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Pentagon funding seen boosted now, squeezed later

* Pentagon to get funding boost in fiscal 2011 budget

* Pressure growing for more austerity at Pentagon

* Analysts expect record budget request over $700 bln

WASHINGTON, Jan 8 (Reuters) - U.S. President Barack Obama is expected to boost funding for the Pentagon in his fiscal 2011 budget but defense spending may be squeezed over the next couple of years, officials said on Friday.

After huge spending growth on wars in Iraq and Afghanistan, Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, said pressure was increasing for greater austerity at the Pentagon because of the country’s economic woes.

High unemployment and a record $1.4 trillion deficit are among the toughest domestic challenges facing Obama and could dim the election prospects for his Democratic Party in congressional elections in November.

“We’re in a time of real economic challenge,” Mullen told the U.S. Naval War College, citing data released on Friday showing the nation’s unemployment rate stuck at 10 percent.

“And so what does that mean for the military?” Mullen asked. “I don’t anticipate that the money is going to go up. In fact, I anticipate it’s probably going to go in the next couple of years in the other direction.”

Other defense officials said the Pentagon would receive a funding increase in real terms -- meaning beyond the rate of inflation -- in Obama’s fiscal 2011 spending plan, which the White House is expected to release on Feb. 1. Fiscal 2011 begins on Oct. 1.

The officials said Mullen was talking generally about growing pressure to rein in defense spending.

Cutting overall defense spending will be hard in the foreseeable future. U.S. forces are gradually pulling out of Iraq, but Obama has ordered 30,000 more troops to Afghanistan while setting the goal of beginning to bring them home in mid-2011.

Fiscal 2010 Defense Department funding, including war costs and military construction, is nearing $663 billion, officials said.

Analysts estimate that the Pentagon’s budget request for fiscal 2011, beginning next October, would likely total just over a record $700 billion -- a figure that includes money for additional troops in Afghanistan.

PROCUREMENT PROGRAMS FACE PRESSURE

Despite the increase, procurement will likely remain under pressure in fiscal 2011 and more weapons-buying programs may be axed, analysts said, because personnel and healthcare costs are eating up more of the overall Pentagon budget.

Last year’s budget battles underscored the challenge faced by Defense Secretary Robert Gates in trimming even a limited number of weapons programs over the objections of lawmakers who see them as a source of skilled manufacturing jobs.

Congress eliminated funding for Lockheed Martin Corp's LMT.N F-22 fighter jet, as Obama had requested.

But lawmakers funded 10 more Boeing Co BA.N C-17 transport planes than the Pentagon had asked for, at a cost of $2.5 billion.

Congress also kept alive an alternate engine for the F-35 Joint Strike Fighter made by General Electric Co GE.N and Rolls Royce Group RR.L, despite Pentagon objections. (Reporting by Adam Entous; Editing by Peter Cooney)

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