Stated another way, in comparison to the way the budget agreement was forged in October 1990, the assumption or the number that was assumed as part of the agreement and built into the caps between domestic, discretionary, international, and defense was $277.9 billion for this fiscal year.

Included within the Budget Enforcement Act was a provision which called for specific reductions or increases, depending on the rate of inflation. It is a statutory requirement based on what the actuals produced year to year relative to what the assumptions were made by the negotiators as part of that particular agreement. When you adjust the summit level overall, the value that would have been in comport with the summit agreement dollar for dollar would have been $275.6 billion and the program adjustments that we proposed as part of the President's budget now is an $8 billion program decrease. Overall, it is a $10 billion reduction from where the summit agreement was reached in October 1990.

Throughout this span, we are looking at a $63.8 billion reduction of which $13 billion of that is tied up in the statutory inflation change that was part of that summit agreement.

Comparably, the outlay picture is much the same. Overall, a decrease of $37.1 billion, but one-third of that is directly tied to the inflation change as part of the Budget Enforcement Act and the primary reason again is that fiscal year 1991 inflation actuals occurred or came in below the amounts that were assumed as part of the Budget Enforcement Act.

This is not an anomaly unique to defense. This is across the Federal Government. The same application of the inflation totals are used in the domestic discretionary side as well as here.

Senator DOMENICI. May I ask a clarifying question on the previous question, the previous one. What did you say the President's request in the budget is?

Mr. O'KEEFE. For 051, it is $287.6 billion.

Senator DOMENICI. No; I did not mean the number, I mean what did you use with reference to that inflation adjustment that was allowable under the budget agreement?

Mr. O'KEEFE. Let me give you the statistics. I believe it is about 32 percent, I believe, and then 4 percent each year. They are specified in the statute as to what the estimated inflation would be.

The clarifying provision as part of the Budget Enforcement Act, however, specifies that to the extent that inflation in any given year produces an actual that is either above or below what was assumed, then you adjust the base line accordingly.

The actual effect here as a consequence of the $13 billion change is primarily in fiscal year 1991. The assumption made by the summit negotiators was, I believe, 5.1 percent inflation estimated for that year. The actuals came in at 3.8, so the difference of 1.3 percent is what is calculable as part of the base line adjustment throughout each fiscal year thereafter and is in accordance with the way the scoring rules work for the, or the scorekeeping rules work for the Budget Enforcement Act.

Senator DOMENICI. I will have some questions later. Thank you.

FORCE STRUCTURE AND MANPOWER

Mr. O'KEEFE. I think Chairman Powell will be here Thursday to certainly delve into more on the force structure. This is just a reminder of the kinds of changes that are driving some of the numbers we are looking at there. Overall, within the Army and the Air Force, it is more appropriate to apply a one-third reduction of the size of the force, from 18 to 12 divisions, from 36 to 26 tactical fighter wings.

The overall size of the Navy, of course, is declining a little less rapidly, but about on the same course from 15 to 12 carriers and the overall fleet which has been projected, as you may recall, as a 600-ship Navy is now closer to about 450.

In terms of how this translates into overall force reductions, I think the upshot that in the span of time we are looking through the future year defense program concluding by 1997, roughly 1 million fewer people will be in U.S. Department of Defense employ when we finish this particular program. Most of that is associated with uniformed, active duty military that is attended to the reduction of one-third of the divisions, one-third of the air wings, et cetera.

But the balance of which, in the Selective Reserve and again, Chairman Powell will get into this, I am sure, in more detail on Thursday. The basic thrust there is to deactivate the units which were specifically assigned to the active divisions that have not been taken from the roles of the Federal Government.

On the civilian side, the primary reductions there are comparable in terms of the overall work load reductions in the industrial sectors as well as overall defense management report decreases that we are seeing within the management side of the equation as well.

Graphically depicting in an effort to give you a feel for the degree of difficulty dive, if you will, that we are pursuing, the active duty military uniformed side of the equation, a year ago we were looking at a reduction program that would call for about 318,000 or 321,000 folks in the span between 1991 and 1995 to reflect again that change to the overall force construction composition of 18 to 12 divisions, et cetera.

We have had to accelerate that particular program in some measure in light of the withdrawal from Europe efforts that we have engaged in as well as starting from a higher plane as a result

of the Desert Shield/Desert Storm endeavor last year. We started off the year 29,000 active duty military higher than we had anticipated, principally because we retained more folks within the military departments in anticipation of that particular campaign.

Overall, comparably, I guess the message here is we are achieving the reductions we were looking at for personnel 1 year earlier and starting from a higher level than what we had anticipated. Overall, in the span of time, we are looking at about, in this fiscal year, 538,000 folks leaving the U.S. military, of which about 80,000 of that is in the Army between now and September 30.

1.1

SELECTED RESERVES MANPOWER REDUCTIONS
(End Strength in millions)

1.0

0.9

On the reserve side of the equation, we had looked to, a year ago, a program that would cap out at about 900,000 reservists over the span, again matched directly with the number of divisions and air wings that were on the active side as part of the overall roundout equation. We are now looking at a program that is about 922,000 at the end of this program, but starting from a steeper plane yet again.

The program that was submitted this year is again about 96,000, 97,000 in strength reduction for the reserve side of the equation, 90 percent of which are identified as specific units that had previously been part of either the NATO mission or had been tied directly as roundout units to divisions which are now deactivated.