UPDATE 1-Obama urged to scrap some Pentagon programs

(Adds suggestions for use of savings, in 7th paragraph)

By Jim Wolf

WASHINGTON, Nov 10 (Reuters) - A group of outside advisers to the Pentagon is urging President-elect Barack Obama to scrap unspecified military programs due to a growing gap between arms-buying plans and how to pay for them.

"Business as usual is no longer an option," the Defense Business Board said in a series of briefings presented last month to Pentagon leadership. Copies of the panel's briefing slides were made available by the Defense Department on Monday.

"History suggests the department is entering a period of fiscal constraint in a tough economy with deficit and competitive spending pressures," the briefing material said.

"Eliminate programs and activities not vital to the mission," it recommended to the incoming administration.

Cuts at the margin "won't work this time," the board said. "Nor will pushing things off to the later years."

The board did not "call out specific programs to cut," said Navy Cmdr. Darryn James, a Pentagon spokesman. Its final report is to be released later this month.

The briefing material suggested investing savings into items on the armed services' wish lists, offering them back to Congress as "goodwill" or a combination of both.

U.S. defense spending has climbed more than 60 percent during the eight years of the Bush administration, and will total at least $612.5 billion in fiscal 2009. This includes $542.5 billion for the core defense budget and an initial allowance of $70 billion for the wars in Iraq and Afghanistan.

A top defense adviser to Obama, former Navy Secretary Richard Danzig, has said he does not see overall defense spending declining in the first years of Obama's administration. Obama has said he would review every major arms program,

InsideDefense.com, a trade publication, last week quoted a briefing paper for Obama's national security advisory team as saying prime targets for possible cuts included missile defense, notably a laser built aboard a modified 747 jumbo jet by Boeing Co (BA.N). The new administration will also mull cuts to the Army's Future Combat Systems, co-managed by Boeing and SAIC (SAI.N), it said.

The Defense Business Board said "bold action" was required to resolve growing mismatches between projected future budget levels and weapons-buying plans.

The Defense Department cannot replace worn combat hardware, modernize and "transform" its capabilities simultaneously, the panel said.

"Choices must be made across capabilities and within systems to deliver capability at a known price within a specific period of time," it said in a presentation titled "Decision making in a fiscally-constrained environment."

Since 1947, there have been four periods of significant increases in budget authority, each of which has been followed by a period of significant decreases, the panel said.