America’s future security “is inextricably tied to the technology we produce” Defense Deputy Secretary Bill Lynn told a gathering of industrial leaders.  Speaking at the Aerospace Industries Association President’s Dinner in Paris, France, Lynn said that in the current period of constrained resources, the challenge for the U.S. and its European Allies “is to accommodate our changing fiscal circumstances without undercutting our military effectiveness, now or in the future.”

Lynn said the US responses to five past defense drawdowns— World War II, Korea, Vietnam, the economic crisis in the 1980’s, and the end of the cold war—had resulted in a later need to rebuild lost capabilities at great expense.  To avoid losing capability during the impending defense spending downturn, Lynn said defense planners had to make tough choices in order to keep a “capable, professional fighting force,” and “preserve the capabilities resident in our industrial base.”  To manage this drawdown more effectively, he said planners must draw on four lessons learned from the past as they make decisions. 

First of all, he said planners have to “make hard decisions early.”  Delayed decisions may result in spending on programs that are ultimately terminated, robbing higher priority programs of much needed funds, Lynn said.

Second, efficiencies cannot yield the savings necessary to meet lower spending targets, Lynn warned.  While planners must make changes and increase productivity to operate more efficiently, he said there aren’t “enough pure productivity gains to generate all the required savings.”  As a result, Lynn said planners must prioritize and eliminate programs that are not affordable.

Third, Lynn echoed recent statements by incoming defense secretary Leon Panetta that budget reductions must be balanced, rather than concentrated in a particular area.  To avoid the problems created by focusing cuts on a single area, such as operations or investment, he said reductions should be balanced “across force structure, operating, and investment accounts.”

Lynn said the final lesson was “not to cut too much, and not to cut to fast, especially from core mission areas.”  Doing so, he said, could lead to excessive costs to rebuild and leave troops ill prepared and equipped for future conflicts.

Lynn said the U.S. is incorporating these lessons as it conducts a comprehensive review to frame the choices for policymakers.  This review is framed in terms or strategy and missions, and capabilities.  Cuts he said, will not be made using an “across-the-board”  approach, but rather on a strategic assessment.

While making decisions about budget reductions, defense planners must preserve the capabilities of the defense industrial base, Lynn said.  This not only includes crucial manufacturing facilities, but also the “financial strength and durability” of firms that run these factories, invest in next-generation technologies, and design complex systems.  He said these major themes would guide DoD’s current study of the defense industrial base to “assemble a long-term policy to protect that base.”

The first theme is to preserve competition, Lynn said.  Competition, in the broadest sense of the term, will expose the defense industry to the “currents of technology, innovation, and capital markets,” and yield the best goods and service for the warfighter. 

The second theme, he said is to recognize the importance of international sales to the industrial base.  Lynn described the archaic export control system as a “significant impediment to our international competitiveness.”  He said the administration is addressing these impediments by comprehensive export control reform, including identifying a single agency to make export control decisions and developing a single munitions export control list.

Finally, Lynn said, it is important to target research and development spending to make sure promising R&D projects continue.  He identified long-range strike systems, UAVs, and cyber defense capabilities as current key technologies that must be continued.