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03 February 2003

New Defense Budget Reflects Anti-Terror, Missile Defense Focus

(Services shift $80,000 million to implement transformation strategy)
(2200)

The Defense Department February 3 unveiled a Fiscal Year 2004 budget
totaling $379,898 million that will focus on priorities such as
winning the global war on terrorism, fielding initial elements of a
missile defense system, and building more ships.

"Meeting today's threats while preparing for tomorrow's challenges" is
the central theme of the new budget, which is $15,300 million larger
than last year's request. It is the first budget drawn up by the
military services since the Bush administration announced its new
National Security Strategy last year. In keeping with that strategy,
the Department said, the new defense budget focuses on anticipated
threats such as terrorism "rather than on specific regional dangers or
requirements."

Anticipating the ongoing nature of countering terrorism, the Pentagon
is seeking chemical and biological detection equipment, protective
gear, and harbor patrol boats. Last year Congress did not appropriate
the full amount requested for anti-terror spending, nor did it
appropriate a follow-up request the administration sought for
contingency spending on terrorism.

The Missile Defense Agency is seeking $7,700 million for researching,
developing and testing missile defenses. The new budget would fund 10
ground-based interceptors providing what is described as an "initial
modest capability against North Korean missiles." Some $739 million
would be used in the coming fiscal year -- which begins October 1 --
to buy 108 PAC-3 (Patriot Advanced Capability-3) missiles to defend
against cruise and tactical ballistic missile attacks.

Besides preparations to defend against a possible terrorist or rogue
state attack, the military services have undertaken a major effort to
transform how they will fight in the 21st Century. Military
procurement will be driven by that transformation strategy and as much
as $80,000 million is being dedicated to support it.

The Navy is buying one new submarine in FY 04 and is seeking $1,200
million to convert four Trident ballistic missile subs, equipping them
to carry 150 Tomahawk cruise missiles as well as Special Operations
Forces.

Special Operations Forces are seeking a large increase in funding in
this budget, from $1,500 million to $4,500 million under the expanded
Special Operations Command.

The Army wants to buy 301 Stryker wheeled armored combat vehicles and
spend $1,100 million to develop the Comanche helicopter as a
low-observable platform for reconnaissance and light attack missions.

Following are excerpts of the Defense Department budget release:

(NOTE: In the text, billion equals 1,000 million.)

(begin excerpt)

EMBARGOED UNTIL 9 A.M. EST, FEB. 3, 2003

January 31, 2003

FISCAL 2004 DEPARTMENT OF DEFENSE BUDGET RELEASE

President George W. Bush today released details of his fiscal year
(FY) 2004 Department of Defense (DOD) budget. The budget requests
$379.9 billion in discretionary budget authority -- $15.3 billion
above FY 2003.

The FY 2004 DOD budget is the first to reflect fully the Bush
Administration's new defense strategy, which calls for a focus on the
capabilities needed to counter 21st century threats such as terrorism
-- rather than on specific regional dangers or requirements.

The central theme of the new budget is "Meeting today's threats while
preparing for tomorrow's challenges." The budget establishes a balance
between near-term and longer-term demands -- in FY 2004 as well as
over the six years covered by the FY 2004-2009 Future Years Defense
Program (FYDP). The budget funds strong support for:

-- Winning the global war on terrorism

-- Sustaining high quality people and forces

-- Transforming the U.S. military and defense establishment

The DOD prepared its FY 2004 budget using a new combined
program/budget review process -- with greater transparency and
substantial interaction between the military services and the Office
of the Secretary of Defense. The Department increased support for
programs to transform the capabilities available to U.S. forces --
while sustaining robust funding for near-term force readiness and the
capabilities needed now in the war on terrorism.

The budget reflects Secretary Rumsfeld's insistence on realistic
funding for all DOD programs. By making tough, strategy-driven
decisions, the Department has established a program that can be
executed with the funding projected in the President's budget.

Global War on Terrorism

In his FY 2003 budget, President Bush requested $10.1 billion for the
Department's baseline funding including $8.2 billion for acquisition
and other requirements resulting from the Department's experience in
the global war on terrorism, $1.2 billion for increased air patrols in
the continental United States, and $0.7 billion for implementation of
the Nuclear Posture Review. Congress appropriated only $7 billion of
the $10.1 billion requested. Congress did not appropriate the
additional $10 billion the President requested as a contingency for FY
2003 incremental operations costs related to the global war on
terrorism.

In the FY 2004 budget, the Department continues to acquire
capabilities critical to the war on terrorism. FY 2004 initiatives for
force protection and combating terrorism include intrusion detection
systems, blast mitigation measures, chemical and biological detection
equipment, personal protection gear, waterside security enhancements,
harbor patrol boats, regional command systems, mass notification
systems, and initiatives to restrict access to DOD installations.

Force Readiness

The new budget sustains the robust Operation and Maintenance (O&M)
funding of last year -- so that U.S. forces are fully prepared for
intensely waging the war on terrorism and meeting other commitments.
FY 2004 O&M discretionary budget authority is $117 billion, in real
terms about 1 percent above FY 2003.

Readiness indicators are sustained at traditionally high levels. The
FY 2004 readiness goals are about the same as last year, and all are
met:

-- Army tank miles: 913

-- Army flying hours: 13.1 hours/crew/month

-- Navy flying hours: 20.8 hours/crew/month

-- Navy ship operations for deployed forces: 54 underway days/quarter

-- Air Force flying hours: 16.8 hours/crew/month

Reserve Components. The budget includes about $30 billion for Reserve
components in the Military Personnel, O&M, Procurement, and Military
Construction accounts. This funding reflects the Department's
substantial reliance on Reserve components for the global war on
terrorism and other commitments. The Department also is pursuing
initiatives to mitigate the concerns of reservists' civilian employers
and for increased support of Reserve component families.

Transformation

Transformation is the process whereby DOD is overhauling the U.S.
military and defense establishment to enable it to counter 21st
century threats most effectively. Transformation is about new ways of
thinking, fighting, and organizing the Department and its operations
-- as well as about acquiring new system capabilities. To increase
military effectiveness, the Department is strengthening joint
warfighting by advancing new operational concepts, command and
organizational changes, and expanded joint experimentation and
training.

The FY 2004 budget reflects ongoing major changes to the Department's
Combatant Commands -- aimed at strengthening warfighting preparation
and execution. Improvements include:

-- Establishing of Northern Command to consolidate homeland defense
missions

-- Creating a strategic plan for transforming DOD training to meet
combatant commander requirements to link readiness reporting to create
a joint national training capability

-- Enhancing roles for the Joint Forces Command to improve joint
operations and training

-- Merger of Space Command and U.S. Strategic Command

-- Expanding the planning and warfighting role of the Special
Operations Command (SOCOM), increasing funding for Special Operations
Forces (SOF) by $1.5 billion to $4.5 billion in FY 2004 (not including
military personnel costs), and transferring 1,890 manpower billets to
SOCOM

Transforming Military Capabilities

In DOD budgets, military transformation is reflected primarily in
investment programs -- i.e., in programs funded in the appropriations
titles of Research, Development, Test, and Evaluation (RDT&E) and
Procurement. Through such funding, new military systems are being
developed and fielded -- to achieve a new portfolio of military
capabilities to decisively combat the full spectrum of threats to U.S.
security. A key objective for this new portfolio of capabilities is to
provide alternative means for meeting near-term needs and to encourage
competition for fulfilling future missions.

Highlights of FY 2004 investment funding for key programs supportive
of transformation:

Missile Defense. $7.7 billion for the Missile Defense Agency to
continue research, development and testing of an evolutionary missile
defense program focusing on fielding an initial capability in 2004 and
2005, and expanding that capability over time through additional
measures and technology infusion. The plan is -- over the next 2 years
-- to deploy a limited defense against ballistic missiles:

-- In FY 2004: Includes 10 ground-based interceptors. This would
provide initial modest capability against North Korean missiles.

-- In FY 2005: Includes 10 additional ground-based interceptors; up to
20 sea-based interceptors; land, sea and space sensors; and command
and control upgrades. This would add modest capability against Middle
East threats.

The FY 2004 budget also includes $739 million for Patriot Advanced
Capability-3 program, including procurement of 108 PAC-3 systems to
protect against cruise missile and tactical ballistic missile attack.

CVN-21. $1.5 billion for the planned 2007 aircraft carrier, which has
been upgraded to the CVN-21 design -- whose innovations include an
enhanced flight deck, a new nuclear power plant, allowance for future
technologies, and reduced manning. Some of these capabilities
previously were not going into a new carrier until 2011. This is an
example that fulfills President Bush's goal of skipping a generation
of systems or technologies.

New ship classes/technologies. $1.2 billion to continue development of
technologies to be applied to the whole family of 21st century surface
combatants including DDX destroyer, littoral combat ship, and CG(X)
cruiser.

SSGN (Guided Missile Submarine) Conversion. $1.2 billion to continue
to convert four Trident ballistic missile submarines to submarines
each capable of carrying more than 150 Tomahawk cruise missiles and a
contingent of special operations forces.

Transformational Satellite Communications. $453 million to further
develop a new system based on laser communications and greatly
enhanced radio-frequency capability, which would free users from
current bandwidth constraints and provide greatly enhanced
interoperability and connectivity to support net-centric operations.

Advanced Extremely High Frequency (EHF) Capability. $778 million to
continue development of a new satellite constellation to provide much
greater protected communications capabilities than the current MilStar
satellite communications system.

Space Based Radar (SBR). $299 million to continue development of a new
space-based capability to detect and track global targets.

Cryptologic Modernization. $416 million to improve protection of DoD
networks.

Army Transformation

-- $1.7 billion to continue development of Future Combat Systems (FSC)
-- a family of fighting vehicles that constitute the centerpiece of
Army transformation. The budget maintains the accelerated Initial
Operational Capability (IOC) date of 2010. The FCS program includes
$456 million to continue development of new indirect fire systems to
replace the Crusader artillery system cancelled last year.

-- $955 million to procure 301 Stryker armored wheeled combat vehicles
and $46 million to continue development. The FY 2004-2009 budget
supports the conversion of six Army brigades to Stryker Brigade Combat
Teams, although the fifth and sixth brigades will continue to be
reviewed

-- $1.1 billion to continue development of Comanche -- a
low-observable, next-generation helicopter for reconnaissance and
light-attack missions.

Unmanned Aerial Vehicles (UAV)

-- Global Hawk unmanned aerial vehicle (UAV): $610 million including
$250 million to procure upgraded capabilities and four more
high-endurance, long-range UAVs -- which provide persistent
intelligence on opposition forces.

-- Predator UAV: $250 million: $40 million for continued development
and $210 million to procure upgraded capabilities, spares, ground
stations, and 14 more vehicles, 4 of which are the B model.

-- Unmanned combat aerial vehicles (UCAVs): $275 million to continue
development of this important new asset for attack and other military
missions.

-- Unmanned undersea vehicles (UUVs): $81 million to continue
development of the Long-term Mine Reconnaissance System and more
advanced multi-mission UUVs.

Other Investment Programs

Highlighted below are other investment programs essential to achieving
the transformation and modernization of U.S. forces. Funding shown is
for FY 2004 Procurement and RDT&E.

Shipbuilding. 512.2 billion for procurement of seven ships -- up
sharply from $9.5 billion and five ships in FY 2003.

F/A-22. $5.2 billion to support procurement of 22 F-22s in FY 2004, to
continue the development of the aircraft, and to improve its ground
attack systems. This aircraft has been redesignated the F/A-22 to
recognize its future ground attack capability.

F/A-18E/F. $3.5 billion to support procurement of 42 aircraft.

Joint Strike Fighter (JSF). $4.4 billion to continue system
development and demonstration.

C-17. $3.7 billion to support procurement of 11 aircraft.

V-22. $1.8 billion to support the development program and procurement
of nine MV-22 (Marine Corps variant) and two CV-22 (Air Force
variant).

Chemical-Biological Defense Program. $1.1 billion for the total
program, with a $200 million increase to extend near-maximum
chemical-biological protection to 200 installations, increase Army
biological detection capabilities, and combat new chemical agent
threats. Restructured Programs

To implement Secretary Rumsfeld's guidance stemming from the 2001
Quadrennial Defense Review, the Military Services have shifted
billions of dollars from their older multi-year budget plans to new
ones -- as they have terminated and restructured programs and systems.
For FY 2004-2009, the Military Services estimate that they have
shifted over $80 billion to help them transform their warfighting
capabilities and support activities.

(end excerpt)

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