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The dawn of a new century brings with it continued hope for peace and a more stable world. The reality of the last century brings us a continued awareness that the United States military must be ready to lead the way to meet even more complex challenges. Doing this requires America’s armed forces to be strong and agile, ready to meet any challenge and to win. Today, we have the most precise, most lethal, most versatile, best–equipped, and best–trained forces on earth; and we have a defense program that ensures our forces will maintain their superiority in the new century.

President Clinton continues his support of a modernized military with the first real defense spending increase in over a decade, an increase that not only maintains current readiness, but prepares us to build the forces we will need in the future. This budget meets the Joint Chiefs’ goal of $60 billion for modernization of major weapon systems, preserves our unparalleled technological superiority into the foreseeable future, and also supports our troops with higher pay, improved housing, and other quality of life initiatives that will help us to recruit and retain the highly qualified men and women who remain central to our military capability.

A superior military force has many elements—well–trained people, capable leadership, and advanced equipment—all of which require sustained investment over many years. It is essential that we pursue a consistent path beyond the tenure of any single administration. As I promised in my confirmation hearing, we have taken the outstanding work of my predecessors and built upon it by pursuing the strategy developed in the Quadrennial Defense Review (QDR). This strategy has enabled us to both meet today’s requirements and invest in the future transformation of the armed forces. This transformation—of equipment, organization, and operational concepts—is well underway, but will be fully implemented only by those who succeed the current Administration, and the current Congress. Three years ago, I outlined my priorities for my tenure as Secretary of Defense:

· The first priority was our people in uniform and their families. U.S. military superiority requires high–quality people, which necessitates that we provide them with appropriate pay, housing, and medical benefits.

· The second priority was to maintain high levels of readiness to ensure we can quickly respond to crises whenever and wherever necessary.

· The third priority was modernization of the force to ensure future readiness. I pledged to reverse the eleven straight years of decline in the procurement budget and championed transforming the support elements of DoD through continued acquisition reform, adoption of best business practices, and reducing excess infrastructure.


We ask much of our men and women in uniform. They are on call 24 hours a day and understand they will be regularly deployed, relocated, and restricted in their lifestyle because of the unique demands of military life. They must be prepared to forge into deadly conflict, and they must be trained to use lethal, cutting–edge technology. We call upon our armed forces to manage complex battlefields that include combatants and civilians, using the skills of both warrior and diplomat.

The end of the post–Cold War drawdown, coupled with an unprecedented strong economy, created major recruitment and retention challenges. As we compete with colleges and civilian industry for America’s best and brightest, recruiting enough qualified Soldiers, Sailors, Airmen, and Marines to properly fill our ranks has become especially challenging. This challenge has been exacerbated by the stress of high operating tempo (OPTEMPO) and personnel tempo (PERSTEMPO) on active duty retention and by the extra demands of maintaining aging equipment. To address these challenges, with the strong support of Congress, we have undertaken major improvements in pay and benefits:

· This fiscal year we are implementing the largest pay raise in nearly two decades. The budget we are proposing builds on this with additional pay raises in FY 2001 and FY 2002 that are half a percentage point above inflation.

· Our proposed budget fully funds the significant pay table reforms adopted last year that will reward and help retain our best and most experienced military personnel.

· We proposed, and you fully funded, military retirement reforms that increased retirement benefits for those now at mid–career, ensuring that all our personnel who retire at 20 years will receive 50 percent of their base pay.

· We are proposing a major improvement to housing benefits. We will increase the Basic Allowance for Housing (BAH) so that out–of–pocket expenses for those living off base will be cut from 19 to 15 percent in FY 2001, and eliminate entirely out–of–pocket housing expenses over the Future Years Defense Program (FYDP). Since BAH is tax–free, this increase will put even more money into the pockets of military personnel and their families.


U.S. armed forces continue to be fully capable of executing the National Military Strategy, and we continue to take necessary measures to ensure that this remains the case. The QDR found that Operations and Support (O&S) budgets were consistently underfunded, due primarily to a pattern of underestimating O&S costs and overestimating programmed efficiencies and, to a lesser extent, unprogrammed contingency costs. One result was a recurring migration of funds from procurement to pay for immediate readiness requirements, which both delayed procurement programs and increased their cost through program instability and stretch–outs. The QDR sought to attack this problem at its root by rebalancing our overall defense program to fix known and projected deficiencies in O&S budgets and to create a substantially increased but sustainable modernization program.

Our proposed budget fully funds the Services’ FY 2001 Operation and Maintenance (O&M) budgets, putting O&M funding per troop at record high levels so that operations, training, and maintenance goals can be met. The proposed budget also fully funds projected FY 2001 costs for operations in Bosnia and Kosovo, with the President having provided an increase of $2.2 billion for these operations. To protect readiness for the rest of the current fiscal year, we are requesting $2 billion in supplemental appropriations to cover DoD’s FY 2000 costs for Kosovo operations.

Because of the complexity and pace of these operations, the Defense Department vigilantly assesses readiness indicators, operating tempo, and the impact of our commitments on our people. When possible, we use reserve forces to lift the burden from our first–to–fight units. Additionally, we have increased funding for maintenance and spare parts and changed the way the Department operates in order to enhance and improve unit combat readiness.


Each year throughout the mid–1990s, the Defense Department leadership identified an annual procurement budget of roughly $60 billion as necessary in order to recapitalize defense equipment and the move toward a transformed force that embodied the Revolution in Military Affairs. But due to the recurring migration of funds to pay for O&S costs and despite the Department’s best efforts, the procurement budget continued to decline every year, putting the $60 billion objective further and further out of reach. The QDR staunched this hemorrhage of modernization moneys and established a sustainable procurement program to transform our forces and enable the attainment of Joint Vision 2010 capabilities. Reversing over a decade of decline, each budget since the QDR has substantially increased procurement. The proposed FY 2001 budget provides $60 billion, an increase of over 33 percent since FY 1997 that meets the projection of the QDR.

The Department’s modernization and transformation strategy aims to ensure U.S. military preeminence well into the 21st century. Much about the future security environment is uncertain, but much is already clear. A number of states will have the capability to threaten U.S. vital interests, through coercion, cross–border aggression, and other hostile actions. Other states will face internal humanitarian crises and ethnic conflict which may involve U.S. interests and require the U.S. military to respond quickly while minimizing risks of American and noncombatant casualties. Whether in the context of major theater war or smaller–scale contingencies, future opponents are likely to threaten or use asymmetric methods such as terrorism, cyber attacks on critical computer–based networks, and weapons of mass destruction in order to offset U.S. conventional superiority. Some non–state actors may also threaten U.S. interests through terrorism and other asymmetric means.

Transformed military forces are needed because the strategic environment is changing. Technology, vastly changing the civilian world, is changing the military sphere as well. Exploited effectively, through innovative operational concepts and new organizational arrangements, new information systems and other technologies will allow U.S. forces to be smaller, faster, more agile, more precise, and better protected. In short, U.S. forces will be more capable of meeting the security challenges of the 21st century in order to protect citizens at home and project power abroad.

The Department is transforming its forces to meet future challenges through:

· Service initiatives that explore new concepts to leverage technology and to develop better, faster, and cheaper ways to more effectively support the warfighter operationally and logistically in joint environments.

· Science and technology efforts focused on areas that can enhance U.S. military capabilities to meet projected challenges.

· Efforts to encourage international transformation activities.

In the past year:

· The Air Force has made great strides toward transformation to an Expeditionary Aerospace Force, organized and trained to conduct regular expeditionary operations.

· The Marine Corps has instituted path–breaking, large–scale experiments in conducting urban operations, to be prepared for future missions in a world in which the majority of the population lives in littoral regions.

· The Navy has continued numerous fleet battle experiments, moved toward exploiting electric drive for propulsion of 21st century warships, led the way to integrating information technology throughout the force, and more fully developed its vision for network–centric warfare.

· The Army has initiated a fundamental transformation of its organization, structure, and armaments that will lead to a more agile, mobile force able to meet the requirement to respond rapidly with potent force to crises in distant reaches of the globe.

· The Atlantic Command was transformed to the Joint Forces Command and assigned additional special responsibilities for promoting joint experimentation of revolutionary operational concepts, as well as integrating Service and defense agency capabilities to enhance interoperability and joint readiness.

Since the 1997 Defense Reform Initiative Report was released, significant effort and progress have been made to bring competition and best commercial practices into the business of defense. Since launching the reform initiative, a Defense Management Council of DoD leaders acting as the Secretary’s Board of Directors and an advisory panel of Chief Executive Officers from leading private sector corporations have worked to accelerate the implementation of wide–ranging reforms. DoD continues to meet reform challenges and make progress in adopting 21st century business practices to meet the future needs of U.S. warfighters:

· The Department of Defense is continuing the vigorous transformation of its financial management operations, processes, and systems to meet the information needs of decision makers, satisfy statutory requirements, eliminate fraud and waste, and provide superior customer service. Implementing these reforms will enable DoD decision makers to have the fullest availability of data on costs—so they can allocate resources most wisely and be able to make the best assessment of how well funds are achieving their intended purposes. Finally, this will provide more accurate and timely financial services at the lowest achievable cost.

· The Department also adopted a vision of becoming a world–class buyer of best value goods and services from a globally competitive, industrial base. To accomplish this, the Department has accelerated incorporating the attributes of world–class commercial entities into its processes for acquiring goods and services through aggressive acquisition and logistics reform. The result is a system that provides the warfighter with goods and services better, faster, and cheaper.

· The Department has the world’s largest infrastructure—with a physical plant valued at over $500 billion and a landmass that reaches 40,000 square miles. However, the Department is encumbered with obsolete and excess facilities that drain resources that we could otherwise spend on modernization and readiness. DoD is pursuing a three–pronged strategy—eliminate excess infrastructure, consolidate or restructure the operation of support activities, and demolish unneeded buildings. Base Realignment and Closure (BRAC) is an integral part of DoD’s readiness and modernization plans to support the warfighter.


Upon taking office, I engaged my priorities—people, readiness, and modernization—to help shape the work of the first QDR, one of the most fundamental and comprehensive reviews ever conducted of our defense posture, policy, and programs.

After analyzing the threats, risks, and opportunities facing the United States until the year 2015, we used the QDR to design a defense strategy to shape the international security environment in ways favorable to U.S. interests; respond to the full spectrum of crises when required; and prepare now for the challenges of the future through focused modernization, new organizations and operational concepts, programs to ensure high–quality people, and hedging against threats that while unlikely would have disproportionately large security implications. After developing this strategy, we anchored its implementation to the fundamentals of military power today and in the future—quality people, ready forces, and superior organization, doctrine, and technology. In the QDR and our subsequent budgets, we have made the necessary choices to ensure that this became reality, not mere rhetoric.

America’s security and continued leadership in the world depend upon our military having the resources to accomplish the nation’s goals. Our current budget achieves this objective and lays the foundation for a successful future. Most importantly, it supports our Soldiers, Sailors, Airmen, and Marines with our tangible commitment to the quality of life that our military members and their families deserve.

I am proud to report to you that we are meeting the goals I set when I came before you three years ago. My successor will inherit a Department and military, not only far better than that which won the Gulf War, but given our rapid application of lessons learned from Operation Allied Force, better than that which prevailed in the conflict with Belgrade. We in the Defense Department cannot achieve this alone; we will need your continued support to provide for America’s security needs in the coming century.

William S. Cohen

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