The President's 2003 budget requests $94.3 billion for military pay and allowances, including $1.9 billion for an across-the-board 4.1 percent pay raise and $300 million for the option for targeted pay-raises for mid-grade officers and NCOs. It also includes $4.2 billion to improve military housing, putting the Department on track to eliminate most substandard housing by 2007-several years sooner than previously planned. It will also lower out-of-pocket housing costs for those living offbase from 11.3 percent today to 7.5 percent in 2003-putting us on track to eliminate all out of pocket housing costs for the men and women in uniform by 2005. The budget also includes $10 billion for education, training, and recruiting, and $18.8 billion to cover the most realistic cost estimates of military healthcare.

Together, these investments in people are critical, because smart weapons are worthless to us unless they are in the hands of smart, well-trained soldiers, sailors, airmen, and marines.

COST SAVINGS

While this budget proposes increases in a number of important areas, it also includes a number of terminations. We have proposed terminating a number of programs over the next 5 years that were not in line with the new defense strategy, or which were having program difficulties. These include the DD-21, Navy Area Missile Defense, 18 Army legacy programs, and the Peacekeeper Missile. We also accelerated retirement of a number of aging and expensive to maintain capabilities, such as the F-14 and 1000 Vietnam-era helicopters.

We have focused modernization efforts on programs that support transformation. We restructured certain programs that were not meeting hurdles, such as the V22 Osprey, Comanche, and Space-based Infrared Radar System (SBIRS) programs. Regarding V-22, the production rate has been slowed while attention is focused on correcting the serious technical problems identified by the blue ribbon panel and a rigorous flight test program is to be conducted to determine whether it is safe and reliable. The restructured programs reflect cost estimates and delivery dates that should be more realistic.

We are working to generate savings and efficiency by managing the Department in a more business-like manner. For example, today, the B-1 bomber cannot operate effectively in combat environment where there is a serious anti-aircraft threat. So the Air Force is reducing the B-1 bomber fleet by about one third, and using the savings to modernize the remaining aircraft with new precision weapons, self-protection systems, and reliability upgrades that will make them suitable for use in future conflicts. This should add some $1.5 billion of advanced combat capability to today's aging B-1 fleet over the next 5 years-without requiring additional dollars from the taxpayers. These are the kinds of practices we are encouraging throughout the Department.

We are also proceeding toward our goal of a 15 percent reduction in headquarters staffing and the Senior Executive Council is finding additional ways to manage DOD more efficiently.

The budget reflects over $9 billion in redirected funds from acquisition program changes, management improvements, and other initiatives-savings that help to fund transformation and other pressing requirements.

We would have liked to save more. Several things have held us back. One example was our decision not to make deep cuts in manpower. Before September 11, the services were considering such cuts as trade-offs for other needs. In retrospect we are finding that to fight the war on terrorism and fulfill the many emergency homeland defense responsibilities, we have had to call up over 70,000 guard and Reserves. It is clear now-in the midst of the war on terror, the final dimensions of which are unknown-that it is not the time to cut manpower. Our goal is to avoid having to increase manpower end-strength by refocusing our country's forces, by tightening up on the use of military manpower for non-military purposes, and by phasing down some of the domestic and the many of the international activities that the U.S. military is currently engaged in.

Defense is a manpower intensive business-some 60 percent of defense costs are related to manpower (pay, healthcare, etc.). That leaves only about 40 percent of the operating budget for everything else. So without end-strength cuts, DOD is limited in what can be done.

Second, Congress's decision to put off base-closure for 2 more years means that the Department will have to continue supporting between 20-25 percent more infrastructure than is needed to support the force. I know that members of this Committee worked hard to prevent a delay-and we appreciate that support. But the decision to holdup the process another 2 years will end up costing the taxpayers in the range of $6 billion annually.

Further, because of the new force protection requirements for forces here in the U.S., DOD is forced to spend to protect 25 percent more bases than we need.

Moreover, we are forced to put off investments in infrastructure replacement because we can't know which bases will be kept and which may be closed. It would have been a waste of the taxpayers' money to invest significant sums in modernizing bases that could eventually be closed.

By putting off modernization, we are making the cost of modernizing more expensive since the costs of repairing and replacing decrepit facilities grow exponentially each year the investments are put off. So the decision to delay base closure will ultimately be an expensive one for the taxpayers.

We stand by our goal of reducing the replacement rate for DOD facilities from the current and unacceptable 121 years, to a rate of 67 years (which is closer to the commercial standard). We have dedicated some $20 billion over the 2003-2007 FYDP to this end. But most of those investments had to be delayed until the outyears, when we will know which facilities will be closed.

The 2-year delay in base-closure should not taken as an opportunity to try to "BRAC-proof" certain bases and facilities. Earmarks directing infrastructure spending on facilities that the taxpayers of America don't need and that eventually could be closed would be compounding the waste the delay in BRAC is already causing. This leads to another area of concern: earmarks. Mr. Chairman, I asked DOD Comptroller Dov Zakheim to check, and he reports to me that last year alone-in the 2002 budget-Congress made changes to 2,022 individual programs and line items. In some cases, Congress either increased or cut requested programs, and in others Congress added funding for un-requested programs.

Congress changed 13 percent of all Research, Development, Test and Evaluation programs-995 different changes in all; 8.6 percent of all procurement programs436 individual changes; and 15 percent of all military construction programs-146 individual changes.

Now each of these individual changes probably seems modest-and each one is. But in the aggregate, their effect is substantial. We find the Department like Gulliver, with thousands of Lilliputian threads over the Department. No one, individual thread kept Gulliver down. But in the aggregate, he couldn't get up.

Between the 2,000-plus earmarks and changes, and the hundreds of reports Congress requires DOD to prepare every year, we find ourselves killing thousands and thousands of trees, and spending hour after hour trying to figure our how we can do our jobs and show respect for the taxpayers dollars that they deserve.

Mr. Chairman, I don't know quite how it happened, but over the past 2 decades distrust seems to have developed between Congress and the executive branch. Possibly the executive branch did some things that caused distrust in Congress, and Congress has, for whatever reasons, decided that they want to try to micromanage the Department by putting literally thousands of earmarks on the legislation. We need to find a compromise of some sort.

TRADE OFFS

After considering the costs of keeping the Department moving on a straight-line, plus the costs of the war, we have roughly a $9.8 billion increase. That's a lot of money. But it required us to make a number of difficult trade-offs.

• We were not able to meet our objective of lowering average age of tactical aircraft. However, we are investing in unmanned aircraft, and in the F-22 and JSF, which require significant upfront investments, but will not come on line for several years.

• While the budget proposes faster growth in Science and Technology (S&T), we were not able to meet our goal of 3 percent of the budget.

• We have not been able to fund shipbuilding at replacement rates in 2003-which means we remain on a downward course that, if not unchecked, could reduce the size of the Navy to a clearly unacceptable level in the decades ahead.

The fiscal year 2003 shipbuilding budget is $8.6 billion and procures 5 ships-two DDG-51 destroyers and one Virginia class submarine, one LPD-17 Transport Dock Ship, and one T-AKE Dry Cargo Ship. There are several reasons for this level. One problem involves contractor difficulties. Also, we are forced to fund ongoing programs where, for whatever reasons, cost estimates were too low.

Second, the Navy has made a calculation that, in the short term, we can maintain the required force level at the current procurement rate because the current average age of the fleet is at an acceptable level. Specifically, we are still benefiting from the sizable shipbuilding investments of the 1980s. The Navy concluded that it was more important now to deal with significant needs that had been under-funded in

recent years, such as shortfalls in munitions, spare parts, and steaming hours, which are all fully funded in this budget. Further, the budget would also invest significant sums in SSGN conversion, which do not count in the shipbuilding totals because, while they do provide new capabilities, they do not buy new ships.

To sustain the Navy at acceptable levels, the U.S. needs to build eight or nine ships annually. The proposed Future Years Defense Program budgets for procurement of 5 ships in fiscal year 2004, 7 ships in 2005, 7 ships in 2006, and 10 ships in 2007.

So we have not done everything we hoped to be able to do. But these remain our goals and we intend to get these trends on the upswing in the years ahead.

CONCLUSION

Three hundred seventy-nine billion dollars is a great deal of money. But consider: the New York City comptroller's office has estimated the local economic cost of the September 11 attacks on the city alone will add up to about $100 billion over the next 3 years. Money magazine estimates of the cost of September 11 to the U.S. economy at about $170 billion last year-and some estimates range as high as $250 billion a year in lost productivity, sales, jobs, airline revenue, media and advertising, and costlier insurance for homes and businesses.

That is not to mention the cost in human lives and the pain and suffering of so many thousands of Americans who lost husbands and wives, fathers and mothers, sons and daughters, and sisters and brothers that terrible day.

The message is clear: we must invest so our country can deter and defend against the now clear new threats-against those who might wish to attack and kill our people. All together, this proposed defense budget amounts to 3.3 percent of our Nation's Gross Domestic Product. Compared to the cost in lives and treasure if we fail to stop another September 11 or worse, it is cheap at that price.

It is a tragedy repeated throughout history: free nations seem to have difficulty recognizing the need to invest in their Armed Forces until a crisis has already arrived. In 1950-just 5 years after the allied victory in World War II-General Ŏmar Bradley urged President Truman to spend at least $18 billion on defense. The Joint Chiefs requested an even higher amount at $23 billion, and the services' estimate was higher still at $30 billion. But the President concluded the country couldn't "afford" that much-$15 billion was as much as the U.S. could "afford."

Six months later, the United States was suddenly at war in Korea. Just as suddenly, the President, Congress, and the American people found they could “afford” $48 billion just fine-a 300 percent increase.

In this time of crisis, let us work together to make the investments necessary to win this war-and to prevent the next one. Let us do so chastened by our experiences on September 11, and with a renewed commitment to ensure that, once the fires burned out, the war ends, and the Nation rebuilds, we won't forget the lessons learned at the cost of so many innocent lives; that we won't go back to old ways of doing things. The lives of our children and grandchildren depend on it. Thank

you.

Chairman LEVIN. Thank you, Secretary Rumsfeld.

General Myers.

STATEMENT OF GEN. RICHARD B. MYERS, USAF, CHAIRMAN, JOINT CHIEFS OF STAFF

General MYERS. Mr. Chairman, Senator Warner, other distinguished members of the committee: Thank you very much for the opportunity to appear before you today. It is very much an honor to report on the state of our Nation's Armed Forces.

We are a military force and a Nation at war, and as the Secretary said, the attacks of September 11 shattered the prism through which we all looked at the world. In the span of a few minutes, we confirmed the historic reality that adversaries can strike at us anywhere in the world, even inside our own borders.

When President Bush came to the Pentagon the following day, the assembled troops told him: We are ready, Mr. President. They spoke for themselves and all the men and women of our services. As we found out, they were right.

Take the crew of the U.S.S. Enterprise: on their way home from a 6-month deployment, they learned of the attacks. Each man and woman on board felt a shudder as the rudder came hard over and they increased to flank speed and came to a new heading to arrive off the Pakistani coast the next morning.

Or take the young marines of the 15th Marine Expeditionary Unit (MEU) aboard the U.S.S. Peleliu off the coast of Australia who began cleaning their weapons, knowing that they could in a short time be fired in combat.

Our bomber crews in receipt of alert orders began planning their strike missions a few days later, and our Army Rangers and Green Berets began to collect detailed intelligence as they received their orders to go fight in Afghanistan.

They were all ready to defend our freedom and to strike back against our Nation's enemies. Fighting together as a joint team, they have achieved much in the first phase of this global war against international terrorism. Like many of you, I visit some of them, and I saw them working hard on the front lines, getting the mission done regardless of the formidable obstacles that they had to overcome. I saw them proudly wearing their country's flag on the sleeves of their desert BDUs and on their flight suits. I saw in their eyes strength, courage, and commitment, and I knew these young Americans would get the job done.

As I talked with them, one message came through loud and clear: This is truly a total force effort. Unless you ask, you do not know whether you are talking to someone from the Reserve or Active component. Many of our Reservists and Guardsmen did not wait to be called up. They volunteered. I heard about one Navy Reservist who sold his business so he could serve without distraction. I think you will agree that these American heroes are unmatched in the world and we have every reason to be proud of them.

When I was a young fighter pilot, I never imagined that some day we would have to fly combat air patrols over Detroit, New York, and many other locations here at home. But that, along with other defensive actions, is exactly what we have done in the 5 months since this war began. These actions on the home front are called Operation Noble Eagle and they include more than 13,000 combat air patrol sorties over the United States, flown by the National Guard, Reserves, Active-Duty, and NATO air crews. The Air Force alone has committed 260 planes and 1,200 airmen flying almost 57,000 hours from 29 different bases.

We have also established a Homeland Security Joint Task Force to provide the command and control of our homeland security task. We are helping our busy Coast Guard by augmenting port security. We also have 7,200 national guard troops at 444 airports and we are protecting many critical infrastructure sites.

Our overseas offensive actions have included air, land, and maritime operations, with three primary objectives: to disrupt and destroy global terrorist organizations; to eliminate safe havens for terrorists; and to prevent access to weapons of mass destruction by terrorist groups.

General Tommy Franks and his entire team have done a tremendous job in Afghanistan with Operation Enduring Freedom and the results so far speak for themselves. Working closely with our coali

tion partners and Afghan opposition forces, we drove the Taliban from power and severely degraded the al Qaeda network. The plan worked and it continues to work. The Taliban were forced to surrender all major cities to opposition forces, and a number of Taliban and al Qaeda leadership personnel were either killed or captured. We destroyed their training camps, centers, and command and control sites.

For the first time, we combined humanitarian operations with combat operations as we air dropped rations, medical supplies, and shelters, thus helping avert a humanitarian disaster of potentially extraordinary proportions. Our efforts have helped the Afghan people reclaim their lives.

These results have been achieved with about 60,000 deployed troops in the Central Command area and about 4,000 on the ground in Afghanistan. Our success has been enabled by the following key factors: Clear and well-established national security goals; the overwhelming support of the American people; outstanding leadership from the President and the Secretary of Defense; great support from Congress; and close inter-agency coordination; patience in formulating our response to the attacks; great support from our coalition partners and the anti-Taliban forces; good planning from Central Command that was well executed; superb assistance from the services and supporting unified commands, particularly Transformation Command; flexibility and adaptability at the tactical level; and ultimately, our great soldiers, sailors, airmen, marines, and Coast Guardsmen who made it all happen.

But there remains much to do. Even as we continue the longterm effort to win this global war, we must also sustain other global commitments, such as Operation Northern Watch, Operation Southern Watch, other responsibilities in the Persian Gulf, the Balkans peacekeeping mission, and the defense of the Korean Peninsula.

To fulfil our range of commitments and protect our global interests, we must make the investments necessary to maintain the quality of our force while preparing for future challenges of the 21st century. The best means of accomplishing these goals are to improve our joint warfighting capability and transform the Armed Forces into a 21st century force.

With the help of Congress, we have come a long way in recent years toward improving our joint warfighting capabilities. Certainly the operations in Afghanistan are proof of our progress, but there is much more to be done.

To illustrate, let us consider the issue of interoperability. In recent years we have gotten pretty good at making sure that our legacy systems work well together. For example, we took a Cold War anti-submarine platform, the Navy's venerable P-3, put some different data links and sensors on it, and have used it in support of ground units to hunt for Taliban and al Qaeda in Afghanistan. We also used P-3s in tandem with AC-130 gunships, the Joint STARS, and Marine Corps attack helicopters. That they all worked together is a tribute to the ingenuity of all the people involved.

But we need to make sure that new systems are conceived, designed, and produced with joint warfighting requirements in mind. To do that, we need to change our thinking to look at new systems