Raising Revenues Lessens Need For Cuts

Budget Cuts List Includes ABL, GMDS, STSS, SR

Many leading space and ballistic missile defense (BMD) procurement programs could be cut back or killed outright under a compendium of defense procurement and other budget- cutting alternatives prepared for Congress that are designed to reduce budget deficits.

However, the study also lists revenue-raising moves that could be used to reduce deficits, instead of cuts to BMD programs aiming to shield U.S. cities and armed forces against enemy missiles tipped with nuclear, chemical or biological weapons.

Every major defense contractor has programs on the defense acquisitions potential reduction list, including The Boeing Corp. [BA], Lockheed Martin Corp. [LMT], Northrop Grumman Corp. [NOC], General Dynamics Corp. [GD] and Raytheon Co. [RTN].

As lawmakers cast about for ways to reduce the flood of red ink that deficit spending is splashing across federal budget books, the nonpartisan Congressional Budget Office (CBO) came up with an exhaustive list of possible funding cuts that might be made to various programs, both defense and non-defense.

As well, however, the watchdog agency also came up with a list of revenue-raising moves that wouldn’t involve cutting defense or domestic programs.

Following its usual policy, CBO doesn’t advocate or oppose any of the spending-cuts or revenue-raising possibilities, instead taking no position. In its biennial report to lawmakers, CBO merely lays out the proponents’ arguments for and opponents’ arguments against each program targeted by the budget options.

Airborne Laser. The Airborne Laser (ABL) involves a Boeing 747, highly modified, with a laser by Northrop Grumman and a beam control/fire control system by Lockheed This system would fire a continuous laser beam at an enemy missile, destroying it and frying its electronics, avoiding the problem of other ballistic missile defense (BMD) systems that use hit-to-kill, a missile hitting a missile. Some critics have likened that to a bullet hitting a bullet.

Also, the ABL kills the enemy missile shortly after it rises from a launch pad (the boost phase), before the enemy weapon has a chance to spit out multiple warheads or confusing chaff.

CBO estimates that dropping the ABL program might save $540 million in budget authority and $330 million in outlays in fiscal 2008. CBO has no firm estimate for the 2008-2012 or the 2008-2017 periods. Through 2011, CBO says this might save on the order of $1.7 billion, and save perhaps $10 billion or so in 2012 through 2017.

CBO notes that ABL critics cite its rising costs, schedule delays and technological challenges. More, if “the ABL must operate closer to a missile’s launch site, it may be vulnerable to enemy air defenses,” the report continues. As well, if ABL isn’t developed, there would be the rival Kinetic Energy Interceptor (KEI), a missile that rises to hit an incoming enemy missile. Further, with ABL, three to four 747 aircraft would be needed to maintain a constant presence at a single location to defend against a potential enemy missile launch, CBO notes: one on station, one or two in transit to the station area, and one being serviced at a base.

“A single, fixed, ground- or sea-based interceptor battery could provide similar coverage at lower cost,” CBO says critics assert.

But proponents of the ABL program say even though its development has posed technological challenges, “it will provide a leap in the nation’s ability to defend against ballistic missile attack.”

Also, even if the boost-phase KEI were developed successfully, ABL might be ready earlier and provide a critical boost-phase capability in the interim. And Air Force officials have seen major progress in the ABL program, and are confident it will be developed successfully. (Please see separate story on KEI in this issue.)

Ground-Based Midcourse Defense System (GMDS). Another possible outlay reduction move would include canceling development of the Ground-Based Midcourse Defense System after block 2004/2006, according to the CBO.

This system would use missile interceptors based in Alaska and California to demolish incoming enemy missiles before they can strike their targets.

CBO estimates this move to cancel development would save $2.3 billion in budget authority and $1.2 billion in actual outlays in fiscal 2008. In fiscal 2008 through 2012, this reduction would save a projected $8.5 billion in budget authority and $7.8 billion in outlays, while in 2008 through 2017, it would save $13.6 billion in authority and $12.9 billion in outlays.

“This option would cancel the development of the block upgrades to the GMD system after the Block 2004/2006 effort,” the CBO explained. “The [reduction] option would continue to operate the interceptors at the two sites and would spend about $300 million a year to develop improvements to the initial capability.”

However, the spending-cuts plan would shrink some elements of the program.

“This option would cancel additional interceptor missiles and development of a third ground-based interceptor site currently planned for later blocks. The nonpartisan Congressional Budget Office (CBO) estimates that this option would save $1.2 billion in outlays in 2008 and nearly $13 billion between 2008 and 2017.”

In future, however, CBO estimates include an assumption that there would be a third site in the system.

Critics say the GMDS isn’t ready to field without technology improvements and testing of the system, both in individual components and as a working entirety, CBO noted.

Initially fielding but a limited portion of the GMDS would allow testing and provide limited tracking and engagement capacity for ballistic missiles launched from North Korea toward

Alaska or the West Coast of the continental United States, the budget office observed critics state.

“Moreover, the delay in additional deployments would allow time to improve missile defense technologies for incorporation into a more capable operational system, should the United States decide to deploy one,” the report continues.

But backers of the GMDS have a different outlook, saying rising enemy threats may not give the United States the luxury of waiting for another day.

“Opponents of this option argue that ballistic missile launches from enemy nations pose a current threat to the United States,” the CBO report observes. “Thus, developing and deploying all currently planned GMD segments would provide urgently needed protection for the nation and its allies. In particular, only by fielding all GMD segments will the United States be able to defend all of its territory and extend its missile defenses to its allies and deployed forces.”

Space Tracking and Surveillance System (STSS). This reduction in the Space Tracking and Surveillance System (STSS), formerly called SBIRS Low) would save an estimated $310 million in fiscal 2008 budget authority and $190 million in outlays. In 2008 through 2012, it would save roughly $2.8 billion in authority and outlays. And in 2008 through 2017, it would save $12.4 billion in authority and $11.7 billion in outlays.

“This option would terminate Block 2012 of the STSS program and replace it with ground- and sea-based radars,” CBO explained. A House report states that a DOD study shows “ground based radars not only provide a viable alternative to a space based system, but also provide this capability at significantly lower cost and risk.”

Based on CBO calculations, canceling STSS Block 2012 would save about $4 billion over the next five years and about $14 billion over a decade.

Those 10-year savings would come from not starting Block 2012 research and development (about $6 billion), from not buying and launching the new satellites (about $8 billion), and from not operating the constellation (about $100 million).

“However, MDA still would be able to use the demonstration satellites for technology testing and for gathering data from a planned series of tests,” CBO noted.

But backers of STSS have a different argument.

They say “the STSS flight demonstration system could validate the use of spacebased infrared sensors for tracking and discrimination of warheads launched on enemy ballistic missiles,” CBO observed. “Although technical issues associated with the STSS sensors remain to be solved, use of ground-based systems for discrimination also poses technical challenges. Moreover, groundbased radars cannot match the global coverage offered by a full constellation of STSS satellites.”

The Air Force SBIRS-High GEO program also has experienced cost growth and schedule delays, and its capability would be insufficient for tracking ballistic missiles throughout all phases of flight, the budget office observed.

Space Radar Program (SR). Canceling the Space Radar Program might save $570 million of budget authority in fiscal 2008 and $340 million in outlays, the CBO estimates. In 2008 through 2012, it might save $5.7 billion in authority and $5 billion in outlays, while in 2008 through 2012 it might save $14.2 billion on budget authority and $13.7 billion of outlays. But depending on future DOD actions, these savings might not be realized, CBO cautions.

CBO notes that this budget cuts plan “would cancel SR and retain current surveillance systems, including JSTARS and Global Hawk, to provide battle-planning information.”

Arguing for this cuts proposal would be observations that development of Space Radar faces “significant technical challenges and costs,” the CBO observed.

Critics of the program point to a House report that the nine satellites envisioned for SR could have gaps in tracking vehicles on the ground.

However, backers of the program say SR would aid military transformation by providing superior intelligence to warfighters. Further, SR would mean the United States wouldn’t need to seek access to bases in nations near a conflict, would obviate the time-consuming delays of transporting airborne sensors to the region, and would be less vulnerable to attack than sensors on the Earth. Other proponents say SR technology is mature and ripe for operational use.

Raising Revenues Instead. Rather than cut defense programs, however, Congress might wish to cut other programs, or to obviate the need for cuts by increasing revenues instead.

This could include moves such as raising the tax rates on individual incomes by adding 1 percentage point to each tax bracket, changing payroll taxes, and other revenue-raising initiatives including changes in miscellaneous fees.

The full 374-page CBO volume entitled “Budget Options” may be viewed in entirety by going to http://www.cbo.gov on the Web.