[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]









       THE DEPARTMENT OF DEFENSE AND THE FISCAL YEAR 2013 BUDGET

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, FEBRUARY 29, 2012

                               __________

                           Serial No. 112-22

                               __________

           Printed for the use of the Committee on the Budget














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                        COMMITTEE ON THE BUDGET

                     PAUL RYAN, Wisconsin, Chairman
SCOTT GARRETT, New Jersey            CHRIS VAN HOLLEN, Maryland,
MICHAEL K. SIMPSON, Idaho              Ranking Minority Member
JOHN CAMPBELL, California            ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California              MARCY KAPTUR, Ohio
W. TODD AKIN, Missouri               LLOYD DOGGETT, Texas
TOM COLE, Oklahoma                   EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   BETTY McCOLLUM, Minnesota
TOM McCLINTOCK, California           JOHN A. YARMUTH, Kentucky
JASON CHAFFETZ, Utah                 BILL PASCRELL, Jr., New Jersey
MARLIN A. STUTZMAN, Indiana          MICHAEL M. HONDA, California
JAMES LANKFORD, Oklahoma             TIM RYAN, Ohio
DIANE BLACK, Tennessee               DEBBIE WASSERMAN SCHULTZ, Florida
REID J. RIBBLE, Wisconsin            GWEN MOORE, Wisconsin
BILL FLORES, Texas                   KATHY CASTOR, Florida
MICK MULVANEY, South Carolina        HEATH SHULER, North Carolina
TIM HUELSKAMP, Kansas                KAREN BASS, California
TODD C. YOUNG, Indiana               SUZANNE BONAMICI, Oregon
JUSTIN AMASH, Michigan
TODD ROKITA, Indiana
FRANK C. GUINTA, New Hampshire
ROB WOODALL, Georgia

                           Professional Staff

                     Austin Smythe, Staff Director
                Thomas S. Kahn, Minority Staff Director














                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, February 29, 2012................     1

    Hon. Paul Ryan, Chairman, Committee on the Budget............     1
        Prepared statement of....................................     3
        Questions submitted for the record.......................    64
    Hon. Chris Van Hollen, ranking member, Committee on the 
      Budget.....................................................     3
        Prepared statement of....................................     5
    Hon. Leon E. Panetta, Secretary, U.S. Department of Defense..     7
        Prepared statement of....................................    13
        Response to questions submitted by:
            Chairman Ryan........................................    65
            Mr. Rokita...........................................    69
            Mr. Honda............................................    72
    GEN Martin E. Dempsey, USA, Chairman, Joint Chiefs of Staff..    20
        Prepared statement of....................................    20
    Hon. Allyson Y. Schwartz, a Representative in Congress from 
      the State of Pennsylvania, prepared statement of...........    64
    Hon. Todd Rokita, a Representative in Congress from the State 
      of Indiana, questions submitted for the record.............    67
    Hon. Michael M. Honda, a Representative in Congress from the 
      State of California, questions submitted for the record....    71

 
       THE DEPARTMENT OF DEFENSE AND THE FISCAL YEAR 2013 BUDGET

                              ----------                              


                      WEDNESDAY, FEBRUARY 29, 2012

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 2:00 p.m., in room 
210, Cannon House Office Building, Hon. Paul Ryan, [Chairman of 
the Committee] presiding.
    Present: Representatives Ryan, Garrett, Calvert, Cole, 
Price, McClintock, Chaffetz, Stutzman, Lankford, Black, Ribble, 
Flores, Mulvaney, Huelskamp, Young, Amash, Rokita, Guinta, Van 
Hollen, Schwartz, Doggett, Blumenauer, Yarmuth, Pascrell, 
Honda, Wasserman Schultz, Moore, Castor, Tonko, and Bonamici.
    Chairman Ryan. The hearing will come to order. First off, 
let me just start by welcoming our Secretary of Defense, former 
Budget Committee chairman, Secretary Panetta. As you see, you 
see your face here in the Budget Committee room. I do not know 
the last time, secretary, that you have been in this room, but 
it is a real pleasure. You have respect on both sides of the 
aisle here, and we want to just tell you how appreciative we 
are of your time. We have not had a SecDef here in quite a 
while, and this is a topic that is so much more budget relevant 
these days than ever before. We are just so appreciative of you 
being here.
    I want to welcome everybody to today's hearing to examine 
the president's budget request for the Department of Defense, 
and to explore how the federal government can meet its highest 
priority, providing for the common defense and strengthening 
our national security. As I mentioned, we have Secretary 
Panetta here who is no stranger to this committee. In addition 
to his extraordinary background as secretary of defense, the 
CIA, he has served as chairman of this committee.
    We also want to warmly welcome the other two distinguished 
witnesses here joining Secretary Panetta: General Martin 
Dempsey, chairman of the Joint Chiefs of Staff. In the 38 years 
since graduating from West Point, General Dempsey has led 
troops in combat, served as a combatant commander, and most 
recently, as the chief of staff of the Army. Thank you for your 
service, general, and welcome to the committee. We also welcome 
the Department of Defense's comptroller, the Honorable Robert 
Hale, who is no stranger, as well, to this committee from his 
years of service to the Congressional Budget Office. Again, 
welcome back Secretary Hale.
    Relative to last year's request, the president's budget 
calls for a $487 billion reduction in base defense spending 
over the next decade. This comes on top of already planned 
spending reduction for the global war on terrorism. The United 
States remains a nation at war, and our troops remain engaged 
in a fierce enemy overseas. It is difficult to square this 
reality with the president's steep reductions in both troop 
levels and funding levels. The timing of these cuts raises 
serious concerns that decisions are being driven by budgetary 
concerns as opposed to strategic priorities.
    Mr. Secretary, I think you have a unique perspective on the 
tension between meeting our national security requirements and 
getting spending, deficits, and debt under control. While they 
have yet to offer a balanced budget, our friends across the 
aisle have called for a balanced approach. Of course, budgeting 
is about setting priorities. Such calls assume that all of 
government's activities are equally important, that the blind 
proportionality can substitute for a clear-headed analysis of 
our priorities and responsibilities as policymakers. Like all 
categories of government spending, defense spending should be 
executed with efficiency and accountability, yet many fear that 
arbitrary and deep reductions that the president has proposed 
in the defense budget would lead to a dramatic reduction in our 
defense capability. I commend you for your efforts to fund 
defense priorities within a rapidly shrinking budget. Your 
predicament, in my opinion, secretary, is due to failures 
elsewhere in the federal budget.
    According to Harvard's Niall Ferguson, a financial 
historian, the fall of great nations is the result of their 
excessive debt burdens. In their path to decline, defense 
spending is always the first casualty.
    The failure by the administration to deal honestly with the 
drivers of debt, specifically when it comes to government 
spending on health care, is a failure that imperils our 
economic security and now our national security. With his calls 
for crushing levels of debt and crowding out of defense by 
entitlement spending, the president's budget, in my personal 
opinion, charts a path to decline.
    In addition to examining the steep defense reductions in 
the president's budget, I hope today's hearing informs us of 
the consequences to our security that would result from a 
disproportionate cuts to defense spending under the Budget 
Control Act sequester. Congress has a solemn obligation to 
ensure our troops fighting overseas have the resources that 
they need to successfully complete their missions, and to 
adhere to our commitment to their service upon their return.
    Every citizen owes a debt of gratitude to the military 
families that continue to make untold sacrifices for our 
security, and for the freedoms that we cherish. We are in deep 
gratitude. We want to make sure that we honor them with the 
right kind of priorities, and with the right kind of defense 
policy. With that, before hearing testimony from Secretary 
Panetta and General Dempsey, I would like to yield to ranking 
member Mr. Van Hollen.
    [The prepared statement of Chairman Paul Ryan follows:]

Prepared Statement of Hon. Paul Ryan, Chairman, Committee on the Budget

    Welcome all to today's hearing to examine the President's budget 
request for the Department of Defense, and to explore how the federal 
government can meet its highest priority: providing for the common 
defense and strengthening our national security.
    I want to begin by welcoming Leon Panetta back to the committee. In 
addition to his demonstrated experience in national security, Secretary 
Panetta has an extraordinary background in federal budgeting, including 
service as Chairman of this committee.
    Mr. Secretary, there is a portrait of you in our hearing room and 
we are always under your watchful gaze as we conduct our work here at 
the Budget Committee.
    We also warmly welcome our other two distinguished witnesses 
joining Secretary Panetta.
    General Martin Dempsey, the Chairman of the Joint Chiefs of Staff. 
In the 38 years since graduating from West Point, Gen. Dempsey has led 
troops in combat, served as a combatant commander, and most recently 
served as the Chief of Staff of the Army. Thank you for your service, 
General.
    We also welcome the Defense Department's Comptroller, the Honorable 
Robert Hale--who is no stranger to this committee from his years of 
service at the Congressional Budget Office. Welcome Secretary Hale.
    Relative to last year's request, the President's budget calls for a 
$487 billion reduction in base defense spending over the next decade. 
This comes on top of already planned spending reductions for the Global 
War of Terrorism.
    The United States remains a nation at war, and our troops remain 
engaged against a fierce enemy overseas.
    It is difficult to square this reality with the President's steep 
reductions in both troop levels and funding levels. The timing of these 
cuts raises serious concerns that decisions are being driven by 
budgetary concerns as opposed to strategic priorities.
    Mr. Secretary, I think you have a unique perspective on the tension 
between meeting our national security requirements and getting 
spending, deficits, and debt under control.
    While they've yet to offer a balanced budget, our friends across 
the aisle often call for a ``balanced approach.'' Of course, budgeting 
is about setting priorities. Such calls assume that all of government's 
activities are equally important, and that blind proportionality can 
substitute for a clear-headed analysis of our priorities and 
responsibilities as policymakers.
    Like all categories of government spending, defense spending should 
be executed with efficiency and accountability. Yet many fear the 
arbitrary and deep reductions that the President has proposed in the 
defense budget will lead to a dramatic reduction in our defense 
capability.
    I commend you for your efforts to fund defense priorities within a 
rapidly shrinking budget. Your predicament, in my opinion, is due to 
failures elsewhere in the federal budget.
    According to Harvard's Niall Ferguson, a financial historian, the 
fall of great nations is the result of their excessive debt burdens. In 
their paths to decline, defense spending is always the first casualty.
    The failure by the Administration to deal honestly with the drivers 
of the debt--specifically when it comes to government spending on 
health care--is a failure that imperils our economic security and our 
national security.
    With its call for crushing levels of debt and the crowding out of 
defense by entitlement spending, the President's budget--in my 
opinion--charts a path to decline.
    In addition to examining the steep defense reductions in the 
President's budget, I hope today's hearing informs us of the 
consequences to our security that would result from the 
disproportionate cuts to defense spending under the Budget Control 
Act's sequester.
    Congress has a solemn obligation to ensure our troops fighting 
overseas have the resources they need to successfully complete their 
missions, and to adhere to our commitment to their service upon their 
return.
    Every citizen owes a debt of gratitude to the military families 
that continue to make untold sacrifices for our security and the 
freedoms we cherish.
    With that, before hearing testimony from Secretary Panetta and 
General Dempsey, I yield to Ranking Member Van Hollen.
    Thank you.

    Mr. Van Hollen. Thank you, Mr. Chairman. I want to join 
Chairman Ryan in welcoming you back, Mr. Secretary, to the 
Budget Committee. Welcome, General Dempsey. Welcome, 
Undersecretary Hale. I thank all of you for your dedicated 
service to the United States of America. Please extend our 
thanks and appreciation to the men and women who serve in our 
military. Our country is secure and free because of the 
sacrifices they and their families make every day.
    The president, the Department of Defense, our armed 
services, armed forces, along with the State Department, 
intelligence community, and law enforcement deserve a great 
deal of credit for the important work they have done over these 
last many years. We have successfully redeployed our troops 
from Iraq, captured or killed countless terrorists actively 
planning attacks, and greatly diminished al Qaeda's 
capabilities. We forged a coalition that successfully helped 
the people of Libya end dictator's Muammar Gaddafi's brutal 40-
year reign, that included the Lockerbie bombings that killed 
innocent Americans, and of course we eliminated the mastermind 
of 9/11, Osama bin Laden. These successes have helped 
strengthen our national security.
    We must continue to support a strong military that is 
second to none, and as President Obama has made clear, and I 
quote:
    ``The size and the structure of our military and defense 
budgets have to be driven by a strategy, not the other way 
around, but during this difficult fiscal period we have to be 
much smarter and more efficient in how we shape our defense 
budget. The strength of our military depends, in large part, on 
the strength of our economy, and the long-term strength of our 
economy depends, in large part, on putting together a plan to 
reduce our long-term deficits and debt in a credible and 
predictable way.''
    Last year, the former chairman of the Joint Chiefs of 
Staffs, Admiral Mike Mullen warned policymakers of this growing 
risk. As people here know, he said, and I quote, ``Our national 
debt is our biggest national security threat.'' Everybody must 
do their part. From 2001 to 2010 the base Pentagon budget, 
separate from the war effort, nearly doubled. In 2010, the 
United States spent more on defense than the next 17 countries 
combined, and more than half of the amount spent by those 17 
countries was from seven NATO countries and four other close 
allies: Japan, South Korea, Australia, and Israel.
    Last year, Admiral Mullen argued that the flush defense 
budget had allowed the Pentagon to avoid making difficult 
choices. He said, and I quote, ``With the increasing defense 
budget, which is almost double, it has not forced us to make 
the hard trades. It has not forced us to prioritize. It has not 
forced us to do the analysis,'' end quote.
    We can no longer afford to have taxpayer resources spent 
without doing the analysis, without ensuring that every dollar 
is spent efficiently and effectively invested. We can no longer 
go along with business as usual if we are going to get our 
fiscal house in order. There is now wide bipartisan consensus 
that all spending, including spending at the Pentagon, must be 
on the table, as we figure out how to get our finances back on 
track. Even this committee, where agreement is sometimes 
difficult to come by, voted last year on amendment to the 
budget that emphasized that defense spending should be 
considered as we strive the bring the deficit under control; 
and last August, as our colleagues know, the Congress codified 
that consensus by passing the Budget Control Act which capped 
discretionary spending, including security spending.
    Today, we find ourselves in a hard position. We are facing 
the prospect of an across-the-board $1.2 trillion sequester 
beginning January 2, 2013. If we do nothing, the Defense 
Department will be cut by another $500 billion over the next 
nine years in addition to the cuts on the caps. No one believes 
that an across-the-board reduction is the preferred way to get 
our finances in order. However, any effort to turn off and 
replace the sequester must be done responsibly by reaching 
agreement on a deficit reduction plan that is balanced and lays 
a strong foundation for our security.
    We have time, the president's 2013 budget, provides an 
alternative. I hope that will become part of the discussion I 
hear in the House. The president's plan responsibly replaces 
the sequester with even greater deficit reduction through a 
balanced plan that calls for shared responsibility. It makes 
key investments in our long-term economic growth. It puts a 
priority on protecting key investments in defense, rather than 
protecting tax loopholes for special interests, and tax breaks 
for the very wealthy. The defense budget is built on a forward 
looking strategy developed by our top civilian and military 
leadership. It maintains our unparalleled military strength, as 
General Dempsey has said. It is a military with which we can 
win any conflict, anywhere.
    Some have criticized the cuts in the defense budget as 
being too deep. I think it bears reminding that under the 
president's budget, the spending levels remain high by 
historical standards. We will still spend more in 2013 in real 
terms for defense, than during the peak years of the Korean 
War, the Vietnam War, and the Cold War. Even if you exclude war 
funding, average annual defense expenditures under the 
president's 10 year budget will still be higher in real terms 
than the average annual expenditures during the Korean War, the 
Vietnam War, and the Cold War period under President Ronald 
Reagan.
    In addition, the reductions in the president's defense 
spending are only half of the amounts recommended by the 
bipartisan Simpson-Bowles commission. Secretary Panetta, when 
you were sworn in as secretary of defense, you said that a 
choice between fiscal discipline and a strong national defense 
is a false choice. I agree, and I am confident we can work 
together to get our fiscal house in order and ensure that we 
have the strongest military in the world. Thank you all, and I 
look forward to your testimony.
    [The prepared statement of Chris Van Hollen follows:]

      Prepared Statement of Hon. Chris Van Hollen, Ranking Member,
                        Committee on the Budget

    Thank you Mr. Chairman. Welcome back to the Budget Committee, 
Secretary Panetta. Welcome General Dempsey and Under Secretary Hale. 
Thank you all for your dedicated service to our country.
    Please extend our thanks and appreciation to the men and women who 
serve in our military. Our country is secure and free because of the 
sacrifices they and their families make.
    The President, the Department of Defense, and our Armed Forces, 
along with the State Department, intelligence community, and law 
enforcement, deserve a great deal of credit for the important work they 
have done over these last few years. We have successfully redeployed 
our troops from Iraq, captured or killed countless terrorists actively 
planning attacks, and greatly diminished Al Qaeda's capabilities. We 
forged a coalition that successfully helped the people of Libya end 
dictator Muammar Gaddafi's brutal 40-year reign that included the 
Lockerbie bombing that killed innocent Americans. And, of course, we 
eliminated the mastermind of 9/11--Osama bin Laden. These successes 
have helped strengthen our national security.
    We must continue to support a strong military that is second to 
none, and, as President Obama has made clear, `the size and the 
structure of our military and defense budgets have to be driven by a 
strategy, not the other way around.' But during this difficult fiscal 
period we have to be much smarter and more efficient in how we shape 
our defense budget. The strength of our military depends in large part 
on the strength of our economy, and the long-term strength of our 
economy depends on implementing a plan to reduce our long-term deficits 
and debt in a predictable, credible way. Last year, the then-Chairman 
of the Joint Chiefs of Staff, Admiral Mike Mullen, warned policy makers 
of this growing risk. He said, `Our national debt is our biggest 
national security threat.'
    Everyone must do their part. From 2001 to 2010, the `base' Pentagon 
budget nearly doubled. In 2010, the U.S. spent more on defense than the 
next 17 countries combined, and more than half of the amount spent by 
those 17 countries was from seven NATO countries and four other close 
allies--Japan, South Korea, Australia, and Israel. Last year, Admiral 
Mullen argued that the flush defense budget had allowed the Pentagon to 
avoid making difficult choices. He said, `* * * with the increasing 
defense budget, which is almost double, it hasn't forced us to make the 
hard trades. It hasn't forced us to prioritize. It hasn't forced us to 
do the analysis.'
    We can no longer afford to spend taxpayer resources without doing 
the analysis; without ensuring every dollar is efficiently and 
effectively invested. We can no longer go along with business as usual 
if we are going to get our fiscal house in order.
    There is now wide bipartisan consensus that all spending, including 
spending at the Pentagon, must be on the table as we figure out how to 
get our finances back on track. Even in this committee, where agreement 
is often hard to come by, a majority of our members voted in favor of 
an amendment last spring to include language in the 2012 budget 
resolution emphasizing that defense spending should be considered as we 
strive to bring the deficit under control. And last August, the 
Congress codified that consensus by passing the Budget Control Act 
(BCA), which capped discretionary spending, including security 
spending. These BCA caps would, in essence, encourage `making the hard 
trades' across the government, including the Pentagon.
    Today, however, we find ourselves in a difficult position. We are 
facing the prospect of an across-the-board $1.2 trillion sequester 
beginning January 2, 2013. If we do nothing, the defense budget will be 
cut another $500 billion over the next nine years in addition to the 
cuts already made through the BCA discretionary caps. No one believes 
an across-the-board reduction is the preferred way to get our finances 
in order or to take care of priorities. However, any efforts to turn 
off and replace the sequester must be done responsibly, by reaching 
agreement on a deficit reduction plan that is balanced and that lays a 
strong foundation for our security.
    We still have time. The President's budget for 2013 provides an 
alternative to consider, and I hope it facilitates negotiations in the 
Congress. The President's plan responsibly replaces the sequester with 
even greater deficit reduction through a balanced plan that calls for 
shared responsibility. It reduces our deficits to manageable levels 
over time as the economy rebounds in the near-term. It makes key 
investments in education, infrastructure, and science and innovations 
to strengthen our economy over the longer-term. It puts a priority on 
protecting key investments in defense rather than protecting tax 
loopholes for special interests and tax breaks for the very wealthy. 
The defense budget is built on a forward-looking strategy developed by 
our top civilian and military leadership. It maintains our unparalleled 
military strength. As you have said, General Dempsey, this budget does 
not lead to a military in decline. It maintains a military that, as you 
have said, `can win any conflict, anywhere.'
    Some have criticized the cuts in the defense budget as being too 
deep. I think it bears reminding that under the President's budget, 
defense spending levels will remain high by historical standards. We 
will still spend more in 2013 in real terms for defense than during the 
peak years of the Korean War, the Vietnam War, and the Cold War. Even 
if you exclude war funding, average annual defense expenditures over 
the President's 10-year budget will still be higher in real terms than 
the average annual expenditures during the Korean War, the Vietnam War, 
and the Cold War period under President Ronald Reagan. In addition, the 
reductions in defense spending in the President's budget are only half 
of the amount of cuts recommended by the bipartisan Simpson-Bowles 
Commission.
    Secretary Panetta, when you were sworn in as Secretary of Defense, 
you said that a choice between fiscal discipline and a strong national 
defense is a false choice. I agree and I am confident we can work 
together to get our fiscal house in order and ensure that we continue 
to have the strongest military in the world.
    Again, I thank you for coming and I look forward to hearing your 
testimony.

    Chairman Ryan. Thank you Mr. Van Hollen. Let's start with 
you, Secretary Panetta, and then we will go to you General 
Dempsey.

 STATEMENTS OF LEON E. PANETTA, SECRETARY, U.S. DEPARTMENT OF 
DEFENSE; AND GENERAL MARTIN E. DEMPSEY, CHAIRMAN, JOINT CHIEFS 
  OF STAFF; ACCOMPANIED BY ROBERT F. HALE, UNDER SECRETARY OF 
       DEFENSE (COMPTROLLER) AND CHIEF FINANCIAL OFFICER

                  STATEMENT OF LEON E. PANETTA

    Secretary Panetta. Chairman Ryan, Congressman Van Hollen, 
and members of the Budget Committee, it is a real honor and 
pleasure to be able to have this opportunity to appear before 
you; this is home. I spent 16 years in the Congress and a good 
chunk of those years in the Budget Committee. So this is a 
place where we fought through a lot of the same battles that 
you are fighting through right now in the 1980s and 1990s.
    As a former chairman of the House Budget Committee and 
former OMB director, I have a deep appreciation for the very 
important role that is played by this committee in trying to 
achieve fiscal discipline, and helping set the federal 
government's overall spending priorities.
    As you know, I had the honor of working on most of the 
budget summits and proposals during the 1980s and 1990s with 
both Republican and Democratic presidents: President Reagan, 
President Bush, and President Clinton; and the work of all of 
those efforts ultimately produced a balanced federal budget. 
Believe me, I know firsthand what a tough and critical job you 
have in this committee, particularly given the size of the 
deficits that you are working with that unfortunately face our 
country again.
    It is no surprise that there is a vigorous debate here in 
Washington about what steps should be taken to confront these 
challenges. We went through many of the same debates in the 
1980s and 1990s. Thankfully, the leadership of both parties 
were willing to make some very difficult decisions that had to 
be made in order to reduce the deficit.
    Today, you face the same difficult choices, and while I 
know there are differences, the leaders of both the legislative 
and executive branches of government have a duty to protect our 
national and our fiscal security. I know that as elected 
members of Congress, particularly the members of this 
committee, you take this duty seriously, as I do as secretary 
of defense. I do not believe, as I have been quoted, I do not 
believe that we have to choose between fiscal discipline and 
national security. I believe we can maintain the strongest 
military in the world, and be part of a comprehensive solution 
to deficit reduction. The defense budget that we have presented 
to Congress and the nation, seeks to achieve those goals.
    The Fiscal year 2013 budget request for the Department of 
Defense was the product of a very intensive strategy review 
conducted by senior military and civilian leaders of the 
department with the advice and guidance of the National 
Security Council of the president. The reasons for this review 
are pretty clear.
    First of all, we are at a strategic turning point after a 
decade of war, and we have been through a decade of war, and at 
the same time, during that decade, there was substantial growth 
in defense budgets. Second, Congress did pass the Budget 
Control Act of 2011, which did impose some spending limits that 
impacted on the defense budget to the tune of $487 billion over 
the next decade. We decided that the fiscal situation that we 
were confronting presented us, at the Defense Department, with 
an opportunity to establish a new defense strategy for the 
future. We developed strategic guidance before any budget 
decisions were made because we wanted those budget decisions to 
be based on strategy, not the other way around. We agreed that 
we are at a key inflection point. The military mission in Iraq 
has ended, we still have a very tough fight on our hands in 
Afghanistan, but 2011 did mark significant progress in reducing 
violence and in transitioning to an Afghan-led responsibility 
for security, and we and our NATO allies have committed to 
continue that transition through the end of 2014.
    Last year, successful NATO operations did lead to the fall 
of Gaddafi, and as pointed out, targeted counter-terrorism 
efforts have significantly weakened al Qaeda and decimated its 
leadership, but even though we have had those successes, unlike 
past drawdowns, and let me stress that, unlike past drawdowns, 
and I have been through most of those in recent history, where 
the threats that we confronted receded. The problem today is we 
still face a very serious array of security challenges. We are 
still at war in Afghanistan. We confront terrorism, even though 
we have reduced the threat in the Fatah, terrorism exists in 
Somalia, in Yemen, in North Africa, and elsewhere, and make no 
mistake, they still threaten to attack this country.
    We faced a proliferation of weapons of mass destruction. We 
continue to face threats from Iran and North Korea that 
destabilize the world. We have turmoil in the Middle East; any 
one of those situations could explode on us in terms of 
conflict. We have rising powers in Asia that continue to 
challenge international rules and international stability, and 
growing concerns about cyber intrusions, and cyber attacks. We 
must meet these challenges, and at the same time, meet our 
responsibility to fiscal discipline. This is not an easy task. 
Further, we did not want to make the mistakes of the past.
    Every time these drawdowns have occurred in the past, what 
has happened is we have hollowed out the force. Our decision 
was we want to maintain the strongest military in the world, 
not to hollow out the force by just simply cutting across the 
board and weakening every element in defense. I required that 
we take a balanced approach to budget cuts and put everything 
on the table that we have at the Defense Department, and most 
importantly, to not break faith with the troops and their 
families, those that have deployed time and time again to the 
war zone.
    The president's budget requests $525.4 billion in fiscal 
year 2013 for the base budget, and $88.5 billion to support the 
war efforts. In order to be consistent with Title I of the 
Budget Control Act, our fiscal year 2013 base budget request 
had to be roughly $45 billion less than we had anticipated 
under last year's budget plan. Over the next five years, 
defense spending will be $259 billion less than planned for in 
the fiscal 2012 budget, a difference of nearly 9 percent; and 
over 10 years, starting in fiscal year 2012, it will be reduced 
by $487 billion.
    To meet these new budget targets and our national security 
responsibilities, we had to fundamentally reshape our defense 
spending priorities based on a new strategy. The Department of 
Defense has stepped up to the plate. We have met our 
responsibilities under the Budget Control Act. With these 
record deficits, no budget can be balanced on the back of 
defense spending alone. Based on my own budget experience, I 
strongly believe that all areas of the federal budget must be 
put on the table, not just discretionary alone, but mandatory 
spending, and, yes, revenues. That is the responsible way to 
reduce deficits, and the responsible way to avoid the sequester 
provisions contained in Title III of the Budget Control Act.
    The sequester Meade Acts would cut another roughly $500 
billion from defense over the next nine years. These cuts would 
truly hollow out the force and inflict severe damage on our 
national defense. The president's fiscal year 2013 budget does 
put forward a proposal to try to avert sequestration and would 
reduce the deficit by $4.3 trillion over the next decade; and I 
recognize that people agree or disagree with those proposals. 
What I strongly urge is that working with those proposals, come 
up with a large, balanced package of savings that have to be 
achieved that could de-trigger sequestration, reduce the 
deficit, and maintain the strongest national defense in the 
world. The $487 billion in 10 year savings that we have 
proposed come from four areas in the defense budget: 
Efficiencies, trying to improve the way the defense department 
operates, make it more efficient; force structure reductions, 
this comes out of manpower; procurement adjustments, 
procurement reforms, dealing with modernization, weaponization; 
and compensation, a difficult area to confront, but an area 
that has grown in the defense budget by almost 90 percent. Let 
me walk through each of these areas.
    First of all, with regard to efficiencies, Secretary Gates 
had proposed about $150 billion in efficiencies in the fiscal 
year 2012 budget, and we are in the process of implementing 
those efficiencies, but we made the decision that we could add 
another $60 billion on top of that, primarily from the 
following: streamlining support functions, consolidating IT 
enterprises, re-phasing military construction programs, 
consolidating inventories, and reducing service support 
contractors. As we reduce force structure, we have a 
responsibility to provide the most cost-efficient support for 
the force. For that reason, the president will request the 
Congress to authorize the base realignment and closure process 
for 2013 and 2015. As someone who went through BRAC, and I did 
in spades, Fort Ord Reservation was closed in my district, it 
represented about 25 percent of my local economy; so I know 
what it means to go through that process; yet, as difficult as 
it is, it still remains the only effective way to achieve 
infrastructure savings in the long run.
    Achieving audit readiness is another key initiative that 
will help the department to try to apply greater discipline in 
the use of defense dollars. We do not have department-wide 
audit ability at the present time, and that is a shame. For 
that reason, I have directed the department to achieve audit 
readiness by the end of calendar year 2014, so that we can 
speed up the process of being able to face the American 
taxpayers and tell them exactly how their funds are being used, 
but efficiencies are not enough to achieve the necessary 
savings. Budget reductions of this magnitude require 
significant adjustments to force structure, to procurement 
investments, and to compensation. Those choices reflected the 
strategic guidance and vision that we worked on, and were the 
basis for the decisions that followed.
    Let me just summarize those if I can, and let me also make 
clear that this strategy has the full support of all of the 
service chiefs, the service secretaries, all the 
undersecretaries. The Defense Department is unified in the 
presentation of the budget strategies that I am about to 
summarize.
    One, we know that the force of the future will be smaller 
and leaner, that is a reality by virtue of the drawdowns that 
we are engaged in, but we have made the decision that that 
force must be agile, it must be flexible, it must be ready to 
be deployed, and it must be technologically advanced. We knew 
that coming out of the wars, that there would be a drawdown, 
but we also knew that the force we wanted had to be truly agile 
and mobile. In addition to that, the force structure that we 
had, we wanted to be able to afford to properly train and 
equip. The very definition of hollowing out the force is to 
maintain a larger force structure and then cut training and 
equipment and weaken that force, and that is something we did 
not want to do. We are implementing force structure reductions 
consistent with that strategic guidance for a savings of about 
$50 billion over the next five years. The adjustments include, 
and you have read these, we are resizing the active Army, we 
are going from about 562,000 as a result of the ramp up after 
9/11. We are going to about 490,000 soldiers by 2017. We will 
transition down in a gradual way, and we will reach a level 
that is still higher above the level we had prior to 9/11.
    We will gradually resize the active Marine Corps to about 
182,000 from roughly 202,000. We will reduce and streamline the 
Air Force's airlift fleet. In addition, the Air Force will 
eliminate seven tactical air squadrons, but we will still 
retain a robust force of 54 combat coded fighter squadrons, and 
maintain our capabilities on airlift as well. The Navy, while 
it will protect its highest priority and most flexible ships, 
will retire seven lower priority naval cruisers that have not 
been upgraded with ballistic missile defense capability.
    Secondly, we felt we had to rebalance our global posture, 
and focus on those areas that represent the greatest threats to 
our national security, so we will emphasize Asia-Pacific and 
the Middle East. The strategic guidance made clear that we must 
protect capabilities needed to project power in Asia-Pacific 
and the Middle East. These are the areas where, as you know 
just by picking up the newspaper, these are the places that can 
represent the greatest threats to our security. For that 
reason, we maintain the current bomber fleet, we maintain our 
aircraft carrier fleet at a long-term level of 11 ships and 10 
air wings. We maintain the big deck amphibious fleet, we 
enhance our Army and Marine Corps force structure presence in 
the Pacific, and we also maintain a strong presence in the 
Middle East.
    Third, where elsewhere in the world, and we have 
responsibilities elsewhere, we cannot ignore Europe or Latin 
America or Africa. What we have recommended is that we build 
innovative partnerships and strengthen key alliances and 
partnerships in those areas. The strategy makes clear that even 
though Asia-Pacific and the Middle East represent areas of 
growing strategic priority, the United States will strengthen 
its key alliances with NATO, and the other alliances that we 
have in the Pacific. We will build better partnerships, and one 
of the recommendations is to develop innovative ways, such as 
rotational deployments using the Marines, using the Army, and 
using special forces to sustain U.S. presence elsewhere in the 
world.
    Fourthly, we need to ensure that we can confront and defeat 
aggression from any adversary, anytime, anywhere. We have to 
have the capability to defeat more than one enemy at a time. 
This is the 21st century, and our adversaries will come at us 
using 21st century technology, and for that reason we have to 
be able to respond with 21st century technology. So we must 
invest in space, in cyberspace, in long-range precision 
strikes, and in special operations forces to ensure that we can 
still confront and defeat multiple adversaries, even with the 
force structure reductions that I outlined earlier.
    Even with some adjustments to the force structure, this 
budget sustains a military that is the strongest in the world. 
We will have in the Army 18 divisions and 65 brigade combat 
teams. In the Navy we will maintain 285 ships, with the Marines 
we will have 31 infantry battalions and 10 artillery 
battalions, and in the Air Force we will maintain 54 combat 
squadrons, as well as 275 strategic airlifters. We will have, 
without mistake, the strongest military in the world, even 
after we have made these reductions.
    The last point I would make is that this cannot just be 
about cuts, it also has to be about investments and so we have 
targeted our investments. In developing that technological leap 
that we have to have if we are going to be able to get ahead of 
the rest of the world, we are investing in science and 
technology and basic research and special operations forces, in 
unmanned air systems, and in cyber. At the same time, we 
recognize the need to prioritize and distinguish urgent 
modernization needs from those that can be delayed, 
particularly in light of the cost problems we confront. We have 
identified $75 billion in savings over five years that result 
from canceled or restructured programs. $15.1 billion from 
restructuring the joint strike fighter program, $13.1 billion 
by stretching investment in the procurement of ships, $2.5 
billion from terminating an expensive version of the global 
hawk. All of these are important steps to try to modernize the 
force, but do it in a cost-effective way. An additional key to 
this strategy is making sure that we maintain a strong reserve 
and a strong National Guard. That has been one of the basic 
support systems for the last 10 years of war. We have relied on 
the National Guard, we relied on the reserve, and those of you 
that have been to the battle zone know that these individuals 
are fighting alongside the active duty. They are getting 
tremendous experience, they are making tremendous sacrifices, 
but they are an experienced and effective force. We need to 
maintain that for the future.
    And also we need to maintain a strong and flexible 
industrial base. If we start losing that industrial base, and 
it impacts on our ship-building capability, on our tank 
construction capability, on our plane development, if we lose 
those crafts, if we lose those skills, we will damage our 
national defense. We have to try to maintain that industrial 
base at the same time.
    Finally, with compensation, the most fundamental element of 
our strategy and our decision-making process is our people. 
They, far more than any weapon system or technology, are the 
great strength of the United States. We are determined to 
sustain basic benefits that flow to the troops and to their 
families and to wounded veterans, and yet, at the same time, we 
had to look at the compensation area because it has grown by 90 
percent since 2001, and we have to implement cost constraints 
in the future in this area. For that reason, we have approached 
in a way that we think is fair, transparent, and consistent 
with our commitments to our people.
    On military pay there will be no pay cuts, and we are going 
to provide pay raises these next two years, but then limit 
those pay raises in the out years. On TRICARE costs for health 
care, we have recommended increased fees; we have not increased 
those fee levels since 1990.
    We have looked at retirement commission to look at the 
retirement area, with the proviso that we grandfather those 
benefits so that those that are serving will not lose the 
benefits that were promised to them, but at the same time, try 
to look at what reforms can be made on retirement for the 
future.
    That is the package that we have presented, this has not 
been easy, this is a tough and challenging responsibility, but 
we need your support. As someone who comes from the legislative 
branch and has served in this Congress, has served in this 
room, and in the Congress, I believe in the partnership between 
the executive and legislative branches when it comes to making 
these kinds of decisions, so we need your partnership to try 
and implement this strategy.
    Please make no mistake, there is no way I can reduce the 
defense budget by a half a trillion dollars and not have it 
impact on all 50 states, and also, not have it increase risks. 
We think they are acceptable risks, but nevertheless, there are 
risks. We have a smaller force, we will depend a lot more on 
mobilization, we will have to depend on our ability to develop 
new technologies for the future, we have troops that are coming 
home, we have to provide them jobs, we have to provide them 
education and support, so that they do not wind up on 
unemployment rolls. There is very little margin for error in 
what we have proposed. You have mandated, and the Congress has 
mandated on a bipartisan basis that we reduce this budget by 
$487 billion. In many ways, this will be a test. As you know 
better than I, everybody talks a good game about deficit 
reduction, but this is not about talk, this is about action, 
and doing what is right for this country.
    Mr. Chairman and members of the committee, as a former 
member and a former chairman of the budget committee, this 
committee cannot cease to being a conscience of the Congress 
and the country when it comes to fiscal responsibility and 
doing what is right for this nation. I look forward to working 
with you closely in the months ahead to try to develop what 
this country expects of their leaders, to be fiscally 
responsible in developing a force for the future, a force that 
can defend this country, that can support our men and women in 
uniform, and most importantly, be the strongest military in the 
world. Thank you.
    [The prepared statement of Leon E. Panetta follows:]

         Prepared Statement of Hon. Leon E. Panetta, Secretary,
                       U.S. Department of Defense

    Mr. Chairman, members of the committee. Thank you for the 
opportunity to appear before you to discuss the President's budget 
request for Fiscal Year 2013 (FY13) for the Department of Defense.
    As a former Chairman of this committee and Director of the Office 
of Management and Budget, I have a deep appreciation for the important 
role you play in helping set the federal government's overall spending 
priorities. It is a tough job, but it is a critical responsibility, 
particularly given the significant challenges we are facing as a 
country. Our economy is still recovering from an historic recession. We 
are grappling with very large debt and deficits that over the long-term 
threaten our nation's fiscal solvency. Meanwhile, we remain a nation at 
war, and we are confronting a complex range of security challenges that 
threaten global stability and our homeland.
    I recognize that there are vigorous debates in Washington about the 
proper role of government in confronting these challenges. But if there 
is consensus on one thing, it is that one of the fundamental duties of 
the federal government is to protect our national security. This is a 
responsibility for both political parties, and all branches of 
government. And I know that as members of Congress you take this duty 
as seriously as I do as Secretary of Defense.
    In order to protect our national security, I believe that we must 
maintain the strongest military in the world, and I am committed to 
sustaining our military strength as Secretary of Defense. But that is 
not enough. Our national security also depends on strong diplomacy, it 
also requires strong intelligence efforts. Above all, protecting the 
nation requires a strong economy, fiscal discipline and effective 
government.
    As someone with a lifetime of experience developing and 
implementing budgets, I do not believe that we must choose between 
fiscal discipline and national security. I believe we can maintain the 
strongest military in the world, and be part of a comprehensive 
solution to deficit reduction.
                        defense strategy review
    We were able to achieve that balance because the FY13 budget 
request for the Department of Defense was the product of an intensive 
strategy review conducted by the senior military and civilian leaders 
of the Department under the advice and guidance of President Obama. The 
reasons for this review are clear: first, the United States is at a 
strategic turning point after a decade of war and substantial growth in 
defense budgets. Second, given the size of our debt and deficits, 
Congress passed the Budget Control Act of 2011, imposing limits that 
led to a reduction in the defense base budget of $487 billion over the 
next decade.
    We at the Department decided that the fiscal situation presented us 
with the opportunity to establish a new strategy for the force of the 
future, and that strategy has guided us in making the decisions 
contained in the President's budget. These decisions reflect the fact 
that we are at an important turning point that would have required us 
to make a strategic shift under any circumstances. The U.S. military's 
mission in Iraq has ended. We still have a tough fight on our hands in 
Afghanistan, but 2011 marked significant progress in reducing violence 
and transitioning to Afghan-led responsibility for security--and we are 
on track to complete that transition by the end of 2014, in accordance 
with our Lisbon commitments. Last year, the NATO effort in Libya also 
concluded with the fall of Qadhafi. And successful counterterrorism 
efforts have significantly weakened al-Qaeda and decimated its 
leadership.
    But despite what we have been able to achieve, unlike past 
drawdowns when threats have receded, the United States still faces a 
complex array of security challenges across the globe: We are still a 
nation at war in Afghanistan; we still face threats from terrorism; 
there is dangerous proliferation of lethal weapons and materials; the 
behavior of Iran and North Korea threaten global stability; there is 
continuing turmoil and unrest in the Middle East; rising powers in Asia 
are testing international relationships; and there are growing concerns 
about cyber intrusions and attacks. Our job is to meet these challenges 
and at the same time, meet our responsibility to fiscal discipline. 
This is not an easy task, but is one that I believe is within our grasp 
if we all do our part for the American people.
    To build the force we need for the future, we developed new 
strategic guidance that consists of five key elements:
     First, the military will be smaller and leaner, but it 
will be agile, flexible, ready and technologically advanced.
     Second, we will rebalance our global posture and presence 
to emphasize Asia-Pacific and the Middle East.
     Third, we will build innovative partnerships and 
strengthen key alliances and partnerships elsewhere in the world.
     Fourth, we will ensure that we can quickly confront and 
defeat aggression from any adversary--anytime, anywhere.
     Fifth, we will protect and prioritize key investments in 
technology and new capabilities, as well as our capacity to grow, adapt 
and mobilize as needed.
                        strategy to fy13 budget
    We developed this new strategic guidance before any final budget 
decisions were made to ensure that the budget choices reflected the new 
defense strategy.
    While shaping this strategy, we did not want to repeat the mistakes 
of the past. Our goals were: to maintain the strongest military in the 
world, to not ``hollow out'' the force, to take a balanced approach to 
budget cuts, to put everything on the table, and to not break faith 
with troops and their families. Throughout the review we also made sure 
this was an inclusive process. General Dempsey and I worked closely 
with the leadership of the Services and Combatant Commanders, and 
consulted regularly with members of Congress.
    As a result of these efforts, the Department is strongly united 
behind the President's budget request for fiscal 2013, and the Future 
Years Defense Plan.
                            defense topline
    The President's budget requests $525.4 billion in FY13 for the base 
budget of the Department of Defense and $88.5 billion to support the 
war efforts. In order to be consistent with Title I of the Budget 
Control Act, our FY13 base budget request had to be roughly $45 billion 
less than we had anticipated it would be under last year's budget plan. 
Over the next five years, defense spending under the FY13 budget will 
be $259 billion less than we had planned for in the FY12 budget--a 
difference of nearly nine percent. Over the ten years starting in FY12, 
it will be reduced by $487 billion. This represents a significant 
change to our defense spending plans, and in order to meet these new 
budget targets and our national security responsibilities, we had to 
fundamentally reshape our defense spending priorities, based on our new 
defense strategy.
    Whereas under last year's budget we had planned for several years 
of modest real growth in the defense base budget, the $525.4 billion 
base budget request for FY13 represents a decline of more than two 
percent over last year's enacted level in real dollar terms.
    At the same time, we expect total defense spending, which includes 
war-related costs, to be reduced significantly over the next five 
years. Given the drawdown in Iraq and the ongoing transition in 
Afghanistan, funding requests for overseas contingency operations have 
already begun to decrease sharply. After adjustment for inflation, we 
expect total defense spending to be down by more than 20 percent, 
mostly because of the drop in war costs. This decline is roughly 
consistent with the size of the drawdowns after Vietnam and the Cold 
War--although we are determined to implement these reductions in a 
manner that avoids a hollow force and other mistakes of the past.
    While the defense base budget will not be significantly reduced 
over the next five years--in fact, it will remain above 2008 levels 
after adjusting for inflation--the Department has historically required 
modest real growth in force structure and modernization accounts in 
order to maintain our force structure without hollowing out the force. 
That means that even with a defense base budget that is roughly flat in 
real dollar terms, we will have to get smaller in order to maintain a 
ready, agile, and deployable force.
    I believe that this pattern of defense investment is both 
appropriate and sustainable within the overall federal budget. Spending 
on the defense base budget has increased by about 30 percent in real 
terms since 2001, and by fiscal 2013, it will make up 45 percent of all 
Federal discretionary budget authority. That said, the defense base 
budget will represent only 3.2 percent of GDP in 2013--and as our 
economy continues to grow, we project that percentage will fall to 2.8 
percent by 2017.
    Ultimately, we need to base our investment in national defense not 
on numbers but on strategy, and a clear-eyed assessment of the risks 
and threats that exist to our national security. Given the complex and 
dangerous world we continue to inhabit, the President's proposal for 
spending on the defense base budget represents the investment we need 
to provide an adequate defense for the nation.
    There is no doubt that our budget deficits are too high and that, 
as the economy recovers, we need to reduce deficits in order to 
strengthen our long-term economic outlook and protect our national 
security. The Department of Defense has stepped up to the plate with 
its share of the cuts needed to meet the original caps enacted under 
the Budget Control Act. But with these record deficits, no budget can 
be balanced on the back of discretionary spending alone.
    Based on my own budget experience, I strongly believe that Congress 
and the Administration need to put all areas of the federal budget on 
the table and work together to achieve sufficient deficit reduction, in 
a balanced way, to avoid the sequester provisions contained in Title 
III of the Budget Control Act. Sequester would subject the Department 
to another roughly $500 billion in additional cuts over the next nine 
years, and in FY13, these cuts would have to be implemented with 
limited flexibility. These changes could hollow out the force and 
inflict severe damage to our national defense and programs that are 
vital to our quality of life.
    I understand that sequester is designed to force the Congress to 
confront the hard choices that must be made in any serious effort to 
deal with the deficit. We all recognize what those hard choices are. 
They involve dealing with mandatory spending, which represent almost 
two-thirds of the federal budget, and additional revenues. It's a 
matter of simple arithmetic that discretionary spending, which accounts 
for only one-third of the federal budget, cannot be expected to 
contribute 100 percent to our deficit reduction efforts.
    History has made clear that real deficit reduction only happens 
when everything is on the table--discretionary, mandatory spending, and 
revenues. That has been true for every major deficit reduction plan 
enacted by the Congress in recent history.
    We still have time to avert sequestration, and the President's FY13 
budget represents a path to doing so. The President's FY13 budget 
proposes a balanced plan to produce about $4 trillion in savings, 
including the $1.0 trillion in deficit reduction already generated by 
the Budget Control Act's discretionary caps. The President's plan would 
add mandatory savings and revenue increases to the already enacted 
discretionary cuts. If enacted, this proposal would provide a basis for 
halting sequestration, while ensuring the maintenance of a strong 
national defense.
                   accommodating defense budget cuts
    Let me turn now to the changes we made to accommodate the 
reductions required to be consistent with the Budget Control Act. I 
believe that these changes offer convincing evidence that we have made 
tough choices in the Department of Defense, and that we are doing our 
part to help achieve the national security imperative of deficit 
reduction while making decisions that fit within our overall defense 
strategy.
    The $259 billion in five year savings from defense that are part of 
this plan come from three broad areas:
     First, efficiencies--we redoubled efforts to make more 
disciplined use of taxpayer dollars, yielding about one quarter of the 
target savings;
     Second, force structure and procurement adjustments--we 
made strategy-driven changes in force structure and procurement 
programs, achieving roughly half of the savings;
     Finally, compensation--we made modest but important 
adjustments in personnel costs to achieve some necessary cost savings 
in this area, which represents one third of the budget but accounted 
for a little more than 10 percent of the total reduction.
    The remaining reductions reflect economic changes and other shifts. 
Let me walk through these three areas, beginning with our efforts to 
discipline our use of defense dollars.
                more disciplined use of defense dollars
    If we are to tighten up the force, I felt we have to begin by 
tightening up the operations of the Department. This budget continues 
efforts to reduce excess overhead, eliminate waste, and improve 
business practices across the department. The more savings realized in 
this area, the less spending reductions required for modernization 
programs, force structure, and military compensation.
    As you know, the FY12 budget proposed more than $150 billion in 
efficiencies between FY 2012 and FY 2016, and we continue to implement 
those changes. This budget identifies about $60 billion in additional 
savings over five years. Across the military services, new efficiency 
efforts over the next five years include:
     The Army proposes to save $18.6 billion through measures 
such as streamlining support functions, consolidating IT enterprise 
services, and rephasing military construction projects;
     The Navy proposes to save $5.7 billion by implementing 
strategic sourcing of commodities and services, consolidating 
inventory, and other measures;
     The Air Force proposes to save $6.6 billion by reducing 
service support contractors and rephasing military construction 
projects;
    Other proposed DoD-wide efficiency savings over the next five years 
total $30.1 billion, including reductions in expenses in the Office of 
the Secretary of Defense and the Defense Agencies.
    As part of these initiatives, we are continuing the initiative to 
improve the Department's buying power by seeking greater efficiency and 
productivity in the acquisition of goods and services. We are 
strengthening acquisition support to the warfighter, executing 
acquisitions more efficiently, preserving the industrial base, and 
strengthening the acquisition workforce. This budget assumes that these 
policies produce savings of $5.3 billion over the next five years.
    In terms of military infrastructure, we will need to ensure that 
our current basing and infrastructure requirements do not divert 
resources from badly needed capabilities.
    As we reduce force structure, we have a responsibility to provide 
the most cost efficient support for the force. For that reason, the 
President will request that Congress authorize the Base Realignment and 
Closure process for 2013 and 2015. As someone who went through BRAC, I 
realize how controversial this process can be for members and 
constituencies. And yet, it is the only effective way to achieve 
infrastructure savings.
    Achieving audit readiness is another key initiative that will help 
the Department achieve greater discipline in its use of defense 
dollars. The Department needs auditable financial statements to comply 
with the law, to strengthen its own internal processes, and to reassure 
the public that it continues to be a good steward of federal funds. In 
October 2011, I directed the Department to emphasize this initiative 
and accelerate efforts to achieve fully auditable financial statements. 
Among other specific goals, I directed the Department achieve audit 
readiness of the Statement of Budgetary Resources for general funds by 
the end of calendar year 2014, and to meet the legal requirements to 
achieve full audit readiness for all Defense Department financial 
statements by 2017. We are also implementing a course-based 
certification program for defense financial managers in order to 
improve training in audit readiness and other areas, with pilot 
programs beginning this year. We now have a plan in place to meet these 
deadlines, including specific goals, financial resources, and a 
governance structure.
    These are all critically important efforts to ensure the Department 
operates in the most efficient manner possible. Together, these 
initiatives will help ensure the Department can preserve funding for 
the force structure and modernization needed to support the missions of 
our force.
        strategy-driven changes in force structure and programs
    But it is obvious that efficiencies are not enough to achieve the 
required savings. Budget reductions of this magnitude require 
significant adjustments to force structure and procurement investments. 
The choices we made reflected five key elements of the defense 
strategic guidance and vision for the military.
1. Build a force that is smaller and leaner, but agile, flexible, ready 
        and technologically advanced
    We knew that coming out of the wars, the military would be smaller. 
But to ensure an agile force, we made a conscious choice not to 
maintain more force structure than we could afford to properly train 
and equip. We are implementing force structure reductions consistent 
with the new strategic guidance for a total savings of about $50 
billion over the next five years.
    These adjustments include:
     Gradually resizing the active Army to 490,000 soldiers;
     Gradually resizing the active Marine Corps to 182,100 
Marines;
     Reducing and streamlining the Air Force's airlift fleet. 
The Air Force will maintain a fleet of 275 strategic airlifters and 318 
C-130s--a fleet more than capable of meeting the airlift requirements 
of the new strategy. In addition, the Air Force will eliminate seven 
Tactical Air squadrons but retain a robust force of 54 combat-coded 
fighter squadrons, maintaining the capabilities and capacity needed to 
meet the new strategic guidance;
     The Navy will retire seven lower priority Navy cruisers 
that have not been upgraded with ballistic missile defense capability 
or that would require significant repairs, as well as two dock landing 
ships.
2. Rebalance global posture and presence to emphasize Asia-Pacific and 
        the Middle East
    The strategic guidance made clear that we must protect capabilities 
needed to project power in Asia-Pacific and the Middle East. To this 
end, this budget:
     Maintains the current bomber fleet;
     Maintains the aircraft carrier fleet at a long-term level 
of 11 ships and 10 air wings;
     Maintains the big-deck amphibious fleet;
     Restores Army and Marine Corps force structure in the 
Pacific after the drawdown from Iraq and as we drawdown in Afghanistan, 
while maintaining a strong presence in the Middle East.
    The budget also makes selected new investments to ensure we develop 
new capabilities needed to maintain our military's continued freedom of 
action in face of new challenges that could restrict our ability to 
project power in key territories and domains.
    Other key power projection investments in FY13 include:
     $300 million to fund the next generation Air Force bomber 
(and a total of $6.3 billion over the next five years);
     $1.8 billion to develop the new Air Force tanker;
     $18.2 billion for the procurement of 10 new warships, 
including two Virginia-class submarines, two Aegis-class destroyers, 
four Littoral Combat Ships, one Joint High Speed Vessel, and one CVN-
21-class aircraft carrier. We are also investing $100 million to 
increase cruise missile capacity of future Virginia-class submarines;
3. Build innovative partnerships and strengthen key alliances and 
        partnerships
    The strategy makes clear that even though Asia-Pacific and the 
Middle East represent the areas of growing strategic priority, the 
United States will work to strengthen its key alliances, to build 
partnerships and to develop innovative ways such as rotational 
deployments to sustain U.S. presence elsewhere in the world.
    To that end, this budget makes key investments in NATO and other 
partnership programs, including $200 million in FY13 and nearly $900 
million over the next five years in the NATO Alliance Ground 
Surveillance system.
    The new strategy also envisions a series of organizational changes 
that will boost efforts to partner with other militaries. These include 
allocating a U.S.-based brigade to the NATO Response Force and rotating 
U.S.-based units to Europe for training and exercises; and increasing 
opportunities for Special Operations Forces to advise and assist 
partners in other regions.
4. Ensure that we can confront and defeat aggression from any 
        adversary--anytime, anywhere
    This budget invests in space, cyberspace, long range precision-
strike and the continued growth of special operations forces to ensure 
that we can still confront and defeat multiple adversaries even with 
the force structure reductions outlined earlier. It also sustains the 
nuclear triad of bombers, missiles and submarines to ensure we continue 
to have a safe, reliable and effective nuclear deterrent.
    Even with some adjustments to force structure, this budget sustains 
a military that is the strongest in the world, capable of quickly and 
decisively confronting aggression wherever and whenever necessary. 
After planned reductions, the FY17 joint force will consist of:
     An Army of more than one million active and reserve 
soldiers with 18 Divisions, approximately 65 Brigade Combat Teams, 21 
Combat Aviation Brigades and associated enablers.
     A Naval battle force of 285 ships--the same size force 
that we have today--that will remain the most powerful and flexible 
naval force on earth, able to prevail in any combat situation, 
including the most stressing anti-access environments. Our maritime 
forces will include 11 carriers, 9 large deck amphibious ships, 82 
guided missile cruisers and destroyers, and 50 nuclear powered attack 
submarines.
     A Marine Corps with 31 infantry battalions, 10 artillery 
battalions and 20 tactical air squadrons.
     An Air Force that will continue to ensure air dominance 
with 54 combat coded fighter squadrons and the current bomber fleet. 
Our Air Force will also maintain a fleet of 275 strategic airlifters, 
318 C-130s and a new aerial refueling tanker.
5. Protect and prioritize key investments, and the capacity to grow, 
        adapt and mobilize
    The force we are building will retain a decisive technological 
edge, leverage the lessons of recent conflicts and stay ahead of the 
most lethal and disruptive threats of the future.
    To that end, the FY13 budget:
     Provides $11.9 billion for science and technology to 
preserve our ability to leap ahead, including $2.1 billion for basic 
research.
     Provides $10.4 billion (base and OCO) to sustain the 
continued growth in Special Operations Forces;
     Provides $3.8 billion for Unmanned Air Systems. We slowed 
the buy of the Reaper aircraft to allow us time to develop the 
personnel and training infrastructure necessary to make full use of 
these important aircraft.
     Provides $3.4 billion in cyber activities. We are 
investing in full spectrum cyber operations capabilities to address the 
threats we see today and in the future;
    At the same time, the strategic guidance recognizes the need to 
prioritize and distinguish urgent modernization needs from those that 
can be delayed--particularly in light of schedule and cost problems. 
Therefore this budget identifies about $75 billion in savings over five 
years resulting from canceled or restructured programs. Key 
modifications and associated savings over the next five years include:
     $15.1 billion in savings from restructuring the Joint 
Strike Fighter by delaying aircraft purchases to allow more time for 
development and testing;
     $13.1 billion by reducing investment in procurement of 
ships, while continuing to focus on the higher-capability vessels most 
needed to carry out our defense strategy;
     $1.3 billion in savings from delaying development of the 
Army's Ground Combat Vehicle due to contracting difficulties;
     $4.3 billion in savings from delaying the next generation 
of ballistic missile submarines by two years for affordability and 
management reasons;
    We will also terminate selected programs, including:
     The Block 30 version of Global Hawk, which has grown in 
cost to the point where it is no longer cost effective, resulting in 
savings of $2.5 billion; and
     The weather satellite program, because we can depend on 
existing satellites, resulting in savings of $2.3 billion;
    We have also invested in a balanced portfolio of capabilities that 
will enable our force to remain agile, flexible and technologically 
advanced enough to meet any threat. To that end, ground forces will 
retain the key enablers and know-how to conduct long-term stability 
operations, and the Army will retain more mid-grade officers and NCOs. 
These steps will ensure we have the structure and experienced leaders 
necessary should we need to re-grow the force quickly.
    Another element is to maintain a capable and ready National Guard 
and Reserve. The Reserve Component has demonstrated its readiness and 
importance over the past ten years of war, and we must ensure that it 
remains available, trained, and equipped to serve in an operational 
capacity when necessary.
    Another key part of preserving our ability to quickly adapt and 
mobilize is a strong and flexible industrial base. This budget 
recognizes that industry is our partner in the defense acquisition 
enterprise.
              ensuring quality of the all-volunteer force
    Now to the most fundamental element of our strategy and our 
decision-making process: our people. This budget recognizes that they, 
far more than any weapons system or technology, are the great strength 
of our United States military. All told, the FY13 budget requests 
$135.1 billion for the pay and allowances of military personnel and 
$8.5 billion for family support programs vital to the well-being of 
service members and their families.
    One of the guiding principles in our decision making process was 
that we must keep faith with our troops and their families. For that 
reason, we were determined to protect family assistance programs, and 
we were able to sustain these important investments in this budget and 
continue efforts to make programs more responsive to the needs of 
troops and their families. Yet in order to build the force needed to 
defend the country under existing budget constraints, the growth in 
costs of military pay and benefits must be put on a sustainable course. 
This is an area of the budget that has grown by nearly 90 percent since 
2001, or about 30 percent above inflation--while end strength has only 
grown by three percent.
    This budget contains a roadmap to address the costs of military 
pay, health care, and retirement in ways that are fair, transparent, 
and consistent with our fundamental commitments to our people.
    On military pay, there are no pay cuts. We have created sufficient 
room to allow for full pay raises in 2013 and 2014 that keep pace with 
increases in the private sector. However we will provide more limited 
pay raises beginning in 2015--giving troops and their families fair 
notice and lead time before changes take effect. Let me be clear: 
nobody's pay is cut in this budget nor will anyone's pay be cut in the 
future years of this proposal.
    This budget devotes $48.7 billion to health care costs--an amount 
that has more than doubled over the last decade. In order to continue 
to control the growth of these costs, we are recommending increases in 
health care fees, co-pays and deductibles to be phased in over four to 
five years. None of the fee proposals in the budget would apply to 
active duty service members, and there will be no increases in health 
care fees or deductibles for families of active duty service members 
under this proposal. Those most affected will be retirees--with the 
greatest impact on working-age retirees under the age of 65 still 
likely to be employed in the civilian sector. Even with these changes, 
the costs borne by military retirees will remain below levels in most 
comparable private sector plans--as they should be.
    Proposed changes include:
     Further increasing enrollment fees for retirees under age 
65 in the TRICARE Prime program, using a tiered approach based on 
retired pay that requires senior-grade retirees with higher retired pay 
to pay more and junior-grade retirees less;
     Establishing a new enrollment fee for the TRICARE-for-Life 
program for retirees 65 and older, using a tiered approach;
     Implementing additional increases in pharmacy co-pays in a 
manner that increases incentives for use of mail order and generic 
medicine; and
     Indexing fees, deductibles, pharmacy co-pays, and 
catastrophic caps to reflect the growth in national health care costs.
    We also feel that the fair way to address military retirement costs 
is to ask Congress to establish a commission with authority to conduct 
a comprehensive review of military retirement. But the President and 
the Department have made clear that the retirement benefits of those 
who currently serve must be protected by grandfathering their benefits. 
For those who serve today I will request there be no changes in 
retirement benefits.
                           a balanced package
    Members of the committee: putting together this balanced package 
has been a difficult undertaking and, at the same time, an important 
opportunity to shape the force we need for the future. I believe we 
have developed a complete package, aligned to achieve our strategic 
aims.
    As a result, the FY13 request is a carefully balanced package that 
keeps America safe and sustains U.S. leadership abroad. As you take a 
look at the individual parts of this plan, I encourage you to do what 
the Department has done: to bear in mind the strategic trade-offs 
inherent in any particular budget decision, and the need to balance 
competing strategic objectives in a resource-constrained environment. 
The best example of this balancing act is the size of the budget 
itself, which in my view strikes the right balance between both the 
fiscal and security responsibilities of the Department to the nation.
    But we will need your support and partnership to implement this 
vision of the future military. I understand how tough these issues can 
be, and that this is the beginning and not the end of this process. 
Make no mistake: the savings we are proposing will impact all 50 
states. But it was this Congress that mandated, on a bi-partisan basis, 
that we significantly reduce discretionary funding, which realistically 
leads to substantial cuts in the defense budget. We need your 
partnership to do this in a manner that preserves the strongest 
military in the world. This will be a test of whether reducing the 
deficit is about talk or action.
    My hope is that now that we see the sacrifice involved in reducing 
the defense budget by almost half a trillion dollars, Congress--and 
this Committee in particular--will be convinced of its important 
responsibility to make sure that we avoid sequestration.
    The leadership of this department, both military and civilian, is 
united behind the strategy that we have presented, and this budget. 
Like all strategies and all defense budgets, there are risks associated 
with this spending plan. I cannot reduce the defense budget by almost 
half a trillion dollars and not incur additional risks. In our judgment 
these risks are acceptable, but nevertheless these additional risks do 
exist. Those risks primarily stem from the fact that we will be a 
smaller military. Will our forces be able to mobilize quickly enough to 
respond to crises? Will we be able to compensate with more advanced 
technology? Can we ensure the continued health of the all-volunteer 
force and meet our obligations to transitioning service members so they 
don't become part of the unemployment rolls?
    We believe we can deal with these risks, and that the budget plan 
we have presented has an acceptable level of risk because it was 
developed base on our defense strategy. But there will be little room 
for error. If this Congress imposes more cuts in the defense budget, 
that will increase the risk and could make it impossible for us to 
execute the strategy we have developed. And if sequester is triggered, 
this strategy will certainly have to be thrown out the window and the 
result will be risks that are unacceptably high. So I really urge you 
to try to confront this issue and try to do everything you can to avoid 
that outcome, and to give us the opportunity to implement the strategy 
we have developed with the necessary and appropriate level of spending.
    I look forward to working closely with you in the months ahead to 
do what the American people expect of their leaders: be fiscally 
responsible in developing the force for the future--a force that can 
defend the country, a forced that supports our men and women in 
uniform, and a force that is, and always will be, the strongest 
military in the world.

    Chairman Ryan. Thank you. General Dempsey, if you could try 
to summarize, as best you can, because we have a lot of members 
who want to get to questions. The floor is yours.

             STATEMENT OF GENERAL MARTIN E. DEMPSEY

    General Dempsey. Fair enough. Thank you Chairman Ryan, 
Congressman Van Hollen, distinguished members of the committee. 
Thanks for the opportunity to be with you here today. I will 
tell you, I think this budget does represent a responsible 
investment in our nation's security, and strikes a purposeful 
balance between succeeding in today's conflicts and preparing 
for tomorrow. It also keeps faith with the nation and with the 
greatest source of our military strengths, that is America's 
sons and daughters and I will submit the rest of my statement 
for the record.
    [The prepared statement of Martin E. Dempsey follows:]

           Prepared Statement of GEN Martin E. Dempsey, USA,
                    Chairman, Joint Chiefs of Staff

    Chairman Ryan, Representative Van Hollen, and distinguished members 
of the Committee, it is my privilege to update you on the state of the 
United States' Armed Forces and to comment on the President's budget 
proposal for fiscal year 2013. The context for this year's posture 
testimony is unique. Our military has transitioned many of our major 
operations, and we have new strategic guidance that sets priorities. We 
are also facing real fiscal constraints and an increasingly competitive 
security environment. The President's proposed fiscal year 2013 defense 
budget accounts for these realities. It provides a responsible 
investment in our nation's current and future security.
                       global military operations
    Today our Armed Forces stand strong. We are proud of the 
performance and accomplishments of our men and women in uniform over 
the past year. They have carried out far-ranging missions with much 
success. They have defended our homeland, deterred aggression, and kept 
our Nation immune from coercion. And despite a decade of continuous 
combat operations, our troops and their families remain resilient.
    U.S. Forces-Iraq recently completed its mission. More than twenty 
years of military operations in and over Iraq came to conclusion. The 
security of Iraq is now the responsibility of the Iraqi people, 
leaders, and security forces. We have transitioned to a normal 
military-to-military relationship. Diplomats and civilian advisors are 
now the face of the United States in Baghdad. To be sure, Iraq still 
faces challenges to the country's future. But as we look to that 
future, we will continue to build ties across Iraq to help the people 
and institutions capitalize on the freedom and opportunity we helped 
secure.
    In Afghanistan, we are seeing the benefits of the surge in combat 
forces begun in early 2010. The security situation is improving. By 
nearly every measure, violence has declined. The Taliban are less 
capable, physically and psychologically, than they were two years ago. 
Afghan and ISAF forces have maintained persistent pressure on insurgent 
groups and have wrested the initiative and momentum from them in much 
of the country. But these groups remain determined, and they continue 
to threaten the population and the government. Combat will continue.
    Key to long-term stability in Afghanistan is the development of the 
Afghan National Security Forces (ANSF). In 2011, the Afghan National 
Army grew by 18 percent. The Afghan National Police grew by 20 percent. 
These forces, combined with the nascent but ever more capable Afghan 
Local Police, are steadily assuming responsibility for Afghan security. 
The process of transition began in July, and today, after nearly 
completing the second of five ``tranches'' of transition, Afghan 
security forces are now responsible for the day-to-day security of 
almost half of Afghanistan's population. Developing the ANSF, degrading 
insurgent capabilities, and turning over responsibilities have allowed 
us to begin a measured draw down of our forces in Afghanistan. We have 
withdrawn over 10,000 of the surge troops and will withdraw the 
remaining 23,000 by the end of this summer. By that time, we expect the 
ANSF to achieve their initial operating capability and to be 
responsible for securing nearly two-thirds of the Afghan population. 
They are on track to meet the goal of assuming full lead for security 
by the end of 2014.
    Sustaining progress in Afghanistan requires dealing with some 
significant challenges. The ANSF and other national and local 
government institutions require further development. Corruption remains 
pervasive and continues to undermine the capacity and legitimacy of 
government at all levels. Insurgent sanctuaries in Pakistan remain 
largely uncontested. And ultimately, much more work remains to achieve 
the political solutions necessary to end the fighting in Afghanistan.
    Our military has been vigilant and active in other areas and with 
other missions to keep America and our partners safe. We decapitated 
al-Qa'ida and pushed this terrorist network decidedly closer to 
strategic defeat through the successful special forces operation 
targeting Osama Bin Laden. We supported NATO in its UN mission to 
protect civilians in Libya allowing them to end Muammar Qaddafi's 
tyrannical rule. We responded quickly to the devastating earthquakes 
and tsunami that struck Japan, saving lives and acting on our 
commitment to this key ally. We fended off cyber intrusions against our 
military's computer networks and systems. And we helped counter 
aggression and provocation from Iran and North Korea.
                          a time of transition
    While our military continues to capably and faithfully perform this 
wide array of missions, we are currently in the midst of several major 
transitions. Any one of them alone would be difficult. Taken together, 
all three will test our people and our leadership at every level.
    First, we are transitioning from a war-time footing to a readiness 
footing. With the end of our operations in Iraq and Libya and the 
ongoing transition of security responsibilities in Afghanistan, our 
troops are steadily returning home. From a peak of more than 200,000 
troops deployed to combat two years ago, we have fewer than 90,000 
today. This shift cannot lead us to lose focus on on-going combat 
operations. But, it does mean we must give attention to restoring our 
readiness for full spectrum operations. We need to reset and refit, and 
in many cases replace, our war-torn equipment. We need to modernize 
systems intentionally passed over for periodic upgrading during the 
last decade. We must retrain our personnel on skills used less often 
over the last decade. And we will have to do all of this in the context 
of a security environment that is different than the one we faced ten 
years ago. We cannot simply return to the old way of doing things, and 
we cannot forget the lessons we have learned. As described in the 
Department's recently released strategic guidance, we should adjust our 
missions, our posture, and our organizational structure in order to 
adapt to ever evolving challenges and threats.
    Second, our military is transitioning to an era of more constrained 
resources. The days of growing budgets are gone, and as an institution 
we must become more efficient and transparent. We must carefully and 
deliberately evaluate trade-offs in force structure, acquisition, and 
compensation. We must make the hard choices, focus on our priorities, 
and overcome bureaucratic and parochial tendencies. In sum, we must 
recommit ourselves to being judicious stewards of the Nation's 
resources.
    Third, tens of thousands of our veterans--and their families--are 
facing the transition to civilian life. Many enlistments are coming to 
their normal conclusion, but we are also becoming a leaner force. As we 
do this, we must help our veterans find education opportunities, 
meaningful employment, and first-class health care. We must pay 
particular attention to those bearing the deepest wounds of war, 
including the unseen wounds. We must help those who have given so much 
cope with--and where possible, avoid--significant long-term challenges 
such as substance abuse, divorce, depression, domestic violence, and 
homelessness. Addressing these issues is not the exclusive 
responsibility of the Services or veterans organizations. How we 
respond, as a military community and as a Nation, conveys our 
commitment to our veterans and their families. It will also directly 
affect our ability to recruit and retain our Nation's best in the 
future.
    I have outlined several priorities for the Joint Force to help us 
anticipate and navigate the challenges these transitions present. We 
will maintain focus on achieving our national objectives in our current 
conflicts. We will begin creating the military of our future--the Joint 
Force of 2020. We will also confront what being in the Profession of 
Arms means in the aftermath of war. And above all else, we will keep 
faith with our Military Family. In doing all these things, we will 
provide an effective defense for the country and strengthen the 
military's covenant of trust with the American people.
                        a responsible investment
    The President's Fiscal Year 2013 Department of Defense base budget 
of $525 billion and overseas contingency operations (OCO) budget of $88 
billion represent a responsible investment in our Nation's security. 
The decisions underlying them flow from the strategic guidance the 
Department of Defense issued last month. This guidance set priorities 
for assessing our programs, force structure, and spending in the 
context of a persistently dangerous and increasingly competitive 
security environment. With those priorities in mind, the budget 
proposal strikes an appropriate and necessary balance between 
succeeding in today's conflicts and preparing for tomorrow's 
challenges. It accounts for real risks and real fiscal constraints, 
marrying versatility with affordability.
    The tradeoffs were complex, and the choices were tough. They will 
produce $259 billion in savings over the next five years and a total of 
$487 billion over the next ten years. They will not lead to a military 
in decline. Rather, this budget will maintain our military's decisive 
edge and help sustain America's global leadership. It will preserve our 
ability to protect our vital national interests and to execute our most 
important missions. Moreover, it will keep faith with the true source 
of our military's strength--our people.
    The merits of this budget should be viewed in the context of an 
evolving global security environment and a longer term plan for the 
Joint Force. Coming on the heels of a decade of war, this budget begins 
the process of rebalancing our force structure and our modernization 
efforts and aligns them with our strategy. Essentially, we are 
developing today the Joint Force the Nation will need in 2020, and our 
plans to build this force will unfold over the course of several budget 
cycles. This budget is the first step--a down payment. If we fail to 
step off properly, our recovery will be difficult, and our ability to 
provide the Nation with the broad and decisive military options will 
diminish.
    It is worth addressing head-on some of the major changes we are 
planning as we adapt to changing global opportunities and challenges. 
And just as this budget must be viewed in the context of a broader 
plan, these changes must be viewed in the context of our evolving 
force. They represent a comprehensive, carefully devised package of 
decisions that strikes a fine balance. They are not, and cannot be 
viewed as, individual, isolated measures. In all cases, needed 
capabilities are preserved or, when necessary, generated, through one 
or several programs.
    This budget will make critical investments in our future force. 
Certain specialized capabilities, once on the margins, will move to the 
forefront. Networked special operations, cyber, and Intelligence, 
Surveillance, and Reconnaissance will become increasingly central. The 
results will be a Joint Force that is global and networked, that is 
versatile and innovative, and that is ably led and always ready. This 
force will be prepared to secure global access and to respond to global 
contingencies. We will be a military that is able to do more than one 
thing at a time--to win any conflict, anywhere.
    Particular attention will be placed on our anti-access/area-denial 
capabilities. The proliferation of technology threatens our unfettered 
access to the global commons--access that is fundamental to global 
commerce and security. As we rebalance our global posture to emphasize 
the Asia-Pacific region and the Middle East, we are adjusting our 
operating constructs and the systems we employ. This includes divesting 
some outdated ships, planes, and equipment as well as investing in new 
programs. We will also commit to our partnerships and to helping 
develop our partners' security capabilities.
    Similarly, this force will place added focus on our military's 
cyber defense capabilities. The threats to the average American's day-
to-day life and our military capabilities that emanate from cyber space 
have evolved faster than many could have imagined. We must adapt to 
these threats with similar adroitness and capacity. This budget allows 
for us to expand many of our nascent cyber capabilities and to better 
protect our defense networks. Similarly, bipartisan cyber legislation 
being introduced in Congress is a good first step in developing 
protection for our Nation's critical infrastructure. With much work to 
be done, we look forward to working with agencies across the government 
and with our allies and partners to confront this broad range of 
emerging threats.
    While some additional capabilities for our Joint Force will be 
needed, others will not. The Joint Force of the future will be leaner 
than today's. We will no longer be sized for large scale, prolonged 
stability operations. As a result, we expect to draw down the Army from 
562,000 to 490,000 by the end of fiscal year 2017, and the Marine Corps 
from over 202,100 to 182,100 by the end of fiscal year 2016. Some of 
this reduction was planned several years ago when Congress authorized 
temporary end strength increases to support our operations in Iraq and 
Afghanistan.
    But in making ourselves leaner, we will not make the mistakes of 
previous draw downs. We will not retain organizational structures that 
lack the people, training, and equipment necessary to perform the tasks 
we expect from them. We will be realistic about the organizations we 
keep, while also maintaining our ability to reconstitute and mobilize 
forces. We will still be able to respond to any large scale 
mobilization against us. To do this, the Joint Force will retain 
capacity in our reserve components and our industrial base should they 
be required to surge. We will maintain the Army Reserve end-strength at 
205,000 and reduce the Army National Guard by only 5,000 down to 
353,200. The Marine Corps reserves will be retain their current 
strength.
    Another major concern among our troops, their families, retirees, 
and with the American public is military compensation and benefits. I 
want to make it clear that cuts in spending will not fall on the 
shoulders of our troops. There are no proposed freezes or reductions in 
pay. There is no change to the high quality health care our active duty 
members and medically retired Wounded Warriors receive. But we cannot 
ignore some hard realities. Pay and benefits are now roughly one third 
of defense spending. Pay will need to grow more slowly in the future. 
We are also proposing a commission to review of military retirement. 
And to control the growth of healthcare costs, we are also recommending 
changes to TRICARE. These adjustments include modest, new or phased-in 
increases in health care fees, co-pays, and deductibles largely for our 
retirees--but not our active duty service members. Even with these 
increases, TRICARE will remain one of the finest medical benefits in 
the country.
    Overall, these proposed changes value both the demands of military 
service and our duty to be good stewards of the Nation's fiscal 
resources. They will sustain the recruitment, retention, and readiness 
of the talented personnel we need. Most importantly, they will sustain 
our enduring commitment to our troops and their families--we must never 
break faith with them. I want to note, however, that keeping faith with 
our service men and women is not just about pay and benefits. It is 
also about ensuring we remain the best trained, best equipped, and best 
led force on the planet.
    The last, and perhaps most critical issue, is risk. This budget and 
the strategy it supports allow us to apply decisive force 
simultaneously across a range of missions and activities around the 
globe. They mitigate many risks, but they accept some as well, as all 
strategies must. The primary risks lie not in what we can do, but in 
how much we can do and how fast we can do it. The risks are in time and 
capacity. We have fully considered these risks, and I am convinced we 
can properly manage them by ensuring we keep the force in balance, 
investing in new capabilities, and preserving a strong reserve 
component. We can also compensate through other means, such as 
effective diplomacy and strong partnerships. I believe that these risks 
are acceptable and that we will face greater risk if we do not change 
from our previous approaches.
                               conclusion
    In the upcoming year, our Armed Forces will build on the past 
year's achievements, adapt to emergent challenges, seize new 
opportunities, and continue to provide for our common defense. We will 
continue to face threats to our security, whether from aggressive 
states or violent terrorist organizations. But our military will be 
ready for them, and our response will be a source of pride for the 
American people. In all of our efforts, we will aim to maintain 
strength of character and professionalism--at the individual and 
institutional level--that is beyond reproach.
    As we embark on this critical new course, we will need Congress' 
support to help us build the Joint Force the Nation needs and to 
strengthen our relationship with the American people. As I stated 
before, this budget and the choices that underlie it should be 
understood in the context of the comprehensive, carefully balanced, 
multi-year plan they support. These choices were tough. Some decisions 
will be controversial. But they call for an investment that allows our 
force to take the steps necessary to ensure our Nation's defense for 
years to come. We ask Congress to support this budget and, more 
importantly, to avoid the deep and indiscriminant cuts that 
sequestration would impose.
    I thank this Committee, and the entire Congress, for all you have 
done to support our men and women under arms and their families. Your 
resolute attention to their needs and to our security has been both 
invaluable and greatly appreciated.

    Chairman Ryan. That was pretty fast. I would not have 
expected that. We are not used to that fast.
    Secretary Panetta, as I mentioned, we have tremendous 
respect for you, for your past, and for your service to our 
country. I agree with lots of what you said in your testimony, 
but it is just hard to get my mind around whether this is a 
strategy-driven budget or a budget-driven strategy, and that is 
what we are getting down to here.
    The administration, since February 2010, has reduced the 
base budget, and that is the budget without the costs of the 
wars in Iraq and Afghanistan, by $500 billion. At each time of 
these requests, your predecessor and now you, have argued that 
this budget reflects a strategy-driven budget, but you have 
just said that the world is not safer, that the challenges are 
mounting. You mentioned WMD, Iran, North Korea, turmoil in the 
Middle East, and on and on and on. So I do not know how to 
reconcile this. Is the world becoming safer, and therefore we 
can trim our sales so much more, or are we changing our 
strategy? Are we changing our defense in foreign policy to a 
much less ambitious goal?
    Secretary Panetta. I think the fundamental problem is that, 
as Mike Mullen said, that one of the key threats to our 
national security is the national debt, and in the effort to 
try to confront the national debt, obviously the Congress came 
forward and proposed the Budget Control Act. The Budget Control 
Act provided about a trillion dollars in reductions. You 
developed a fence that was part of the Act, that set aside 
national security, and ensured that we would be required to 
reduce the budget by almost a half a trillion dollars. That is 
the law, and that is the requirement that I have abided by.
    General Dempsey. Mr. Chairman, could I take a stab at 
adding to that a little bit because I do wear the uniform. I 
have been around 38 years, and have gone through any numbers of 
strategic reviews, and some of your questioning about whether 
we could really make this a strategy-driven discussion, I think 
probably relates to the amount of time we have taken. I am a 
personal believer in Parkinson's law, some of you may remember 
in 1955 in the Economist magazine there was a postulate put 
forward that work expands to fill the time available, so I 
actually believe that, and I believe that in the six months, or 
five months, that we had to take a very comprehensive look at 
strategy, we actually accomplished that task.
    Chairman Ryan. Okay, so when we take away the budget 
gimmicks and the accounting tricks, which is what we do in this 
committee, we have a budget from the president that has a net 
spending increase of $1.5 trillion. It has a tax increase of 
$1.9, so it has about $400 billion in deficit reduction over 10 
years, but you are dropping this category by $487. So from our 
perspective, this looks like a budget-driven strategy, not a 
strategy-driven budget because there is no entitlement reform, 
there is no reform in the other parts of government, and the 
only real specified cuts are here.
    Let me ask it this way, we have this new revised defense 
strategic guidance talks about increasing the Asia-Pacific 
region. Most analysts who look at this strategy, and this 
region, say that this necessarily means we need more naval and 
air forces, but your budget abandons the long-standing goal of 
a 313-ship fleet, and it does very little to expand or 
modernize the Air Force that General Schwartz, the chief of 
staff of the Air Force, notes is smaller and older than the Air 
Force at the end of the post-Cold War drawdown. So how do we 
reconcile this rhetoric with this budget?
    Secretary Panetta. Well, first and foremost, some of the 
questions you are asking ought to probably be better directed 
to an OMB director.
    Chairman Ryan. Yeah, but you can do that, too.
    Secretary Panetta. I can play any role, but today I am 
secretary of defense. I am dealing with the number that was 
handed me, and what we did to try to respond to that number. 
The approach we took was to say if we are going to emphasize 
the Pacific and the Middle East, we have to have force 
projection. That is the reason we are maintaining 11 carriers. 
Some had proposed that we ought to cut back on our carrier 
force, and we said no, we are going to maintain 11 carriers 
because they are very important to our ability to project 
power. We are going to maintain our bomber fleet, but more 
importantly, we are investing in a new bomber, and developing a 
new bomber for the future. In addition to that, we continue to 
invest in the joint strike fighter, which is a fifth-generation 
fighter that we think is very important for the future.
    In addition to the ships in the Navy, we are going to 
maintain the number of ships that we have now and our plan is 
the next five years to meet that 300-ship Navy that we think is 
important for this country. So we have tried to protect the key 
priorities that relate to the strategy that we have developed, 
which is to stress the Pacific, stress the Middle East, and 
maintain the kind of forces we need to confront any enemy in 
those areas.
    Chairman Ryan. Well, without going into the OMB territory, 
these are the only specific cuts we see. Everything else is net 
increasing, but let me get to some specific budgets about your 
budget. You did a good job of identifying budget gimmicks when 
you were here as chairman, and trying to push them out of the 
budget when agencies tried to put them in when you were OMB 
director. There is two of them I want to talk about here, and I 
will do this as fast as I can. You moved funding for the 64,900 
soldiers and Marines from the base budget, which is capped 
under the BCA, to the war budget which is uncapped. How is that 
not a circumvention of the budget caps?
    Secretary Panetta. That is why I have a comptroller here, 
is to answer that kind of question.
    Mr. Hale. The OCO rules say that we will budget for 
permanent end strength in the base budget. We have now decided 
that we are going to go down to 490,000 in the Army, 182,000 in 
the Marines. In our view the difference between where we are 
now and that 490 and 182 is no longer permanent, it is there 
because of Afghanistan.
    Chairman Ryan. But your end strength reduction is 92,000 
soldiers, not 65,000. So why did you not put the entire 92,000 
in the OCO budget?
    Mr. Hale. Because everything above 490 for the Army, and 
above 182 for the Marines is now primarily in the force because 
of Afghanistan, and therefore we think are properly budgeted in 
OCO, and is something I might add that we cleared fully with 
OMB.
    Chairman Ryan. First time that has ever been done. This is 
not normal.
    Mr. Hale. We have had end strength, temporary end strength, 
there for a number of years, Mr. Chairman, smaller, but they 
have been there.
    Chairman Ryan. Yeah, I would say that. We usually have 
extra costs of having personnel in war zones covered, but this 
includes the full $6 billion of costs of computating troops in 
the war budget; so that I would say is pretty unprecedented.
    Mr. Hale. Well, we have had about a 1.2 billion in the last 
budget, and now it is six, but again, this is an unprecedented 
change. We have made a decision to go to a much smaller Army 
and a much smaller Marine Corps consistent with the new 
strategy.
    Chairman Ryan. The last administration tried plowing base 
budget spending into their supplementals as well. I do not know 
how you can say that this is not plowing base spending into a 
supplemental.
    Let me ask this question, you mentioned the joint strike 
fighter. You have got a large number of program restructurings 
in this budget request. For the most part of it you are 
delaying the acquisition of purchase. For example, I think you 
claim $15.1 billion from the joint strike fighter program over 
the next five years, but the program of record has not changed. 
So you are doing a five year budget, but as you know, we do 10 
year budgets; you are just pushing it into the back end of the 
10 year budget. So how does that achieve any taxpayer savings 
over a 10 year period? And if you are elongating these 
programs, does that not violate the direction you are getting 
from the Perry-Hadley Commission, which is to tighten the 
timeframe of these programs?
    Secretary Panetta. Well, the key there is to produce a 
plane that, when we go to full production, does not have to be 
changed time and time and time again, which does the very 
problems that you have pointed out, which is it increases the 
costs, and increases the expenditures to the tax payer. Our 
goal here is, having worked with the joint strike fighter, that 
we felt as it goes through the tests, let's be able to 
determine what changes need to be made now, not go into full 
production with what we have, but wait and trail that out, and 
when we have completed those tests, when we know what is to be 
in the final product, then we will go into full production. 
This was based on substance, it was not based just simply on 
trying to achieve the savings, although fortunately, when you 
do extend it out you do get some savings.
    Chairman Ryan. And you think that takes another five years? 
That is what makes it difficult to see this as more of a 
budget-driven strategy than a strategy-driven budget.
    Secretary Panetta. Well, I would urge you to sometime go 
down to some of our facilities and look at this plane and the 
technology that is involved in the plane; it is spectacular 
technology, but it also requires a great deal of testing to 
ensure that it works.
    Chairman Ryan. Well, there are a lot of members, and I want 
to be cognizant of their time, so I will appreciate it, Mr. Van 
Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman. Let me thank all 
of you for your testimony today. I was not going to go down 
this line of questioning, but I do want to take a moment to 
discuss the math here because we are the Budget Committee. When 
the acting director of the OMB was here the other day, the 
chairman criticized him and the administration for saying as 
part of this budget we have got the $487 billion worth of cuts, 
and saying that was stuff that the Congress did on a bipartisan 
basis. Today, the chairman is criticizing, I think, the 
administration for taking those same budget cuts as part of 
this budget and savings. You just cannot have it both ways.
    I would also point out that in addition to the security 
cuts made as part of the Budget Control Act, we took very deep 
cuts over the next 10 years in non-defense discretionary 
spending. Those items are also on the chopping block as part of 
sequestration. I just would note as a historical note, that in 
designing the sequester, the offer was made to our Republican 
colleagues to say instead of having these particular defense 
cuts as part of sequester, we can get rid of a lot of special 
interest tax loopholes. They chose to put the defense cuts on 
the table before cutting tax loopholes and special interest tax 
breaks. That is just a matter of historical record. That is a 
decision they had to make.
    I would also point out that as part of the administration's 
budget request there are over $300 billion in savings in 
mandatory health, which is about equivalent, in aggregate, to 
the amount recommended by Simpson-Bowles in that category, as 
well as some non-health mandatory spending cuts; and of course, 
the president's budget includes about $1.6 trillion in revenue 
raised as part of a balanced approach, closing those tax 
loopholes, and asking folks at the highest income levels, the 
top 2 percent, to go back to the same top marginal rates they 
were paying during the Clinton administration, a period when 
the economy was booming.
    Mr. Secretary, I want to ask you about one of the proposals 
that has been put forward by the chairman of the Armed Services 
committee to deal with sequester, and what he proposed in a 
piece of legislation that I have right here, is across-the-
board cuts in civilian personnel, both at the Defense 
Department, and outside the Defense Department. I think it is 
worth noting that 36 percent of executive branch civilian 
employees are at the Defense Department; almost one in four 
civilian employees in the federal government work at the 
Defense Department. That is 764,000 out of 2.1 million federal 
employees. So that proposal would result in the Department of 
Defense cutting over 80,000 civilian workers over the budget 
period.
    Now, as part of your budget you have emphasized and need to 
strengthen the defense acquisition workforce in order to save 
tax payer money, to make sure that we are not wasting money, 
and to make sure we have sufficient capacity and capability. In 
fact, you say that this workforce determines the quality of 
DOD's acquisition outcome, an area of the budget which we all 
agree is in need of improvement.
    Mr. Secretary, and I would point out GAO has highlighted 
this as an important area as well and has pointed out that in 
many cases, we actually now hire contractors as part of the 
acquisition process because we do not have enough in-house 
expertise, a practice that raises conflit cof interest issues, 
which GAO has also pointed out could waste tax payer money.
    So Mr. Secretary, I want to know that if we were to mandate 
a 10 percent cut in the DOD civilian workforce, what impact 
would that have with respect to strengthening the acquisition 
process and saving tax payers money without harming the defense 
of this country?
    Secretary Panetta. Yes, let me respond by first saying that 
Congressman McKeon, I think, was trying to make a good faith 
effort to try to do something to avoid sequester, and I commend 
him for that, but I have also told him personally that the 
approach of simply going after the civil service side of it, 
particularly when it came to defense where we do have over 
700,000 civilians who work in the Defense Department alongside 
the military men and women in uniform, that it could impact on 
our ability to implement our mission, particularly with regards 
to the area that you just described.
    Look, I was director of the CIA. The CIA is made up of 
civilian workforce, and these are people who every day put 
their lives on the line in order to protect this country. It is 
not to say that, obviously, some savings cannot be achieved 
here, but I think to just put it all on the backs of the civil 
servants in this country I think would not be a wise step.
    Mr. Van Hollen. Thank you, Mr. Secretary, let me ask you a 
question with respect to your audit workforce, and despite 
efforts of the Defense Department over the years, the Defense 
Department remains a federal agency that has not now passed a 
clean audit. The Department of Homeland Security finally 
cleared that hurdle, so there is clearly room here for 
improving efficiency, and in fact, as part of your budget, you 
recommend increasing the audit workforce in order to save tax 
payer money, and not allow those dollars to be wasted. In fact, 
you recommend a 10 percent increase in the audit workforce, so 
that we can get a handle on these things. I am going to assume 
that a 10 percent cut in that work force when you have asked 
for a 10 percent increase would make it more difficult for you 
to save tax payer dollars in a wise way through auditing.
    Secretary Panetta. Obviously.
    Mr. Van Hollen. Thank you. Now I want to get to this issue 
of contractors because sometimes people in Congress, when they 
talk about we are going to reduce the civilian workforce, they 
think it is going to save the tax payer dollars. You go back to 
your constituents and say hey we reduced the size of the 
civilian workforce when in fact, in many instances, those same 
tasks and responsibilities are contracted out.
    And in fact, Mr. Secretary, if you could talk about that 
because one of your goals has been, in part, to reduce the 
numbers of contractors. I would point out that the project on 
government oversight has a study that found that contractors 
get paid 1.8 times more than the government pays federal 
employees for performing comparable services. So anybody who 
thinks that just cutting federal civilian employees and 
contracting out that work saves tax payer money is just plain 
wrong. So if you could talk about that choice and that 
challenge.
    Secretary Panetta. Well, one of our efforts at efficiencies 
is to try to reduce the numbers of contractors we had there. I 
think it was Secretary Gates who basically said he did not know 
how many contractors were at the Defense Department because you 
are looking at just numbers of contractors plus all of the 
subs, and plus the others that are related to that, so it is a 
huge number, but there is no reason why we should not know how 
many contractors we have. Frankly, there have been 
responsibilities that have been contracted out that I think 
should be performed within the civil service side of the 
Defense Department. So we are looking at that whole area as 
part of the efficiencies, the $60 billion that we hope to 
achieve in savings, that represents a good part of that.
    Mr. Van Hollen. Thank you, Mr. Secretary. My last question 
deals with looking at our national security challenge in a 
comprehensive way. Your predecessor, Secretary Gates, often 
pointed out that we need to deploy the full scope of resources, 
focusing, yes, on the military, but also on our diplomatic 
capabilities, our development assistance capabilities. I would 
just like to read a quote from him that he gave at a speech at 
the Nixon center. He said, and I quote:
    ``I never miss an opportunity to call for more funding for, 
and emphasis on, diplomacy and development. Whatever we do 
should reinforce the State Department's lead role in crafting 
and conducting U.S. foreign policy to include foreign 
assistance on which building security capacity is a key part. 
Proper coordination and concurrence procedures will ensure that 
urgent military capacity building requirements do not undermine 
Americans overarching foreign policy initiatives.''
    Admiral Mullen stated in a letter to the majority leader in 
2010, ``The diplomatic and development capabilities of the 
United States have a direct bearing on our ability to shape 
threats and reduce the need for military action.'' General 
Dempsey has made similar statements in the past.
    I want to ask you because last year's Republican budget, 
cut around $240 billion from diplomacy and development 
assistance, which your predecessor and Admiral Mullen and 
others have said are important to our overall national 
security. Could you comment on whether you share the views of 
Secretary Gates on this issue?
    Secretary Panetta. Look, I think we all understand that a 
strong national security cannot be just dependent on our 
military power and our military weaponry and our military men 
and women. A strong national security is dependent on having a 
strong diplomatic arm, a strong development arm, a strong 
intelligence arm, a strong capability to try to have a strong 
economy in the world. I mean all of this is related to our 
national security, and I think if any one of these areas 
suffers cuts above and beyond others, it is going to damage our 
security just by virtue of the kind of broad approach we need 
to have to maintain the leadership position we have in the 
world.
    Chairman Ryan. Thank you. Mr. Calvert.
    Mr. Calvert. Thank you Mr. Chairman. Mr. Secretary, thank 
you for your service. I believe your home in the Carmel 
Monterrey area has to be one of the most beautiful places on 
the planet, so I know you are enduring a big sacrifice being 
here, so I thank you very much.
    Secretary Panetta. It does make my sanity subject to 
question.
    Mr. Calvert. Yes. And General, thank you for your 38 years 
of service. The next few years may be your most critical time.
    Secretary Panetta, you have publicly stated that 
sequestration is unacceptable. I agree with you, and I am 
concerned about the devastating impacts of sequestration, both 
the method and the amounts that would have on our ability to 
protect our vital national interests around the world. As you 
mentioned, right now China is building two aircraft carriers, 
with them the ability to project power. China continues to 
develop anti-satellite missiles and cyber warfare capability. 
Iran is on the precipice of obtaining a nuclear weapon. North 
Korea is increasingly unstable and confrontational. North 
Africa is experiencing a rise in terrorism. There is strife in 
many parts of Central and South America, right in our backyard. 
The Arab awakening in the Middle East remains unpredictable. 
Russia continues to rise, both economically and militarily, and 
the list goes on.
    According to reports, sequestration reductions would lead 
to the smallest ground force since 1940 that was mentioned, a 
fleet of fewer than 230 ships, the smallest level since 1915, 
and the smallest tactical fighter force in the history of the 
United States Air Force. Mr. Secretary, can you elaborate on 
your thoughts on the devastating impacts if sequestration takes 
place?
    Secretary Panetta. Well, I have been saying this and I 
think you understand. You take a meat axe approach to the 
defense budget where you basically cut $500 billion across the 
defense budget, what you are basically going to be doing is 
weakening every area of the defense budget. You are going to 
impact on force structure, you are going to impact on 
compensation, you are going to impact on our ability to develop 
the kind of weaponry that we do need for the future. The 
reduction in sequestration we are virtually going to have to 
stop production on most of the key weapons that we have in 
production as a result of that kind of impact. The bottom line 
is that sequestration would be totally irresponsible. It would 
devastate our national defense, it would weaken this country, 
and it would tell the rest of the world that the United States 
is going to be not only a weak power, but unable to respond to 
the threats that you just pointed out.
    Mr. Calvert. Thank you, Mr. Secretary, for that very direct 
answer. General Dempsey, last week during a HAC-D hearing you 
talked about the current environment being the most dangerous 
time that you can remember in your 38 year career. Can you 
please expand on that, and what that means in the context of 
sequestration?
    General Dempsey. Yeah, I can. It is a bit of a strategy 
paradox, is it not, because the great powers are not really any 
longer really standing off against each other, but there are 
plenty of, let's call them near-peer competitors, and even more 
important, there are a wide variety of non-state actors, super 
empowered individuals, terrorist groups, who have acquired 
capabilities that heretofore were the monopoly of nation 
states. And so when I said that it is the most dangerous period 
in my military career, 38 years, I really meant it. I wake up 
every morning waiting for that cyber attack or waiting for that 
terrorist attack or waiting for that nuclear proliferation, 
waiting for that proliferation of technologies that makes it an 
increasingly competitive security environment across the globe. 
The effect of sequestration will be that we will have to go 
back and redo our strategy, the strategy that we just adapted 
from the QDR strategy to this emerging defense strategy as we 
have described it. We would have to redo that, and as the 
secretary said, it would, in my personal military judgment, 
impose unacceptable risks to our national security.
    Mr. Calvert. Thank you. Thank you, Mr. Chairman.
    Chairman Ryan. Mr. Doggett.
    Mr. Doggett. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary and General Dempsey, and your entire team. I guess I 
can say that this is a room where we always look up to you, Mr. 
Secretary, but we do appreciate your service. In San Antonio, 
military city as we call it in Texas, as I am sure in a number 
of other cities across America, there has been concern, or at 
least great interest, in your comments about base realignment 
and closure. San Antonio, as you know, actually gained, though 
it was a traumatic gain, with the closure of Brooks Air Force 
Base, there in the last round. This city, under the leadership 
of Mayor Castro, has already reached out with Fort San Antonio 
to find, I think, about 139 additional acres if there is a need 
for expansion at Lackland. We see the 24th Air Force 
cybercommand there as a place where cyber warfare alternatives 
can be provided to those facilities that we have here in the 
Washington area. I think that the proposal that Senator 
Hutchison and Senator Tester have put forward to include 
overseas bases in any of that review, that there at least needs 
to be a mechanism in any future BRAC to consider where our 
overseas commitments are, even though there are treaties and 
other things to consider, and would just ask you to consider 
that as you go forward.
    Then of course all of us have thousands of veterans in our 
areas, and people that are military retirees. You have a number 
of proposals that you are considering that would impact those 
military retirees. Can we assure those who are retired now, or 
who are nearing retirement, that they can feel that their 
retirement on fixed income is secure?
    Secretary Panetta. With regards to your last question, yes. 
Our goal with regards to looking at retirement, we have made 
clear, and the president has made clear, that people ought to 
be grandfathered in who are serving in the military, those who 
have served, or are about retire, that they will get full 
retirement benefits as promised to them. Our goal is to try to 
look to the future and see what reforms we can make with 
regards to those that will join the armed forces in the future.
    With regards to your overseas bases question, and I 
understand exactly what the thrust of the legislation is about. 
We do have the authority to close bases overseas, obviously, we 
would have to do it pursuant to the treaties and the diplomatic 
relationships that we may have, but nevertheless, we have, over 
the last few years, cut almost 100 bases overseas. We are in 
the process of taking down two of the four brigades in Europe, 
and that will involve some additional infrastructure reductions 
as well. So I am trying to do this on the basis of substance. 
What is it we need to have, what is it that we need to 
maintain, and that is the basis on which we are approaching it 
in the Defense Department.
    Mr. Doggett. Two even more controversial issues: one of 
them, I believe you are doing everything you can to seek a non-
military approach to Iran, and I would just encourage that you 
continue to do that. It is difficult to see, while all options 
have to be on the table, how military intervention there can do 
anything but make our families less secure.
    Secondly, in Afghanistan, I know that your remarks have 
caused some extended public discussion and will continue to do 
so about our future in Afghanistan. I view Colonel Danny Davis, 
and I have read his article in the Armed Forces Journal, and am 
aware of his other comments; I am sure they were not well 
received in some quarters, but as a hero who spoke out about 
the troubles that we have during our policies in Afghanistan. 
What happened there this past weekend in a very secure area 
where brave Americans were killed by people in Afghan uniforms 
I know is troubling to all of us. I think your comments that we 
were prepared to move forward in 2014, unlike some of my 
colleagues, I would like to see you move more quickly rather 
than more slowly, and encourage looking at our policy there to 
find a way to ensure our security, having achieved many of our 
goals, and assure our security without as broad a footprint as 
we have today. I thank you Mr. Secretary.
    Secretary Panetta. I appreciate that. With regards to 
Afghanistan we really have, I think, turned a corner in 2011 
with regards to Afghanistan. We were able to weaken the 
Taliban, we were able to reduce the level of violence there, 
the Afghan army, for the first time, really engaged and 
performed well and took over the key security responsibilities 
in key areas. We are in a process of transitioning areas now to 
Afghan control and security. We just completed a second tranche 
which represent over 60 percent of the population of 
Afghanistan now being under Afghan control and security, and we 
are going to continue that process. The final tranche will take 
place in 2013, and our goal at that time, then, is to obviously 
move towards having the Afghans take the lead on combat 
operations with our support. We will still be in combat mode 
and support, but we are going to try to be able to move that 
responsibility over to the Afghans, but maintain our transition 
through the end of 2014. NATO is unified on that path, and it 
represents what we agreed to in Lisbon. I think it is the right 
path. Even with the events, I might say, over the last week, 
and I have to tell you that the Afghan army performed well. 
They controlled the demonstrations, the level of violence was 
able to go down, and they performed very well which gives us 
additional confidence that these guys can do the job that we 
have asked them to do.
    Chairman Ryan. Thank you. Mr. Cole.
    General Dempsey. Mr. Chairman, I am not going to answer the 
Congressman, but I would like to take the opportunity to make 
sure you know that my silence on the issues of Iran or 
Afghanistan are not in agreement with your position, and I 
would be happy to come and speak with you about it. To 
understand the complexity here, there seems to be, sometimes, 
some stark black and white choices, there are not, and I would 
love to have the opportunity to talk to you.
    Mr. Doggett. I look forward to visiting with you.
    Chairman Ryan. Great. Mr. Cole.
    Mr. Cole. Thank you very much, Mr. Chairman. Thank both of 
you. I had the opportunity to hear you in Defense 
Appropriations Sub-Committee and as usual, it is always 
compelling and really thoughtful testimony, and I appreciate 
it. My friend Mr. Calvert, who also had the benefit of that 
brief, he asked some really good questions on sequester, I want 
to ask you a timing question, and a probability question. In 
your view, and you have been around this place, number one how 
likely do you think it is sequester will really happen, and 
because I, actually, am very afraid about it, but everybody 
seems to think that will never happen. Well, of course we all 
thought the Super Committee would work too, and that was not 
supposed to happen. So we are here, and dismissing these things 
out of hand, I think, is dangerous.
    The second question is from your planning standpoint, how 
much time do you need to prepare for that? I think Congress 
sort of has the idea that we will wait until after the 
election, and then we will address whether or not there is 
going to be a sequester. What does that do to you, and 
obviously your uniformed subordinates, in terms of planning?
    Secretary Panetta. With regards to sequester, I sure as 
hell hope it does not happen. I think, as I said, it would be a 
terrible reflection, I think, on the Congress and the 
leadership of this country if the leadership of both parties 
were not able to come together and de-trigger that mechanism. I 
do remain confident, I really do after 40 years in this town, 
and having been through a lot of battles, legislative battles 
and challenges, that I still have a deep fundamental belief 
that in the end, despite the politics, despite the back and 
forth that often takes place in this Congress, that when it 
comes to our national security and when it comes to issues like 
this that ultimately the right decisions are made. I remain 
hopeful that you will do the right thing with regards to 
sequester.
    With regards to planning, we are not planning on sequester. 
As General Dempsey pointed out, I would have to throw the 
strategy I just presented to you out the window if we had to do 
that with sequester. At some point, I suspect OMB, probably in 
the summer, will have to request that we take a look at it, and 
try to determine what steps would be taken. I just think that 
it would very difficult to plan, frankly, because it does have 
this kind of crazy formula that would be applied and which we 
would have very little flexibility to try to do what we could 
to avoid the impact of sequester.
    General Dempsey. Sir, could I add please?
    Secretary Panetta. Sure.
    Mr. Cole. Please.
    General Dempsey. Although we are not planning, congressman, 
the defense industrial base, which has to have value 
proposition and business plans, are planning for it, and at 
some point, the specter of sequestration will have its own 
effect, whether it ever goes into existence or not.
    Mr. Cole. That is a great point. Let me ask you, Mr. 
Secretary, as well. You mentioned it was going to sort of take 
an all-of-the-above strategy to deal with a budget deficit of 
this size. To your knowledge, has the president proposed any 
entitlement reforms?
    Secretary Panetta. I believe that as part of the request in 
the budget that they would include some recommendations with 
regards to entitlements. I know during, obviously, the 
negotiations that were held on the budget deal that some of 
those were put forward. I honestly believe that you have to 
confront that. Look, discretionary spending is one-third of the 
budget. You cannot ignore the two-thirds of the budget that are 
blowing through the ceiling right now. That has to be part of 
any deal, and when we faced this, and as I said, almost every 
summit that I was a part of, we had to put entitlements on the 
table, we put discretionary on the table, and we had revenues 
on the table, and that is what led to the agreements that both 
Republican and Democratic presidents put forward. I think that 
is where you have to go. These are record deficits you are 
dealing with. I never in my lifetime, especially after getting 
a balanced budget, expected that we would have a 1.3 trillion 
deficits. That has to be dealt with, and it can only be dealt 
with through the tough choices I just pointed out.
    Mr. Cole. Last question, and we do not have a lot of time. 
You went through and you described what those processes took to 
the Defense Appropriations Sub-Committee just in terms of the 
conditions that had to prevail to reach the desired outcome. If 
you have a second, would you mind just laying that out again? 
In your opinion, as somebody who has been through these, to 
achieve that kind of goal?
    Secretary Panetta. I am sorry; you are talking about in 
terms of what?
    Mr. Cole. Well, I am actually out of time, but thanks for 
your service and I appreciate what you are doing.
    Chairman Ryan. Mr. Blumenauer.
    Mr. Blumenauer. Thank you Mr. Chairman. Mr. Secretary, I 
thought your statement was excellent. I loved the outline that 
you presented, and you are the right person at the right place 
at the right time. There is nobody in history that has had the 
range of experiences that you have had legislatively, in the 
executive branch, and the various departments; you know this 
stuff. I think it is important that you emphasize that we will 
still have the most powerful military in the world if this 
takes place, and actually if it went beyond that because of the 
outstanding capability that we have. I think you implied, but I 
think we Congress need to have more sympathy with the notion of 
how we deal with the notion of risk. We are not going to reduce 
risk to zero, but I think what you have attempted to do here is 
to provide a more balanced approach to a wider of variety of 
risk. It is much less likely that we are going to fight two 
land wars. There is nobody in the world that can engage us in 
naval efforts. Even after the Chinese somehow, someday get an 
aircraft carrier or two. I think you have done a great job of 
helping us think through what we need to deal with the risks of 
the future: the terrorists, cyber terrorism, asymmetrical 
attacks, special ops challenges that are being faced right now, 
both in uniform and CIA, and whatnot. I am of the opinion that 
our military can do this. They can take the parameters that we 
give them with your leadership. This is something that can be 
done. I have been stunned at the capacity what they have done 
in the past.
    Congress has screwed it up. Congress has raised 
compensation levels. Talk about entitlements, we have not 
raised TRICARE since 1990, and it is less sustainable than 
anything we are talking about with Medicare. We have required 
the military to buy equipment that it did not necessarily want, 
in some cases did not need. The political engineering of the 
tasks that you, your predecessors, and the men and women in 
uniform have had to cope with boggles my mind and it is amazing 
that it is as good as we have today.
    Congress could not close a base. We had to come up with 
this jerry-rigged system so that we could actually deal with 
military closures. I am hopeful that we do not fail in terms of 
going all political on you, undercutting you, making it harder 
than this difficult task is.
    One of the things, Mr. Chairman, I hope we can do, and I 
have talked about it around this table before, is to deal with 
some of these things that we agree on because if we could give 
you an iron-clad timetable of 12 or 15 years, there is a whole 
lot that you could do, but we have forced you to do things with 
civilian contractors, and then not given you money to have 
oversight. I am hopeful that we will be equal to the challenge 
in Congress. I am not worried about the president. I am not 
worried about the men and women in uniform; I am not worried 
about your capacity. I am worried about Congress.
    But I would like to zero in on just one area that you have 
specific expertise in because you mentioned Fort Ord. One of 
the things I have been trying to work with since I came to 
Congress is to deal with helping the military clean up after 
itself, and Congress has fallen down.
    We have not given you the resources. We have had other 
priorities, and we have cut the ground out from underneath you, 
but we are still working. You have given Sam Farr a task; he 
has been in Congress 18 years, and you are still cleaning up 
after Fort Ord. That has real applications in terms of military 
readiness. If we did a better job of helping the military clean 
up after itself, there would be applications that you could use 
to keep our men and women safe overseas and families safe 
around these military facilities. The military is the largest 
generator of Superfund sites. I have got one in Portland, 
Oregon that is the result of three naval efforts, in three 
wars, and decommissioning ships, and we are going to bankrupt 
companies in Portland because the Department of Defense is not 
participating in cleaning up after itself. I wonder if, and my 
time is short, but I wonder if we can engage you in something 
where there is a better partnership when you are spending $1.7 
million a minute to help bases all across the country. Maybe it 
would not be so hard to close bases if we did not stick them 
with a toxic mess of unexploded ordinance, and then leave the 
community and turn our back on them.
    Secretary Panetta. I would be more than happy to engage you 
in that process having been through it at Fort Ord. Frankly, 
the only way to ultimately achieve savings when you do BRAC 
rounds is to be able to have the clean up, and do it 
expeditiously so communities can re-use the property and not be 
stuck holding property that cannot be re-used. There are a lot 
of things I think we can do to improve that process, and I 
would be more than willing to engage with you on that.
    Mr. Blumenauer. Thank you very much, thank you Mr. 
Chairman.
    General Dempsey. Chairman, if I could because whenever 
there is a dangling participle here I want to make sure I do 
not let it just hang. You said you are confident we can do what 
we need to do at this budget level and even beyond. I am not 
signing up yet for the even beyond.
    Chairman Ryan. Point taken for the record. Dr. Price.
    Mr. Price. Thank you, Mr. Chairman. I want to thank the 
secretary and general as well for joining us today. Mr. 
Secretary, I could not be more struck by your comment about the 
entire budget and the need for complete reform, looking at the 
whole budget, not just the third of the pie that is the 
discretionary side. I think so often in this town we sweep 
things under the rug, and right now what is being swept under 
the rug, sadly, is addressing the real fiscal challenges, and 
that has all sorts of spin-offs into the economy and challenges 
there if we do not stop spending money that we do not have. 
General Dempsey, I want to visit a comment that you made 
recently regarding the nation of Iran. The statement, and I 
think I have the quote correct here, that stunned me and many 
of my constituents, and that is your quote, ``We are of the 
opinion that Iran is a rational actor,'' unquote. Do you stand 
by that statement, and maybe you want to explain a little more?
    General Dempsey. Yes, I do, sir. I stand by it because the 
alternative is almost unimaginable. The alternative is that we 
attribute to them that their actions are so irrational that 
they have no basis of planning. Not to sound too academic about 
it, but Thucydides in the 5th century B.C. said that all 
strategy is some combination of reaction to fear, honor, and 
interests; and I think all nations act in response to one of 
those three things, even Iran. The key is to understand how 
they act, and not trivialize their actions by attributing to 
them some irrationality. I think that is a very dangerous thing 
for us to do. It does not mean I agree with what they decide, 
by the way, but they have some thought process they follow.
    Mr. Price. Maybe you can help me understand then, what you 
believe to be the rationality of an assassination attempt on 
the Saudi ambassador in our territory?
    General Dempsey. Well, I am not here to justify Iran's 
actions.
    Mr. Price. Just asked you to comment on the rationality of 
it.
    General Dempsey. I do not understand their rationality, but 
I am not them.
    Mr. Price. But you have described them as a rational 
country.
    General Dempsey. I am suggesting that they take actions; 
they are calculating. What I am suggesting is that we need to 
be equally and maybe even more calculating.
    Mr. Price. Do you believe it to be rational on their part 
to seek nuclear weapons?
    General Dempsey. No, not by my standards, of course not. 
Absolutely not on my terms.
    Mr. Price. Over the last three years, the amounts requested 
by this administration for missile defense for, arguably, our 
strongest ally in the world, Israel, went from $121 million in 
2011 to $106 in 2012, to $99 in 2013. What justification, given 
what we see out of the nation of Iran, can you give, either 
general or secretary, for that decrease in that trend line?
    Secretary Panetta. Well, let me mention with regards to 
Israel, we have significantly increased the amount of funds 
that we provide to Israel. It is now $650 million, which more 
than doubles what was the level in the prior administration of 
about $320 million. We have provided significant funding for 
Israel's Arrow and Sling ballistic missile defense programs. We 
have secured funding for Iron Dome system, which is a great 
defense for them against short-range rockets. Whatever 
decisions we have made with regards to Israel and their 
assistance level has been made in conjunction with them.
    Mr. Price. And I understand that sometimes they have 
concurred and sometimes they have not.
    Secretary Panetta. Right.
    Mr. Price. I guess I would express a grave concern on the 
part of folks who watch this, and I know you do with keen 
interest and great concern, that the public statements that 
have been made, general, regarding what we believe Israel 
should or should not do, are harmful to the ability for 
planning to occur, I suspect, diplomacy to occur, that in fact 
some of the comments that you have made many believe have 
empowered Iran to a greater degree. So I would just ask you if 
you believe that if Iran gets a nuclear weapon, do you believe 
they can be deterred diplomatically?
    General Dempsey. Well, we have all said, everyone in 
uniform, there is no group in America more determined to 
prevent Iran from achieving a nuclear weapon than the Joint 
Chiefs of Staff, I assure you of that.
    Mr. Price. Mr. Secretary?
    Secretary Panetta. We are committed, not just to contain, 
but to prevent Iran from getting a nuclear weapon. That is a 
fundamental commitment that the president, and the 
administration has made. We have made very clear to Iran that 
they are not to close the Straits of Hormuz. We think that the 
international community is unified in trying to isolate Iran, 
and trying to make clear to them that they have to stop their 
process of trying to move towards nuclear development, that 
they have to stop the kind of spread of terrorism that they are 
engaged in, and if they want to resolve these issues to join in 
a diplomatic effort, and join the international community in a 
diplomatic effort to resolve these issues. Make no mistake 
about it, we are maintaining all options on the table to make 
very clear to Iran that they are not to do what we just said.
    Mr. Price. Thank you, Mr. Chairman.
    Chairman Ryan. Thank you. Ms. Castor.
    Ms. Castor. Thank you Mr. Chairman. Secretary Panetta, and 
General Dempsey, thank you very much for being here and all of 
your years of service.
    Over the past decades, the threats to America's national 
security have evolved from the conventional threats, threats 
from state actors, to unconventional, non-state actors, 
terrorist networks, and terrorist organizations. America and 
the Department of Defense have rightfully adapted and grown a 
terrific special operations force, special forces; we have 
invested in that, and the budget has grown there rightfully. 
The best examples of the value of those investments: the take 
out of Osama bin Laden. Thank you very much. The Maersk Alabama 
when the sharpshooters were able to take out the pirates and 
really save lives in doing so, and then just last month the 
rescue in Somalia of aid workers. So I think the new strategy 
that you emphasize in the budget rightfully invests, and 
continually, in special operations.
    The former SOCOM commander, Admiral Eric Olson, always 
emphasized quality over quantity, but after years in Iraq and 
Afghanistan where special operators around the globe have been 
assigned to the central command area of responsibility, it is 
obvious that special operations in other parts of the world 
have been in doubt. Admiral McRaven, the current SOCOM 
commander, is asking for greater agility and flexibility in 
building forces around the globe back to where they need to be.
    You did not get into it in detail in your testimony, would 
you go into greater detail on the importance in the strategic 
shift to special operations around the globe?
    And also another problem with sequestration is, and I am 
interested in your interpretation, of across-the-board cuts. 
You said if that happens you would have to throw out your 
strategy, but how are you interpreting that right now? If the 
worst case scenario happens and we know we have got to continue 
to invest in special operations, but do you interpret it that 
across-the-board cuts means that we will not be able to make 
those strategic investments where we need to be making them?
    General Dempsey. I will take the easy one and I will pass 
it to my boss. Special operating forces are really, what I 
would describe as, one of three capabilities that over the last 
10 years we have learned the most about; and in fact, that is 
one of the things about our strategy. What we have done is 
learn the lessons of the last 10 years of war, and how we can 
better integrate existing conventional capabilities with 
emerging capabilities. The three I will mention are ISR, which 
is phenomenally better in terms of ELINT, SIGINT, full-motion 
video, high definition, all the things that have happened on 
your iPhone have happened to us in ISR, if you have an iPhone, 
I hope you do.
    The second one, of course, is special operating forces. We 
are going to grow them by 3,000 in this budget. Eventually, 
over the fit of probably 8,000, and that will allow us to get 
back to, not only the high end direct action activities, but 
also building partner capacity across the globe with new and 
emerging partners; and the last one is cyber. That is the third 
of those three capabilities, I think, that we have to account 
for now. Ten years ago, we would not have had a conversation 
about cyber; we better be having a conversation about cyber 
today. Mr. Secretary.
    Secretary Panetta. Yeah, the problem, as I said, with the 
formula in sequester by taking it across-the-board it is going 
to impact on every area of the defense budget, but it will 
impact on our investments. The investments that we are making 
will be undercut and we will find ourselves, instead of having 
the kind of weaponry, the kind of technology that we need, the 
kind of equipment, the kind of training, the kind of support 
system that we need, all of that will be undercut by virtue of 
sequester. You are not only hitting the main elements of the 
defense system, our force structure, and the support systems 
that are there, you are hitting the investment portion that it 
is so important to the future.
    Ms. Castor. There is a lot of talk about giving special 
operations greater flexibility even outside of the combatant 
commanders, and what is your view of how that is going to 
evolve?
    Secretary Panetta. Well, look, first and foremost I am big 
supporter of special operations, particularly in my last job we 
had a great relationship and worked very closely together. 
Admiral McRaven is looking at ways to try to see how we can 
expand their role because we are talking about trying to get 
them into more of a rotational presence in places around the 
world. We are in the process of considering some 
recommendations. We have not made any final decisions, but I 
can tell you this: Special forces will play a large role in the 
future.
    Ms. Castor. Thank you very much.
    Chairman Ryan. Mr. Ribble.
    Mr. Ribble. Thank you, Mr. Chairman. Thank you, and I want 
to thank all three of you for being here today. Mr. Secretary 
you come here with some very unique qualifications to be here 
today. General Dempsey, your record is quite exemplary, and I 
want to congratulate you on having children that followed you 
in service. It is quite an honor to be here with all of you.
    Just to kind of preface some comments, Mr. Secretary, based 
on what you talked about prior with three years of trillion 
dollar deficits. It is a concern and I appreciate you bringing 
that up. I just want to read something from another relatively 
famous general, Dwight Eisenhower. In his farewell address, he 
said:
    ``Another factor in maintaining balance involves the 
element of time. As we peer into society's future, we, you and 
I and our government, must avoid the impulse to live only for 
today, plundering for our own ease and convenience the precious 
resources of tomorrow. We cannot mortgage the material assets 
of our grandchildren without risking the loss, also, of their 
political and spiritual heritage. We want democracy to survive 
for all generations to come, not to become the insolvent 
phantom of tomorrow.''
    That is a wonderful warning to all of us regarding trillion 
dollar deficits, and you have sat in these chairs, and you know 
the challenges that we face. Back in 1977 you were one of the 
first people to ever introduce a biannual budget bill. Do you 
still support that concept?
    Secretary Panetta. I have always thought it made sense to 
try to extend, because we were fighting a budget battle every 
year. Frankly, we would have been better off establishing a two 
year process; it would give us some planning for the future; it 
would allow us to look not just at the moment, but also what we 
need for the next year; and frankly, it would have provided a 
little more stability, I think, within the Congress. So the 
answer to your question is yes, I still support a biannual 
budget.
    Mr. Ribble. All right, and I am appreciate of that, sir, 
because I have offered one up for this Congress, and hopefully 
maybe I can finish what you started several decades ago. How 
would that affect military planning to actually have a two year 
budget cycle rather than a single year?
    Secretary Panetta. I think it would give us the opportunity 
to establish a much more stable approach to funding defense if 
we knew that we did not have to fight this battle over funding 
every year, but had at least a two year cycle to be able to 
look at.
    Mr. Ribble. Do you feel it would enhance oversight?
    Secretary Panetta. I think it would because my view, and 
the point behind the legislation I introduced was to allow one 
year to go through the budget process, the appropriation's 
process, and frankly, one year for better oversight.
    Mr. Ribble. Okay, thank you and I am very cognizant of the 
budget restraints we have. We are all wrestling with this, all 
of us are, and I know you are as well. I represent north east 
Wisconsin where the fine ship builders at Marinette Marine are 
building our littoral combat vessels.
    Secretary Panetta. Oh yeah.
    Mr. Ribble. I am just kind of wondering how the decision 
process was made for reduction in LCS?
    Secretary Panetta. You know, obviously the Navy made the 
recommendations on it because, I think, they were trying to 
emphasize other elements within the fleet that they thought 
they would need for the kind of flexibility and agility that we 
needed. Specifically, I cannot give you my specific answer on 
that.
    Mr. Ribble. General, any idea?
    General Dempsey. No, I think it goes back to the chairman's 
comment about are we giving up on a particular number as the 
goal for the size of the fleet. I think what the CNO is doing 
is taking a look at future threats, taking a look at a new 
fiscal environment, which we all acknowledge, and determining 
how best to manage the fleet so it provides as much versatility 
as possible, and anything we do now has to be multi-role. That 
is one of the characteristics of the decisions we have made in 
this budget. You will see that things that had a single role in 
the past we are letting them go so we can have as much multi-
role capability as possible.
    Mr. Ribble. General, if I could just follow up with one 
quick question. Thank you for that answer, by the way. Could 
you also maybe just expound a little bit on what we might be 
able to do encourage nations like Germany and France and others 
in Europe, because I think there is a sense that we are pulling 
more of their weight than they are. Could you maybe just 
address that a little bit?
    General Dempsey. Yeah, I always start an answer to that 
question by pointing out that if we go to war tomorrow the 
folks we are going to ask to go with us are still our 
traditional partners, and so we need to stay committed to them 
as they do to us. Their NATO budget in the aggregate is 
actually quite large. It is about $300 billion in defense in 
the aggregate. Your point, though, is the absolutely correct 
one, which is how can we best harmonize their capabilities with 
ours. And there are some things they need to invest in, as we 
have told them, for example, ISR, tankers, things on which they 
rely on us. They have an initiative in NATO called NATO Smart 
Defense, and we are trying to actually articulate what that 
means so that it produces the outcome you just described.
    Mr. Ribble. Thank you, and I yield back.
    Chairman Ryan. Mr. Pascrell.
    Mr. Hale. Can I just briefly say a word on biannual 
budgeting, and that is it did not work before because we never 
got a biannual appropriation, so if you are going to push it.
    Chairman Ryan. Point taken. Mr. Pascrell.
    Mr. Pascrell. Thank you, Mr. Chairman. Secretary Panetta, 
thank you for your service. Thank you also Mr. Hale, and 
General Dempsey. I am a bit embarrassed, all the way from the 
academy to the head of the 7th Army to here, and you got to be 
asked a question, Mr. Chairman, knowing your record, very 
specifically, as to why are you cutting, or recommending, that 
we cut the missile defense money for Israel from $120 million 
to $106 million. That message is there, it is only a small part 
of the budget, is it not?
    When we end a day of pandering, Mr. General, on our side of 
the table here, and then we will really get some action in the 
Middle East. Israel is one of our strongest allies. We have 
committed to that country, we doubled the money in the last 
three years as you pointed out, so it is really beyond me. It 
wastes our time as to who is more concerned about Israel, Uncle 
Louis or Aunt Tilly. We are committed to that country, period. 
It is important that that democracy continue, so I apologize 
for what you were asked in terms of what you have given to this 
nation.
    Now, secretary, I want to talk on a very light subject, 
procurement. The realities of the situation that we live in 
where we need to provide the resources to our military and keep 
us secure at all times. In previous years, changes to 
procurement were notoriously tough to make, even though the 
administration would not request unneeded weapon systems, like 
the F-35 alternative engine. Members of Congress would sneak 
funding into the bills anyway. This year, we actually had an 
open appropriations process and I have to salute the other 
side. I want to give the folks on the other side credit. We 
were actually allowed to take a vote individually on some of 
these unneeded weapon systems, like the F-35. This unnecessary 
program was kept alive for years. How much money did we waste 
when you go back in the years when there are attempts to change 
things? Now that it has been eliminated, we are going to save 
$3 billion.
    Mr. Secretary, can you talk a little bit about the other 
procurement changes that are included in this budget and how 
they will save the tax payers money moving forward? Before you 
answer that question, Mr. Secretary, if you would my time will 
run out, on the matter of traumatic brain injury, we have a 
long way to go to live up to what this Congress and past 
Congresses have attempted to do for our soldiers who have not 
been responded to when they come off the signature injury of 
traumatic brain injury and post-traumatic stress disorder. I 
would like you to address that, you cannot do it today, but at 
least address the first question.
    Secretary Panetta. Well, just briefly on your last comment 
on traumatic brain injury, this is an area of tremendous 
concern because what we are seeing is that men and women coming 
back from the battle area, even though they may not display the 
symptoms of it, when they are back in their communities it is 
clear that they have had that kind of injury. Also, obviously, 
for those that have gone through IEDs, traumatic brain injury 
is something that we see all the time, and the ability to work 
with that and ensure that these kids are able to regain their 
capability. Science, and medical science, is doing some 
wonderful things, but we need to do much more to ensure that 
they are protected.
    With regards to procurement, this is an area in particular 
where I think we have to do everything possible to try to 
achieve savings. You have pointed out some of the decisions 
that we have made with regards to the procurement area in order 
to ensure that, frankly, we do not go ahead with a weapon 
system unless we know that it has been tested and that it is 
fully capable of performing the mission. The problem in the 
procurement area is this stuff drags on for too long, frankly, 
and the longer it drags, on the more changes are made, the more 
expensive it is, and by the time it finally comes out it is 
already outdated. We have to stop that process, and that means 
we have to begin by looking at the changes that have to be made 
up front, make sure we stick to that, and then go into 
production on that sooner rather than later.
    Also, we have to do more competitive bidding with regards 
to the weapon systems. We have to require industry itself to 
cut costs where it can, instead of, sometimes, going ahead and 
doing things on their side that build in additional costs in 
the system, so there is a series of steps that we are taking 
that are part of our efficiencies to improve procurement 
reform.
    Chairman Ryan. Thank you. Mr. Flores.
    Mr. Flores. Thank you Mr. Chairman. Secretary Panetta and 
General Dempsey, thank you so much for your service. Just 
wanted to let you know that there are several of us in this 
Congress that have your back when it comes to the sequester. We 
have your back when it comes to supporting our uniform military 
men and women, and we also have your back when it comes to not 
balancing the budget on the backs of our uniformed military 
because what you do is the number one responsibility of the 
United States government.
    That said, one of the quotes that you said, Mr. Secretary, 
was that this budget and this strategy had no margin for error. 
I would like to ask you this question, what keeps you awake at 
night with respect to this budget and this strategy? The second 
quote comes from General Dempsey: ``We have an increasingly 
competitive security environment.'' So in light of those two 
quotes what keeps you guys awake at night?
    Secretary Panetta. I worry all the time about the fact that 
we are going to wake up and we will be subject to a crisis or 
an attack, a cyber attack, for example, that we have no idea 
where it came from, and it virtually has crippled our country, 
taken down our power grid, taken down our financial systems; 
and I worry a great deal about that. There is a hell of a lot 
to worry about in the world we are in.
    I worry about what can happen with Iran. I worry about 
North Korea. We worry a great deal about what can happen in the 
Middle East as a result of the turmoil there: Syria, Yemen, 
Bahrain, other places, Egypt. Those are concerns, but first and 
foremost, I guess, I worry about the unexpected attack that we 
are not prepared to deal with.
    Mr. Flores. Right, General Dempsey, do you have anything to 
add to that?
    General Dempsey. I do, thanks.
    Mr. Flores. You can keep it short for me.
    General Dempsey. I will, sir, that is all I do. I do short; 
you heard my opening statement.
    Mr. Flores. I like your style; that is my style.
    General Dempsey. Right. I worry about the kids that we put 
in uniform. If we do not ensure they are the best trained, the 
best equipped, and the best led force on the face of the 
planet, then shame on us. The other thing I worry about: The 
world needs America to be a stabilizing global power. The world 
needs America, and if we reduce our defense capabilities, and 
we maintain our global aspiration, that disconnect will put 
those kids at risk.
    Mr. Flores. I would like to have a chart come up.
    It is a defense spending as a percentage of total GDP 
because this is where I want to go. You have made some quotes 
talking about the security environment that we have, and you 
have a quote about no margin for error. If I can get the chart 
up.


    This is defense spending as a percentage of GDP. The long 
orange line represents where we have been historically. The 
lines to the right represent different outcomes, and the bottom 
line is the sequester, which we are going to fight to keep that 
from happening, but we will have to find alternative areas to 
cut. The green line is the president's budget, which is the 
second line from the bottom. Spending less than 3 percent of 
GDP, which is the lowest number in recent history, probably 
ever in the history of this country bothers me in light of your 
quotes. So I would ask you this, and I am not trying to get you 
cross-wise with the president's policy, but in light of your 
earlier quotes about our security engagement, what should 
defense spending be as a percentage of GDP long-term, assuming 
we are not trying to recapitalize a force that has been 
hollowed out, that we have long-running planning cycle where we 
can plan this over the long term?
    Secretary Panetta. I think the answer is not a number. The 
answer is really what is our capability? Do we have a strong 
capability to be able to respond to any adversary, more than 
one adversary at a time, and not only confront them but defeat 
them; that is the challenge. In the budget we presented, we 
feel confident that we can take on any adversary and be able to 
not only confront them but to defeat them. I think that has to 
be the fundamental question. I think we are comfortable, even 
though this has been a difficult process, we are comfortable 
that with this budget strategy that we have presented here that 
we can protect America.
    Mr. Flores. Well, let us get into the weeds for just a 
second. Let us talk about the joint strike fighter, for 
instance, and well get into BRAC if I have time. I have 
actually sat into the joint strike fighter, and you are right, 
it does have amazing capabilities, but I am worried about 
reprogramming it so that we defer purchases out to five years. 
When you do that, the unit cost goes up.
    Secretary Panetta. No, I know.
    Mr. Flores. And so what is going to happen to the unit 
cost, what is going to happen to the foreign buyers that want 
to buy this? Say, if we slow down, then they are going to slow 
down.
    Chairman Ryan. Gentleman's time.
    Mr. Flores. Okay.
    Chairman Ryan. You want to answer that quick?
    Secretary Panetta. Can I give it a quick answer? We have 
got three variants on the JSF fighter, and that by just by 
virtue of having three variants, we have got to make sure that 
every one of them works. We have been testing each of them. I 
just took the marine version off of delay, or probation, 
because it had met the test. We want to do this right. It is a 
complicated effort, but the time we have to test it will 
guarantee that ultimately when we go to production we have a 
better plan.
    Chairman Ryan. Ms. Bonamici.
    Ms. Bonamici. Thank you, Mr. Chairman. Mr. Secretary, and 
General Dempsey, thank you so much for your testimony and thank 
you for your service. I join many others, I am sure, in 
appreciating your recognition that the unacceptable level of 
debt is a threat to our national security, and I hear that back 
at home as well. And thank you for making proposals that will 
implement efficiencies while keeping our military strong and 
our nation safe.
    I wanted to ask you about overseas contingency operations. 
The budget includes $44.2 billion per year from 2014 through 
2022 as placeholders for future war costs. Now, Mr. Secretary 
and General Dempsey, you have stated that the forces are on 
track to take the lead responsibility for Afghanistan security, 
and you talked about that today, by the end of 2014. So, 
assuming that that timeline holds, is it possible that we could 
have significantly fewer deployed troops in 2015 and beyond and 
could our costs be dramatically less than the $44.2 billion in 
those upcoming years?
    Secretary Panetta. Well, there is no question. We are 
running almost how much a year now for the war?
    Mr. Hale. We asked for $88.
    Secretary Panetta. It is about $88 billion that we are 
confronting in the war. As we transition down there is no 
question that we are going to achieve additional savings as we 
transition to the Afghan force. We will still, and the 
president has made clear that we have an enduring presence, and 
we will have an enduring presence in Afghanistan, but it will 
be at a level that I think will help support them, but will be 
far less than what we are doing at the present time, that is 
for sure.
    General Dempsey. In fact, could I add, congresswoman, that 
the costs of this conflict are fully encumbered. What I mean by 
that is some of that outgo cost is training to deploy, some of 
it is executed in country, but we also have this huge bubble of 
recapitalization and reconstitution coming our way. We have 
said for some time even if the war ended today the next two 
years will be resetting a force. So I cannot predict for you 
exactly what those costs will be out that far, and I think the 
placeholder is important.
    Ms. Bonamici. Thank you, and I think I want to take this 
opportunity to make a suggestion for some of those cost-savings 
and reiterate the importance that Mr. Blumenauer raised about 
cleaning up some of the superfund sites.
    Also, I wanted to talk about healthcare costs. The 
Affordable Care Act adopted a number of measures to begin 
reducing the escalation of health care costs across the board, 
and, in fact, the cost-containment measures reduced TRICARE for 
Life costs by $4.4 billion over 10 years, thereby reducing 
military personnel accrual costs in the DOD military personnel 
accounts. So, as some advocate for the cost savings of the 
Affordable Care Act to be eliminated, how would that impact the 
military personnel budget without those cost savings from the 
Affordable Care Act?
    Mr. Hale. We are looking at that all the time. It is a 
complicated question. The $4.4 you mentioned was a CBO 
estimate. I think I would like to take that for the record in 
terms of getting our experts to comment. There is not a real 
simple answer.
    Ms. Bonamici. Thank you, and I will yield back my time.
    Chairman Ryan. Thank you. Mr. Mulvaney.
    Mr. Mulvaney. Thank you, Mr. Chairman. Mr. Secretary, thank 
you for being here today. All you gentlemen, thank you for 
being here today. I recognize that we are in a difficult 
position. We are sitting here trying to perform a balancing act 
just like you are. We are trying to figure out how to pay for 
what it is we want to accomplish as a nation. I need your help, 
please, to help me understand. I need slide number 12, please.


    Help me understand why we are where we are, or why it is so 
difficult, and if we do not have slide number 12, it is going 
to be difficult to do this. Gentlemen, we are looking at, in 
terms of constant 2005 dollars right now, we are looking at a 
national defense outlays that are roughly 25 percent above 
where they were in the late 1980s when the Soviet Union was 
still around, 70 percent above where they were as recently as 
the late 1990s. I hear what you are saying about this first 
$487 billion for the cuts. There is no room for error. If I 
could go ahead, maybe, let us try the second slide and see if 
we can get to where we are going.


    Anyway. What we are looking at now is even with the $487 
that you gentlemen were looking at, which is the green line; 
you are looking at essentially flat spending. Again, this is 
flat spending off of numbers that are dramatically increased 
over what they were just a decade ago. The sequester, which, 
Mr. Secretary, you have described variously as a disaster, as a 
crazy doomsday mechanism, as a meat axe approach, only takes us 
down to 2007 levels. It is a 9 percent cut, but it is a nine 
percent cut off of a number that has increased 70 percent since 
the year 2000. Why is it so hard? And I want to agree with you, 
and I want to accomplish the same things you want to 
accomplish, but why is it so hard to cut 9 percent from a 
budget that is up 75 percent from a decade ago?
    Secretary Panetta. I have to tell you, every budget summit, 
or agreement, I have been a part of, we have never cut the 
defense budget by a half a trillion dollars. Never. So this is 
a very significant cut that the congress gave us to reduce the 
defense budget by. And to do it at a time when we are facing 
the threats that we are facing in the world, I think that has 
to be taken into consideration. If you continue to come back at 
defense and continue to cut it, the margin of error that I 
talked about is there because it will weaken us in our ability 
to address the number of threats that are out there. If we were 
coming out of World War II, or if we were coming out of a war 
where the threat that we were confronting totally receded, that 
would be one thing. That is not the case. You are asking us to 
do a half a trillion dollars in defense cuts at the same time 
we are facing a huge amount of threats out there that confront 
this country. That is the problem.
    Mr. Mulvaney. And I recognize the fact that it is a half a 
trillion dollars. By the way, if I understand your testimony 
earlier, you are planning on the first $487, but is it my 
understanding that you have not made plans for the 
sequestration?
    Secretary Panetta. That is correct.
    Mr. Mulvaney. And, in all fairness, Mr. Secretary, that is 
just as much the law right now as the first $487 billion, is it 
not?
    Secretary Panetta. It is the law, but it does not take 
effect until January of 2013.
    Mr. Mulvaney. Which is nine months from now?
    Secretary Panetta. January 2013.
    Mr. Mulvaney. What am I supposed to tell my folks back 
home, that the Secretary of Defense is not making plans for a 
half a billion dollars in cuts that take place in nine months?
    Secretary Panetta. Yes, because I think it is totally 
irresponsible for the congress to allow a sequester to take 
place that will weaken our defense system and devastate it with 
these across-the-board cuts.
    Mr. Mulvaney. Well, now, you are preaching to the choir. I 
voted against the Budget Control Act for that same reason. The 
point of the matter is that it is just as much the law as what 
you gentlemen are planning for.
    Secretary Panetta. But it is a law that frankly does not 
require a hell of a lot of planning because it is so blind-
minded in the way that it approaches it, it basically provides 
a formula that cuts defense across the board. There is not a 
hell of a lot of planning I can do to deal with that kind of 
approach to cutting the budget.
    Mr. Mulvaney. Mr. Secretary, I do not want you to get the 
impression that we are not all on the same team, because I 
really do believe in this particular circumstance across both 
sides of this aisle, and I share the same worries that you 
mentioned before. I share the worries about what is happening 
in the Middle East. I share the worries about cyber attacks. I 
share the worries about domestic defense. I do not question 
what you are saying in terms of the role that this country 
ought to perform. My problem is how the hell are we going to 
pay for it? Do you remember those words, sir?
    Secretary Panetta. Yes, indeed.
    Mr. Mulvaney. They were yours in this same chamber 20 years 
ago, and I just want to let you know that we are just trying to 
do the same thing that you tried to accomplish in 1992.
    Secretary Panetta. Absolutely, and I am with you on that. I 
think it has to be paid for.
    Mr. Mulvaney. Thank you, sir.
    Chairman Ryan. Thank you. Mr. Honda.
    Mr. Honda. Thank you, Mr. Chairman, and welcome. It is good 
to see a local boy. Mr. Secretary and General Dempsey, I just 
want to thank you for appearing before us today and for your 
tremendous service. In recent history, we have seen some 
tremendous successes which should be credited to you and to 
many others. The end of our presence in Iraq, the SEAL Team 6 
mission, the expedited schedule for drawdown on Afghanistan 
will go down in history as much as the celebrated events. For 
some of us, these milestones could not come soon enough.
    With this now behind us, we have to take a hard look at the 
money that we have been spending and commend you for coming up 
to the challenge of drawing up a new guidance which finds 
approximately $480 billion in savings, and you have done this 
in a very smart and sophisticated way that does not endanger 
our country or its citizens. And with this recent discussion, I 
suspect, and I know the answer to the question of sequester, or 
the impact of it.
    The cuts up to now, and I guess the question was going to 
be is it good enough, and it sounds like the answer would be, I 
am going to answer my own questions. Up until now, and we need 
not to go any further because of the complicated defense 
situation we face ourselves with in terms of cyber systems and 
everything else. But, given that the defense spending that we 
have had that is calibrated by international standards, I 
understand that the International Peace Research Institute 
found in our nation's current defense spending is bigger than 
the next 17 countries, and given the cuts that we just put in, 
or that you are recommending, what will be our standing, even 
with these cuts? Will we still be greater than the 17 
countries?
    Secretary Panetta. Yes.
    Mr. Honda. The answer is yes. Thank you. And then, I guess 
the issue about health care has been addressed for our 
veterans, but the 4.4 percent reduction was a surprise to me, 
because I was asked that at a town hall meeting whether TRICARE 
is going to be sustained or not, and I said to my knowledge, 
yes. And now I found out that I was inaccurate. How will we 
supplant and how will we be able to augment the kinds of 
services that TRICARE is going to have to cut with future 
funding?
    Secretary Panetta. Well, I will yield to Bob, but what we 
have done in TRICARE is basically provided fee increases for 
those that are covered by TRICARE. We do not impact the quality 
of care they receive nor the kind of care they receive, but we 
do require that they will pay additional fees for those 
services. That is the proposal that we presented.
    Mr. Hale. No change in benefits.
    Secretary Panetta. No change in benefits.
    Mr. Honda. The fee increases, will that be doable for our 
veterans?
    Secretary Panetta. We have tried to design it in a way that 
would have minimum impact on those least able to do it, so we 
are talking about people who retire at higher levels, number 
one. Number two, this is still the best health deal in town in 
terms of the kind of coverage we provide with TRICARE.
    Mr. Honda. I understand that.
    Secretary Panetta. I mean, it is not bad. And right now, 
health care costs at the Defense Department are $50 billion. I 
have got to do something to try to control those costs, and 
this was one of the ways we thought made sense.
    Mr. Honda. Okay. Thank you. If I could switch fields now, 
in Asia we have had the issue of Okinawa and some of the 
redeployment of Marines, and some of our fixed wing and 
helicopters to different bases. I would like to sit down with 
someone and get a full detail on that.
    Secretary Panetta. Sure.
    Mr. Honda. But on the set aside, I understand that Webb, 
Levin, and McCain had asked for a study of this security system 
or what is the current security system, or they wanted a study 
of that area before they would move forward on their budget? Is 
that still in play, and where are we with that study?
    Secretary Panetta. I think they have always expressed 
concerns about some of the approaches that had been agreed to 
with regards to how we would relocate to Guam and the amount of 
money that would be expended in that move, but we are in the 
process of working with Japan to try to negotiate an approach 
that we think will make better sense. This has been something 
that has been bouncing around for 15 years. We think it is time 
that we try to resolve it, and the Japanese have been very 
cooperative in working with us on this effort.
    Mr. Honda. Yeah, to the tune of three prime ministers, but 
I appreciate that. And are the two landing strips that they 
were looking at with one of the air bases, is that off the 
table?
    Secretary Panetta. I think that is one of the things we 
have been discussing.
    Mr. Honda. Okay. Great. Thank you very much.
    Chairman Ryan. Thank you. Mr. Rokita.
    Mr. Rokita. Thank you, Mr. Chairman. Good afternoon, 
gentlemen. Mr. Secretary, I would like to get a ratio from you. 
When you think of the term war fighter or combat troops, for 
every one of those brave men and women, how many others are 
behind them, whether they are contractors, whether they are 
civilian employees, uniformed, non-combat, what is the ratio?
    Mr. Hale. Well, currently, we have 1.4 million people in 
uniform. We have about 750,000 civilians, and, although it is 
hard to measure the number, something on the order of 300,000 
contractors. Who is supporting who at what time, it is hard to 
say, but if you want to count the civilians and the 
contractors, that would be 1.4 to 1.
    Mr. Rokita. What is it?
    Mr. Hale. If you count all the contractors and civilians, 
it would be about a million, roughly, and you have got about 
1.4 million in uniform.
    Mr. Rokita. So that is 1.4 to 1 is what you are saying, 
nothing like one combat troop, one war fighter to eight or 10 
or anything like that.
    Mr. Hale. It depends on how you are defining support.
    Mr. Rokita. I am trying to be as clear as possible, all 
support.
    Mr. Hale. Some of that military personnel are providing 
support.
    Mr. Rokita. All support that would come out of this budget. 
This is the Budget Committee, so what would that ratio be?
    Secretary Panetta. I think that the ratio that he provided 
is probably pretty close.
    Mr. Rokita. 1.4 to 1? Okay. How long will it be before the 
Defense Department is audit-ready?
    Secretary Panetta. I have directed that we try to develop 
our audit capability on a faster track. I think right now the 
target was to hit 2017. What I am trying to do is to at least 
begin to develop an audit capability by 2014. That is the 
effort that we are trying to make with a final product coming 
out in 2017.
    Mr. Rokita. Thank you, Secretary. And just so we are clear, 
this is not where the military is able to pass an audit that 
would otherwise be given to other government agencies, it is 
just getting the Defense Department in a position to, or so an 
audit can be conducted to see how this money is being spent and 
see how efficiently it is being spent?
    Secretary Panetta. No, you are absolutely right. I mean, 
there is no way I can justify to the American taxpayer spending 
the kind of money we spend at Defense and not having the 
ability to audit where those funds are going. Now, there are 
individual audits. It is not like we do not know where all 
these funds are going, but frankly, we as a department need to 
have auditability as a department with the entire budget.
    Mr. Rokita. Right. So, you understand the concern from 
members, like my friend Mr. Mulvaney, we are all on the same 
team here, but, we also have a duty to make sure we are 
spending this money as wisely as possible?
    Secretary Panetta. You bet. You bet.
    Mr. Rokita. Let me finish just by reading a letter from 
Commander of U.S. Navy Reserves, 21 years in the military, John 
Pickerill; he is from Crawfordsville, Indiana. I met him for 
the first time just a few weeks ago. This is not a ``gotcha'' 
kind of letter, but I want you to respond to it. I think you, 
my democratic as well as republican colleagues would appreciate 
what he is saying. This is after he talks about the 12 service 
members who were needlessly electrocuted because of faulty 
wiring and bad electricians by defense contractors.
    ``While stationed in the Green Zone, I was assigned a 
living trailer that had joined a living trailer of two young 
contractors in their 20s. After being there for a while, I 
struck up a conversation with them and found out that they had 
a job running network cable. When I asked how they liked it, 
they said it was so great to be working there. He was making 
over $300,000 per year plus all living expenses, and he bragged 
that if he could stay there for three years, he would be able 
to put a million dollars in the bank and retire before he 
turned 30.''
    ``As another example, one of the officers assigned beneath 
me befriended a contractor, and one day she came to him in 
tears. She was an honest girl who could not understand why her 
boss was telling her to mark down eight hours on her timesheet 
when she only worked two hours per day. These are merely a few 
accounts. Once I returned home, I had a hard time putting this 
thought out of my mind. How much of all this spending was 
necessary for our national defense? Was any of it necessary for 
our national defense? This was taxpayer money spent not on 
national defense but instead on increasing the profits of 
defense contractors.'' And I offer this for the record.
    Secretary Panetta. Listen, I think the observation of that 
individual is of concern to all of us. I think when taxpayers 
give us the money to spend on defense, we owe them the 
responsibility to make sure that every dollar is being spent in 
order to protect this country and to be able to justify it. And 
I am not saying there are not occasions like pointed out in the 
letter of those examples of people who abuse the system. What 
we have a responsibility to do is to make sure the system is 
not abused. And that is something I am intent on doing.
    Mr. Rokita. Thank you. I yield.
    Chairman Ryan. Thank you. Ms. Wasserman Schultz.
    Ms. Wasserman Schultz. Thank you, Mr. Chairman. Mr. 
Secretary, Generals, it is great to have you here. Mr. 
Secretary, I know that my colleague, Mr. Price, asked you 
earlier about funding levels for Israeli missile defense. Could 
and I apologize, I was not here when he asked that question, 
and would you mind repeating and explaining what those numbers 
mean in terms of our overall security cooperation with Israel, 
and also explain those numbers as it relates to the numbers in 
comparison to previous administrations?
    Secretary Panetta. Yes. What I said was, first of all, 
obviously, our support to Israel is unshakable and we have 
reflected that, frankly, in our budget request. The budget 
request, by the way, is done in collaboration very closely with 
the Israeli government. Since taking office, the administration 
has requested money for a number of missile systems that they 
have, the Arrow and David Sling Ballistic Missile Defense 
programs as well as the Iron Dome System, which is a very 
effective system for defense against short-range rocket 
attacks. The total amount of assistance that we provide Israel 
is $650 million, which is more than double what was provided in 
the last administration, which was at a level of I think about 
$320 million. So, we are making a significant contribution to 
Israeli defense.
    Ms. Wasserman Schultz. Thank you. And, since actions speak 
louder than words, which I think is a pretty universal truth, 
and I know Mr. Price raised the issue of public statements when 
he was here, could you describe the administration's actions to 
date to deter Iran's nuclear ambition and their progress 
towards developing and deploying a nuclear weapon?
    Secretary Panetta. The administration and the president has 
made clear that we will prevent Iran from getting a nuclear 
weapon, period. This is not about containment, this is about 
preventing them from gaining a nuclear weapon, and nobody 
should make a mistake about our intent here. And what we have 
done is to work with the international community to make clear 
to Iran that they have to deter from the effort that they are 
making to develop their nuclear capability, they have to stop 
what they are doing in terms of promoting violence abroad, and 
providing assistance to terrorists abroad. They have to stop 
any kind of effort that would close the Straits of Hormuz. We 
have made very clear what those red lines are. The 
international community has joined together to implement a 
series of very tough sanctions, diplomatic sanctions, economic 
sanctions; and I can tell you that those sanctions are biting. 
They are isolating Iran. They are impacting on their economy. 
They are impacting on their ability to govern their own 
country. The whole point of those sanctions is to put pressure 
on them to make clear that they have to join the international 
community, live up to their international responsibilities. But 
if they do not, we have put every option on the table to make 
clear to them that there is nothing that we will hesitate to do 
to stop them from developing those kinds of weapons.
    Ms. Wasserman Schultz. And thank you. And would you say 
that we have applied the toughest sanctions that Iran has felt 
to date with the most international buy-in in history?
    Secretary Panetta. These are the most sanctions we have 
ever applied against one country. The sanctions we have just 
applied impact on their energy, impact on their banking system, 
and those will continue to take effect. The combination of what 
we have done, I think, has sent a very clear signal that the 
behavior they are engaged in is not to be tolerated.
    Ms. Wasserman Schultz. Thank you, Mr. Secretary, and also 
thank you for your long-time service to our country. I yield 
time.
    Secretary Panetta. Thank you. Mr. Huelskamp.
    Mr. Huelskamp. Thank you, Mr. Chairman. A couple of 
questions, first. Secretary Panetta, you talked earlier, and 
there were signs about the sequester, and of course the 
president of the United States did sign that deal that included 
that, and yet there is no provisions in your budget to 
implement a sequester. Did the president direct you to ignore 
that particular law?
    Secretary Panetta. The position of OMB was that we are not 
to plan for a sequester at this time, and that is the direction 
we have been given, and that is what we are doing.
    Mr. Huelskamp. Is that normal to simply ignore a law that 
could have pretty drastic consequences by refusing to plan for 
that law?
    Secretary Panetta. Well, as we pointed out, this is pretty 
unusual to have a sequester mechanism. The point of it from the 
very beginning was to be so drastic and so insane that it would 
force the congress to do what is right and come up with a 
deficit reduction package. That is the whole purpose of 
sequester. I do not think the congress intended sequester to 
actually happen, to be truthful. I mean, it was supposed to be 
a gun at your head.
    Mr. Huelskamp. Secretary, I asked the question, did the 
president direct you to ignore the sequester or did you do that 
yourself?
    Secretary Panetta. The president did not direct me. We 
basically got directions from OMB to basically not plan for 
sequester, particularly after coming up with $500 billion in 
deficit reduction.
    Mr. Huelskamp. When would you plan to plan for the 
sequester? And the president is involved here; it is not just 
congress, obviously. The president would have to sign a plan 
that would suspend that. Are you just hoping that that will 
never happen? I mean, is that what we are doing here?
    Secretary Panetta. Well, I would hope that you would hope 
that would never happen.
    Mr. Huelskamp. There is no answer, apparently. There is no 
plan for that. The law is very clear, whether the president 
liked it or not, he signed it, and on recommendation, I 
presume, of his advisers.
    Second question I want to ask a little bit more is the 
issue of audit-readiness, and my colleague had mentioned that, 
and he hoped by 2014, maybe by 2017, what exactly does that 
mean if you are not audit-ready?
    Secretary Panetta. It means that the defense budget is not 
auditable, and we are the only agency that is not auditable, 
and that is a shame. And when I became secretary, the first 
thing I did was to direct the comptroller that we have to move 
on a faster track to develop auditable books.
    Mr. Huelskamp. What assurance do we have that you are 
spending hundreds of billions of dollars where you are telling 
us you are going to spend it today? How do we know that? You 
are essentially saying we do not know that?
    Secretary Panetta. I mean, auditing is ensuring that how we 
say we are spending dollars is in fact audited to confirm that 
that is the case. We do have audit in the different agencies. 
It is not like we do not carry on auditing within the different 
services. But, overall, for the department as a whole, we do 
not have auditability, and that is what needs to be corrected.
    Mr. Huelskamp. And I had a constituent that contacted me 
today about a news item. Did you know that apparently our 
federal taxpayers are paying for a $750,000 soccer field at 
Gitmo? Is that something that the Department of Defense knew 
about?
    Secretary Panetta. I am sorry, what was that?
    Mr. Huelskamp. A $750,000 soccer field at Gitmo that was 
just announced by the Department of Defense. Is that something 
you were aware of, Mr. Secretary?
    Secretary Panetta. No, I was not.
    Mr. Huelskamp. Are you also aware of that the armed forces 
also owns five separate luxurious resorts around the world, 
that obviously service members can attend as well as perhaps a 
million civilians can attend as well? Is that something you 
were aware of that the Department of Defense owned as well?
    Secretary Panetta. No.
    Mr. Huelskamp. Is that something proper for the Department 
of Defense to own a resort that allows you to stroll barefoot 
on the Waikiki Beach, sightsee European castles, shop in 
Seoul's exciting shopping districts, or the best one, to go to 
Walt Disney Resorts? Is that something that is proper for the 
Department of Defense to own?
    Chairman Ryan. Let him answer the question.
    Mr. Hale. That is non-appropriated funds.
    Secretary Panetta. That is non-appropriated funds, first of 
all, which means that it is not part of the defense budget. 
But, more importantly, a lot of the facilities are provided for 
men and women who go into battle and who have been deployed 
overseas, and you know what? I think that the very least we owe 
them is the ability to be able to enjoy whatever time they take 
off from going to war.
    Mr. Huelskamp. Okay. Well, this also applies to over a 
million civilians that have never seen war. It also, for folks 
that do not live in these particular areas, they cannot jump on 
a plane, Mr. Secretary. But all I wanted to raise is the point 
that if you are not audit-capable and you are here asking for 
more money, and you are not ready for a sequester, my 
constituents are very concerned with the proper use of taxpayer 
funds. So I appreciate the answers to the questions. I yield 
back my time.
    Mr. Hale. Mr. Chairman, I would like to add briefly to 
that. The fact that we are not audit-ready means that we cannot 
go through a series of requirements imposed by auditors. We 
need to do that, and I have made it a major area of emphasis. 
But our systems are designed to know where we spend the money, 
and we have passed audits that indicate we are taking the 
direction that Congress gives us, passing it out appropriately 
to our commands. So, I can tell you where we are spending the 
money. I cannot go through all the detailed things that is 
required by an audit. We need to do it, but I do not want to 
leave you with the impression that we are sitting over there, 
spending this money wherever we want. They do 150 million 
accounting transactions a year. If even 1 percent of them were 
off, we have 3,000 auditors watching us, we would know and you 
would know. So, we do know where we are spending the money.
    Mr. Huelskamp. Okay, and if I might just follow up.
    Chairman Ryan. Gentlemen, I am sorry. Time has expired.
    Mr. Huelskamp. Well, he was able to answer afterwards I 
asked him a question.
    Chairman Ryan. I let him answer your question after the 
time had expired. We have a vote hanging at 5:00 and about five 
other members. So, Mr. Lankford.
    Mr. Lankford. Gentlemen, thank you. General Dempsey, thanks 
for all your years of service and for being here. You have been 
in front of quite a few committees and have done this. I am 
sure it is your favorite part of every single week.
    General Dempsey. It is.
    Mr. Lankford. I am sure. Secretary Panetta, you have been 
on both sides of this. It must be interesting for you to come 
and sit in a room and give testimony, looking at yourself 
looking back at you in your painting on the wall, knowing that 
you have been on both sides of this as well; and I appreciate 
many decades of service for you as well and what you have done. 
You have stated the fact that many of us have stated in other 
areas as well. Education, for instance, there have been years 
and years of just throw more money at it, and that will fix the 
problem, because there are issues. But, continuing to throw 
money at it does not necessarily give you better outcomes. It 
takes some reforms to the systems and structures. What I hear 
from you is you are basically both saying the same thing with 
defense. There need to be some things that occur and that may 
not necessarily mean throwing more money at it. It may mean 
reforming systems and structures. So, I want to ask you about a 
couple of those. When you mention force reduction, what are we 
talking about between all branches and force reduction?
    Secretary Panetta. We are talking about 120,000 that will 
be reduced over these next five years between now and 2017.
    Mr. Lankford. Okay. Are those all uniformed, or are those 
some civilian as well?
    Secretary Panetta. What I gave you was all uniform.
    Mr. Lankford. Okay. Where are we on civilian reductions? 
Because we had, as you have mentioned earlier, about 700,000 
civilians there, not including contractors.
    Secretary Panetta. We have had reductions in the civilian 
core as well.
    Mr. Hale. They are fairly modest at the moment. They are 
about 15,000 over the five year period.
    Mr. Lankford. Okay.
    Mr. Hale. I think something we do need to look at again in 
terms of the balance.
    Mr. Lankford. Well, that is a question, then, obviously. 
You are dealing with a significant ``why,'' I guess, in that, 
when you have got 120,000 uniform reductions and 15,000 
civilian reductions. Can I ask as far as what you are thinking 
is the type of civilian reductions there, or why the disparity 
between the two?
    Secretary Panetta. I think our hope is on civilian 
reductions that we tie that to efficiencies, getting rid of 
overhead, getting rid of duplication, getting rid of the 
contract operations that we do not need. So the reductions on 
the civilian side are pursuant to a list of efficiencies that 
we have got to put in place that hopefully will produce more 
with regards to reductions in that area.
    Mr. Lankford. So, your 15,000 is a floor rather than a 
ceiling on that one?
    Secretary Panetta. That is right, exactly.
    Mr. Lankford. And are there key areas that you are already 
looking at? You mentioned a couple of them in broad terms, but 
more specifically whether we are dealing with, for instance, if 
we close down a line of aircraft, obviously there are civilians 
that handle that area. Is that the kind of thing you are 
talking about, or are you talking about more service?
    Secretary Panetta. I was talking more internal in terms of 
the operations within the Defense Department because where 
there are duplicative operations, where there are operations or 
areas that are performing roles that frankly we can reduce the 
number of people at, that is the kind of thing I am talking 
about. But in addition to that, as pointed out by the 
comptroller, we have got a large number of contract employees, 
and those contracts that we can reduce will reduce obviously 
the contract employees that you talked about.
    Mr. Lankford. Okay, because that is the second part of my 
question, how do you not just reduce civilian employees but 
increase contractors to compensate for that so you are really 
just moving it over to another area?
    Secretary Panetta. That is what we have got to make sure 
that that does not happen.
    Mr. Lankford. Okay. Go ahead.
    Mr. Hale. May I briefly? From 2012 to 2013, the reduction 
in civilians is roughly proportional to the military. We need 
to look at the out years. Frankly, we ran out of time. There is 
only so much you can do in a couple of months.
    Mr. Lankford. I know that feeling extremely well.
    Mr. Hale. Bear with us.
    Mr. Lankford. So, that is a pending possibly in another 
proposal on it, or is that at 2014?
    Mr. Hale. Well, not in this budget, but we will look at it, 
because I think the 2013 number is pretty reasonable, but 
beyond 2013, and I think we go through a five-year planning 
process each year, we need to look again. It may be the right 
number in the out years, but I am not so sure.
    Mr. Lankford. Okay. Second part of this question as well, 
obviously you have put together a lot in this time period. You 
talked a lot about procurement reform, some lines going away, 
but also a lot of innovation that needs to occur. That is a 
heavy technology. So, I get a feeling that there is this push 
and pull between procurement. We have got to be lighter, more 
agile, more mobile, more technologically savvy, more equipment 
to be able to help us there. That is more R&D. That is more 
procurement, but we have got to come down on procurement as 
well. We have some aircraft in the Air Force, and I am 44 years 
old, they are much older than I am, that we are still using, so 
we need some in there. So, how are you balancing that out 
between those two?
    General Dempsey. Yeah. Well, I mentioned one thing we are 
looking at: multirole, and shorter procurement timelines. I 
mean, look, when I was the chief staff of the Army I got 
briefed on programs where the requirements were established in 
2003. We are not going to deliver until 2014.
    Mr. Lankford. Right, and the technology is behind on that.
    General Dempsey. Making it a certainty that we are going to 
deliver something that is either late to need or that does not 
spiral in new technology. And, as you spiral in new technology, 
the requirement goes up, and the next thing you know, you are 
off to the races on cost. So, acquisition reform has to include 
a much closer merger of requirements and material solutions 
with senior leader involvement and shorter horizons. But, I 
will tell you that we have not gotten industry on board with 
that, and we have not gotten the Congress of the United States 
on board, but that is the answer.
    Mr. Lankford. Okay. Thank you. I yield back.
    Chairman Ryan. Thank you. Mr. Young.
    Mr. Young. Thank you, gentlemen, for being here today. 
Thank you for your service to our country. First I want to 
commend the secretary and the undersecretary for your ambitious 
efforts on the audit-readiness initiative. I am happy to serve 
on the audit-readiness panel here within congress, and to the 
extent that we can assist you in your efforts there, we will 
continue to lend a critical eye as your efforts play out, but 
we want to help however we can; it is very important.
    I am concerned that some of these proposed cuts to our 
defense budget may not be strategy-based and I am open to all 
manner of cuts, identifying efficiencies, changing how we do 
business with respect to health care for our service members 
and veterans, looking into retirement, all manner of different 
things, but it has to be strategy-based. I know you would agree 
with that. It seems to me there are essentially two different 
processes that you have to go through here. First, you have to 
clarify the strategy based on current threats, and you have 
indicated, I think you characterized the process as adapting 
the existing QDR to current circumstances. So, you are looking 
for cost efficiencies within the DOD budget and shifting our 
posture to the Asia-Pacific region. Is that a fair 
characterization?
    Secretary Panetta. Correct.
    Mr. Young. Okay. And then the second process, as I see it, 
is translating that strategy into specific spending requests, 
requesting appropriations based on that redefined, re-clarified 
strategy. Now, I think more work could be done in communicating 
part one, which is why we are pivoting to the Asia-Pacific 
region, why we intend to invest more resources into the Middle 
East, but I do not want to be too critical of the 
administration in that part one of a two part process. But it 
is the second part, translating strategy into requested 
appropriations where I have very little idea how the Department 
of Defense and the administration, more generally, came up with 
each of these spending requests. In an absence of that sort of 
clarity, I think many of us are inclined to fall back on back-
of-the-envelope shorthand things, like what percentage of GDP 
are we spending on military? You know, when you think about it 
that strikes me as a superficial way to determine how much we 
ought to be spending on our military. Would you agree with that 
statement? That's not a strategy-based assessment, a percentage 
of GDP?
    Secretary Panetta. No.
    Mr. Young. Okay. What about reference to the level of 
military spending of other countries? Is that also superficial?
    Secretary Panetta. It is.
    Mr. Young. Okay. So in following our oversight role here, I 
also said on the Armed Services Committee, but I think all 
members of member of Congress would benefit from a window into 
your analysis there. How you translated your strategy into 
spending requests. I suspect that this is a sensitive 
methodology, one that you do not want to, maybe, articulate in 
an open hearing, is that correct?
    Secretary Panetta. Well, no not necessarily. Frankly, we 
went through that process with each of the service chiefs. And, 
frankly, we can sit down with you. We have a report that lists, 
based on each of the strategies, what decisions in the budget 
were made pursuant to those strategies. And we can walk through 
that with you. We are happy to do that.
    Mr. Young. I think I would benefit immeasurably in 
performing my oversight role should we hold those meetings. 
Could we open it up to my colleagues, as well?
    Secretary Panetta. Sure.
    Mr. Young. And do you believe that some of these meetings 
would be better done in a secure setting, as opposed to out in 
the open?
    Secretary Panetta. Yes. There will be some things, in 
particular cyber and some certain technologies, to overcome 
anti-access that we would probably have to do closed. But most 
of it, as the Secretary said, would be available in open 
setting.
    Mr. Young. Well, I appreciate your commitment to holding 
each of these meetings for each of the respective services and 
I will play a role in helping to assemble some of my 
colleagues.
    Secretary Panetta. Great.
    Mr. Young. So thank you very much. I yield back.
    Chairman Ryan. Thank you. Mr. Stutzman.
    Mr. Stutzman. Thank you, Mr. Chairman, and thank you, Mr. 
Panetta and General Dempsey. Secretary Panetta, I really 
respect you and think you are the right person for the job at 
the right time with all of the experience that you have. I want 
to talk to you a little bit about the role of the National 
Guard and some of the decisions that you made.
    You said in your opening statement that we rely on a strong 
Reserve, a National Guard, and I agree with you completely. As 
we drawdown, potentially, in the Middle East, we are going to 
rely a little bit more on the Guard and Reserve units. That 
will increase.
    And I was made aware of a letter that the National 
Governors Association sent to you, about 49 different 
governors. I do not know if you are aware of the letter or not, 
but they definitely are concerned about this same approach with 
the cuts to the Guard. Could you talk a little bit about that 
because in their letter then mention that the Air Guard 
provides 35 percent of the U.S. Air Force's capability for 6 
percent of the budget. They also mention in the letter that we 
must oppose the proposal that the Air National Guard absorb 59 
percent of the total aircraft budget reductions and 
approximately six times the per capita personnel reductions. 
Could you talk a little bit about that approach?
    Secretary Panetta. Sure. Look, the main thing we did want 
was to maintain a strong Guard and a strong Reserve. The fact 
is that we are going to be maintaining the Guard at basically 
the same current levels, we are going to maintain the Reserve 
at the same levels. With regards to the Air Guard, which is an 
area that the Air Force focused on, in the past they have made 
cuts with regards to the active duty force itself in terms of 
planes. They did not focus on the Reserves in the Guard 
operation. They decided to look at those, particularly with 
regards to planes like the A-10s, and again looked at are these 
planes multi-mission? Can they perform the kind of role that we 
need with the new agility that we have as part of our strategy? 
And their determination was that these are basically single-
mission aircraft and that those are the ones that we need to 
gradually reduce. We will still retain a large number of them, 
but they wanted to reduce some of those. That is what is 
impacting right now with regards to the concerns, I think, that 
were in the Governors letter.
    Having said that, what I have asked the Secretary of the 
Air Force to do, as well as the Air Force Chief, is to do 
everything possible to try to mitigate the impact of those 
reductions with regards to some of those planes to see what we 
can do. I mean, there are areas we are going to increase. We 
are going to do more unmanned; we are going to do more ISR. Are 
there ways to try to mitigate some of this by virtue of some of 
the things we are going to need under the new strategy?
    Mr. Stutzman. I represent Fort Wayne, which we have the Air 
Guard base there in Fort Wayne, and we have the A-10s there. I 
think what I have seen and numbers propose is that the Air 
Guard can store and maintain these particular aircraft for 
about 28 cents on the dollar. You know, my feeling is that we 
could utilize the Guard even more than what we currently do by 
maintaining aircraft, and the value that we have, and the 
experience that the pilots provide. And I think that is 
something that is really important and should be kept in 
consideration.
    Final question is, and this kind of goes into the proposal 
and the Air Force reductions, but one of the key elements of 
your Defense strategy is an increased focus on the Asia-Pacific 
region. Most analysts looking at that region see a dominant 
role for air and naval components in any strategy in that 
region. But the modernization budget eliminates planned growth 
in the Navy and shrinks the Air Force. Why does not the 
modernization program match the Defense strategy?
    Secretary Panetta. Well we think it does and for that 
reason, frankly, we are maintaining 11 carriers and not cutting 
back on our carriers because that is a major element of force 
projection. We are maintaining the bomber fleet, we are going 
to be investing in the new bomber for the future, and we are 
investing in obviously the joint strike fighter to try to 
develop that kind of fifth-generation capability. With regards 
to the Navy itself, we are going to be continuing investments 
in the ships that will provide the kind of agility that will 
give us the capability to move quickly on the flat deck ships 
that we have. We are going to be maintaining a Navy of 285 
ships. That is what we have now, that is what we will have in 
2017. Our goal in the next five years is to continue to develop 
the Navy to a 300-ship Navy. So everything about our strategy, 
very frankly, stresses both our naval and Air Force elements in 
order to project force both in the Middle East as well as in 
the Pacific.
    Mr. Stutzman. Thank you.
    Chairman Ryan. Thank you. Mr. Garrett.
    Mr. Garrett. Thank you Chairman, secretary, and panel; I 
appreciate you being here. I think I may be winding things up 
for you. It was several hours ago I think, I think Mr. Doggett 
raised the question, or raised the issue, with what is going on 
in Afghanistan right now and with regard to the tragic 
situation of a loss of a couple of our soldiers over there. And 
obviously the issue, well there are multiple issues that are 
out of there, but it is a tragedy that we lose our soldiers 
over there. I am just curious, from the media accounts, I know 
that this country has apologized to that country for what has 
occurred, but have you personally or the administration heard 
from the Afghan government to apologize to us and the families 
of those soldiers who have lost their life from Afghanistan?
    Secretary Panetta. Yes. Minister Wardak, who is the defense 
minister, called me over the weekend and apologized for what 
happened.
    Mr. Garrett. I appreciate that because that is something 
that we have not heard from the press. Secondly, to a point 
that Mr. Rokita raised, which was regarding to the audits. I 
have served on this committee now for nine years and I may be 
here longer than everyone here except for Chairman Ryan. And 
regardless who is sitting over there, Democrat or Republican, 
we have heard the same thing: that we are going to get to this, 
it is a big; it is important, and it is going to happen sooner 
rather than later. At the beginning of the testimony I thought 
I heard you say that you hope to have this done by around 2014, 
but then following the questioning it sounded like maybe I 
heard 2017 for this. Which is the year you are anticipating 
that it is up and running?
    Secretary Panetta. Well, it is a complicated process, but 
let me ask Hale to talk about his, because he is the one that 
deals with the auditing operation.
    Mr. Hale. We are heading to be audit-ready for the key 
statement, the budget statement, that I think is the greatest 
concern to me and should be to you because it is all the budget 
data that we use by 2014, and all of the statements by 2017, 
which is the provision in the law. And I would have to agree 
with you, we have over-promised and under delivered for a long 
time.
    Mr. Garrett. What is the hardest point of this as far as 
getting it done? Because if this was private industry and the 
CEO was sitting there and just saying, ``Well, you know, we 
just really do not know where all the money has been going to 
as far as in the certified audit,'' that CEO, present company 
excepted, would be out.
    Secretary Panetta. Right.
    Mr. Garrett. And I am not just saying that here. But what 
is the hardest point? I have heard that over the years that it 
has to do with identifying what your assets really are around 
the country.
    Mr. Hale. You know, the hardest point has been sustained 
management attention to this. We have never had a CEO that 
actually paid attention in the same way that Secretary Panetta 
has. That has helped a lot. There has not been sustained 
management attention. There are technical factors, as well, but 
I think I will spare you them, unless you want to hear them.
    Mr. Garrett. No, maybe if you could send them to us in a 
short paper on it that would be appreciated because we have 
never gotten that in the past.
    Secretary Panetta. Congressman, I share your concern. As a 
former member of this committee and a former budget chair and a 
former OMB Director, when I found out that this was the case it 
was to the extent that it is unacceptable.
    Mr. Garrett. One of the very first things in my notes, 
hours ago, when you were talking about where we have 
efficiencies, about $150 billion here, and that you are going 
to have added onto that to $60 billion, that is $210. That all 
sounds great. What I am wondering is, can you really articulate 
that, can you really document that?
    Secretary Panetta. Yes. I have asked the same question.
    Mr. Garrett. From a department-wide perspective, not from 
an individual perspective.
    Secretary Panetta. No.
    Mr. Garrett. If you can say in this department over here 
and this area over here, we got it.
    Secretary Panetta. Yes, we can.
    Mr. Garrett. You can?
    Secretary Panetta. Yes, we can.
    Mr. Garrett. How do you do that without a department-wide 
audit and putting into perspective into the entire department?
    Secretary Panetta. Because my question was we were supposed 
to do $150 billion in efficiency savings and I asked this guy 
next to me, ``What are we doing to achieve those savings,'' and 
they have laid out each of the areas where we are making 
progress in achieving those savings. And we can share those 
with you.
    Mr. Hale. Mr. Garrett, our systems are designed to tell you 
where we spend the money based on what you appropriate. They do 
that pretty well. They are not designed to provide the 
information that a private sector auditor wants in order to 
pass audit. They need to be, but they are not. So that is what 
we cannot do. We do know where we are spending the money. When 
you appropriate funds, I can track it.
    Mr. Garrett. All right. My time is going quick. So just a 
couple things. You also said that the example that he raised 
here, it sounds like an abuse of the system that Mr. Rokita was 
raising about people making too much money and what have you 
under these cases. My take away from that, and I do not know 
what the underlying facts are, as you do not as well, that does 
not sound like an abuse necessarily by the contractor, that 
maybe it sounds more like an abuse by someone from the DOD, 
from the procurement side of the equation that that would even 
occur. Last question in 15 seconds if the Chairman would allow. 
The Department has developed a military primary proposal in 
2008, and your own Defense Business Board produced several 
proposals this last summer. The question on this, I guess is a 
redundancy, is why are we looking at another reform commission 
when you already have proposals that are out there? And I will 
close with that.
    General Dempsey. You mean on retirement?
    Mr. Garrett. Yeah.
    General Dempsey. Well, I for one suggested that that 
committee, which was peopled entirely with civilian 
businessmen, should be reopened and include the participation 
of uniformed military and, in particular, non-commissioned 
officers. Look, I am not getting ready to sign up for a 
retirement plan that treats uniformed military who moved 21 
times in 20 years and who put their lives at risk. I am not 
going to equate our retirement plan to the civilian sector. And 
what we got was a civilian sector proposal.
    Chairman Ryan. Okay, point taken. A couple points in 
closing. I just want to reemphasize, Secretary, what I was 
trying to make in the beginning, which is put all of this in 
perspective. I have heard you mention that the number you have 
got that was given to you is because the law Congress passed, 
the BCA. I would simply point out that the firewall in the BCA 
is there for 2012 and 2013, not thereon after. So this is a 
number you were given by OMB, not by Congress. To put that in 
perspective, the savings from the BCA and from discretionary 
spending is $917 billion. The budget we passed out of this 
committee and off the floor in the House last year saved $1.6 
trillion out of discretionary spending net. We took last year's 
Obama line, the Gates line, $78 billion off of the fiscal year 
2011 fit-up and agreed with that number and still saved $1.6 
trillion.
    Now, I clearly understand some of my colleagues do not like 
what we did. We also saved far more than that in mandatory 
spending, because, as you mentioned, that is two-thirds of the 
budget. The point I would simply say, and I heard you mention 
that you were given the chore of coming up with the $500 
billion in deficit reduction. You have done that. You have done 
a wonderful job. I mean, really. What you were given as a job 
to do, you have done your job exceptionally well. I really mean 
that. I just think you were given a job to do heavy lifting for 
other parts of the budget that did not have this kind of 
responsibility placed upon them, your other Cabinet 
secretaries, other parts of the government.
    The budget that the president sent us has a net deficit 
reduction of $400 billion. So you are carrying the weight of a 
$500 billion deficit reduction just out of your department and 
all of the rest of the government for the next 10 years, net 
deficit reduction of $400 billion. It is a budget that has a 
net spending increase of $1.5 trillion. Only way you can get to 
the $400 billion reduction number is because the tax increase 
is $1.9 trillion. So it is about priorities. It is about what 
is the priority of the federal government, what is the 
responsibility of the federal government, and are we applying 
the kind of discipline that you clearly have exercised in the 
rest of government? And we would simply argue that your 
administration is not. You are, but the administration is not 
and, as a result, this is why we still make the case that this 
is not a strategy-driven budget but a budget-driven strategy. 
And I do not want to always have the last word. I want to allow 
my colleague. I do not want to be dictator over here.
    Mr. Van Hollen. Thank you, Mr. Chairman. I appreciate that. 
Thank you, Mr. Secretary, General Dempsey, Comptroller, 
Undersecretary Hale. Thank you all for your testimony.
    A few words in response to the Chairman. And I think, as 
the secretaries indicated, we all hope we can find a bipartisan 
way. We must find a bipartisan way to undo the sequester but 
replace it with, what I hope will be, a balanced approach to 
deficit reduction. I think the secretary was loud and clear on 
that. With respect to the president's budget, what the 
president did was to take the BCA, Budget Control Act, 
discretionary levels that were enacted on a bipartisan basis by 
this Congress and he extended, essentially, the firewall levels 
moving forward. The firewalls, the Chairman's right, were in 
place for two years, but if you extend and project those 
forward you save, within the defense budget, the amount 
essentially that is being proposed in this budget.
    I also want to reiterate the fact that when it came to the 
sequester and how it was designed, there was a discussion about 
whether or not we would reach that deficit target in part by 
closing a lot of tax loopholes, getting rid of some tax 
subsidies, and asking folks at the very high end of the income 
scale to pay to help reduce our deficit in a balanced way. And 
the response was no, we prefer to put this defense spending as 
part of the sequester mechanism.
    Now, to his credit the chairman of the Armed Services 
Committee said at least at one point that if he were forced to 
choose between those two he would close the tax loopholes. I do 
not know if he still maintains that position. But as we go 
forward, let us look for the kind of bipartisan, balanced 
framework that other bipartisan commissions have taken to this 
task. And with that I close.
    Chairman Ryan. Yes, and I will just close with we agree we 
should just do our jobs. We know savings should be taken from 
this budget, that there clearly is room for savings. Everybody 
agrees with that. The question gets into the debt. And we just 
want to do our jobs. We do not want to give it to commissions, 
or to sequesters anymore. We just want to do our jobs. And with 
that I want to thank you gentlemen for indulging us for all 
this time. This hearing is adjourned.
    [The prepared statement of Ms. Schwartz follows:]
    
    
    [Questions submitted for the record and their responses 
follow:]

         Questions Submitted for the Record From Chairman Ryan

    1. The President's budget requests two additional rounds of Base 
Realignments and Closures, but does not request any funds to implement 
any base realignments or closures. Does the budget request, however, 
assume the eventual operational cost savings that would result from 
base realignments and closures?
    2. GAO has estimated that the most recent BRAC round cost at least 
$35 billion to implement before any net savings would be achieved. Do 
you have any reason to believe these implementation costs would be less 
in a future BRAC round? Please provide a copy of any analysis that 
supports such belief.
    3. Your budget documentation claims $41.8 billion in savings within 
the FYDP (FY 13-17) from the restructuring of major defense acquisition 
programs. How much of that $41.8 billion is just shifted into the 
second five years of the budget window (FY 17-22) and beyond?
    4. The major effort to equip and expand the Afghan National 
Security Forces has been completed, but the President's budget requests 
$5.7 billion in continued ANSF funding. Does that $5.7 billion 
represent an ongoing and open-ended requirement for the U.S. government 
to maintain the ANSF that will continue even once the ANSF has assumed 
lead responsibility for securing that country?
    5. The President's budget requests $2.9 billion in Overseas 
Contingency Operations funding for Iraq. Given the complete withdrawal 
of U.S. combat forces from Iraq at the end of 2011, will this be the 
last DOD request for OCO funds for Iraq? If not, when will these costs 
transition to the base budget?
    6. What criteria does DOD use in determining whether funding is 
eligible for inclusion in the Overseas Contingency Operations request?

     Mr. Panetta's Response to Questions Submitted by Chairman Ryan

                                  brac
    Question: The President's budget requests two additional rounds of 
Base Realignments and Closures, but does not request any funds to 
implement any base realignments or closures. Does the budget request, 
however, assume the eventual operational cost savings that would result 
from base realignments and closures?

    Answer: No. The President's budget request does not assume the 
eventual operational cost savings that would result from the Base 
Realignments and Closures (BRAC) because these savings cannot be 
determined until the BRAC analytical process is complete. That said, 
savings as much as $2 billion annually is fairly typical of the earlier 
rounds (88-95).

    Question: GAO has estimated that the most recent BRAC round cost at 
least $35 billion to implement before any net savings would be 
achieved. Do you have any reason to believe these implementation costs 
would be less in a future BRAC round? Please provide a copy of any 
analysis that supports such belief.

    Answer: Yes, we do believe the implementation costs would be less 
in a future Base Realignments and Closure (BRAC) round. By way of 
background, BRAC 2005 was by far the largest round undertaken by the 
Department. The BRAC Commission made 222 recommendations, resulting in 
24 major closures, 24 major realignments and 765 lesser actions. These 
actions affected some 125,000 military personnel at more than 800 
locations across the United States. The cost of implementation totaled 
$35.1 billion, including $24.7 billion for military construction and 
another $10.4 billion to move personnel and equipment, outfit 
facilities, and carry out environmental cleanup. Although the 
implementation cost far exceeded that of any prior round, so too do the 
savings ($4 billion a year).
    The 2005 round took place during a period of growth in the 
military, and it reflected the goals and needs of that time. Congress 
approved the 2005 BRAC round just months after September11, 2001, and 
the objectives were set out the following year. Although elimination of 
excess capacity was an objective, the focus of the 2005 BRAC round was 
on aligning our infrastructure with our military strategy so as to 
maximize warfighting capacity and efficiency. BRAC 2005 enabled the 
Department to reset its infrastructure to accommodate the return of 
forces from Europe and Korea, restructure its medical platforms, 
markedly increase joint basing and other cross-Service efforts, 
accommodate the Army's modularization, and revitalize the Army's 
reserve and guard infrastructure. These efforts were needed, and they 
have contributed significantly to the Department's effectiveness. 
However, they necessarily required substantial investments.
    Because the focus of the BRAC 2005 round was on transforming 
installations to better support forces--as opposed to saving money and 
space--it is a poor gauge of the savings that the Department can 
achieve through another BRAC round. The prior BRAC rounds--which 
reduced capacity and paid off in 2-3 years--represent a better gauge of 
such costs and savings. The table below shows the associated costs and 
savings of the first four rounds of BRAC (1988, 1991, 1993, and 1995).


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Major base         Major base      Minor closures and  One-time costs\1\   Annual recurring
                         (TY$B)                               closures         realignments        realignments            ($B)         savings\2\ ($B)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BRAC 88................................................                16                  4                   23                2.7                1.0
BRAC 91................................................                26                 17                   32                5.2                2.3
BRAC 93................................................                28                 12                  123                7.5                2.7
BRAC 95................................................                27                 22                   57                6.6                1.9
BRAC 05................................................                24                 24                  765               35.1                4.0
                                                        ------------------------------------------------------------------------------------------------
      Total............................................               121                 79                1,000               57.1            12.0\3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note 1: Through FY 2001 for prior BRAC Rounds and through FY 2011 for BRAC 2005.
Note 2: Annual recurring savings (ARS) begin in the year following each round's 6-year implementation period: FY 1996 for BRAC 1988; FY 1998 for BRAC
  1991; FY 2000 for BRAC 1993; FY 2002 for BRAC 1995, and FY 2012 for BRAC 2005. These numbers reflect the ARS for each round starting in 2002.
Note 3: Does not add due to rounding

        budget documentation--fydp defense acquisition programs
    Question: Your budget documentation claims $41.8 billion in savings 
within the FYDP (FY 13-17) from the restructuring of major defense 
acquisition programs. How much of that $41.8 billion is just shifted 
into the second five years of the budget window (FY 17-22) and beyond?

    Answer: Approximately, $19.2 billion has been shifted into the 
second 5 years of the budget window (FY 17-22) for the Ground Combat 
Vehicle, MV-22 Osprey, P-8A Poseiden, E-2D Advanced Hawkeye (AHE) 
Surveillance Aircraft, F-35 Joint Strike Fighter, and SSBN(X) 
development programs.
         afghan national security forces (ansf) train and equip
    Question: The major effort to equip and expand the Afghan National 
Security Forces has been completed, but the President's budget requests 
$5.7 billion in continued ANSF funding. Does that $5.7 billion 
represent an ongoing and open-ended requirement for the U.S. government 
to maintain the ANSF that will continue even once the ANSF has assumed 
lead responsibility for securing that country?

    Answer: No, the $5.7 billion in FY13 represents the total annual 
costs required to sustain and develop the ``surge'' Afghan National 
Security Forces (ANSF) of 352,000 Afghan National Army and Afghan 
National Police personnel. The $5.7 billion also includes force 
generation costs for the Afghan Air Force.
    The Secretary of Defense and the Minister of Defense and Minister 
of Interior of Afghanistan will conduct joint six month reviews to look 
at the ongoing size, capabilities and costs of the future Afghan 
National Security Forces.
                 overseas contingency operations budget
    Question: The President's budget requests $2.9 billion in Overseas 
Contingency Operations funding for Iraq. Given the complete withdrawal 
of U.S. combat forces from Iraq at the end of 2011, will this be the 
last DOD request for OCO funds for Iraq? If not, when will these costs 
transition to the base budget?

    Answer: Overseas contingency operations (OCO) budget requests for 
post Operation NEW DAWN (OND)/Iraq activities may continue beyond FY 
2013.
    The cost to train, garrison, and support the troops redeploying 
from Iraq has moved into the FY 2013 DoD base budget. However, the 
Department believes that post-OND retrograde and reset activities may 
continue for up to 2 years after the fiscal year of redeployment and 
that these costs are appropriately budgeted in the OCO. For example, of 
the $2.9 billion included in the FY 2013 OCO request for Iraq, 
approximately $1.4 billion is for retrograde and reset of U.S. 
equipment used in Iraq.
    Other costs in the $2.9 billion include $0.5 billion for the Office 
of Security Cooperation-Iraq, and about $1 billion for classified 
programs. The Department will work with the Office of Management and 
Budget to determine the timing and amounts that might move into the DoD 
or other Agency base budget programs.
     overseas contingency operations request determination criteria
    Question: What criteria does DOD use in determining whether funding 
is eligible for inclusion in the Overseas Contingency Operations 
request?

    Answer: The Department uses war/overseas contingency operations 
criteria developed collaboratively with the Office of Management and 
Budget (OMB) to determine which budget requirements to include in the 
OCO. The criteria establish the framework for including the incremental 
costs of contingency operations in the OCO budget. For example, the 
criteria:
     Establish the geographic areas in which combat or direct 
combat support operations occur that should be included in the OCO 
budget;
     Specify which personnel and operations costs should be 
included in the OCO budget (e.g., deployment-specific training, 
military pay and allowances to include Reserve Component personnel 
mobilized to support war missions, incremental operational costs in 
theater, incremental logistical support, certain intelligence 
activities);
     Provide for the replenishment of expended munitions and 
purchase of equipment lost to combat operations or washouts, the repair 
of equipment used in combat to original capability, and purchase of 
specialized, theater-specific equipment; and,
     Include international programs such as the Afghanistan 
Security Forces Fund and logistics support for coalition partners.
    The criteria also stipulate several specific budget requirements 
that should not be included in the OCO budget. These include, for 
example, training equipment not for specialized, theater-specific use, 
Base Realignment and Closure projects, construction of child care 
facilities, recruiting and retention bonuses, and programs to maintain 
industrial base capacity.
    These criteria have been useful for budgeting requirements between 
the DoD base and OCO budgets for several budget cycles. The OMB and DoD 
work in close collaboration to apply the criteria and to clarify and 
update them as we build upon our experience budgeting for overseas 
contingency operations. When necessary, OMB has approved exceptions to 
these criteria.

       Questions Submitted for the Record From Hon. Todd Rokita,
         a Representative in Congress From the State of Indiana

     How many war fighters (combat troops) do we currently have 
deployed to the front lines, facing daily threats from our enemies? By 
``war fighter'' I mean troops with boots on the ground that actively 
engage in combat, not just how many active servicemen and women are 
deployed.
    1. How many active duty support staff are employed to support those 
war fighters?
    2. According to DoD, there are nearly 775,000 civilians in the DoD 
workforce--roughly the same size as the population of Indianapolis. The 
average 2011 civilian salary was nearly $90,000--higher than the 
average military salary. Your FY2013 budget included a 0.5% pay 
increase for civilian employees. Why aren't you looking for more 
savings within the civilian workforce? I want our defense spending to 
go to the men and women on the ground, not a person pushing paper at 
the Pentagon.
     What metrics should be used to determine how much spending 
is enough?
                      department of defense audit
     Please detail what the Department of Defense is doing to 
become audit ready.
    1. Specifically, how are resources being allocated to make the 
department audit-ready as soon as possible?
    2. What is the timeline for the distribution of resources for this 
accounting process?
    3. How many personnel, including contractors, are involved in 
making the department audit-ready?
    4. What steps have been taken thus far to move toward audit-
readiness?
                          global hawk question
     I understand Congress has provided funding for the Air 
Force to secure 21 Global Hawk Block 30 aircraft at a cost of nearly $4 
billion. In the FY 2013 budget, you propose to terminate this program 
and waste the $4 billion already spent in favor of the aging U-2 
platform. Why has your department made this decision? Do you have plans 
to utilize the Block 30's already procured?
    Attached in the following pages is the entire email that 
Representative Rokita mentioned in his questioning of Secretary 
Panetta.

From: John Pickerill
Date: Mon, 13 Feb 2012 04:48:35
To: Congressman Rokita

Subject: Follow-Up from our conversation at the Lincoln Day Dinner on 9 
Feb

    Congressman Rokita: Thanks for taking the time to talk with me 
during last Thursday's Lincoln Day dinner in Crawfordsville. In case 
you don't remember who I am, I was the one you spoke to toward the 
front of the room. After my wife spoke to you and mentioned I was an 
Iraq War veteran you graciously came over to introduce yourself. During 
our conversation I had briefly mentioned a disturbing example I saw 
with the defense contracting industry in Iraq, and you asked if I could 
follow up with you at your personal email address to go into a little 
more depth.
    As a Navy Reservist I was mobilized to Iraq from June of 2008 
through May of 2009, where I was assigned to the staff of Multi-
National Forces Iraq under General Petraeus, and then General Odierno. 
We were initially located in the Green Zone in Baghdad, but when the 
U.S returned the Iraqi Presidential Palace back to the Government of 
Iraq, the staff was moved to Victory Base Complex adjacent to Baghdad 
International Airport. During my time there, KBR, a subsidiary of 
Halliburton, held the defense contract for almost every aspect of life 
for a U.S. service member in Iraq. They constructed the living areas, 
cooked the food, provided the laundry services, provided the repair 
services, made the drinking water, provided the sewage service, and the 
electric service.
    During this time KBR was under investigation for faulty electrical 
wiring that caused the electrocution deaths of over a dozen U.S. 
service members. It became such a problem that the Commanding General, 
GEN David Petraeus, had to personally address the problem during his 
daily briefing. All this while at one of the most critical moments of 
the Iraq War when he was attempting to execute the force surge to turn 
the tide of the war. He had to personally direct the formation of 
``Task Force SAFE,'' a task force to investigate and correct the cause 
of these electrocutions as well as other incidences of electrical shock 
to U.S. service members. I experienced this first-hand during my 
temporary stop in Kuwait while awaiting follow-on transportation to 
Baghdad. I had just arrived in Camp Virginia, Kuwait (June 2008 
timeframe) and went to the AT&T phone trailer to call my wife to let 
her know I made it safe. When I approached the trailer steps there was 
an 8.5 x 11 piece of paper taped to the steel handrail that read, ``Do 
Not Touch. Electrified.'' I should note that all electric service in 
Kuwait and Iraq is 220 volt (not 110 volt). There was nothing else to 
prevent someone from accidentally being shocked by the handrail. In a 
second incident, while waiting at Ali Al Salim airbase in Kuwait for 
transportation back to Baghdad following my R&R visit (January 2009 
timeframe), I left the terminal to find a restroom just before my 
flight. I went to the closest restroom trailer and when I attempted to 
go in there were KBR electrical service workers there that advised me, 
``You don't want to go in there.'' I then saw a similar sign warning of 
an electric shock hazard.
    GEN Petraeus was briefed that as part of the corrective action, 
Master Electricians from the United States would have to be flown over 
to Iraq to inspect all of the thousands and thousands of shower and 
restroom trailers throughout Iraq to ensure they were safe.
    Despite these incidences, when the electrical services contract for 
the Iraq War came up for re-bidding, the U.S. government again awarded 
it to KBR.
    In addition to the electrical service and other services mentioned 
above, KBR operated burn pits and incinerators. It should be noted that 
all meals were served on plastic plates, with plastic utensils, and 
plastic or Styrofoam cups. All of this was eventually burned in one of 
these pits or incinerators. At the time I was there there were over 
150,000 U.S. service members in Iraq. In addition to this were over 
300,000 defense contractors. If you add the State Department personnel 
and non-U.S. service members, there had to be well over half a million 
people eating in these KBR served dining facilities, all being served 
with plastic plates, utensils, cups, etc., all of which was burned. We 
could routinely see the black ash residue floating in the air. I don't 
really regard myself as a bleeding-heart environmentalist, but this 
struck me as such a waste of U.S. taxpayer dollars to be purchasing 
half a million plastic plates, utencils, etc. every day; and then to 
burn these plastics with seemingly little regard to the toxins that 
plastics typically give off, and what we were exposing our service 
members to.
    While stationed in the Green Zone, I was assigned a living trailer 
that adjoined the living trailer of two young contractors in their 
twenties. After being there for a while I struck up a conversation with 
them and found out that they had a job running network cable. When I 
asked how they liked it (because the U.S. service members were always 
anxious to get home, while the contractors didn't seem to be in a hurry 
to want to go back home), he said it was so great to be working there. 
He was making over $300,000 per year plus all of his living and travel 
expenses. He bragged that if he could stay there for three years he 
would be able to put over a million dollars in the bank and retire 
before he turned 30.
    As another example, one of the officers assigned beneath me 
befriended a contractor, and one day she came to him in tears. She was 
an honest girl who couldn't understand why her boss was telling her to 
mark down 8 hours on her timesheet when she was only working 2 hours 
per day. These are merely a few accounts that I personally became aware 
of while there only one year. It deeply troubles me about how much U.S. 
taxpayers are spending on defense contracting when I remember that 
there were 300,000 contractors there and we had been in Iraq for 8 
years.
    Once I returned home, I have had a hard time putting this thought 
out of my mind: How much of all this spending was necessary for our 
National Defense? Was any of it necessary for our national defense. 
This was taxpayer money spent, not on national defense, but instead on 
increasing the profits of defense contractors. How many times have we 
heard about Congress authorizing military spending on, say, dozens of 
C-130 aircraft that the Air Force doesn't need or doesn't want only to 
find out that those aircraft are being built in a certain 
Congressperson's district? I am now convinced that most U.S. military 
spending has nothing to do with national defense. Instead, it goes to 
fund that beast which President Eisenhower warned us about at his 
farewell address: The military-industrial complex. The defense 
contracting industry then becomes a generous contributor to re-election 
campaigns of key Congressmen and Senators that can assure future 
defense contracting business growth and profit. This cycle continues, 
and the national debt keeps rising, and U.S. dollar gets weaker and 
weaker.
    We Republicans cannot only attack welfare spending if we want to 
honestly address our debt situation. If we Republicans are going to 
consider ourselves true Conservatives and stand up for smaller 
government that is fiscally responsible and follows the principles of 
the Constitution, we must stand for a Constitutional and fiscally 
responsible foreign policy as well. The United States spends more money 
on weapon systems and surveillance systems than the rest of the world 
combined. When we consider overall military spending, the entire 
world's militaries spend about $1500 billion combined. Of that, the 
U.S. spends about $700 billion, or almost half of the world's total. 
China is the next highest at $100 billion, a mere \1/7\ of our 
spending. The U.S. Navy has 11 aircraft carrier battle groups. There is 
no other Navy in the world with more than 2 aircraft carriers, and our 
biggest rivals, China and Russia, have only one a piece. The U.S. has 
3,300 warplanes. That is more than twice what China has and 50% more 
than what Russia has.
    To be told that cutting our military budget would be dangerous to 
our national defense is not only disingenuous but dishonest. What is 
truly dangerous to our national defense is for the United States to be 
foolish enough to follow in the Roman Empire's and Soviet Union's 
footsteps of spending so much on our military that we collapse 
economically from the inside out. A complete rethinking of our foreign 
policy is urgently needed.
    Again, it was a pleasure to meet you. Thank you for taking the time 
to let me share my concerns with you.
            Very Respectfully,
                                            John Pickerill,
                                                Crawfordsville, IN.

      Mr. Panetta's Response to Questions Submitted by Mr. Rokita

                          deployed warfighters
    Question: How many war fighters (combat troops) do we currently 
have deployed to the front lines, facing daily threats from our 
enemies? By ``war fighter'' I mean troops with boots on the ground that 
actively engage in combat, not just how many active servicemen and 
women are deployed.

    Answer: All Airmen with boots on ground in Afghanistan attend a 
pre-deployment combat skills training course. The combat pay 
entitlement delineates Air Force combat-ready war-fighters ever-poised 
to defend against enemy attack. As of Monday, 23 April 2012, 6,492 
Active Duty Airmen, 452 Air Force Reservists, and 1,636 Air National 
Guardsman totaling 8,580 Air Force combat-ready war-fighters are 
deployed to Afghanistan.

    Question: How many active duty support staff are employed to 
support those war fighters?

    Answer: As of Monday, 23 April 2012, there are 12,304 Active Duty 
Airmen, 1,470 Air Force Reservists, and 2,993 Air National Guardsman 
totaling 16,767 deployed airmen in support of OEF, but not having boots 
on ground in Afghanistan.

    Question: According to DoD, there are nearly 775,000 civilians in 
the DoD workforce--roughly the same size as the population of 
Indianapolis. The average 2011 civilian salary was nearly $90,000--
higher than the average military salary. Your FY2013 budget included a 
0.5% pay increase for civilian employees. Why aren't you looking for 
more savings within the civilian workforce? I want our defense spending 
to go to the men and women on the ground, not a person pushing paper at 
the Pentagon.

    Answer: The pay raise for civilians included in the budget request 
is not set by the Department, but is based on a government-wide 
determination by the Office of Personnel Management on behalf of the 
President. The Department's FY 2013 budget reflects a balanced 
workforce that decreases overall spending on military end-strength and 
civilian personnel, as well as on contract services. It reflects our 
best judgment today and represents a carefully coordinated approach 
based on the Department's strategy and policy that balances operational 
needs and fiscal reality.
    Proposed reductions in the military personnel levels reflect 
declines in our current overseas commitments; revised strategy, posture 
and operational planning; and changes to our force structure. 
Reductions in civilian personnel are predominantly associated with 
ongoing organizational assessments and mission/function prioritization 
in an effort to reduce administrative workload.
    The overwhelming majority of the Department's civilian workforce 
works outside of the Pentagon, to include approximately 4,500 civilians 
who volunteered for deployments to CENTCOM AOR in support of 
contingency operations. The Department's civilian workforce performs 
key enabling functions for the operating forces, such as critical 
training and preparation to ensure readiness, equipment modernization 
and reset, medical care, family support, and base operating and 
infrastructure services--all vital services that support our men and 
women in uniform.

    Question: What metrics should be used to determine how much 
spending is enough?

    Answer: There is no single metric given the dynamics of the 
security situation in theater. Generally, we break the cost between 
variable and fixed costs.
     Variable costs are driven by the average annual troop 
strength in theater and assumed pace of operations.
     Fixed costs are not sensitive to changes in troop 
strength. For example, combat losses, equipment reset requirements, 
intelligence support, training, and equipping Afghanistan security 
forces.
    As we build the next Overseas Contingency Operations budget 
request, we compare the funding requirements submitted by the 
components to actual execution to determine the reasonableness of the 
requests. Any requests that are inconsistent with previous funding 
levels are adjusted. Wars are dynamic and evolving in nature, driven by 
national policy and military strategy. As a consequence, OCO costs are 
difficult to predict as precisely as base budget costs. Nevertheless, 
using the measurements and techniques described above, the DoD 
validates and refines the OCO budget estimates as accurately and 
clearly as possible.
                      department of defense audit
    Question: Please detail what the Department of Defense is doing to 
become audit ready. (a) Specifically, how are resources being allocated 
to make the department audit-ready as soon as possible? (b) What is the 
timeline for the distribution of resources for this accounting 
process?(c) How many personnel, including contractors, are involved in 
making the department audit-ready? (d) What steps have been taken thus 
far to move toward audit-readiness?

    Answer: The DoD plans to spend $300 million to $400 million a year, 
over the next 6 years, on improving business operations and achieving 
auditable financial statements (excluding resources to implement 
enterprise resource planning systems). This investment relates directly 
to Service and Agency plans and reports. Appropriate levels of 
personnel, training, tools, and support are being targeted toward 
achieving auditable financial statements. The Department has reported 
that the resources and plans were in place to meet the previous 2017 
goal. The Department carefully scrutinized requests from Components for 
additional funding to meet Secretary Panetta's accelerated Statement of 
Budgetary Resources goal and, where appropriate, included those 
requirements in the Fiscal Year (FY) 2013 budget request.
    The Department has a few hundred people who are totally devoted to 
the audit readiness effort. To further support this effort, in October 
2011, I directed that achieving auditable financial statements will be 
an ``all hands'' effort throughout DoD. As a result, civilian, 
military, and contractor personnel across the Department are involved 
in financial improvement and audit readiness efforts. Financial 
auditability is not an additional activity--it is really more of a 
change in how we do what we are already doing to support our 
warfighters. Auditability is a goal that every commander, every 
manager, and every functional specialist must understand and embrace to 
improve efficiency and accountability within the Department. Leadership 
commitment from the highest level is setting the tone and priority for 
audit readiness. The Service Secretary and Chief of Staff for each 
Military Service have committed to achieving specific near term goals 
in support of their plans for achieving auditable financial statements. 
I have reviewed these commitments and plans and am holding senior 
leaders, both civilian and military, from across the Department 
accountable for progress against those plans.
    In addition to the steps described above, the Department has 
established a comprehensive Financial Improvement and Audit Readiness 
Strategy for achieving improved financial information and auditability. 
The strategy focuses improvements on policies, processes and controls, 
systems and data, audit evidence, and human capital. This clear, 
comprehensive strategy for achieving audit readiness is critical to 
ensuring that limited resources are assigned effectively to facilitate 
sustained and measurable progress. The strategy provides a critical 
path for the Department, while balancing the need to achieve short-term 
accomplishments with the long-term goals of improved financial 
information for decision making and an unqualified opinion on the 
Department's financial statements.
    The Department is making progress towards its audit readiness 
goals. In FY 2011, independent auditors issued clean opinions for 
Defense organizations totaling $110 billion in budgetary resources, a 
dollar amount equal to many other federal agency budgets. The
    Marine Corps will soon be the first Military Service to receive an 
audit opinion on a financial statement, a significant step for the 
entire Department. The Army, Navy, and Air Force all obtained 
independent validation of their processes for recording funds received 
from Congress. Other accomplishments that demonstrate the Department is 
making progress include the
    Air Force receiving a validation of its reconciliation process, 
essentially accurately reconciling Air Force's checkbook.
                          global hawk question
    Question: I understand Congress has provided funding for the Air 
Force to secure 21 Global Hawk Block 30 aircraft at a cost of nearly $4 
billion. In the FY 2013 budget, you propose to terminate this program 
and waste the $4 billion already spent in favor of the aging U-2 
platform. Why has your department made this decision? Do you have plans 
to utilize the Block 30's already procured?

    Answer: A reduction in high-altitude requirements coupled with a 
reduced budget presented the Department with a decision between U-2 and 
Global Hawk Block 30. The U-2 was sufficient to meet the new 
requirements. In addition, the expected savings of Block 30 were never 
realized. In terms of dispositioning the current Block 30s, the Air 
Force is considering several alternatives at this time but has not made 
a final determination. The Air Force is developing a plan to place 
these assets in useable storage for future possibilities or disposition 
them to other users.

     Questions Submitted for the Record From Hon. Michael M. Honda,
       a Representative in Congress From the State of California

                    united states institute of peace
    In this new era of fiscal constraint, I want to ensure we employ 
the most cost-effective use of resources to protect American national 
security interests. We have seen from a decade of war that the military 
cannot and should not do it all, especially when it comes to civilian 
stabilization efforts.
    What about efforts like the United States Institute of Peace? How 
does it help the military? By statute, the Secretary of Defense has a 
seat on the Board of Directors of the United States Institute of 
Peace--in addition to the Secretary of State and President of the 
National Defense University. How does the US Institute of Peace help 
our military forces address the kinds of threats that you foresee to 
our national security in the 21st century?
                 historical defense budget contractions
    In recent history, we've seen some tremendous successes which 
should be credited to you, among many others. The end of our presence 
in Iraq, the SEAL Team 6 mission, and the expedited schedule for 
drawdown from Afghanistan will go down in history as much celebrated 
events. For some of us, these milestones could not come soon enough. 
With this now behind us, we now have to take a hard look at the money 
we've been spending.
    I commend you for owning up to this challenge by drawing up new 
guidance which finds $480 billion in savings. I think you've done this 
in a smart, sophisticated way that doesn't endanger our country or its 
citizens.
    While I think you deserve praise for a job well-done thus far, I'm 
going to ask, ``is this good enough?'' I wanted your thoughts--from a 
historical perspective--how does this contraction of the defense budget 
compare to other periods of de-militarization? Could we be pushing 
harder, and accomplishing these savings quicker?
                       japan realginment--futenma
    I also wanted your thoughts on an issue very close to me, and 
that's our relationship with Japan and the realignment of forces in the 
region. It is my opinion that the 2006 agreement is completely 
untenable, and I'm encouraged by the recent flexibility displayed by 
the Obama Administration in adjusting major elements of this plan.
    However, the situation at Futenma Marine base is still unresolved. 
The proposed move to Camp Schwab has major environmental and cost 
concerns. The Okinawan people want to see our presence on the entire 
island scaled back significantly, and would oppose relocation to Kadena 
Air Base.
    While I support the reassessment of the 2006 agreement and basing 
options as instructed in the most recent defense authorization, I 
believe that we must give the Japanese government and the Okinawan 
people their rightful negotiating power to fully address their concerns 
in any future agreement.
    We need a new agreement that is fiscally feasible for both the US 
and Japan while lessening the burden on the Okinawan people. I fear the 
longer this decision is delayed, the more the costs will skyrocket, but 
there doesn't seem to be a viable option on the table.
    Can you comment on the status of negotiations regarding Futenma?
    Are we studying other options that haven't been discussed before?

       Mr. Panetta's Response to Questions Submitted by Mr. Honda

                    united states institute of peace
    Question: In this new era of fiscal constraint, I want to ensure we 
employ the most cost-effective use of resources to protect American 
national security interests. We have seen from a decade of war that the 
military cannot and should not do it all, especially when it comes to 
civilian stabilization efforts.What about efforts like the United 
States Institute of Peace? How does it help the military? By statute, 
the Secretary of Defense has a seat on the Board of Directors of the 
United States Institute of Peace-in addition to the Secretary of State 
and President of the National Defense University. How does the US 
Institute of Peace help our military forces address the kinds of 
threats that you foresee to our national security in the 21st century?

    Answer: I believe that the United States Institute for Peace (USIP) 
is a cost-effective resource and contributes significantly to our 
collective efforts to manage conflict worldwide, as illustrated by the 
USIP's recent contributions in Iraq and Afghanistan.
    The USIP has supported U.S. military efforts in Afghanistan since 
2002 in four interrelated areas: strengthening peaceful reconciliation 
and capacity to mitigate conflict; enhancing the rule of law; improving 
cooperation for peace, security, and economic development; and 
increasing the understanding and effectiveness of coalition operations. 
These contributions, along with numerous relevant publications on a 
broad range of issues, directly assist with planning and executing a 
comprehensive Civilian-Military Campaign Plan in support of security, 
governance, and development lines of effort. The USIP also supports the 
Department of Defense's Ministry of Defense Advisors (MoDA) program by 
training our civilian ministerial advisors on core advisory principles 
in preparation for their deployment to Afghanistan. This curriculum 
fills a Defense-wide training gap, and has given MoDA advisors an array 
of tools to support the security transition mission in Afghanistan.
    In Iraq, the USIP synchronized the training of Iraqi facilitators, 
enhancing field coordination with military units and the Department of 
State-led embedded Provincial Reconstruction Teams. In the Mahmoudiya 
region of Iraq specifically, these contributions helped tribal and 
local government leaders forge an agreement that led to a substantial 
decrease in violence there.
                 historical defense budget contractions
    Question: In recent history, we've seen some tremendous successes 
which should be credited to you, among many others. The end of our 
presence in Iraq, the SEAL Team 6 mission, and the expedited schedule 
for drawdown from Afghanistan will go down in history as much 
celebrated events. For some of us, these milestones could not come soon 
enough. With this now behind us, we now have to take a hard look at the 
money we've been spending.I commend you for owning up to this challenge 
by drawing up new guidance which finds $480 billion in savings. I think 
you've done this in a smart, sophisticated way that doesn't endanger 
our country or its citizens.While I think you deserve praise for a job 
well-done thus far, I'm going to ask, ``is this good enough?'' I wanted 
your thoughts--from a historical perspective--how does this contraction 
of the defense budget compare to other periods of de-militarization? 
Could we be pushing harder, and accomplishing these savings quicker?

    Answer: My goal was to develop a new strategy that would enable the 
Department to meet the funding limitations mandated by the Budget 
Control Act of 2011. I think the FY 2013 budget request before you does 
that in a way that protects the broad range of U.S. national security 
interests.
    No, I do not think we should push harder and seek quicker savings. 
The difference between this and previous draw downs in Defense spending 
is that the current global security environment remains an increasingly 
complex set of challenges and we must remain prepared to address these 
challenges. It is also imperative that we keep faith with our troops, 
military families, and veterans. As I have noted, any further 
reductions to the Defense budget will require a reassessment of the new 
strategy.
                       japan realignment--futenma
    Question: I also wanted your thoughts on an issue very close to me, 
and that's our relationship with Japan and the realignment of forces in 
the region. It is my opinion that the 2006 agreement is completely 
untenable, and I'm encouraged by the recent flexibility displayed by 
the Obama Administration in adjusting major elements of this plan. 
However, the situation at Futenma Marine base is still unresolved. The 
proposed move to Camp Schwab has major environmental and cost concerns. 
The Okinawan people want to see our presence on the entire island 
scaled back significantly, and would oppose relocation to Kadena Air 
Base.While I support the reassessment of the 2006 agreement and basing 
options as instructed in the most recent defense authorization, I 
believe that we must give the Japanese government and the Okinawan 
people their rightful negotiating power to fully address their concerns 
in any future agreement.We need a new agreement that is fiscally 
feasible for both the US and Japan while lessening the burden on the 
Okinawan people. I fear the longer this decision is delayed, the more 
the costs will skyrocket, but there doesn't seem to be a viable option 
on the table.Can you comment on the status of negotiations regarding 
Futenma? Are we studying other options that haven't been discussed 
before?

    Answer: The United States and Japan remain committed to 
constructing the Futeruna Replacement Facility (FRF). Numerous other 
options have been studied extensively, including consolidation at 
Kadena Air Base. There is a Japanese domestic political imperative to 
move from the Marine Corps Air Station (MCAS) Futeruna, and both sides 
have reaffirmed on more than one occasion that the FRF at Camp Schwab 
is the only operationally and politically viable alternative.
    Although the Futeruna Replacement Facility will not be constructed 
by 2014 as originally planned, there has been incremental but positive 
movement towards the construction of a replacement facility at Camp 
Schwab. The Government of Japan submission of the environmental impact 
statement to the prefectural government of Okinawa in December 2011 was 
a necessary and politically significant step forward. The U.S. 
Government is committed to working with the Government of Japan in 
taking the next step prior to the start of construction: securing the 
Okinawan governor's approval for the landfill permit.
    As was recently announced, we are del inking the movement of U.S. 
Marine Corps forces to Guam from progress on the FRF, so that both of 
these important initiatives can proceed independently as the specific 
circumstances for each permit.
    Until the FRF is constructed, U.S. Marine Corps aviation will 
continue to operate out of MCAS Futeruna.

    [Whereupon, at 5:09 p.m., the Committee was adjourned.]

                                  
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