President Clinton's FY 1996-1997 defense budget begins implementation of the Department's FY 1996-2001 Future Years Defense Program (FYDP). Both continue the restructuring of America's defense posture to reflect the end of the Cold War and the collapse of the Soviet Union.
The Clinton Administration's blueprint for defense restructuring has been the Bottom-Up Review (BUR), which was completed in September 1993 and reflected in last year's budget submission and the FY 1995-1999 FYDP. In preparing this new budget and FYDP, DoD leaders carried out a thorough, year-long assessment of defense strategy, force structure, priorities, and programs. The assessment was informed by all available sources of information, including: U.S. operations in Somalia, the Persian Gulf, Haiti, and elsewhere; military exercises and studies; and feedback from commanders and troops serving at home and abroad. In general, the assessment validated the primary recommendations of the BUR, although this year's budget contains important differences compared to last year's -- for example, full military pay raises authorized under current law.
America's future security will be robustly protected with the dollars allocated to DoD by the President. The new budget and FYDP strike a prudent balance between immediate military needs, like readiness, and long-term safeguards, like basic scientific research. They also are consistent with the nation's pressing fiscal constraints.
THE DEFENSE TOPLINE
The President's FY 1996 budget requests $246.0 billion in budget authority and $250.0 billion in outlays for the Department of Defense. The topline amounts shown in Table VII-1 are projected to be sufficient to support the FY 1996-2001 FYDP. The topline for those six years includes the $25 billion that President Clinton added to strengthen readiness, fund higher military pay raises and other quality of life improvements, and provide for real growth in FY 2000-2001 to help pay for weapons modernization.
Several months before the President's decision, DoD officials recognized that they faced a potential gap of $49 billion between the defense topline amounts projected for FY 1996-2001 and the likely cost of the FY 1996-2001 FYDP if it included full military pay raises and strong support for force readiness and military quality of life. As a result of this possible gap, the Deputy Secretary of Defense directed a study of possible modernization program reductions, in order to support higher priority spending for readiness and people.
During final preparation of the FY 1996 budget and FY 1996-2001 FYDP, this $49 billion gap was eliminated by the following:
As an example of the lower than expected future inflation, the Employment Cost Index, on which by law military pay is based, has been set at 2.9 percent for FY 1996, down from last year's projection of 3.7 percent. This lower projection is consistent with the fact that FY 1994 inflation turned out to be less than previously estimated.
None of the $25 billion from the President is aimed at covering DoD's unbudgeted spending for ongoing contingency operations, primarily in Haiti, Bosnia, and Southwest Asia. To cover those incremental costs, an FY 1995 emergency supplemental appropriations request is being forwarded to Congress at about the same time as the President's budget.
In determining funding needed to support the FYDP, individual programs were properly priced based on current estimates of inflation. The Department also used realistic projections for future program costs and likely savings from reforms and other changes.
Requested FY 1996 DoD budget authority is, in real terms, 39 percent below FY 1985, the peak year for inflation-adjusted defense budget authority since the Korean War. (See Table VII-2.) Under the President's budget, by FY 1997 the cumulative real decline since FY 1985 will reach 41 percent. In FY 1998 and FY 1999, DoD budget authority will rise just enough to keep pace with inflation, then experience a real increase in FY 2000 and FY 2001, primarily because of higher funding for procurement.
As a share of America's gross domestic product, DoD outlays are expected to fall to 3.4 percent in FY 1996, well below any time since before World War II. (See chart on preceding page.) Other long-term trends for defense spending are detailed in Appendix B. Budget authority by appropriations title and by DoD component, in current and constant (inflation-adjusted) dollars, is also shown in Appendix B.
PRIORITIES IN THE FYDP AND FY 1996 BUDGET
People, Quality of Life, and Readiness
The new budget and FYDP give top priority to keeping U.S. forces ready to fight and win. Above all this means taking good care of uniformed people and their families, which in turn requires strong support for quality of life issues like pay, housing, and medical services. Putting people first and ensuring high readiness are mutually reinforcing goals. On the one hand, preserving the high morale and quality of people depends on enabling them to train rigorously and prepare properly for possible future combat. On the other hand, the quality and morale of men and women in uniform determine -- more than any other factors -- the readiness of America's armed forces.
A rough measure of DoD support for readiness is funding for Operation and Maintenance (O&M) accounts, from which come spending for training, supplies, maintenance of weapons and equipment, and other readiness determinants. In real terms, FY 1996 O&M budget authority is only about 16 percent below its FY 1985 Cold War peak. This is less than half the 39 percent decline in overall DoD budget authority for FY 1985-1996. Moreover, by 1996 the size of U.S. forces and inventories of equipment and facilities will have declined by over 30 percent from 1985 levels; thus, FY 1996 O&M funding compares even more favorably with Cold War levels since it supports fewer forces and less infrastructure.
The preceding data corroborates what is the real measure of readiness -- the actual preparedness and performance of U.S. forces. When called upon during crises, America's armed forces continue to react swiftly and decisively. However, when unbudgeted missions arise, O&M funds often must be diverted from forces not involved; readiness suffers when this happens. The new FYDP and FY 1996 budget provide strong support for readiness, but they cannot accommodate major diversions of O&M funds to unrequested or unbudgeted uses. When O&M dollars and other resources decline unexpectedly, readiness will suffer unless those resources are replaced and/or supplemented expeditiously.
Force Structure and End Strength
As shown in Table VII-3, by FY 1996 the BUR-based restructuring of U.S. forces will be nearly complete.
Table VII-4 shows the decline in personnel strengths since FY 1987, the post-Vietnam War peak for the end strength of both active duty military and DoD civilians. (Selected Reserve strength peaked at 1,137,600 in FY 1991.) The decrease in DoD civilians reflects reductions in forces and facilities, as well as reforms to streamline defense infrastructure and improve management. Other personnel data is in Appendix C.
Procurement and Research and Development(R&D)
The greatest drop in spending since the late 1980s has been for procurement. In FY 1985, budget authority for procurement peaked at $96.8 billion, which equates to $135.7 billion in constant FY 1996 dollars. FY 1996 requested budget authority for procurement is $39.4 billion. Thus in real terms, DoD budget authority for procurement declined by 71 percent between FY 1985 and FY 1996. This is nearly twice the FY 1985-1996 decline for total DoD budget authority (39 percent).
The new FYDP begins the recapitalization of U.S. forces -- that is, the modernization of weapons and equipment to ensure that they remain qualitatively superior to those of likely future adversaries. To fund the carefully planned upgrading of existing systems and the fielding of new ones when required, budget authority for procurement will experience a real increase of 47 percent between FY 1996 and FY 2001. Specific modernization programs are detailed in the Defense Components chapters.
Streamlining Defense Infrastructure
Streamlining the U.S. defense infrastructure (bases, facilities, and support organizations) is a critical part of the restructuring of America's defense posture. It requires both reductions to infrastructure, as well as realignment to achieve optimum effectiveness and efficiency. Major reductions are being accomplished through the base realignment and closure process described in the chapter on Infrastructure and Logistics.
DEFENSE BUDGET ISSUES
Readiness and Contingency Operations Costs
Ever since America fully embraced its global leadership role in the aftermath of World War II, U.S. Presidents have ordered unplanned deployments of the nation's forces for diverse security and humanitarian operations. Over the years, Congress has been asked to approve supplemental appropriations to help the Department of Defense cover its costs for such unbudgeted operations, and the response has been nearly always favorable. For example, to help DoD cover its FY 1994 costs for contingency operations, Congress last year passed two emergency supplemental appropriations requests totaling $1.5 billion.
Supplemental appropriations usually are not passed until several months after contingency costs are incurred, and this is what can hurt force readiness. The main problem is, that while awaiting supplemental funds, DoD is very limited in what it can do to pay contingency costs without cancelling readiness-related spending. These limitations include:
The effect of these limitations is that without adequate supplemental appropriations well before the end of a fiscal year, unfunded contingencies can only be paid from O&M funds for that year, and that can hurt readiness. The vulnerability of readiness to such O&M cuts is magnified by the fact that DoD has little flexibility to divert funds from many programs within O&M accounts. DoD only has genuine flexibility to tap funds appropriated for operations/training, depot maintenance, and operations support and transportation. For FY 1995, these flexible funds total $27 billion; draining these accounts by $2.6 billion (DoD's estimated FY 1995 costs for unbudgeted contingencies) would damage readiness, especially because most of the impact would be concentrated in the fourth quarter of the fiscal year.
What can be done to prevent contingency operations from hurting readiness? Part of the answer is full and prompt funding of supplemental appropriations. In addition, the preservation of readiness requires a new legislative authority to deal with contingency operations. The Clinton Administration is asking Congress to grant the Secretary of Defense limited new authority to enable him to protect readiness more dependably in this and future years. This readiness preservation authority would operate like overdraft protection on a checking account. It would not give DoD more money. It would let DoD protect the readiness of operating units in anticipation of later supplemental funding. It provides for rescissions to pay for any use of the authority unless the President determines that emergency conditions exist that preclude such rescissions.
Categories of Defense Spending
During the past year, the Congressional Research Service (CRS) and others have identified what has been termed nondefense or nontraditional spending within the DoD budget. Their implication or assertion was that such spending could be cut without damage to U.S. military strength, or that it should be transferred to a more appropriate executive department.
The FY 1996 defense budget contains only funding that helps fulfill its statutory and inherent responsibilities. There are no nondefense programs in the FY 1996 budget.
To resolve the confusion created by CRS and others on this issue, it is useful to assess these programs in terms of the following budget categories:
As suggested by the above abbreviated list of alleged nondefense programs, the national security benefit of certain DoD expenditures is clear once properly analyzed. After the past year's rigorous program and budget review, DoD leaders believe that the FY 1996 defense budget presents the best fulfillment of their responsibilities as stewards of U.S. security.
There are programs appropriated by Congress every year which do not fit this framework and which present little value to the Department. The Department again calls on Congress to limit this diversion of limited funding from needed defense programs to unnecessary activities of marginal value to the national defense program.
Events since the end of the Cold War have demonstrated the need for America to retain a strong leadership role and a prudent defense posture. President Clinton's FY 1996 defense budget and FY 1996-2001 FYDP support that need, while remaining fiscally responsible.
