WASHINGTON--President Barack Obama proposed a $526.6 billion
defense budget on Wednesday that seeks to protect administration
priorities in Asia and on cybersecurity while slightly reducing
spending.
The administration's proposed 2014 defense budget avoids tough
decisions on cuts in troop levels and major equipment programs.
However, the administration is resurrecting its attempt to
address costs of the generous military health-care system by
raising fees, and is proposing a modest pay raise for troops as it
looks for ways to trim costs.
The proposed budget, about a 1% decline from 2013 estimates, is
likely to face significant proposals for revisions from lawmakers
of both parties.
The spending plan defers decisions on further reducing the size
of the Army, Marines and civilian workforce, steps that most
analysts expect will be necessary as the Defense Department revamps
its operations after a decade of ground wars in Iraq and
Afghanistan.
The plan also avoids difficult decisions on significant cutbacks
on most major weapons programs, sparing for now the next generation
F-35 fighter jet and a new aircraft carrier.
Instead, the budget outlines a series of narrower cuts to
specific programs related to missile defense, drones, Army
helicopters and cargo planes that are likely to face scrutiny from
Congress, where lawmakers in past years have succeeded in
protecting some of the projects.
Defense officials said that they are waiting for a deficit
reduction deal before offering a budget that takes further massive
Pentagon spending cuts into effect. Military service officials
believe if they offer significant cuts now, they will be accepted
with more required later. "Those who give early, give often," said
one official.
The budget does offer some modest cuts. It promises $19 billion
in reductions from efficiencies, such has holding civilian pay
raises to 1%. It includes a renewed push to kill programs like the
C-27 transport planes, made by Alenia North America, along with the
current generation of Global Hawk surveillance drones, made by
Northrop Grumman Corp., which have been plagued by operating cost
overruns and high purchase prices.
While missile defense spending will increase in some areas, the
budget calls for the termination of a precision tracking space
system to save about $1.7 billion. That program encompasses a half
dozen contractors, including Northrop Grumman.
And as previously signaled by the Pentagon, the Defense
Department wants to restructure the next generation of the Aegis
missile defense system, to save $2.1 billion. Defense analysts said
most of the missile defense cuts were expected and will not impact
the current operation of the system.
Other major cost reductions include the delay of the purchase of
the Boeing Corp.-made Apache helicopters for the Army, a $1.3
billion savings.
The Pentagon will invest new money in maintaining and improving
current systems, including, most notably, adding a "double V" hull
to the Stryker combat vehicle, made by General Dynamics, to make it
more resistant to roadside bombs.
The defense budget does not factor in the across-the-board
spending cuts that took effect last month across the federal
government. The $41 billion in reductions have forced the Pentagon
to ground planes, impose a hiring freeze, delay training and enact
plans to furlough most of the civilian workforce.
The Pentagon is already in the process of slashing costs as the
Defense Department winds down the war in Afghanistan and shifts its
focus to other threats.
The budget includes a modest increase in funds for the growing
U.S. Cyber Command and money to build new Navy ships that will play
a critical role in the administration plans to shift more forces to
Asia, where China and North Korea pose challenges to United States
power.
Defense Secretary Chuck Hagel has ordered Pentagon leaders to
conduct a new review of the nation's military strategy in light of
the fiscal uncertainty.
In his first major policy address since taking over at the
Pentagon, Mr. Hagel indicated in a recent speech that he is looking
to reduce personnel and cut back on unnecessary military
programs.
The military's TRICARE medical system in recent years has
largely protected participants from rising health-care costs, in
the process increasing the financial burden on taxpayers and given
rise to calls for change.
In its proposed budget, the administration will propose new
enrollment fees on TRICARE's standard fee-for-service program. That
proposal would enact an annual $140 fee for families that would
rise to $250 over the next five years.
Also included in the budget is a proposal to raise annual
enrollment fees in the HMO-style system from $539 per family to as
much as $750.
Congress has rebuffed previous efforts to impose such changes.
The latest proposals are certain to face strong opposition again
this year.
Write to Dion Nissenbaum at dion.nissenbaum@wsj.com and to
Julian Barnes at julian.barnes@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires