DOD News Briefing by Secretary Gates from the Pentagon on the Fiscal 2012 Budget Proposal

                 SEC. GATES:  Good afternoon.  Today I'm announcing the president's fiscal year 2012 budget request for the Department of Defense.  This includes a base budget request of $553 billion, and an overseas contingency operations request for $117.8 billion. 

                 These budget decisions took place in the context of the nearly two-year effort by this department to reduce overhead, cull troubled programs, and rein in personnel and contractor costs, all for the purpose of preserving the fighting strength of America's military at a time of fiscal stress. 

                 The goal is not only to generate savings that could be applied to new capabilities and programs, but for our defense institutions to become more agile and effective organizations as a result.  In all these budget requests, if enacted by the Congress, we'll continue our efforts to reform the way the department does business, fund modernization programs needed to prepare for future conflicts, reaffirm and strengthen the nation's commitment to care for the all- volunteer force, including training and support, and ensure that our troops and commanders on the front lines have the resources and support they need to accomplish their mission. 

                 The department's comptroller, Mr. Robert Hale, and Lieutenant General Larry Spencer of the Joint Staff will explain the components and particulars of these requests following my remarks. 

                 As we begin what will be a week of debate and assessment of this nation's investment in national defense, I also want to take the opportunity to touch on two related issues pending with the Congress. First, this department has been operating under a continuing resolution going on five months, resulting in difficulties that may soon turn into a crisis, depending on what happens on the Hill during the next few weeks.  Exactly a year ago, the president requested $549 billion to operate the Department of Defense during fiscal year 2011. If forced to operate under a full-year continuing resolution, the department would only receive about $526 billion -- a cut of $23 billion.  The damage done across our military from that reduction would be magnified as it comes halfway through the fiscal year. 

                 I raise this point today because I'm concerned that the debate over the defense budget in recent days and weeks is becoming increasingly distant from strategic and operational reality -- distant, in other words, from the real world.  In fact, suggestions to cut defense by this or that large number have largely become exercises in simple math, divorced from serious considerations of capabilities, risk, and the level of resources needed to protect this country's security and vital interests around the world. 

                 I realize that in the current fiscal environment, and political environment, it is unlikely that the Defense Department will receive the full amount originally requested by the president for FY '11. Based on a number of factors, including policy changes that led to lower personnel costs and reduced activity forced by the continuing resolution, I believe the department can get by with a lower number. However, it is my judgment that the Department of Defense needs an appropriation of at least $540 billion for fiscal year 2011, for the U.S. military to properly carry out its missions, maintain readiness and prepare for the future. 

                 The second issue I'd like to address is the ongoing debate over the JSF extra engine.  As most of you know, the president and I, as well as the department's senior military leadership, have consistently and firmly expressed our opposition to continuing this costly program. We consider it an unnecessary and extravagant expense, particularly during this period of fiscal contraction.  The Congress has not spoken with one voice on this matter. 

                 And the department has been operating this fiscal year under ambiguous guidance, at best.   

                 Given the situation, I decided to continue funding the JSF extra engine on a month-to-month basis.  I did this not because we had to but because we chose to give the Congress the opportunity to resolve this matter as part of its ongoing debate on the budget.  

                 However, this also means that the American taxpayers are spending $28 million a month for an excess and unjustified program that is slated for termination.  The president, the military services and I continue to oppose this extra engine, and when the current continuing resolution expires, I will look at all available legal options to close down this program.  It would be a waste of nearly $3 billion in a time of economic distress, and the money is needed for higher- priority defense efforts. 

                 With that, I'll take a few questions on the budget and then turn things over to Mr. Hale and General Spencer. 

                 Tony.  This is your bread and butter.  We'll go to you first. 

                 Q:  And my panini, sometimes.  (Laughter, cross talk.) 

                 Q:  Yeah, yeah.  On procurement, the budget last year projected $120 billion in procurement for fiscal '12.  This year's request is 113 billion (dollars), the same request as the '11 figure, 113 (billion dollars).  There's no growth there.  What happened?  Was -- were dollars migrated to operations and maintenance and health accounts?   

                 SEC. GATES:  No.  You can't -- you can't just take the top lines and compare them like that.  For example, there have been some procurement programs that have been cut, like the EFV [Expeditionary Fighting Vehicle] -- like the SLAMRAAM.  So there are a variety of puts and takes, but there are a number of new investment programs, modernization procurement programs, that are in this budget that went above the original program of record -- for example, a new bomber for the Air Force; five new ships, five additional new ships for the Navy; modernization of the ground vehicles for the Army.  So there are a variety of new starts.  In some of them, there may not be big procurement dollars, but they are big investment dollars, looking to the future. 

                 I would add we've plussed up -- we're going to provide -- we're asking for a half a billion dollars for DARPA for cyber-research.  So there are a number of new areas where we are beginning to invest.   

                 So I wouldn't -- I would just say that almost all of the $70 billion that the services kept, that they realized through their efficiency savings, are being put into modernization programs. 

                 Q:  Even though there's not a major increase from the [2]011 request to the [2]012 request. 

                 SEC. GATES:  Right.  Right, because, as I say, there are some things in the procurement that were cut.  Not every procurement dollar was golden. 

                 Q:  Mr. Secretary, speaking of procurement dollars, do you see any possible slowdown in U.S. arms sales to the Middle East amid the current unrest that brought down leaders in Tunisia and Egypt? 

                 SEC. GATES:  Is that a budget question?  (Laughter.)  That's a very curious budget question.   

                 Q:  That's a budget question because what I'm asking you has to do with the arms bill.  There is hope that -- 

                 SEC. GATES:  I don't think they have FMS [Foreign Military Sales] in the budget. (Chuckles.)  Nice try.  (Laughter.) 

                 Q:  You met today at lunch with a number of congressional leaders on this -- on these topics, and I'm wondering if you'd give us your assessment after that meeting, whether there's been -- whether you sense any movement toward some sort of solution on the budget coming out of this meeting that you had.   

                 And secondly, I won't be nearly as obtuse, but if you could give us just -- we can't ignore what's going on in the Middle East, and I'm going to ask you if you could give us just a couple sentences on your assessment of the military taking control in Egypt and what your comfort level is with that movement towards democracy, if it kind of spreads out across the Middle East.   

                 SEC. GATES:  First of all, I won't -- I -- I'm really not in a position to characterize the views of the members or staff who were at the lunch.  I would -- I would note that for the most part, much of the information we gave them today, we gave them six weeks ago.  I know there's a little discomfort in some quarters on the Hill about these announcements and the question of transparency, but the reality is, the members of our committees got significant information on the FY '12 budget six weeks prior to any other committees in the Congress. 

                 And so we had -- there was a lot of information they were already aware of. 

                 I would -- I would simply say that there really wasn't much discussion at all at the lunch about the politics of the budget. There were -- as Mr. Hale went through the budget, there were a number of questions for clarification's sake, but really nothing beyond that. 

                 I have two hearings this week:  one in front of the House Armed Services Committee on Wednesday, one in front of the Senate Armed Services Committee on Thursday.  And I have every confidence that I will have the opportunity to express myself in great detail about Egypt at those two hearings. 

                 Q:  Mr. Secretary -- 

                 Q:  Sir, you were talking about the alternate engines.  You said that you're going to explore all available resources.  What exactly are you talking about?  And is this the line in the sand when it comes to these engines? 

                 SEC. GATES:  Well, I just -- I'll let the statement stand as I -- as I put it.  There are some options available.  My hope is, quite frankly, that there will be a debate about this on the floor of the House this week and that -- and that members will address this directly and vote on it. 

                 And my hope is that, particularly the new members who are interested in fiscal responsibility will see this as an opportunity to save $3 billion for the taxpayers that can be put to better use. 

                 Q:  Mr. Secretary -- (inaudible) -- I understand you wanted to speak to Congress, but we're all in the news business here.  So I am sorry, but I'm going to try again.  What can you tell us, if anything, about your role in dealing with Field Marshal Tantawi over the last many days?  People are extremely curious, because you may be the only person in the administration -- of course, to our knowledge -- that has spoken to him.  And the -- I take it actually -- believe it or not, here's a budget question.  Budgets deal with the operational uncertainty that your troops face around the world, the Middle East -- there's a great uncertainty.  It all comes together. 

                 What is in this budget that now deals with the Middle East?  And what can you tell us about what you've been up to over the last many days? 

                 SEC. GATES:  Well, I would simply say that the budget affects our operations and maintenance all over the world and our activities.  And certainly the overseas contingency operations [OCO] funds our efforts in Iraq and Afghanistan.  But I will wait until Wednesday to talk about Egypt. 

                 Q:  One more budgetary question, please, one more.  The overseas contingency budget increases this year.  I wonder if you can say how much of that forecasts the U.S. will in fact draw down in July in Afghanistan.  Is that what this budget is trying to?  Or wasn't that supposed to be based on the on-the-ground conditions at the time? 

                 SEC. GATES:  The -- first of all, there is a fairly dramatic reduction in the overseas contingency operations budget from FY '11.  FY '11 was $160 billion.  FY '12 is just under $118 billion, so a drop of almost $42 billion. 

                 The -- what was the second part of your -- 

                 Q:  How much -- how much of this -- 

                 SEC. GATES:  Oh, the -- what we have done is what we have done in the past.  We have budgeted in FY '12 for 98,000 troops.  It's a conservative approach to budgeting, but since we don't know how many troops will be reduced during the course of FY '12 -- as I told members of Congress today at lunch -- it just makes more budget sense to do this conservatively and budget on a straight-line basis from FY '11.  And then if -- depending on the size of the drawdown, then that may be money we just don't spend. 

                 But because we have no idea what the size of the drawdowns will be, because they are going to be conditions-based -- at least the pace will be conditions-based -- we decided to budget conservatively on a flat level.  But that's not to say that we will have 98,000 troops at the end of FY '12. 

                 In fact, it's a lead-pipe cinch we won't. 

                 Q:  Mr. Secretary? 

                 SEC. GATES:  Thank you.  And I'll turn it over to the experts now.