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Public Statements

Additional Views of Senator John McCain on the National Defense Authorization Act


Location: Washington, DC

U.S. Senator John McCain (R-AZ) today released his additional views on the National Defense Authorization Act (NDAA) that passed in the Senate Armed Services Committee:

"In a very tough fiscal environment, this markup represents an effort, albeit one I am not at all satisfied with, to support our warfighters and the readiness of the United States military. Unfortunately, we could have and should have done much more. Against my wishes and votes, the committee chose to authorize hundreds of millions of dollars of unnecessary and unrequested pork-barrel projects and rejected my efforts to finally put a stop to the out-of-control cost overruns of the already unaffordable F-35 program. While the bill as a whole does good for our military, it is hardly a product that we should boast about. Americans have every right to expect more of us, commensurate with the sacrifices our troops and their families make for us every day.

"The Defense Authorization bill is an important piece of legislation that directly supports our troops, their readiness and training, and military families while our country continues to be engaged in two wars and supporting a NATO operation in Libya. Therefore, I voted to move the bill out of committee. Nevertheless, I will continue my efforts to fight the egregious and unconscionable waste and misallocation of precious resources in this bill during debate on the Senate floor and I reserve the right to oppose passage of the bill by the full Senate unless it is improved. I urge my colleagues to do the same.

"The President requested $553 billion for the routine operations of the Department of Defense for 2012. The overall budget request, including funding for operations in Iraq and Afghanistan, was $671 billion. This bill will reduce that amount by almost $6.4 billion. But the cut is actually deeper, and the tangible negative impact on the real priorities of the Department of Defense is more serious, when we take into account that over $1 billion was taken from the military's request for their legitimate and prioritized needs and used for unrequested funding that was added by this Committee for pork-barrel, special interest spending that is not wanted by the Pentagon.

"The Defense Department has been told by President Obama to make some very hard decisions to find an additional $400 billion in national security spending cuts by 2023 -- on top of the $178 billion in efficiencies and top-line reductions over the next five years that Secretary Gates has already announced. As a result, the Department cannot afford to waste a dime on projects that do not provide increased combat capability or a substantial increase in efficiency or effectiveness for the taxpayer and the warfighter. The Armed Services Committee must play its role by scrutinizing the Defense budget for programs that are wasteful, out of control, or are not essential to our core national security needs. But most importantly, this Committee must ensure we do not add to the problem by continuing business as usual by adding unneeded, unrequested spending. This should be our guiding principle for every decision we make. Sadly, that was not done in this mark up.

"For example, this bill authorizes funding for so-called "innovation' and "transition' programs totaling $250 million for the purpose of continuing earmarks, pure and simple. The funding mechanism used in this bill has been designed to skirt the technical definition of an earmark contained in Senate Rules, but make no mistake these programs were not requested or desired by the Pentagon. Instead of funding real military priorities vetted and approved by our most senior and experienced military leaders, these funds will be used to fund special interests and pet projects of individual Members. This is just another glaring example of why Congress as a whole is held in almost universal disrepute by the American people.

"The House of Representatives tried this same gimmick to get around the moratorium on earmarks in their chamber by creating a neat little $1 billion "Mission Force Enhancement Transfer Fund' as their pork basket in the Defense bill. That transparent charade fooled no one. As the Council for Citizens Against Government Waste noted, Members of the House readily seized the opportunity to turn it into a slush fund for their pork projects back home by "taking $651.7 million to fund 111 projects: 59 of the add-ons, or 53 percent appear to be similar to projects included as earmarks.' That may not be what was intended, but clearly that is what happened.

"This bill uses a similar ruse -- putting hundreds of millions of dollars into what amounts to slush funds of undesignated spending to be steered by powerful Members to their pet projects and special interests as a means to backdoor earmarks. To avoid this predictable result, I offered a series of amendments to strike all unrequested funding increases that ignored and contradicted the President's budget request. I regret I was not more successful.

"To highlight an example of how this works, $10 million was added for the "Metals Affordability Initiative,' something used to push Member-generated unrequested funding on the Air Force for the benefit of major defense contractors. Developing new, technologically superior and less-costly specialty metals for the aircraft industry is a valid joint interest of the Pentagon and the defense industry. But if this program produced great results as claimed, why wouldn't the Air Force fund it themselves, not depend on Congress to earmark the money? Rather than allowing economic forces to incentivize the Air Force and the defense industry to invest where mutual returns are high, this program is a self-licking ice cream cone. The Air Force does not ask for the money because it has higher priorities. Defense contractors use lobbyists to get Congress to fund the program, and the money the Congress supplies cuts the costs of research and development for defense contractors so they can benefit from government-sponsored research and pay for more lobbyists.

"This program, like many other examples of waste in the Pentagon budget, would not exist if it hadn't been pushed by Congress and funded by earmarks when the Air Force has higher priorities. In this case, the earmarks total $70 million since 1999 -- not a small taxpayer investment. Two years ago, eight Senators requested $7 million each for this program as an acknowledged earmark. In negotiations with the House, that number grew to $10 million of unrequested funding and was authorized by Congress. Last year, 10 Senators requested $10 million each for the initiative as an earmark. Although we claimed to have eliminated earmarks in our Authorization bill last year, $8 million was provided by our pork-loving colleagues in the Defense appropriations bill.

"According to watchdog groups, over $1.1 million has been spent on lobbying for the initiative since 2003. Last year, over $200,000 was spent on lobbyists for an $8 million return to the defense industry through government-sponsored research. The report you are now reading says that the Committee "strongly urg[es] the Air Force to institutionalize this program with adequate resources in future years.' The straight-talk translation of that Washington babble is the Committee is trying to force the Air Force to burrow this program into their core budget so Congress doesn't have to earmark it. I disassociate myself from that request. This is a low priority program for the Air Force and I do not support telling a military service they should request funding for programs they do not deem a high military priority.

"I was able convince the Committee to delete one item of unrequested spending of interest to Americans who are trying hard just to pay "the bills that count.' I was able to challenge and remove $6 million from the Chairman's draft bill that was proposed for a military utility assessment of a telescope searching for -- if you can believe it -- extraterrestrial life.

"Unfortunately, I was not as successful in ending hundreds of millions of dollars of other wasteful, misallocated spending. For example, this bill will provide an extra $322 million for tank upgrades that the Army no longer needs or wants -- unrequested funding which every senior Army leader coming before our committee has rejected. And, that $322 million for 2012 is just a down payment. To keep the tank plant in Lima, Ohio, running until 2017 when the Army wants to start the next round of tank upgrades will cost about $500 million a year. That's four years after 2012 at about $500 million a year in a continuing waste of Army resources. The Army knows that starting the plant up again in 2017 will cost money, too, but the most efficient solution is to stop production in 2012 when the Army's current requirements have been fully met. But that's not the decision of this Committee. I will continue my efforts on the Senate floor to strip this unnecessary funding from the Defense Bill.

"I am also strongly opposed to the cuts taken from accounts required to support the warfighter that were used to fund these outrageous earmarks and unneeded, unrequested spending. Secretary Gates has sounded the alarm against excessive reductions in defense spending that cut into the muscle of our military capabilities. I could not agree with him more. I am acutely aware that "budgetary cowardice,' as Secretary Gates recently described general across-the-board reductions, is the path to a hollow force.

"In rejecting Secretary Gates' advice, this committee cannot possibly foresee the full repercussions of the cuts to the military services' and Defense-wide Operation and Maintenance (O&M) accounts that the Committee took to fund its billion-dollar-plus shift of scarce resources to programs not requested by the Pentagon. But, we do know these accounts were extraordinarily stressed by the series of continuing resolutions for the first six months of Fiscal Year 2011 when crucial depot maintenance was deferred, contracts were delayed or cancelled, and civilian employees were told to expect a furlough. After Congress finally ended its dereliction of constitutional duty and provided full-year funding for the Defense Department in March -- six months into the fiscal year -- these same O&M accounts were further stretched by our operations in Libya. Those costs are being borne within existing funding for FY11 and are now projected to reach $1.1 billion by September 30, 2011. If the Department can find savings within the O&M accounts in Fiscal Year 2012 by finding efficiencies and reforming practices, then by all means we should encourage them to do it. But, we should give our military leadership the flexibility to fund the higher priorities of their selection that directly support the warfighter and also fund those items that were deferred during FY11 as a result of these unbudgeted and unexpected events. This bill contains over $406 million that was added specifically by my amendments to address this purpose, taking that money from the Medium Extended Air Defense System (MEADS) program being developed with NATO allies that Defense and Army leaders have repeatedly testified is at high technical risk of failure and which will never be operationally fielded by the United States.

"The bill makes some minor progress in controlling the Defense Department's spiraling health care costs, but as with other challenges we faced in this bill, we could have and should have done more. Fulfilling the Department's request to link TRICARE Prime enrollment fees for working-age retirees to the index of National Health Expenditures per capita would have been the right thing to do. Instead, this bill limits future increases to the Cost of Living Adjustment (COLA) for military retired pay, which for several years in this economic environment has been static. Doing so ignores the fiscal reality that when national health care costs increase, so do health care costs for the Department of Defense. As Secretary Gates has repeatedly testified, health care costs are "eating the Department alive.' According to the Congressional Budget Office, medical care could consume more than 16 per cent of the Defense Department's top-line by the year 2028.

"TRICARE fees haven't changed since they were established in 1995. At that time, according to Defense Department estimates, working-age retirees paid about 27 percent of their total health care costs when using civilian care. In response to questions from the Committee during the markup of this bill, the Department confirmed that in fiscal year 2011, out-of-pocket expenses for working-age retirees who are enrolled in TRICARE Prime and therefore pay a $460 per year fee for family coverage, would represent less than 9 percent of the total cost of the family's health care costs.

"Military retirees and their families deserve the best possible medical care in return for a career of military service to their nation, and nothing less, and that is what TRICARE must provide. But we cannot ignore the fact that health care costs will undermine the combat capability and training and readiness of our military in the future if we don't control the cost growth now. Elsewhere in this report, the committee notes that it plans to review options for phasing in future enrollment fee adjustments as early as fiscal year 2014. As a result, I plan to address TRICARE Prime enrollment fees when the bill is debated on the Senate floor. We must find an equitable way to both sustain the health care benefit for our military retirees and ensure that future health care costs do not undermine the needs of our troops on active duty and their families in the future.

"Finally, this committee has the solemn responsibility to our country to exercise aggressive oversight to eliminate weapons programs that are over cost, behind schedule, or are not providing improvements in combat power and capabilities. Last month, we heard from Defense and industry witnesses concerning the problem-plagued F-35 program and the potential for further cost overruns and production delays. If we fail to act now, continuing cost overruns on the F-35 of the kind we have experienced over the last 10 years will siphon off precious resources and put at risk every other major Defense procurement program. We simply can't stand by and let that happen. I offered an amendment that would have sent this message loudly and clearly.

"Under my amendment, the entire F-35 program would go on probation if on December 31, 2011, the actual cost of building these jets under the fixed-price contract for the fourth lot of aircraft exceeded the negotiated target cost by 10 percent. If, a year from that date, the actual cost remained at least 10 percent above the contract's target cost, my amendment would have effectively required that the program start winding up. Probation would only have been triggered if there was a cost overrun of several hundred million dollars at a point on December 31, 2011 when only 30 percent of the work on the contract is expected to be completed. And I might add that, under this contract, even when the actual cost is 10 percent over the target cost, the prime contractor is still allowed a tidy profit that most Americans would be more than happy to have on an investment. So, to avoid termination of the program, all the contractor would have to do is absorb more of the cost overruns and accept less of a profit. That did not seem unreasonable.

"It seems to me that if costs were several hundred million dollars or more over the target price with 30 percent of the work done on a fixed-price contract, we would have a good idea where the F-35 program was headed. My amendment would have sent an unmistakable signal to the Pentagon and the prime contractor that we will not continue down the road of cost overruns and schedule delays on the F-35 simply because other alternatives were hard to come by. While the 13-13 vote on my amendment allowed the Chairman to block its adoption, I will renew my efforts to keep focus on constraining the costs of the F-35 both in terms of buying the aircraft and their sustainment costs, which are currently estimated to be a jaw-dropping $1 trillion over the F-35's lifecycle. As badly as new-generation aircraft may be needed by the Air Force, Navy, and Marine Corps, the F-35 cannot be allowed to drain resources from all the other procurement needs we face for the next 25 years.

"As an alternative to my amendment on the F-35, the bill requires that the contract for the fifth lot of aircraft be executed under a fixed price and requires the contractor to bear the responsibility for any cost overrun, with a carve-out for certain constructive changes required by the government. Unfortunately, I have no sense at all that leadership at the Department of Defense would have accepted any proposal by the prime contractor that the program use this type of contract to produce F-35 aircraft -- particularly after Secretary Gates added $7.4 billion and 33 months to finish developing them.

"Even after Secretary Gates' efforts to restructure the program twice over the last year and a half, the General Accountability Office (GAO) found that the F-35 program still has considerable "concurrency risk,' that is, the risk of major, costly discoveries late in production arising from the overlap between development and production. I am concerned that the absence of a contract structure that would let the Department and the prime contractor work together to reduce that risk efficiently -- which is the result imposed by the F-35 provision adopted in the bill -- could result in the contractor simply insisting on a much higher fixed price, or require that a "risk premium' be baked into the fee structure of the next lot's contract. By rejecting my amendment, I believe we lost an opportunity to tell the Pentagon and the prime contractor that increased cost on the F-35 cannot and will not be tolerated. My amendment sent that message strongly, simply, and powerfully. Its rejection is an opportunity lost when the future of the program hangs in the balance.

"This Nation is at a critical juncture of decisions concerning our conduct of three wars, our record deficit spending, and the dynamic state of world affairs. We cannot continue business as usual, and yet in too many cases that is exactly what this bill does. Our citizens need decisive action to make hard decisions and the will to carry them out. This bill fails to provide that leadership and continues to put off the hard calls and fiscal discipline that our country so desperately needs. I cannot, as it is currently drafted, give it my full support, but I will continue my efforts to improve the bill as it moves through the process of consideration by the Senate and conference negotiations with the House."

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