I would like to begin with an anecdote I heard two weeks ago at an OSCE conference in Vienna. It is a story that was making the rounds in Budapest in 1989, at the time the Cold War was coming to an end.

There was this man fishing in the Danube. Eventually he caught a big fish. While he was dragging the fish on shore, the fish began to speak and asked that his life be spared. He said that he would grant the fisherman three wishes if his life could be saved. Since it is an unusual thing to hear a fish speak, the fisherman thought it was worth a try. So he said: "I want to be a prince. I want to live in a palace. And I want a beautiful wife." The fish promised to deliver and was released from his ordeal. The next morning the fisherman awoke in a palace. And indeed he was a prince. The door opened and a beautiful woman appeared and said: "Get up Franz-Ferdinand. Today is our trip to Sarajevo."

Perhaps this story may be a useful reminder that we should be careful about what we wish for. All of us, of course, are very glad that the Cold War is over, but we have not yet adjusted to the immense complexities of the new era. We thought and acted like strategists during the Cold War, but that art sadly has been lost over the past few years. With the Cold War over, we have lost sight of the big picture. And because there is no big picture, we find it difficult to reach consensus on many foreign and defense policy issues.

The only way to find a new consensus is to start looking at the big picture again. We need to start looking for connections between things that seem to have no connections. The connection I would like to draw this morning is between our defense capabilities and our alliances -- between our military power and our security structures.

I would propose that we try to reach a consensus on two points:

1) That our alliances depend on America remaining a strong and global military power.

2) That we need to devise a new transatlantic bargain for the NATO alliance to guide us, not only through NATO expansion, but through European conflicts such as Bosnia.

DEFENSE

Let me begin with the first point about defense. You cannot talk intelligently about America's security structures unless you first talk about American military power. As Malcolm Wallop is fond of saying, "diplomacy without military power is but a prayer." And a security alliance without adequate military backing is but a promise without a prayer.

My concern is that, if current trends in defense spending cuts are continued, both the U.S. and our alliances could indeed become a promise without a prayer. If defense spending continues to plummet, the U.S. will be hard-pressed to meet its future alliance commitments.

We at Heritage have long argued that the Clinton Administration has not asked the Congress for adequate funding to maintain the force envisioned in its Bottom-Up Review. You will recall that this force supposedly would be large enough to win two major regional conflicts "nearly simultaneously."

We estimated that the Administration's defense budget will fall short by some $110 billion over five years. The result will be deeper than anticipated cuts in military capabilities and combat readiness. For example, according to our estimates, the force structure of the U.S. armed forces could be reduced by roughly 20 percent below levels recommended in the Bottom-Up Review, and military personnel levels would have to shrink by roughly 15 percent below levels envisioned in the BUR.

I cannot see how our alliance commitments can be kept if, in fact, we are going to reduce our forces to levels lower than the bare minimum envisioned in the Bottom-Up Review. At these lower force levels, we would not be able to cover two major regional conflicts at the same time. If war broke out in one region -- say, in Asia -- we would be forced to move troops, weapons, and ships from another region in which we have alliance commitments -- for example, Europe. By doing this, we would have strengthened one region at the expense of the other. In effect, we would have been forced to make choices between alliances.

This is not a choice we should be forced to make. It should be obvious that, at some point, a lack of sufficient military forces casts doubt on our alliance commitments. Our allies are masters at taking our pulse and measuring our power. They are keenly aware of the "promise without a prayer" problem of which I spoke earlier.

If we value our alliances -- and I know there is a bipartisan consensus that we do -- then I believe we should take maintaining our military capabilities more seriously. In short, we must provide adequate funds for defense. All the diplomacy in the world will not save our alliances if America is perceived by our allies to be a waning and weakened military power. Our democratic values are keenly important to our allies. But our military power is critically important.

NATO AND EUROPE

Now let me turn to NATO. There is, of course, a bipartisan consensus favoring U.S. participation in NATO. There is not much doubt about that. But there has not been much discussion or debate, at the political level at least, of what needs to be done to ensure that NATO survives.

I firmly believe that the United States needs to revitalize the Atlanticism represented by the NATO alliance. Unless we define a new transatlantic bargain between the U.S. and Europe, the Atlantic Alliance may either collapse or wither away. This would be dangerous not only for Europe, but for the United States. The details of this transatlantic bargain may take a while to develop, but working them out will require Americans and Europeans to change old habits and take new risks.

The old transatlantic bargain was, to put it crudely, "If you European members of the alliance are attacked by the Soviet Union, we will risk our own annihilation to come to your defense." Of course, the strategic rationale for this bargain has changed; the threat of hegemony has weakened, although not entirely disappeared, while other, less apocalyptic threats have emerged.

A new transatlantic bargain will be much more complicated -- and possibly even riskier in the near term. I could see a new bargain emerging that goes something like this: "We Americans will do all the things we used to do (deter a strategic attack on Europe as a whole), but in addition to this, we will help you solve some of your purely regional problems if you help us solve some of our problems outside of Europe."

What does this mean? It means, in principle, that if the circumstances are right and the interests and mission are clear, the United States should consider involving its military forces, including ground troops, in lesser regional contingencies and crisis management operations (peacekeeping operations) in Europe. By doing this, we would be going beyond Article Five commitment because we would be involving ourselves in actions that go beyond defending an ally from an attack.

This would not mean, however, putting U.S. troops in military operations that are bound to fail. U.S. leadership should not be defined as merely doing what the Europeans ask. Sometimes leadership will mean saying "no" to dumb ideas. And it may be that committing U.S. troops to a peace-enforcement operation in Bosnia today is a dumb idea.

While U.S. participation in so-called major regional contingencies, such as a major attack on Europe, would be more or less automatic, participation in lesser regional contingencies (at least those not involving a direct attack on an alliance member, as in Bosnia) would not be automatic. Since an agreement for participation would have to be reached by consensus, a veto by the U.S. not to send ground forces would not necessarily stop an operation if the Europeans decided to go ahead with their own troops. In any event, the Americans could support the operation in other ways, with air power, for example, as we are now doing in Bosnia. In this way, the U.S. could refuse to send ground troops without undermining a fundamental principle of the alliance.

An important assumption here is that the dispatch of U.S. troops for lesser regional contingencies in Europe is something new -- a step up the ladder of risk, so to speak. Putting troops in actual combat is different from stationing them in peacetime for potential combat, as we did in Europe for most of the Cold War. The Europeans would have to understand that our making such a commitment would be a new chip in the bargain. In fact a lesser regional conflict not involving a direct attack on an alliance member is, by definition, an "out of area" operation. Sending U.S. forces to Europe for peacekeeping purposes would be keeping our end of the new bargain with respect to "out of area" operations.

Another chip that we Americans could throw into the bargain could be to provide a missile defense umbrella for Europe. This would be making good on our strategic end of the bargain. By promising to defend our European allies from missile attack, we would be adding a new dimension to extended deterrence.

What would we expect from the European members of the alliance in return? First, they would have to take up a greater burden for maintaining international peace and stability outside of Europe. And, second, they would have to do a better job of submerging their national preferences for the greater good of the alliance.

If we Americans are asked to take on greater risks -- and sending U.S. forces into combat entails greater risk -- then the Europeans should be assisting us in "out of area" operations outside of Europe. Otherwise, it will be difficult to convince the Congress and the American people that this new transatlantic bargain is worth the risk and the money. These "out of area" operations would be like Operation Desert Storm -- i.e., arranged by consultation and determined to be in the mutual interest of the alliance and international peace and stability.

Another part of the bargain is NATO expansion. If we expand NATO, we are bringing more countries into the bargain, so to speak; we would be giving Poland and other countries security guarantees. In return, we would expect them to come up to NATO's standards. But we get something else as well. We fill the strategic vacuum in Central Europe; we anchor these countries to the West; and we provide a geopolitical hedge against a revived Russian threat.

There are, of course, many issues involving NATO expansion which I do not have time to go into: Who exactly should be brought in? What happens to the countries that are left out? What kind of defense posture should we have for new members? And what are the time lines?

Let me say only this: It would be wise to expand NATO sooner rather than later. The longer we wait, the more difficult it will be. The Russians will not become less resistant to NATO expansion simply because we go more slowly. In fact, if they think that we are slowing down because of them, they may increase their resistance.

A second point: There are no easy solutions to the problem of countries falling outside the NATO defense perimeter. However, the difficulty of this problem should not be used as an argument against NATO expansion. It makes no sense to argue that NATO expansion will create new dividing lines when old ones already exist. To be sure, if NATO expands, there will be a new dividing line, but I would rather have that dividing line on the eastern border of Poland than on the western one. There will always be some European countries outside NATO, whether it expands or not.

CONCLUSION

I have chosen to speak only about NATO. The relationship between military power and security structures is equally true for our alliances in Asia. Our allies in Asia will not for long trust our commitments to them if they perceive that our purpose is uncertain and our capabilities are weak. They will tend to measure the strength of our resolve by the commitment we make not only to our alliances, but to our own defense.

We can easily find a bipartisan consensus favoring our alliances in principle. The trouble begins when we start talking about costs and risks. Then the details begin to get troubling, and they could become deeply divisive.

I believe that a bipartisan consensus can be reached on the principle of NATO expansion. But can we maintain this consensus when the cost of expansion -- up to $35 billion over ten years, by some estimates -- comes up in defense budget debates in Congress? I hope so, but I have my doubts unless we start thinking more strategically. We will not be able to make the proper connections unless we have a consensus on America's overall purpose and strategy in the world.

I believe that a growing gap between our military capabilities and our alliance promises poses the greatest threat to our ability to remain engaged in the world. If we cannot remain militarily strong, we will drift off into isolationism not by intent, but by default. Ultimately, this is far more dangerous to America's position in the world than the isolationist speeches of Pat Buchanan or Ross Perot.

Kim R. Holmes, Ph.D., is Vice President of Foreign and Defense Policy Studies and Director of the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.