Pentagon Faces Tough Budget Choices Article

FEBRUARY 21, 2009
Pentagon Faces Tough Budget Choices Article

http://online.wsj.com/article/SB123517702184037607.html

By AUGUST COLE
The Obama administration is expected to unveil a Defense Department
budget next week that ensures wrenching decisions at the Pentagon about
which weapons programs should face cuts.

The financial crisis and the $787 billion economic-stimulus package have
shaken up many long-term assumptions about government spending. The
preliminary budget for fiscal 2010, which starts Oct. 1, will be the
White House's first chance to reveal what its spending priorities will
be across the federal government. A more detailed version is expected in
April that will reveal the winners and losers.

U.S. Air Force
The F-22 Raptor fighter is one of the weapons programs likely to come
under pressure in the new Defense Department budget.
With fiscal pressure mounting, many in the defense industry are braced
for what could be the beginning of a protracted campaign to pare
spending on big programs. Most defense companies reported record profits
in 2008, and some contractors have grappled with cost overruns and
delays on their biggest weapons programs, making them easy targets for
cutbacks.

In the defense contractors' corner: national-security-minded lawmakers,
as well as those trying to protect local jobs.

Defense Secretary Robert Gates has been trying to use the Pentagon
budget as a tool for achieving his broader policy goal of balancing the
military's traditional orientation toward big wars with today's focus on
unconventional missions against insurgents and terrorists. Mr. Gates
said last week he has already been hunting for items he can pare back,
in order to ensure "the budget reflects the need to balance current and
future capabilities and the president's priorities." Even before the
financial crisis, he pressed hard for such changes.

A Defense Department spokesman declined to comment on the budget.

The Obama administration's base budget for the Pentagon will likely be
higher than last year's, according to people following the process. But
that's because the base budget is expected to roll in many additional
costs that previously had been accounted for separately. In recent
years, billions in Defense Department spending for military operations
in Iraq and Afghanistan, as well as other items, were appropriated
outside the Pentagon's base budget.

Mr. Gates said last week that he is trying to fold such war costs and
other supplemental spending into the general Pentagon budget, but that
he is not able to move as quickly as he would like, citing "today's
economic realities."

For fiscal 2009, Congress so far has allocated about $66 billion in such
supplemental funding, on top of the Defense Department's base budget of
$513 billion. Mr. Gates has estimated that approximately another $70
billion in fiscal 2009, which ends Sept. 30, will be needed, and a
request to Congress is expected soon.

In fiscal 2008, the Pentagon had a base budget of $480 billion and $187
billion in supplemental spending.

"Overall spending, when you count the base [budget] and the
supplemental, will go down" from fiscal 2009, said Robert Work, vice
president of strategic studies at the Center for Strategic and Budgetary
Assessments in Washington. Mr. Work, who was also on the Obama
transition team, said that the White House's Office of Management and
Budget and the Defense Department appear to have settled on a base
budget figure ranging from $535 billion to $540 billion for fiscal 2010.

Lawmakers also expect a similar figure, according to people familiar
with the situation.

Mr. Gates's vision for a leaner budget is bumping up against the
military's own assessment of its weapons needs. Air Force Chief of Staff
Gen. Norton Schwartz said Tuesday the service will ask for more Lockheed
F-22 Raptor fighters, though Mr. Gates has said the planned 183 jets are
sufficient. But Gen. Schwartz also cut back the Air Force's previous
goal of buying 381 of the $143 million jets.

For Boeing Co., a more than $200 billion Army modernization effort,
shared with SAIC Inc., is expected to come under pressure, despite
success in speeding up deployment of some systems.

Write to August Cole at