Star Wars Faces a Budget Hit


By Stan Crock The Pentagon has eight missiles on the ground in Alaska and California, poised to shoot down any makeshift ballistic missile that comes our way. Trouble is, sometimes the interceptors stay on terra firma when they're launched. That's what happened in December in the latest Star Wars test, which came two years after a different snafu. A computer glitch was to blame in December, the Missile Defense Agency (MDA) says.

Such woes could be part of the reason missile defense is heading toward a 10% cut in its 2006 budget, to $8.8 billion. MDA spokesman Rick Lehner, contacted before an embargo on the budget was broken, wouldn't comment on the projected spending. But outsiders have no such qualms. "It's a very complex program with a lot of technical issues," notes Steven Kosiak, a defense-budget analyst with the Center for Strategic & Budgetary Assessment, a Washington think tank. "It's hard to spend all that money efficiently."

ALTERED PRIORITIES. However, there's probably more than missile mishaps behind the dollar drop for Star Wars. The war on terror and Iraq may have taken their toll on missile defense and changed the way Defense Secretary Donald Rumsfeld assesses potential threats. He went into office worried about space issues, the ballistic-missile threat, and transforming the military.

Then came September 11, Afghanistan, and Iraq.

"The Rumsfeld vision of future warfare has had a severe collision with reality," says Loren Thompson, chief operating officer of the Lexington Institute, a conservative think tank in Arlington, Va. The problems facing missile defense, he says, are "the relatively weak case for the overall mission and the need to spend money in other ways."

Consider as well the difference between the 2000 election and last year's. Five years ago, missile defense was one of Bush's key issues, a surefire way to galvanize his conservative base. "America must build effective missile defenses based on the best available options at the earliest possible date," he declared during his first run for the White House.

"NO DEMONSTRATED CAPABILITY." Since then, despite the roughly $10 billion a year that has poured into the program, Rumsfeld has conceded the system doesn't have to be 100% effective. It just has to work well enough to change the calculation of an enemy thinking about lofting a missile at Los Angeles or New York. Problem is, it doesn't even seem capable of doing that, as the December test showed.

After more than 20 years of effort, major parts of the system are nowhere near ready for prime time, notes Philip Coyle, a top Pentagon weapons tester in the Clinton Administration. Neither the sophisticated X-band radar nor the Space-Based Infra-red System-High (SBIRS-High), both of which are critical to detecting and tracking incoming missiles, is close to operational. SBIRS-High is running into such difficulties that Lockheed Martin (LMT) has agreed to defer a $10 million award -- its total profit on the project for 2004-2005. After a major restructuring in 2002, the cost of this one part of Star Wars was pegged at $4.4 billion -- and since then has swelled to $5.6 billion.

What's more, every time there is an attempt to intercept a missile, the target carries a beacon to tell the interceptor where it is -- a service an enemy isn't likely to offer. The bottom line: The system "has no demonstrated capability to defend against a realistic attack under realistic conditions," Coyle says.

NEW THREAT. And as the American program struggles, other countries are making headway in pursuing new technologies. Scott Ritter, the former arms inspector in Iraq who correctly concluded Baghdad had no weapons of mass destruction, now says Russia has tested an SS-27 Topol-M mobile ballistic missile that would render the current Star Wars scheme useless. It is too fast to hit right after takeoff unless the interceptor is lucky enough to be really close to the launch pad.

Also, the SS-27 is hardened against lasers, so the airborne laser -- a program already way behind schedule -- wouldn't work. And because it's maneuverable and capable of releasing three warheads and four decoys, it would be much harder to defeat as it falls in the terminal stage of flight.

MDA spokesman Lehner says Ritter's objection misses the point of his agency's goal, which is to address "the more rudimentary missiles North Korea and Iran are developing." But what if Pyongyang or Tehran buys an SS-27? "I don't know about that," he told BusinessWeek Online.

No wonder Bush changed the subject in 2004. "The domestic politics of it are less than they were," says Michael O'Hanlon, a defense expert at the Brookings Institution. "We went through an election campaign in which we barely heard mention of it." Even a strong backer of missile defense such as Frank Gaffney Jr., president of the Center for Security Policy, isn't overwrought by the cuts. According to Thompson, they most affect the kinetic-energy interceptor, which is supposed to collide with an incoming warhead in the boost phase.

UNTOUCHABLE TARGETS. While Gaffney would like more money spent on missile defense, he says his "strong preference would be to take money out of the kinetic energy interceptor, rather than other areas." The Northrop Grumman (NOC)-Raytheon (RTN) program is the most recent addition to the missile-defense arsenal, and as a result, the most vulnerable, Thompson says.

A leaked December budget memo says the program faces further cuts of $800 million a year from projected spending through fiscal 2011. That could be just the start if Washington gets serious about the budget deficit. Congress isn't going to slash outlays for military pay, housing, medical care, or retiree benefits. It can't scrimp on operations and maintenance with forces under fire.

Procurement is all that's left. And if lawmakers protect C-130J transports, F/A-22 fighters, and ships, Star Wars' $9 billion budget -- and its dubious performance -- make it an inviting target. The way it's looking now, the proposed cuts in Star Wars may well have a better chance of succeeding than the system's missiles. Crock is senior diplomatic correspondent for BusinessWeek, based in Washington, D.C.


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