Statement of Secretary of Defense
William S. Cohen
In Connection with the FY 1998 Defense Budget

Mr. Chairman, members of the committee, it is an honor to come before this committee as the nationís new Secretary of Defense. As I begin my tenure, a key goal of mine is to forge a good working relationship with this committee and with the Congress as a whole. The security of America depends on wise decisions in both our branches of government. On matters of national defense, bipartisanship and cooperation are essential. Political consensus at home strengthens Americaís hand abroad. As I begin I am also acutely aware that the office of Secretary of Defense is a profound and solemn responsibility. The Secretary of Defense must provide wise counsel on how best to keep America and its vital interests secure. He plays a pivotal role in ensuring that U.S. forces are sent into harmís way only after careful deliberation and preparation and that they always have the wherewithal to achieve their mission. Americaís military men and women must have the best possible leadership, training, weapons, and support, and I am committed to seeing that they do. In this statement I want to highlight the strategic context in which our upcoming defense decisions will be made, then summarize President Clintonís fiscal year (FY) 1998 Department of Defense (DoD) budget request.

Strategic Context of U.S. Defense Decisions

While the threat of nuclear holocaust has been significantly reduced, the world remains a very unsettled and dangerous place. Hostile regimes and instability threaten U.S. interests in key regions. The proliferation of weapons of mass destruction and the ballistic missiles that deliver them continue to be a serious concern. The threats of terrorism, international organized crime, and drug trafficking remain unabated. And with the global economy increasingly interdependent, our future well-being can be threatened by conflicts within or between nations and by other disruptions to trade and stability. America must remain actively engaged in this complex global environment. We must exert strong leadership to deter aggression, foster peaceful resolution of conflicts, underpin stable foreign markets, encourage democracy, and promote a better future for the community of nations. An absolutely central component of strong U.S. leadership will continue to be our military strength. We cannot be the worldís policeman, but we must recognize that strong U.S. leadership on behalf of stability and democracy is in our own best interest. Serious threats to U.S. security and well-being can be found in all key regions of the globe and generally can best be addressed in concert with others. Therefore, America must continue to cultivate the cooperation of other nations, directly and through international organizations. We must keep our security alliances strong and adapt them to this post-Cold War world. America also must be prepared to act unilaterally when necessary--to intervene decisively if U.S. vital interests are at stake. In particular, America must continue to forge a pragmatic partnership with Russia--through efforts to nurture close NATO-Russia relations, strengthen U.S.-Russian military-to-military cooperation, continue Cooperative Threat Reduction activities, and advance our arms control agenda. Our policies also need to recognize the ever-increasing importance of the East Asia-Pacific region. Our national security is not only a matter of defense, but also of diplomacy. Indeed, the two are closely linked. Our foreign affairs programs can strengthen Americaís security in close synergy with our military strength. For example, the forging of our overall relationship with Russia encompasses activities ranging from DoDís Cooperative Threat Reduction program to the State Departmentís Freedom Support Act programs. Mindful of that reality, I urge the Congress to provide healthy funding for our international affairs programs. A strong military is a necessary support to a successful diplomacy; successful diplomacy can often make the costly use of that military unnecessary. Arms control also can be a high-payoff, low-cost means to advance U.S. security. For example, the Chemical Weapons Convention provides a major advancement for Americaís disarmament and nonproliferation goals. I therefore urge Senate advice and consent to ratification by April 29, 1997 of the Convention, which would commit other nations to the measures that the U.S. already is pursuing. Over the past few years, President Clinton and Secretary Bill Perry made substantial progress meeting the complex challenges of this new security era, and I will do my utmost to build upon their accomplishments.

Defense Budget Topline

President Clintonís FY 1998 defense budget begins implementation of the FY 1998Ė2003 Future Years Defense Program (FYDP). The FY 1998 request totals $250.7 billion in budget authority and $247.5 billion in outlays for DoD. Budget authority for FY 1998 is $2.8 billion above the amount in last yearís DoD plan. For FY 1999 through 2003, plans call for DoD budget authority to increase above projected inflation. This planned real growth was possible because President Clinton added $7 billion to the previously planned DoD topline and allowed DoD to keep $4 billion of inflation savings. This is the fifth time in four years that President Clinton increased defense spending above previously planned levels. DoD budget authority requested for FY 1998 is, in real terms, about 40 percent below its level in FY 1985, the peak year for inflation-adjusted defense budget authority since the Korean War. As a share of Americaís gross domestic product, DoD outlays will fall to 3.0 percent in FY 1998, well below average levels over the past five decades.

Budget Priorities for the Future

While I was not involved in preparing President Clintonís FY 1998 defense budget request, I do recommend that the Congress fully support it--as it will sustain Americaís military might and our active engagement around the world. Having said this, however, let me also note that over the next few months I will be reviewing major DoD plans and programs in connection with the Quadrennial Defense Review. Our central goal in the QDR will be to ensure a proper match of strategy, programs, and resources. I expect important results from the QDR, but it is still too early to predict those results. In considering the Departmentís budgetary needs, I will be stressing three top priorities. My first priority goes to people. We must continue to attract and retain the high quality personnel necessary to preserve U.S. military superiority. The increasing complexity of technology, quickening pace of warfare, and growing unpredictability of the international scene require that our people be more adaptable and versatile than ever. The key to Americaís military strength is the superb quality of our uniformed men and women. My second priority is readiness. We must ensure the force readiness needed to carry out U.S. defense strategy, so that our forces are able to respond to crises whenever and wherever necessary. To support both my priorities of people and readiness, we must provide a good quality of life for our military personnel and their families--focusing especially on compensation, housing, and medical benefits. My third priority is modernization. We must develop and field new and upgraded weapons and supporting systems in order to guarantee the combat superiority of U.S. forces in the years ahead. The substantial reduction in force structure following the end of the Cold War allowed us to terminate or defer many programs within acceptable risks. But this trend must now be reversed. It is also very important that we overhaul DoDís support elements and activities. We must make substantial progress on acquisition reform, streamlining infrastructure, reengineering DoD business practices, and more. The Departmentís infrastructure and support activities must consume less of the defense budget without sacrificing the quality of support to the armed forces, in order for my top three priorities of people, readiness, and modernization to be met.

Attracting and Retaining High Quality Personnel

By ensuring the battlefield superiority of U.S. forces today and tomorrow, the entire defense budget supports the goal of attracting and retaining high quality military personnel. New recruits want to be a part of a winning team, and seasoned professionals want to be trained and equipped so they have confidence of success when called upon. The high quality of todayís uniformed personnel is the result of many years of investment and hard work, and it can only be sustained by more of the same. Any proposed budget savings that would undermine the high quality of our military personnel would be false savings. Investments in people offer the greatest returns for Americaís defense dollars. Providing a good quality of life for our uniformed personnel and their families is essential to sustaining the long-term quality of U.S. forces, as well as crucial to ensuring high readiness. Reflecting that reality, the FY 1998 budget includes strong support for military pay, housing, medical services, and other important benefits for our personnel. The budget supports:
· Military pay raises up to the maximum percentage established by law. The FY 1998 budget funds a 2.8 percent pay increase; the outyears provide for 3.0 percent per year.
· Expanded use of the Family Housing Improvement Fund. To solve its housing problems more rapidly, the Department is seeking to take advantage of private sector expertise and capital, which will result in greater payoff from our budgeted funds.
· The construction or modernization of approximately 11,000 barracks living spaces, with the majority of the new or modernized living spaces providing each unaccompanied service member with more room and a private sleeping area.
· Strong child care; family support; and morale, welfare, and recreation programs.

Ensuring Force Readiness

I agree with General Shalikashvili that U.S. forces are as ready today as they have ever been. The high readiness and quality of our forces is being demonstrated everywhere that those forces are deployed or conducting exercises and training. To ensure high readiness and quality, the new budget provides strong support for training, exercises, maintenance, supplies, and other essentials needed to keep U.S. forces prepared to carry out their combat missions decisively. This readiness-related spending occurs mostly in the Departmentís Operation and Maintenance (O&M) accounts. Reflecting the priority given to readiness, O&M is the only appropriation title given a dollar increase in the new budget: from $92.9 billion in FY 1997 to $93.7 billion in FY 1998. Within its own O&M account, each military service will work to ensure high levels of readiness, while pursuing initiatives to reduce overhead costs. It is important that the Department continue to take action to prevent unbudgeted costs of non-routine operations, like those in Bosnia, from absorbing funds needed for readiness, modernization, and other top priorities. To that end, the FY 1998 budget retains the practice of budgeting for all known military operations. The request includes $1.5 billion in FY 1998 in the Overseas Contingency Operations Transfer Account to complete planned operations in and around Bosnia. In addition, $.7 billion is included in Military Service/Defense Agency budgets for the continuing operations in Southwest Asia. In its FY 1997 defense bill, Congress appropriated $1.3 billion to cover fully the costs of military operations that were projected at the time of the billís completion. Since then, two developments occurred that now leave the Department facing $2.0 billion in unbudgeted FY 1997 military operations costs. First, new provocations by Iraq last September increased the intensity of U.S. operations in Southwest Asia. Second, this past November President Clinton approved participation of U.S. forces in a new phase of operations in Bosnia to further advance the goals of the Dayton Peace Accord. The Administration is requesting a FY 1997 supplemental appropriation of $2.0 billion to cover these new projected costs. Of this $2.0 billion, $124 million is for Southwest Asia operations. The Administration is also requesting authority for the Secretary of Defense to rescind $4.8 billion in previously appropriated FY 1997 funds. The goal will be to target spending that is not expected to make significant contributions to U.S. military capabilities. The budget assumes that $2.0 billion of these rescissions would offset the FY 1997 supplemental appropriation request for Bosnia. The other $2.8 billion in rescissions is necessary to reach outlay targets. I urge your support for this rescission authority and for the FY 1997 supplemental appropriations. The uncertainty surrounding most contingency operations makes it very difficult to predict their costs. Therefore, budget development for such operations is less certain than for other parts of the Defense budget. The Department is intent on continuing to improve the speed and accuracy of its cost estimating for any future operations. That will help us to fund these operations through productive interaction with Congress and to keep them from undermining force readiness. One final word on the operation in Bosnia. As I said at my confirmation hearing, I plan to work hard to help ensure that the participation of U.S. ground troops in Bosnia will indeed end by June of 1998, as planned.

Modernization of the Force

For several years, the Defense Department has been able to reduce its procurement of new weapons and upgraded capabilities without undermining the battlefield superiority of U.S. forces. The average age of military equipment has not risen substantially--partly because many new weapons were procured in the 1980ís and partly because older equipment was weeded out as forces were drawn down. This decline in procurement spending has made room in the budget for robust funding for training, maintenance, quality of life, and other components of near-term readiness. Now, to ensure the long-term superiority of U.S. forces, it is necessary to begin investing in the procurement of new systems. Consistent with that goal, spending for procurement is projected to increase to $60 billion by FY 2001, a target amount and date that the Clinton Administration first established in its FY 1996 budget. By FY 2002, procurement spending is projected to achieve real growth in excess of 40 percent over the FY 1998 level of $42.6 billion. I plan to remain focused on this procurement spending target. Necessary adjustments forced us to set the FY 1998 target we have. Our challenge is to make sure that the Department has a strong modernization program that is achievable and fully sufficient for Americaís security needs. Modernization is one of the most important areas being analyzed in the Quadrennial Defense Review, and one in which I will be intimately involved. The QDR will focus both on the adequacy of DoD modernization programs, as well as on the achievement of savings from operating and support activities--savings that we can invest in modern weapons and equipment and superior technology. The DoD modernization program is multi-faceted and forward-looking. To modernize the combat platforms of U.S. forces, two components are being pursued. First priority goes to leap-ahead systems. These are brand new systems featuring the most advanced technologies and designed to ensure that future U.S. forces have the greatest possible battlefield superiority. Major leap-ahead systems include the Comanche helicopter, tilt-rotor V-22 aircraft, New Attack Submarine (NSSN), F-22 fighter, Joint Strike Fighter (JSF), and F-18E/F aircraft. Cost effective upgrades of existing combat platforms also are important. Through such upgrades, the capabilities of U.S. forces will be substantially increased at a much lower cost than for fielding new systems. Major examples are the CH-47 helicopter engine upgrade, Apache Longbow, Abrams tank upgrade, Bradley Base Sustainment, Tactical Vehicle Remanufacture, AV-8B remanufacture, and B-1B bomber upgrade programs. Another modernization requirement is to expand and ensure the battlespace information dominance of U.S. forces. The key goal here is to make combat leaders as aware as possible to the situation confronting them--most notably with regard to the enemyís size, location, and activity. Major programs: Army digitization, UAVs, Global Broadcast System, Cooperative Engagement Capability, and the MILSTAR and Space-Based Infrared System (SBIRS) satellite programs. Also essential, the Advanced Concept Technology Demonstrations initiative is designed to accelerate the introduction of advanced technologies into the systems of our operating forces. Finally, the Ballistic Missile Defense Program is an essential component of DoD modernization plans.

Ballistic Missile Defense Program

The proliferation of weapons of mass destruction and the ballistic missiles that deliver them pose a major threat and must remain a major focus of U.S. defense policy and budget allocations. America must pursue a robust Ballistic Missile Defense (BMD) program as part of a broader counterproliferation strategy to reduce, deter, and defend against this threat. As a Senator I worked hard to narrow the differences between the Congress and the Clinton Administration regarding missile defense. In my new position I am committed to advancing a missile defense program that is sound, executable, and provides an effective defense against the threat. This budget incorporates changes to ensure that the Department has a strong BMD program, is allocating substantial resources to advance essential BMD goals, and is proceeding as rapidly as is technologically sound. I will be closely monitoring all major aspects of the BMD program. The BMD programís highest priority is Theater Missile Defense (TMD), to meet the threat that exists now. The goal is to develop, procure, and deploy systems that can protect forward-deployed and expeditionary elements of U.S. forces, as well as allied and friendly nations, from theater-range ballistic missiles. In general, these programs are structured to proceed at the fastest pace that technology risks will allow. Key programs include the Patriot PAC-3, Navy Area TMD, Navy Theater Wide, Theater High Altitude Area Defense (THAAD), Medium Extended Air Defense System (MEADS), and Airborne Laser systems. Among its features, this budget accelerates by two years the THAAD program and the first launch of the SMTS satellite system, and adds funds to the Navy Theater Wide program to reduce risk. The next highest BMD priority is development of a National Missile Defense (NMD) program that positions the United States to deploy the most effective possible system to defend U.S. territory when the threat warrants such a deployment. The NMD program will develop all the elements of a system in a balanced manner, achieving the first test of an integrated system by FY 1999. If the FY 1999 test is successful, the U.S. would be in a position, beginning in FY 2000, to deploy this initial system within three years of a decision to do so, based upon the threat. After the FY 1999 test, until a decision to deploy is made, the NMD program would be geared to improving the performance of the designed system by advancing the technology of each element of it and by adding new elements--all the while maintaining the capability to deploy the system within three years of a decision. The third BMD priority is the continued development of a technology base that improves the capability of both the Theater and National defense programs to respond to emerging threats. These expenditures seek both to enhance the performance and reduce the cost of future BMD systems. FY 1998 budget authority requested for BMD is $3.5 billion. For FY 1999 through FY 2003 an additional $17.9 billion is planned. This $21.4 billion total for BMD programs in FY 1998-2003 is $2.4 billion above what was projected by the Department last year.

Streamlining and Improving

DoD Support Activities The new budget and FYDP reflect projected savings from various sources. DoD civilian personnel are being drawn down--partly as a result of post-Cold War force structure reductions and partly because of management reforms. Excess inventories of supplies are being reduced. Acquisition reform is changing the way the Department develops and procures new weapons and making the process less expensive both for the Department and for its private contractors. Financial and personnel management systems are being consolidated and modernized, making them less costly and more responsive to both customers and DoD decision makers. The Department is identifying what goods and services can be produced more cost effectively by the private sector than by DoD elements, and pushing to implement these changes as quickly as possible. Savings from such outsourcing or privatization initiatives are crucial to achieving robust funding of force modernization. The Department is continuing to carry out the decisions of the Base Realignment and Closure (BRAC) process for streamlining defense facilities within the United States. BRAC savings began to exceed implementation costs after FY 1996. The results from all four rounds of BRAC actions should be implemented completely by the end of FY 2001 and should provide a net savings of $14 billion for the years FY 1990 through FY 2001. After FY 2001, the costs avoided by having reduced and realigned the Departmentís base structure will amount to about $5.6 billion every year thereafter. In view of the significant demands on the Defense budget, the Department must continue to streamline, improve, and reinvent its support activities wherever possible. The goal is to provide better products and services at reduced cost to U.S. forces and other DoD customers.


These are some of the major security challenges facing our nation and the ways in which the Presidentís FY 1998 budget addresses those challenges. This year promises to be a pivotal year in the continuing task of adapting Americaís defense posture to the uncertainties of the post-Cold War period. I look forward to working with the Congress to ensure that our armed forces remain strong and our policies sound, as America continues to lead the world toward a peaceful and prosperous future. We are coming to the end of a century in which the United States played a unique role in defeating tyranny and aggression, nurturing open political and economic systems, and leading peoples of the world toward a better future. Much of that extraordinary achievement was based on the willingness of Americans to build and maintain extremely capable military forces. Now that the Cold War is over and freedom is becoming harder to suppress around the globe, Americaís defense challenges clearly are less daunting, but they remain substantial nevertheless. The greatest need is for America to skillfully fulfill its global leadership mandate. In an increasingly interdependent world, such leadership is critical to influencing the actions of others who could affect our national well-being. It is also key to creating the international conditions in which peace, stability, democracy, and free trade can flourish. Let us therefore remember that strong U.S. leadership continues to depend on sound defense policies and budget priorities, to which we now must focus our full attention.