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Bush's Defense Budget
Puts Off Cuts to Weapons

By GREG JAFFE and JONATHAN KARP
Staff Reporters of THE WALL STREET JOURNAL
February 7, 2006; Page A17

WASHINGTON -- President Bush's defense budget includes billions of dollars of new spending to fight unconventional threats such as insurgents, but it defers the big decisions on cuts to major weapons systems -- cuts that most senior defense officials acknowledge eventually will be necessary.

The $439.3 billion defense budget for fiscal 2007 is 4.8% more than the current budget and includes $84.2 billion in weapons purchases, up 8% from the 2006 request. That is less than the 17% jump the Pentagon had forecast. To pay for equipment, the military is offering up cuts in personnel.

BUDGET BREAKDOWN


• Read more about Bush's $2.77 trillion spending plan that provides big increases for the military and homeland security but squeezes many other government programs in an effort to get soaring deficits under control.

• Plus, see a graphic charting spending changes and agency proposals.

• Complete Coverage

The budget includes about $5.1 billion for a 15% increase in the number of special-operations troops who are skilled in fighting terrorists, training foreign armies and conducting counterinsurgency campaigns. It also sets aside $1.7 billion for unmanned surveillance planes and ground vehicles, which are being used in large numbers in Iraq and Afghanistan. The Army gets an $11 billion boost, to $111.8 billion, to continue its shift to a faster, more agile force.

The Bush administration budget doesn't offer up any large cuts to major weapons systems, which could put strain on future budgets as they advance. Most of the systems are designed for big conventional wars, not conflicts such as the one in Iraq or the war on terrorism. Unless defense spending increases dramatically in the next five years, the Pentagon is unlikely to be able to afford all those systems.

"It is generally acknowledged that there is a big mismatch between the budget levels the Pentagon is projecting for the next five years and the likely cost of all of these programs. This budget doesn't do much to fix that mismatch," said Steven Kosiak, a senior budget analyst at the Center for Strategic and Budgetary Assessments in Washington.

Current defense-budget plans call for the Pentagon to spend about $502 billion in 2011, but that figure likely won't be enough to accommodate the rising costs of personnel and pay for all of the new weapons systems in the Pentagon pipeline.

PENTAGON PRIORITIES


See highlights of the defense budget proposal.In the summer and autumn, some senior Pentagon officials involved in a massive review of spending -- conducted every four years -- debated at least cutting back such big weapons programs as the Navy's DD(X) destroyer, made by Northrop Grumman Corp. and General Dynamics Corp., and the Joint Strike Fighter and F-22 fighter jet, both made by Lockheed Martin Corp.

In the end, none were cut. The current budget, for example, sets aside about $2.6 billion to begin construction of two DD(X) ships, which could cost as much as $3 billion apiece, and adds a further $793 million in DD(X) research funds. Some senior defense officials had argued that the destroyer's primary mission of providing long-range firepower support to ground forces could be carried out more efficiently by planes dropping precision-guided munitions. But ultimately, said a senior defense official involved in the review, the Pentagon decided that the U.S. shipbuilding industry, already in disarray, needed the program.

The Air Force, typically the biggest recipient of procurement funds, will get $2.2 billion for Lockheed Martin's F-22 supersonic stealth fighter, the newest addition to its arsenal. The budget proposes $1.3 billion for the first five F-35 Joint Strike Fighters and $1.1 billion to buy C-130 cargo planes, also made by Lockheed.

Overall expenditures for space operations are slated to rise about 5% to about $9.8 billion. In terms of development and procurement, the latest blueprint envisions a slower ramp-up and about $3.3 billion lower spending through 2011 than anticipated just a few months ago.

The Air Force plans to trim as many as 57,000 positions. The Navy is betting that its new ships, which require smaller crews, will allow it to shed some of its work force, and the Army is planning to shrink its force to about 482,000 soldiers in 2011 from about 512,000 today. But "If these personnel efficiencies don't materialize we are going to have a real out-year problem," said one senior defense official who participated in the budget review.

Even if the Pentagon manages to cut personnel, some say much bigger cuts are needed. "The cuts in force structure will be helpful and will free up money for other investment. But they are relatively modest and not enough," Mr. Kosiak says.

Write to Greg Jaffe at greg.jaffe@wsj.com and Jonathan Karp at jonathan.karp@wsj.com

Bush puts national security at centre of budget By Caroline Daniel and Andrew Balls in Washington
Mon Feb 6, 6:50 PM ET

The White House on Monday put national security at the centre of its budget priorities, proposing increases in defence and homeland security while calling for $65bn in cuts in areas such as health insurance for the elderly and long-term entitlement reform.

Joshua Bolten, director of the Office of Management and Budget, said meeting "national priorities" would require "tightening our belts elsewhere".

The budget would hold overall discretionary spending below the inflation rate in 2007. The requests for a 6.9 per cent increase in defence spending and 3.3 per cent in homeland security spending, meant that cuts of about 0.5 per cent would be needed in other areas.

The budget included cuts for a number of departments, including agriculture, education, health and the justice department. Mr Bush identified 141 discretionary programmes as poorly performing or unnecessary, including programmes that Congress had refused to cut last year. The White House proposed that 154 programmes be cut last year, and Congress cut 89 of them.

The budget also called for cuts of $65bn in Medicare, the medical programme for the elderly, and other domestic entitlement programmes over the next five years. The biggest part would come from slowing the growth of Medicare spending to save $36bn over the next five years, a controversial proposal in an election year.

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Last year, the White House's efforts to overhaul Social Security, the federal pension system, failed in the face of opposition from both Republicans and Democrats on Capitol Hill.

The White House forecast the deficit in the 2006 fiscal year at $423bn - a new record - or 3.2 per cent of gross domestic product. It said this would fall to $354bn or 2.6 per cent of GDP in the 2007 fiscal year, and said it remained on track, under certain assumptions, to reduce the fiscal deficit to close to 1 per cent of GDP by the end of the decade.

Independent economists have questioned the deficit forecasts, owing to the spending assumptions and the increases in revenue under the Alternative Minimum Tax.

The 2006 deficit included the $120bn for the cost of the war in Iraq and Afghanistan, of which $50bn has already been approved by Congress. The White House did not include the costs for Iraq and Afghanistan in the 2007 deficit forecast.

Mr Bush again called for the tax cuts passed in his first term, some of which are set to expire, to be made permanent. Yesterday's budget document was the first time it included the cost of making the tax cuts permanent, in terms of the foregone revenue, in its five-year budget plan. It estimated the cost in the 2011 fiscal year at $120bn, in terms of foregone revenue. That is well below the estimate of the non-partisan Congressional Budget Office, which has estimated that cost of extending tax cuts at $195bn in 2011.




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Role of Guard, Reserves to Lessen Overseas By LOLITA C. BALDOR, Associated Press Writer

The National Guard and Reserves will play a much smaller role next year in Iraq and Afghanistan, dropping to less than one-fifth of overall U.S. forces there, the nation's top military officer told senators Tuesday.

In response to repeated questions about the strain on reserve forces on the front lines, Gen. Peter Pace, chairman of the Joint Chiefs of Staff, told the Senate Armed Services Committee that Guard and Reserves will make up just 19 percent of the forces deployed in Iraq and Afghanistan over the next year.

Currently they make up about 30 percent of U.S. forces in those countries, Pace said. That means the planned reduction would lower the reserves' proportion of total American forces in Iraq and Afghanistan by about one third.

There are now about 138,000 American troops in Iraq and 19,000 more in Afghanistan.

The planned reduction in reserves comes as Bush administration officials have been saying they hope to reduce the numbers of U.S. troops in Iraq this year, assuming the Iraqi government and its forces can take a wider role in the war and keeping order.

The Bush administration has been under pressure to bring more American troops home. A study commissioned by the Pentagon said last month that the wear and tear of the U.S. deployment in Iraq was beginning to wear down the Army and questioned how much longer it could continue operating there at full effectiveness.

Reserve forces have made up as much as 40 percent of U.S. forces in Iraq and Afghanistan. The number of Army National Guard soldiers in Iraq and Afghanistan peaked at 69,416 last September, with most in Iraq.

Gen. Peter Schoomaker, the top Army officer, told the senators that heavy use of the Guard and Reserve has given the Army time to reorganize and prepare for its regular troops to take on a broader role beginning in March.

Defense Secretary Donald H. Rumsfeld, meanwhile, told the panel that continued corruption in Iraq could damage efforts to create a democracy there and it is up to the Iraqis to seize control and take more responsibility for their country.

"It's true that violence, corruption and criminality continue to pose challenges in Iraq" and are "so corrosive of democracy," he said.

"It's critically important that it be attacked and that the new leadership in that country be measured against their commitment to attack corruption," he added.

Rumsfeld provided no specific examples. But there have been recent allegations that some revenue from Iraq's slowly rebuilding oil industry have been siphoned to help finance the insurgency there.

Rumsfeld added that "our awareness of corruption is increasing," because coalition officials are doing more to investigate those problems within the government.

Committee chairman John Warner, R-Va., said the next six months would be critical in Iraq and will be key to the eventual withdrawal of U.S. troops and coalition forces. He said increasing problems with corruption in Iraq make it more difficult for coalition forces.

Rumsfeld faced criticism from one committee member who said the $439.3 billion defense budget for 2007 that President Bush proposed on Monday is not responsible because it doesn't reflect the billions of dollars that will be spent on Iraq and Afghanistan.

Sen. Carl Levin (news, bio, voting record), D-Mich., also questioned whether the U.S. will be able to sustain necessary troop levels in Iraq, where difficult conditions are wearing down both people and equipment. A report conducted for the Pentagon drew a similar conclusion last month.

Bush proposed an initial payment of $50 billion for those wars next year, compared with $120 billion the administration says will be needed this year.

Rumsfeld also said the U.S. military must continue to change in order to defend the nation against enemy terrorists who could acquire a nuclear weapon or launch a chemical attack against a major U.S. city, Rumsfeld told the Senate Armed Services Committee.

"No nation, no matter how powerful, has the resources or capability to defend everywhere, at every moment of the day or night, against every conceivable type of attack," said Rumsfeld.

He said Bush's new Pentagon budget — a 7 percent boost over this year — would help pay for the military's transformation into a more flexible fighting force. Transformation includes large spending increases for special operations forces, unmanned vehicles, foreign language skills and gathering intelligence.

The new plan includes White House estimates that the country's two overseas wars and its homeland defense could cost as much as $10 billion a month this year — nearly 50 percent more than last year.

During fiscal year 2005, which ended last Sept. 30, the Defense Department spent about $6.8 billion a month on operations in Iraq and Afghanistan and the replacement of equipment damaged or destroyed there.

___

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