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18. Department of Defense


Highlights of 2002 Funding

To signal to our servicemen and women our renewed respect, the President:
  • Provides an additional $1.4 billion for military compensation to improve quality of life and reenlistment and retention of military personnel.
  • Increases, by $400 million, funding to improve the quality of housing for military personnel and their families and to decrease out-of-pocket housing-related expenses.
  • Funds new and expanded benefits for our over-65 military retirees.

To emphasize programs that provide our military forces' information superiority, stealth, speed, precision, agility, mobility, and lethality in the future, the President will propose a $2.6 billion initiative in research and development for missile defense alternatives and new technologies to support the transformation of U.S. military capabilities.

(Note: The Army Corps of Engineers Civil Works program is discussed in Chapter 30.)



Today's military, the strongest on earth, faces a number of challenges that the President's 2002 Budget begins to address. These include assuring that military personnel are adequately paid, their families are adequately housed, and they receive the training and equipment needed to do their jobs. Under the framework of a new national security strategy, the President has asked the Secretary of Defense to conduct three reviews.

18–1. Department Defense, 4.6% Average Annual Growth, 1998–2002

First, the President believes that the Nation's defense strategy should drive decisions on defense resources, not the other way around. For this reason, the Secretary of Defense will conduct a strategy review to create a vision for the role of the Nation's military in the 21st Century. This review will examine the appropriate national security strategy, force structure, and budget priorities. It will guide future decisions on military spending. To speculate now on the results of this strategy review could compromise the outcome. Consequently, the Administration will determine final 2002 and outyear funding levels only when the review is complete.

Second, the President believes America must rethink the requirements of deterrence in our current security environment. The President proposes to maintain the lowest number of nuclear weapons consistent with our present and future national security needs. The review will also identify the Nation's missile defense needs.

Third, the Administration will conduct a review of the overall quality of life for our military personnel.

2002 Funding Level: The 2002 discretionary budget authority level for the Department of Defense (DOD) provides an increase of $14.2 billion, or 4.8 percent, from the 2001 enacted level of $296.3 billion. This funding increase will allow DOD to address its most pressing priorities. These include relieving some of the housing problems our military troops and their families are currently facing, addressing the need for increased military pay, and undertaking a thorough review of research and development programs to determine the most promising investments for the future. The budget includes more than $4 billion as a first step towards achieving these initiatives. The budget proposes the transfer of the Maritime Security Program and associated funding from the Maritime Administration to DOD. In addition, the budget provides $3.9 billion for the first year of expanded health benefits for over-65 military retirees recently authorized by Congress in the 2001 Defense Authorization Act.


The following programs, included in the budget, reflect the President's highest priority defense initiatives.

Military Pay: The budget provides an additional $0.4 billion to increase the military pay raise to 4.6 percent. The pay raise is set at the Employment Cost Index plus 0.5 percent. The President is also proposing an additional $1 billion for military compensation programs to address specific recruiting and retention needs. Increases in housing allowances will also be funded to reduce service members out-of-pocket expenses for housing.

Research & Development (R&D): The budget proposes a $2.6 billion initiative ($20 billion over five years) to fund R&D of new technologies. Among areas in which new investment might be made include: leap-ahead technologies for new weapons and intelligence systems; improvements to the laboratory and test range infrastructure; technologies aimed at reducing the costs of weapons and intelligence systems; efforts, such as counter-terrorism and counter-proliferation that are focused on countering unconventional threats to national security; and funding to continue research, development, and testing of a missile defense program.

Military Family Housing: The budget provides an additional $400 million to improve the quality of housing for military personnel and their families. Programs including allowances for out-of-pocket housing costs, new construction, renovation of existing housing, and privatization will all be considered.

Potential Reforms

The Administration will emphasize several reforms to improve the efficiency of Defense operations.

Competitive Sourcing and Privatization: The Administration believes that the Federal Government should seek every opportunity to open to competition functions that are commercial in nature. Studies show that the Government can achieve significant cost savings through increased competition, while maintaining services of comparable quality. The savings can be used by the military services to apply more resources to high priority programs identified by the defense strategy review. In 2002, DOD will continue its efforts to study opportunities for outsourcing and privatization with particular emphasis on commercial type functions.

Commercialization: DOD and the Intelligence Community can become even more efficient through greater reliance on commercial products and services. As part of the strategy review requested by the President, DOD will review opportunities to expand its use of commercial practices and products that will facilitate the modernization of our military forces.

Base Infrastructure and Closure: DOD wastes money on infrastructure it does not need and its authority to dispose of these properties is diminished by the rules and regulations that now govern the process. The Secretary of Defense is reviewing the current force structure, but with 23 percent in estimated excess infrastructure, it is clear that new rounds of base closures will be necessary to shape the military more efficiently.

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