* Individual programs cut, overall reduction comes later
* Gates warns more stop-gap spending could cut too deep
* House panel chairman questions wisdom of Pentagon cuts
(Rewrites with Gates comments, adds lawmaker reaction, updates
shares to close)
By Andrea Shalal-Esa and Jim Wolf
WASHINGTON, Feb 14 President Barack Obama sent
Congress a $671 billion defense budget on Monday with $13
billion in program cancellations and a smaller war budget that
drew immediate fire from a divided Congress.
Some U.S. lawmakers called for even bigger cuts while
others rallied to resurrect funding for job-rich programs.
The administration's fiscal 2012 budget proposal includes
$118 billion for wars in Afghanistan and Iraq, $41.5 billion
less than requested last year, given the troop drawdown in
But it called for a record Pentagon base budget of $553
billion, a boost of $22 billion above the level enacted for
2010. Congress has failed to agree on 2011 funding, leaving
spending at 2010 levels under a temporary spending bill.
Defense Secretary Robert Gates said critics who were
calling for even bigger cuts were out of touch with reality and
warned that the Pentagon faced a looming crisis if Congress did
not act soon to pass a spending bill for the 2011 fiscal year.
"Suggestions to cut defense by this or that large number
have largely become exercises in simple math, divorced from
serious considerations of capabilities, risk, and the level of
resources needed to protect this country's security and vital
interests around the world," Gates told reporters.
The stop-gap spending bill expires March 4, and Gates
warned that extending that measure for the whole of 2011 would
cost the Pentagon $23 billion.
He insisted that the U.S. military needs at least $540
billion for fiscal 2011 that ends Sept. 30 to carry out its
missions and maintain readiness.
Gates also blasted lawmakers blocking the Pentagon's
five-year effort to cancel a $6 billion interchangeable engine
for the F-35 Joint Strike Fighter being built by General
Electric (GE.N) and Britain's Rolls-Royce Group (RR.L).
"We consider it an unnecessary and extravagant expense,
particularly during this period of fiscal contraction," Gates
said, vowing to examine "all available legal options" to shut
it down once the current stop-gap spending measure expires.
The proposed budget contained few surprises after a Jan. 6
briefing at which Gates mapped out plans to cut Pentagon
spending by $78 billion through 2016. [ID:nN06126742]
CUTS "DROP IN THE BUCKET" OR TOO EXTREME?
The 2012 spending plan calls for $113 billion to buy
weapons and services, down from $120 billion projected a year
ago, but still at a record level. Weapons research would get
nearly $77 billion, roughly on par with last year's
U.S. defense contractors including Lockheed Martin Corp
(LMT.N), Boeing Co (BA.N), Northrop Grumman Corp (NOC.N) have
been bracing for slower growth in defense spending after a
decade of double-digit increases that have nearly doubled the
Pentagon's core budget since Sept. 11, 2001.
Some Republican lawmakers are already calling for deeper
cuts given the U.S. budget deficit and nearly $1.5 trillion
national debt; others want to add money back to the defense
Christopher Preble, with the conservative Cato Institute,
said on Monday the cuts outlined by Gates were a "drop in the
bucket," amounting to just over 2 percent of total Pentagon
spending and said "far deeper cuts" were needed.
House Armed Services Committee Chairman Howard McKeon said
he agreed that a fiscal 2011 spending bill was needed, and said
he had real concerns about the cuts Gates is seeking in 2012.
"We cannot take our eye off our national security
requirements," McKeon said, vowing to ask tough questions when
Gates testifies before his committee on Wednesday.
Defense shares mostly edged down on Monday.
Among large contractors, industry leader Lockheed closed
down nearly 1 percent to $80.92. Northrop shed 2.6 percent to
$68.70 and Raytheon Co (RTN.N) fell 0.4 percent to $50.86.
Boeing gained 0.2 percent to $72.26.
"Big platforms are getting stretched out and that's going
to hurt the primes the most," Morgan Keegan analyst Brian
Ruttenbur said. Supplemental budgets, which have provided some
growth for big contractors, are dropping.
Growth areas in the 2012 budget plan include cybersecurity,
to be funded with $2.3 billion, about $10 billion in spending
on space-based weapons, and nuclear security. It also included
$9.7 billion for Lockheed's F-35 fighter.
At the same time, the Pentagon proposed to cut $13 billion
from programs like a landing craft being designed by General
Dynamics Corp (GD.N), a surface-launched missile being
developed by Raytheon for the Army, as well as the SM-2
surface-to-air missile that Raytheon builds for the Navy.
(Reporting by Andrea Shalal-Esa and Jim Wolf; Additional
reporting by Karen Jacobs in Atlanta; Editing by Tim Dobbyn)