In fiscal years 1999 and 2000, the Congress provided considerable additions to the funding for the U.S. military, both through regular defense appropriations and through emergency spending. Nevertheless, the debate over military programs and the defense budget is far from over. Some observers argue that past budget cuts and increased deployments have put stress on U.S. forces, diminishing their readiness for their primary mission--fighting and winning the nation's wars. Other observers believe that the military is spending too much to maintain Cold War forces and equipment and too little to develop capabilities appropriate for the kinds of threats that are probable in the 21st century.

This volume summarizes the major defense issues likely to be debated during the second session of the 106th Congress and the arguments on both sides of those issues. It also presents a variety of options for change that reflect the proposals of advocates from various parts of the policy spectrum, together with the advantages, disadvantages, and budgetary impact of those options. Because the Congressional Budget Office (CBO) is a nonpartisan support agency of the Congress, it does not make recommendations about policy. Thus, CBO neither endorses nor opposes any of the options in this volume.

This report confines itself to activities funded through the budget function for national defense (function 050), which includes the military functions of the Department of Defense (DoD) and the atomic energy activities of the Department of Energy. Spending and revenue options for other federal activities can be found in CBO's Budget Options report, published in March 2000. (Part One of that report illustrates the possible scope and effects of some broad policy proposals to use projected budget surpluses or to cut taxes. Part Two provides specific spending and revenue options that lawmakers might adopt to offset the cost of new initiatives, to reorder priorities, or to help maintain overall budgetary discipline.)
 

Today's Security Environment: Fewer Forces and More Peacetime Operations

The collapse of the Warsaw Pact and the dismantling of the Soviet Union a decade ago removed the single largest military threat to the United States and its allies in Europe and Asia. As the ramifications of those developments became clearer, policymakers concluded that a major reduction in U.S. forces was possible. Consequently, between 1989 and 1999, the numbers of active-duty military personnel as well as civilian DoD employees were reduced by about 34 percent. The number of reservists was also cut significantly--by 26 percent in the case of selected reservists organized in units. The magnitude of the reductions is illustrated by the changes to major elements of the force structure: the number of active Army divisions decreased from 18 to 10, the number of battle force ships in the Navy went from 566 to 317, and the number of fighter-air-wing equivalents in the Air Force declined from 37 to 20.

Besides cutting forces, policymakers have greatly redefined the responsibilities of the military services in the past decade. The lessening of Cold War tensions has permitted a reduction in the alert status of certain strategic nuclear forces. Conventional forces have been redirected to prepare for hostilities against one or two regional powers. And U.S. foreign policy has placed much greater emphasis on using the military for operations other than war. Overseas deployments for such operations are occurring much more frequently than they did during the Cold War. Those deployments vary considerably in the demands they place on military forces. Some are major operations of long duration involving tens of thousands of personnel; others are more modest in scope and limited in duration.

Among the most significant operations other than war are peace missions conducted under the auspices of the United Nations or the North Atlantic Treaty Organization. Since 1990, the U.S. military has begun six such operations--in Somalia, Haiti, Bosnia, Macedonia, East Timor, and Kosovo. Only the operations in Somalia, Haiti, and Macedonia have officially ended. (U.S. troops first entered Haiti in 1994, and the last contingent remained until January 2000.)

The extended length of some peace operations requires that the units originally deployed be relieved by replacements. Thus, for every unit actually involved in such a mission, there may be another unit that has just returned from it and is recovering and a third unit that is training in preparation for deployment. To the extent that the tasks performed during peace missions differ from those performed during combat, that can mean that all three units are less able to prepare for their primary combat missions.

A second class of operations other than war is one sometimes referred to as "watch standing." Those operations have one thing in common with peace missions--the extended nature of the commitment. Today, U.S. forces stand watch in the Persian Gulf region to ensure that Saddam Hussein does not threaten the safety of U.S. allies or his own people. Those operations (Northern Watch and Southern Watch) involve U.S. aircraft that fly over Iraq to enforce the no-fly zones set out in U.N. sanctions. The operations have continued since the end of the Gulf War in 1991. Until the outbreak of hostilities in Kosovo, those operations represented the most demanding commitment for Air Force and Navy flyers since 1991.

A third type of frequent operation is humanitarian intervention. Examples include relief operations after flooding in Bangladesh, support for refugees from Rwanda, and, more recently, support for refugees from Kosovo and East Timor. In contrast to the other two sorts of peacetime operations, humanitarian missions are generally of short duration (weeks, not months or years). They tend to place strains on particular types of units--especially airlift forces, supply and other support units, and military police.
 

Concerns About Military Readiness

Military leaders argue that the recent pace of peacetime operations, coupled with reduced numbers of forces, is having an adverse impact on readiness for conventional war. In September 1998, the chiefs of the military services testified to the Congress that the readiness of their forces was declining. Many quantitative measures of readiness--including the C-ratings in Status of Resources and Training System (SORTS) data--indicated that most U.S. forces were still near their peaks at that time. But according to the service chiefs, some of those indicators were beginning to decline enough to establish a downward trend. Moreover, some military leaders question whether those overall quantitative measures provide an accurate picture.

In their testimony before the Senate Committee on Armed Services on September 29, 1998, and before that committee and the House Committee on Armed Services in January 1999, the service chiefs cited four main problems with readiness.

• Recruitment and Retention. The services are having trouble retaining experienced officers and enlisted personnel in certain specialties, such as pilots and crew chiefs in the Air Force. Furthermore, all of the services had difficulty meeting their recruiting objectives last year, and recruits' scores on the Armed Forces Qualification Test are lower than in the recent past.
  
  
• Material Readiness. Mission-capable rates--the percentages of equipment ready for action--have declined for many units, in part because of shortages of spare parts. So far, that problem seems to be concentrated in units in the United States rather than units deployed abroad. Equipment and parts managers are apparently making sure that deployed units get what they need at the expense of nondeployed units.
  
  
• Overseas Deployments. According to the chiefs, the pace of overseas deployments was significantly greater in the 1990s than during the Cold War era. That increase has placed particular stress on "high-demand/low-density" units, such as military police and civil affairs companies in the Army, and security, airborne warning and control system (AWACS), and Joint Surveillance Target Attack Radar System (JSTARS) squadrons in the Air Force. More frequent deployments have also necessitated repeated call-ups of reserve units as well as the use of individual volunteer reservists to support those missions.
  
  
• Quality of Life. Several factors have had an adverse impact on the quality of life for military families, the chiefs said. One is increased time away from home as a result of more frequent and longer deployments. Another is aging and poorly maintained facilities and family housing units for military personnel.

The level of funding for operations and maintenance--the type of appropriation that contributes most directly to readiness by paying for training, fuel, and maintenance depots--is actually higher today per active-duty service member than it was when the force reductions began. Nonetheless, readiness may still be suffering for a number of reasons. First, DoD's involvement in operations other than war may mean large hidden costs in terms of wear and tear on equipment. Second, today's smaller force may require higher expenditures per capita than a larger force. (For example, certain costs, such as satellite reconnaissance, are fixed and do not fall with the level of active-duty personnel.) Third, aging equipment may be adding to the costs of maintenance. And fourth, DoD may have been unable or unwilling to give up costly business practices and facilities from the Cold War era. For example, it has not reduced its base structure commensurate with the reduction in forces and personnel. DoD estimates that by 2003, its base structure will be 21 percent smaller than in 1989, whereas its forces will be 36 percent smaller. Even after four rounds of base realignments and closures--the last in 1995--DoD retains a system of equipment maintenance depots with capacity substantially in excess of its requirements. In addition, it keeps a peacetime medical establishment far greater than its wartime requirements. (Chapter 4 of this volume provides more information about current trends in readiness.)
 

The Congress's Response

The 106th Congress has responded to concerns about the military by increasing DoD's appropriations. For fiscal year 2000, the Congressional budget resolution set the ceiling for budget function 050 at $288.8 billion in budget authority--some $8.5 billion more than the Administration had requested. The enacted version of the defense authorization act and the sum of the various appropriation acts for national defense also totaled $288.8 billion in budget authority.⁽¹⁾

In providing that funding, the Congress followed three main priorities. First and foremost was ensuring the ability of U.S. forces to meet their commitments worldwide. To further that goal, the Congress increased funds directed at supporting the readiness of personnel, modernizing forces, and researching and developing new weapon systems.

A second Congressional goal was to counter future threats to national security. Resources were added to combat emerging threats--such as the proliferation of nuclear, chemical, and biological weapons and of the means to deliver those weapons against U.S. allies or the United States itself.

The Congress's third major goal was to provide service members with a compensation package that would enable DoD to meet its requirements for personnel. For example, the Congress provided for a series of annual across-the-board pay raises that--beginning with the 4.8 percent increase in 2000--would exceed the growth rate of private-sector wages. The Congress also approved an Administration initiative to modify the structure of military pay. That initiative provided an additional pay increase of up to 5.5 percent for personnel in certain ranks and with particular lengths of service. Finally, the Congress increased retirement benefits for military personnel who entered the armed forces after the Military Retirement Reform Act of 1986 took effect and who thus had been in line for less generous retirement benefits than service members who preceded them.
 

The Structure of This Volume

Recent Congressional actions by no means represent the last word on the U.S. defense budget. The major issues likely to be debated by the Congress in the future fall into three main categories: sizing and shaping military forces to match their missions; modernizing their weapons and their ability to counter emerging threats; and providing the military personnel, equipment, and facilities that those forces require. Each of those categories is the subject of a chapter in this report. The chapters summarize the issues and present various options for further action. In each option, the text provides general background information, discusses the pros and cons of the change, and estimates the savings or costs for the 2001-2010 period. As noted above, the inclusion or exclusion of a specific option does not represent an endorsement or rejection of that option by CBO.

Sizing and Shaping U.S. Forces to Match Their Missions

In the post-Cold War era, U.S. conventional forces are organized in accord with the requirement to be able to fight two major theater wars (MTWs) that occur nearly simultaneously. The number of forces required for that scenario--10 Army divisions, 20 tactical fighter wings, 10 aircraft carrier battle groups, three Marine divisions, and so forth--generally corresponds to current force levels. But in certain instances, elements of today's forces are still either larger or smaller than required for the two-MTW scenario.

Examples of forces in excess of those requirements include some combat troops in the Army National Guard, which have little or no planned role in executing the two-MTW strategy. Examples of forces that fall short of the requirements include units that would have to swing from one combat zone to another if a second MTW broke out, such as strategic bombers and airlift and sealift forces. In addition, the Army generally does not have enough support forces for two regional conflicts at the same time. Chapter 2 presents various options for sizing and shaping U.S. forces.

Modernizing Weapon Systems and Countering Emerging Threats

In contrast to more recent concerns about near-term readiness, the lagging pace of modernization efforts has been a concern for several years. While the military services were being downsized, it made sense to halt weapons purchases. In fact, the military was retiring many types of equipment well before their useful lives had ended because they were no longer needed to equip the smaller forces that remained. By the mid-1990s, however, the downsizing was virtually complete, and the services wished to resume buying equipment. At that point, General John Shalikashvili, then Chairman of the Joint Chiefs of Staff, called for increasing procurement appropriations from $45 billion a year to $60 billion. Since then, the Administration has requested and the Congress has appropriated greater amounts for procurement, but they have yet to reach the $60 billion goal. (The President's budget request for fiscal year 2001 includes $60 billion for procurement. But when adjusted for inflation since 1995, General Shalikashvili's goal would correspond to $65 billion for 2001.)

Modernization efforts face more obstacles than simply lack of funds. Weapons can frequently take too long to develop, be too expensive to buy in large quantities, and be left behind by the rapid advance of technology. As a consequence, even when money is available, addressing shortfalls in equipment or arresting a trend toward aging weapons can be difficult to do in the short run.

Chapter 3 discusses modernization programs and presents options that deal with the military services' acquisition efforts. Some of those options would try to halt the trend toward aging equipment by, for instance, buying more current-generation aircraft for the Air Force. Others would develop and procure entirely new capabilities, such as fully funding national missile defense programs--which the Congress recently declared a national policy--or buying tactical unmanned aerial vehicles for all of the services. Other options would extend the usefulness of existing assets--for example, by converting ballistic missile submarines into conventional missile platforms. Finally, some options would cancel or limit procurement of systems that may not fit the military's current needs as well as alternative systems do.

Supporting Military Forces: Personnel, Equipment, and Facilities

Chapter 4 presents options for recruiting, retaining, and supporting a high-quality force. It includes options that would increase funding in response to shortfalls identified by the services as well as options that might reduce costs in the long run by changing the way DoD compensates service members and manages its support activities.

Among the options that would require increased funding are ones that would improve the quality of life for service members through greater housing allowances, better access to child care, and the promise of comprehensive medical care for military retirees. Military health care and housing are major Administration priorities that are likely to be the subject of significant Congressional debate this year, just as military pay and retirement issues were last year. Other options would provide additional funding to construct or maintain DoD facilities, areas in which the Congress has often questioned the adequacy of DoD's budget requests.

Among the options designed to reduce the costs of supporting U.S. forces are ones that would downsize the military medical system, consolidate the networks of commissaries and exchanges, and close more bases and maintenance depots. Because those options would require DoD to change the way it does business, if they were not managed well, they could put military readiness at greater risk in the short run. In the long run, however, such initiatives might contribute to readiness by freeing additional resources that could be used for modernization.
 

Some Limitations of This Volume

This report focuses on the advantages and disadvantages of options that are the subject of public debate and that address issues of significant concern. Because CBO drew mainly on its own research and knowledge base in putting together the options, this volume excludes important issues that CBO has not yet had a chance to analyze thoroughly (such as the availability of spare parts or whether current funding for training is adequate). The omission of options in those and other areas in no way reflects on their importance for military readiness compared with the options that are discussed.

Estimates of costs or savings for the options in this report were calculated relative to program levels that predate the Administration's budget request for fiscal year 2001. Future CBO cost estimates for bills that include these options may not match the savings or costs shown in this report, for various reasons. The policy proposals in a bill may not match the assumptions used in developing these options, or the budget projections or defense plans against which a proposal is measured may have changed from the ones used here.

1. Appropriations for the national defense budget function are provided mainly through three appropriation acts, the ones for national defense, military construction, and energy and water (which provides funds for atomic energy activities of the Department of Energy).

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