Pentagon budget would reshape military priorities

WASHINGTON (Reuters) - President Barack Obama asked Congress for $663.8 billion for the Defense Department in the coming fiscal year as part of a shift in priorities designed to bolster U.S. forces for wars like Iraq and Afghanistan.

"We're going to save money by eliminating unnecessary defense programs that do nothing to keep us safe," Obama said in unveiling the budget plan.

A new helicopter being developed by Lockheed Martin Corp to carry the president was one of the highest-profile programs killed after its costs threatened to nearly double to over $13 billion.

Adding to programs targeted for cancellation last month by Defense Secretary Robert Gates, the request would kill the kinetic energy interceptor, a missile defense program developed by Northrop Grumman Corp.

The proposal for fiscal 2010, which starts October 1, includes $130 billion in war funding, mainly for Iraq and Afghanistan. It would end a controversial reliance on "emergency" supplemental requests to fund post-September 11, 2001, conflicts.

The proposed core Pentagon budget would grow $20.5 billion from the total provided by Congress this year, an increase of 4 percent, or 2.1 percent real growth after inflation.

Fleshing out the plan outlined by Gates on April 6, the Defense Department's chief financial officer, Robert Hale, said the fiscal 2010 budget had been "crafted to reshape the priorities of America's defense establishment."

It would end production of Lockheed's premier F-22 fighter and Boeing Co's C-17 military cargo aircraft, moves that that already have sparked opposition from lawmakers keen to save high-paying jobs around the country.

Also eliminated, at least for now, would be an $87 billion Army ground vehicle modernization plan, and an alternate engine for the Lockheed F-35 fighter that Congress keeps funding despite Pentagon resistance.

The budget, which must be approved by Congress, also calls for terminating a new long-range bomber, which the Defense Department had planned to begin fielding in 2018 to boost the existing Cold War-era bomber fleet.

Sixty-two Republican and Democratic members of the House of Representatives sent Obama a letter on Wednesday reminding him of his outspoken public support for the C-17 program and calling the decision to stop production "an enormous mistake" that would strain the military's future airlift capability.

They said the program supported 30,000 jobs across 42 states and had an economic impact of $8.4 billion, and massive layoffs were ill-advised given the state of the economy.

A bipartisan group of 14 senators sent a separate letter to Gates on Tuesday, urging him to reconsider his decision to halt F-22 and C-17 production until a mobility capabilities study and the 2010 Quadrennial Defense Review were completed.

Hale said the kinetic energy interceptor had been canceled because it had been having "technical problems." In April, Gates announced plans to turn Boeing's Airborne Laser, designed to destroy ballistic missiles at the speed of light in the early moments of their flight, into a research program.

But the budget would add nearly $2 billion to the budget for intelligence, surveillance and reconnaissance systems that support U.S. forces, including more round-the-clock battlefield coverage by unmanned aerial vehicles.

The spending plan would also would grow "special operations" personnel by more than 2,400, or 4 percent.

Not all U.S. money spent on security and defense is part of the Pentagon's core budget. Tens of billions of additional dollars fund the Energy Department's nuclear weapons complex and security operations of the Department of Homeland Defense.

The Pentagon's plan calls for shifting the Navy's aircraft carrier program to a five-year build cycle that would delay procurement of the next carrier one year and result in a fleet of 10 carriers after 2040, down from 11 currently.

"The healthy margin of dominance at sea provided by America's existing battle fleet makes it possible and prudent to slow production of several shipbuilding programs," a Pentagon statement accompanying the budget said.

The budget seeks $6.8 billion to buy 30 Lockheed F-35 Joint Strike fighters plus $3.6 billion in research and development funding. The Pentagon said it planned to buy 513 F-35s over the current five-year plan, and 2,443 overall.

The budget request also asked for $2.9 billion to buy 31 F/A-18 and E/A-18 fighters built by Boeing, but no extra planes to cover a projected strike fighter shortfall.

The Pentagon said it would cut $1.2 billion from missile defense spending in fiscal 2010 and set its budget request for the Missile Defense Agency at $7.8 billion.

(Reporting by Jim Wolf; additional reporting by Andrea Shalal-Esa and David Morgan; Editing by Tim Dobbyn)