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CAN CLINTON HOLD LINE ON DEFENSE BUDGET?

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It is Bill Clinton's Pentagon now. The president has set its funding, appointed its key personnel and approved its new strategy.

He has built his budget around the conclusions of the Defense Department's 1993 "bottom-up review" that determined how large, how modern and how combat-ready U.S. forces should be in the post-Cold War world.He has stood fast against efforts by liberals to slice his $264 billion defense request for fiscal 1995.

In doing so, he has delivered on the position he staked out in his State of the Union address Jan. 25: "The budget I send to Congress draws the line against further defense cuts. . . . We must not cut defense further."

And despite the trouncing last year of his effort to eliminate the military's ban on homosexuals, Clinton has managed to stamp the nation's defense policies with some of his political and philosophical priorities, such as an emphasis on "economic conversion" and expanded opportunities for women in the military.

But those accomplishments bring their own burdens. Now, Clinton bears responsibility for a program he has called "a defense plan that maintains our post-Cold War security at a lower cost."

Clinton must prove he can deliver the military force and the high-tech weaponry that he has promised his budgets will buy.

And he must defend his program against future pressures for cuts as the defense budget squeeze, which was tight from the start, gets even tighter.

Thus far, Clinton has fended off challenges to his defense programs from the left with the help of a solid alliance of congressional Republicans and centrist Democrats.

That same coalition, concerned about controlling the federal deficit, has shied away from trying to force Clinton to restore any significant portion of the $123 billion that he has pledged to cut over five years from the long-term Pentagon spending plan he inherited from George Bush.

Nevertheless, pro-Pentagon lawmakers, such as Senate Armed Services Committee Chairman Sam Nunn, D-Ga., have been vocal and emphatic in their skepticism that the Defense Department can avoid a train wreck as its optimistic spending assumptions meet fiscal realities.

"Today, our military forces are ready; they are capable; and they are manned by high-quality, dedicated people," Nunn said in Senate debate June 22. "But there are some real danger signals on the horizon."

Developments in recent months will only make it more difficult for the Clinton Pentagon to live within its tight budgets.

In mid-July, Defense Secretary William Perry raised the bar a notch, declaring that future Pentagon budgets should provide full cost-of-living pay increases for military personnel, rather than the lower-than-inflation raises presumed in Clinton's projected budget requests.

Those higher raises could chew up more than $12 billion of Clinton's $1.3 trillion five-year defense plan, which even Perry and his senior aides regard as extremely tight. Perry contends that the administration should raise its projected defense requests to cover the higher cost.

"It's a quality-of-life issue," Perry said in an interview, contending that the higher pay raises were needed to preserve the combat-readiness that the administration touts as its top defense priority. Erosion of the quality of life would sap morale, discourage re-enlistments and thus undermine readiness a few years down the road, Perry maintains.

Privately, other Pentagon officials are deeply skeptical that the Clinton team will boost future defense requests in the current fiscal climate.

If those skeptics are right, the funds for larger pay increases may be drawn from the weapons procurement and development accounts that have borne the brunt of Pentagon budget cuts since 1985.

Earlier this year, Congress raised the bar as well by mandating in its budget resolution additional federal spending cuts totaling $31 billion through fiscal 1999. The reductions apply to discretionary spending, which includes both the defense budget and non-mandatory domestic programs.

The action grew out of a Senate amendment to the budget resolution sponsored by Sens. Jim Exon, D-Neb., and Charles Grassley, R-Iowa. Because the Pentagon spends roughly half the discretionary funds from which the cuts would be made, most observers believe that it also will absorb a significant portion of the reduction.

More broadly, the Exon-Grassley amendment highlights members' enthusiasm for deficit reduction, especially when they can support it in the abstract, without singling out where the ax should fall.

The anti-deficit fervor suggests that Congress will be no more willing to increase defense spending next year, even if the November election boosts GOP numbers in the Senate and House.

"There's a lot of sentiment for more defense spending out there, but it's in a vacuum," says one GOP defense specialist. "You can't put the votes together" because of the need to identify offsetting cuts in popular domestic programs. "There's just no way to turn."