shores, interests, and friends. Simply put, we are more vulnerable than ever. Those that would do us harm may not be constrained by conventional norms of conduct or dissuaded by the vague threat of prosecution or retaliation. New concepts and capabilities must be considered to strengthen our deterrence and maintain our security. The President has properly called for a new "strategic framework" to address this new reality.

Clearly, we must be judicious in determining how and when we commit our Armed Forces around the world, but just as clearly this global leadership role requires robust, balanced, versatile, and credible Armed Forces to deter potential aggressors and defend our vital national interests, both at home and abroad. To remain a credible force, we must act now to develop the improved capabilities and concepts to protect our homeland, and deter and defeat anticipated and unanticipated threats in the future.

Indisputably, our Armed Forces are the best, most powerful in the world today. This well-deserved reputation was not earned without cost, however. While our servicemen and women have performed their military missions with great dedication and professionalism, our people, equipment, and infrastructure are increasingly stressed by the effects of the unprecedented number of military deployments over the past decade, combined with years of declining defense spending. As the service chiefs have told us repeatedly, future readiness and the upkeep of military facilities have been deferred to pay for current operations and maintenance.

Congress has been sensitive to this issue, providing much needed extra funding for defense in recent years. In fiscal year 2000, we reversed a 14-year decline in defense spending by authorizing a real increase in defense spending. Last year, we continued that momentum by providing an even larger increase for fiscal year 2001. Over the past 2 years, we have increased military pay by over 8 percent; restored retirement and health care benefits to keep faith with those who serve; raised procurement levels to begin recapitalization and modernization of aging equipment; and significantly increased investment in research and development for the future. While much has been done, much remains. The President is to be commended for the increases he has proposed in defense spending. Since taking office, the President has recommended increases totaling $38.2 billion. The increases he has proposed for fiscal year 2002 represent an almost 11 percent increase in defense spending above the amount available in fiscal year 2001. While this increase begins to address the shortfalls, I fear it may not be enough.

There is one area of the budget before us I specifically want to highlight—the funding for the development and deployment of missile defenses. Ten years after the Gulf War demonstrated our vulnerability to ballistic missile attack, our forces overseas and our homeland remain defenseless. The Rumsfeld Commission highlighted-and the North Koreans demonstrated-the proliferation and growing sophistication of these ballistic missile technologies increasingly available to rogue states and lawless elements. We must move rapidly to comply with the Cochran Act and deploy missile defenses, "as soon as technologically possible." I would remind my colleagues that this act, which was passed overwhelmingly by the Senate-973-and signed into law by the President, limits deployment only by technological progress. There are no limitations based on treaty restrictions. The budget request of $8.3 billion for missile defense is a step in the right direction.

There is a growing consensus in Congress, in the new administration, and among the American people that significant new investment in defense is necessary and prudent. I credit the joint chiefs for the courageous role they have played in building this consensus. Beginning in September 1998, and at least once a year since then, the chiefs have come before us to testify to critical shortfalls in defense spending. I simply ask now, is the budget amendment before us sufficient to meet the nearterm and long-term needs of the respective services?

General Shelton, you and the Service Chiefs have often spoken of a strategy-resource mismatch. We have followed a strategy that has led to a geometric rise in the commitment of our forces, without a corresponding increase in resources. Secretary Rumsfeld, we are all very familiar with the review process you have undertaken to address our military strategy and anxiously await the recommendations you will make upon conclusion of the Quadrennial Defense Review (QDR). Crafting a strategy that more realistically anticipates near-term, as well as emerging threats is a noble goal. Whatever strategy is ultimately adopted must be adequately funded, lest we create another mismatch at a reduced level of capability.

Mr. Secretary, we look forward to working with you to ensure we keep faith with our Armed Forces to fully fund all that we ask them to do. We also look forward to forthright dialogue and partnership that must be a part of our deliberations this year, as well as the fiscal year 2003 budget process and beyond, as we truly begin

to turn this mighty ship you lead to best confront the challenges of today, and the ones that lie ahead.

Thank you.

Senator WARNER. At this time I would also like to insert Senator Thurmond's and Senator Hutchinson's statements for the record. [The prepared statements of Senators Thurmond and Hutchinson follow:]

PREPARED STATEMENT BY SENATOR STROM THURMOND

Thank you, Mr. Chairman. Secretary Rumsfeld and General Shelton, I want to join our Čhairman, Senator Levin, and Ranking Member, Senator Warner, in welcoming you to this long overdue hearing on the fiscal year 2002 budget. Mr. Secretary, you have been very busy during the past 5 months and have stirred up much dust. I congratulate you for setting into motion a critical review of our defense strategy and the operations of the Department of Defense. I look forward to the conclusions of your efforts.

General Shelton, although this may not be your last appearance before the committee, it will be your last posture hearing. You have weathered many storms during your 4 years as Chairman of the Joint Chiefs of Staff and will be remembered for the many actions you advocated to improve the quality of life for our military personnel and their families. I expect that I speak for many here on the committee when I say, "thanks for a job well done!"

Mr. Chairman, as we begin the process that culminates in the National Defense Authorization Act for Fiscal Year 2002, I would like to share a quote from a poem by Elizabeth Barrett Browning:

Happy are all free people, too strong to be dispossessed. But blessed are those among nations who dare to be strong for the rest!

The United States of America is a blessed nation because those who proceeded us had the foresight to provide for the best equipped, trained, and motivated Armed Forces in the history of our great Nation. By our strength we have become the protector of the rest of the world and must not shed that mantle of responsibility. The budget that we will consider over the next several months will provide for the continuation of our leadership whether in the form of a missile defense system, new high technology weapons or the best quality of life for the men and women who wear the uniforms of our military services.

I do not think that anyone will dispute the fact that over the past several years our Armed Forces have become frayed from over commitments and under funding. We must reverse that trend. I believe this budget amendment, although less than many of us had hoped for, is a good start. With this amendment, President Bush will increase the defense budget by more than $38 billion over the fiscal year 2001 defense budget. More importantly, the increase will provide real benefits in terms of improved family housing, readiness, and research and development. It will also provide robust funding for a National Missile Defense program which I consider the most urgent requirement for our Nation's security.

Mr. Chairman, despite all the positive aspects of this budget, I believe it does not adequately fund the modernization of our Armed Forces. It is still short of meeting the standard of revitalizing our infrastructure every 67 years. It will not close the pay gap between the private sector and the military. More importantly, it assumes almost $1 billion in savings or efficiencies that are not going to be realized.

Mr. Chairman, I appreciate the fact that fiscal and time constraints will leave us little flexibility to make significant changes to the budget request. However, we must ensure that we maximize the resources that are available. I intend to work with you, Senator Warner and Secretary Rumsfeld, to ensure that we achieve that goal. Thank you, Mr. Chairman.

PREPARED STATEMENT BY SENATOR TIM HUTCHINSON

Mr. Chairman, the President's Fiscal Year 2002 Defense Budget Amendment directly addresses areas of critical need in our military. It places the needs of our troops first, and places special emphasis on quality of life issues. Mr. Secretary you should be applauded for your efforts in shaping a budget that will significantly improve morale and retention.

I am particularly pleased about the level of funding provided for military healthcare. Last year, as Chairman of the Subcommittee on Personnel, I worked very hard to improved the military healthcare system. In cooperation with Senator

Warner and other members of this committee, we passed Warner-Hutchinson Tricare-for-Life, as well a comprehensive pharmacy benefit. The President's budget includes substantially increased funding for these and other healthcare items.

I do have concerns about some specific programmatic decisions, and I look forward to working with the administration and my colleagues on this committee regarding these issues. However, this budget provides needed funding for personnel, missile defense, and military construction. I look forward to further reviewing the details of the President's submission.

Chairman LEVIN. Thank you, Senator Warner.
Secretary Rumsfeld.

STATEMENT OF HON. DONALD H. RUMSFELD, SECRETARY OF DEFENSE; ACCOMPANIED BY DR. DOV S. ZAKHEIM, UNDER SECRETARY OF DEFENSE (COMPTROLLER)

Secretary RUMSFELD. Mr. Chairman, I had planned to make about 10 to 12 minutes of remarks and ask that my statement be put in the record. I can do that, or if the Senators have to leave, I could delay it until they have a chance. I can do whatever you want.

Chairman LEVIN. With leave of my colleagues on this side, because of that caucus, instead of alternating, let's have three or four on the Republican side ask their questions first and then come to us. Would that be agreeable? I am willing to forego my first line of questions as well.

We did not have a chance to talk about this-let's start out in that direction. Secretary Rumsfeld, why don't you start with your 10-minute opening, and then we will call on our Republican colleagues, at least for a few minutes each, while they are here, to give them a chance to ask a few questions, and then we will take the same number on this side.

Senator WARNER. Thank you, Mr. Chairman, for that very special accommodation.

Chairman LEVIN. Secretary Rumsfeld, please proceed with your opening.

Secretary RUMSFELD. Thank you, Mr. Chairman, and members of the committee.

In discussing the budget, it seems to me it is useful to begin by confronting some less than pleasant but important facts. The U.S. Armed Forces have been underfunded in a number of respects over a sustained period of years. We have been living off of the substantial investments made in the 1970s and the 1980s. Shortfalls exist today in a number of areas, shortfalls that I must say are considerably worse than I had anticipated when I arrived.

Mr. Chairman, as you and members of the committee know well, the U.S. Armed Forces are the best-trained, best-equipped, and most powerful military force on the face of the earth, and certainly the members of this committee have contributed greatly to that strength. Peace, prosperity, and freedom across the world are underpinned by the stability and security that the men and women of the Armed Forces provide.

I was recently in Kosovo and Turkey to visit our troops. They are dedicated men and women who are ready, willing, and able to take on any mission the Government may ask of them. Our country has many strengths. Indeed, in some ways it is because our forces are so capable that we face the challenges we do. Over much of the

nineties, the U.S. has simultaneously underfunded and overused the force, and it has taken its toll. Asked to do more with less, they have saluted, done their best, but it has been at the cost of needed investment in infrastructure, maintenance, and procurement.

With an end to the Cold War, there was an appropriate drawdown, a well-earned peace dividend, but it went too far, in my view, overshooting the mark by a good margin. We are certainly well past the time to take steps to arrest the declines and put the Armed Forces on a path to better health.

For example, many of our facilities are dilapidated and need repair and replacement. There are shortfalls in spare parts, flying hours, training and personnel. Navy nondeployed force readiness is down to 43 percent from 63 percent in 1991. Only 69 percent of the Air Force total combat units are mission-ready, down from 91 percent in 1996. Of the Army's major air and ground combat systems, 75 percent are beyond their half life, and 60 percent of all military housing is characterized as substandard.

While the DOD was using its equipment at increased tempos, procurement of new equipment fell significantly below the levels necessary to sustain existing forces, leading to steady increases in the average age of the equipment. It was called a procurement holiday.

I know you agree that we have an obligation to make certain that the men and women in the Armed Forces have the proper equipment, training, facilities, and the most advanced technologies available to them. The President's 2002 defense budget adds needed funds to begin stabilizing that force. Using the 2001 enacted budget of $296.3 billion as a baseline, the President earlier this year issued a budget blueprint that outlined a 2002 baseline budget of $310.5 billion. This included $4.4 billion in proposed new money for presidential initiatives in pay, housing, and R&D. The request before you proposes to raise that investment $18.4 billion, as the chairman said, to a total of $328.9 billion.

Taken together, these increases amount to $22.8 billion. I am told that represents the largest peacetime increase in defense spending since the mid-1980s. It certainly would represent a significant investment of the taxpayer's money. But let's be clear about this increase; while significant, and while we certainly need every cent of it, it does not get us well. The underinvestment went on far too long, the gap is too great, and there is no way it can be fixed in a year, or even 6 years.

I want to be very straightforward about what this budget will do and will not do. This budget will put us on a path to recovery in some categories, such as military pay, housing, readiness training, and health care. It will start an improvement but leave us short of our goal in others, such as maintenance of weapons systems and reaching best standards with respect to facilities replacement. In other categories there will be continued shortfalls and modest, if any, improvements.

Considering the private sector, the standard for overall facility replacement is 57 years. The DOD's target is 67 years. Under the 2001 enacted budget, the DOD was replacing facilities at an unbelievably poor average rate of 192 years. The 2002 budget gets us closer. It would allow us to replace facilities at an average of 101

years. That is an improvement, but it is still a long way from the acceptable target of 67 years.

In my view, we could do better. With a round of base closings and adjustments that reduce unneeded facilities, we could focus the funds on facilities that we actually need and get the replacement rate down to a lower level. Without base closings, to achieve the target it would require an additional $7 billion a year for 9 years, or a total of $63 billion.

Mr. Chairman, let me just say a word about the 2003 budget. Today, we are proposing $328.9 billion defense budget for 2002. But to keep the Department going next year on a straight line basis with no substantial improvements, just covering the cost of inflation, honestly budgeting for outyears in major weapons systems, and funding health care, which is going to be another $4-plus billion, according to the actuaries, we would need a budget of about $347 billion. That is another $18 billion increase, which would be before addressing important transformation issues.

So where do we find the money? We simply have to achieve some cost savings. We have an obligation to the taxpayers to spend their money wisely. Today, DOD has substantial overhead. Despite 128 acquisition reform studies, we have an acquisition system that is antiquated. It takes twice as long as it did in 1975 to produce a weapons system, and this is at a time when technology generations are shortened to something like a year or two, or 18 months.

We have processes and regulations so onerous that a number of commercial businesses developing military technologies simply do not want to do business with the Department. The Department needs greater freedom to manage so we can use the taxpayer's money more wisely. For example, I think we ought to consider contracting out commissaries, housing, and some other services that are not considered core military competencies, which can be performed more efficiently in the private sector.

For fiscal 2002, the Department proposes a pilot program to see if this is a good idea; the Army and Marine Corps will contract out certain commissaries, and the Navy will contract out refueling support, including tanker aircraft.

Mr. Chairman, I cannot promise it, but I have never seen an organization that could not operate at something like 5 percent more efficiency if it had the freedom to do so. It is not possible today, given all the restrictions on the way the Department must function.

With those savings, we could increase the shipbuilding budget, which certainly needs it. We are on a six-ship basis now. It needs nine ships to maintain the 310-ship Navy. If we keep going in the direction we are going, we are going to end up down at 230 ships at a steady state and that simply is not enough. We could procure an additional 700 aircraft annually, rather than the 189, to help meet and reach a steady state requirement for the Army, Navy, and Air Force, at enormous savings in maintenance and repairs.

We have a big task ahead. Since the Cold War, we have a 30 percent smaller force doing 165 percent more missions. This President's budget proposes a large increase by any standard. It will allow us to make some improvements to the readiness, morale, and condition of our military. The taxpayers have a right to demand