[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


                                     

                         [H.A.S.C. No. 111-108]
 
                    RESOURCING THE NATIONAL DEFENSE 
                     STRATEGY: IMPLICATIONS OF LONG 
                       TERM DEFENSE BUDGET TRENDS

                               __________

                                HEARING

                               BEFORE THE

                             FULL COMMITTEE

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                           NOVEMBER 18, 2009

                                     
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                   HOUSE COMMITTEE ON ARMED SERVICES
                     One Hundred Eleventh Congress

                    IKE SKELTON, Missouri, Chairman
JOHN SPRATT, South Carolina          HOWARD P. ``BUCK'' McKEON, 
SOLOMON P. ORTIZ, Texas                  California
GENE TAYLOR, Mississippi             ROSCOE G. BARTLETT, Maryland
NEIL ABERCROMBIE, Hawaii             MAC THORNBERRY, Texas
SILVESTRE REYES, Texas               WALTER B. JONES, North Carolina
VIC SNYDER, Arkansas                 W. TODD AKIN, Missouri
ADAM SMITH, Washington               J. RANDY FORBES, Virginia
LORETTA SANCHEZ, California          JEFF MILLER, Florida
MIKE McINTYRE, North Carolina        JOE WILSON, South Carolina
ROBERT A. BRADY, Pennsylvania        FRANK A. LoBIONDO, New Jersey
ROBERT ANDREWS, New Jersey           ROB BISHOP, Utah
SUSAN A. DAVIS, California           MICHAEL TURNER, Ohio
JAMES R. LANGEVIN, Rhode Island      JOHN KLINE, Minnesota
RICK LARSEN, Washington              MIKE ROGERS, Alabama
JIM COOPER, Tennessee                TRENT FRANKS, Arizona
JIM MARSHALL, Georgia                BILL SHUSTER, Pennsylvania
MADELEINE Z. BORDALLO, Guam          CATHY McMORRIS RODGERS, Washington
BRAD ELLSWORTH, Indiana              K. MICHAEL CONAWAY, Texas
PATRICK J. MURPHY, Pennsylvania      DOUG LAMBORN, Colorado
HANK JOHNSON, Georgia                ROB WITTMAN, Virginia
CAROL SHEA-PORTER, New Hampshire     MARY FALLIN, Oklahoma
JOE COURTNEY, Connecticut            DUNCAN HUNTER, California
DAVID LOEBSACK, Iowa                 JOHN C. FLEMING, Louisiana
JOE SESTAK, Pennsylvania             MIKE COFFMAN, Colorado
GABRIELLE GIFFORDS, Arizona          THOMAS J. ROONEY, Florida
NIKI TSONGAS, Massachusetts          TODD RUSSELL PLATTS, Pennsylvania
GLENN NYE, Virginia
CHELLIE PINGREE, Maine
LARRY KISSELL, North Carolina
MARTIN HEINRICH, New Mexico
FRANK M. KRATOVIL, Jr., Maryland
ERIC J.J. MASSA, New York
BOBBY BRIGHT, Alabama
SCOTT MURPHY, New York
DAN BOREN, Oklahoma
                    Erin C. Conaton, Staff Director
                Andrew Hunter, Professional Staff Member
               Jenness Simler, Professional Staff Member
                    Caterina Dutto, Staff Assistant


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2009

                                                                   Page

Hearing:

Wednesday, November 18, 2009, Resourcing the National Defense 
  Strategy: Implications of Long Term Defense Budget Trends......     1

Appendix:

Wednesday, November 18, 2009.....................................    37
                              ----------                              

                      WEDNESDAY, NOVEMBER 18, 2009
  RESOURCING THE NATIONAL DEFENSE STRATEGY: IMPLICATIONS OF LONG TERM 
                         DEFENSE BUDGET TRENDS
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

McKeon, Hon. Howard P. ``Buck,'' a Representative from 
  California, Ranking Member, Committee on Armed Services........     2
Skelton, Hon. Ike, a Representative from Missouri, Chairman, 
  Committee on Armed Services....................................     1

                               WITNESSES

Berteau, David J., Director, Defense Industrial Initiatives 
  Group, Center for Strategic and International Studies..........     6
Daggett, Stephen, Specialist in Defense Policy and Budgets, 
  Congressional Research Service.................................     5
Donnelly, Thomas, Director, Center for Defense Studies, American 
  Enterprise Institute...........................................     8
Goldberg, Dr. Matthew, Deputy Assistant Director, Congressional 
  Budget Office..................................................     3

                                APPENDIX

Prepared Statements:

    Berteau, David J.............................................    93
    Daggett, Stephen.............................................    65
    Donnelly, Thomas.............................................   101
    Goldberg, Dr. Matthew........................................    41

Documents Submitted for the Record:

    Dr. Matthew Goldberg's Letter to the Hon. John Spratt 
      Regarding the Annual Incremental Costs for Deploying Troops 
      to Afghanistan and Iraq....................................   111

Witness Responses to Questions Asked During the Hearing:

    [There were no Questions submitted during the hearing.]

Questions Submitted by Members Post Hearing:

    [There were no Questions submitted post hearing.]
  RESOURCING THE NATIONAL DEFENSE STRATEGY: IMPLICATIONS OF LONG TERM 
                         DEFENSE BUDGET TRENDS

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                      Washington, DC, Wednesday, November 18, 2009.
    The committee met, pursuant to call, at 10:07 a.m., in room 
HVC-210, Capitol Visitor Center, Hon. Ike Skelton (chairman of 
the committee) presiding.

 OPENING STATEMENT OF HON. IKE SKELTON, A REPRESENTATIVE FROM 
        MISSOURI, CHAIRMAN, COMMITTEE ON ARMED SERVICES

    The Chairman. The hearing will come to order. Ladies and 
gentlemen, welcome to today's hearing. Resourcing the National 
Defense Strategy: Implications of Long Term Defense Budget 
Trends is the subject today.
    In the first week of February 2010, the Department of 
Defense (DOD) will deliver two critical documents to our 
committee. One is the Quadrennial Defense Review, known as the 
QDR, which will outline the National Defense Strategy and some 
of the major policy changes required.
    The second will be the President's budget request for 
fiscal year 2011, the first true budget of the Obama 
Administration and one of the primary mechanisms for adopting 
the QDR's recommendations. These documents along with the two 
ongoing wars are likely to dominate the discussions on our 
committee for the next year.
    The QDR is by design a process that is not supposed to be 
constrained by the budget. However, the fiscal year 2011 budget 
request is of necessity so constrained, though also deeply 
shaped by the QDR. So while the QDR will not and should not be 
limited by the budget, we in this committee will be required to 
confront budget limitations simultaneous to our review of the 
QDR. It is critical that we understand the budget constraints 
that are likely to shape the fiscal year 2011 budget, both in 
that specific fiscal year and over the Future Years Defense 
Program (FYDP) that will accompany it.
    The picture frankly is not a pretty one. We owe a debt to 
our colleague John Spratt, who held a hearing on the Budget 
Committee on October 14th to review the questions featuring two 
of the witnesses we have before us: Dr. Matthew Goldberg of the 
Congressional Budget Office (CBO), Stephen Daggett of the 
Congressional Research Service (CRS). These two gentlemen 
shared testimony with the Budget Committee about the need for 
continuing steep increases in defense spending to carry out the 
current programs of the Department, increases that may not 
materialize unless the Obama Administration is able to add 
funding to the defense budget projections left to them by the 
Bush Administration at a time of exploding deficits.
    These witnesses are joined today by David Berteau of the 
Center for Strategic and International Studies (CSIS) and Tom 
Donnelly now of the American Enterprise Institute (AEI) and 
formerly of the House Armed Services Committee staff. After 
hearing from them we will have a deeper understanding of the 
implications which rising costs in the area of operations, war 
spending, health care, personnel, acquisition, and major weapon 
systems have for the Department of Defense's future and a 
better appreciation for the challenges that go into building 
the fiscal year 2011 budget.
    I now turn to my friend, the gentleman from California, 
Buck McKeon, for his opening remarks.

 STATEMENT OF HON. HOWARD P. ``BUCK'' MCKEON, A REPRESENTATIVE 
  FROM CALIFORNIA, RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. McKeon. Thank you, Mr. Chairman. Today the committee 
meets to receive testimony on Resourcing the National Defense 
Strategy: Implications of Long Term Defense Budget Trends. I 
would like to thank Chairman Skelton for agreeing to hold this 
hearing on this subject, and I would also like to thank our 
witnesses for being here. Your testimony this morning gives our 
members an opportunity to understand the impact of Secretary 
Gates' April 2009 decision to terminate several major defense 
programs, as well as to help the committee prepare for the 
upcoming defense budget and the 2010 Quadrennial Defense 
Review.
    In May Secretary Gates testified before the House Armed 
Services Committee on his 2010 budget proposal and on his April 
2009 program cuts and emphasized the need to balance the 
Department and focus on the conflicts in Iraq and Afghanistan. 
Our concern then and what remains our concern today is the 
tradeoff that came along with the April 6th announcement. 
Secretary Gates assured the Congress that his program decisions 
were the product of holistic assessment of capabilities, 
requirements, risks, and needs for the purpose of shifting the 
Department in a different direction.
    Today's hearing will help the committee understand the true 
impact of these cuts and whether the April decisions have 
indeed taken the Department in the right direction. Many in the 
Congress have a different perspective of the defense budget and 
believe it is not headed in the right direction. In my view, 
the Secretary's plan for balancing the Department has come at 
too high a cost.
    As Stephen Daggett's testimony lays out, the Department's 
QDR assumes that the base defense budget, not including the 
war-related funding, will be essentially flat for the next five 
years, with growth sufficient only to cover inflation. In other 
words, zero real growth. It is in an environment of fiscal 
restraint that the Department will pay for the cost of 
Secretary Gates' balance by moving $60 billion over the next 
five years from within the Department to pay for programs 
supporting current operations.
    Equally alarming is that as the defense budget remains 
flat, military personnel costs and operation and maintenance 
costs will consume an increasingly larger share of the budget. 
This does not include the cost of other big ticket items that 
will command more defense dollars, such as the war supplemental 
costs that will migrate to the base budget or the price of 
resetting the force as our forces return home from theater.
    The pressures on the defense budget that I have just 
described warrant in my view, a higher top line. When one 
considers the current threat environment and some alarming gaps 
in our capability, the need for more dollars going to defense 
becomes critical. As we saw with the April cuts, a leaner 
budget resulted in changes to longstanding assumptions about 
the capabilities needed to hedge against the risks we face.
    Thank you. I yield back.
    The Chairman. I thank the gentleman. We have Dr. Matthew 
Goldberg, please.

 STATEMENT OF DR. MATTHEW GOLDBERG, DEPUTY ASSISTANT DIRECTOR, 
                  CONGRESSIONAL BUDGET OFFICE

    Dr. Goldberg. Thank you, Mr. Chairman, Mr. McKeon, and 
other distinguished members of the panel. It is my pleasure to 
be here today to talk about CBO's analysis of the 2010 defense 
budget. As you probably know, over the past seven years we have 
taken a look at the defense budget, and ordinarily we have 
access to the FYDP, the Future Years Defense Program, which 
goes out another five years, and we form a projection, which is 
to say if all the programs and all the funding and all the 
force structure implications in the budget in the FYDP were to 
be fully funded and implemented over that six-year period, what 
we would project out is for another roughly 12 years. Based on 
that momentum of those programs and plans and policies how much 
would it take to sustain them, sustain those decisions in the 
current budget and FYDP.
    Of course this year we did not have the FYDP. We were 
working off the 2010 budget and related materials, Secretary 
Gates' various announcements which we studied, as I am sure you 
did, Mr. Chairman.
    The 2010 request, putting aside for a moment the overseas 
contingency operations, the 2010 request was for $534 billion 
in total obligational authority. We have projected that to 
sustain the programs of record that are reflected in that 
request it would actually cost $567 billion on average between 
2011 and 2028. In other words, there would be a ramp-up just 
due to the momentum of sustaining the programs that are in the 
2010 budget.
    There are various reasons for this. One is the continued 
growth in pay and benefits for both military and civilian 
personnel. Even the pay raises that are indexed to the 
employment cost index, the ECI, represent a real increase in 
pay relative to inflation. In other words, the real pay raises 
are built into the budget and we expect those to continue.
    In addition, we have observed that systems as they age have 
higher costs of operations and maintenance, and we are also 
expecting that the newer systems that replace them will 
probably have costs at least as high for operations and 
maintenance.
    So all these factors contribute to the increase that we 
foresee.
    In addition, of course there is the overseas contingency 
operations (OCOs). The Department requested $130 billion for 
2010. We have not done any analysis beyond that point of what 
would happen in light of the proposed increases in troop levels 
in Afghanistan. But what we have is sort of a steady state 
number. If U.S. military presence worldwide were to decline to 
30,000 in 2013, the case we looked at, not specifying whether 
those troops would be in Iraq or Afghanistan, being agnostic 
about the locations, but declining to 30,000 would require $20 
billion in 2010 dollars every year to sustain that level of 
forces overseas.
    We also looked at other reasons why the costs could be 
higher, higher than they are in our base projections. I already 
indicated medical inflation has been higher in the Department 
of Defense than both the Department and analysts have 
anticipated. If that continues, if pay raises above the 
employment cost index continue for another five years, and if 
the cost of procuring weapons systems continues to grow as they 
have in the past, then we have a higher estimate, including 
what we called unbudgeted costs, costs that are not reflected 
in the budget, but that may be realized for all of these 
reasons. Costs might be as high as $624 billion on average 
through 2028 if all those things come to pass, or some 17 
percent higher than what was in the 2010 request.
    There is a shifting of funds. There is more money in the 
operation and maintenance and military personnel accounts. We 
see continued growth there because of the pay raises and 
because of the cost to continue supporting weapon systems. But 
there have been declines in the procurement and the Research, 
Development, Test, and Evaluation (RDT&E) accounts, mostly in 
the procurement accounts, in light of various changes that 
Secretary Gates announced in April. For example, the 
cancellation of the Future Combat Systems (FCS), cancellation 
of the second airborne laser, the cancellation of the 
Presidential helicopter, the Air Force combat, search and 
rescue helicopter, and the Multiple Kill Vehicle (MKV). And 
with those with other changes we are projecting that the need 
for procurement funds could actually--by 2020 would be about 
$20 billion less in our current projections than what we were 
projecting last year at this time based on the 2009 FYDP.
    So in other words, we see long-term implications where if 
all of the changes that Secretary Gates proposed in April were 
made, were carried through, that the procurement budget 
required would be lowered by some $20 billion per year by 2020. 
That is probably an overestimate in that some programs have 
been removed and other programs, successive programs, have not 
yet been formulated which would be put in their place. So in 
reality 2020 is probably an upper bound, but we expect to see 
that if current plans will continue that the amount of funds 
required for procurement would probably be less and there would 
be migration into the operation and maintenance and military 
personnel accounts.
    I think I am out of time, Mr. Chairman. So I would be happy 
to take your questions when we come around.
    [The prepared statement of Dr. Goldberg can be found in the 
Appendix on page 41.]
    The Chairman. Stephen Daggett, welcome.

STATEMENT OF STEPHEN DAGGETT, SPECIALIST IN DEFENSE POLICY AND 
            BUDGETS, CONGRESSIONAL RESEARCH SERVICE

    Mr. Daggett. Mr. Chairman, Mr. McKeon, members of the 
committee, thanks very much for inviting me to testify this 
morning. Mr. Skelton, it is particularly good to see you. It 
has been some time since we had a chance to talk in your 
office. I look forward to doing that sometime again.
    My testimony really focuses on four issues. First of all, 
by most accounts the defense budget is relatively robust right 
now. It is about, if you include war-related funding, it is 
about 20 percent higher than the peak of spending in the 1980s, 
which in turn was the peak of spending in the post-Cold War 
world except for the very highest level of spending during the 
Korean War.
    At the same time many of the leaders in the military 
services are warning about the need to make very difficult 
tradeoffs within the budget. So the question I addressed is why 
the discrepancy? Why on the one hand by most historical 
standards does the budget seem so high and yet we face these 
difficult choices? And I provided a number of answers to it.
    The basic answer is that the cost of defense has climbed 
even more rapidly than the budget itself, and there are six 
factors I have identified that have increased the cost of 
defense.
    First is the increase in cost in military personnel. By my 
account, an average service member is 45 percent more expensive 
in 2009 than in fiscal year 1998. That is above inflation, 
after adjusting for inflation.
    Second is the trend in operations and maintenance cost. 
Operation and maintenance per active duty troop continues to 
grow at a rate between two and three percent per year above 
base inflation, which is a trend, by the way, that is starkly 
at odds with cost of doing business in the civilian sector of 
the economy and which most companies have reined in costs have 
lower costs of operation rather than higher.
    A third factor is apparently accelerating increases in cost 
from one generation of new weapons to another. We always expect 
that the next generation of weapons will cost somewhat more 
than earlier generations, but at a certain point there has to 
be a limit to how far you can go in that direction. You can't 
afford to buy weapons and replace the force on a one-for-one 
basis with a new system. Many new weapon systems appear to be 
dramatically more expensive than their predecessors.
    Fourth factor, and I identify it as an independent factor 
driving up the cost of acquisition, is we tend to 
systematically underestimate the cost of new programs, 
resulting in unplanned cost growth and scheduled delays. Forty-
four percent of new weapons programs, according to Government 
Accountability Office, have had a 25 percent or larger increase 
in estimated costs above initial projections. So we are not 
doing very well at estimating costs of major programs.
    Total cost growth in most of the major defense acquisition 
programs in 2007 amounted to about $300 billion across the 
board, which a full year and a half worth of weapons 
procurement.
    A fifth factor is we have increased demands on ground 
forces. We have increased the size of the Navy and Marine Corps 
by 92,000 troops at a cost of $12 to $15 billion per year. In 
addition, we have new equipment requirements that are the 
result of war for transportation equipment, for communications 
equipment, for force protection equipment.
    And finally we are preparing for a much broader range of 
challenges in the international security environment, ranging 
from traditional to disruptive to catastrophic threats to the 
homeland to irregular warfare, and we are trying to figure out 
ways to adjust to all of these.
    Second major point is in April Secretary Gates announced a 
number of changes in major weapons programs. How will that 
affect this disconnect between the growing cost of programs and 
the budget? And my answer is it will help to a certain degree. 
It would help to a larger degree to the extent that these 
changes represent changes in policy that will last over quite a 
long period of time. We seem to have turned away from 
maximizing the capabilities of systems from multi-role missions 
and toward systems that will cost less because they are aimed 
at a narrower range of missions. We seem to have also turned in 
the direction in the acquisition phase, in the development 
phase of insisting that at milestone review processes we are 
sure that the technology that we are integrating into new 
systems will actually be available at cost and on the kind of 
schedule that is planned initially.
    Fourth point that I addressed, and I will just skip over it 
very briefly but we can talk about it more in Q and A, is the 
deficit situation that we face now one is one in the past that 
has led to constraints on the defense budget over the long 
term. If the defense budget were not to grow over the next 10 
years and we had the kind of growth we had in military 
personnel and Operations and Maintenance (O&M) accounts in 
recent years, that would squeeze out funding for acquisitions 
so there would not be enough money left by the end of the 
decade to support a very robust modernization program at all.
    Finally, this QDR it seems to me is likely to come up with 
a number of new requirements for major systems. A number of 
those changes could end up being quite expensive. I gave one 
example of anti-access strategies, which could lead to 
requirements for different kinds of delivery vehicles to 
deliver power ashore from forces offshore. And the effort to 
cope with these kinds of new challenges it seems to me it is 
not necessarily a sidebar to the budget. It could be a 
significant budget driver in future years.
    With that, I will be glad to leave it to questions and 
answers. Thanks.
    [The prepared statement of Mr. Daggett can be found in the 
Appendix on page 65.]
    The Chairman. Thank you very much, Mr. Daggett.
    Mr. Berteau.

  STATEMENT OF DAVID J. BERTEAU, DIRECTOR, DEFENSE INDUSTRIAL 
   INITIATIVES GROUP, CENTER FOR STRATEGIC AND INTERNATIONAL 
                            STUDIES

    Mr. Berteau. Thank you, Mr. Chairman. I had to find the 
button here.
    It is a great privilege to appear before you today, and I 
appreciate the opportunity. My statement actually doesn't have 
the same level of precision of data as the two colleagues who 
preceded me here today, because I knew that theirs would, and I 
basically used the CBO data and the CRS data for much of our 
analysis at CSIS anyway. So we took advantage of that.
    What my statement does is look at some of the key issues 
and at the process, and I would like to summarize it now and 
ask the full statement be submitted in the record.
    The Pentagon's biggest problem today is that they are 
facing probably the most significant set of challenges in at 
least the last 20 years, perhaps a good bit longer than that, 
and yet they are not recognizing that that is the situation 
that they are in. We have had more money than we have had ever 
over the last 10 years, and yet our shortfalls are actually 
bigger than they have ever been as well, or at least in 
relevant memory. I think the Korean War probably is an 
exception, but it goes back too far to be relevant today.
    And I think the saddest thing and the most difficult thing 
for this committee to wrestle with is they have quit keeping 
score. There is no longer a process, a rigorous process, inside 
the Pentagon that tries to capture what its requirements are 
and what its shortfalls are.
    Mr. Goldberg mentioned the absence of a FYDP with the 
fiscal year 2010 budget, and that is actually true, and quite 
disgraceful. But the reality is there has not been a fiscally 
disciplined FYDP put together by the Pentagon since before 
September 11, 2001. The existence of supplementals has made it 
way too easy to fix a problem by putting it into the 
supplementals and funding it there. And so there hasn't been a 
disciplined attempt to figure out what the real defense program 
is what it would cost, what the shortfalls are, how do you 
prioritize across the shortfalls, how do you make the tradeoffs 
necessary, and then how you defend them to the Congress so the 
Congress either accepts them or makes the adjustments necessary 
that you all would seem to be in place.
    It seems to me the Pentagon should be teeing up these 
issues today and laying out those options, and they are not 
doing that. So the challenge this committee has is how do you 
assess the options and determine the priorities without the 
data that you would get from a physically disciplined FYDP, 
without the information on acquisitions systems necessary from 
the selected acquisition reports.
    Well, maybe the QDR will fix this. That is kind of the 
idea, that is why we do a QDR. The impact of the non-disclosure 
agreements of course has made it more difficult for those of us 
who think we like to watch what the Pentagon is doing and make 
intelligent commentary on it. It has been a little more 
difficult for us because we don't actually get much visibility 
than what is going on. There is nothing wrong with that as long 
as we had some comfort and assurance that what is going on is 
going to produce a QDR that will answer the kind of questions 
that we raise here this morning. But I am afraid that much of 
what we have seen indicates a lack of a willingness to wrestle 
with those questions at the broad level. So I think those who 
believe that the QDR will have all the answers may end up being 
sorely disappointed.
    There are a lot of unspoken risks as well that we are 
addressing today, I suspect we will come back to them during 
our questions, in addition to the issues facing DOD, there are 
of course a number of significant issues facing the industrial 
base as well, and I would be happy to touch on those as we go 
through the questions.
    I will yield back the balance of my time, Mr. Chairman, and 
look forward to your questions.
    [The prepared statement of Mr. Berteau can be found in the 
Appendix on page 93.]
    The Chairman. Thank you very much.
    Tom Donnelly.

  STATEMENT OF THOMAS DONNELLY, DIRECTOR, CENTER FOR DEFENSE 
             STUDIES, AMERICAN ENTERPRISE INSTITUTE

    Mr. Donnelly. Thank you, Mr. Chairman, Mr. McKeon, and 
members of the committee. Mr. Skeleton, you mentioned that I 
used to work for this committee. That still remains the high 
point of my resume. So I am very pleased to come back and talk 
to my old bosses.
    I have three questions that I would like to pose and offer 
at least the sketch of an answer to in talking about long-term 
budget trends. I want to talk not only about defense budget 
trends per se, but I also think it is essential to talk about 
trends in Federal budgeting and spending overall, because if 
there is one thing that really constrains our defense choices 
going forward, and I would certainly agree with David that we 
are at a crossroads that we haven't been at in a long time, it 
is not so much the growth of the debt or the deficit per se, 
although because that has mushroomed that is a larger factor 
than it has been in the past. But it is other forms of 
particularly mandatory spending that are depriving the Defense 
Department of the money it needs to fund its programs.
    Finally, we have to ask the question that the QDR is 
supposed to answer, and that is how much is enough to meet the 
strategy, which is also the title of this hearing. And before I 
begin one more, I very much want to commend the committee for 
insisting upon setting up at least a partially independent 
panel to review the QDR's work. The Congress has an 
institutional responsibility. Those of us who were on the 
committee staff were constantly pounded by Article 1, Section 8 
of the Constitution, so I applaud the committee for making that 
happen and hope that process turns out to be a fruitful one.
    To turn to my questions, I also need to use a slightly 
different set of metrics in order to measure things across 
time. I think that using the measurement of percentages of 
gross domestic product are by far the best way to measure the 
amount of sacrifice or the opportunity costs, if you will, to 
the economy of defense spending over the time. And actually if 
you look at the numbers through those lenses, you see exactly 
the opposite picture from what my colleagues have portrayed.
    Just very quickly to summarize and to distinguish, as we 
have learned to do in recent years between the baseline defense 
budget, the cost of raising, training and equipping the forces, 
and the wartime costs that we paid through supplementals; that 
is, the cost of actually employing the force, you get again 
quite a different picture. And in that regard, the costs of our 
defense have really gone down significantly over the post-World 
War II period. That would be the period where the United States 
has been the primary guarantor of the international security 
system.
    In the 1950s our baseline posture cost us about nine 
percentage gross domestic product (GDP). That fell in the 1960s 
to seven and a half percent, and fell even in the 1980s, even 
allowing for the Reagan buildup, to about five or six percent. 
And in the 1990s it fell even further to an average of between 
three and a half and four percent. And if we look at the 
Administration's budget plans going forward, it is going very 
quickly to fall to three percent and remain there through the 
projected 10 years of the budget plan that the Administration 
put out earlier this year.
    It is true also that the cost of our wars has gone down. 
Korea cost about an extra three percent of GDP to fight, 
Vietnam about two percent, and our total combined global war on 
terror or long war, whatever term of art you want to use to 
capture the Iraq and Afghanistan experience, has cost on 
average about one percent of GDP rising very slightly to about 
one point two percent in recent years in part because of slower 
economic growth and the surge in Iraq. And if we project that 
forward, we will wait and see what the Afghanistan decision is.
    So overall the burden to the American economy of military--
of both raising the force and deploying the force has fallen 
significantly over the course of the last 60 years.
    What has happened inside the pie of the budget? Well, my 
colleagues have talked a lot about the growth in personnel 
costs and health care costs in particular. So I won't linger on 
those, but I just want to put that in--take three snapshots of 
how that has changed things.
    In the Reagan years, at the height of the Reagan buildup, 
and of course we are still sort of living off the investments 
of those years, the Pentagon spent about one point four two 
dollars in procurement for every dollar it spent on personnel. 
During the 1990s after the post-Cold War drawdown and for 
reasons that were related to the desire to preserve the old 
volunteer force, the situation was almost entirely reversed. 
The Clinton Administration say in 1998 spent about one point 
five five dollars on personnel for every dollar that it spent 
on procurement. So the ratios have been essentially inverted. 
And even in recent years and with some of the investments that 
the Bush Administration made, that ratio has only been reduced 
to one dollar for procurement to one point two two dollars for 
personnel. As my colleagues suggested, I think that proportion 
is only likely to again rise if current trends continue.
    I mentioned that I wanted to talk a bit about the rest of 
the picture and in particular talk about the portion of defense 
as an element of Federal spending. I have got a lot of 
statistics on that in my testimony, but let me just kind of use 
the projections of the Administration, take snapshots again 
through time to try to suggest the relative balance of these 
things.
    According to the numbers put out by the Office of 
Management and Budget (OMB) earlier this year for 2016, Federal 
spending total will be about 22.4 percent of GDP. Of course the 
amount of borrowing projected over those years will increase 
the total debt to about 70 percent of GDP. So even as 
entitlement spending grows, so will debt service, but to the 
point where all of those mandatory expenditures will themselves 
account for 22 percent of GDP. So before the Congress 
authorizes or appropriates a single penny, basically all the 
money will be gone. And domestic discretionary programs are 
supposed to grow to about four point two percent of GDP and 
defense is held to three percent of GDP.
    The question I want to leave you with is whether this is 
adequate, as you were asking in the title of the hearing and as 
I am sure we will get to in the Q and A session, whether this 
is sufficient to meet our strategic goals. The United States 
remains the guarantor of international security of the 
remarkably peaceful and prosperous and liberal international 
system that now prevails, although it is under attack and under 
threat from many quarters. And the question that I think needs 
to be asked of the QDR is not whether the risks are balanced, 
you can always balance risk, the question is whether the level 
of risk is adequate or is too dangerous or is a threat to the 
entire system going forward.
    Thank you for your time.
    [The prepared statement of Mr. Donnelly can be found in the 
Appendix on page 101.]
    The Chairman. Thank you, Mr. Donnelly.
    Mr. Daggett, get your crystal ball out. Tell us in your 
opinion, as succinctly as possible, of what does today's 
National Defense Strategy consist and what should the National 
Defense Strategy consist of tomorrow?
    Not an easy question.
    Mr. Daggett. Not an easy question.
    The Chairman. You are fully equipped to answer it.
    Mr. Daggett. Well, there has been a bit of a shift in 
National Defense Strategy in recent years with more of a focus 
on preparing for irregular warfare. The big change in strategy 
has been that. The increase in size of ground forces in 
particular in order to provide a rotation base for deployment 
of a pretty substantial number of forces abroad in contingency 
operations like that in Iraq and Afghanistan.
    Beyond that I see a little bit of a shift in defense 
strategy in the direction of maritime forces, and part of that 
is the shift in focus away from Europe, which would have been 
primarily a ground theater of operations, and to the Pacific, 
which is mainly maritime.
    The two have created--the fact that we shifted in two 
directions, one which has led to a substantial increase in 
ground forces and the other which emphasizes and reemphasizes 
naval forces and also to a degree long range power projection 
forces in the Air Force, means we are really committed to 
adding capability in pretty much every dimension in the force.
    So it hasn't been simply a matter of making tradeoffs 
between one set of priorities and another. We have tried to add 
capabilities pretty much across the board, and that is one 
reason why I think the budget has been driven up in the 
direction it has been driven, why we see shortfalls. We are 
trying to meet a much broader range of requirements. And I see 
new requirements emerging in the future, particularly to cope 
with what is called hybrid warfare, and that is that even 
enemies at the lower end of the spectrum of conflict will be 
equipped with pretty high-technology weaponry like Hezbollah 
and Hamas, including anti-ship cruise missiles and more precise 
munitions of other kinds and also a shift in the direction of 
what the Administration terms high-end asymmetric warfare, and 
that is the notion that future foes of whatever capability will 
try to challenge the United States in areas in which we are 
relatively weak, and that means to me even potentially attacks 
on the homeland, attacks on communication systems, as well as 
efforts to drive U.S. power projection forces further offshore.
    So all of these to me are driving requirements up, and it 
becomes more difficult to make choices between various systems. 
You know, I also think that you are correct, that we are going 
to have to cope with budget constraints, we are going to have 
to figure out how to set priorities in a situation in which 
there is not enough money to do all of the above, and as 
evidence of that let me just make a final kind of closing 
point, and that is that to me the big change that is going on 
in the international security environment doesn't have to do 
with military forces. It has do with financial power, and the 
financial shifts are all away from the United States and toward 
Asia. The projection used to be that China would have a larger 
economy than the United States in 40 years or so. Now it is 
down to about 30 years or so after this last financial crisis, 
and that has to affect the dynamic of U.S. planning.
    In the past we could assume that we could build up military 
capabilities to such a degree that it would dissuade potential 
future foes from trying to challenge us in building up military 
capabilities. I am not sure how long that is doable given the 
shift of financial resources toward the East. So it puts an 
emphasis to me in building cooperative relations with potential 
future foes to the extent that we can in areas like protecting 
the global economy, including maritime, but also cyberspace and 
things of that sort.
    That is a beginning of an answer to your question.
    The Chairman. Thank you very much. A quick follow-up.
    In recent days I have heard the phrase used Pax Americana, 
and I think aptly so. When in your crystal ball will that begin 
to shift away from us, if it ever does?
    Mr. Daggett. I think we are in the midst of a shift away 
from American military predominance towards something 
different. I mean we are still for several years clearly going 
to be technologically predominant in military capabilities. How 
long we will have the ability to do all of the above, to 
project power of every kind--of ground forces, maritime forces, 
air forces--I don't know, but it is eroding slowly over time, 
and the more we can we can rely, it seems to me, on allies to 
do a part of that work for us, the better off we will be in the 
long term, and the more we can avoid conflict the better we 
will be in the long term.
    I don't know if that is a precise answer to your question, 
but I think--you know, the days of the American century were 
really the last 50 years of the 20th century, and the 21st 
century is turning slowly into something different, which is 
much more balance in the international security environment. 
The U.S. can still shape that, and it is still the main power 
shaping what the global environment will look like. So you can 
call it a Pax Americana for the foreseeable future just in that 
way, but our shaping in the environment has to be in a 
direction that I think leads to more cooperation with allies 
and an effort to build kind of an agreement with rules of the 
road with potential future--what we have regarded in past as 
potentially future foes like China.
    The Chairman. Thank you. Mr. McKeon.
    Mr. McKeon. Thank you, Mr. Chairman.
    In meetings I have had with defense contractors recently 
they have had a great concern about our industrial base. Would 
you please, each of you, describe what you would see as the 
impact on the industrial base as regard to the recent cuts in 
the defense budget?
    Dr. Goldberg. If you would like me to start, sir. Certainly 
the procurement cuts that Secretary Gates has announced and 
that are starting to be built into 2010 budget and presumably 
the 2011 budget will have an effect on defense contractors.
    I should point out a few things, that some of the programs 
that have been cut will inevitably be followed by some other 
program that has not yet been formulated. For example, the 
Presidential helicopter, there will be some sort of platform. 
The Future Combat System, the Secretary in his announcement 
left open the possibility of reformulating the ground vehicles 
program, but in a way different from the program inherited from 
the previous Administration.
    So it is not as though we are going to zero in on all the 
programs that we cut.
    I should also point out that the contractor base, as I am 
sure you know, is much more than the big 5 or 10 Lockheed 
Martin, Northrop Grumman, Boeing, et cetera. I looked up some 
numbers in 2008. The Department of Defense contracted a total 
of $390 billion. Not only is most of the procurement budget and 
much of the RDT&E budget contracted, but much of what goes out 
of the operations and maintenance budget is contracted, six 
billion a year to Logistics Civil Augmentation Program (LOGCAP) 
to support the troops in Iraq and increasingly in Afghanistan. 
Many other contractors do base construction, military 
construction, support of the bases, provide security on bases 
here in the U.S., Information Technology (IT) support. Every 
time you walk into a base or Pentagon or visit a base you see 
contractors.
    So I think taking a broader view, the Department is very 
reliant on contractors in a way that is probably more permanent 
and sustainable than just looking at the big, big procurement 
programs that have been cut in the 2010 budget.
    Mr. Daggett. I think I would begin to address the question 
by looking at different elements of the industrial base. One is 
look at aircraft in general. There are now really only two 
major--in the long term there are really two major production 
lines for fighter aircraft, F-18s and F-35s. The defense 
industry is therefore understandably concerned that they will 
lose the capacity to develop new systems, because the kind of 
opportunity for design teams to develop new kinds of fighter 
aircraft is diminishing. I think that is true in that area. In 
other areas it is less true.
    I see, given the growth of requirements to deal with high-
end asymmetric threats and things of that sort, increasing 
demand for new designs of advanced systems for Command, 
Control, Communications, Computers, Intelligence, Surveillance 
and Reconnaissance (C4ISR) and lots of other areas to some 
degree offsetting those kinds of changes.
    On shipbuilding in general it has long been the case that 
the U.S. shipbuilding industry depends pretty much strictly on 
military production. The changes that Secretary Gates announced 
in Navy shipbuilding won't in my view lead to any substantial 
decline in the budget for Navy ships; it will lead to it being 
focused on a smaller number of ship designs and actually I 
think that could lead to some cooperative effort with the 
defense industry to improve the efficiency of shipbuilding 
production and maybe increase numbers by doing it that way.
    In other areas the industrial base is not as robust. 
Helicopters, for example, most recent helicopter programs that 
we have had have been based on European design helicopter 
frames with electronics built by the United States, reflects 
the fact that the Europeans have been building more helicopters 
for a long time for commercial as well as other purposes. 
Electronics and things of that sort, again I see a relatively 
high demand, if there is a shift, it will be away from 
platforms and towards C4ISR in the military. So that may be a 
relatively robust area in the future.
    To some degree it depends on the top line. If as I said the 
Defense budget is frozen for the next 10 years, then that leads 
to a decline in acquisition which I think would make it very 
difficult for defense industry to sustain the kind of design 
capabilities that we have looked to it for in the past. I don't 
necessarily foresee that happening. But, you know, instead we 
would look at, if necessary, cuts in the size of the force and 
certainly increases in the top line to sustain some level of 
defense acquisition, but that is an outside possibility that 
there could be simply a decline in the industrial base.
    Mr. Berteau. Mr. McKeon, I think there are two parts to 
your question, one which is specifically what you asked, which 
is what is the impact. The second implied part is what can we 
do about it, because ultimately that is the real challenge. The 
industrial base has had a lot of money flowing into it in the 
last 10 years. Procurement for hardware, procurement and 
research and development (R&D) for hardware is up about 60 
percent since 2001. Contracts for services, and there is a 
whole services industrial base which I think we have to keep 
our eyes on as well, has doubled in that period of time.
    But the future doesn't look nearly as good, and I think 
from the point of view from the hardware side, the procurement 
and R&D, all of the testimony this morning is consistent with 
our analysis, which is that will be shrinking both potentially 
in real terms and certainly in relative terms to the 
requirement.
    It is also getting harder and harder for defense to use 
commercial variants. In theory it would be you would save money 
and time by starting with a commercial platform and then 
militarizing that platform. The study we did as part of a 
defense science board task force that I was on showed that it 
is pretty hard to find cases where it did actually save us time 
and money. So our ability as a nation to use the power of the 
commercial industry, both here and around the world, has been 
diminished over time.
    There is a question of what do we do about it. Congress has 
a clear law in place that says DOD needs to consider the 
industrial base impact of decisions on major weapon systems. 
Consider, of course, is a very soft word here, and in our study 
I think we have yet to find in recent years any single decision 
which was changed as a result of the consideration of the 
industrial base. In other words, the documentation basically 
said we have made the decision, how do we line up the 
industrial base impact to be consistent with that decision?
    The bigger challenge is it doesn't look at the whole 
industrial base; it just looks at the piece necessary for that 
particular weapon system. And you can always define the 
universe in such a way, you say we will have enough, we will be 
able to get what we need, materials, technology, skills, et 
cetera. Over the long run, though, nobody has taken a look at 
the comprehensive impact and what it will do for the industrial 
base as a whole.
    Mr. Daggett noted that we are down in many cases to a 
single provider for an awful lot of systems and subsystems. And 
yet we all know that only when you have good competition do you 
not only get better price control and schedule control but you 
get better technology development, because that is where the 
technology comes from is a competitive environment.
    If we are at the point where the only place we can get 
competition is by going global, then that raises a whole set of 
new issues. And I think DOD still operates under the idea that 
95 percent of all good new ideas are being developed in 
America. That may be true in the very narrow defense part of 
the universe that Defense Advanced Research Projects Agency 
(DARPA) looks at, for instance, but I don't think it is true in 
terms of where global technology is going at all. I don't think 
we have a lock on new technology anymore. And so that delicate 
balance of how do you balance competition, domestic protection, 
with globalization is one that hasn't been wrestled with.
    I think all of those are critical questions.
    Mr. Donnelly. I agree with essentially everything that my 
colleagues have said, but just to gild the lily a little bit, 
it is worth remembering that there was a significant round of 
industrial consolidation in the 1990s after the end of the Cold 
War, but that actually didn't go as far as some people wanted 
to make it go, because people were reluctant to sort of take 
apart the arsenal of democracy on the chance that we would need 
to use that again. It has been about 15 years since that 
happened, and the fundamental imbalance between the structure 
of the industry and the amount of work that the industry has to 
do is leading us I think to the situation that we see before us 
and inevitably another round of industrial consolidation.
    We have kept two nuclear submarine shipyards open because 
they are regarded as national treasures, but we have never had 
enough work to justify those two yards and have come up with 
all kinds of Rube Goldbergesque arrangements to keep both--some 
work going into both yards.
    The further canary in the coal mine here is the question of 
the industrial workforce, which has a huge demographic hole in 
its middle. You have the people who are now relatively senior 
who have spent their careers in the defense industry reaching 
the end of their careers and because of the financial 
constraints there was essentially a hiring freeze, or close to 
it, during those late 1990s or early 2000 years. So what you 
have is a very immature workforce, if you will, at the bottom 
and a very small, the kind of, you know, ballistic missile 
pocket protector generation that is reaching the end of its 
career at the top end and very little experienced middle 
management in between. And there are bound to be consequences 
of that going forward that will probably lead to further snafus 
in program management and the inability particularly to 
integrate large-scale efforts, even if they involve as many 
electronics, as they do, platforms.
    Mr. McKeon. Thank you, Mr. Chairman.
    The Chairman. Thank you, Mr. McKeon.
    We are under the five-minute rule, Mr. Ortiz.
    Mr. Ortiz. Thank you, Mr. Chairman. I can remember during 
the first Bush I war with Iraq that we were having problems 
with our allies because they could not really help us, because 
we were so advanced technology-wise that we didn't get much 
help from them. Sometimes I wonder whether we are spending a 
lot of money on weapons that we don't need to fight a war with. 
Maybe I am wrong, this is only my personal belief. But then we 
talk about how the benefits to our soldiers and pay has gone 
up. But what bothers me is that when you look at the big 
picture and you look at the two theaters, war theaters in Iraq 
and Afghanistan, when you have got more contractors than you 
have troops, that bothers me.
    And I know that this has created a problem because some of 
the soldiers that we are trying to get out--their time ended, 
they spent time and they were getting out and here comes the 
backdoor draft and they wanted to come out because they were 
going to get a job with the contractors and they were going to 
get paid $130,000 or $140,000 a year. For the specialists they 
were making $45,000. I don't know. And then we have all this 
equipment that has been destroyed. And when you go and you 
visit the National Guard units and the reserve units you will 
find that most of the equipment that they had before the war 
has been left behind in Iraq or Afghanistan. And we have to 
realize that they fight or they answer to two masters, the 
Federal Government and the states.
    So looking at this problem that I have mentioned, the 
contractors, the pay increases, the weapons that maybe we don't 
need, how can we grasp it and bring it in, rein it in so that 
we can reduce some money? I throw these questions to you, and 
maybe I am wrong, but I see a lot of things that need to be 
done, but how do we rein them in to do what is best for our 
troops and for the taxpayer?
    And now I leave it in good hands.
    Dr. Goldberg. Mr. Ortiz, a very interesting set of problems 
that you raise and I have a few comments coming from a couple 
of different directions. One argument that we have made at CBO 
in terms of contractors may actually be a cheaper solution than 
increasing the force structure for a couple of reasons.
    One is that many of the contractors who hired in the 
theater are either host country nationals, Iraqis, or third 
country nationals who get paid a lot less than the American 
expatriates, the American veterans, who hired at some of the 
high salaries that you mentioned. A lot of the third country 
nationals are paid considerably less because they don't have 
the options that we have here.
    And another thing about contractors is--the advantage of 
contractors is they are temporary. When you don't need them, 
terminate the contract. Whereas if we wanted to have our U.S. 
Army units perform a lot of those functions, we would have to 
build presumably permanent end strength and we have to provide 
dwell times for each battalion that we deploy to the theater. 
We have a battalion or two here in garrison recuperating. So 
you multiply the cost of increasing force structure of two or 
three when you consider dwell time.
    So contractors in many cases can be an effective solution. 
You don't have to maintain a garrison here, you don't have to 
maintain a rotation base, and when the war is over you just end 
the contract and that is it.
    As far as the equipment, that is an important concern, the 
equipment that is been worn out, and we have done some 
estimates early in the year. Equipment reconstitution costs; 
that is, replacing, repairing the equipment that was worn out, 
damaged, lost, during the war will probably take an extra two 
years, even after the conflict in Iraq ends. So we see costs 
going out as late as 2013 to get the force, including the 
National Guard, their equipment back to the state where they 
were again ready to perform all their missions.
    Mr. Daggett. I will just make one point echoing that. We 
have a couple of reports that have looked at new information 
that DOD is providing recently on use of contractors, 
specifically in Iraq and in Afghanistan. As Matt said the bulk 
of the contractors, particularly in Afghanistan are third 
country nationals, neither U.S. nor Afghan, and they perform a 
lot of the basic functions.
    So use of contractors now appears to be built into the way 
in which the U.S. deploys forces abroad for good or real, but a 
lot of it is the people who get attention are contractors for 
security functions and things of that sort. The bulk of the 
contractors are not for those purposes. They are for food 
services and transportation and things of that nature, which 
otherwise would be more expensive if they were handled by U.S. 
military personnel.
    Mr. Ortiz. You know, and the numbers I am giving you from 
what I understand are not contractors from those countries.
    Mr. Daggett. Yes.
    Mr. Ortiz. I am talking American contractors who are paid 
hundreds of thousands of dollars.
    Mr. Daggett. Well, they are contracted by American firms 
generally, but the people they hire for most of these 
activities, again food services and transportation, very 
undramatic kinds of things, are mainly nationals of other 
countries. The high-profile contractors really are Blackwater 
and things of that sort. They have gotten the bulk of 
attention. Those people to tend to be considerably higher paid, 
Special Forces, American Special Forces personnel have been 
leaving the force to join those kinds of contractors, and that 
has presented a problem in retention in Special Forces, yes, 
but that is a relatively smaller part of contractor pool.
    Mr. Ortiz. My time is up.
    The Chairman. I thank the gentleman.
    Mr. Bartlett.
    Mr. Bartlett. Thank you very much, I have three quick 
concerns. Let me express them.
    Mr. Daggett, you mentioned the asymmetric warfare that we 
are involved in and that we will be attacked where we are weak 
and perhaps here in the homeland. I would suggest that one of 
our greatest vulnerabilities, not just in the homeland but our 
military, is our susceptibility to--our vulnerability to 
electromagnetic pulse (EMP). We may avoid that, sir, but what 
we may not avoid is a major solar storm of the Carrington 
magnitude. A high official in Federal Energy Regulatory 
Commission (FERC) told me that if that happened our grid would 
come down, cascading bring down some of the major transformers, 
it would be perhaps several years before the grid was back up. 
I asked him the consequences of that. He said probably 80 
percent of our population would die. I see no activity on the 
part of either the military or the Homeland Security that 
addresses this enormous threat to life as we know it.
    Secondly, Mr. Berteau, you mentioned unaddressed risks, I 
read just recently China developed and is now fielding an anti-
ship missile. If that is a cruise missile, supersonic, we have 
no defense against that. We would have to stand off 1,200 miles 
from any land where an enemy had that kind of a weapon.
    I see no indication that we are addressing that and 
reordering our military for the future to that reality, which 
is here and will increase.
    And thirdly, Mr. Donnelly, you mentioned that our military 
expenditure today is less in terms of GDP than it has ever 
been. I would suggest there is no shortage of money. What there 
is a shortage of is our ability to convince the American people 
that we need more money. The American people will support any 
level of funding of the military which is necessary to address 
our national security interests.
    Am I wrong in having these concerns?
    Mr. Daggett. On EMP, I know that you have been involved in 
a commission that has been studying electromagnetic pulse (EMP) 
issues. I have to say I haven't looked at it as thoroughly as I 
think I probably should. I have taken a look at some--lots of 
different studies of potential future asymmetric threats.
    I discussed one----
    The Chairman. Would you get just a little closer to the 
microphone?
    Mr. Daggett. Yeah. I discussed one set of those challenges 
in the testimony, which is access denial kinds of challenges, 
which I am convinced is an increasing problem for U.S. Naval 
forces. But the United States is beginning to address that. The 
decision to terminate DDG-1000 and use, instead, DDG-51 as a 
basis for blue-water forces reflects, I think, in part a 
decision that it is more difficult to maintain a ship of the 
size of the DDG-1000 in littoral waters given area denial 
strategies by the Chinese and by others than in the past. And 
that can include not just antiship cruise missiles, as you 
mentioned, but also smart mines, even precision-guided 
ballistic missile capabilities and things of that sort, let 
alone small boats with suicide bombers on board.
    So there are a lot of those kinds of challenges. And EMP is 
one of them. But there are a number of other asymmetric 
challenges which we are going to have to cope with in the 
future. And, as I said, I think they could in the future become 
a pretty significant budget driver.
    Mr. Berteau. Mr. Bartlett, let me respond to both your 
first two points there.
    On the vulnerability on the grid, I would urge you as you 
are looking at defense next year also to notice that it used to 
be, 15 years ago, that much of the defense infrastructure in 
the U.S. had its own independent power sources. Today, that is 
no longer true. We have now privatized, and DOD is largely 
dependent on the commercial grid.
    Mr. Bartlett. Sir, we have gone in the wrong direction, 
haven't we? The military ought to be able to island itself. We 
have a bunch of our electric production which cannot do a black 
start; it has got to have electricity to start if it if goes 
down. We will now be incapable of that.
    And wouldn't it be a good idea if the military could island 
itself so it could be a starter for this?
    Mr. Berteau. And I suspect there is a third option there 
from a technology point of view that ought to be looked at.
    From the unaddressed risk things, particularly the one you 
raised--and we can't talk about much about it here in an open 
session. But I actually think the QDR has done a better job on 
these sets of risks than in many other areas, and I suspect 
that you will be able to see some of the results of that when 
the QDR is released.
    Mr. Donnelly. Mr. Bartlett, apropos of your last question, 
I agree wholeheartedly. The willingness of the American people 
to fund an adequate defense is quite remarkable.
    Just to pick a rather--almost unhappy, but I think 
illustrative example, the Congress, and even including many 
Members who disagreed with President Bush's war policy in Iraq, 
fully funded essentially every request to support the forces in 
the field that was made, over dozens and dozens of votes.
    So if there is strong and articulate leadership on the part 
of our politicians, I am quite convinced that Americans will do 
what is necessary, particularly when they rightly and properly 
understand that the cost isn't nearly as great as some measures 
make it appear to be, and that the costs of not doing so are as 
dire as they obviously are.
    The Chairman. I thank the gentleman.
    Mr. Taylor, the gentleman from Mississippi.
    Mr. Taylor. Thank you, Mr. Chairman.
    And thank you, gentlemen, for being here. Three questions:
    How much a month to run the United States effort in Iraq?
    How much a month to run the United States effort in 
Afghanistan, DOD dollars?
    And lastly, I am looking at your report, and if I have read 
it correctly, you say that about 20 percent of our budget, DOD 
budget, is procurement, 15 is R&D, 35 is O&M, and 25 percent is 
military personnel. I am curious how that tracks historically.
    If we were to go back 10 years, 20 years, 30 years, is that 
about how it has always been, or is one portion of this getting 
out of kilter? And I am particularly interested in rate of 
return for our R&D money. Are we getting what we are paying for 
there?
    So I will open that up to the panel. First is the hard 
numbers on Iraq and Afghanistan, whoever can provide those.
    Dr. Goldberg. Mr. Taylor, I am better prepared to talk 
about Iraq. We did a study recently on the President's plan to 
draw down from Iraq. I would refer you to that study. And we 
are showing that the Administration's plan, which would take 
out about three brigades per month, would total 156 billion to 
complete the operations in Iraq through----
    Mr. Taylor. That wasn't the question, sir.
    The question was how much per month DOD money for the 
United States effort in Iraq and same question for Afghanistan?
    Dr. Goldberg. The monthly burn rate now, we are looking at 
about five billion a month.
    Mr. Taylor. In Iraq?
    Dr. Goldberg. Total Iraq and Afghanistan.
    Mr. Taylor. For both?
    Dr. Goldberg. For both.
    Now, what we have not done yet--because we haven't gotten a 
request, Mr. Taylor--is to look specifically at whether the 
cost of operations in Afghanistan, how they would differ for 
the same troop level, or per troop, from what we see in Iraq. I 
suspect it would be more expensive to conduct operations in 
Afghanistan because of the terrain and the geography, but I 
don't have those numbers. That is something we have not yet 
looked at at CBO.
    Mr. Taylor. Okay. How about the DOD budget pie and the 
percentages that I gave you? How does that track historically 
going back 20, 30 years?
    Dr. Goldberg. The numbers you gave are indeed our numbers. 
And there has been a trend, going back, say, through 1980--I 
have the chart, and it is in our testimony; there was a big 
bulge in procurement in the early 1980s during the Reagan 
years, and much smaller during the 1990s during the Clinton 
years. And right now we are at about the percentage or close to 
the percentage that we had during the Reagan years when you 
include the procurement that was in the supplementals as well 
as in the base budget.
    Military personnel has been growing, and operations and 
maintenance have been growing, particularly since about 2000. 
It was in 2000 when a lot of the changes were enacted, the 
repeal of the REDUX retirement, in other words making retiring 
at 50 percent rather than 40 percent of base pay, the 
concurrent receipt of veterans' benefits, et cetera.
    A lot of those changes were passed in 2001--time frame, 
TRICARE for Life. So the military personnel costs have really 
been increasing since about 2000-2001, and that has taken a 
bite out of procurement, and it has taken a bite out of the 
RDT&E budget. That is really the main thing I see.
    How the future is differing from the past is, we have a 
momentum in military personnel and in operations and 
maintenance to the extent that civilians get paid out of that 
account that is squeezing out the procurement accounts.
    Mr. Taylor. Is the ratio of R&D to procurement, has that 
been constant, say, over the past 20 or 30 years?
    Dr. Goldberg. It has not been. R&D has been pretty constant 
in sort of real dollar terms, but procurement has fluctuated a 
lot. So the ratio of R&D to procurement was low during the 
Reagan years when procurement was high. I think it is easier to 
say it the other way around. Procurement was the dominant 
factor in the 1980s, less so in the 1990s, when RDT&E was 
pretty flat and procurement came down. And then, more recently, 
since 2000, procurement has been up again and RDT&E kind of 
flat, so procurement has been a higher fraction.
    Mr. Taylor. Okay.
    Mr. Berteau. Mr. Taylor, if I could add two things to that 
from our CSIS work, two anomalies, I think, are worth your 
paying attention to here.
    Everything that Mr. Goldberg says is correct. But the 
growth in the percentage of O&M over the last 10 years has been 
historically unprecedented; and absent changes in getting that 
under control, that is going to continue to be the most 
significant unfunded shortfall.
    Mr. Taylor. Now, that is a huge thing. So is that medical, 
is that housing, is that equipment repair?
    Mr. Berteau. It is a combination of increased pay for 
civilians, increased use of contractors, and supplemental costs 
from the war.
    Mr. Taylor. Okay.
    Thank you, Mr. Chairman.
    The Chairman. Thank the gentleman.
    Mr. Franks.
    Mr. Franks. Well, thank you, Mr. Chairman.
    Thank all of you here today.
    Mr. Donnelly, if it is all right, I am going to start with 
you. You know, I know the Administration continues to talk 
about the nominal increase in the defense budget, but you point 
out so effectively that that is not a reflection of the actual 
increases as a part of GDP.
    And the service chiefs tell us all the time that they need 
more. And I think that their challenge is complicated by the 
fact that so much of the time their baseline budget is being 
eaten up by personnel issues.
    And there is a major shift. And Mr. Taylor, I think, was 
trying to get at that point. And if I can just be very direct 
here, it seems this Administration finds massive amounts of 
money for bailouts and economic stimulus packages, but not 
enough to fund the basic money needed for the defense hardware 
and the equipment reset for this country. And there is, of 
course, a point--I won't say of no return--but where it becomes 
very difficult to undo all of that because we reach a tipping 
point and our future capability is diminished. And with all 
respect to Mr. Daggett, I think that we too casually consider a 
future where America's military capability and our influence is 
diminished and more balanced in the world. And I think that has 
pretty profound implications for the future and for freedom 
itself.
    And so, with that, when do you think or do you think we are 
actually facing some critical junctures here where if we don't 
react, there could become some tipping points in our future 
that would be very difficult to recover from?
    And I will ask that generally, and hope I will have time 
for another question.
    Mr. Donnelly. Well, I will try to be succinct then.
    I really believe that the coming year is very much a point 
of deflection. We have not only the Quadrennial Defense Review, 
but the Nuclear Posture Review and the Space Review; we have a 
new budget, the first fully vetted or the first budget that 
will fully reflect this Administration's priorities. And the 
path that we are on, I think is pretty clear. So the 
conversation, particularly in the Congress this coming year, is 
going to be really quite critical.
    I would just conclude with, I don't believe that the ebbing 
of the Pax Americana is anything like inevitable. And I think 
it would be ahistorical to suggest that there is an ironclad 
connection between, you know, slice of global GDP and strategic 
preeminence. Great Britain at the height of the Pax Britannica 
never accounted for more than nine percent of global GDP, yet 
they were still able to rule the waves and essentially 
establish the international order.
    So I think that issue needs a lot more reflection and work 
than is often given.
    But again I would say that this coming year and the 
decisions that we will see enumerated in the various reviews 
and the numbers that we will see in the budget and FYDP 
presented to Congress really mark a fork in the road for us. 
And if we--we should think very hard before we go down that 
path.
    Mr. Franks. I suppose, if all philosophies at the table 
were of equal import or equal effect in the world, it wouldn't 
bother me so much. You know, I wouldn't mind handing over some 
of this responsibility to China if I had the confidence that 
they would take care of freedom. Given their own record, it 
makes even the most casual among us a little concerned.
    And you know, I am also--it seems like there is an old 
saying that there is nothing so tragic in the world as a 
beautiful theory that becomes totally destroyed by an unruly 
set of facts. And the realities in the world, I think, that we 
face are pretty significant. And when two airplanes hit two 
buildings it cost our economy two trillion dollars, which is 
about four times our Defense Department budget at the time. So 
I am just concerned that the more pressure we put on our 
military and our defense capability, that the more significant 
those risks could grow in the future, and that we ask very 
noble people to do things that are really almost impossible to 
do. And we keep handing them that equation.
    So let me ask you, what do you think the proper percentage 
of GDP should be for the military, and the fact that, if it is 
a percentage of the GDP, it increases as the economy grows? 
What should that percentage be?
    Mr. Donnelly. I don't think that the GDP metric tells us 
what is affordable or not. If it were so high that it would 
cripple the ability of our economy to grow, that would be--I 
think that is when you really begin to worry. But whether it 
is, you know, four percent or five percent, it is clearly 
consistent with historical patterns of economic growth and 
higher defense spending.
    So I think the question is whether it is adequate to meet 
the strategic requirement or achieve the goals that we have set 
for ourselves. I think that is highly debatable at this point.
    But if you are asking, can we afford a sufficient defense, 
I also think that is a no-brainer kind of question too. Four 
cents out of our dollar, five cents out of our dollar won't 
beggar us and won't prevent our economy from growing, but it 
could quite clearly close a number of these gaps that my 
colleagues have mentioned.
    The Chairman. Thank the gentleman.
    Mr. Franks. Thank you, Mr. Chairman.
    The Chairman. Dr. Snyder.
    Dr. Snyder. Thank you, Mr. Chairman. You all have given us 
a lot to think about today.
    I want to be brief in my question and let each of you 
discuss the answer in the time that I have. We are talking 
today about the Defense budget, but we probably would be 
smarter as a country if we were talking about the national 
security budget.
    Mr. Daggett, you referred several times to you think the 
future is--I believe your words were--``cooperative 
relationships.'' The Secretary of Defense has been probably the 
leading spokesman in the last year or two of the Bush 
Administration about the need to increase our investment in 
diplomacy, and the State Department--State Department budget, 
State Department employees, U.S. Agency for International 
Development (USAID), USAID budget--and yet in the process we 
have here on the Hill we don't really balance a line of 
helicopters versus the budget for USAID. In our budget process 
it will be basically a top line versus a top line on the floor 
of the House, which I don't think gets at all to the kind of 
weighing that we should have.
    Let me start with you, Mr. Donnelly. How should we, as 
Members who are trying to sort this out, look at the overall 
national security budget that is much broader than just 
Defense? And much broader, by the way, than just State 
Department and USAID. We have veterinarians and the Ag 
Department and----
    Mr. Donnelly. I am absolutely sympathetic to your basic 
approach. And if you start using the kind of metrics that I 
used about the Defense budget relative to other elements of 
Federal spending or our economy as a whole, certainly our 
ability to afford better statecraft or create other elements of 
``national power,'' to use the silly term of art, to be able to 
do a better job of state building in Afghanistan or Iraq, again 
our ability to afford those things is quite clear. Again, the 
limiting factor, it seems to me, is not the size of the economy 
or the relative size of the Defense account or the State 
Department's budget, but the thing that is squeezing everything 
out is the mandatory spending for entitlements and debt 
service.
    So to solve the long-term problem, to build the capacity 
that you refer to, which I think is essential, we really need a 
larger dose of broader fiscal discipline. To rob the Defense 
Department to create a more responsive set of diplomats or 
USAID seems to be kind of a zero-sum approach from where I sit.
    Mr. Berteau. Mr. Snyder, if I could add a couple things to 
that, you will recall that the President, in announcing his 
initial Afghan strategy back in March, part of the element of 
that was what I believe he referred to as the ``civilian 
surge.'' And it is interesting to compare what civilian surge 
capability is with what military surge capability is. And the 
orders of magnitude are wildly different. You can triple the 
capacity or the delivery of certain USAID services in 
Afghanistan and you are still talking fewer than 30 people. If 
you triple the military surge capacity, you are talking 100,000 
people.
    So I think that the orders of magnitude are so different 
that we have a lot of work to do in terms of not only building 
the resources and putting them in place, but building the 
capacity and the capability to use those resources. That is a 
very significant challenge.
    It is one of the best responses to the strategy issues that 
Mr. Daggett laid out in response to Chairman Skelton's 
question, but it is going to take us a good while to get there. 
And I am not even sure we have really started yet.
    Mr. Daggett. I have been thinking about exactly the issue 
you raised. How do you even begin to think about the role of 
Defense in conjunction with the other agencies of government in 
setting global policy in this international environment? And I 
think there is a starting point for talking about it, and it is 
actually work done by the Intelligence Community (IC).
    The National Intelligence Council (NIC) every five years 
does a report called Global Trends. The latest is Global Trends 
2025. So it looks out 15 years. And it is a really pretty 
thorough look at the evolving international security 
environment.
    And they emphasize a number of things. They do take a look 
really at military challenges, of the changes in military 
technology and how that is affecting security. But they discuss 
changes in financial power as well. They talk about the growth 
of ideological extremism, Islamic--you know, extreme Islamic 
fundamentalism as a persistent issue.
    They also discuss things like energy policy, access to 
other kinds of resources, limitations on water resources as a 
potential source of conflict in many areas of the globe, 
regional conflicts over various other kinds of issues, the 
potential impact of climate change on all of the above, which 
tends to overlap where there are already potential bases for 
conflict in other areas.
    So it is a good starting point for thinking about what are 
the kinds of problems the country as a whole needs to address, 
and then what agencies of the government are most appropriate 
to take the lead in addressing those kinds of challenges.
    Dr. Snyder. Thank you.
    The Chairman. Thank the gentleman.
    Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman.
    I have got a couple comments unrelated to anything you guys 
are even remotely responsible for, but they do tie in. All of 
these numbers that you churn around and play with are unaudited 
and unauditable. DOD across the system does a great job of 
thinking they know what the money is and where it is going, who 
is doing it. But they don't, they can't audit it, and so I am 
going to continue to beat on the Administration to continue 
this effort to get the numbers correct.
    Now, at 50,000 feet, which is what we are talking about 
right now, it would take a spectacular error to sway these 
numbers much. But every one of those dollars we spend gets 
appropriated one at a time, even though en masse, and they get 
spent one at a time. And the DOD, along with the Intelligence 
Community, neither one of them can show us that they know for 
sure where all this money is going. So we will keep pounding on 
them, with an acknowledgment that the basis for the 
conversation might not be as firm as we would like to have it.
    Mr. Daggett, you had mentioned that the growth in 
compensation, regular military compensation, is about 45 
percent above rate of inflation, which I think is reflective, 
if you look at Mr. Daggett's chart, of underpaying our military 
for a long, long time.
    We made a concerted effort before I got here to try to 
right that ship. If you take a look at this chart, it looks 
like we are closing the gap. We still haven't closed it 
entirely.
    While that is a factor, I think we need to recognize that 
in 1998 they were underpaid. And today I think they are 
probably reasonably compensated for what we are asking them to 
do.
    But, Mr. Chairman, I want to yield back my time because I 
don't have any comments beyond that, other than to just thank 
you for having this hearing this morning. Thank you.
    The Chairman. I thank the gentleman.
    Mr. Kissell.
    Mr. Kissell. Thank you, Mr. Chairman.
    And thank you, gentlemen, for being here today. Just a 
couple quick questions.
    Mr. Berteau, you had mentioned something about, that our 
thinking sometimes excludes the technical advances that are 
made elsewhere in the world. I just wonder if there are any 
glaring examples there that we have overlooked.
    Mr. Berteau. I think one of the primary areas was already 
referred to by Mr. Daggett, and that is in the rotary wing 
industry, in the helicopter industry, where the technological 
capacity from an avionics perspective, from a drive train 
perspective, from a turbine engineering perspective has evolved 
more dramatically with the commercial industry on the European 
side than it has on the U.S. side.
    And I think, there we are being put at risk of future 
technology developments in the rotary wing industry, not from 
the electronics packages, from an equipment package point of 
view, from a mission package point of view, but from a platform 
capability point of view, or we run the risk of the Europeans 
leaving us behind dramatically there.
    Mr. Kissell. Do you think that is because we just didn't 
see the need for this or just somehow missed it altogether? How 
did that come to be?
    Mr. Berteau. About 20 years ago we had the idea that we 
could push in the defense industry what we called ``dual-use 
technology,'' that we could simultaneously have companies that 
were satisfying our highest-level military needs, and at the 
same time use much of the same fundamental core business base 
to satisfy commercial needs. That has proven to be a much more 
elusive objective than we thought it would be in the early 
1990s.
    I have not done a thorough assessment of this. Off the top 
of my head, I would say it is that, in part, the gap in Europe 
and the gap elsewhere in the world between military use and 
military technology and commercial use and commercial 
technology, is a more narrow gap elsewhere than it is in the 
U.S. In the U.S. it is a bigger gap.
    We are always pushing for the latest technology edge. That 
makes it harder for our guys to bridge that dual-use gap there. 
It is an issue worth further study.
    Mr. Kissell. And, Mr. Goldberg, and if anybody else has any 
ideas on this, we passed a pretty sweeping piece of 
legislation, the Weapon Systems Acquisition Reform Act 
(WSARA)--get rid of the waste, let's do this better. But I have 
heard in different comments that you all have made that, you 
know, we still don't have a way of accounting for this, we 
still don't keep score, and all the things that we were wanting 
to address in that legislation.
    Mr. Goldberg, do you see that legislation being effective 
towards helping this budget process?
    Dr. Goldberg. Mr. Kissell, I am assuming you are referring 
to the legislation this session, the Weapons Systems 
Acquisition Reform?
    Mr. Kissell. Yes.
    Dr. Goldberg. I think it is a little too early to tell, but 
I think there is great potential in that legislation, 
particularly redesignating the Cost Analysis and Program 
Evaluation office, the so-called CAPE, in DOD, which has the 
potential at least, if implemented correctly, to get more 
realistic estimates of cost and schedule not only internally to 
the Pentagon, but to the Congress, much earlier in the 
procurement process so there can be much better oversight.
    So I think there is a potential there, if that office and 
that program is implemented correctly, for a lot of reform. I 
don't think it will solve any--I don't think it will solve all 
the problems; it is not a panacea. But it would give greater 
visibility and greater congressional oversight, so I think it 
has a lot of potential.
    Mr. Kissell. Any other thoughts on that?
    Mr. Berteau. I would add one thing, sir.
    At CSIS we are actually tracking the implementation of the 
Weapons Systems Acquisition Reform Act. And I will be glad to 
send you a copy of our report card when it is done.
    On that particular point that Mr. Goldberg raised, better 
cost analysis, the Congress has just confirmed the new director 
of that position, and so--she will be in position shortly. They 
have yet to fill the billets of the additional staff, and they 
right now don't have the capability in place to do the 
additional cost estimates required by the law.
    Mr. Kissell. I would appreciate that information.
    I yield back my time, Mr. Chairman.
    The Chairman. Thank the gentleman.
    We have Lamborn--wrong list. Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman.
    Gentlemen, thank you so much for joining us today. I have a 
couple of questions for Dr. Goldberg and Mr. Daggett.
    The decision has apparently been made to move on our 
aircraft carrier construction cost centers from four years to 
five years. And as we know, if you look at the cost of 
production there, those overhead costs haven't changed; they 
are going to continue along the lines.
    My concern is that as you look at those overhead costs and 
that capacity, those costs are still going to be there. Those 
yards then are going to have to look to distribute those costs 
elsewhere. And they also build other ships; my concern is, 
those costs might be shifted to the construction of other 
platforms.
    We have also recently been unable to get a commitment out 
of the Under Secretary of the Navy concerning the commitment of 
the production of two Virginia class submarines per year. So if 
we go to a one-sub-per-year build, that concerns me also about 
the overhead costs, also those up-and-down cycles in manpower.
    As you know, the folks that construct our nuclear subs and 
nuclear aircraft carriers are highly skilled individuals. If we 
are up and down on a roller coaster ride both with cost and 
with availability of personnel, that gives me some concern.
    So I just wanted to get your perspective, if you can speak 
to those issues and give us your perspective on consistency in 
decision-making, whether it is on cost centers or whether it is 
on commitments on the number of subs that are being built.
    Dr. Goldberg. Well, I think ultimately the decision to 
reduce the carrier force has been made on the basis of more 
strategic decisions, how many we need to meet the mission, and 
in particular, with the Fleet Response Plan and the way the 
Navy can get carrier presence, the feeling that they can get by 
with less. It does lead to volatility and a problem in covering 
overhead. Undoubtedly--I don't have estimates of those numbers, 
but undoubtedly, some of the costs of maintaining that 
capability at the yards will be passed on. We do not completely 
avoid those costs by reducing the frequency of the carrier 
purchases, and similarly with the submarines.
    Mr. Daggett. Yeah, just a very general comment.
    We haven't looked directly at allocation of overhead costs 
in shipbuilding for some time. My colleague, Ron O'Rourke, did 
a pretty detailed study of the shipbuilding industrial base 
some time ago, but it is getting pretty old at this point. So 
it might be time for another look at it, given the changes in 
requirements in the Navy.
    In general, you know, a big issue for the shipbuilding 
industrial base has been, the Navy has been trying to put 
pressure on shipbuilders to invest in improvements in 
efficiency. And to my way of thinking, the more you have 
predictability in the shipbuilding plan, the more you can 
insist on that. So it is important for the Navy to settle on a 
pretty long-term sustainable shipbuilding plan.
    And I can only think that the recent decisions will help to 
some extent in that regard. At least it is identified, we are 
going to build one carrier every five years. And as long as we 
follow through on that commitment, we can plan on that basis. 
It would be helpful from the point of view of the shipbuilding 
industry to get up to two submarines a year if possible.
    But we are also now, you know, we know at least--I think, 
after the QDR, we will know whether we are going to go back to 
some version of DDG-1000 or, instead, rely on DDG-51 hull for 
most of the other--most surface-combatant basic designs. And it 
appears likely to be DDG-51 as the basic design. So that will 
rationalize that as well.
    And you know, the comment I made in my testimony is, to the 
extent that we do have relatively long production runs of 
fairly stable designs of major ships and other systems as well, 
then we can focus on efficiency-improving measures, including 
encouraging the industry to make more investments in those 
areas. So, you know, it could be a positive step in that 
direction, but we will have to see where it goes.
    Mr. Wittman. One additional question to you both. Do you 
see the current course that we are on with strategic planning, 
authorization, and budget being in the proper balance to make 
sure that we provide for the robustness in our fleet, in our 
capability, but also making sure that we are looking at 
sustainability as far as our industrial base to meet those 
needs?
    Dr. Goldberg. Sustainability is a big issue. And I guess I 
don't have any recommendations for how to do it differently.
    One thing we didn't get this year was the Navy's annual 
shipbuilding plan, which helps us. We generally do an annual 
forecast of the sustainability of the program and the resources 
it would require, which we could not produce this year.
    Again, I think, to echo what Mr. Daggett said, having a 
predictable plan that doesn't change year to year would be a 
good thing in terms of sustaining the industrial base and 
giving the yards a basis for forecasting their workforce. So I 
would hope that we could reach that state.
    Mr. Daggett. Again, very much in general, since the end of 
the Cold War, we have really been in flux in terms of defining 
what the strategy is. And I do see a long-term trend.
    I think if you read--if you start with the base force in 
1990 and the Bottom-Up Review in 1993 and then the Quadrennial 
Defense Review since then, you see a progression. And the 
progression has been actually in the direction of broadening 
the kinds of challenges that we think we face. And that has led 
to--in turn, to really changes in our strategic plans and 
setting strategic priorities, the latest big change being an 
increased emphasis on ground forces, when all the trend 
previously had been moving away from that and making ground 
forces more deployable.
    I am not sure we have reached the end of that discussion by 
any means. I mean, I think this QDR appears to be addressing 
some pretty far-reaching decisions about future threats that 
might be quite unique. So, you know, on the one hand we do want 
stability in shipbuilding and areas like that; we want to get 
there. But the discussion of strategy has really been moving in 
a direction that I think is coming to grips with actual--you 
know, real changes in the international security environment 
that we need to continue. And they are evolving and changing 
over time. There are new threats that we are facing, and we are 
going to have to figure out how to deal with that and how to 
shift investments in the Defense accounts in order to do that 
as well.
    So I don't see us at the end of it by any means.
    Mr. Wittman. Thank you, Mr. Chairman.
    The Chairman. Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman. Let me start with Mr. 
Donnelly, and then I will work my way to the left. And that 
would be that a concern of mine that we are so focused right 
now on asymmetric warfare or counterinsurgency operations that 
require very light forces.
    Are we losing our focus on maintaining the type of 
conventional deterrence that is necessary with a resurgent 
Russia, with Iran, with China, with North Korea?
    Mr. Donnelly.
    Mr. Donnelly. Honestly, I don't think so. You know, to talk 
to people in the Air Force or the Navy, you get much greater 
concern about, say, the rise of China and the growth of the PLA 
military capacity or, you know, lots of discussions about what 
an Iran campaign might look like.
    However, you know, I think that it is true that in the 
political world the focus has been lost on that. And 
particularly wrestling with the Chinese challenge is just very 
difficult for people to come to grips with.
    So it would be better if we could have an out-loud 
conversation about these things. And that would, I think, 
advance all our understanding, and we would probably come to 
some sensible answer and be able to balance these things 
appropriately.
    But I am less concerned about the dialogue inside the 
Pentagon than I am sort of amongst the rest of us.
    Mr. Coffman. Mr. Berteau.
    Mr. Berteau. Sir, I think we are okay for now. I think the 
bigger question is, what does the longer-term structure look 
like and what are we willing to invest over the long term? And 
we really just don't have the visibility that we need to have 
into the Pentagon's thinking today to be able to answer that.
    I am going to be cautiously optimistic for a little while 
until I see numbers that make me pessimistic. If I don't see 
numbers that sustain cautious optimism by next February, 
though, I am going to start turning more pessimistic.
    Mr. Coffman. Mr. Daggett.
    Mr. Daggett. Yeah. The argument you referred to, it seems 
to me, is mostly within the Army. It is really how the Army 
should be organized as much as anything else.
    And, you know, it faces some difficult issues. Does it 
focus mostly on capabilities for irregular warfare or does it 
try to maintain, you know, large armored forces with offensive 
capabilities and so on, which some argue are becoming less 
relevant? And it is really a very vigorous debate going on 
inside the Army over how to square the circle essentially.
    And, you know, I think what the Army--what I see the Army 
is coming down to is trying to maintain across-the-board 
capabilities and really struggling with the best way to do 
that. And I am not sure that they are at the end of the debate. 
I am not sure the answer they have come up with is the right 
one.
    But for the present it appears to be that the basic unit 
will still be a brigade combat team. We will have a balance of 
heavy and light forces. And brigade combat teams in cases like 
Iraq and Afghanistan will be augmented to be able to carry out 
training with foreign militaries, but they will still be the 
basic unit. We are not going to build separate units 
specifically for training of foreign militaries. We will have 
some of those capabilities in Special Forces, but otherwise the 
all-purpose forces are going to have to remain all-purpose 
forces.
    You know, whether that is sustainable or not, I am not 
sure. I am not sure you can train everybody for everything all 
the time. So, you know, it is a big issue.
    Beyond that, the Air Force and the Navy are still focused 
on high-end combat.
    Mr. Coffman. Dr. Goldberg.
    Dr. Goldberg. Mr. Coffman, I would agree it is principally 
an Army issue. The promise that was put forward for Future 
Combat System (FCS) was that we would have a force that is 
lighter, faster, more easily deployable, and make some trade-
offs in terms of less armor versus greater informational 
awareness. And the Army itself, narrowly, as well as in the QDR 
process, is rethinking that whole strategy, what kind of manned 
vehicles they want. And I think that is really where the debate 
is.
    I don't know how it is going to turn out. But in the next 
few years, as we see what the successor is to the FCS program, 
the Army ground combat program, we will get a better idea.
    Those considerations of lighter, faster, more deployable, I 
think, are very important because we don't know where we'll 
be--nobody knew we would end up--15 years ago that we would end 
up in Iraq and Afghanistan. And the fact that we have great 
mobility assets and some lighter forces has turned out to be 
fortuitous.
    Mr. Berteau. Mr. Coffman, could I add one thing to that?
    Mr. Coffman. Please.
    Mr. Berteau. Both my colleagues to the right indicated this 
is primarily a ground forces or an Army issue. I think it is 
important to keep sight of the lift problem as well.
    For much of my career we have had more Army than we could 
move on the timetable. That was the whole driver behind the 
FCS. And if we do rethink that, the role of the Navy and the 
Air Force is going to be very, very powerfully affected here in 
terms of both sealift and airlift. And it is pretty easy to 
project scenarios in which we don't have nearly enough of 
either.
    Mr. Coffman. Thank you. Mr. Chairman, I yield back.
    The Chairman. Thank the gentleman.
    You know, in talking with the Army leaders, they are trying 
to train and build for a full-spectrum Army, and I have 
indicated to them there are only two problems with that: One is 
time and one is money. And I think it might be very difficult 
to train a soldier to be a first-class individual in the 
mountains doing Special Operations-type and then a platoon 
sergeant backing up an armored division across a plain. And I 
just don't see how that can happen.
    Do you have recommendations for the Army along this line, 
Mr. Daggett?
    Mr. Daggett. No. If I may, I think you have put your finger 
on precisely the issue; and I have to say I am not in the 
position to be able to judge how much training you can do.
    The Army does insist that in Afghanistan and Iraq the 
brigade combat teams are quite capable, when augmented 
appropriately, of carrying out the training mission. And you 
know, I can understand, in particular in Iraq, that they are 
almost forced to come to that conclusion because if you are 
going to have a training presence still in Iraq, you don't want 
to rely strictly on the Iraqis for force protection. You want 
to have that organic to the training unit itself. And if you 
are going to have a large self-protection capability, well, you 
may as well have a full brigade team with all the combat 
capabilities that go along with it.
    So assigning your regular unit to do the training is quite 
likely the right answer in Iraq. Now, does that apply also 
elsewhere in the world or is the training mission more 
specialized than that, requiring, you know, particular people 
with particular experiences? And the answer to that is maybe. 
That may be the case.
    It may not be universally applicable elsewhere, but I don't 
see it as necessarily being the wrong answer under current 
circumstances, though.
    Mr. Donnelly. Mr. Skelton, if I could toss in two 
sentences. My colleague, Fred Kagan, and I did a whacking big 
study a couple years ago on sort of the future of American land 
power. So I want to recoup that investment briefly, if I could.
    Actually, I think overall the Army is doing a pretty good 
job of adapting to an immensely wide variety of challenges. I 
mean, the kinds of operations that the Army has conducted in 
land forces more broadly over the last--since 9/11 ranges all 
the way from the most traditional kind of mounted armored--you 
know, the march to Baghdad in three weeks was, you know, 
arguably the best expression of blitzkrieg that there has ever 
been in terms of distance covered and so on and so forth.
    But that same force has adapted quite remarkably to quite 
different irregular warfare challenges. And we have also 
learned that the best--that all kinds of training are not the 
same. Training, say, a Filipino counterterrorism unit as 
opposed to standing up an Iraqi Army or an Afghan Army while 
they are in the midst of fighting a war are quite different 
challenges. And when it comes to the Iraqi and Afghanistan 
experience, unit partnering has proved to be the most efficient 
and the most effective means of increasing the capacity of our 
partnering forces, which sort of throws you back onto the 
brigade combat team as, actually, a quite useful tool in this 
regard, although it needs enablers of all kinds to be able to 
do this.
    So when you are talking about the full spectrum of 
operations, I think that is just the reality. And the Army is 
not buying a lot more heavy tank units as it adds forces. And 
even now it is shifting a number of heavy brigade combat teams 
(BCTs) to Stryker-equipped BCTs. So the balance of the force is 
slowly shifting, but the broad capabilities that it retains 
have all been employed at very high rates in recent years.
    The Chairman. Thank the gentleman.
    I have Mr. Spratt, and then as I understand it Mr. Bartlett 
has a second-round question.
    Mr. Spratt.
    Mr. Spratt. I am sorry to be late in arriving. I heard from 
half the team before because we had a similar hearing on the 
Budget Committee and had a briefing this morning.
    This may be redundant to what you have already discussed, 
but there is lots of talk now about how much it costs to deploy 
one troop, one combat trooper, to a theater like Afghanistan or 
Iraq. And the number being bandied about now is a million 
dollars incremental cost.
    Do you think that is a valid estimation? And if not, what 
is the proper way to calculate on the back of an envelope the 
incremental costs for deploying troops to theaters like this on 
an average annual basis?
    Dr. Goldberg. Mr. Spratt, I would have to take that for the 
record.
    We have not at CBO done an explicit study, particularly of 
the conditions in Afghanistan, as opposed to the combined 
Global War on Terror (GWOT) Central Command (CENTCOM) 
operations, which were the basis for our previous estimates. So 
I don't really have it at this time. And I entertain a request 
from either this committee or the Budget Committee to do a more 
detailed analysis of the cost of operations in Afghanistan. I 
don't have that at the present time.
    [The information referred to can be found in the Appendix 
on page 111.]
    Mr. Spratt. Okay.
    Mr. Daggett.
    Mr. Daggett. Can I say we have looked at it, just as you 
said, just as a really back-of-the-envelope calculation. And 
the calculation is pretty straightforward.
    The most recent estimate of costs in Afghanistan is, it is 
about $68 billion in fiscal year 2010, and that is for roughly 
68,000 troops. So the math is pretty simple; it is about a 
million dollars per troop. But that is really just taking the 
top-line, total amount of spending that is allocated to 
Afghanistan and scaling it to the number of boots on the ground 
in Afghanistan.
    And if you make an incremental change in the number of 
troops, does it scale one-for-one? And the answer is, a big 
part of it does. Eighty percent of that is military personnel 
and operation and maintenance, and that likely would scale 
pretty closely.
    There are some parts of it that don't. Afghan Security 
Forces Fund, the amount of equipment we provide to equip the 
Afghan Army wouldn't necessarily change with the size of the 
U.S. force. It changes with the size of the Afghan force, but 
not with the size of the U.S. force. And there are some 
overhead activities which might not have to increase quite in 
proportion to the increase in the size of the force.
    But that said, if it is not a million dollars per troop it 
is not far off, I think.
    Again, it would be phased in over time, so it wouldn't be a 
million dollars the first year. But in the end, that is 
probably not far off from what the sustainment costs of a troop 
would be, I think.
    Mr. Spratt. Mr. Berteau.
    Mr. Berteau. Similarly, sir, we have not looked at that 
specific question.
    But I think that I would probably agree with the front end 
of Mr. Daggett's calculation, but not necessarily the back end. 
I think that the marginal change up or down for troops is 
actually quite dramatically different. And my own estimate, 
based upon the costs we have looked at, is that drawing down 
would not save you anywhere near a chunk of a million dollars 
per person. Increasing will cost you a little bit closer to 
that.
    That is just the estimate. I think we would have to look at 
that further as well.
    Mr. Spratt. Mr. Donnelly.
    Mr. Donnelly. Very briefly--and I would never want to try 
to outdo my colleagues on the actual arithmetic of this, but I 
think there is one important conceptual thing to keep in mind 
in making these calculations, and that is, where do the costs 
of mobilizing Guardsmen and Reserve people, get accounted for?
    There is certainly a large part--I mean, one of the reasons 
that we have done this is because we have been able to slough 
off personnel costs of mobilization into emergency 
supplementals and not increase active duty on the book's end 
strength. We have had more than 100,000 folks mobilized pretty 
much every day since 9/11. So certainly in Afghanistan, since 
Guard brigades have, for example, been responsible for the 
Afghan Army training mission, one of the things that you would 
want to pick apart, to understand where the money is actually 
going, is how much of it is going to mobilize Guardsmen and 
Reservists who account for active duty shortfalls?
    Mr. Spratt. One final question. We have got a Defense 
budget at historic highs. And when you look at the components 
of it, they are all swelling.
    There is no single component that is driving this. The O&M 
costs and personnel costs due to the deployment of the troops 
to, and expeditionary forces, and the extraordinary wear and 
tear and the harsher environmental conditions on equipment, 
that is one factor.
    And then you have got the increase in size of the 
personnel, 92,000 troops being added to ground forces, and 
increased costs per troop because of the benefit increases that 
we have effected over the last 10 or 15 years.
    And then, of course, you have got acquisition costs, which 
are substantial with the Army redoing its forces, the Navy 
rebuilding its surface ship Navy, and the Air Force buying the 
F-35 and other airplanes.
    Where do you look for savings in a budget like this at the 
present time?
    Dr. Goldberg. I would say you really have to look hard at 
procurement, because all the personnel compensation changes are 
already built into the numbers.
    In other words, so many improvements have been enacted to 
the point where I think we have achieved pay comparability and 
we have improved benefits and improved housing; and there is a 
momentum that carries those benefits forward. And there is no 
way to cut the benefits that have already been enacted.
    And similarly in O&M, to the degree that O&M is funding 
civilian salaries, which tend to get parity pay increases with 
military personnel, and for other reasons--O&M has, so to 
speak, its own momentum--I would think the area with the most 
latitude for cuts would be the procurement accounts.
    Mr. Daggett. Traditionally, when the budget has been 
declining, the part of the budget that has disproportionately 
been affected has been acquisition, has been procurement and 
R&D. They have declined--you know, they have declined very 
rapidly when the budget has declined marginally; they have 
increased very rapidly when the budget has increased even 
marginally. So that is the variable part of the budget.
    That said, by no means would I give up on looking at O&M as 
a potential place for savings. I would be very leery of 
projections that O&M costs are going to level off in the 
future. Historically, when the Defense Department has projected 
that, it hasn't worked out. And in the end, year after year, 
DOD ended up taking money out of the procurement accounts in 
order to pay ``must'' bills in O&M.
    But again, it is not a reason not for looking very hard at 
it. You know, we spend something like $20 billion a year just 
on fuel. If you could reduce that by 10 percent, that is a 
pretty substantial saving right there. We spend about $27 
billion a year on base operation support activities. So if you 
can improve efficiency even in operating your facilities by 10 
percent, that is another two point five to three billion 
dollars.
    So there are certainly areas you can look at in the O&M 
accounts to try to achieve some savings.
    And I also think, frankly, if the budget is going to be 
constrained over the long term, one area in which there will 
have to be a discussion is whether we can sustain the increases 
in the size of the force we have agreed on recently. I see that 
as very much on the agenda. It is a difficult thing to take on, 
but if the budget is going to be constrained by the deficit 
situation in the long term, at some point it is almost 
unavoidable that you have to take a look at that, for good or 
ill.
    The Chairman. Thank the gentleman.
    Wrap it up, Mr. Bartlett.
    Mr. Bartlett. Thank you very much.
    There is a reality that is very hard to avoid, and that is 
that the urgent almost always sweeps the important off the 
table--this dynamic, along with the assumption that the EMP 
threat is a very esoteric threat, probably coming only from a 
Russia or a China, which would result in all-out war and 
therefore very unlikely to happen, so we are not addressing 
this threat.
    Let me suggest that it will probably come from a nonstate 
actor or a state masquerading as a nonstate actor. All that 
they need is a tramp steamer, a Scud launcher, which they can 
buy on the open market, and a crude nuclear weapon, perhaps one 
loosed from the Soviet Union dissolution or one from Iraq or 
Afghanistan. And, you know, if they miss their target by 100 
miles it won't make any difference.
    Now, this can't reach the center of our country, 300 miles 
high, and therefore take down our whole country, but it could 
take down all of New England, which would be Katrina 10 times 
over. And we are not certain but what the cascading effects of 
the collapse of the grid there would take down the grid in the 
rest of the country, damaging some transformers so that we 
could not bring the grid back up.
    I know that the military is now taking a new look at EMP, 
thank God, because during the Clinton years we waived EMP 
hardening of all of our weapons systems. I asked why. As 
Solomon Ortiz says, we don't need any of this high-tech stuff 
to fight the enemies we are now fighting. And when we will need 
is against a peer or near-peer, and one of the first things 
they do--it is in all of their war games, all of their open 
literature. One of the first things they do is an EMP lay-down, 
which will deny us the use of all of the equipment that is not 
EMP-hardened, which is essentially all of our equipment.
    I understand now that the Pentagon is taking a new look at 
EMP. But they are looking at either the 30 or 50--it is not 
clear to me which--kilovolts per meter. The Russian generals 
told the EMP Commission that the Soviets had developed and they 
had a weapon which would produce 200 kilovolts per meter at the 
center, which was 100 kilovolts per meter at the margins of our 
country. And we have not, as I understand it, built or tested 
anything at that level, which would mean that what we think is 
hardened is not hardened, and about all we have hardened now is 
our command and control. It is a little bit like me having my 
brain and spinal cord work and my arms and legs won't.
    I don't understand what good I would be in fighting a war 
if that is true. Are my concerns unrealistic?
    Mr. Berteau. I have to say, Mr. Bartlett, that I came in 
here today with a long list of things that I was worried about. 
You have added one to that list. And I am going to have to tell 
you that I don't have a response to the challenge you have laid 
out there. It certainly seems to me to be worthy of more 
attention than I have seen it get.
    Mr. Bartlett. By the way, sir, the tramp steamer they 
launch that from will be sunk. There will be no fingerprints on 
it. You know, this is a huge, huge vulnerability. It would, in 
fact, end life as we know it in this country.
    And I am very concerned that the urgency of processing 
these two wars have swept this really important defense off the 
table.
    The Chairman. No comment?
    Mr. Donnelly. I am no EMP expert either. But in addition to 
a pulse that would be generated by a nuclear weapon--and this 
may reflect my limited understanding of the technology, but I 
think it is also becoming increasingly aware that there may be 
other means for generating for sort of tactical purposes----
    Mr. Bartlett. You are exactly right, sir, directed energy 
weapons.
    The thing I mentioned in the previous question was, there 
is an absolute certainty there will be another major solar 
magnetic storm, perhaps of the Carrington magnitude; and if 
that happened, FERC tells me it would take down our grid, and 
it would cost a trillion to $4 trillion, I think, to bring it 
back, and take perhaps several years.
    I asked them the consequences of that to our country. This 
is the magnetic storm. By the way, the same thing you do to 
protect against that protects you against EMP. And I asked, 
what would be the consequences of that?
    He said probably 80 percent of our population would die. 
You are totally immune to EMP. You wouldn't even know it was 
happening if you looked in the opposite direction. But, you 
know, you can't eat. If there is no electricity, there is no 
anything in our culture. You know, I just think that we are 
permitting the urgency of these immediate problems to sweep 
really important things off the table, and this is one of them.
    There are others, but this is a major one.
    The Chairman. Certainly thank the gentleman.
    And if there is no further business, we appreciate the 
excellent testimony of our panel, and we look forward to seeing 
you again.
    [Whereupon, at 12:01 p.m., the committee was adjourned.]


      
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