Thu Jan 6, 2011 3:20pm EST * Gates announces $178 billion in savings
* US to cut up to 47,000 troops starting in 2015
* Lawmakers already flagging concerns over cuts
* Defense budget to stagnate in 2015 and 2016 (Rewrites following Gates briefing, adds details of savings)
By Andrea Shalal-Esa and Phil Stewart
WASHINGTON, Jan 6 (Reuters) - The Pentagon announced $178 billion in cost savings over five years but softened the blow by recycling much of the money into other programs and helping pay down the U.S. budget deficit by trimming its bureaucracy.
Defense Secretary Robert Gates said the Pentagon would achieve the savings partially by taking the extraordinary step of reducing U.S. troop levels.
He also announced cuts or cancellations of poorly performing weapons programs, including a $13-billion Marine Corps landing craft, designed by General Dynamics Corp (GD.N).
The budget proposal is already raising hackles in some quarters of Congress, which ultimately controls the Defense Department's budget.
"I'm not happy," House Armed Services Committee Chairman Howard McKeon told reporters, saying the new cuts were more dramatic than expected.
Gates said the military services had come up with $100 billion in savings over five years that would be redirected within other military programs. He said an additional $78 billion would go toward deficit reduction, made up primarily of $54 billion in Pentagon-wide savings, changes to economic assumptions, and cutting troop strength beginning in 2015.
The plan calls for cancellation of a ground-launched missile built by Raytheon Co (RTN.N), and the second overhaul in a year of the Pentagon's largest weapons program: Lockheed Martin Corp's (LMT.N) F-35 Joint Strike Fighter.
Under the proposal, the Pentagon would trim its force levels by up to 47,000 U.S. troops starting in 2015. That is long after U.S. troops are due to leave Iraq at the end of this year. It is also the year when U.S. war planners hope to hand over responsibility for Afghan security to local forces.
"These projected reductions are based on an assumption that America's ground combat commitment in Afghanistan would be significantly reduced by the end of 2014 in accordance with the president's strategy," Gates said.
The $178 billion in internal cost savings over five years will offset $78 billion in budget cuts, allowing defense spending to grow modestly until 2015, when it will stagnate for the remaining two years of a five-year plan to be formally unveiled next month. (Editing by Tim Dobbyn)
