The new budget includes major decreases in active duty, Reserve forces, and in civilian personnel levels. So our committee will examine these and many other issues today and during the remainder of our hearing cycle. There are many competing concerns which Congress and the executive branch must balance as they assess the defense budget request this year.

Maintaining needed military capability now and in the future still must be of paramount consideration in an unstable world. We also must minimize any adverse impacts on our military personnel, Government employees, and defense industry workers. Nevertheless, we must be diligent to identify any additional defense budget savings which safely can be made.

Despite the latest proposed decreases, the defense budget request before us totals $258.7 billion in budget authority and $271.3 billion in outlays. This still is a very large amount of money and Congress needs to hear the most cogent justification possible for these funds. So we look forward to your testimony and answers to our questions.

I would like to first call upon our distinguished vice chairman, Senator Stevens, for any opening remarks.

Senator STEVENS. Mr. Chairman, I cannot think of anything you have just said that I disagree with, so I will not make any opening statement. I do want to apologize to our witnesses, however. I must, as you know, attend the Joint Federal/State Commission on Policies and Practices Affecting Alaska Natives soon, in about 40 minutes. So I will ask to be excused at that time. Thank you.

PREPARED STATEMENTS

Senator INOUYE. I have opening statements from Senators DeConcini and D'Amato that I would like to place in the record at this point.

[The statements follow:]

STATEMENT OF SENATOR DECONCINI

Mr. Chairman, thank you for convening this round of hearings on the fiscal year 1993 defense budget. As we all know, last year was a difficult one for defense and for this subcommittee. Under your able leadership, and that of Senator Stevens, we were able to craft a wise, not wasteful, defense budget. The budget deficit, the real decline in the threat to our national security, as well as the highly partisan climate we expect in an election year, will make last year's difficulties seem easy in comparison.

President Bush proposes a $272 billion defense budget for fiscal year 1993 and a 5-year defense budget of $1.424 trillion. This amounts to a mere $50 billion reduction in defense spending over the next 5 years from the administration's previous plan which was proposed during the cold war. Given recent world events and the state of our economy, I believe defense can and should be cut even deeper.

The President's budget proposes a 2.6 million base force by fiscal year 1995. This is the same end number that was proposed by the Defense Department after the fall of the Berlin Wall, but before the stunning and unexpected collapse of the Soviet Union. The President's new proposal only gets us to the 2.6 million sooner. I do not propose a hollow force. I do propose a realistic force in light of the reduced threat. A leaner force will require less operations and maintenance funding as well as less equipment since a smaller force would require fewer tanks, ships, planes, et cetera. I do not propose that we eliminate research and development efforts though. We must avoid losing our technological edge. We cannot allow our capability to produce ships and aircraft erode.

STATEMENT OF SENATOR D'AMATO

Mr. Secretary, Secretary Cheney made a speech before the West Point Society of the District of Columbia recently that struck many as openly contemptuous of America's defense industry.

Apparently, he was unimpressed by the performance of U.S. weapons during Operation Desert Storm.

I will have some questions for you regarding the specifics of Secretary Cheney's speech.

Thank you, Mr. Chairman.

Senator INOUYE. Mr. Secretary.

Mr. ATWOOD. Thank you, Mr. Chairman. I will not read from the prepared text which we provided to you. And if it is all right with you, I would ask that it be made part of the record.

Senator INOUYE. I would assure you, Mr. Secretary, your full statement will be made part of the record.

Mr. ATWOOD. I thought I might take just a few moments and summarize some of the items that I feel are critical within that statement. And then, if it is acceptable to you, I would ask our Comptroller, Mr. Sean O'Keefe, to provide a little background on the details of the budget.

STRATEGIC OVERVIEW

First of all, as you know, the world events in 1989 and 1990 were remarkable in that we saw the great burst of enthusiasm within the Warsaw Pact countries, in particular even in the Soviet Union, and a great lessening of the tensions there. The Berlin Wall came down, Germany was reunited, and many positive steps happened, sufficient so that the President, in August 1990, proposed a new defense strategy based partly upon the events which had taken place, and partly upon the events which we anticipated would take place in the years ahead.

And that defense strategy consisted of a revised approach to what our Armed Forces would be, including continuation of our efforts in strategic defenses and strategic initiatives. It included, also, a drawdown in the activities and force levels that we would have overseas, but, nevertheless, still deployed forces overseas. It also proposed a very large contingent force ready, highly mobile, in the continental United States. And finally, it proposed a reconstitution capability in case emergencies came.

This was based on the status of world events in August 1990, and anticipated that there would be a continuation. Inherent in our plans was a drawdown of about 25 percent of our active Armed Forces, and they included a number of events that we were engaged in at this time. No. 1, of course, was the discussions on the CFE Treaty, discussion on the START negotiations, and anticipation of a continuing increase in goodwill by the Warsaw Pact countries.

We had what we call an off-ramp in case those events did not transpire. Although we were planning on a 25-percent drawdown over a 5-year period of time, if, in fact, the events did not take place, we could at any instant stop that drawdown-what I call offramps, in the periods between 1990 and 1995.

Fortunately, as events transpired, the world threat changed as we had hoped. We did come to agreement on CFE and on the START negotiations. The Warsaw Pact literally came apart, and the non-Soviet Warsaw Pact nations became our closer associates. And as a result the President, in September 1991, proposed a new strategic initiative which President Gorbachev responded to in a very positive way.

Finally, by the end of 1991 the former Soviet Union had dissolved completely, leaving the independent republics within the Soviet Union and a new commonwealth of independent states or CIS. As a result of that, and as a result of many of our trips and the intelligence we had, it was quite apparent that the economy in the former Soviet Union was such that they were no longer able to pursue high-technology weapons. Hence, in our outlook and the basis of what the President proposed in our budget for 1993 and proposed in some detail in his State of the Union Message.

It was based on the fact that since no longer were we being chased in weapons production, nor were we chasing someone in weapons production, there was no need to go, as we had been, at a rapid pace to develop and produce new weapons. Weapons production was no longer the forcing factor. So the President proposed a change in our acquisition approach. And this was reflected in about a $50 billion reduction over the 6-year period following, including 1993.

That is the basis for our budget in 1993. I want to repeat, it is based upon the events that happened during the past 3 years. It is based upon a proposed drawdown of our active Armed Forces by 25 percent. It is based upon the events that followed that initial change in our national defense strategy, all being positive, culminating in the breakup of the former Soviet Union. As a con

sequence, we have proposed a budget which is based on that continuation of the drawdown of our Armed Forces.

But further than that, it is based upon the realization of what has happened in our discussions on strategic weapons. And it is based upon the fact that we are no longer chasing the Soviet Union for new technology and new technology weapons. Hence, we will continue at a much slower pace.

I might stop at this point and ask Sean O'Keefe if he would give a few charts on some of the details of the budget itself.

Mr. O'KEEFE. Thank you, Mr. Secretary. Over the course of the last several years, obviously, there have been many many modifications of the President's program. This chart is referred to lovingly by the Secretary as the pitchfork chart, in an attempt to define, I think, where we began in April 1989, as the first modification of the Bush administration's program. Looking at a 1.2-percent real increase per year over the span of the 5-year plan, subsequently modified a year later after the Berlin Wall came down to a negative percent each year, which was the first time historically, that the administration had forecast an ever-declining defense budget profile throughout the Future Year Defense Program.

The third line down is the summit agreement. The yellow line that is represented there was the assumption after the summit agreement was forged in October 1990. The annual real decrease from that point forward beyond the average of 3 percent per year. And then the bottom line is the latest reduction and adjustment the President has proposed and appended to this February's particular submission.

Overall, over the span of time, we are looking at a real decrease from the high watermark of the Reagan years through the span of about 37 percent in real terms.

Represented another way, as a share of Federal outlays, total spending throughout the Federal Government, during the peak years of the Vietnam war we were looking at about 43 percent of Federal spending. Today we are looking at about 18 percent, which is where we were projecting to conclude this particular program, a year ago. At this point, now, we are looking at it as a factor for fiscal year 1993. By the time the future year defense program is complete, we are looking at about a 16.3-percent assumption of the overall Federal spending program, year to year.