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Office of the Press Secretary

For Immediate Release December 1, 1994
                            PRESS BRIEFING

The Briefing Room

1:18 P.M. EST

MS. MYERS: As was just announced, this entire briefing will be ON THE RECORD. Deputy Secretary of Defense John Deutch will make an opening statement and then take your questions.

So, Secretary Deutch.

DEPUTY SECRETARY DEUTCH: Thank you, Dee Dee. I would like to begin by describing in some -- a bit more detail the initiative that the President announced for defense. Let me begin by saying that since the beginning of the administration, the President has been insisting with the Secretary of Defense, the Joint Chiefs and others in the department two things: One was that we keep up readiness of our forces at a time when we are downsizing military forces. that has always been difficult in the past, in the history of this country after the first world war and the second world war. The President has insisted to the Department that the readiness is maintained at high levels as we downsize. And, secondly, that the bottom-up review program presented a rational and complete program that was fully funded to meet the new defense needs of the country. So the initiative that is being discussed today has to be seen in the context of both the consistent presidential insistence on readiness and, secondly, the bottom-up review, which has been adopted as the road map to where we are taking defense in this country.

If I may show you the first board, it summarizes the five elements in the President's initiative. The first is that the emergency supplemental of over $2 billion will be submitted for Fiscal '95. In January when Congress comes back with the Fiscal '96 budget, that will provide for costs that have already been paid during Fiscal '95 for contingency operations in Haiti, in the deployment to Kuwait, in Bosnia, for Cuban refugees, for other matters so that we will have funds replenished in the operations and maintenance accounts of the Department and provide for the readiness to avoid having any shortfall in readiness of our units.

Secondly, the President agreed to support and fund the quality of life improvements which Secretary Perry has announced previously as being of great importance to the men and women in uniform throughout the world.

Third, for the first time in many years -- perhaps ever -- the President has agreed to support and fully fund a military pay increase as provided by law through the end of the century, an important step for the men and women in uniform.

The President will add $25 billion to the top line of the Department to ensure -- and here this chart should go on to say adequate readiness, quality of life improvements in the military pay that I've just mentioned to you -- the $25 billion top-line increase is very important to providing the resources necessary, both to maintain readiness, quality of life and the military pay.

Finally, within this $25 billion, there are funds provided in the out-year towards the end of the century, at the end of the century, for needed modernization and recapitalization of our equipment for our forces.

I would also like to add that part of the program, although we are not going to announce anything today, has to do with modernization reductions. There will be some lower-priority programs that will be reduced, and that has been discussed for the past six months. The important point to make, however, is that the quality and the amount of those modernization reductions will be significantly reduced because of the availability of this $25 billion that the President has put into the program.

Let me say, from the perspective of the military and the civilians of the Department of Defense, this presidential initiative is very, very welcome indeed. Not only does it put full strength behind our readiness efforts, it also provides for the men and women in uniform, and there is a good news story here for modernization as well. As I will show you in a moment, it provides funds when they are required for modernizations at the end of the century, and at the same time, because of the additional funds, the cuts that were contemplated for modernization will be much reduced.

This is being greeted in the Department of Defense as being central to the President's consistent emphasis on maintaining readiness and funding the bottom-up review as a rational approach to defense policy and defense requirements in this new world.

We have worked all of this out in great detail with the Office of Management and Budget and with the National Security Council. We have Bob Bell here from the National Security Council, and this is an integrated approach by OMB, the Department and the NSC to make the President's instructions take place.

Let me turn to the next chart to give you an example of the types of qualitative areas where readiness will be increased. These are: full funding for training and op tempo. We will also make some very selective additions to -- (inaudible) -- strength to take care of areas where there have been particularly high personnel tempo increases in the contingency operations that we've seen during the past year -- AWACS crews and Patriot crews, Navy frigates being examples. We will be reducing the depot maintenance backlog and the facilities maintenance backlog that do provide a danger for readiness in the intermediate term and where some of the current indicators have shown that backlog is increasing more than we want.

May I have the next chart, please? The next chart illustrates the kind of quality of life improvements that we will be doing. Improved barracks for single men and women on military facilities throughout the country, more military family housing, increased child care. We will provide for cost of living for military individuals who live in high cost of living areas in the United States. There will be increase for morale, welfare and recreation in the Marine Corps -- especially hard-hit in recent years.

Bill Perry has insisted that before these quality of life increases are actually allocated, we have an outside panel consisting of retired military, enlisted, as well as general officers, other experts, to indicate exactly how this quality of life improvement money can make the best impact for the men and women in uniform.

Finally, let me show you the precise changes to the top line of the Department. This was the original guidance which was being followed by the Department last year for the six-year planning period under which we are trying to proceed through the bottom-up review. The Presidential decision that was announced today is at this level, with the additions as indicated on this chart. The total funding is $25 billion, it provides for the readiness enhancements, the quality of life and military pay.

I would like to make two observations about these numbers. First of all, you will see that the defense budget will still be declining from $252 billion this year to $246 billion next year. That is consistent with the plan that the Joint Chiefs and the civilians in the Department of Defense have committed themselves to an orderly drawdown. It is completely consistent with the bottom-up review. And we anticipate this, and so the $2 billion that are added here brings you closer to the '95 level, but the turnaround in the defense budget will only occur in Fiscal Year '98. That is consistent with the planning that we've had for the past two years.

Secondly, the funding in the out-years is much higher than in the near-term years. That not only helps the general budget problems that the President faces, but it also provides the real growth in the out-years when recapitalization and modernization dollars are needed.

In summary, the Department of Defense welcomes this presidential initiative in the strongest possible terms. It provides for readiness. And from our perspective it fully funds the bottom-up review and permits us to continue with the defense program that the President has instructed us.

Thank you very much.

Q The emergency supplemental would add to the deficit, correct?

DEPUTY SECRETARY DEUTCH: The emergency supplemental will change the top-line numbers and, therefore, yes, it will add to the deficit.

Q And could I ask you a follow-up question? Do you have an exact figure other than over $2 billion?

DEPUTY SECRETARY DEUTCH: We do not have an exact figure. Those numbers are being worked right now, but we will have a number -- when it's submitted in January, there, of course, would be a precise number.

Q Are there any plans to ask the Kuwaitis or any other partners to --

DEPUTY SECRETARY DEUTCH: Yes, there are. There are -- for the Kuwait expenses, we would have hope to get a significant return on that.

Q Will that reduce the $2 billion?

DEPUTY SECRETARY DEUTCH: No. That is what doesn't allow me today to give you precise numbers.

Q A follow-up on that, sir, if I may. Can you ascribe just roughly the $2 billion among Haiti, Bosnia, Kuwait -- what? What --

DEPUTY SECRETARY DEUTCH: I cannot give you a precise background -- but let me give you the big numbers. The big numbers are: Haiti, Kuwait, the cost of the Cuban migrant camp at Guantanamo and Bosnia. Those are the four big elements.

Q In that order? In that order?


Q Well, can you give us some order?

DEPUTY SECRETARY DEUTCH: I can, but not off the top of my head. I'll have to look it up and tell you. I can tell you --

Q To what extent is this a reaction to the news that three army divisions have slipped into these lower states of readiness? And do you stand by the statement you made last month that U.S. military forces now are as ready or more ready than they've ever been?

DEPUTY SECRETARY DEUTCH: Let me answer both points. First of all, the important point here is, this supplemental that we're asking for has to be granted early by Congress. If that supplemental is not granted early by Congress, it will be impossible for the units which will have reduced operations and maintenance expenses because they've been spent on contingencies to recapture high readiness. So if we don't have early action by Congress on the supplemental, the same shortfall that you mentioned in those three army divisions will occur again.

So, early action on the supplemental is the way to assure that that shortfall does not occur again.

Q But my question was, would you be doing this had not those three divisions gone into --

DEPUTY SECRETARY DEUTCH: Absolutely. Secretary Perry has said over and over again that -- when he submitted the supplemental for Fiscal '94, that these were required if we were going to avoid readiness shortfalls. Those readiness shortfalls inevitably happened because of the late action on the supplemental.

Q The second part of the question -- do you stand by your earlier statements?

DEPUTY SECRETARY DEUTCH: You know, there are times when you wish you could take a sentence back. That's one of the sentences I wish I could take back.

Q The $4 billion -- in the next two years of the President's term -- will he take offsets from other portions of the budget?

DEPUTY SECRETARY DEUTCH: Clearly, the additions here will have to come from somewhere in the federal budget. Now, that's not some -- a question I can address with -- but, I will tell you, a lot of it will come from a more efficient and more reformed activity in the government. And part of the reason we can get by with this budget is because we are running a more efficient government operation in the Department of Defense.

Q Can you just roughly break that down now? What proportion would be coming from stretch-outs of acquisition and what proportion from other departments, and what other funding sources?

DEPUTY SECRETARY DEUTCH: How this will be funded elsewhere in the federal budget? Is that the question?

Q The $25 billion, yes.

DEPUTY SECRETARY DEUTCH: The 25 billion? I am not the right person to address that. I am trying to tell you about the -- how this money will be used to protect the national defense. It obviously is a judgment that the President has made of the importance of having a strong defense and readiness that he has made this addition.

On the other hand, let me mention to you that when we discussed the bottom-up review, from the very beginning, we pointed out that there was a shortfall for military pay and inflation. It was a wedge in our program last year. This year there is no wedge. The reason that the Joint Chiefs and the civilian management in the department are so pleased with this program, is the wedge that was present when we first talked about the bottom-up review, is no longer present in this new program.

Q Secretary Deutch, could you assess what your chances of getting these numbers will be with the Republican Congress? And how difficult might it have been had Democrats maintained a majority?

DEPUTY SECRETARY DEUTCH: I can't speculate on that. I will say to you that this is the same program -- the same program that we have been talking about, that the President has been talking about since he first came over to the Pentagon the first time and we discussed with him the plans for the bottom-up review -- an emphasis on readiness, on fully funding the bottom-up review. The same program is what we are going to try and defend to the Congress as being what the country needs.

Q Given the fact that more than half of this isn't spent until after -- until the turn of the century and after, can you give us an idea of what weapons systems we're talking about.

DEPUTY SECRETARY DEUTCH: I cannot. One of the reasons that there has been some -- take some time to make those final decisions, is that we did not know where we would come out with this initiative from the President. Now that we have this number, what we can say is that those modernization reductions in the near-term will be less than would have otherwise been the case. And secondly, that modernization and recapitalization funds are provided in the outyears when we really have to replace the existing family of weapon systems. This is a good news story for modernization as well.

Q But you mean you didn't even have a wish list prioritized?

DEPUTY SECRETARY DEUTCH: No -- we absolutely had a wish list prioritized. The fact of the matter is, is to make the final decision we had to know what the full financial program was because the first priority of Secretary Perry and of the President was readiness, quality of life and military pay. Until we knew how -- what resources we had totally available, it was not clear how much we would have to go after the modernization accounts.

Q There's been as much -- reported as much as a $40 billion shortfall in Pentagon spending. Does this make up for part of that, and there's still a shortfall?

DEPUTY SECRETARY DEUTCH: It's a good question. From our perspective, this taken in the context with two other things will explain the $40 billion shortfall. Now, I don't want to get into a huge number deal here, but let me just tell you the sources --

Q You mean to say it will cover it?

DEPUTY SECRETARY DEUTCH: It will cover it. Let me tell you the three places the way it will be covered. It will be covered in three ways. One is with this $25 billion. The second is with more favorable economic assumptions that the Congressional Budget Office has made for future inflation, because part of that out-year shortfall had to do with the inflation that was projected. There's a lower projection for inflation, therefore the requirement went down. And the third is from the modernization reductions that will have to take place. That is why I say that from the perspective of the military and the civilians of the Pentagon, we have a fully funded program without wedges.

Q Does this mean that if Congress goes over and above the $25 billion that you would consider that wasteful considering our resources --

DEPUTY SECRETARY DEUTCH: I never say that what Congress does is wasteful. We do think it's very important. And Bill Perry and I will do everything we can to defend this budget. We think this budget makes sense substantively. And we will defend the budget as presented.

Q I don't mean the $25 billion --

DEPUTY SECRETARY DEUTCH: I'm talking about the whole program. The whole program we think is what the country needs. And it is the same program that we've been working on since we began the bottom-up review. This is a program that we think provides for the defense. The President has told us that's a program he thinks the country needs. And we are defending it. And we will defend it on its merits.

Q But you do not have the money to pay for this other than increasing the deficit. It's not coming out of any other --

DEPUTY SECRETARY DEUTCH: I am not the right person to give you a complete picture of what the federal budget is going to look like. And I cannot tell you -- to give you that perspective, that is something that really should be directed to Alice Rivlin and the Office of Management and Budget.

I will say to you that one of the reasons we can make it is because we are operating more efficiently. And I think that's generally true throughout the government.

Q If you -- and this is a big if, of course -- but if you get, if the President gets the $25 billion, let me focus on weapons systems just for a moment, will you then be able to keep, say, the better-known weapon systems that were perhaps in jeopardy, such as the Osprey and the Comanche and others, or do you don't know yet?

DEPUTY SECRETARY DEUTCH: I cannot speak to you today about specific weapon systems. When those decisions are made, we will get back to you. But I want to tell you that included in this plan is now a good sense of how much we have to come back for the modernization programs. And when we do make those announcements, it should be seen in the context of the whole program.

Q Can you tell me what Republicans you've consulted with on this now since the White House is stressing its cooperation with Republicans?

DEPUTY SECRETARY DEUTCH: What Republicans I have personally consulted with? I've certainly talked to several members of Congress. In general terms, this morning, Secretary Perry had a breakfast with some of the leadership, both sides of the aisle, the defense committees, appropriators and authorizers. It went very successfully. A broad range of subjects were addressed. No specific numbers were discussed.

Q What's your original read on the Republican leadership's reaction to this?

DEPUTY SECRETARY DEUTCH: I believe that the congressional leadership, Republican and Democrat, support a strong defense. And I believe that this presidential initiative will be well received up on the Hill. This is a very good news story for defense. The President has once again shown that he's supporting the Department and its needs and the people in the department. And we regard this as being very, very good news for defense.

Q Do you think you would have gotten this through the President had the Republicans not won both houses of Congress with --

DEPUTY SECRETARY DEUTCH: I can only say two things to you. The first time I spoke to the President personally, and Bill has spoken with him often, Bill Perry. First off, I personally spoke about this was in July, okay, about the needs to take out the wedge, to do the military pay increase, to look at readiness, and to pay some attention to our modernization accounts. And I was certainly -- anybody you want to ask in this building will tell you I've been after full funding of this program, as has been Bill Perry. And the President has been insisting on it since at least, on this year, since the summer.

THE PRESS: Thank you.

END1:35 P.M. EST