Pentagon cuts to reflect Gates, White House tussle

Tue Jan 4, 2011 5:52pm EST

* Gates fought White House to limit budget cuts

* Several weapons programs to be canceled

* Administration official cites need for sacrifice

By Andrea Shalal-Esa

WASHINGTON, Jan 4 (Reuters) - U.S. Defense Secretary Robert Gates has been successfully pushing back against White House attempts to more severely cut into weapons program funding than what the Pentagon had been bracing for, an analyst and defense company source said on Tuesday.

Gates is due to brief lawmakers on Thursday about his drive to find $100 billion in savings over five years from overhead and unnecessary programs, congressional aides said on Tuesday.

Gates had hoped to plow the savings back into the Pentagon budget for troop costs and weapons programs. But the White House recently has been pressing Gates to make even bigger cuts of about $150 billion, and then use the money to help narrow huge federal deficits.

Gates has whittled the proposed cut down to around $80 billion, said defense analyst Loren Thompson, chief operating officer of the Virginia-based Lexington Institute, who was briefed on the communication between the Pentagon and White House.

Gates will explain the efficiency drive to lawmakers on Thursday morning before announcing the measures at a Pentagon briefing, the congressional aides said.

Congress ultimately has to approve Obama's budget proposal and the Pentagon's suggested program cuts.

The defense company source, who was not authorized to speak about the budget negotiations, said Gates took the issue all the way to President Barack Obama, and while he managed to shrink the size of the demanded cuts, it was clear that the Pentagon would not be allowed to keep all the savings it had found.

"The American people will be asked to make painful compromises on tax increases, Medicare cuts and Social Security. It's clear that the Defense Department will have to surrender some portion of its planned growth as well," said defense consultant Jim McAleese on Tuesday. "That is still preferable than a dramatic defense contraction."

Gates, whose office has said he intends to retire in 2011, had some leverage in budget negotiations because "the White House is trying to convince him to stay through the end of the president's first term," Thompson said on Tuesday.

Gates is expected to announce on Thursday the end of a program for the Expeditionary Fighting Vehicle, a 40-ton amphibious landing craft that General Dynamics Corp (GD.N) is developing for the Marine Corps at a cost of over $13 billion, said two defense company officials and a congressional source, none of whom were authorized to speak on the record. [ID:nN03185583]

The Pentagon also is likely to cancel a surface-launched missile system being developed by Raytheon Co (RTN.N), and further extend the development phase of the Pentagon's largest arms program, the Lockheed Martin Corp (LMT.N) F-35 Joint Strike Fighter, for up to two years, one of the defense company sources said.

Pentagon officials thought the administration would ask Congress for $566 billion in military spending in fiscal 2012, not counting overseas fighting, but the White House budget office is now pressing for a figure of $554 billion with more cuts to come later, Thompson said.

The White House has said it would release its proposed budget for fiscal year 2012 during the week of Feb. 14.

One administration official, who was not authorized to speak on the record, said on Tuesday it was premature to talk about specific proposals or numbers in the budget.

"As the president has said, this will take shared sacrifice -- so that we can focus our resources on what is critical to growing the economy, spurring job creation, and making the United States more competitive," the official said. (Additional reporting by Andy Sullivan) (Reporting by Andrea Shalal-Esa; editing by Carol Bishopric)

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