Congress slams defense budget cuts

WASHINGTON Tue Apr 7, 2009 9:06am BST

Secretary of Defense Robert Gates (L) speaks during a joint news briefing with Gen. James Cartwright, Vice Chairman of the Joint Chiefs of Staff, on FY2010 budget recommendations at the Pentagon in Washington April 6, 2009. REUTERS/Yuri Gripas

Secretary of Defense Robert Gates (L) speaks during a joint news briefing with Gen. James Cartwright, Vice Chairman of the Joint Chiefs of Staff, on FY2010 budget recommendations at the Pentagon in Washington April 6, 2009.

Credit: Reuters/Yuri Gripas

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WASHINGTON (Reuters) - Defense Secretary Robert Gates on Monday proposed killing weapons programs that are over budget, behind schedule and out-of-date, urging Congress to rise above parochial interests to support his plan.

But it took just minutes before the first group of U.S. senators dashed off a letter to President Barack Obama opposing the proposed $1.4 billion cut in missile defense spending, showing the challenges Gates faces in pushing through reforms.

Cutting missile defense just after North Korea's launch of a long-distance missile would leave the United States vulnerable to growing ballistic missile threats, said the group, which included Jeff Sessions, a Republican, Joe Lieberman, an Independent, and Mark Begich, a Democrat.

Representative John McHugh, the top Republican on the House Armed Services Committee, also weighed in, saying the proposals would amount to $8 billion in cuts in defense spending.

The visceral reaction highlighted the difficulty of actually cutting defense programs, but analysts say the economic crisis, mounting budget pressures, and growing public outrage about wasted spending of any kind may boost the chances of success for at least some of his reforms.

Gates called the budget a rare opportunity to reform Pentagon procurement. "My hope is that ... the members of Congress will rise above parochial interests and consider what is in the best interest of the nation as a whole," he said.

Watchdog groups, who have called for greater discipline and restraint in defense spending for years, were skeptical.

"There is a reason President Eisenhower originally wanted to call it the 'military-industrial-congressional' complex," said Travis Sharp, defense analyst at the Center for Arms Control and Non-Proliferation. "Particularly in this economy, Congress is motivated by jobs and home state pork, not national defense."

FIGHTING TO MAINTAIN PROGRAMS

The Gates briefing was closely watched by the Pentagon's top contractors, Lockheed Martin Corp, Boeing Co, Northrop Grumman Corp, General Dynamics Corp, BAE Systems and Raytheon Co, which have seen their shares hammered by investors in recent weeks.

The companies are already fighting to keep big-ticket weapons programs alive, taking out expensive ads to highlight the high-paying jobs they provide, and lobbying lawmakers.

House Armed Services Committee Chairman Representative Ike Skelton welcomed the Pentagon's decision to restructure the Army's $160 billion Future Combat Systems modernization program, but said it was too soon to predict if Congress would go along with the broad changes proposed by Gates.

"The buck stops with Congress. I'm sure we'll have some very interesting hearings," Skelton told Reuters in a telephone interview. "Better wait until the last song is sung, because Congress will still have to pass judgment."

Senator John McCain, who has introduced legislation aimed at reforming Pentagon procurement, backed the restructuring moves outlined by Gates, and said they were long overdue.

OFFSETS MIGHT INCREASE CHANCE OF SUCCESS

Scott Sacknoff, index manager for the Spade Defense Index, said Gates had carefully crafted his proposal to provide some increased funding to offset most of his cuts.

He also focused the terminations mainly on programs that were still in the research phase, which generally involve less jobs, said Virginia-based defense consultant Jim McAleese.

For instance, cutting ground vehicles in the Army modernization program would trigger additional purchases of existing vehicles made by General Dynamics and BAE Systems.

"Ultimately, the speech provides some answers to the unknown and will make it easier for analysts and investors to move forward," Sacknoff said in a statement, noting that the defense index rose 3.5 percent between the end of the Gates briefing and the end of the trading day.

Richard Aboulafia, with the Virginia-based Teal Group, said Congress would likely reverse some Pentagon decisions such as not buying more Boeing Co C-17 transport planes: "The name of the game is to make this a congressional battle."

Rob Stallard, defense analyst with Macquarie Securities, said the announcements were largely in line with his expectations and recent comments from Gates.

"Some programs marked for execution could be added back, similar to how previously canceled programs have been resurrected from the dead in past years," he wrote in a note.

Greg Bingham, vice president of the Washington-based Kenrich Group, said the global economic crisis and Obama's popularity might allow Gates to succeed with his proposals.

"I can't remember the last time a secretary of defense proposed such far-reaching changes. Given the current political environment, it may actually work," he said. "Anything is possible right now."

(Reporting by Andrea Shalal-Esa; Editing Bernard Orr)

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