THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, December 11, 1995 TAG: 9512090242
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
TYPE: Opinion
SOURCE: BY JAMES L. GEORGE, SPECIAL TO BUSINESS WEEKLY
LENGTH: Medium: 91 lines
Although at first glance the 1996 Defense Appropriations bill reluctantly signed by President Clinton might have looked like good news for those who support increased warship building - the Congressional Republicans added $7 billion and increased Navy warship building from three vessels to five over the president's original request - it was probably only a brief, very brief, respite.
In fact, overall, 1995 has proved a very disappointing year, and for the long term the various budget agreements could well be the proverbial strike three on solving the Navy's funding problems.
The problem is that since the mid-1980s the Department of Defense budgets have shrunk almost 40 percent in real terms (when adjusted for inflation) with most reduction in weapons procurement. For example, in the last four years, the Navy's new shipbuilding requests have averaged about four per year.
Since warships last approximately 30 years, you don't need a computer to calculate that eventually there will be a 120-ship Navy - 4 times 30 equals 120.
The Navy's six-year Future Year Defense Program (FYDP) shipbuilding request submitted this year actually averaged only three per year for the first four before rising to seven and six in the always optimistic last two. To maintain the currently proposed 346-ship Navy requires shipbuilding rates in the 11-12 per year range, three times current rates.
Worst, for each year of building only four ships, considerably more are needed to make up the difference. And, there are even doubts that these low building rates can be maintained due to shortages in the defense budget plans.
These shortfalls ranged from about $20 billion according to the administration, to $50 billion from the Congressional Budge Office (CBO) and a whopping $150 billion from the General Accounting Office (GAO).
When asked, Pentagon officials give, or at least gave, two official reasons and one unofficial answer to the funding shortfalls. These are that savings from the Base Realignment And Closure (BRAC) process and Acquisition Reform would be used for future weapons procurement. Unofficially, many were hoping that the more conservative, pro-defense Republicans now controlling both houses of Congress would bail them out.
Unfortunately, none of these explanations stands up to closer scrutiny.
The fourth, and last, round of BRAC took place in 1995. Although originally scheduled to be a major round resulting in many billions of dollars in savings, local politics intervened. Closings were more modest than expected. Savings are now estimated at around $1 billion per year, but only after the turn of the century.
This administration, like all before it, came in with high hopes that reforming the cumbersome weapons acquisition system would save billions of dollars. Although the jury is out, those hopes are fading fast.
In a recent interview in Defense News, the DOD official in charge said, ``we're not pushing numbers'' on savings. The real problem is that procurement rates are way down. For example, the Navy, which once bought about 100 planes per year, now buys about 20. No amount of acquisition reform can make up the difference in the increased unit costs caused by lower building rates.
Finally, many were hoping that the Republicans would add more funds and pressure President Clinton. In response to Republican pressure, the president added $25 billion over the six-year FYDP, but most of that comes in the always optimistic last two years. For fiscal year 1996, the Republicans increased the president's request from to $265 billion from $258 billion.
Although the Republicans want to increase defense spending even more, they have a higher priority, which is to balance the budget by 2002 - the exact year when all the military services are counting on increased funding.
Even more ominous, a memo from the Joint Chief of Staff to the secretary of defense was leaked last month stating that weapons procurement must be increased from the current $39 billion per year to $65 billion now, and not after the turn of the century.
That is a $26 billion per year increase, confirming the pessimistic CBO and especially GAO shortfall estimates. After all the heat the Republicans have taken over only slowing the growth of domestic programs like school lunches and Medicare, it would be hard to see defense spending increasing any faster.
In fact, according to the Republican's future plans, further defense spending increases are quite modest, barely keeping up with inflation.
While disappointments from BRAC and acquisition reform savings might have been strikes one and two, the various budget decisions from 1995 were probably the fatal strike three for further increased defense spending.
Stand by for the 120-ship Navy. MEMO: James L. George of Potomac, Md., is the author of The U.S. Navy in the
1990s: Alternatives For Action. An adjunct fellow with the Hudson
Institute of Indianapolis, he served in the Reagan administration as
acting director for multilateral affairs at the Arms Control and
Disarmament Agency.
by CNB