TYPE: COMMITTEE HEARING

LENGTH: 17268 words

COMMITTEE: SENATE APPROPRIATIONS COMMITTEE

SUBCOMMITTEE: DEFENSE SUBCOMMITTEE

HEADLINE: U.S. SENATOR DANIEL INOUYE (D-HI) HOLDS HEARING ON FY 2003 DEFENSE APPROPRIATIONS

SPEAKER:
U.S. SENATOR DANIEL INOUYE (D-HI), CHAIRMAN

LOCATION: WASHINGTON, D.C.

WITNESSES:

PAUL WOLFOWITZ, DEPUTY SECRETARY OF DEFENSE
DR. DOV ZAKHEIM, UNDERSECRETARY OF DEFENSE (COMPTROLLER)

BODY:

 
U.S. SENATE COMMITTEE ON APPROPRIATIONS: SUBCOMMITTEE ON
DEFENSE HOLDS A HEARING ON FY 2003 APPROPRIATIONS FOR THE
DEPARTMENT OF DEFENSE

FEBRUARY 27, 2002
 
SPEAKERS:
U.S. SENATOR DANIEL K. INOUYE (D-HI)
CHAIRMAN
U.S. SENATOR ERNEST F. HOLLINGS (D-SC)
U.S. SENATOR ROBERT C. BYRD (D-WV)
U.S. SENATOR PATRICK LEAHY (D-VT)
U.S. SENATOR TOM HARKIN (D-IA)
U.S. SENATOR BYRON DORGAN (D-ND)
U.S. SENATOR RICHARD DURBIN (D-IL)
U.S. SENATOR HARRY REID (D-NV)
U.S. SENATOR DIANNE FEINSTEIN (D-CA)
 
U.S. SENATOR TED STEVENS (R-AK)
RANKING MEMBER
U.S. SENATOR THAD COCHRAN (R-MS)
U.S. SENATOR ARLEN SPECTER (R-PA)
U.S. SENATOR PETE V. DOMENICI (R-NM)
U.S. SENATOR CHRISTOPHER (KIT) BOND (R-MO)
U.S. SENATOR MITCH MCCONNELL (R-KY)
U.S. SENATOR RICHARD C. SHELBY (R-AL)
U.S. SENATOR JUDD GREGG (R-NH)
U.S. SENATOR KAY BAILEY HUTCHISON (R-TX)
 


*


INOUYE: Secretary Wolfowitz, Dr. Zakheim, on behalf of the committee I'd like to welcome you as we begin our deliberations on the DOD appropriations requests for FY 2003.

"Provide for the common defense," so states the Constitution in its preamble.

That this function was so important to the formation of this more perfect union, our forefathers placed this clause in the very first paragraph of our nation's governing document.

The function of this subcommittee is to appropriate the funding necessary to ensure that our military can provide for the common defense. It is indeed a critically important task. Last year, some would argue we failed in that endeavor. On September 11, 2001, our defenses broke down. Three icons of American strength, the Twin Towers and the Pentagon, the workplaces of thousands of Americans, were attacked with devastating consequences.

The attack came not from a hostile nation, but from a handful of terrorists armed with jumbo jets. Their weapon, filled with irony, was one which symbolizes American economic success and democratic freedoms. Our airlines have afforded millions of our citizens to travel unfettered for business and pleasure.

As we all know, thousands of lives were lost, and had it not been for the heroic efforts of civilians on a fourth plane, another location would have also likely been attacked.

Some would argue we failed in this attack. They want to know how this happened, what went wrong and who was to blame. And I think these are fair questions.

It might not be fair, but it seems to me that many who are quick to point fingers today are the same ones who would have argued that we need to cut defense spending, that we don't need to modernize our forces or pay our troops. Many are the same ones who wonder why some of us feel it is necessary that we pay our military personnel a decent wage and why we work to ensure that they have adequate housing, acceptable health care and the promise of a reasonable retirement income after they have sacrificed for their country.

I know that our witnesses today and my colleagues here are not among these naysayers. We recognize that less than one percent of the American population is willing to wear the uniform of our nation. We know that we should be grateful to them and we must treat them accordingly.

I tell you this because I already hear the criticism of your budget request for FY 2003. These critics argue, why should we be giving the Pentagon an increase of $48 billion when they just had a $20 billion increase less than a year ago?

They point out that at the same time as defense is increasing substantially, all other discretionary spending is being curtailed with a minimal increase only to cover accounting change. They wonder how homeland defense, the protection of the waterways, the airports and the ports will be safeguarded within this small increase in domestic spending. They find the disparity between defense and nondefense troubling.

Mr. Secretary, Dr. Zakheim, I will not be a party to shortchanging defense, but I think that you have your work cut out for you. It will be up to you to convince our colleagues that your needs are greater than those of other federal agencies, the FBI, the Customs Service, the Coast Guard, the State Department and others. They too must strive to better protect our nation from another terrorist attack and meet the challenges of this century.

Your task is particularly challenging as you have requested $10 billion for unknown contingency costs. Your critics call this a slush fund. Any light you can shed on this would help us to defend this request.

Mr. Secretary and Dr. Zakheim, we look forward to your testimony on these and other important issues. But before we proceed it's my privilege to call upon my good friend, the vice chairman of the subcommittee, Senator Stevens.

STEVENS: Well, thank you very much. And I apologize for being a little late. I was at another subcommittee meeting before that vote.

I do join you in welcoming these two witnesses. I think no administration has faced in this short a period of time the range of national security challenges that this one has faced in this first year, a changed, substantial change in our society.

But I thank the men and women of our armed services. A great deal of gratitude to the two of you. We're delighted to see you here today. We know your hard work and your sacrifice in taking these positions. And I do thank you for your extraordinary leadership in meeting these challenges. I'm sure that you are now and will become even more trusted partners of this committee in our work for defense.

We've got both a blessing and a curse right now. The additional funds that we have before us now requested by the administration will go a long way to meet the needs that we know exist in our Department of Defense. But it's going to increase the second-guessing that we'll face along the line about the choices to be made in the budget and particularly between the budget for defense and nondefense. As the chairman has indicated we constantly face questions about why there should be such an increase in defense.

We worked with you last year to produce legislation to meet the -- respond to the attacks of September 11. And I know under leadership of Senator Inouye we will continue with the same determination to meet the needs that you will outline here today to assist our men and women in uniform both at home and abroad.

I joined the chairman and others last week in going to Central Asia. And I've got to tell you, we have traveled the world to meet with our military forces now for well over 30 years and I've never seen young people so ready and so confident and so able. They really had a tremendous attitude. The morale was very high. And it reflects very greatly upon the job that you all are doing and those in command structure are doing to reassure these young people of what their task is and what their mission is.

I look forward to your testimony and to an opportunity to work with you as the year goes ahead. Let me say I think there are going to be some changes within the command structure that I still don't understand. But we'll watch it with you carefully how they unfold.

Thank you very much.

INOUYE: Thank you.

Senator Hollings?

HOLLINGS: Well, thank you very much, Mr. Chairman. I am glad to meet Dr. Zakheim. I've been an admirer of the Secretary Wolfowitz a long, long time. And incidentally, I'm an admirer of Rumsfeld and was so before he became popular.

Last year when there was talk in even news stories that he'd be the first in the cabinet to leave -- I'm going to get into that, but since the distinguished gentleman -- like "Clueless in the Nation's Capital," I guess that's the governors that David Broder writes about. Because they come to town and they're worried as get out, and they find almost a hedonistic government here in Washington.

Specifically every one of them have got deep, deep deficits. There are not any surpluses. State that's just over here across the river is over a billion. Up in New York, the state there is $48 billion. The City of New York, Senator Inouye, Senator Stevens and I were in there on saving the City of New York. That's $25 billion in the hole. There are at least a half dozen states trying to not just cut spending but increasing taxes.

Governor Bush down in Florida, he is holding back, withholding on a tax cut. And he is not calling it a tax increase. When we up here try to hold the line, they say, "Oh, no, that's increasing taxes." And that's just not a part of -- you can't comment on the reality in this town without being, "Oh, he's partisan."

All the pollsters have taken over totally, Mr. Chairman. But the point is that we just seemingly go on and on. In 1999 -- and incidentally, the Clinton budget -- I'll have to say it if nobody else will, but he was very sensitive about having ducked the military. It was a point in his campaign. And in fact it's a point down in my state still. But the fact was he wasn't going to deny the military in his eight years as president and commander in chief.

And while we had it coming up in 1999 to $275 billion, in 2000 we jumped it to 2,095, and last year we jumped it another $11 billion to 306. Both the year before last we had a pay increase. Last year we had a pay increase. I support the pay increase that you're now submitting. That's not the point.

The point is that this aura of somehow the defense was all going to pot, when the two distinguished gentlemen and ranking member is saying the morale is high and everybody knows they have performed admirably in Afghanistan. So we had a strong defense.

But last year, sitting in that same seat, Secretary Rumsfeld, six days before 9/11, attested to the fact that he was going to have a new high-tech type defense. And the legacy calls for these old systems was going to be phased down, and that was going to pay for the high- tech. And he said it's going to cost more money. But he attested to the fact that the budget you're now about to testify on, Secretary Wolfowitz, was 347. He said it would be 328 for last year, as the fiscal year -- excuse me, for this fiscal year. But for the one you are testifying for this morning it was going to be 347.

Well, of course since that time we'd added $20 billion in the supplemental. And we willingly did so. We want to make sure those troops are cared for and everything else of that kind. And yet we find here it is, there's no tomorrow. There's $50 billion more. Like they say, the contingency fund, the -- what did you call it? -- the Crusader, the (inaudible) that jump up, jump forward, jump down, every kind of piece of equipment they'll get in there.

And then they tell us in your submission here that the Navy, by the way, the following year is going to really start on with way more ships and everything else of that kind. That's some projected $650 billion just what we going to have to approve this year for the ten- year stretch, or the ten-year budget.

So I'll be questioning trying to find out how in the world can we maintain the credibility of -- this subcommittee, Mr. Secretary, is on your side. I'll never forget Schwarzkopf come up here after Desert Storm. He didn't go to the authorizing committees at all. And he didn't go another -- he said, "I'm coming to this Defense Subcommittee here in the United States Senate. Can you save my central command?" They were about it abolish it.

And we saved it. You remember that, Senator Stevens, the chairman. And we've always had on the other side Chairman Inouye. So we on your side. But we the ones that is going get beat up upon, where do you get this and where do you get that. So I welcome you, but we're going to have to have some cold hard justifications because this town is going to sober up sometime this year.

We already -- we ended up last year without a surplus; on the contrary, $143 billion in the red deficit. As you sit in that chair, we're already in the four months into this fiscal year, almost five months, $190 billion in the red. We got a deficit. And we know it will exceed over 350. And so the politicians that are running for reelection in October when those figures come out that we are running with a deficit of $350 billion, Afghanistan and that war didn't cost that much.

But of course we say, "By the way, we not going to pay any bills. All the governors are having to pay their bills. We've always paid for our wars. We put on the taxes. I'm ready to vote for it right now this minute to pay for this. But we say, "By the way, since we got a war we're going to have deficits. And incidentally, the war is never going to end."

Thank you, Mr. Chairman.

INOUYE: Senator Hutchison?

HUTCHISON: I just would like to say that I think the Department of Defense has done a phenomenal job, phenomenal since September 11.

Who would have thought that this would be in the mission that you would undertake? We thought you were going to be required to update the military for the next century. But instead you're obviously taking that task but also dealing with the crisis at the moment. And I certainly appreciate the increase in the needs. And we will work with you in every way.

I do have a couple of questions which I will save for the question.

And I want to mention that the department has always funded the research for Desert Storm disease, which I think has enormous implications for the future as well as the past, making sure that our people are treated right from previous service, but also making sure that we know the cause so that we can treat the people who will be submitted to possible chemical warfare in the future.

And I don't see anything in this year's budget in your submission. So I would like to just point that out and say that I hope that you will be amenable to continuing that research for the safety and the potential vaccines that we will need for chemical exposure in the field in the future.

But I thank you. And I will have a few questions later.

INOUYE: Thank you.

Senator Feinstein?

FEINSTEIN: Thank you very much, Mr. Chairman.

Gentlemen, I didn't start out quite where Senator Hollings is in his remarks, but I must tell you I've come to have a very great appreciation for how the department is being run, for the leadership of the secretary, for you, Mr. Wolfowitz. I've had occasion, as you know, through the briefings and intelligence, to follow this. And I think you're doing a very impressive job. And I just want to say that.

Now, I have some real concerns about this budget. And I also want to speak to this. I think that my first concern is that perhaps the force structure changes aren't always attuned to this new warfare, which is asymmetrical, which is probably going to be with us for a long time, where there's going to be a great deal of difficulty in sorting out combatants from noncombatants and where the type of warfare may not always be the same as it is in Afghanistan where you have the ability for the Northern Alliance to do much of the groundwork and we just use our technology in the air with great success.

That if this war on terrorism is going to be sustained -- and no one knows really what victory actually will be -- that kind of privileged position isn't always going to be there. And so I have a concern as to whether our force structure is really adequate to reflect this kind of a war concept.

I also believe that because we're in this and we're in it for a sustained period of time we no longer have the relative luxury to fund systems with questionable applicability, particularly related to the missile defense systems. I am very concerned about the continued priority the department is placing on the development of a national missile defense program for which I can see little applicability in the war that we're actually going to be sustaining most likely for the next decade. I hope not, but it's very likely that that could be the fact.

And so I'm concerned that the testing, the cost, and strategic and arms control implications of the current missile defense plan may well detract valuable resources, time and attention for more pressing security needs.

Now, I'm willing to support a judicious testing program because I think it's important to do so. But I have real questions about the administration's development and deployment plan. And I hope to ask about that in my questions.

I also have concern about the fact that the department is asking for the 44 F-18s, the 12 C-17s, the Joint Strike Fighter, the F-22, all of these planes. And I wonder, frankly, if they're all necessary and what the priority, if there is a priority -- I mean, I know the Joint Strike Fighter isn't going to come on-line soon enough to provide the kind of interservicing we had hoped for. But nonetheless these are significant new requests.

So the bottom line is I look forward to discussing that with you and also this $10 billion fund that is there, which concerns me because I've reread the resolution we passed to authorize the action, the military action against those who were responsible for 9/11 or connected to 9/11. Now, I recognize the word "connected" may also authorize other things. But to put in a -- really $10 million (sic) seems to me significantly reduces the Congress's opportunity to exercise the purse strings as we are entitled to do.

So those are areas of my concern. And I just want to thank you for the very good work that you and the secretary have done up to this point. And I look forward to having an opportunity to ask these questions at the appropriate time.

Thanks, Mr. Chairman.

INOUYE: Senator Domenici?

DOMENICI: Well, thank you very much, Mr. Chairman. Let me say, Dr. Wolfowitz, it's good to have you here. My comments are going to be very brief.

First I want to say things have been going our way for a change. This was a very difficult war to get into, and frankly I'm very proud of the way it has progressed. I commend the department, secretary, those who have helped him, such as yourself, and obviously the president for leadership. There's a long way to go, however.

You've also been fortunate in that the recession that we were all so worried about may have already bottomed out. The economists are now saying this may be the shallowest recession we've had in modern days and that already the gross domestic product is moving into a positive mode from having been only two or three months in the mildest of recessionary numbers.

Our country was faced with both a recession and a war. And there were a lot of people who wondered how long we could continue to fund the defense and other needs and have recession. I think we're going to have that question answered because I think we're going to be out of the recession and growing.

From my standpoint, the question is, do you need everything that you asked us for? And if you do, then we ought to fund it. If there are some things we can save money on, it doesn't mean we ought to give you less.

Because obviously there are some things that should be funded that aren't. I think it's just as important that you tell us, tell this committee, what you think would be helpful that did not get funded. Because I believe that this is the time to send the right signals and to get started.

With reference to science and technology I'm somewhat concerned as to whether we're doing enough in that area, Doctor, and I'd like your comments in terms of research, science and technology. Because actually, we're living in an era when about every ten years we completely change technology, as I understand it. My questions will be directed in that area.

And I thank you once again. And it's a pleasure to serve on this committee. And we hope that we'll be able to do you justice, do the Defense Department justice.

My thought, if nobody else raised it, I raise it -- if they did, I want to lend my voice to it -- is the $10 billion that you seek in an emergency type fund that would not be appropriated for items, I think that's something new and unique. I don't know how we can do that. I don't know how it sets itself into a budget. So I believe there has to be some discussion about that $10 billion, which you would want us to give you as a flexibility pot, I guess. I'm not sure that we can do that.

But I do share the basic underpinnings of that request. You do need flexibility. In fast-moving times you might need a reserve for flexibility. I just am not sure we know how to do that.

Thank you very much, Mr. Chairman.

INOUYE: Senator Dorgan?

DORGAN: Dr. Wolfowitz, thank you very much for what you are doing and Secretary Rumsfeld and the administration. I think things have gone very well and the Congress and the American people appreciate that.

I, along with some of my colleagues, was in Central Asia some weeks ago, and I couldn't be more proud of the men and women who are serving our country. And I know that they recognize your leadership and in support of the Congress in that service.

Dr. Wolfowitz, I'd like to call you at some point, if you'll take my telephone call, to visit about a couple of issues. There isn't money in this budget to buy airplanes for the International Guard. We've got some of the best pilots flying the oldest planes, old block 15, F-16s. You know, we need to do something about that. We talked to the previous administration about it as well. But at some point we have to reconcile that issue.

I'd also like to just mention on the area of defense microelectronics, there was an ad in the Post the other day that said battles are fought with weapons but they are won with information. As all of us know, the Department of Defense has trouble keeping up with advances in commercial electronics and information systems. New generations of microchips are being introduced in the commercial world roughly one every 18 months.

And by the time DOD deploys a system, its electronics are often several generations behind those being marketed in the commercial world. And I hope that we can talk about the defense microelectronics activity. Senator Stevens and I have done some work in that area. And I think it's an increasingly important area. And we're recognizing that especially with what's happening in Central Asia.

But again, let me -- I know you came to testify. And let me allow you to do that. Thank you for being here, and let me, if I can, pursue a couple of these issues through a telephone call.

Thank you.

INOUYE: Senator Shelby?

SHELBY: Mr. Chairman I ask unanimous consent that my entire statement be made part of the record.

INOUYE: (Inaudible).

SHELBY: And other than that I just want to welcome Secretary Wolfowitz to the committee. And I look forward to what he has to say. But I also want to join the chorus in commending not only Secretary Wolfowitz but Secretary Rumsfeld for the leadership that you've shown over at the Pentagon. And I want to say thank you on behalf of my constituents and I think a lot of the American people.

INOUYE: Thank you very much.

May I now call upon Dr. Wolfowitz.

WOLFOWITZ: Mr. Chairman and members of the committee, it's an honor to appear before this committee. I am aware I'm in the presence of three decorated veterans from World War II, members of that greatest generation. And I'm in the presence of the committee that has been in the forefront of providing the resources that are enabling our marvelous men and women to accomplish what they are doing now for this nation's security.

We do indeed face enormous challenges, in some ways not as big perhaps in terms of the scale or in terms of the resources involved, but in terms of the stakes involved in some ways as big as that great challenge of World War II.

We are faced, as we always are faced in wartime, with these difficult issues of priorities. And Mr. Chairman, you referred to that in your opening remarks, and I'm sure we'll get into it in questions. But I think we all owe an enormous debt and enormous vote of thanks to what our military has been able to accomplish already so far in this campaign.

If I had come to you in June and said we needed extra money in order to be able to base forces in Karshi-Kandagan (ph), not only would you not have believed me; I'm not sure I would have believed myself, nor would I have been able to tell you that that was in Uzbekistan. We are now performing functions today that were in no military plan as of September 11. We're doing them, I think, with great effectiveness.

And I believe, although one has to knock on wood in saying it, there's still a very long way to go. I think it's unquestionable that the success so far in that campaign has done a great deal to protect Americans here at home. Secretary Rumsfeld has said no amount of defenses and barriers and protective activities and no amount of hunkering down can protect us from every possible way the terrorists can attack. And therefore while we have to take security measures and we're taking them on an enormous scale and I might say not just in the FBI or the Customs but also billions of dollars and tens of thousands of people in the armed services are engaged in protecting our facilities here in the United States.

But by taking the war to the enemy and doing it as effectively as our men and women have been able to do, I believe we've made a significant contribution to the fact that so far -- and I can only say so far -- they haven't struck again.

WOLFOWITZ: It's not that they're not trying. We had the evidence of Mr. Reid, who nearly killed 150 people on a civilian airliner, who was clearly part of that same network. We have intelligence every day that says that they are still planning.

So there may be some downs as well as some ups. I think Senator Domenici said it's nice that things are going our way for a change -- and they are going our way for a change -- but they may not always be going our way. We've got to have the same kind of staying power for this conflict that your generation had in World War II.

I think we can say a thanks that we're able to accomplish this campaign, this war with a defense budget that even with this very large increase will be less than 3.5 percent of our GDP. And I don't believe there's any time in history that I'm aware of, certainly not in the history of the 20th century, when we ever were able to go to war with that small a defense burden. I hope it will stay at that level. But I think we should appreciate how much is accomplished with a relatively small force.

And as we look at priorities, it's not to shortchange any of the other things that other agencies have to do for our security or related activities, that the State Department does to make this campaign possible. But I do believe that the priority does need to be on all of those activities conducted by our government that can help make not only our citizens today secure but provide a free and safe future for our children and grandchildren.

Mr. Chairman, I have a much longer statement that I'd like to submit for the record if you'll bear with me for maybe 10 minutes. I'd like to just summarize the main points in it.

We are in fact trying to do two major tasks at the same time. We're trying to fight a war on terrorism. We're also trying to prepare our forces for the conflicts that might come a decade from now or even longer. And the defense forces of any particular year are very much the product of investments that were made a decade or two decades before. So even as we're fighting this war, we need to be certain that we're doing everything we can to make sure that our successors 10 or 20 years from now have those capabilities that they need to protect our country in the future.

When the Cold War ended, Mr. Chairman, we began a very substantial drawdown of our defense forces and our budgets. It was appropriate to do so. We cast a large piece of it in lowering the level of our defense burden by half of what it was at its Cold War peak. Much of that, as I said, was an appropriate adjustment to the great improvement in our security that resulted from victory in the Cold War.

But ultimately that drawdown went too far. While our commitments around the world stayed the same and even grew in some cases, our country spent much of the 1990s living off of investments made in the Cold War instead of making new investments to address the threats of this new century.

As I discussed with this committee last year, even before September 11th we faced the urgent need to replenish critical accounts. After September 11th we find ourselves facing the additional challenge of accomplishing three significant missions at the same time. We can only accomplish those three missions, fighting the war on terror, supporting our people and selectively modernizing the forces we have and transforming our armed forces for wars of the future, with proper investments over a sustained period.

And we have to accomplish these missions in an environment of rising costs, particularly rising costs for that most critical element of the force our people. Indeed, if one wants to understand properly why we are here for such a large increase, a $48 billion increase, I think you need to understand that the 2003 budget addresses a variety of must-pay bills, many of them in those personnel accounts.

It includes a $14.1 billion increase for retiree health care and pay raises. If we don't pay our people properly, we risk jeopardizing that critical element of the force.

There are other bills, such as realistically pricing the systems that we buy and realistically costing our activities. That's another $7.4 billion. There are $6.7 billion in that total to cover inflation and $19.4 billion including the contingency fund for the war on terror. Added together, those bills come to $47.6 billion, which is why President Bush sent to Congress a 2003 defense budget request of $379 billion, a $48 billion increase from the 2002 budget.

And if you do that arithmetic, Mr. Chairman, you can see that the only reason we are able to have a considerable amount of money to invest in new programs after paying all of those bills is because we have in fact reallocated priorities, killed programs and made hard choices and smart choices.

The 2003 budget request was guided by the results of that year's strategy review and the quadrennial defense review. Out of the intense debate that led to those reviews we reached agreement within the department on the urgent need for real changes in our defense strategy.

Among the new directions set in the QDR I'd highlight three as the most important. First, we decided to move away from the two major theater war force sizing construct to a new approach that instead places greater emphasis on deterrence in four critical theaters backed by the ability to swiftly defeat two aggressors at the same time while preserving the option for one rather than two major offenses to occupy an aggressor's capital and replace the regime.

Second, to confront a world marked by surprise and substantial uncertainty, we concluded that we needed to shift our planning from the threat-based model that has guided our thinking in the past to a capability-based model that is more appropriate for a future that is highly uncertain.

Third, that capabilities-based approach places great emphasis on defining where we want to go with the transformation of our forces. In the testimony that follows I'm going to address where we're putting dollars and resources behind that transformation. But as Secretary Rumsfeld has said, transformation is about more than just dollars; it's about more than bombs and bullets and dollars and cents. It's about new approaches. It's about culture. It's about mind-set and ways of thinking of things.

And that, by the way, Mr. Chairman, has been characteristic of major military transformations in the past where frequently we have seen two adversaries, one equally equipped with the same new equipment but one of which understood the implications and the organizational, doctrinal, cultural changes required to use it effectively, and the other one didn't. Indeed that is part of the reason why the British -- that is why the British and French lost the Battle of France in a mere four weeks to an enemy that was no stronger in equipment accounts.

In just the few months of the current campaign we have seen a great deal of that kind of change underway. To mention just one example, not long ago I had the opportunity to be briefed by an Air Force F-15 pilot who had been persuaded to forgo a rated pilot's job to instead fly an unmanned Predator aircraft from a location far from the field of battle. For a pilot destined for the cockpit, it was a difficult choice for her -- yes, it was a woman pilot -- especially given concerns among pilots that such an assignment could stymie their careers.

But there is no question that unmanned vehicles have made a significant impact in the current campaign and promise even greater operational impacts in the future, which is why the Air Force leadership today is working hard to encourage other such trailblazers to become predator pilots and help define a new concept of operations.

So at this moment what it means to be a fighter pilot in the U.S. air force is undergoing a transformation.

It's also important to note that transformation doesn't mean transforming the entire force overnight. It begins with leveraging the systems we have with new technology and new thinking. And as we begin by changing only a small percentage of the force, we can indeed change the capability of the entire force.

That is our aim. And by giving some definition to what transformation is and putting money behind those ideas, we believe we've already energized the defense team in dramatic ways and that we can energize a transformation that will be ongoing and exponential and provide the right forces to our successors a decade from now.

In the QDR, in the review that defined the investment priorities in the '03-'07 FYDP, we identified six key transformational goals. And I would like to discuss how this budget addresses those goals. I would note that the budget as a whole requests some $53.9 billion for research, development, test and evaluation. That's a $5.5 billion over fiscal year '02.

And it requests $71.9 billion for procurement. That's a $7.6 billion increase over '02.

It funds 13 new transformational programs and accelerates funding for 22 more existing programs.

Out of that total investment of some $125 billion, $126 billion in procurement and RDT&E, the transformation programs that I'm going to discuss in those six key categories account for roughly $21 billion, or 17 percent of our investment funding, rising to 22 percent over the course of the FYDP.

I'm going to discuss the details of that $21 billion in each of the six key categories as follows.

First, our highest transformational priority and identified as such even before September 11th is protecting our bases of operation in homeland defense. We know that both terrorists and state supporters of terrorism are actively looking to build or buy nuclear, chemical and biological weapons of mass destruction. We also know that a number of hostile regimes, many of them, by the way, who also support terrorism, are investing heavily in ballistic missile capabilities to threaten our allies and even to threaten the homeland of the United States.

To meet our objective of making homeland defense the department's top priority, the president's 2003 budget funds a number of programs, including not only a $7.8 billion request for our refocused and revitalized missile defense research and testing program, but it is also important to note that the budget invests $10.5 billion for a variety of programs directly addressed to combating terrorism.

That's almost double -- in fact it's slightly more than double -- the amount that we were investing in that area just two years ago and approximately $3 billion more than we're budgeting for missile defense in '03. That is due in very great measure to new priorities that we have to address in the wake of September 11th, needs that range from the immediate necessities of hiring guards and building jersey barriers to the long-term necessities of training first responders and refining our intelligence response to the ongoing threat of terrorism.

Of that $18.3 billion I just identified we consider some $8 billion of that to be truly transformational. And I should note that in the totals I'm giving here of transformational programs we're applying a pretty tight definition to what we consider transformational.

Our second transformational goal in the QDR is denying enemy sanctuary. Again, this was identified as a high priority long before September 11th. It's obviously been a major capability we have been using in this campaign. As we rout out al Qaeda and members of the Taliban, it is readily apparent how important it is to be able to rob our enemies of places to hide and function.

The key to that is long-range precision strike. And I would emphasize that long-range precision strike is not just about heavy bombers. It's also done with ground forces. And most importantly it's done most effectively when we can link ground and air assets together.

In my last year in the Pentagon, Mr. Chairman, during the Persian Gulf War where we worked so hard to try to stop Iraqi scud attacks on Israel, we had an almost total inability to take advantage of what we had in the air and link it with the brave people we put in on the ground. Obviously we've come a long way in the last ten years in what we've been able to do in Afghanistan, but we need to go much further.

As we've seen in the campaign in Afghanistan, special forces mounted on a horseback have used modern communications to direct strikes from 50-year-old B-52s. When Secretary Rumsfeld was asked why he was introducing the horse cavalry back into modern war, he said, "It's all part of a transformation plan."

And indeed it is. Transformation isn't just about new systems. It's also about using old systems in new ways with new doctrines, new types of organization and new operational concepts.

The '03 budget funds a number of programs designed to help us deny sanctuary to our enemies. It includes roughly a billion dollars of increased spending on unmanned aerial vehicles. It includes another billion dollars for conversion to start the conversion of four Trident nuclear submarines from a Cold War nuclear mission into stealthy high-endurance conventional strike submarines.

It's important to note, as I said, that we are applying a very strict definition to which programs we consider transformational. As an illustration, there are many things in this budget not included in these figures.

WOLFOWITZ: For example, in this budget request we're asking for nearly $2 billion, $1.7 billion precisely, for funding to increase production of the joint direct attack munitions and other precision- guided munitions which have proven critical to making transformation work.

With just that strict definition, the '03 budget requests $3.2 billion for transformational programs to support that objective of denying sanctuary to our adversaries and $16.9 billion over the FYDP, an increase of 157 percent.

Third critical category is countering the very determined efforts of those who want to keep us out of their operating areas through what we call anti-access strategies, by attacking our ships at sea or denying us access to bases or attacking our bases. We see both in what our adversaries say and in what they do that they recognize if they have to go head to head with American forces they will lose. If they can keep us from being able to operate in their area, it's their only chance. We have to be able to counter that.

Overall, the 2003 budget requests $7.4 billion for programs to support that goal of projecting power over vast distances, $53 billion over the FYDP. That's an increase of 21 percent.

Our fourth key goal is leveraging information technology, the technology that was key to linking horse cavalry with B-52s. In that example in less than 20 minutes from the time an NCO on horseback entered key information into his laptop, JDAMS launched from a B-52 miles away were dropping on enemy positions just a few hundred meters from that NCO -- who was obviously a brave man, I would point out.

Clearly a key transformation goal is to leverage advances in information technology to seamlessly connect U.S. forces and to ensure that they see the same precise real-time picture of the battlefield. The '03 budget funds a number of programs designed to leverage information technology.

One technology that we're investing in heavily, which has very large future potential is laser communications, a promising experimental technology that, if successful, will give wide-band satellites the ability to pass data to each other at speeds measured in gigabits per second as opposed to megabits per second, a significant and dramatic improvement.

I would note, Mr. Chairman, that I don't think you had to worry about gigabits during World War II. It is impressive to see what the young men and women I just visited, for example, at Fort Lewis in Washington, what they were able to do with computers. It's almost second nature to them. And one example that we got in that same Air Force briefing I referred to, we were told about how the people netting these information-gathering networks together are operating in chat rooms, operating six chat rooms at a time. We don't have to teach them what chat rooms are. They come in the service already knowing them. It's a remarkable capability.

The '03 budget requests $2.5 billion for programs to support this objective of leveraging information technology.

As our fifth objective, as information warfare takes an increasingly significant role in modern war, is to be able to protect our information networks and attack and cripple those of our adversaries. Many of the programs in that area are classified. It is a new area. It's one that I think we have to work even harder in. The '03 budget requests $174 million for programs to support that objective and an increase of 28 percent over the FYDP.

Finally, our sixth priority for transformation is space. Space is the ultimate high ground. The '03 budget requests about $200 million to strengthen space capabilities and $1.5 billion over the FYDP, an increase of 145 percent.

As important as transformation is, Mr. Chairman, it is even more important to take care of our people. They are the key not only to the future but also to the present. The men and women who wear our nation's uniform are doing us proud. Military service by its nature asks our service members to assume risks and sacrifices that the rest of us do not.

But we should not ask those who put themselves in harm's way to forgo competitive pay or quality housing. The president's '03 budget requests $94 billion for military pay and allowances, including $1.9 billion for an across-the-board 4.1 percent pay raise. It also makes major advances in lowering out-of-pocket housing costs for those living in private housing so that we will be able by 2005 to eliminate all out-of-pocket housing costs for our men and women in uniform.

Just a word, Mr. Chairman, on cost savings. We understand that we have a requirement to make the best possible use of the very substantial resources that you and your colleagues and the American taxpayers are providing us. We have taken a realistic approach in looking at a number of programs and found areas where we can save money. We have proposed terminating a number of programs over the next five years that were not in line with the new defense strategy or that were having program difficulties, including the DD-21, the Navy Area Missile Defense, some 18 Army Legacy programs, and the Peacekeeper missile.

We also accelerated retirement of a number of aging and expensive-to-maintain capabilities, such as the F-14, DD-963 destroyers, and Vietnam-era helicopters.

We are also proceeding toward our goal of a 15 percent reduction in headquarters staffing and the senior executive council is finding additional ways and will continue to find additional ways to manage the department more efficiently.

The budget, as I mentioned at the beginning, reflects over $9 billion in redirected funds from acquisition program changes, management improvements, and other initiatives, savings that help to fund transformation and other pressing requirements.

Throughout this budget, Mr. Chairman, we were required to make some tough tradeoffs. We were not able to meet our objective of lowering average age of tactical aircraft. However, we are investing in unmanned aircraft and in the F-22 and the Joint Strike Fighter, which requires significant upfront investments but will not come on- line for several years.

While the budget proposes faster growth in science and technology, we have not yet met our goal of having 3 percent of the budget in that category. And we've not been able to fund shipbuilding at replacement rates in 2003. Although our ships are relatively new, we've got to change that course or we will eventually find ourselves with a substantially and dangerously reduced force.

In conclusion, Mr. Chairman, a budget of $379 billion is obviously a great deal of money. But it is misleading to compare this budget, as some have done, to budgets of the Cold War or to the defense budgets of other countries. We do not fight other countries' budgets on the battlefield; we fight their forces. The budget of the Taliban would have been a tiny fraction of that of the United States, yet it has been unquestionably important that we have had the capability to deploy forces thousands of miles away rapidly and effectively to an unsuspected theater of operations to defeat that force.

Our success thus far in meeting this challenge only confirms that ours is the best military force in the world. We must have the best military force in the world. We can't afford to have less than that.

The New York Controller's Office estimated the local economic cost of the September 11th attacks on New York City alone will add up to about a hundred billion dollars over the next three years. Estimates of the cost to the national economy from September 11th range from about $170 billion last year. And estimates range as high as almost $250 billion a year in lost productivity, sales, jobs, airline revenue and countless other areas. And the cost in human lives and the pain and suffering of so many thousands of Americans is incalculable.

The president's budget addresses our country's need to fight the war on terror, to support our men and women in uniform and to prepare for the challenges of the twenty-first century. This committee has been, continues to be an important safeguard of the long-term interests of our great nation. And I know you understand there is nothing more important than preserving peace and security.

We look forward to continuing to work with this committee to ensure that peace and security is what we can leave to generations to come. Thank you for your patience.

INOUYE: I thank you very much, Mr. Secretary.

Because of the constraints of time, may I request that the questioning period be limited to ten minutes per member.

Six days ago Senator Stevens and I had the privilege of visiting our troops in Uzbekistan and Pakistan and Afghanistan. And as the vice chairman pointed out, we were not just impressed but amazed at the high level of morale.

However, the personnel tempo which is now being driven by the war on terrorism and the pace of deployments I believe is putting a significant strain on our personnel and their families. So my question is, are current end strength levels adequate to meet the U.S. military commitments at home and around the world?

And secondly, have the events of 9/11 impacted the department's ability to recruit and retain military personnel?

WOLFOWITZ: Let me answer the second part of the question first. And the answer is that we seem to be doing very well on retention and recruitment. The willingness of Americans to come forward and serve their country and the willingness of reservists to serve on active duty is remarkable and heartwarming.

You are, I think, correct in identifying the fact that we are pushing our forces hard. In addition to what you've mentioned, we have -- and I'd like to get the exact number for the record -- but well over 80,000 people now called to active duty. Many of them on Homeland Security missions. Indeed, during the Olympics in Utah we had more people on active duty in the state of Utah than we had on active duty in Afghanistan.

And you can't keep calling people back to reserve duty and expect them to stay in the reserves. That isn't quite what they had in mind when they joined.

So we are looking very hard at what our long-term personnel requirements will be. But Secretary Rumsfeld has been pressing people to not simply say we need extra people to do all these extra tasks but also to identify where perhaps there are things that we're doing that we don't need to do so that we can reduce that strain not by adding people but by reducing some unnecessary missions.

As you may know, he's been trying long before September 11th to get our 2,000 or so people out of the Sinai where, in our view, at least the military mission is no longer needed. For reasons I can understand we're told that politically it's not a very good time. That's the kind of example, though, of what we run into as we try to find ways to reduce those burdens.

But we would like to try to manage, if we can, without increasing end strength. But we can't do that on the backs of the men and women in uniform or even worse the backs of their families. As you know, Mr. Chairman, nothing will send somebody out of the service faster than being sent away on a deployment or on a company tour leaving his family at home for intolerable periods of time.

INOUYE: It's true that the retention and recruiting in general would be acceptable, but I'm certain you're having shortfalls in certain areas, like pilots and nurses. Have you provided any incentives to recruit or retain men and women in those categories?

WOLFOWITZ: Let me try to get you a more detailed answer for the record. I had been given the impression that we're doing quite well on the recruiting side and that we haven't needed extra incentives.

Where we are not doing so well is we've had to put stop loss orders in for a lot of military specialties. I don't think it's a recruiting problem. I think it's that you can't train up the number of people you need fast enough to meet those needs. And that is a real issue and one that we've got to address. Because keeping people in the service when they had made other plans is, again, not the way we want to treat our people if we can avoid it.

INOUYE: And now if I may go to the $10 billion question. How do you respond to the critics of this request?

WOLFOWITZ: Well, first of all, it's absurd to call it, as some of them do, a slush fund. The purpose of this request is very clear. It's to continue the kind of operations that we're conducting today. And basically at roughly the level we're conducting them today.

One of your colleagues earlier referred to this as a new and unique request. It isn't actually new or unique. It is pretty much exactly part of what we came to the Congress for last fall. In fact it's less. We came to you with a request for a $10 billion fund that could be used for any purposes in the war on terror and another $10 billion that could be used with 15-day notification, then another $20 billion that required going through a congressional approval process.

One might think of this as just the front end of that $40 billion request we had. And I think it's the only prudent way to plan going into a new year where we expect to be continuing to conduct operations at at least something like this level.

WOLFOWITZ: For those who are concerned that they're somehow writing a blank check to some unlimited expansion of the war, I would just assure them that this isn't going to fund anything much more than roughly the level of activity that we're at for approximately five months into fiscal year '03.

We don't know where we're going to be in fiscal year '03. It is, I suppose, possible that we will be able miraculously to be able to say we don't need to conduct military operations at that level. It's equally possible, maybe more likely, that we'll find that in many ways our expenses and burdens are rising.

It seems to me the only prudent things to do especially in thinking about allocating resources for the next fiscal year is to assume that at least a $10 billion amount is necessary and that you ought to have that available going into the year and not have to come with a supplemental on October 1st, which is where we'd be if this money weren't appropriated.

INOUYE: Since I'm from the Pacific, I'm certain you understand my special concern for the Navy. And I've been concerned about the shipbuilding program because it continues to be plagued with cost overruns and delays. In the '03 budget request there's $645 million to complete prior-year shipbuilding programs. This is on top of the $729 million provided for the same purpose.

What is your plan to address these issues and getting the shipbuilding program back on track?

WOLFOWITZ: I'm going to ask Dr. Zakheim to add some more detail here, but you were correct in identifying the fact that we have some problems in how shipbuilding is going. And while we would like to see our shipbuilding at a higher level in this budget, the leadership of the Navy, after a lot of careful thought, decided it was a much higher priority to get the readiness accounts up to improve the operation and the care of the present force.

And they do have the advantage that, as I mentioned earlier, our current fleet is relatively new. I think the average age is about 16 years. And while we're not building at replacement rates, we don't have to be quite at replacement rates yet.

Even if we were to put more money into shipbuilding this year, we're not so sure that we would be putting it into the right programs, partly because of some of the problems that you identify.

Dov, do you want to add to that?

ZAKHEIM: Well, only to say that the way the Navy approached its overall budget was to fully fund readiness. And in the past, as you know, Mr. Chairman, what's often been the case was that readiness was underfunded and funds migrated from the procurement accounts to the readiness accounts.

So that the ships that are in the budget -- and one could, I think, make a reasonable argument that the two SSGNs that the deputy secretary mentioned in his statement -- also count as part of shipbuilding. But those five plus two are likely to be protected in a way that previous shipbuilding budgets just were not. So when you add that to the realistic funding, the funding of prior-year contracts, we feel reasonably safe about this budget and about the rest of the five- year shipbuilding program where we will ramp up to ten or so ships by '07.

INOUYE: Thank you.

Just for the record, the Office of Strategic Influence is now out of business, isn't it?

WOLFOWITZ: That's correct.

INOUYE: I have some...

WOLFOWITZ: It was never in the business of producing disinformation or misleading people. I would like to make that clear. That is not our business. And I think quite fundamentally we understand, I think as the whole country and the rest of the government understands, that truth is on our side in this war and truth is one of our most important weapons. And we do not want to do things that in any way diminish our ability to deliver the truth by allowing people to think that we do something else.

INOUYE: We have been told that you may have a supplemental request submitted by the end of April, but it doesn't appear to be that will be done. What's the status now?

WOLFOWITZ: I'm very hesitant to predict how long it takes things sometimes to get out of the executive branch. There is an urgency to get a supplemental request up here because we are starting fairly soon to run out of the supplemental appropriation that you passed last fall. And it would be unfortunate if we end up back in the situation that we've been in so often before where we are dipping into future accounts in order to cover expenses in the expectation that we'll get reimbursed in the supplemental.

We're trying to work it as fast as we can. And our colleagues in OMB are working hard with us. And we'll just try to get it here as quickly as possible.

INOUYE: I thank you. My time is up.

Senator Stevens?

STEVENS: Thank you very much.

Secretary Wolfowitz, we have followed this in this subcommittee, the C-17, for years. At one time all three of the other defense committees and subcommittees of the Congress had opposed the C-17. And we insisted that it proceed. We still have a really, I think, overwhelming support for that system. As a matter of fact, the availability of that aircraft is a limiting factor in our ability to redeploy our forces today.

This budget request reduces the procurement rate by 20 percent, the 12 aircraft in 2003. But it does not decrease the overall buy. And so my question to you is, one, why did you do this? And two, what will be the additional cost of the procurement if we follow your request?

WOLFOWITZ: My understanding -- first of all, I agree with you strongly about the importance of the C-17 and applaud you and others who made sure that this program survived and we have the benefit of it today.

My understanding is that the 12 aircraft budgeted for in '03 will be combined with the previous multiyear purchase to maintain the economical production rate at the plant during FY '04 -- that's the rate as 15 -- and that our follow-on multiyear procurement will sustain a C-17 production profile at that rate through FY '07. So that I am told that this profile results in the same total costs and the same delivery schedule but that to revert to a traditional multiyear at this point would require an additional $650 million in '03 appropriations without accelerating the delivery schedule.

So I think, as I understand it, it's a matter of trying to match up the year-by-year funding with the actual production capability but not to add anything to the cost of production.

STEVENS: I would request you give us the detail for the record. Last year we were told the most efficient and cost-effective rate of production was 15 a year. And we authorized that. And we funded at that level. Now it's going down to 12. And you tell us that somehow or other that that 12 next year will continue the rate of 15 this year.

I have serious questions about that. And I hope you'll give us the details of that analysis for the record.

WOLFOWITZ: I would like to see them myself, Senator. We'll get them for you.

STEVENS: Secondly, I understand we're going forward now with Fort Greely as a test facility for the national missile defense system . Can you tell me when do you believe the test that will be operational?

And secondly, X-band radar that was proposed over that system for Shemya has been delayed, and I'm told that there's some concept of placing those radars on ships at sea. It was my understanding, I think the committee's understanding, that the X-band radar Shemya would be part of a worldwide deployment of X-band radars.

I've never heard of putting X-band radars on ships at sea. And I'd like to know, is that correct? Is that going to be the functional addition to the national missile defense system, X-band radars in sea in the Pacific?

WOLFOWITZ: On Fort Greely, Senator, we started site preparation in August-October time frame and cleared land and started grading some roads. The GND (ph) validation of operation concept, environmental assessment covering Fort Greely has been performed and is ready for public comment. And upon completion of that 30-day public comment period in April we would be awarding contracts, the Army Corps of Engineers would be awarding contracts, for start of the actual test bed construction. And that would include roads, a readiness control building, a missile assembly building, mechanical-electrical building, and electrical substation interceptor storage buildings and several other smaller buildings.

In late June we will reach the expiration period of our six-month ABM treaty withdrawal notification. And at that point we would begin excavation and construction of six missile silos. All of those facilities would be completed and an operationally realistic missile prototype ground-based missile defense field with five prototype interceptors should be installed and checked out and ready by September of 2004.

That would give us a capability we've never had before for validating construction techniques, validating the operational concept and doing it in a representative arctic environment.

On the X-band radar, my understanding is that the Missile Defense Agency is still looking at the best location deployment systems for X- band radars, including very definitely the possibility of Shemya. Indeed I think they feel that Shemya is an operational requirement for an effective system.

But they're also looking at ships and other locations with respect to a test bed on an operational system.

STEVENS: Thank you for that.

Could you tell me, what is the Missile Defense Study Group? We've read about it in the press. I have not been informed. I don't think any of us have been informed. What is that? We have a Missile Defense Agency, the BMDO under General Ron Kadish. And we've got the statement of the undersecretary of defense for acquisition that there is now a new group, the Missile Defense Support Group.

Can you tell us what that is?

WOLFOWITZ: It's the -- part of the oversight mechanism that was put in place when we restructured the BMDO office into the Missile Defense Agency. We tried to give General Kadish and his people more flexibility to pursue things that work and stop doing things that don't work.

But we wanted some mechanism that would ensure a reasonable level of oversight and review of those decisions. And the Missile Defense Support Group is the group that performs that function as an adjunct of the Senior Executive Council, which consists of the three service secretaries and the undersecretaries.

So I'd describe it as a management tool and a management tool that's meant to give General Kadish a great deal of flexibility but keep a reasonable level of oversight at the same time.

STEVENS: Will that be then at the Missile Defense Agency as the organization that will comply with the federal acquisition procedures, contract awards, other functions and that this Missile Defense Study Group is an oversight policy group or -- I'm -- we worry about there's a second level here now that might second-guess the decisions of the agency.

WOLFOWITZ: Well, the level that would have any authority to overrule the decisions of the agency would be the level of the service secretaries and the undersecretary for acquisition and myself. In the past arrangement he could have his decisions second-guessed by the Defense Acquisition Board, which is a whole other large bureaucracy.

I think we actually have given him more flexibility, but there has to be some degree of oversight. But he is the accountable official. And my understand -- and if it's wrong I'll get you an answer back for the record -- my understand that it is the head of the Missile Defense Agency who has the responsibility for complying with acquisition regulations.

STEVENS: My last -- I see our distinguished chairman is here. I want to give him an opportunity to ask his questions.

But we have tried to implement a program for reduction of consultants in the Department of Defense. As a matter of fact, we made a reduction in the budget itself to reflect that desire from this subcommittee. I'm told we're not able to document how many consultants are currently employed by and how much is actually spent for noncareer workers in the capacity of consultants by the department.

STEVENS: Could you please provide for the record a statement of how many consultants and contract workers the department employs now, how many they plan to employ in 2003 and how much will the department spend for such services in '02 and '03?

WOLFOWITZ: We will do that, Senator.

INOUYE: I thank you very much.

And now if I may, I'd like to recognize the chairman of the committee.

Chairman Byrd?

BYRD: Well, I've had the pleasure and the privilege of hearing Mr. Wolfowitz recently. And I'm glad to have this opportunity to ask just a few questions again.

And I thank you, Mr. Chairman. And I thank you, Mr. Ranking chairman, Ted Stevens.

Doctor, instead of concentrating on completing our operations in Afghanistan, the Pentagon seems to be looking for opportunities to stay longer and to extend itself further into the region. This concerns me. I think that we seem to be good at developing entrance strategies, not so good in developing exit strategies.

I see that the Pentagon is basing a $30 billion projected cost of the war on a series of assumptions regarding operations. According to the information I've received from your office, you have calculated that America's war on terrorism will cost a total of $30 billion in fiscal year 2002.

Congress has already provided $17.4 billion, which means that the Defense Department will need a $12.6 billion supplemental just to cover the cost of the war for one year.

Does the Pentagon have a list of goals that it expects to accomplish, Dr. Wolfowitz, with the $30 billion?

WOLFOWITZ: That $30 billion is basically a projection. And I would emphasize we're at every stage of this campaign things change. We change rapidly. Just as we had no idea on September 10th that we'd be engaged in a conflict halfway round the world in Afghanistan, we also had no idea on October 15th that we would be deploying forces on the ground in Afghanistan as quickly as we did. We had no idea the Taliban would collapse as quickly as it did. We had no idea that we would be putting people on the ground to pursue al Qaeda terrorists in caves as quickly as we did.

Everything here has gone in ways that have been unpredictable. So I say that by emphasizing that whatever I'm going to say about where we will be in June or in August or in September is a prediction of the unpredictable.

But what we've basically done is to say it's a reasonable assumption that we will continue to operate at roughly the level we're at today. And I would emphasize the level we're at today particularly for a major conflict of this kind is very, very low. We only have about 5,000 people on the ground in Afghanistan. That's 0.01 percent of what was deployed in the total coalition force in the Persian Gulf 10 years ago.

They are engaged in primarily our major objective is to continue to pursue al Qaeda terrorists, to capture them or kill them, to obtain information and intelligence about what they were doing there and what their ties are to people elsewhere.

Not so long ago we picked up a videotape in Kabul, I believe it was, or somewhere in Afghanistan that led to the arrests of terrorists in Singapore who were planning to attack American Navy ships. This is a global network, and by what we've been able to do in Afghanistan I think we have significantly disrupted that network and given ourselves more intelligence to go after it.

At the same time, we do not want to see Afghanistan become again in two or three or five years a haven for the same group of terrorists or another group of terrorists. And that requires some attention to maintaining the security conditions of the country after we're finished.

But I would assure you, Senator Byrd, we have no desire to stay one day longer than we have to or to use one soldier or sailor or airman or marine more than we have to and that our basic principle on the long-term security of Afghanistan is to try to train and equip the Afghans to do as much of the job for themselves as possible. I think that is the strategy and that's the basis on which we've made what is, I admit, a guess as to what our costs will be in this coming year.

BYRD: Well, Dr. Wolfowitz, General Franks is a good commander.

WOLFOWITZ: Outstanding, I might say.

BYRD: He takes his orders, as you do, from the president. What I see here appears to be an expanding agenda. I read all of these accounts about creating an army in Afghanistan. We went there to hunt down the terrorists. We don't know where Osama bin Laden is, whether he's alive or dead or where Mullah Omar is hiding. We've bombed the caves of Afghanistan back into the Dark Ages, which lasted a thousand years.

And we've killed Afghans who are not our enemies. We killed 16 just a few days ago because we dropped -- apparently didn't have the correct intelligence. There have been a lot of bodies, I'm sure, brought out of those caves.

But we don't have Osama bin Laden. And if we expect to kill every terrorist in the world, that's going to keep us going beyond doomsday.

How long can we afford this? How much have we spent in Afghanistan already, to date?

WOLFOWITZ: I believe the total that we've spent on deployments -- and I think that includes money that we spent for Operation Noble Eagle, which is the air defense of the United States -- is $10.3 billion through the end of January.

STEVENS: $10.3 billion?

WOLFOWITZ: $10.3 billion. That includes a number of immediate security measures that were taken for Homeland Security and force protection after September 11th that total $3.9 billion.

STEVENS: So we spent how much in Afghanistan?

WOLFOWITZ: Dov, do you have it broken down between Afghanistan and Noble Eagle?

ZAKHEIM: No, you have them together.

WOLFOWITZ: I'm sorry. What I have is a $7.4 billion figure which, I'm sorry, Senator, I don't have the breakdown. I'll try to get it for you. The $7.4 billion figure covers our operations in Afghanistan and our air defense deployments in the United States, those two together. I would guess at a roughly $6 billion of that total is Afghanistan.

BYRD: And the president is asking for $379 billion for defense for FY 2003, which is more than a billion dollars a day. How long can we stand this kind of pressure upon our treasury? And the president has committed our country to build an Afghan national army, according to what I read in the press. And to spend hundreds of millions of dollars to rebuild that country? And there's no end in sight. No end in sight in our mission in Afghanistan.

Look at the Philippines. We're sending 660 troops to help fight a rebel group there. Already ten soldiers on that mission have lost their lives in a helicopter accident.

Look at Columbia. On Monday a State Department official said we have yet to see any effect of the $1 billion in U.S. aid that has been sent to the jungle down there. The drugs that we're supposed to be eradicating are still finding their way on our streets. But as the Columbian government heats up its war against the rebel drug dealers, the president is considering sending more aid, perhaps more U.S. troops, to that country.

And then there's Iraq, and so on and so on and so on.

Mr. Chairman, you've been very liberal with me with the time. Let me ask just one final question.

I've not heard any estimates of how much it will cost to train and equip an Afghan national army. But the president has said that the U.S. will assist in its creation. Now, Congress has control of the purse strings. If we pay attention to Section 7 of Article 1 of the United States Constitution we've got to begin asking some questions. No blank checks to be written.

Do we know how much it will cost, Dr. Wolfowitz, to follow through on the administration's promise? Or have we committed in essence to giving Afghanistan the blank check? Where are we? What's it going to cost? What's the end game here? When will we know that we have victory, that we've achieved victory and that we need to get out of Afghanistan?

WOLFOWITZ: Senator, we're actually still in the process of trying to assess what would be the right kind of army for Afghanistan and what it would cost. And frankly, the push in our assessment is to get people's expectations down and to be more realistic and not to try to create some giant force that they don't actually need.

And we agree strongly with the thrust of your comments that we don't want to have a long-term continuing American presence in that country if we can help it. Of course, that is, I think, the main reason why we want to see the Afghans themselves have some capability to take over those security functions.

Because the other side of the coin -- and I'm pretty sure you would agree with this because I know -- and I know how stalwart you've been in support of our defense programs over many years and you know that, as I know, that we enjoy a much safer world today because we persevered through the Cold War. And I think we'll enjoy a much safer world five or ten years from now, maybe sooner, but I don't think probably much sooner than that -- by persevering in this war on terrorism.

But you're absolutely right that we've got to be careful about overcommitting ourselves. We've got to be very careful about not taking on other people's jobs for them and looking for ways to get out of places as well as ways to get in. So it's balancing those two things at the same time.

But I can't tell you when we will have won. I mean, unfortunately that's something we sort of know only when the terrorists have stopped. We do know that they're still out there in large numbers. And it's not only Afghanistan. But we do know that what we're able to accomplish in Afghanistan, even as we speak, is helping us to prevent terrorist acts here in the United States.

BYRD: I thank you, Doctor.

I thank you, Mr. Chairman. I thank my colleagues for your patience.

INOUYE: Thank you very much,

Senator Hollings?

HOLLINGS: Back to the original theme, Secretary Wolfowitz, every response up here is to the needs of the reelection campaign and not the needs of the country. And if there's any division, then we just move on, that old political axiom, When in doubt do nothing and stay in doubt all the time.

That comment is made as a result of your comment about the Sinai. I find that you and I are going down the same side of the street together. We've got 13 peacekeeping. Now we're going to add two more, in the Philippines and in Georgia. Now we're going into the old-time Soviet.

HOLLINGS: I never thought we'd ever get into there. But you've gotten us in there in my morning paper. Whoopee. I can get reelected on that down in South Carolina. We're invading communism.

But the truth of the matter is, if you've got to go into these places, eliminate the other one. I'm not worried so much about Afghanistan because I know you're sincere about it, but there can be no sincerity to the Balkans. Ye gads. Ten years ago we went there for one year. Now it's ten years.

And the politics ought to be even better. In other words, we are into a sacrificial, supposedly, mode around here, which doesn't exist. But tell the Europeans that they're just going to have to take over or let them -- they can run that down there. I mean, yes, I mean we got to sit here and argue with the Council of Foreign Relations. I mean, are they going to run the government? They don't pay any bills.

Why not cut back at the Balkans? Kosovo, they just hunker down by themselves there, all those troops.

It seems to me you agree with Secretary Rumsfeld on Sinai. And the people around in that area are not very friendly to us. They're not very understanding and cooperative. They don't want us there. So why don't we get out of the Sinai?

WOLFOWITZ: Well, I agree with Secretary Rumsfeld.

Unfortunately, the people there do want us there. That's what we're grappling with.

HOLLINGS: You haven't talked to the 900 that we got.

WOLFOWITZ: Oh, our people don't want to be there, and we don't want...

HOLLINGS: No, the 900 who will tell you the people around them do not want us there. They're not very friendly about our deployment there at all. Go over there and talk to them.

With respect to the -- since my time is limited, with respect to the C-17, it was Secretary Kerry (ph) when we put him in that cockpit up there, he saved the C-17 for us when some on this committee were getting rid of it. I agree with Senator Stevens. Let's get that procurement up at least to the 15 and more.

Because I visited with him. And we get right into your same comment with the reserves. They are going around the clock. You got the full 38th regular C-17 outfit. And then you got the 315th Reserve by General Black. And they are going around -- I think it's 78 percent of everything going into Afghanistan into that war is going in on a C-17.

And yes, their morale is high, but how they going to keep it up in the reserves? Like the frustration denoted in the distinguished chairman's question, when are we going to have victory? They want to know, when are we going get some relief? So you need more regular crews and more regular planes in the C-17 force.

I'm for the high-tech. I'm for the new defense that Secretary Rumsfeld testified to last year and reiterated by the commander in chief. I went down with him a month ago to the Citadel when he got rid of the ABM treaty. And he says, "Yes, we're going to take the legacy costs and put it over into this new highly technology force, defense force, and balance off those costs." And we now asking for three strike fighters or new fighters.

Yes, let's go with the F-22 and maybe even limit it some in the first buy. But why continue the F-18? Can we economize there and be realistic? I'm trying to get rid of this $50 billion more that wasn't needed last September that's all of a sudden needed when we hadn't even spent the $20 billion more that we've already had in the supplemental. Could we do that and not hurt defense?

WOLFOWITZ: First of all, I mean to say we haven't spend the supplemental, Senator, we are spending it. We're spending at a great rate. And we're going to run out of it.

HOLLINGS: You spent the $20 billion already?

WOLFOWITZ: Not yet. But...

HOLLINGS: That isn't what our budget figures show, Budget Committee.

WOLFOWITZ: We've spent $10.3 billion already. We're spending...

HOLLINGS: About half of it.

WOLFOWITZ: It's actually -- the amount we got total I believe was 17.3. And we, as of the end of January, spent $10.3 billion of that. We're spending at a rate that we'll need more money by late spring.

And as I said also, there are some costs like health-care bills and things of that kind that we've simply got to pay.

Let me, on the question of these deployments, which we are trying to bring down, we have had some success, particularly in the Balkans. In Bosnia we had nearly 4500 troops there in January of last year. As of last month we've gotten that down to 3,160. So that's more than a thousand troops down. We're bringing them down more.

And we are trying to take advantage of the fact that our allies have said they want to help. They are helping, by the way, substantially in Afghanistan today. Those numbers change so, but we have roughly in Afghanistan today roughly 5,000 Americans. And I believe -- I'll get you the exact numbers for the record -- our allies have something in the neighborhood of 6,000 troops. They have more than we do by roughly a thousand in the combination of the peacekeeping force in Kabul and people on the ground with us, including Australian, Canadian, New Zealand, British special forces.

So we're getting a lot of help from people. But this is a difficult strenuous operation. And I think indeed what's remarkable is that we're able to do it without an enormous increase in our defense budget of the kind we undertook for World War II or the Korean War or even for Vietnam. We are looking for every place that we can save some money.

And you raise the question of the three new fighters. The problem is they don't come in at the right times. If we had the Joint Strike Fighter available today, we could do without the F-18. But absent the Joint Strike Fighter, we've got to do something or our Navy aircraft are just going to get terribly old. They're already too old already. And it leads to maintenance problems and accidents and things of that kind.

HOLLINGS: The Crusader? Do you think we need that?

WOLFOWITZ: I think we need some of it, a lot fewer than the Army had planned on. We've cut that program by almost two-thirds. And they've done a lot to cut the size and weight of the system. But I'm not one of those people who think that I can bet the farm on not needing artillery ten years from now. And I think this is the best artillery system available.

HOLLINGS: B-22? We've killed more Americans than the enemy.

WOLFOWITZ: B-22 is a troubled program. We had a very senior level group look at it. They believe that those problems can be worked out. We'll know, I think, sometime over the course of next year whether that optimism is justified or not. If it's not, we're going to have...

HOLLINGS: Oh, when you design the defense, Mr. Secretary, as you and I know, we clear that area. We've got this air power and everything else like that we not -- like on the Normandy beaches. And the Black Hawk helicopter will get more than enough troops to where we want after we've by air power cleared the area. It seems to me that that's a luxury that is not needed.

With respect to a new Virginia class submarine, I agree on the retrofitting the regular force with respect to Tomahawks and carrying on the seal crews and what have you. But do we need another new one in the subs?

WOLFOWITZ: I think we do, Senator. And what I -- we may at some point figure out more fundamental changes in how we use our submarine force, and then maybe we'll look at different designs. But I do think that if you look out ten years from now and look at what an adversary can do with our technology against ships on the surface of the sea, you can only conclude that we're going to need more subsurface capability not less.

And that means also that we have to sustain the remarkable industrial base that builds those incredible ships. So that's the context in which I think one has to look at the Virginia class. Not as a Cold War function we don't need anymore but part of that subsurface force of the future.

HOLLINGS: Thank you, Mr. Chairman.

INOUYE: Thank you.

Senator Shelby?

SHELBY: Thank you.

Mr. Secretary, as I said, I'm glad you're with us today.

Last June I asked General Ryan about what he called the growing symmetry of technology between the U.S. and our European allies. Also last year Lord George Robertson said, and I'll quote, "We have a glaring trans-Atlantic capability gap and an interoperability problem between the allies."

The Bush administration has consistently pushed, and I have supported, modernization of our military.

I have eight articles here that I'd just like to make part of the record written over the last two weeks that paint an increasingly dim picture of the U.S. European relations as well as a growing capabilities gap. Even attributing much of what is being said by our allies to political posturing and rhetoric, if we could, I'm increasingly concerned about the capabilities gap and how this will translate to the battlefield.

One, in terms of concrete military capabilities, how big is the current capabilities gap between us and our NATO allies?

WOLFOWITZ: It's very large.

SHELBY: Very large.

Since our allies' current military budgets do nothing that I know of to narrow this gap and presumably will restrict their ability to join the fight in the future, I would submit that the prospect of having to go it alone puts even greater pressure on us to provide more funding if we hope to be able to execute future operations and defeat future threats. Would you agree?

WOLFOWITZ: If the implication is that we have to spend more because our allies are spending less, I'm not sure I would agree with that. I would like to see them spending more. I think...

SHELBY: Well, we all would.

WOLFOWITZ: There's no question about that.

It's also, in fairness, look, I agree with the thrust of what you're saying and I agree with Lord Robertson's criticism of the inadequate defense spending levels of our allies. At the same time I really do want to emphasize, particularly for those British and French and Canadian and Australian troops who are risking their lives on the ground in Afghanistan with us today -- and they are. In fact the most recent...

SHELBY: We're thankful for that.

WOLFOWITZ: ... casualty we had was an Australian -- that we enormously appreciate the effort that they're making.

I think it would be much better for them and for us if they were investing more in their future forces as we are doing.

SHELBY: They might be willing in the future, but they might not be capable.

WOLFOWITZ: There is that distinct danger, that's right. And even today they are very, very dependent on our lift and our other support capabilities to get them to the battlefield. And as I believe it was Senator Hollings just pointing out now, lift is one of the most constrained resources.

SHELBY: I know, Mr. Secretary that the gap concerns us on this side of the Atlantic. But as Lord Robertson pointed out at the Wehrkunde Conference, I believe it was, in Yen (ph), it has to concern them in the future and their ability to project force and to be a player around the world, doesn't it?

WOLFOWITZ: I think so. And you know, I do think you referred to some of the political posturing that's going on over there.

SHELBY: Election year over there, I know.

WOLFOWITZ: I guess so. It always seems that there's an election somewhere every month.

That it is a fact that we were attacked on September 11th and they weren't. But I would hope for greater understanding on their part that they could be next, that we were attacked by hijackers who didn't just come from Middle East. Some of the them came from Europe. The worst of them came from Hamburg as a matter of fact.

And I think we really are in this thing together. And on the whole we have been. The voices that get the most attention are the noisiest ones. But that's why I keep coming back to what we're seeing on the ground in Afghanistan. It's a different picture. And it's not one you hear enough about, in my opinion.

SHELBY: To another area, transformation. Almost all the talk about transformation involves around technology, equipment and future tactics, with the big issue of course being funding or money. Each service is working to transform its fighting forces.

This budget includes $21 billion for transformation programs. And over the next five years $136 billion is projected to go to fund transformation efforts.

Debate is heating up, Mr. Secretary, as you well know, over the need to buy more tactical aircraft, ships, ammunition and to capitalize more systems in an effort to keep our forces ready while we build this transformation bridge to the future. I don't hear much about fundamental force structure transformation these days.

When I think about the money you're asking us to spend, I think about an article which appeared in the San Diego Union Tribune on January the 30th of this year.

SHELBY: In it a retired rear admiral discussed fundamental transformation ideas and the need to take steps toward -- to eliminate interservice duplication to save money. I know you've spoken on that before.

The example used was to combine the medical, logistical and intelligence groups currently serving each military branch.

In the context of the budget hearing I think this article asked an important question. I'd like to know your answers.

Mr. Secretary, if you were building a new military from scratch -- and I know you're not -- today, would it be structured like our military is currently structured? How do we get to where we want to go, I guess, from where we are?

WOLFOWITZ: It's...

SHELBY: Transformation.

WOLFOWITZ: ... a hugely important question. And as I think you have stated in asking the question, transformation is about more than money. And as Secretary Rumsfeld has said repeatedly, it's probably the changes in the way people think that are the most important piece of it, the way they're organized and the way they operate. That includes looking systematically at how we do things and whether we're continuing to do things just because we've done them for the last 10 or 20 or 30 years and we don't need to do them anymore.

That's my Sinai example, for example, although the president of Egypt and the prime minister of Israel disagree with me. But at any rate I think that's that example.

We're looking very systematically at where we ought to be combining either for efficiency of the kind of thing that you talk about or for improved combat effectiveness. I mean, we now have Army guys on the ground interacting with long-range bomber pilots in ways that you didn't...

SHELBY: It's working, too, isn't it?

WOLFOWITZ: It's working. It would have been a total waste of time and effort 50 years ago.

So we really do have to think different. And we do have to keep in minute this legacy force which you referred to. And we are investing. And the real reason for the three tactical fighters that Senator Hollings has asked about is to make sure that that legacy force -- I don't even really like that word -- but the main part of our force which has got to fight the wars of the next 10 years while we build those future capabilities has the equipment that it needs.

You know, I can't remember how many smart comments I've read about how, gee, this budget didn't cut 30,000 people out of the Army or out of the Navy or the Air Force. I haven't read it about the Marine Corps. But at any rate, imagine where we would be, I think, now, I mean, in light of the kinds of questions particularly the chairman was asking about the possibility of looking at increased end strength, if we had started whacking away at force structure before.

We took a very careful look at force structure over the course of the summer in the QDR. And we concluded that we could reduce the strain on the force structure by changing our strategic concepts but that given the deployment requirements that we had for an -- able to do a global force, that we needed something roughly the size of what we have today.

It's not an accident that we are the only country in the world that can even think about mounting operations in a remote place like Afghanistan on three weeks' notice. But we're a much safer country today because we're able to do that. And I think it's an investment that's worth it.

SHELBY: Mr. Chairman, I ask unanimous consent that these articles be made part of the record.

INOUYE: Without objection.

SHELBY: I thank you.

INOUYE: Thank you, very much.

Senator Specter?

SPECTER: Thank you, Mr. Chairman.

Mr. Secretary, I join my colleagues in welcoming you here. How are you enjoying the job?

WOLFOWITZ: Enjoying it.

SPECTER: The issue of Iraq has dominated a good bit of the news. And when Secretary of State Powell recently commented about the axis of evil he said we did not plan to go to war against North Korea and we did not plan to go to war against Iran. But Iraq was conspicuously absent on the nondeclaration.

And by 20-20 hindsight I think most would agree that we made a mistake in not proceeding against Bin Laden and al Qaeda based on the indictments which had been charged in federal court against Bin Laden for killing Americans in Mogadishu in 1993 and the embassy bombings indicted 1998 and then the implication of Cole in his worldwide jihad.

So what Saddam Hussein is doing is a real problem. Aside from the comments which have been made by the officials, it seems to me that it might be very useful for this subcommittee or the Appropriations Committee sitting as a whole or perhaps Armed Services or Foreign Relations to conduct hearings to try to get as much on the public record as we can for a public understanding.

Some things would have to be said confidentially in closed session, doubtless. But it would be useful, in my view, to know as specifically as we can in public session -- I know the balance in closed session -- as to the threat which Saddam poses on weapons of mass destruction, the specifics of what he has done by ignoring the U.N., what the chances are of compliance.

I see the secretary general is now going to meet with him. He has a track record of backing down when things look like they're getting tough. If we are to act against him, what is the game plan, in rough outline, again, perhaps in closed session? And what happens after he's toppled? It could hardly be a surprise to Saddam Hussein to know that something might happen.

What's your thinking on the utility of such a congressional hearings?

WOLFOWITZ: Senator, you raise a whole series of unquestionably key issues that people have got to think through. I think you can understand that for any of us in the executive branch, these are decisions that can be taken only by the president. And he's made some very clear and important statements. I think what he said was...

SPECTER: Only by the president? What happened to the constitutional authority...

(CROSSTALK)

WOLFOWITZ: Well, I think there are appropriate ways to do consultation. I think what the president laid before the Congress and the country on January 29th is the fact that we have a problem. The problem is countries that are openly hostile to the United States supporting terrorists and pursuing weapons of mass destruction. And the implications of where that is heading is too dangerous for us to sit back and wait for it to happen and react afterwards.

I think you made the very correct analogy with how we should have dealt with Bin Laden before September 11th. And of course you recognize, as do I, that if we had done so, no doubt people would have said we didn't have sufficient evidence. We're in that zone where we can't wait until we have proof beyond a reasonable doubt that somebody is...

SPECTER: But what is the congressional role on the declaration of war or the authorization of use of force? The president came to the Congress, wanted a resolution for the use of force against al Qaeda. Of course he knew he'd get it.

In 1991, some recollections differ, but I have a pretty firm recollection that President George H. W. Bush did not want a resolution. But we got one. And it was a tough debate. The most important thing that's happened in the 22 years I've been here, 50 to 47 in the Senate.

WOLFOWITZ: Can I just correct it. He did want a resolution. There was some debate about whether to ask for it. And he made the decision to in fact ask for it.

But you're right. It was an absolutely critical debate. I think it was very important in unifying the country (inaudible)...

(CROSSTALK)

SPECTER: Isn't the country better served for the issue to come before Congress if there is consideration by the president on the use of forces in Iraq?

WOLFOWITZ: The problem is I think in your question you're sort of assuming that he's made decisions that I don't know that he has made yet. And I'm not at all in a position to start speculating about what the...

SPECTER: There's a lot of attribution that you've made decisions.

WOLFOWITZ: Well, and a lot of it is completely erroneous, Senator. So don't believe everything you read and certainly not what you read about my views.

SPECTER: Well, that's why I used the word "attribute." There was no charge there.

WOLFOWITZ: OK. And I don't make decisions about that sort of thing. I participate in advising people who do make the decisions.

WOLFOWITZ: Mr. Secretary, you've done an outstanding job for years and years and years. And I know there's no definitive resolution we're going to come to today. But I want to state one member's opinion that the Congress ought to be involved and the American people ought to be involved. And there ought to be a dialogue.

And one way to get there -- and I don't know of another good way to get there -- is on the hearing line. And it seems to me imminent enough so the Congress ought to consider the matter. And how we resolve it I don't know, but I raise it.

I want to talk to you about this latest proposal.

WOLFOWITZ: I mean, I would add, Senator, that there are obviously things that are easily discussed in closed sessions that we wouldn't want to be sitting out here discussing while Saddam Hussein or Mr. Khomenei or other people are listening to us. So that is one aspect of the dialogue that I think we need to keep in mind as well.

And we have had -- I think I participated by now in four or five of them I think -- very good closed discussions with the full Senate up in the Capitol Building.

SPECTER: Well, I agree with you about the closed sessions. But the sessions we have in S. 407 are very helpful, but they're not really quite hearings where you have 10 minutes to pursue a question. And even that's not necessarily enough.

But I commend that to you for your consideration because some of us feel very strongly that the Congress ought to be involved and ought to be involved at an early date. And you can't quite wait until the president's made a decision to use force and the Congress is out of it.

Let me ask you about the proposals for Israel to go back to pre- 1967 borders and for the Arab states to, they say -- normalize is the wrong word because they've never been normal -- but to recognize Israel and Israel's right to exist. And the concerns which trouble me are, how do you do that and protect the Israelis that are in settlements outside of the 1967 borders?

And would you talk about relations. How do we deal with Saudi Arabia or other foreign countries or other Arab countries on having a real peace where two decades plus since Camp David and $50 billion plus on aid to Egypt since Camp David and there's a very cold peace. And when President Mubarak has been asked about it, he says that's the best he can do. But they don't have a real trade. They don't have real visitors exchanges. They don't really have a warm peace.

And if the matter is to be pursued, what can be done on those two big issues or assurances to Israel that they will be getting something in exchange for that kind of a concession?

WOLFOWITZ: I think ultimately the Israelis have got to make the decisions about what they need for their security and what they can live with. And I think if one goes back to President Sadat's courageous visit to Israel in 1977 at a time -- in fact we have made progress. If you think back to then, it was a time when Sadat used the word "Israel" in speaking to the Israeli Knesset. It was the first time in history that an Arab leader had referred to Israel by its proper name.

And he changed, as I think you remember, I remember vividly, in just 24 hours, changed the whole psychological outlook of the Israeli public, Israeli people toward making peace with Egypt. And of course led to a return to the 1967 borders and a peace which for all of its coolness has actually been sustained to this day.

But that coolness, unfortunately, is one of the things that contributes, I think, to Israeli reluctance now to take risks. And I think it certainly would make a big difference in moving toward a peace settlement that I think the Israeli desperately want. We certainly want to see it. I think the Palestinian people desperately need it, to create that atmosphere where people are willing to take risks.

SPECTER: Well, I quite agree with you it's an Israeli decision. But the president was reported to have called the crown prince. And I think the United States is going to be involved.

Mr. Chairman, I want to conclude just by posing two questions and asking written responses.

Mr. Secretary, I'm pleased to see that there's a request for $1.9 billion for the V-22 Osprey. I would appreciate a response in writing, not to take up the time of the committee here, on how the Osprey is looking, what are the tests showing. Lots of problems on falsification of records, but I think it's a great plane. And let's see on the merits where that stands.

And the second...

WOLFOWITZ: We'll get that for you, Senator.

SPECTER: Thank you.

And the second question I'd like, you have $436 million for C- 130J aircraft, four planes, but there's nothing for the EC-130J which is used by the 193rd Air Guard at Harrisburg, which has done extraordinary service in Kosovo and elsewhere.

SPECTER: And they're desperately in need of two new planes to carry on their very important mission. If you'd give a response to that.

Thank you very much of the good work you're doing, Mr. Secretary, Dr. Zakheim.

And thank you...

WOLFOWITZ: Senator, if you'll forgive me the reminiscence, I remember when you visited Indonesia when I was ambassador, and you were then, as I recall, the junior senator from Russell, Kansas. And I think you're now the senior senator. Am I right?

SPECTER: That's right. I was the junior senator from Russell, Kansas. And Senator Dole is still the senior senator from Russell, Kansas.

(LAUGHTER)

WOLFOWITZ: I just thought it was remarkable, two senators from different states and both born in the same small town in Kansas.

SPECTER: It's in the water, Mr. Secretary.

(LAUGHTER)

WOLFOWITZ: Good to see you again.

INOUYE: Mr. Secretary and Dr. Zakheim, we thank you very much for appearing before the subcommittee today, and we will continue our discussions throughout this year.

Several members have requested that they be permitted to submit questions to you for your consideration and response, and I hope you'll do so.

The subcommittee will stand in recess until March the 6th, when we will receive testimony on the Army's budget request.

Thank you very much.

END

NOTES:
[????] - Indicates Speaker Unknown
   [--] - Indicates could not make out what was being said.[off mike] - Indicates could not make out what was being said.

PERSON:  DANIEL K INOUYE (94%); ROBERT C BYRD (57%); ERNEST F HOLLINGS (57%); BYRON DORGAN (56%); PATRICK J LEAHY (56%); TOM HARKIN (56%); DIANNE FEINSTEIN (55%); HARRY REID (55%); RICHARD J DURBIN (55%); THAD COCHRAN (54%); TED STEVENS (54%); ARLEN SPECTER (53%); CHRISTOPHER (KIT) BOND (53%); PETE V DOMENICI (53%); MITCH MCCONNELL (52%); JUDD ALAN GREGG (52%); KAY BAILEY HUTCHISON (51%); 

LOAD-DATE: March 4, 2002