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






                                     

                         [H.A.S.C. No. 112-158]

 
   DEPARTMENT OF DEFENSE PLANS FOR SEQUESTRATION: THE SEQUESTRATION 
          TRANSPARENCY ACT OF 2012 REPORT AND THE WAY FORWARD

                               __________

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                           SEPTEMBER 20, 2012


                                     
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                   HOUSE COMMITTEE ON ARMED SERVICES
                      One Hundred Twelfth Congress

            HOWARD P. ``BUCK'' McKEON, California, Chairman
ROSCOE G. BARTLETT, Maryland         ADAM SMITH, Washington
MAC THORNBERRY, Texas                SILVESTRE REYES, Texas
WALTER B. JONES, North Carolina      LORETTA SANCHEZ, California
W. TODD AKIN, Missouri               MIKE McINTYRE, North Carolina
J. RANDY FORBES, Virginia            ROBERT A. BRADY, Pennsylvania
JEFF MILLER, Florida                 ROBERT ANDREWS, New Jersey
JOE WILSON, South Carolina           SUSAN A. DAVIS, California
FRANK A. LoBIONDO, New Jersey        JAMES R. LANGEVIN, Rhode Island
MICHAEL TURNER, Ohio                 RICK LARSEN, Washington
JOHN KLINE, Minnesota                JIM COOPER, Tennessee
MIKE ROGERS, Alabama                 MADELEINE Z. BORDALLO, Guam
TRENT FRANKS, Arizona                JOE COURTNEY, Connecticut
BILL SHUSTER, Pennsylvania           DAVE LOEBSACK, Iowa
K. MICHAEL CONAWAY, Texas            NIKI TSONGAS, Massachusetts
DOUG LAMBORN, Colorado               CHELLIE PINGREE, Maine
ROB WITTMAN, Virginia                LARRY KISSELL, North Carolina
DUNCAN HUNTER, California            MARTIN HEINRICH, New Mexico
JOHN C. FLEMING, M.D., Louisiana     BILL OWENS, New York
MIKE COFFMAN, Colorado               JOHN R. GARAMENDI, California
TOM ROONEY, Florida                  MARK S. CRITZ, Pennsylvania
TODD RUSSELL PLATTS, Pennsylvania    TIM RYAN, Ohio
SCOTT RIGELL, Virginia               HANK JOHNSON, Georgia
CHRIS GIBSON, New York               BETTY SUTTON, Ohio
VICKY HARTZLER, Missouri             COLLEEN HANABUSA, Hawaii
JOE HECK, Nevada                     KATHLEEN C. HOCHUL, New York
BOBBY SCHILLING, Illinois            JACKIE SPEIER, California
JON RUNYAN, New Jersey               RON BARBER, Arizona
AUSTIN SCOTT, Georgia
TIM GRIFFIN, Arkansas
STEVEN PALAZZO, Mississippi
ALLEN B. WEST, Florida
MARTHA ROBY, Alabama
MO BROOKS, Alabama
TODD YOUNG, Indiana
                  Robert L. Simmons II, Staff Director
                Jack Schuler, Professional Staff Member
          William (Spencer) Johnson, Professional Staff Member
                    Lauren Hauhn, Research Assistant


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2012

                                                                   Page

Hearing:

Thursday, September 20, 2012, Department of Defense Plans for 
  Sequestration: The Sequestration Transparency Act of 2012 
  Report and the Way Forward.....................................     1

Appendix:

Thursday, September 20, 2012.....................................    43
                              ----------                              

                      THURSDAY, SEPTEMBER 20, 2012
   DEPARTMENT OF DEFENSE PLANS FOR SEQUESTRATION: THE SEQUESTRATION 
          TRANSPARENCY ACT OF 2012 REPORT AND THE WAY FORWARD
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

McKeon, Hon. Howard P. ``Buck,'' a Representative from 
  California, Chairman, Committee on Armed Services..............     1
Smith, Hon. Adam, a Representative from Washington, Ranking 
  Member, Committee on Armed Services............................     2

                               WITNESSES

Austin, GEN Lloyd J., III, USA, Vice Chief of Staff of the Army..     6
Dunford, Gen Joseph F., USMC, Assistant Commandant of the Marine 
  Corps..........................................................     9
Ferguson, ADM Mark, USN, Vice Chief of Naval Operations..........     7
Hale, Hon. Robert F., Under Secretary of Defense (Comptroller)...     4
Spencer, Gen Larry O., USAF, Vice Chief of Staff of the Air Force     8

                                APPENDIX

Prepared Statements:

    Hale, Hon. Robert F., joint with GEN Lloyd J. Austin III, ADM 
      Mark Ferguson, Gen Joseph F. Dunford, and Gen Larry O. 
      Spencer....................................................    51
    McKeon, Hon. Howard P. ``Buck''..............................    47
    Smith, Hon. Adam.............................................    49

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Mr. Bartlett.................................................    67
    Mr. Brooks...................................................    67

Questions Submitted by Members Post Hearing:

    Mr. Franks...................................................    71
    Ms. Tsongas..................................................    73
   DEPARTMENT OF DEFENSE PLANS FOR SEQUESTRATION: THE SEQUESTRATION 
          TRANSPARENCY ACT OF 2012 REPORT AND THE WAY FORWARD

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                      Washington, DC, Thursday, September 20, 2012.
    The committee met, pursuant to call, at 10:02 a.m., in room 
2118, Rayburn House Office Building, Hon. Howard P. ``Buck'' 
McKeon (chairman of the committee) presiding.

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

    The Chairman. The committee will come to order.
    Good morning, ladies and gentlemen. The House Armed 
Services Committee meets today to receive testimony on the 
Department of Defense planning for sequestration, the 
Sequestration Transparency Act of 2012 and the way forward. 
Thank you all for being here.
    This will be the last week the House is in session until 
mid-November. Today's hearing will provide Members a final 
opportunity before the lame-duck session to inform themselves 
and their constituents about how sequestration will be 
implemented and how those decisions will affect our men and 
women in uniform and our national security.
    We had hoped that the President would provide this 
information in the report required by the Sequestration 
Transparency Act. Unfortunately, he failed to comply with both 
the letter and the spirit of the law. Not only was the report 
late, but the report submitted to Congress merely paid lip 
service to the dire national security implications of these 
cuts after the President has had over a year to consider this 
crisis.
    Moreover, the White House has even gone so far as to 
instruct the Department of Defense not to make preparations for 
sequestration. Nevertheless, as previous testimony of this 
committee has provided, many of our military leaders believe 
initial preparation for sequestration must occur well in 
advance of the January 2, 2013, implementation date.
    For example, when the Secretary of the Army John McHugh was 
asked this spring if plans for sequestration were underway, he 
stated, ``We are not doing as yet any hard planning. That would 
probably happen later this summer.'' Today, we are following up 
with the Department to review and understand the mechanics of 
sequestration, how would they implement it, and the timelines 
necessary to develop a comprehensive and complete strategy if 
sequestration were to occur.
    This morning, we will hear firsthand from the Honorable 
Robert F. Hale, Under Secretary of Defense, Comptroller of the 
Department; General Lloyd J. Austin III, Vice Chief of Staff of 
the Army; Admiral Mark Ferguson, Vice Chief of Naval 
Operations; General Larry O. Spencer, Vice Chief of Staff of 
the Air Force; and General Joseph F. Dunford, Assistant 
Commandant of the Marine Corps.
    Let me make one final observation and appeal to our 
witnesses. As the recent violence throughout the Middle East 
has reminded us, we are living in the most dynamic and complex 
security environment in recent memory. The decisions we make 
with regard to sequestration will have a tangible and lasting 
effect on that global security environment.
    Last month, in testimony before the committee, the White 
House budget director stated, and I quote, ``The impact of 
sequestration cannot be lessened with advance planning and 
executive action.'' He misses the point. Planning can't resolve 
sequestration, but the lack of planning and the failure to 
exercise leadership now can make a dire situation worse.
    Gentlemen, we understand that there are no easy choices 
here, but now is not the time for ambiguity. In your testimony, 
I urge each of you to be as clear with us as you possibly can 
about what the road ahead portends for the implementation of 
sequestration. This could well be the last opportunity for our 
military to get these facts on the record before the deadline 
for a legislative remedy has passed.
    With that, I look forward to your testimony and again thank 
you for your service and thank you for being here today.
    Mr. Smith.
    [The prepared statement of Mr. McKeon can be found in the 
Appendix on page 47. ]

STATEMENT OF HON. ADAM SMITH, A REPRESENTATIVE FROM WASHINGTON, 
          RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. Smith. Thank you, Mr. Chairman. I appreciate that we 
are having this hearing. I think sequestration is 
unquestionably the most important issue facing our Government, 
figuring out how to deal with it, and it is important that we 
learn more about it.
    And it is clear, and I believe the President, the Secretary 
of Defense and numerous other executive branch officials have 
made it clear that they see sequestration as having a 
devastating impact on defense. That was the point, I believe, 
of the OMB [Office of Management and Budget] director's 
remarks--was ``Don't think that you can somehow, you know, make 
this work in a way that is not going to have a huge negative 
impact on our national security.''
    That is the main point that has been made by countless 
witnesses and folks in a very bipartisan way. I don't think 
there is any disagreement whatsoever on that. Even if you think 
that savings can be found in the defense budget, and I do, this 
is not the way to do it. It is going to be a $57 billion cut at 
the absolute last minute, in the middle of fiscal year 2013, 
after all kinds of planning was done to try to set it up.
    It is also, you know, across the board. Every program has 
to be cut by the same amount, for the most part--so the very 
limit in terms of any flexibility in terms of handling this. So 
we have established beyond a shadow of a doubt that this is not 
good policy and no one has claimed that it is.
    As for the issue that somehow the Pentagon and the White 
House has done nothing to plan for it, I don't think that is at 
all accurate. We had Under Secretary Ashton Carter here about a 
month ago. He went for about, I don't know, 5, 6 minutes 
chapter and verse right down the line of the programs that were 
going to be cut and how they were going to be cut.
    The executive branch has said which programs, in their 
interpretation of the law, will be exempt. Personnel programs 
are going to be exempt. They have said specifically this is 
going to be, and I may be off on the number here, a 9.6 percent 
across-the-board programmatic cut in everything.
    So I don't think it is accurate to say that we have not 
been planning for it. We have been planning for it. There is a 
limited amount that you can do. There is some ambiguity in the 
law. We have heard a variety of different interpretations as to 
how you can sort of work with that ambiguity in terms of what 
programs count and what programs don't. The President has said 
now here is what it is.
    So we know what it is. The challenge is trying to stop it 
from happening. And the only way to do that is to pass a 
comprehensive plan to reduce the deficit. That is what the 
Budget Control Act required--find savings so that we don't have 
a deficit that is uncontrollable; that we get it under control. 
The requirement is $1.2 trillion over 10 years.
    There have been various plans out there to get us up as 
high as $4 trillion over 10 years, and we simply have to choose 
to do that. I have said it before. I will say it again. I think 
revenue has to be part of that equation. If you are absolutely 
committed to the need to provide for the national security of 
this country; if you are deeply concerned, and I share the 
chairman's views about the complexity of the threat environment 
and our need to be prepared for it, then you ought to be 
prepared to raise the revenue necessary to pay for that 
national security that we want so badly.
    Thus far, we have been unwilling to do that. That puts us 
in the box that we are in. I think it will be interesting to 
hear from all you gentlemen about, you know, how you are 
working out the details of that, but I don't think it is the 
huge mystery that some have portrayed it to be. We know how 
much is going to be cut; roughly, we know what it is going to 
be cut from; and a number of different studies both, you know, 
in the Government and outside, have attempted to assess the 
damage that will be caused by that. And there is a variety of 
different opinions on that, but it is not something that has 
gone unexamined, let us put it that way.
    What I would like us to do is spend the time trying to make 
sure that we stop this thing that just about everybody agrees 
is bad policy from happening. And the way to do that is to be 
realistic about our budget deficit. Stop pretending that we can 
bang the table about how awful the deficit is and then shy away 
from any of the steps necessary to cut spending or raise 
revenue to deal with it. That is the fundamental denial that we 
have to deal with to prevent this problem from becoming very, 
very great come January.
    So I look forward to the testimony from the witnesses and 
trying to deal with this very, very difficult issue. I yield 
back.
    [The prepared statement of Mr. Smith can be found in the 
Appendix on page 49.]
    The Chairman. Thank you.
    Mr. Secretary.

 STATEMENT OF HON. ROBERT F. HALE, UNDER SECRETARY OF DEFENSE 
                         (COMPTROLLER)

    Secretary Hale. Thank you, Mr. Chairman, members of the 
committee. Thanks for the opportunity to discuss the drastic 
effects that sequestration would have on the Department of 
Defense if it goes into effect, as well as the recently 
released report required by the Sequestration Transparency Act.
    I am joined today by the vice chiefs of staff of our armed 
forces. We submitted a joint statement. I will summarize that 
briefly and then the vice chiefs will present some oral 
statements of their own.
    As Secretary Panetta has repeatedly said, sequestration 
would have devastating effects on the Department of Defense. A 
few days ago in response to the requirements of the 
Sequestration Transparency Act, the Office of Management and 
Budget transmitted a report that spells out the dollar 
consequences of sequester. Our testimony today provides you 
some high level assessment of the impacts.
    These consequences really can't be avoided or even 
substantially mitigated by planning alone. The reason is 
simple: Sequestration was designed by law to be inflexible. It 
was never intended to be implemented. It was enacted as a prod, 
as I think you all know, for both Houses of Congress to devise 
a comprehensive plan to reduce the Federal deficit. And the 
only way to avoid these bad consequences now is for Congress to 
enact a balanced deficit reduction plan that the President can 
sign and that halts sequestration.
    If that action is not taken, we are faced with the dollar 
consequences that the Sequestration Transparency Act, STA, 
report spells out. Cut in the national defense function will 
total $54.7 billion in discretionary and direct spending in 
fiscal 2013 under the assumptions of that report. Of this 
amount, $52.3 billion would come out of the DOD [Department of 
Defense] budget.
    Each of our nonexempt budget accounts will take a hit of 
9.4 percent. The only major exempt accounts involve those that 
fund military personnel. The President has exercised his 
authority to exempt military personnel spending from 
sequestration.
    So what effects will these have on DOD? Let me give you 
some examples.
    Funding for our overseas contingency operations, our OCO, 
or wartime budgets, will be subject to sequestration. We will 
protect the wartime operating budgets to the extent that we 
can. Support of our warfighters is our highest priority. But 
that will mean greater cuts in the base budget portion, 
especially of the operation and maintenance accounts, and 
particularly in the Army and the Marine Corps, and that will 
result in reductions in training. Reduced training would affect 
our ability to respond to a new warfighting contingency should 
one occur.
    Sequestration would almost certainly force us to reduce 
spending for civilian personnel in the Department, which would 
lead to hiring freezes and probably unpaid furloughs. This 
could leave us without enough personnel to fix our weapons, 
including the ones that are damaged in war, to maintain a 
strong program of contracting, and to sustain financial 
management and audit efforts, as well as many other support 
functions.
    Sequestration would also have substantial effects on DOD 
investment programs. While there would be no impact on prior 
year funds already on contract--and I think that is an 
important point, those aren't subject to sequestration--there 
would nonetheless be substantial adverse effects. The 9.4 
percent cut would affect each of the budget accounts that fund 
procurement, fund research, development, technology and 
evaluation, and military construction.
    In most cases we would have to buy fewer weapons, which 
would drive up unit costs. In the case of ships and others 
where you can't reduce the number of weapons, sequester would 
result in delays.
    Sequestration would adversely affect our military retirees 
and families. We would have to cut family housing maintenance. 
We would have to cut base operating support. We try to protect 
families wherever we can, but we would have to make some of 
these cuts.
    We wouldn't have enough funds. There would be cuts in the 
Defense Health Program that would leave us without enough money 
to pay TRICARE bills in the last month unless we could find a 
way to offset that, and it will be difficult. We are going to 
be faced with delaying payments to providers, which could 
result in denials of service.
    These are the consequences that would come to play in 
fiscal year 2013. But the law that would go into effect on 
January 2nd actually not only imposes sequestration in 2013, it 
cuts the discretionary caps out through fiscal 2021. In the 
longer term, the cuts would in fact double the reductions 
already imposed by the Budget Control Act, forcing us to make 
substantial reductions in military personnel and units. 
Otherwise, if we don't do that, we would end up with more units 
than we have funds to train and equip.
    Over time, sequestration would lead to reduced forces, 
fewer aircraft carriers, brigade combat teams and fighters. We 
would have fewer options to respond quickly to emerging crises. 
Inevitably, this will require changes to the national security 
strategy that was put into effect last January and which we 
think remains the right one for the times.
    For all of these reasons we believe that a sequestration is 
a very bad policy. We hope that Congress will pass a balanced 
deficit reduction plan that the President can sign and that 
halts sequestration.
    Mr. Chairman, this concludes my opening statement, and 
after the vices have completed theirs we would welcome your 
questions.
    [The joint prepared statement of Secretary Hale, General 
Austin, Admiral Ferguson, General Dunford, and General Spencer 
can be found in the Appendix on page 51.]
    The Chairman. Thank you.
    General.

STATEMENT OF GEN LLOYD J. AUSTIN III, USA, VICE CHIEF OF STAFF 
                          OF THE ARMY

    General Austin. Good morning, Chairman McKeon, Ranking 
Member Smith, the distinguished members of the committee. I 
first want to thank you for the steadfast and strong support 
that you have shown to our men and women and their families. 
And I appreciate this opportunity to appear before you today on 
their behalf to discuss the potential impacts of sequestration 
on your United States Army.
    I look forward to answering your questions after my 
colleagues have concluded their opening comments.
    As we are all well aware, these are challenging times for 
our Nation and for our military. Tough choices must be made, 
and the Army stands ready to do its part. Indeed, we are 
already operating under the Budget Control Act, which will cut 
defense spending by about $490 billion over 10 years.
    However, sequestration would mean another $550 billion cut. 
What is more, sequestration represents a rigid solution that 
would apply these cuts in an indiscriminate and arbitrary 
fashion nearly across the board. And as such, these cuts will 
adversely affect just about every aspect of our Army.
    And of particular concern, cuts will apply to war funding, 
or OCO, which supports training and forces deployed to 
Afghanistan.
    We will do everything we can to ensure that our deployed 
and next-to-deploy soldiers have everything that they need to 
be successful.
    We will also do all that we can to maintain support for our 
soldier and family programs. However, making these necessary 
adjustments will require even deeper cuts to be made within our 
other accounts, and these further reductions will adversely 
affect our readiness, and specifically our ability to respond 
to contingencies.
    Such mechanical cuts will significantly increase risk in 
what is a most complex and volatile global operating 
environment, thus potentially requiring us to relook our 
national military strategy.
    And so, ideally, Congress and the Administration will work 
together to halt sequestration as soon as possible. If not, and 
if sequestration goes into effect, we must be afforded the 
necessary flexibility to adjust resources in order to avoid 
wasteful penalties and inefficiencies and to focus 
appropriately on our highest priorities.
    Indeed, we must continue to work together to ensure that 
our battle-tested Army remains our Nation's force of decisive 
actions, ready today and prepared for tomorrow.
    Mr. Chairman, Ranking Member Smith, members of the 
committee, I thank you again for your continued support and 
demonstrated commitment to the outstanding men and women of the 
United States Army and their families, and I look forward to 
answering your questions.
    [The joint prepared statement of General Austin, Secretary 
Hale, Admiral Ferguson, General Dunford, and General Spencer 
can be found in the Appendix on page 51.]
    The Chairman. Thank you, General.
    Admiral.

   STATEMENT OF ADM MARK FERGUSON, USN, VICE CHIEF OF NAVAL 
                           OPERATIONS

    Admiral Ferguson. Chairman McKeon, Ranking Member Smith and 
distinguished members of the committee, good morning. It is an 
honor to represent the men and women of the Navy and discuss 
sequestration with you today.
    Based on our preliminary review, sequestration will reduce 
funding for the Navy in fiscal year 2013 by nearly $12 billion. 
Should sequestration occur, it would force the Navy to make 
difficult choices in the second half of the fiscal year across 
three broad categories: fleet operations and maintenance; 
procurement; and force structure.
    The immediate impact of sequestration will be to our 
operations and maintenance account, with a reduction of over $4 
billion. This account funds our fleet operations; maintenance; 
spare parts; civilian personnel and training; and directly 
supports fleet readiness.
    These reductions will translate to reduced flying hours for 
our air crews, fewer underway days, and training for our ships 
and submarines, and less maintenance for the fleet.
    This will impact our industrial base and the expected 
service life of our platform.
    We will prioritize expenditures to ensure that our forward-
deployed forces continue to be properly manned, trained and 
equipped. As a result, non-deployed forces will see a 
disproportionate share of reductions under sequestration.
    We will make every effort to preserve quality-of-life and 
family support programs for our personnel. However, we may be 
forced to make selective reductions in base support services 
and infrastructure sustainment.
    These reductions will have cumulative effects to our 
readiness in fiscal year 2014 and beyond.
    Sequestration will also reduce the fiscal year 2013 
shipbuilding and aircraft procurement accounts by over $4 
billion. It will require adjustments to major acquisition and 
modernization programs and will reduce funding for research 
laboratories and technology development centers.
    At this point it is difficult to assess the impact on any 
individual program or family of programs since each contract 
contains unique and complex provisions, dates and pricing. 
Also, a change in one program may have cascading effects on 
investments and other interrelated programs in the future.
    We will carefully examine each of our programs to 
understand the full impact. In some cases, our assessment will 
be we are unable to execute a procurement action. In others, we 
will face delivery delays and higher unit costs as we negotiate 
reductions in scope and quantity.
    While we will work to sustain our shipbuilding and 
procurement programs, the prescriptive and mechanical nature of 
sequestration affords limited flexibility to mitigate the 
impact of these budget reductions.
    Our fiscal year 2013 budget submission already reflects 
difficult choices beneath the Budget Control Act. Our request 
balances our investments in infrastructure, future capability, 
operations, maintenance and training to sustain a ready force.
    The potential reductions to the Budget Control Act beyond 
those reflected in our fiscal year 2013 budget submission will 
translate over time to a smaller force, with less presence, 
longer response times, and reduced ability to provide surge 
forces in support of our major operational plans and other 
emergent needs.
    Under these reductions we will be unable to execute the 
requirements of the current defense strategy.
    Mr. Chairman, last month I visited Central Command region. 
I had the opportunity to visit both of our aircraft carriers, 
Enterprise and Eisenhower, our minesweeper force, our patrol 
craft and other ships in the region. I talked to over 10,000 of 
our forward-deployed sailors.
    At every forum, sailors from the most junior to our 
operational commanders expressed concern regarding what 
sequestration will mean to our Navy and their service. The 
uncertainty of our fiscal future is increasingly on the minds 
of our force.
    Mr. Chairman, Ranking Member Smith and distinguished 
members of the committee, we appreciate the continued support 
of Congress and this committee for the men and women of our 
Navy serving around the globe. On behalf of them and their 
families I appreciate the opportunity to discuss this important 
issue and look forward to your questions.
    Thank you.
    [The joint prepared statement of Admiral Ferguson, 
Secretary Hale, General Austin, General Dunford, and General 
Spencer can be found in the Appendix on page 51.]
    The Chairman. Thank you, Admiral.
    General.

STATEMENT OF GEN LARRY O. SPENCER, USAF, VICE CHIEF OF STAFF OF 
                         THE AIR FORCE

    General Spencer. Chairman McKeon, Ranking Member Smith and 
distinguished members of the committee, good morning and thank 
you for the opportunity to share the Air Force's perspective on 
sequestration.
    As we built our fiscal year 2013 President's budget 
submission, we carefully balanced risk across all mission areas 
while protecting readiness and essential future investments and 
proposed the minimum force structure required to support the 
defense strategic guidance within the resource provided by the 
Budget Control Act. It was difficult, but doable.
    Further reductions through sequestration would affect this 
balance and our ability to execute the strategic guidance as 
currently defined.
    More than two decades of sustained combat operations and 
routine missions at home and around the world have stressed our 
force, decreased our readiness and limited our ability to 
replace our old aircraft and invest in advanced capabilities.
    Further reductions in readiness, such as in training 
programs and maintenance, would not only affect our ability to 
fulfill current wartime deployments, operational requirements 
and defense of the homeland, but it would also significantly 
impact our ability to prepare for future operations.
    The same is true for investments in modernization. 
Sequestration would also drive us to reevaluate and in some 
cases curtail our contracts. This could drive unit cost 
increases and inefficiencies. We don't know to what extent 
because we have not yet had those discussions with industry 
partners. However, these factors would impact the future of 
vital aerospace technology, one of our key competitive 
advantages.
    Mr. Chairman, and committee members, our Nation is 
fortunate to have world-class people who work hard to produce 
world-class air power every day.
    Sequestration will leave the Air Force with people who are 
not adequately trained, who lack the equipment they need and 
who must make do with weapons systems that are not fully 
equipped, representing a hollow force unable to support the 
current defense strategic guidance.
    The United States Air Force and our sister services 
comprise the premier fighting force on the planet. And our Air 
Force leadership team is fully committed to ensuring we do our 
part to remain the world's greatest air and space force for the 
future.
    Thank you, Mr. Chairman. I look forward to your questions.
    [The joint prepared statement of General Spencer, Secretary 
Hale, General Austin, Admiral Ferguson, and General Dunford can 
be found in the Appendix on page 51.]
    The Chairman. Thank you, General.
    General.

STATEMENT OF GEN JOSEPH F. DUNFORD, USMC, ASSISTANT COMMANDANT 
                      OF THE MARINE CORPS

    General Dunford. Chairman McKeon, Ranking Member Smith, 
members of the committee, thank you for the opportunity to 
appear before you today. And thanks for your efforts to 
highlight the impact of sequestration in attempt to halt its 
implementation.
    Much has been said about how sequestration would affect 
both the budget and the strategy. For the Marine Corps, we 
would experience similar challenges to the other services.
    We would suffer a significant degradation in readiness. We 
would be unable to properly support our military strategy. We 
would incur costs and scheduled delays across our investment 
account and would be unable to properly maintain our 
infrastructure.
    We maintain readiness by balancing the allocation of 
resources across our pillars of readiness. To remain ready we 
have to recruit and retain high quality people. We have got to 
maintain the capabilities and capacities necessary to support 
the strategy.
    We have got to sustain high levels of unit readiness for 
both those units that are forward deployed and those at home 
station. We have got to properly maintain our infrastructure.
    And we have to be able to modernize in a way that allows us 
to remain relevant in the context of future security 
challenges.
    If the inflexible cuts associated with sequester are 
implemented, because of the nature and the relative size of our 
budget we will not be able to maintain balance across those 
pillars. We will not be able to do what you expect your force 
in readiness to do.
    In fact, in fiscal year 2013 we will begin to set the 
conditions for a hollow Marine Corps.
    I am prepared to provide more detail on the implications 
for the budget and strategy during your questions. But I share 
the perspective previously offered by the Secretary of Defense, 
the Commandant and other senior leaders.
    Sequestration will have a chaotic effect on the force 
during a time of extraordinary challenges to our Nation.
    But before I close, I would like to share another concern 
that I have about sequestration. For the last 10 years our 
Marines, soldiers, sailors and airmen have done all we have 
asked them to do.
    The competence, responsiveness and flexibility of our force 
was seen again last week when Marines responded in hours to 
reinforce embassies in the Middle East and North Africa. That 
type of response has occurred so often over the last several 
years we might take it for granted.
    The majority of our young men and women in uniform, like 
those in the Fleet Antiterrorism Support Teams that deployed 
last week, or those that are in Afghanistan, are too busy doing 
their jobs right now to worry about the exact details about how 
we develop and pass budgets.
    They care about and they are affected by what we do in 
Washington, but they actually don't think about much about us 
on a daily basis, nor should they have to.
    Frankly, given all they do for us, they have a right to 
expect that whatever it is we are supposed to be doing to 
properly support them, that we are actually doing it.
    Our ability to provide our young men and women with the 
wherewithal to accomplish their assigned tasks is the very 
foundation of the special trust and confidence that they have 
in us. And that trust and confidence is the foundation of their 
spirit, their mettle and their combat effectiveness.
    One of my greatest concerns about sequestration and all the 
associated second and third order effects is that we will lose 
the trust and confidence of the All-Volunteer Force that we 
have worked so hard to build.
    My point is that this is not just about quantifiable 
impacts on budget and strategy as significant as they may be. 
Equally at risk are the intangible qualities that make our 
military the very best in the world. Should we lose the trust 
and confidence of the force by failing to properly support 
them, it will take a very long time to earn it back. That fact 
needs to be a key part of the debate as we move forward.
    Thank you again for the opportunity to be here this 
morning. I look forward to your questions.
    [The joint prepared statement of General Dunford, Secretary 
Hale, General Austin, Admiral Ferguson, and General Spencer can 
be found in the Appendix on page 51.]
    The Chairman. Thank you, General.
    Thanks to each of you for your testimonies.
    I am sure everyone in this room understands the Nation is 
in a serious situation. We have a debt now of $16 trillion and 
growing by leaps and bounds.
    In the last election there was, I am sure, people 
campaigning on the idea that we need to get our spending in 
line with our revenues. We have to get our deficit in order and 
everything needs to be on the table.
    Military leaders have stepped up, and they are all 
patriotic, and said we understand this and we want to do our 
part.
    The Deficit Reduction Act was passed and that was set up in 
a couple of different tranches of cuts. The first cut was 
almost a trillion dollars, half of it, almost a half a trillion 
dollars, coming out of defense.
    When defense actually accounts for 17 percent of our 
budget, 50 percent of the savings were taken out of defense. I 
would contend that that is probably not fair. And I think it 
puts our defense in jeopardy.
    However, military leaders stepped up and said we can do 
that. We had to change our strategy, strategy that we have had 
since World War II, but over a month's--over a year's time, 
really, our leaders managed to work that out in the budget that 
starts October 1st.
    The strategy was changed. We agreed we are not going to be 
able to do all the missions that we have done in the past. We 
can't answer every phone call that, yeah, we are there. We will 
be there.
    But they did that without complaint.
    The second part of the deficit reduction said that we would 
have a super committee that will look at other ways to find 
savings in the mandatory spending side.
    If we took all discretionary spending out, eliminated 
defense, eliminate homeland security, eliminate transportation 
and infrastructure, eliminated education, all Federal spending 
that we get a chance to vote on every year, we would still be 
running a deficit at this point of a half trillion dollars a 
year.
    Defense is not the problem. We need to address the 
mandatory spending side. The super committee was not able to 
carry out their mandate. We all understand that. We understand 
the political pressures.
    But the fact was it didn't happen. And so sequestration 
that was supposed to be so terrible it could never be actually 
put into place is getting closer. We are now 3 months away from 
full implementation.
    I contend that we are already in sequestration. The jobs 
are already being lost. The decisions are already being made to 
slow things down or cut things off and people are losing their 
jobs.
    There are two impacts. One is a big cut on our defense, 
which puts our security at risk. The second side is the impact 
on our economy. And the CBO [Congressional Budget Office] said 
that if this thing goes through that we will go right back into 
another recession, starting next January.
    So this is very, very serious. But the sequestration, the 
way it is outlined, if it should take effect, full effect in 
January, is another $500 billion, $600 billion out of defense 
and it is without any thought or any planning, just you go down 
every line item and cut without any kind of planning.
    A couple of you mentioned training. When I applied for this 
job to our steering committee, I said, ``As I see this job, the 
requirement is to make sure that our men and women in uniform, 
when we send them into battle, they have all of the training, 
the leadership, the tools, everything they need to carry out 
their missions and return home safely.''
    This cuts into that. It means we will not be able to do it.
    The ports and the camps that I have been visiting recently, 
a lot of emphasis is on IED [improvised explosive device] 
training. That is the biggest problem that we are dealing with 
in Afghanistan--severe injuries and deaths, most of them are 
coming from IEDs.
    A lot of training at all of these bases was being put into 
that effort. When you say that we will be cutting back on 
training, that can cost lives and that to me is over the top. 
We have gone way too far.
    The budget year for next year starts October 1st. We have 
already passed now a continuing resolution [CR] that causes all 
kinds of problems for the Defense Department and other agencies 
of the Government for the first 6 months of next year. And then 
sequestration kicks in January 2nd.
    The CR keeps Government open for 6 months. As far as I am 
concerned, the Defense Department shuts down January 2nd 
because sequestration will hit on top of that. As I have looked 
at how we have to cut every line item evenly by 9.6 percent--
was it, Mr. Secretary?
    Secretary Hale. By 9.4 percent.
    The Chairman. By 9.4 percent. If OCO is also included, 
which it is, that includes ammunition for our troops in 
Afghanistan. Correct?
    Secretary Hale. Yes.
    The Chairman. Is that a line item? How is that handled?
    Secretary Hale. The ammunition accounts would be in 
procurement and if we end up cutting procurement at the line 
item level, yes it would be a line item or could be. I would 
need to look back and see exactly where ammunition is funding 
in the OCO budget.
    The Chairman. So nothing has more priority over anything 
else? None of us would agree with that. I mean, that means 
cutting the lawn out at Fort Myer would have the same----
    Secretary Hale. Right.
    The Chairman [continuing]. Priority as troops have in 
Afghanistan.
    Secretary Hale. We will have some opportunity. We budget 
separately for OCO and the base budget, and you approve each 
budget. When we actually begin executing, the budgets merge.
    So there is one operation and maintenance Army account for 
actives that has both OCO and base spending in there. We would 
have some authority to move money within that account and we 
would use it to try to protect the wartime operating budgets.
    But I don't want to make that sound easy, because what that 
means is we would have to make disproportionately large cuts on 
the base side, and that will have some of the effects on 
readiness and training that are of such concern to us.
    So we would have some ability and we would move to use it 
to protect the actual wartime operating budgets.
    The Chairman. I have more questions than we have time, but 
I, again, appreciate your service and all that you are doing to 
protect us from threats abroad.
    Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    I don't actually have questions--a quick comment.
    First of all, I agree with the chairman, again, on the 
impact of this. Clearly, it limits flexibility. I think all of 
you gentlemen have explained that you are trying to, you know, 
do it in as commonsense a way as you can within the limitations 
of the Budget Control Act, but those are fairly severe 
limitations.
    The main comment I have is how anyone could listen to our 
comptroller and our four vice chiefs and conclude that somehow 
the Pentagon isn't planning for this is just utterly beyond me. 
Clearly, you are planning for it. Clearly, you are considering 
on a programmatic basis issues that are a very, very thorny 
problem to deal with.
    So, you know, I appreciate your efforts on that. You know, 
for my part, we will continue to work here to try to make sure 
that you don't have to do what you are planning now to do. So, 
we appreciate your efforts and I yield back.
    The Chairman. Thank you.
    Mr. Bartlett.
    Mr. Bartlett. Thank you very much.
    I would like to reemphasize what our chairman said and kind 
of put our discussion in context. About every 6 or 7 hours, 
there is another billion dollar increase in our deficit. That 
drives our debt up more than a thousand billion dollars a year, 
more than $1 trillion a year, our debt increases.
    As the chairman said, if we were to zero out everything 
that we vote on here--if we had no NIH [National Institutes of 
Health], we had no military, we had no homeland security, no 
Department of Transportation--it is all gone; no Department of 
Education. If we zeroed all of that out, we would still have a 
deficit.
    We borrow about $0.42 out of every $1 we spend. So clearly 
the sequester does not solve our deficit-debt problem.
    If the sequester occurs, defense will be cut something a 
bit more than $50 billion this next year. Defense is a bit less 
than one-fifth of our spending. So if you are going to cut 
defense and the other discretionary programs, let us be fair 
and cut across the board all of the programs.
    That would mean about $250 billion that we would cut from 
our spending next year. That would include Medicare, Medicaid, 
Social Security--across the board, discretionary and 
nondiscretionary programs.
    These cuts by most people are considered draconian and 
impossible, so let us put that in context. This $250 billion 
cut would represent less than a fourth of our deficit next 
year; closer to a fifth of our deficit next year. If you can't 
cut a fifth of our deficit, how will you ever get there?
    If this sequester occurs, this would represent--and this 
was the drawdown from these wars--after wars, we always have 
drawdowns--it would represent about half the percent drawdown 
that we had after the Cold War and after Vietnam. Now, we ended 
up with hollow militaries then. We simply don't want to do that 
again. But it kind of puts this cut in perspective.
    As the chairman indicated, if the sequester is implemented 
as written, it would be totally devastating. I know there are 
some argument as to what precisely the wording of the sequester 
law means, but if you had to renegotiate more than 2,500 
contracts, prime contracts, and many thousands of subcontracts 
and reduce them by 9.6 percent, we would grind to a halt very 
quickly. Obviously, you can't do that.
    Mr. Secretary, if Congress continues to be irresponsible 
and we do not address this problem, are you prepared to 
recommend to us an implementation procedure for the 
sequestration that would cause the least harm to the military?
    Secretary Hale. Yes. We will be prepared to implement this 
in the best way that we can. You know, I am reminded of that 
analogy----
    Mr. Bartlett. Sir, excuse me. That was not my question. I 
know you have a little wiggle room with this, but not a whole 
lot, sir. Are you prepared to recommend to us a change in the 
law that we can then vote on so that this can be implemented at 
much higher levels, rather than at the specific levels that the 
sequester indicates?
    Secretary Hale. I mean we would have to look at that, Mr. 
Chairman, or Mr. Bartlett. You know, in the abstract, I don't 
know what that law would be. We need to avoid this thing, not 
try to make it better. I would like to offer you an analogy. If 
you are driving into a brick wall at 60 miles an hour, let us 
find a way to avoid the wall, not figure out a way to pick up 
the pieces after we hit it.
    I believe that is true. We need to halt this thing, rather 
than try to make it better because we are not going to be able 
to make it fundamentally better.
    Mr. Bartlett. My question anticipated that, sir. I said if 
Congress is going to continue to be irresponsible, then the 
Administration can be responsible and recommend to us an 
implementation procedure which is going to cause the least harm 
to the military.
    Are you prepared to do that?
    Secretary Hale. Yes. Within the law, we will prepare to do 
that. Whether we are going to recommend another law, I think I 
need to think about and I will, and I will be glad to respond 
to that for the record; but within the law, we will recommend 
the best plan that we can if we have to, but it won't help that 
much.
    [The information referred to can be found in the Appendix 
on page 67.]
    Mr. Bartlett. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Reyes.
    Mr. Reyes. Thank you, Mr. Chairman.
    Gentlemen, thank you for being here.
    You know, that old cliche of the devil being in the 
details? We don't like the details that we are hearing, even 
though it was us. And I couldn't agree more with my 
subcommittee chair, Chairman Roscoe, that it is our fault. It 
is Congress' fault for putting you in this position.
    It is a lot like somebody holding a gun to your head, 
wanting to take your possessions. You don't have enough 
possessions, so we are saying, ``Well, give us a plan on how 
you are going to get possessions so you can give them to me.'' 
It is ludicrous.
    Every time that we come up with how we are going to deal 
with sequestration, I can't help but tell my colleagues in 
Congress to look in the mirror. We did this. We passed that 
idiotic law that now have put you in a situation where we now 
want you to solve the dilemma that we didn't have the courage 
not to do.
    So, I don't have any questions, Mr. Chairman. I just think 
that we have, as a Congress, have to accept the responsibility. 
We have to find a way to solve it. And we shouldn't be asking 
the generals that are here and the secretary that have been so 
gracious and patient with us all these months, to give us a 
solution. It is up to us. It is up to us.
    And I say that even though I didn't vote for this idiotic, 
stupid law, I accept responsibility as part of Congress, and I 
think it is up to us to find the solution. However we do that, 
we better do it fast.
    Thank you, Mr. Chairman, and I yield back.
    The Chairman. Thank you.
    Mr. Wilson.
    Mr. Wilson. Thank you very much, Mr. Chairman.
    And thank for being here today.
    Two days ago, I had the privilege of being with 
Congresswoman Vicky Hartzler at the University of Central 
Missouri. And while I was there, we were hosted by the 
university and the issue was sequestration. We have persons all 
over our country--Whiteman Air Force Base, Fort Leonard Wood--
that I had the opportunity to visit. The American people are 
very concerned.
    And I want to thank you for your service, but also we 
really are counting on you to make sure that, again, the 
American people understand what is going on.
    I am particularly concerned, General Dunford. I have the 
privilege of representing Parris Island, Marine Corps Air 
Station, Beaufort Naval Hospital. My late brother-in-law was a 
Marine who received the Navy Cross at Okinawa.
    So I grew up with a great appreciation for the Marine 
Corps. And it is my understanding that the personnel costs of 
the Marine Corps are significantly higher than the other 
services. Approximately 58 percent of the budget is spent on 
personnel. Is that correct?
    And then additionally, I am very grateful that indeed the 
personnel accounts are exempt, but what does that do in regard 
to force level, in regard to readiness, research, procurement, 
training? Secretary Panetta has indicated this could lead to a 
hollow force. And how will the Marine Corps address the issues 
before us?
    General Dunford. Congressman, first, you are correct. 
Fifty-eight percent of our total obligated authority goes 
toward personnel. Our cost per Marine is not higher, but the 
proportion that we spend in our budget on personnel is higher.
    As a result of personnel being exempt in 2013, what I 
alluded to in my opening remarks is that we would then have to 
find a preponderance of funds out of operation and maintenance, 
infrastructure and our modernization accounts. So we will 
continue to do things like run Parris Island. We will 
absolutely continue to support those Marines and sailors that 
are in harm's way in Afghanistan. We will support those that 
are forward deployed.
    But where we will see the biggest impact from a training 
perspective and where those resources will come from are those 
units that are at-home stationed. And I think you know that 
right now two-thirds of our units that are at-home stationed 
are already in a degraded state of readiness. They are in a C3, 
C4 status already.
    And these cuts will further exacerbate deficiencies in home 
station readiness.
    We will also be unable to support the strategy. One of the 
things that we are beginning to do now and had intended to do 
in fiscal year 2013 is reconstitute our 3rd Marine 
Expeditionary Force, which is the core of our contribution to 
the U.S. Pacific Command and the resources that are necessary 
to support that are unlikely to be available.
    And then what we will see across the board in our 
modernization accounts are delays and so forth that will cause 
us to delay programs and in some cases do more with less.
    Mr. Wilson. And, of course, I want to point out the 
challenges you have: facing an asymmetric enemy not in uniform; 
illegal enemy combatants; persons who truly are bloodthirsty 
and act with no regard to the civilian population.
    And, thank you for the success and the hard work that has 
occurred. General Spencer, it has been reported that the U.S. 
Air Force might have to cancel its contract with Boeing to buy 
refueling tankers, the KC-46, as a result of sequestration. The 
Air Force would then have to negotiate a new contract possibly 
for fewer KC-46. How many fewer KC-46s would the Air Force buy? 
What sort of per unit cost increase will this cause?
    General Spencer. Well, Congressman, I would say upfront 
that we wouldn't at this point plan to cancel the contract. 
And, depending on the cuts--and I think the chairman mentioned 
earlier, if sequestration is triggered, the first thing we 
would do is look at those accounts or those areas that we would 
want to try to protect, and OCO, or overseas contingency 
operations, would be one of those.
    So, once you do that, then that drives more of a cut into 
the other accounts. And so assuming we would protect wartime 
operations, that would drive higher than a 9.4 percent cut into 
our other accounts, like our procurement accounts.
    So what we would have to do--we have not had specific 
conversations with the contractor for the KC-46. But depending 
on the amount of the cut, the issue would be, we would have 
to--because we have a firm fixed-price contract--we would have 
to open up that contract.
    And so, we would have to then talk to the contractor about 
revising our payment schedule. And, I would guess the 
contractor would then talk to us about, ``Okay, well, we can't 
give you as many airplanes on the schedule that you asked 
for,'' or, ``We may have to stretch out the airplanes,'' or, 
``By the way, we may have to charge you more because now the 
contract's back open.''
    So, clearly, as we go down--I think, as Mr. Bartlett 
mentioned, as we go down the thousands of contracts and 
thousands of lines, that is the type of process that we have to 
go through with every contract.
    Mr. Wilson. And I am concerned about the cost, and thank 
you for addressing that.
    I yield.
    The Chairman. Thank you.
    Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman.
    I would like to thank the witnesses.
    I commend the chairman for his persistent and continued 
interest in focusing on the severity of this issue, which he 
has done throughout the year.
    I, frankly, wish that the same degree of interest was being 
demonstrated on the House floor this week. The House is leaving 
town tomorrow until after the election. There will be an 
adjournment resolution at some point today or tomorrow. I am 
going to vote no, because I think for us to walk away from our 
responsibilities--we have heard about this morning--without 
making some effort to pass some legislation both Houses and the 
President could sign is not very responsible.
    And, I think it is an interesting contradiction that this 
hearing has set forth chapter and verse about the urgency of 
this problem and the response of the institution is to leave 
town for 6 weeks.
    Now, having said that, let us talk about the importance of 
some of the decisions we may have to make. And I want to 
preface this by saying, I fully embrace the principle that 
anyone who served this country is deserving of high-quality 
health care for the rest of their life. I fully embrace the 
principle that you shouldn't ever change the rules in the 
middle of the game for someone who is retired or who is near 
retirement. I don't think you do that to people.
    However, Secretary Rehnquist, Secretary Gates and now 
Secretary Panetta have come here and laid out for us year after 
year chapter and verse the hard reality that retiree health 
care costs are eating up a larger and larger share of the 
defense budget. We all pretend that is not true, because 
raising the issue is a political landmine.
    But I think if we are serious about not having the 
sequester but equally serious about balancing the budget, one 
of the things that we have to talk about is whether it is 
possible to have a fair and equitable system of having more 
contributions from retirees into the military health care 
system.
    I want to reiterate: I am not for that for present retirees 
or people near retirement. I don't think that is fair.
    I want to ask you this question: If we came up with a 
system that was equitable, that phased in such contributions 
over time so that youngest had the longest to plan for it and 
it was fair in the sense that those at the top of the pay grade 
had a relatively greater contribution than those at the bottom, 
do any of you gentlemen think that such a change would retard 
or impair your recruitment or retention of people in the armed 
services of our country?
    General Austin. We would have to see the actual details of 
the proposal, but certainly I think any change is going to 
create some concern. But having said that, you know, I think if 
it is, as you have described, fair and equitable, I think that 
there are a sizable amount of folks that would view it 
positively.
    Mr. Andrews. I am painfully aware that there will be 
disagreement over definitions of fairness and equity, but I 
appreciate that.
    Admiral, what do you think?
    Admiral Ferguson. Congressman, I think we have the gold 
standard of health care in our country for our people, and they 
richly deserve it, as do our retirees and our dependents.
    I think we would have to examine very carefully the details 
of the proposal in order to give you a better assessment of 
that point.
    Mr. Andrews. Yes, sir.
    Admiral Ferguson [continuing]. We have to preserve it, in 
my view, on a fiscally sustainable basis into the future to 
ensure----
    Mr. Andrews. I agree with that. I don't want to make a 
promise that we can't keep 20 years from now.
    Admiral Ferguson. Exactly.
    Mr. Andrews. Yes, sir.
    General Spencer. Congressman, I agree with my colleagues.
    One of the things that is interesting about retirement, as 
an example, is you would think that folks newly coming into the 
military wouldn't be worried or thinking about retirement, but 
they do, as I think we all found out as we went around and 
talked to people the last time it came up.
    Mr. Andrews. Yes.
    General Spencer. My daughter is married to a soldier in 
Fort Hood in Texas. And when it came up before, she called me 
and asked me, ``Are they going to take my retirement away?''
    So I think, as my colleagues have mentioned, we would have 
to see the details of it, but certainly there is some potential 
there.
    Mr. Andrews. I appreciate that.
    Yes, sir, General.
    General Dunford. Congressman, I think it is important that 
we remember the end state of compensation, which is to recruit 
and retain a high quality force, and you alluded to that.
    Mr. Andrews. Right.
    General Dunford. You know, I think it would be very 
dangerous for us to isolate any aspect of compensation without 
a comprehensive review of compensation writ large. And I think 
that really is what the Secretary and the chiefs concluded last 
year and have come over and recommended, is that we not isolate 
any aspect of compensation, that we not focus singularly on 
health care; that we take the opportunity to look at 
compensation in a holistic way by an independent panel to 
provide choices then that senior leadership could look at in 
order to deal with the very real problem that you outlined----
    Mr. Andrews. I thank each of you gentlemen. And I see my 
time has expired.
    I just want to say that I have been encouraged by the 
dialogue in this committee which has been sober, serious, and 
factual, I think, all year.
    I am equally discouraged by what we don't hear on the 
floor, that this is the kind of question we are going to have 
to come to grips with if we are going to cancel out the 
sequester and reduce the national debt.
    Thank you, Mr. Chairman.
    The Chairman. Appreciate the gentleman bringing that point 
forward.
    And in our authorization bill that this committee passed 
and the floor passed and the House and the President signed 
last year did increase the co-pay on our retirees. It was about 
$5 a month for a single person; about $10 for a----
    Mr. Andrews. I heard about it. I remember.
    The Chairman. And that was first time in many, many years 
that that had been addressed. And we also face the issue in 
this year's bill. That hasn't become law yet because, again, we 
are waiting for the other body to act----
    Mr. Andrews. As I said, this is the kind of sober 
deliberation that will help fix this problem, as opposed to 
sequester, which is across the board.
    The Chairman. Thank you.
    Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    And gentlemen, thank you for being here and thank you for 
your service to the country.
    General Austin, I know you are from Thomasville. That is 
part of my district--and happy to have you in the district. Any 
time you are down there, let me know.
    And General Spencer, Robins Air Force Base is the largest 
industrial complex in Georgia, the largest employer in my 
district.
    So I have opposed sequestration from the start. I 
understand that we have to have some reductions in total 
spending, and certainly I think that you gentlemen are better 
equipped to provide for where those cuts should come than 
Members of Congress and certainly the way sequestration would 
implement those cuts and tie your hands. I think it is probably 
the least efficient thing we could have done.
    The world is a more dangerous place today, is one of my 
other concerns with sequestration. We have seen this with the 
embassy attacks and other places.
    And General, I know that some Marines have been denied 
access to even get in to provide additional protection for our 
embassies in some parts of the world. I think that is something 
we have got to review, as well.
    But I want to go, if I could, to Secretary Hale and to your 
comments. You said that you would consider whether or not 
Congress should pass another law before you made that 
recommendation. And your written statement says, ``very much 
hope that Congress will pass a deficit reduction plan that the 
President can sign and avoids sequestration.''
    Just set the record straight here--this Congress, the House 
of Representatives in this Congress, has passed five different 
measures to avoid sequestration, and the President and the 
Senate, neither one of them have shown leadership in giving us 
any indication of what they will sign. All they say is they 
won't sign what we have passed.
    It is time for the United States Senate to pass a piece of 
legislation that deals with sequestration, and quite honestly 
it is time for the President to show leadership on this issue 
as well.
    And I guess, Mr. Hale, can you tell us what the President's 
proposal is that he would actually sign, going back to your 
written testimony?
    Secretary Hale. Well, Mr. Scott, the Administration has 
made two proposals, one last October to the Joint Select 
Committee on deficit reduction and then one in the President's 
budget. I think that he would sign either of those.
    Mr. Scott. Mr. Hale, can I remind----
    Secretary Hale. Both of them----
    Mr. Scott [continuing]. Can I remind you that the President 
didn't get a single vote from a Democrat or a Republican on his 
budget? That is how fiscally out of balance his proposal was. 
He didn't get a vote in the Senate, a single vote in the Senate 
on his budget.
    I apologize for interrupting, but is it realistic for the 
President to hold to a plan that of 535 potential votes did not 
get a single vote from a Member of either party, and he wants 
to hold to that plan? Is that leadership?
    Secretary Hale. The Administration also said in the 
Sequestration Transparency Act that they would work with 
Congress to find a way to solve sequestration.
    Mr. Scott. Well, that is just words----
    Secretary Hale. So I have to take them at their word that--
--
    Mr. Scott. Well, Mr. Hale, with all due respect, that is 
just words. This Congress has passed five--the House, I should 
say, I apologize, let us not confuse the do-nothing Senate with 
the House--we have passed five measures to avert the potential 
devastation of sequestration on national security. What is the 
President's plan other than a budget that got zero of a 
potential 535 votes?
    Secretary Hale. Mr. Scott, I am the Comptroller of the 
Department of Defense. I know what he has proposed----
    Mr. Smith. Will the gentleman yield? I am sorry. You have 
asked the question of these people and I am happy to answer it.
    Mr. Scott. Sure.
    Mr. Smith. I mean the White House has made two proposals 
that Congress rejected. The House has made five proposals that 
the Senate doesn't accept.
    Mr. Scott. Mr. Smith, did you vote for the President's 
budget?
    Mr. Smith. So I fail to see how you are in a better 
position on that.
    Mr. Scott. Did you vote the President's----
    Mr. Smith. We have all kinds of proposals that the other 
side doesn't agree to----
    Mr. Scott. Did you vote for the President's budget? You did 
not vote for the President's budget.
    Mr. Smith. The President's budget was not presented on the 
House floor.
    Mr. Scott. So you rejected the President's plan as well as 
I did.
    Mr. Smith. The President's budget was not presented on the 
House floor. You put something up that was not the President's 
budget and you have spent all the time since then claiming that 
it was. That, too, is not helpful.
    Mr. Scott. That is simply not true, Mr. Smith, with all due 
respect. I mean, the President got zero votes out of 535 
potential on his budget. It is time for him to lead, follow, or 
get the hell out of the way of this country.
    Thank you, Mr. Chairman, and I----
    The Chairman. Thank you.
    Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman. And, again, thank 
you for the series of hearings, starting with the industrial 
workforce and leading up to today's hearing this morning, for 
focusing on this, and, again, following on the transparency 
report, which was just released, which, by the way, also set 
out the impact in terms of non-defense areas of the Government 
that would be devastated by sequestration.
    I mean, all the way from food supply, because of the cuts 
in terms of food inspection that would paralyze the delivery 
and production of food in this country; the impact in terms of 
health care services with the across-the-board Medicare cuts; 
K-12 Title 1 that would be devastated.
    You know, again, the whole purpose of this was to be 
indiscriminate, to be unacceptable. And you have to look no 
further than the granddaddy of sequestration, who was Senator 
Phil Gramm, who constructed the original sequestration 
mechanism back in 1985. He testified after the Budget Control 
Act was passed and his language was it was never the objective 
of Gramm-Rudman to trigger sequestration; the objective of 
Gramm-Rudman was to have the threat of sequestration force 
compromise and action.
    And what we just heard, you know, shows that we have still 
got a gap in terms of the two sides. But in the past our 
predecessors, starting in 1985 through 1992, kind of, you know, 
grinded away in terms of getting proposals, which were very 
hard for both sides to get to, but nonetheless did what was 
right for the country.
    And, you know, General Dunford, your description of, you 
know, the folks that serve under you, who responded to the call 
a few weeks ago and did their job, and how they, frankly, are 
counting on us to do our job, you know, to me was probably the 
most powerful statement this morning in terms of, you know, 
what the real issue is here, about whether or not the people of 
this country have any confidence in this institution to do its 
job.
    And I would just say, you know, I don't have a question, I 
just--you know, the decision on Friday by the leadership of the 
House to basically cancel all the session days that were 
scheduled in October, to basically leave town for 7 weeks, you 
know, that does not comply with the spirit of Senator Gramm's 
description of what sequestration is supposed to be about. It 
is not about an end, it is about a process, and it is about 
people doing their job.
    And, you know, I personally believe that there still is a 
center in this place that is ready to roll up its sleeves and 
find a path between the two sides which we just heard a moment 
ago. And, again, the example of the Marines who are deployed, 
or whether it is sailors who are, you know, all across the 
globe, or whether it is the amazing work that the Army is 
doing.
    And, again, I visited with you in Iraq, General Austin, 
and, you know, commend you again for your amazing service in 
the Air Force, which are patrolling the skies.
    By the way, the Coast Guard would also get hit by 
sequestration, the folks in New London at the academy. I was 
talking about sequestration with them a short time ago. They 
are impacted, too. You know, we know now, I mean, what is the 
consequences. It is completely unacceptable for our country 
both in terms of domestic and nondomestic sectors. And what we 
have got to do is do our job.
    And I just hope, frankly, that the motion to adjourn is 
going to fail and that people are going to roll up their 
sleeves and get it done.
    By the way, there has been some positive signals from the 
Senate in terms of some negotiations. Senator Lindsey Graham 
this morning talked about a mini-Simpson-Bowles to try and sort 
of get some savings and avoid the January 2nd timeline.
    I commend him. I mean, you know, that is somebody who is 
rising to his constitutional duty to try and start finding a 
middle ground and avoid what is looming on January 2nd. And 
hopefully the spirit of Senator Graham's comments this morning 
is going to be heard in this Chamber and that we are going to 
maybe at least during the recess have some people talking about 
ways to stop this sequestration from going into effect.
    And with that, I yield back, Mr. Chairman.
    The Chairman. Thank you.
    Just a reminder that the House has passed a bill that cuts 
mandatory spending. It was hard, a lot of tough votes, but we 
did pass it. It pays for the first year of sequestration, not 
just defense, but all of the sequestration, pays for the first 
year, which would move the discussion back onto a less 
politically volatile timing that we could be discussing it.
    The Constitution lays out how we function, and it says one 
body will pass legislation, the other passes legislation, a 
conference is called, and you work out your differences.
    I understand the Senate doesn't like our bill, but they 
have not passed a bill that would take us to conference where 
we can really discuss those differences. Rather, they can sit 
and say, ``We don't like what was done.''
    So I guess then what their interpretation of the 
Constitution is, they can say that, then we have to pass 
something and ask them, ``Is this okay, Mr. Senator?'' If that 
isn't done, then I guess we pass another bill and ask them, 
``Is that okay?''
    But the way I read the Constitution is it says, until they 
put up the votes and actually pass something, we can't move 
forward. And that is the big bottleneck that we have facing us 
right now.
    Our bill was based on cutting spending. If they want to 
pass a bill that is totally based on new revenue, then we come 
together and try to work out our differences. But they would 
have a lot more credibility if they did something, if they 
passed a bill that we could go to conference on and actually 
work on. The only reason the Senate is still in town is because 
one Senator is holding them up and they can't get the votes yet 
to pass the CR. And eventually the time will run out and they 
will leave town also.
    Mr. Smith. Mr. Chairman----
    The Chairman. I yield.
    Mr. Smith. I actually agree on the last point, the CR. But 
the helpful place that we need to get here is the problem in 
the Senate is, while, as you see, one person can hold the whole 
thing up, we don't have that rule in the House. We have a much 
more efficient and effective way of moving things forward. So 
the problem in the Senate is it takes 60 votes to do anything. 
So before they can pass a bill they need bipartisan agreement.
    So all I would say, in a note of what I hope is, you know, 
trying to bring us back together here, is, you know, who passed 
what, where? The bottom line is right now Republicans and 
Democrats have not agreed on what needs to be done. And until 
we do, it is not going to get done. It is not like one side is 
doing it and the other side is not.
    It is the nature of the way the Senate is set up that they 
have to get bipartisan agreement before they can pass anything. 
In some instances they have to get unanimous agreement before 
they can do anything. It is the nature of their rules, not that 
one side is showing leadership and the other isn't. We both 
need to come up with a plan that is bipartisan. We need to get 
working on it.
    The Chairman. Actually, the bill that we passed, we passed 
under reconciliation. So they only need 50 votes in the Senate 
to pass this bill. And until they do something, we will not be 
able to solve this problem.
    Mr. West.
    Mr. West. Thank you, Mr. Chairman, and Ranking Member also, 
and thanks to the panel for being here.
    And, General Austin, I want to thank you for being a role 
model for me as a young paratrooper, and it is a pleasure to 
see you.
    My question for General Austin and General Dunford--when 
you look at my friends and a lot of e-mails they send me, five, 
six, seven tours of duty into the combat zone--the second, 
third order effects that has on the family, my big concern 
right now with the sequestration is what are we going to look 
at as far as the personnel strength, because there is going to 
be a reduction on personnel strengths for our Army and for our 
Marine Corps, our ground forces?
    So with that being said, when we are looking at 
implementing these personnel reductions that is going to be 
part of this overall sequestration for the Army and Marine 
Corps?
    General Austin. Thank you, sir. And, again, thanks for your 
service and thanks for your support.
    We are reminded that as we have this conversation, as some 
have pointed out, that there are 61,000 or so soldiers deployed 
to Afghanistan in support of that effort and they are doing a 
magnificent job.
    As we have discussed earlier, personnel under the plan, if 
this plan does go into effect--and we hope that it doesn't. We 
hope that Congress will work with the Administration to make 
that not happen, that is the best case, best course of action--
but if it does, then the personnel accounts are protected in 
fiscal year 2013--or exempted.
    So we would be looking at shaping a force further in the 
out-years. And as what you have heard our chief say earlier is 
that this would probably drive our end strength down by 80,000 
to 100,000 over time. So that is our back-of-the-envelope 
assessment at this point.
    General Dunford. Congressman, as I think you know, we are 
in the process of drawing the Marine Corps down from a high of 
202,000 in the active component to 182,000. And we have got a 
plan to do that between now and fiscal year 2016, a very 
deliberate plan that keeps faith with people.
    Manpower is exempt this year. The thing that we realize is 
that if sequestration takes effect, manpower is exempt in 
fiscal year 2013. What I alluded to earlier is that it would be 
impossible for us to balance those pillars of readiness and 
maintain 182,000 past fiscal year 2013.
    So what the Commandant has really said was once we find out 
what our topline is, inside of that topline we will build the 
very best Marine Corps that we can build in a balanced way, so 
that we don't have more force structure than we have the 
ability to train, properly equip, and to take care of the 
families, as you alluded to.
    What I would tell you is though that at 182,000, we are 
exactly at the line of our ability to respond to a single major 
contingency operation. So as we look forward, if we have 
significant reductions below 182,000, that will cause our force 
structure to be below the level of a single major contingency 
operation.
    Mr. West. Next question is, you know--you gentlemen taught 
me a great thing about anytime you prepare a military 
operation, you look at the most dangerous course of action; so 
with this being the most dangerous course of action, where do 
you all see the two preeminent places where you are going to 
have to accept risk if this continues to go forward, especially 
when we look at the volatility of the world today?
    General Austin. Well, sir, what we would do is continue to 
support those soldiers that are deploying to Afghanistan, and 
the next-to-deploy soldiers. We would make sure that they are 
adequately resourced to get the job done. That remains our top 
priority.
    In addition to that, we would also make sure that we 
support those programs that are enabling and supporting our 
soldiers and families so that we don't break the faith that we 
have established with our soldiers and families.
    You know, the fact of the matter is that we have fought 
with an All-Volunteer Force for over a decade. And as I have 
said before in other places, that if you had asked me 15 years 
ago if we could do that with an All-Volunteer Force, I would 
say absolutely not; that is probably not possible.
    But we have done it. We have done it because we have taken 
good care of our soldiers and families. And so we would want to 
keep those programs in place. So where we think we would begin 
to see eroding capability would be in those forces that are at 
home training and preparing to deploy for contingencies. We 
think that, you know, as you make decisions to transfer 
resources to cover other shortages, that eventually that it 
will erode your readiness to respond to contingencies.
    So, we want to maintain the faith that we have established 
with our soldiers, and we also want to be able to respond to 
contingencies in addition to supporting the fight in 
Afghanistan.
    General Dunford. Congressman West, similar to the Army, our 
priority regardless will remain supporting those Marines and 
sailors that are forward deployed. We will continue to do that. 
You asked for the two main areas that we would take risk, I 
don't see any way that we could maintain a proper modernization 
profile where we could continue to move forward, and we would 
not be able to sustain our investment in infrastructure as 
well.
    And to put that last point in some perspective, we fund to 
a low C-2 level in our infrastructure. If sequestration were to 
take place, we would see almost an immediate drop into C-3 and 
below with our infrastructure.
    Again, to maintain current operations at the level that we 
need to maintain them, as well as to try to maintain as many of 
those family programs that we need to keep faith with our 
Marines--but modernization, infrastructure would certainly 
suffer and they would suffer in a way that would be very, very 
difficult to recover in the years ahead, and frankly be very 
inefficient as we did that.
    The Chairman. Thank you.
    Mrs. Davis.
    Mrs. Davis. Thank you, Mr. Chairman.
    Thank you all for your leadership and for joining us today.
    At the beginning of your statement, Secretary Hale, you 
emphasized, I believe, that we need a balanced budget deficit 
reduction plan. Is there anything in this discussion that we 
have had today that would suggest that perhaps it doesn't need 
to be balanced or that there is something about that in terms 
of all the areas that we are looking at, not just defense, that 
is not part of that discussion?
    Secretary Hale. The Administration favors a balanced 
program of deficit reduction. I realize there are differences 
of opinion, but that would suggest both cuts in spending and 
some increases in revenues. That has to be worked out between 
the two Houses of Congress and the Administration, but I 
believe that they continue to favor that.
    Mrs. Davis. Do any of you feel that that doesn't 
necessarily reflect your services?
    Secretary Hale. I am going to intervene and ask that our 
military leaders not be asked to comment on that particular 
issue, if that is acceptable to you, Mrs. Davis.
    Mrs. Davis. All right.
    Secretary Hale. And that you stick with me on that one.
    Mrs. Davis. Okay. I will stick with you, sir. Thank you.
    I wanted to go to the issue that you really have discussed 
in terms of high priorities--obviously, the warfighter. But 
when we think of the personnel accounts, sometimes I think it 
is difficult for people to recognize the impact of these 
personnel accounts on readiness--childcare centers as an 
example.
    If they were to be drastically reduced, would that have an 
effect on readiness? Is that an area that perhaps needs to be 
looked at as even a higher priority when we are talking about 
these issues?
    Admiral Ferguson. Well, Congresswoman, you know, we have 
made it a priority within the service because many of those are 
funded by the operations and maintenance account, that we would 
have some flexibility to make movements within that account to 
sustain our family support programs, our people programs. We 
think they are the cornerstone of readiness for both families 
and our service members.
    But that does cause reductions in other programs within the 
account in facility infrastructure, sustainment, modernization, 
some base support operations. But I think that we feel very 
strongly due to the deployed nature of our forces that we would 
have to make an effort to sustain those.
    General Austin. I would echo what Admiral Ferguson just 
said. It is absolutely imperative that we continue to take care 
of our soldiers and families. And it does have an impact over 
time on the ability of the family to be resilient. And that is 
a thing that we are very, very focused on.
    General Spencer. Congresswoman, I also agree with my 
colleagues that we would try our best to protect family 
programs, health care, that sort of thing. But I will add 
though, as Admiral Ferguson mentioned, as we look at what we 
want to protect, that is going to squeeze out other accounts.
    And they are all in that sort of organizational and 
maintenance account, the O&M [operation and maintenance] 
readiness account which, you know, has things for the Air Force 
like flying hours to train our combat crews, weapons systems 
sustainment to maintain our aircraft, to have aircraft 
available for our depots.
    We have got our civilian pay--180 civilians or so in the 
Air Force in that account; training; ranges; spare parts. You 
can go down the list--engine overhaul.
    So as we look at--obviously, we would want to protect 
programs like that, but then that would just squeeze out other 
readiness issues as well and make the problem even more 
difficult.
    General Dunford. Congresswoman, what I think you are really 
highlighting is the need for all of us to take a comprehensive 
look at readiness. And as I alluded to in my opening remarks, 
you know, we have got pillars of readiness. And one of those 
pillars is the need to recruit and retain a high-quality force.
    And those programs that you spoke to are inextricably 
linked to our ability to recruit and retain a high-quality 
force, so they are inextricably linked to readiness as well.
    And as General Spencer and the other members of the panel 
have outlined, once you assume risk in one area, you are going 
to accept risk in another area. This is about balance. And the 
difficulty with sequestration is it actually makes it difficult 
to balance across those pillars of readiness.
    So you are going to do things that are inherently things 
you wouldn't do if you had the ability to do this logically and 
manage risk. And that is the difficulty, I think, for all of us 
is that the way the cuts are being applied will not put us in a 
position to manage risk.
    Mrs. Davis. And when we look at--you mentioned health care, 
of course, and that is a great concern, particularly if our 
TRICARE physicians choose not to accept military personnel. Is 
there something you wanted to just mention about that, in terms 
of awareness of what we should be thinking about in that area?
    Secretary Hale. Let me take a shot at that and see if I can 
be helpful. The Defense Health Program is a budgetary account. 
Under the sequester rules, it would receive the same percentage 
reduction as all the other accounts; in the case of the STA 
report, 9.4 percent.
    The only thing we could do would be to try, if that 
actually came to pass, would be to try to move money into that 
account. It will be very difficult, frankly. We could only do 
it through reprogramming and you have got to find something to 
cut. And as I have learned painfully over the last 4 years, 
that is very hard to do.
    So I think we would be faced to some extent with not being 
able to pay all of our TRICARE bills probably right at the end 
of fiscal year 2013. We would try to avoid it, but I think it 
would happen. I am not quite sure what our providers would do 
in that case. We would be just late, and then we would try to 
fix it in 2014, but it is not a good situation and not one that 
I think any of us--I certainly don't want to go through.
    The Chairman. Thank you.
    Mr. Brooks.
    Mr. Brooks. Thank you, Mr. Chairman.
    I would like to first thank our men in uniform for your 
service. It is quite impressive to see three four-stars and an 
admiral here and the dedication that those emblems represent on 
behalf of our country, and also, Mr. Hale, your presence here.
    And I have heard a good bit about why we are here today. 
And I wanted to add my thoughts to it, and people can digest 
them for what they are worth. But we are here today because we 
have had a United States Government that for years now has been 
reckless with the American treasury.
    We have had three consecutive trillion-dollar deficits. We 
are now in our fourth year of a trillion-dollar deficit. Our 
country has never seen this kind of financial irresponsibility 
in its history prior to the last 4 years.
    And it has reached the point where, in the very chairs 
where you all sit, both in 2010 and in 2011, the Chairman of 
the Joint Chiefs of Staff has appeared before the House Armed 
Services Committee and testified that this accumulated debt is 
the greatest threat to America's national security. He did not 
name Al Qaeda. He did not name North Korea. He did not name 
Iran. He did not name anybody else. He said number one threat 
is our debt.
    Now, if you look at the numbers, the debt has one trigger 
point primarily--a lot of factors, but one trigger point. 
Spending has gone up over 40 percent in the last 6 years.
    It doesn't take much of a mathematician to figure out what 
the cause of the problem is when spending has gone rampant. And 
it has gone rampant in large part because the entitlement 
programs, that some of my colleagues have pointed out.
    And in that vein I want to emphasize one point. We are in 
this process of sequestration not only because of this history 
of deficits that have accumulated to $16 trillion in debt that 
have put us in a very hazardous position financially, where we 
are risking insolvency and bankruptcy as a country, which in 
turn if that happens could destroy our national defense 
capabilities, far worse destruction than sequestration would 
ever do.
    We all know how bad sequestration is. But then we get to 
the solution aspect of it and in August of last year an 
agreement is reached.
    But let us be very, very clear about this point. The 
agreement that was reached with respect to sequestration was 
because that is what the White House demanded.
    First, they wanted tax increases on top of tax increases we 
already have in play. I have a list of 12 pages of tax 
increases that are going to hit American families this year, 
next year and the year after that and maybe the year after that 
too--12 pages.
    But that is not enough. They want even more. And so the 
House of Representatives said we are going to protect family 
incomes. And so the President came up with this sequestration 
idea that attacks and puts at risk our national defense 
capabilities.
    And so I am very much in accord with Mr. Scott's comments 
earlier that I believe that if the President is sincere in his 
desire to avoid these national defense cuts, then he should 
also be sincere in proposing a specific plan that is in 
writing, in the form of a bill that can be introduced into the 
United States Congress by at least one person who agrees with 
him.
    And to date I have not seen that plan introduced in the 
House of Representatives where at least one Member of the 
United States House of Representatives has seen fit to agree 
with its terms and conditions.
    And if the President is going to continue to be the 
Commander in Chief and if he is going to continue to rightfully 
complain through his Secretary of Defense about the adverse 
effect of sequestration on our national defense capabilities, 
and I believe those concerns are legitimate, then I pray that 
Barack Obama, as Commander in Chief, will propose a specific 
bill that is introduced in the House of Representatives with 
some semblance of support, if not bipartisan, at least by 
Democrats, that details what his plan is so that the American 
people can see it and they can digest it and decide where they 
want to go with it.
    Now, Mr. Hale, if you are familiar with a specific bill 
that the President has proposed that has been introduced in the 
House of Representatives that is confined to this issue, and I 
am not talking about a smorgasbord where it has got a thousand 
different points, one point happens to touch on sequestration.
    I am talking about a sequestration-fix bill, one bill that 
has been introduced in the House that has the support of 
Members. Please share it with me.
    The Chairman. The gentleman's time has expired.
    If you could, please answer that for the record, Mr. 
Secretary.
    Secretary Hale. I will do that.
    [The information referred to can be found in the Appendix 
on page 67.]
    The Chairman. Mr. Critz.
    Mr. Critz. Thank you, Mr. Chairman.
    Secretary Hale, in your written testimony you are worried 
about a different type of problem. You mention it in your next 
steps and it is the effects of if we don't have sequestration 
but that the process starts.
    And you talk about you don't want to alarm employees. You 
don't want to hold back on obligation of funds for weapons 
projects or operating programs.
    And a statement at the end of this one paragraph says we 
will continue normal operations unless sequestration is 
actually triggered. So does that mean that although it is in 
the back of everyone's minds, the Department of Defense is 
marching forward as if sequestration is not going to happen?
    Secretary Hale. Well, I wouldn't put it that way. We don't 
want to sequester ourselves.
    And so, yes, consistent with OMB's guidance and our own 
guidance, we are not going to start cutting back right now in 
anticipation of sequestration. But we know it is there. It is 
more than in the back of our minds.
    And we have begun steps to look at impact assessment. We 
have worked closely with OMB to understand how the law would 
work. And as we get closer to this event, we will have to move 
toward specific planning to do it.
    But we don't want, as I said, to sequester ourselves----
    Mr. Critz. Right.
    Secretary Hale [continuing]. And start in advance to say, 
``Well, let us cut back this weapons system because maybe we 
will have to do it.''
    Mr. Critz. Right. Right.
    Secretary Hale. We are still hopeful that we won't go 
through this.
    Mr. Critz. And there is a series of information here that 
says that, you know, and obviously we have already received, 
this committee, testimony that indicates that there is actually 
an observable slowdown and reduction in contracts and orders.
    So there are things happening. And in your testimony, and 
we have heard it too, it from the private sector, everybody is 
doing this sort of scenario.
    And the one thing that I would ask you, and I don't know if 
you can quantify it or not or if the service chiefs, vice 
chiefs can quantify it, is how much effort is being put into 
starting to put the pieces of the puzzle together, looking at 
what if sequestration happens.
    Is there a concerted effort within the Secretary of Defense 
or within the services that there are people assigned now to 
start looking because there is a point, and I am trying to 
think, where you mention, ``We are working with OMB to 
understand this complex legislation and are assessing the 
impacts.''
    So although you are not sequestering, you are in process of 
addressing this. And I mean to my point every day that we kick 
the can down the road, you are expending funds for something 
that may not happen.
    Secretary Hale. I think that is right. And it will pick up 
in its pace. We largely do now understand the laws, even if we 
don't like them.
    And we have done high-level impact assessment. You have 
seen that in our testimony today.
    Mr. Critz. Right.
    Secretary Hale. And we will have to pick up the pace, 
working with the services and the defense agencies in terms of 
guidance on how we will implement this, hoping at every point 
that we can stop.
    But if it does not get halted, we will eventually have to 
do detailed budget planning. And that will be enormously costly 
in terms of time within the Administration.
    Let me just go back to one of your other points. In the 
aggregate, we don't see a slowdown in obligation rates, at 
least through the data we have, which is about a month lag.
    I am not saying there is not some program out there that is 
doing it.
    Mr. Critz. Right.
    Secretary Hale. And there may be industries that are making 
advance preparations. But we do not see for the Department as a 
whole a slowdown in obligation rates through maybe a month ago.
    Mr. Critz. Okay.
    Now, are you making any assumptions as you plan for fiscal 
year 2014 with regards to sequestration?
    Secretary Hale. No. The fiscal guidance that we have from 
the Administration is the same as last year, last year's plan 
for fiscal 2014, and does not take into account sequestration.
    Again, we are not going to do this to ourselves. We are 
still hopeful that Congress and the Administration will find a 
way to avoid it.
    Mr. Critz. Okay.
    And if any of the chiefs want to address if there is 
particular folks who have been assigned to getting prepared for 
possible sequestration, please chime in.
    With that, I----
    Secretary Hale. We have a team set up that is working on 
and looking at impacts and will move toward guidance for 
planning. So they are all represented in various forms.
    Mr. Critz. Okay.
    Admiral Ferguson. Yes. Congressman, I would characterize 
the effort--is that our normal staff function is that 
individuals are assessing the impacts. Now that we have the 
Transparency Act report, we understand what the budget amounts 
are.
    The planning involves understanding what your top-line is 
ultimately and the assumptions and the planning factors you use 
to shape the future fiscal target shapes the decisions in 2013.
    So that type of planning is not going on.
    Mr. Critz. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Young.
    Mr. Young. Thank you, Mr. Chairman, Ranking Member.
    I would thank all of you for being here today. I know these 
are unique challenges that we are all confronting and trying to 
find our way through, so appreciate your service.
    The first issue I would like to touch on. You know, my 
district is in south central southern Indiana. And we have a 
number of assets that support the missions of DOD in 
particular, from NSWC [Naval Surface Warfare Center] Crane to 
Camp Atterbury to the Muscatatuck Urban Training Center. Even 
Indiana University has an important role in defending our 
Nation and supporting our military.
    One of the questions I have pertains to the actual cost of 
the sequester. This committee has received testimony from a 
number of industry experts including a former deputy director 
of OMB, who has testified to the fact that the actual budget 
impact of sequestration is going to go far beyond what is in 
the Budget Control Act, $55 billion in fiscal year 2013 top-
line reduction.
    Instead, informally the committee has heard estimates of 
$70 billion for equitable adjustments to contracts or by my 
calculation what is 50 cents on the dollar. Ashton Carter has 
also referenced the so-called hidden tax.
    I would ask Mr. Hale, if you could answer, do you agree or 
disagree with this observation and why? And if you could give 
us an estimate of how much in additional cuts could be required 
as a result of contract cancellations, claims, personnel 
severances and other things. Please let us know.
    Secretary Hale. Well, let me start by trying to clarify a 
bit how sequestration would work.
    If we have already signed the contract and obligated the 
funds, especially with prior year money, that contract is not 
going to be affected; obligated balances, prior year obligated 
balances are not affected by sequestration.
    So I would not anticipate that contracts signed before 
January 2nd are going to be significantly affected. They won't 
be canceled and so we won't encounter fees in that regard. We 
would be forced not to pick up options.
    We would be forced to change contracts that were planned to 
be signed after January 2nd. We would be forced into some 
personnel actions in the civilian area that--we will avoid 
rifts because frankly that would cost us money in that year.
    So I think the bottom line is we are going to, both because 
of the law and the way we would implement it, I don't see those 
sorts of large cancellation fees. There could be some but I 
don't see them occurring.
    And I think that we will just have to find ways to avoid 
the severance cost because we won't be able to afford them.
    Mr. Young. Well, thank you for that response.
    I will pivot a bit and talk strategy here for a second 
because you, Mr. Hale, have indicated that, by your estimates 
and presumably of others, I think some of the service attendees 
here have indicated that some adjustments will need to be made, 
should sequestration go into effect, to the national security 
strategy and to the missions we are asking our military to 
perform on our behalf.
    What I have been struck by, though, is multiple indications 
from different individuals on our panel, all of whom I have 
great respect for, that there is seemingly little to no 
contingency planning going on. We don't know which strategy 
changes will be required, and presumably you are the strategic 
thinkers of our military. To me, that seems most irresponsible 
for this freshman Member and former captain in the Marine 
Corps.
    I think it would be revealing if we could get more 
information on this team that was referenced who is in the 
early stages of, quote--``looking at the impacts of 
sequestration on our strategy.'' That would be revealing, I 
think, because it would tell us what risks are in fact regarded 
as greater and lesser risks to our Nation; what missions we are 
going to ask our military to perform in the future. And we 
could infer from the changes to our strategy what missions are 
of higher and lower priority.
    And finally, we could determine which spending is more 
important or less important, is exactly the sort of analysis we 
don't receive on this committee. And therefore, we are asked to 
make superficial spending decisions based on parochial 
interests and the limited information we receive from the 
Administration.
    So if we could get any information, I would most appreciate 
it.
    Thank you, gentlemen, again for your service.
    The Chairman. Thank you.
    Ms. Hanabusa.
    Ms. Hanabusa. Thank you, Mr. Chair.
    Secretary Hale, you know, I have sat through so many of 
these meetings regarding the effects of sequestration, whether 
it is in this full committee or it is in the Readiness 
Subcommittee. I even sat in on Seapower, which I am not a 
member of, because I represent Hawaii and you can imagine how 
important these issues are to us.
    Today's hearing was called ``Department of Defense Plans 
for Sequestration, the Sequestration Transparency Act of 2012 
Report, and the Way Forward.'' That is the title.
    And the one thing I have got to say is that in all the 
prior hearings and testimony that we have had, including Chief 
of Naval Operations Admiral Greenert, as well as Army Secretary 
John McHugh, that the theme seems to be the same. It is whether 
someone above them has said not to really plan for 
sequestration, or the Office of Management and Budget has said 
just plan your budget for the upcoming year without any 
consideration of sequestration.
    Would that be a correct statement as to how the Defense 
Department has been proceeding on this specific issue?
    Secretary Hale. Well, we are certainly planning our fiscal 
2014 budget without regard to sequestration, and that is 
consistent with fiscal guidance from the Office of Management 
and Budget.
    We made a decision not to plan in detail for sequestration, 
again in the continued hopes that there will be an agreement 
between the Administration and Congress to halt it. I think as 
we get closer to this event, we will have to move towards 
guidance to the service and specific planning. And if it does 
go into effect, I can assure you we will be ready to implement 
it and we will move toward the planning that is required to do 
that.
    Ms. Hanabusa. Can you tell me how long you think it is 
going to take to get to that point? Because some of these 
testimonies we got from February of this year--the chairman has 
always expressed his great concern about sequestration, which 
all of us share. So I am just curious. I mean, you knew that 
sequestration was going to be an across-the-board cut, so the 
report that was done by OMB is a 9.4 percent literally across-
the-board cut.
    So how long will it take you to then drill down from all 
these different program IDs which have the 9.4 percent across-
the-board cut? How long will it take you? I just kind of want 
to know when the chairman is going to call us back in and we 
are going to hear the actual plans.
    Secretary Hale. Well, the first thing we will have to do is 
come up with guidance, as we would do in a regular budget to 
the services. That probably will take place over the next month 
or so. I would say 6 weeks or so after that guidance has gone 
to come up with detailed plans.
    Ms. Hanabusa. So probably a 2-month period, and then we 
will be able to know how each one of these different programs--
--
    Secretary Hale. We will wait as long as we can to begin 
this process. You know, I feel like I spend most of my time 
these days planning for things I fervently hope don't happen. 
And I think we will wait as long as we can to begin this 
process, again in hopes that it is halted, but we won't wait so 
long that we won't have this Department ready if in fact it 
goes into effect on January 2nd.
    Ms. Hanabusa. Now, one of the statements made by OMB in 
their report is this. It says with the single exception of 
military personnel accounts, the Administration cannot choose 
which programs to exempt or what percentage cuts to apply. 
These matters are dictated by a detailed statutory scheme.
    Just so anyone listening in on us, when you say you are 
going to start to study how the cuts are going to take place, 
you are talking about the 9.4 percent within each program ID. 
Is that correct?
    Secretary Hale. That is correct.
    Ms. Hanabusa. So would you say as frustrating as it may be 
for us to try and figure out what is going to happen, so when 
we get home and people ask us how it is going to be cut, from 
your vantage point, it is really up to Congress and the 
President to make everything right.
    Secretary Hale. Well, we are depending on Congress and the 
President and the Administration to halt this. We certainly 
hope that is true. But as I said before, if it happens on 
January 2nd, we will take the steps that are needed to make 
this Department ready, and OMB has said they will do that 
across the Federal Government.
    Ms. Hanabusa. And Mr. Hale, many of the testimonies that we 
have had all say that Defense Department has taken its share of 
cuts already in the first part of the Budget Control Act. And I 
believe that Secretary Panetta said that if we have got to take 
an additional series of cuts, throw everything out the window. 
Would you agree with that?
    Secretary Hale. Well, I don't know if he said it quite that 
way, but if we take substantial additional cuts, whether it is 
sequestration or in some other way, we will have to reconsider 
the security strategy that is put in place. And I know I can 
speak for Secretary Panetta in saying he believes that strategy 
is the right one for current times.
    Ms. Hanabusa. When you say ``the strategy,'' you are 
talking about the 2014 budget that----
    Secretary Hale. The strategy that was put in place last 
January and is the basis for the fiscal 2013 budget he believes 
is the right strategy and he would like to continue it. But if 
there are significant additional budget cuts, we will have to 
revisit that strategy.
    Ms. Hanabusa. Thank you.
    Thank you, Mr. Chair. I yield back.
    The Chairman. Thank you.
    Mr. Schilling.
    Mr. Schilling. Thank you, Chairman.
    And it is great to be amongst you fellows. We really do 
appreciate what you do for our country.
    Just a couple of things to Mr. Hale--a couple of questions. 
One of the things that I am concerned about--we have the Rock 
Island Arsenal in our district. Dave Loebsack from Iowa and I 
share that. And, you know, I truly believe that sequestration 
is here, it is now and it is happening.
    Just this morning, I got a message--``Good morning, 
Congressman Schilling. We just were told that if we don't get 
another $45 million worth of work by October the 1st, we won't 
be able to maintain current workforce. Our contracting people 
are on it, but apparently significant job loss is a 
possibility. I am thinking we are in a bad way, brother; any 
news on your end?''
    You know, so one of the things that I think, you know, 
coming from a small business perspective, is that you are 
constantly planning. And, you know, when we talk about the 
Senate, their inability to pass the 30-some jobs bills and so 
on and so forth.
    But the one thing that I think is critical as a country, 
that both sides of the aisle need to do, and also on the Senate 
side, is there is a word called ``compromise'' and coming 
together and try to find that common ground. And what I have 
seen--this is my very first time ever holding a public office. 
I got to the point to where I just could not take it anymore 
and decided to run for Congress, and hence the reason why I am 
here.
    But what I have found is with this Senate is the fact that 
every time there is something that they don't like, they pick 
up their toys and they leave the toy box and they go home, just 
like what they did with the payroll tax back in the holiday 
that they had back in December.
    But I guess there are a couple of things. I mean, we 
definitely need to sit down and address this, but what I would 
like to do is, if you could, sir, when we talk about--one of my 
concerns is contracts that are written prior to sequestration 
taking hold, is what do we do--I mean, we have a lot of cost 
overruns that are out there. I guess, how do we put an exact 
value on these to be able to say that these things are good?
    I mean, we see constantly the cost overruns are there, but 
that is what we are trying to--I would like to have clarified 
is how do we project? I mean, if you have got a couple million 
or billion-dollar cost overruns, how are we going to deal with 
that?
    Secretary Hale. You are not talking about sequestration. 
You are talking about cost overruns that would occur in a 
regular budget, if I understand you correctly?
    Mr. Schilling. Well, primarily when sequestration hits, and 
you are saying we are going to guarantee the contracts that are 
already in effect prior to sequestration hitting, how are we 
going to deal with the overruns that are going to be there? I 
mean, we have no way to calculate those out.
    Secretary Hale. Well, what I said is under the law, if we 
have already obligated the funds, especially prior-year funds, 
they would not be affected by sequestration. So the contract, 
if already signed, would go forward with the amount of money we 
had obligated.
    Now, if that contract needs more funds and has to be 
modified, it would be subject--any additional funds would be 
subject to sequestration. And I think we would have to judge 
whether or not the added funds were sufficiently important in a 
period of budgetary stringency, and that kind of decision would 
be made by our program managers with guidance from senior 
leaders.
    I don't know if that is helpful, but I think that is the 
process that we would go through.
    Mr. Schilling. Right. Another thing that I, you know, we, 
constantly look at, when I talk to people out in the district, 
most Americans are willing to pay more in taxes. Some here call 
it revenues. I call it what it is. It is an increase in taxes 
on the hard-working American folks out there.
    And most folks that I talk to tell me, ``You know what? We 
are willing to pay a little bit more under one condition--stop 
wasting our money.'' No more tunnels for turtles. No more swamp 
mice in California, and so on and so forth.
    But until then, to raise taxes so that this Government can 
continue to waste our hard-earned tax dollars, I think it is 
pretty difficult in this House to get that through, and we 
can't get that guarantee. So I just wanted to have my two cents 
in there.
    I really appreciate you all's service to the Nation, and 
keep doing what you are doing. I yield back.
    The Chairman. Thank you.
    Mr. Barber.
    Mr. Barber. Thank you, Mr. Chairman.
    First of all, I apologize for being late. Just got through 
with a hearing on ``Fast and Furious,'' which is, of course, 
very important in my district since that was where Border 
Patrol Agent Terry was killed.
    I appreciate the opportunity to ask some questions--first 
question for Secretary Hale.
    At the last committee meeting when we discussed 
sequestration, I said at that time that the lack of action on 
this important issue is really a failure on both our part and 
others to getting our fiscal house in order.
    And we will be voting on adjournment tomorrow. I will vote 
against it. I think we should stay here and not go home. We 
shouldn't be so much worried about our own contracts and with 
our constituents and saving our jobs if we can't save the jobs 
of our community and our constituents from this threat.
    Secretary Hale, as we see this looming threat just over the 
horizon, can you say how it is affecting the morale of our 
service members, how this uncertainty is affecting both them 
and their families?
    Secretary Hale. Well, let me take a shot at that. And I 
would certainly invite the vices who are probably better able.
    I am particularly worried about our civilian members. For 
fiscal year 2013 we will exempt military personnel, so it won't 
have a direct effect on the number of military personnel, 
though it may have effect on their confidence, generally.
    I am particularly worried about our civilians. They will be 
directly affected. We would probably have to have a hiring 
freeze and I suspect we would have to consider unpaid 
furloughs.
    And I think there is starting to be increasing unease in 
our workforce about how this is going to affect individuals, 
and I don't blame them. I am very worried for them. But I would 
invite my colleagues here to comment if they would like.
    General Austin. Thank you, sir.
    From an Army perspective, you know, as I go around to 
different installations and talk to soldiers and families, we 
are beginning to hear more and more of them ask the question 
of, ``What does this really mean for us in terms of support for 
family programs or what does it mean in terms of end strength? 
Will my soldier be caused to leave prematurely?'' Those types 
of things.
    And so the issue is that they are beginning to focus on it 
more so than we would like to see them worry about it.
    And, again, our concern is that we don't want to break the 
faith with the soldiers and families that we have established 
over the years. I think that is one of the things that has 
enabled us to do what we have done and support two fights for 
over a decade.
    Let me commend our families for what they have done to 
date. And with your support we have been able to take good care 
of them.
    So they will continue to be with us, but, again, they are 
focusing on it a bit more than we would like to see.
    Admiral Ferguson. Congressman, as I mentioned in my 
opening, I just returned from a tour to Central Command to 
Middle East, and spoke to about 10,000 sailors on our aircraft 
carriers, mine force, patrol craft. At every forum, from the 
most senior commanders to the most junior sailor, they ask 
about sequestration and what it means to them, their families. 
And I sensed a growing anxiety over the uncertainty of our 
fiscal future and what it means to them and their service to 
the Nation.
    And I would just offer that they are looking very strongly 
to us to solve this and to give them certainty so they can plan 
their lives and their aspirations and their future. And I think 
we owe them that great debt as we go forward.
    General Spencer. Congressman, I have a similar experience. 
There is, I think, some growing anxiety, particularly with our 
civilians in depots, and that, you know, overall our aircraft 
engine repair, et cetera, because of the uncertainty. They 
don't know what is going to happen.
    And as I have gone out and talked to military folks--I 
mean, it is pretty heartwarming, I guess, to hear--all they 
want is parts and to get airplanes off the ground and get 
satellites launched. They just want to get the mission done, 
and as Admiral Ferguson said, they are looking to us to get 
this thing behind us so we can move forward.
    General Dunford. Congressman, I would just reemphasize a 
point I made in my opening statement, and that is our folks 
over the past 10 years have done what they have done because of 
the trust and confidence they have in us. They trust that they 
will have the wherewithal to accomplish the mission when they 
go in harm's way. They trust that we will take care of their 
families when they are deployed.
    And I honestly believe they still trust that that will be 
the case. They still trust us to resolve this issue and make 
sure that they have the proper resources.
    But my point would be, our inability to resolve this, our 
inability to assure them that they will have the wherewithal 
when they go in harm's way the next time to have what they need 
to accomplish the mission I think is a significant risk. And 
the point I would make about civilians is, there is significant 
angst in the civilian community--civilian Marines, as we call 
them--about their future. And that concerns us a great deal. 
Because just like Marines, our success with civilian Marines--
and what they do is important. They participate in our 
training. They fix our equipment. They take care of our 
families.
    And our ability to recruit and retain high-quality 
civilians is equally important. And I think the way we treat 
them and the ability that we have to provide them with some 
predictability in their future is also important.
    So those are some of the concerns I have.
    Mr. Barber. Thank you, Mr. Chairman.
    Mr. Thornberry [presiding]. Thank you, Mr. Barber.
    Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    And I first want to say that I believe that the Congress of 
the United States should stay in session until we resolve this 
problem of sequestration, as well as some of the other issues 
facing this country, such as bumping up against another debt 
limit and the fiscal cliff that we face. And so I will be 
voting against adjournment tomorrow.
    Let me just say, first, I differ with a lot of my 
colleagues. I think that we are capable of more cuts in the 
Department of Defense. I just disagree in the manner that they 
are going to be done through sequester; that is it is going to 
fall disproportionately on weapons and equipment that are so 
vital to our fighting forces.
    But let me just say first, I think that prospectively, I 
would like to see cuts. I think that the Department of Defense 
is far too top heavy--more admirals than ships in the United 
States Navy. And it is that top heavy across the board in the 
other services, as well.
    I think we ought to look at some of the permanent overseas 
military bases that we have: 79,000 troops still in Europe. Our 
NATO [North Atlantic Treaty Organization] allies, most of them 
are spending less than 2 percent of their economy on defense. 
We are at 4.7 percent.
    South Korea--28,000 troops. We are at, again, at 4.7 
percent of defense spending as a share of the economy. They are 
at 2.7 percent. It seems like we care more about defending 
South Korea than the South Koreans.
    This whole notion of nation building, which has been so 
incredibly costly--that we could invade, pacify and administer 
whole countries based on the premise that at the end of the day 
they really just want to be like us, if only given the 
opportunity they will be like us.
    You know, I volunteered to go to Iraq with the United 
States Marine Corps out of retirement--not because I believed 
in the war; because I believed once we were in it we had to 
finish it. But how costly that was not just in terms of lives, 
but in terms of tax dollars spent.
    And as long as I am on this committee, if I can do one 
thing, it would be making sure that this country never goes 
down the road of nation building again. And I am glad to see 
that we are phasing out of Afghanistan.
    On the issue of Libya today, I mean, it is stunning the 
lack of coordination between the intelligence community and the 
State Department. And now that we are being reactive when we 
could have easily been proactive, didn't even have a Marine 
Corps security detachment on the ground in Tripoli in the 
embassy. Pretended as if it was a permissive environment, which 
was stunning to me, and it cost the lives of a U.S. ambassador 
and two of his co-workers.
    With that said, let me put one question out to the United 
States Marine Corps. And with our ability to respond in that 
region right now with FAST [Fleet Antiterrorism Security Team] 
teams and NEO [Non-combatant Evacuation Operation] ops, how 
does sequester impact that capability?
    General Dunford. Congressman, when we look at sequester, 
what we will make every effort to do is make sure that our 
current operations don't suffer. So the expectation would be 
that the Marines that are in Afghanistan, our fleet anti-
terrorism support teams, and the forces necessary to do the 
kinds of things you alluded to a minute ago would be resourced.
    Where you would see the price being paid is units at home 
station, again already in a degraded state of readiness. This 
would further exacerbate that home station readiness. But it 
would not degrade the readiness of those forces that are 
forward deployed. We would make every effort to make sure that 
wasn't the case.
    Mr. Coffman. Let me just say I would never support a cut 
that compromised the national security or the capability of 
this country to defend itself. And I think, fundamentally, 
sequester and the manner that these cuts are going to be done 
will in fact compromise national security, will in fact 
compromise the capability of this country to defend itself.
    You know, I guess another question for the Marine Corps--if 
sequester would occur, what would be the permanent damage to 
the United States Marine Corps in terms of its ability to 
respond to incidents across the board?
    General Dunford. Congressman, the permanent damage would be 
hard to explain at this point. What we would experience, as I 
mentioned to Congressman West, is we would pay for current 
operations.
    Our modernization account, our infrastructure would suffer, 
and then those units that are home stationed would suffer. But 
the immediate impact would be--that is the bench that you 
expect the Marine Corps, as the Nation's crisis response force, 
to be ready when the Nation is least ready in the unexpected 
crises and contingencies that are supported by those forces 
that are at home stationed.
    And so the degraded readiness that we would see in those 
forces at home station would impact our immediate crisis and 
contingency response capability.
    Mr. Coffman. Thank you, Mr. Chairman. I yield back.
    Mr. Thornberry. Thank you, Mr. Coffman.
    Gentlemen, thank you again for joining us today. We 
appreciate your service to our Nation.
    And I wanted to make a little statement before we got into 
my line of questioning, and that is, there is an issue out 
there that I think hasn't gotten as much attention as I think 
it needs to. We all talk about sequester, but we haven't talked 
a lot about Afghanistan and recent events in Afghanistan, with 
the attack there at Camp Bastion and the Taliban's efforts 
there. I think that is something that we all ought to be 
looking at.
    I see we had two brave Marines there defending that 
airfield perished. We see six of our AV-8B Marine Corps harrier 
jets being destroyed, a number of other ones damaged. We see 
that type of brazen attack there in Afghanistan.
    And while at the same time we are here talking about 
sequestration, talking about cuts to the overseas contingency 
operation funds while at the time that we are under, I think, 
some pretty challenging times here in Afghanistan, I think it 
is unconscionable that this body is preparing to go home while 
we look at these challenges.
    That is just not right. This body can do better than that. 
It must do better than that. It must stay in town. Make sure 
this sequester gets set aside.
    As the debate took place earlier--I know folks were talking 
about, ``How do we make reductions to the budget?'' Nobody had 
any intention of ever getting to this point of making these 
types of cuts across the board to our national defense. It is 
not where this Nation needs to be.
    We need to stay in town and get this done. And I, like 
other Members here, have stated I will be voting against this 
body going home. We have to get this job done for our men and 
women that serve this Nation.
    With that being said, Admiral Ferguson, I wanted to point 
to you and ask your estimate about what will happen in one area 
of the Navy, specifically aircraft carriers.
    We know the U.S. law says you have to maintain 11 carriers. 
We know that about seven or eight are at sea at any one time, 
based on maintenance schedules, based on time sailors have to 
be resting a little bit or retraining, whatever the case may 
be, making sure that the refueling is taking place.
    That being said, we know that those challenges are there. 
And we know that if you look at sequestration and look at what 
challenges that is going to place on carrier OPSTEMPO 
[operations tempo], on maintenance schedules, on refueling 
schedules, I want to get your estimate on how you believe 
sequestration will affect that.
    Also manning, how a 9.4 percent reduction in your budget is 
going to affect maintenance schedules and manning schedules. 
Also, are we looking at 9-plus-month deployment schedules and 
shorter dwell times, shorter times for our men and women who 
serve in this Nation's Navy to be at home? Is that going to 
change?
    And thirdly, with the new Asia-Pacific strategy, with that 
shift in strategy, will sequestration allow the Navy to attain 
the goals set forth in that strategy so, Admiral?
    Admiral Ferguson. Well, thank you for the question, 
Congressman.
    Let me speak about the carrier force and then I will go 
into the broader strategic questions that you have posed.
    Firstly, we have an issue right now, and I will digress a 
second, in the continuing resolution is that we need authority 
to complete the refueling overhaul in the Theodore Roosevelt 
and we need additional congressional authority to begin Abraham 
Lincoln, which is prepared to start after the first of the 
year.
    And that we are working with Congress through reprogramming 
action to achieve that and so I would ask support of that 
initiative because not having those carriers complete their 
availabilities or start their refueling will greatly impact 
future availability of aircraft carriers.
    We have a single refueling yard located in Virginia. And 
that single facility has to process the carriers and they are 
stacked up to come through.
    On the broader question of sequestration, what the impact 
will be is that we will have to defer maintenance and we are 
presently supplying two aircraft carriers in the Middle East, 
Enterprise and Eisenhower, now.
    And we are accelerating the preparations and training of 
additional aircraft carriers to replace them as well as sustain 
an aircraft carrier in the Western Pacific.
    Under sequestration we will divert as many resources as 
possible to prepare those air wings, the escort ships and the 
carriers to meet the schedule. But we will be creating a 
deficit in the forces beyond the next group to deploy where we 
will have insufficient funds to offer them sufficient training, 
flying hours and maintenance.
    And over time under sequestration you will see the Navy get 
smaller. We have testified previously to a force of around 230 
to 235 ships in the future if this is sustained for 10 years.
    And you will see less presence forward. You will see an 
inability to complete maintenance periods in a timely fashion 
to meet the requirements of the combatant commanders.
    And it will result in a smaller force that is less 
available to respond to crises and to deploy.
    For those existing forces we are seeing already, because of 
the heavy demand for the Navy, both in the Middle East and in 
the Pacific, longer deployments. Our carriers are operating at 
about 8 months or so.
    Our ballistic missile defense ships are operating at 9 
months, with very rapid turnarounds to go back. And those 
portions of the force in most demand are operating at a very 
high tempo.
    We would not be able to sustain that going forward, under 
sequestration.
    Mr. Thornberry. How about the new Asia-Pacific strategy? 
How do you see this affecting that in the long term? Would we 
be able to maintain meeting the goals of that strategy?
    Admiral Ferguson. Yes. As part of the broader security 
strategy of the Department of Defense, we would be unable to 
sustain that because we would be a smaller force and with less 
presence and less ability to surge.
    And that puts that at risk as we go forward in the future.
    Mr. Thornberry. Very good. Thank you, Admiral.
    General Dunford--wanted to ask you a question and kind of 
put things in perspective. The Marine Corps has been 
extraordinarily busy in recent years.
    As you know, last year a Marine Corps MEU [Marine 
Expeditionary Unit] during a single deployment was able to take 
up a variety of different operations: humanitarian aid in 
Pakistan, combat operations in Afghanistan, anti-piracy efforts 
there in the Horn of Africa, and then being a significant part 
of Operation Odyssey Dawn there in Libya.
    Very, very busy times--your forces being stretched; we all 
know where the Navy is right now as far as the number of 
amphibious ships and being able to really meet the requirement 
that is there and questioning where that goes in the future 
with being able to build additional amphibious ships.
    You lay on top of that the new Asia-Pacific strategy that 
looks at dealing with issues there in that particular region, 
many of which are a need for Marine Corps capability that goes 
with that.
    I wanted to get your perspective, based on this current 
scenario, how do you see your current posture in relation to 
potential sequestration and then laying on top of that the new 
Asia-Pacific strategy, if you can give me your perspective on 
what that means for the Marine Corps?
    General Dunford. Congressman, with regard to the crisis 
response, you know, you alluded to the things that we have done 
over the past 2 years.
    And we would expect we would continue to do those things, 
even under sequestration.
    In other words, there is not a call that we have missed 
yet. And there is no expectation that we will miss a call in 
the future.
    The impact, though, will be on that crisis contingency 
response depth at home that I have talked about. In other 
words, our forward-deployed, forward-engaged forces, we are 
committed to make sure that they go out the door as ready as 
possible.
    But the bench back at home is going to get thinner and 
thinner over time. We have a readiness challenge today. It will 
be exacerbated.
    The critical piece about the Pacific is that we are in the 
process of reconstituting our unit deployment program in the 
Pacific. That really is the core of our contribution to the 
United States Pacific Command and that is the force that would 
execute the combatant commander's theater campaign plan.
    As a result of sequestration, in our initial impact 
assessment we would not have the resources available in order 
to continue to resource the unit deployment program in 2013 and 
beyond.
    And that will, again, preclude us from meeting the goals 
that have been assigned to us in the theater campaign plan by 
the U.S. Pacific Command.
    So it absolutely will have a strategic consequence.
    Mr. Thornberry. Very good. Well, thank you, General 
Dunford.
    Gentlemen, Secretary Hale, General Austin, Admiral 
Ferguson, General Spencer, General Dunford, I want to thank you 
all again for your service to our Nation, for your leadership, 
for your direction during what is a very challenging time both 
for us abroad and here at home.
    And I thank you again.
    And with that, if there are no other questions or business 
to come before the House Armed Services Committee, the hearing 
is now adjourned.
    [Whereupon, at 12:05 p.m., the committee was adjourned.]
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                            A P P E N D I X

                           September 20, 2012

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                           September 20, 2012

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                           September 20, 2012

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             RESPONSE TO QUESTION SUBMITTED BY MR. BARTLETT

    Secretary Hale. Our assessment phase has not been completed and as 
such, our planning phase has not commenced.
    The Department remains hopeful that Congress will halt 
sequestration through legislation. If it does not, we will be ready to 
implement sequestration. [See page 14.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. BROOKS
    Secretary Hale. The President put forward comprehensive deficit 
reduction packages with sufficient deficit reduction to avoid the 
sequester on two occasions.
    First, he submitted a package of proposals in the President's Plan 
for Economic Growth and Deficit Reduction for consideration by the 
Joint Committee that included over $4 trillion in deficit reduction and 
short term measures for job creation. This package was not required and 
the Administration took the nearly unprecedented step of drafting 
legislative language to assist the Joint Committee and expedite 
consideration of the plan.
    Second, in light of the Joint Committee's failure in November of 
last year, the President used the FY 2013 Budget to again propose a 
comprehensive deficit reduction agreed to in the BCA. When combined 
with legislation signed into law last year, the President's Budget 
proposed over $4 trillion in balanced deficit reduction. In total, it 
includes $2.50 in spending cuts for every $1 dollar of additional 
revenue. And the budget was clear in its intent to avoid the sequester.
    Now it is Congress's responsibility to enact balanced deficit 
reduction that the President can sign and avoid the devastating, across 
the board cuts that would occur under the sequester. [See page 28.]
?

      
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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                           September 20, 2012

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                   QUESTIONS SUBMITTED BY MR. FRANKS

    Mr. Franks. What are the top three risks to national security that 
you believe will become even greater liabilities if sequestration is 
not avoided; in what way will they become greater liabilities?
    General Austin. In accordance with guidance from the Office of the 
Secretary of Defense (OSD), the Army is not planning for sequestration. 
The Office of Management and Budget and OSD continue to assess the 
impact of the sequestration process on all of the Department of Defense 
should this event occur.
    Our areas of greatest concern are the ability to conduct operations 
and win decisively; our ability to preserve, protect, and maintain the 
All Volunteer Force; and a potential hollowing out of the force. 
Reduction of significant resources will increase the risks of a 
mismatch between strategy and resources.
    First, the Army will seek to minimize the effects of sequestration 
on training and readiness. However, we would not be able to avoid some 
cuts in funding for readiness, which would result in immediate 
reductions in training. Furthermore, the complex operational 
environment demands that we continue to empower Soldiers and small 
units with significant investments in technologies and equipment. While 
the Army has maintained investments in modernization, sequestration 
cuts would add considerable risks to the execution of many of our 
programs. These impacts will increase risk to our depth and ability to 
cover the full range of missions contained in our defense strategy.
    Second, sequestration could also impact our ability to preserve, 
protect, and maintain the all-volunteer force. The Army must sustain 
the bonds of trust with Soldiers and their Families. The men and women 
of our Army and their Families need to know with certainty that we will 
meet our commitments to them. It is important to note that the health 
of the force and sustaining an all-volunteer Army also depend not just 
on personnel compensation and benefits, but also on leader and Soldier 
development programs and a high state of readiness.
    Finally, sequestration could put us on a path toward a hollow 
force. If sequestration occurs, it is imperative that the Army is 
afforded the necessary flexibility to adjust resources and conduct 
comprehensive strategic analysis, so we can execute our highest 
priority missions. We must ensure that we preclude hollowing the Army 
by maintaining balance in force structure, readiness, modernization 
efforts, and commitments to the all-volunteer force.
    Mr. Franks. What are the top three risks to national security that 
you believe will become even greater liabilities if sequestration is 
not avoided; in what way will they become greater liabilities?
    Admiral Ferguson. The Department has not begun planning for 
Sequestration; however, the prescriptive and mechanical nature of 
sequestration affords limited flexibility to mitigate the impact of 
these budget reductions. A detailed review directed by OMB would be 
required to determine the specific impacts to national security from 
sequestration.
    Based on our preliminary review, sequestration will reduce funding 
for the Navy in FY13 by nearly $12B dollars. Depending on available 
transfer authority to consolidate these cuts, sequestration would 
severely limit the ability to preserve major acquisition or readiness 
programs. It will also affect our industrial base and the expected 
service life of our platforms.
    The potential reductions will translate over time to a smaller 
force with less presence, longer response times, and reduced ability to 
provide surge forces in support of our major operational plans and 
other emergent needs. Under these reductions, we will be unable to 
execute the requirements of the current defense strategy.
    Mr. Franks. What are the top three risks to national security that 
you believe will become even greater liabilities if sequestration is 
not avoided; in what way will they become greater liabilities?
    General Spencer. To meet the objectives set forth in the January 
2012 Defense Strategic Guidance (DSG), the Air Force must maintain the 
highest degree of capability and capacity. Imposition of the funding 
cuts in sequestration will result in long-term sacrifice of our ability 
to maintain the capability and capacity that is required to meet the 
challenges inherent in the future security environment. In the event 
that sequestration is triggered, the following three risks threaten the 
Air Force's ability to provide compelling air, space, and cyber 
capabilities: 1) a decreased ability to maintain readiness and 
proficiency; 2) increased cost to continue sustaining weapon systems 
while newer, more capable systems are delayed due to program 
restructures; and 3) increased cost of next-generation systems 
procurement due to the renegotiation of cancelled contracts and loss of 
economies of scale. Without the ability to mitigate some or all of 
these risks, they will challenge the Air Force's ability to meet our 
Nation's defense priorities.
    Air Force operations and maintenance and investment accounts are 
stretched to meet current readiness and modernization requirements. 
Sequestration effects would require the Air Force to cut operational 
flying hours and an already strained weapon system sustainment program; 
curtail training; reduce civilian hiring, as well as implement 
potential furloughs and reductions in forces; reduce daily operations 
to emphasize mission critical operations; and defer/stop infrastructure 
investments. It will also negatively impact the Air Force's ability to 
recapitalize aging weapon systems, requiring the Air Force to continue 
to sustain legacy weapon systems until newer, more capable systems can 
be procured.
    DSG directs the Air Force stay focused on strategic priorities. 
Sequestration will have a clear and immediate adverse impact on our 
ability to maintain force readiness and provide capabilities to the 
combatant commanders (CCDR). To perform full spectrum operations while 
avoiding the creation of a ``hollow force,'' readiness must remain a 
top priority while recapitalizing an aging, smaller force structure. It 
is imperative that priority modernization programs receive full 
funding: the F-35 Joint Strike Fighter, the KC-46A Refueling Tanker, 
and the Long-Range Strike Bomber. Aside from military personnel costs, 
which have been exempted, sequestration calls for indiscriminate across 
the board cuts. Without the ability to manage cuts and prioritize among 
modernization and other programs, sequestration will result in 
increased costs due to contract termination fees and weapons system 
per-unit cost increases due to contract re-negotiation.
    In summary, the Air Force identifies sequestration's three 
significant risks to national security as: decreased readiness for the 
next major contingency; a reduced capability due to the increased costs 
to maintain legacy systems due to delays in modernization programs that 
have to be restructured; and reduced funding flexibility for new, non-
conventional technology due to increased cost of renegotiated 
procurement programs. In addition to significantly increasing the Air 
Force's operational risk, the cuts to procurement programs will 
prohibitively limit the Air Force's ability to invest in new systems, 
degrading our ability to regenerate capabilities that might be needed 
to meet future, unforeseen demands.
    Mr. Franks. What are the top three risks to national security that 
you believe will become even greater liabilities if sequestration is 
not avoided; in what way will they become greater liabilities?
    General Dunford. The Marine Corps will always seek to optimize the 
nation's investment in our capabilities, regardless of funding levels. 
Even under sequestration, the Marine Corps will continue to strive to 
field the most effective force the nation can afford. The top three 
risks to the Marine Corps are decreased readiness in the Nation's ready 
force, a disproportionate impact on modernization funding, and an 
inability to maintain progress towards a rebalance to the Pacific.
    Risk 1. Decreased Readiness in the Nation's Ready Force.
    The Marine Corps carries the mandate from the 82d Congress to be 
''the most ready when our Nation is the least ready.'' As the Nation's 
forward engagement and crisis response force, the Marine Corps supports 
a globally responsive rotational presence in the Pacific Ocean, Indian 
Ocean, and a transitory presence in the Mediterranean Sea. This forward 
presence buys time and decision space for national leaders. The Marine 
Corps is also forward deployed to influence foundational strategic 
activities and for strategic deterrence. The expeditionary nature of 
the Marine Corps makes it a good friend to allies and partners and a 
lethal combined-arms force in the event of an unforeseen crisis.
    The foundation of this role is the Marine Corps' five readiness 
pillars: high-quality people, unit readiness, infrastructure, 
modernization, and capability and capacity to meet Combatant 
Commanders' demands. If sequestration were to occur, the Marine Corps 
risks severe weakening of these pillars to include decreased personnel 
readiness because of insufficient manning and training resources; 
significant shortfalls in required modernization and infrastructure 
investments; and decreased unit readiness due to inadequate resources 
for training and maintenance. All of these factors will contribute to a 
steady decline in both capability and capacity to meet combatant 
commanders' foundational forward presence requirements.
    Sequestration could also quickly become a national liability by 
forcing political leaders to make a difficult choice between rapid 
maritime capacity (which also contributes to global foundational 
activities) or reducing capacity in the Asia-Pacific region, an 
enduring strategic priority. While it is important to prioritize 
particular global regions, history suggests that the United States must 
remain globally responsive, anticipating the destabilizing and 
disruptive security environment throughout the world. The United States 
requires a Marine Corps that is a ready crisis-response force prepared 
to respond to the most-likely security challenges--this readiness and 
responsiveness will be severely impacted by sequestration.
    Risk 2. Disproportionate Impact on Modernization Funding.
    The decision to exempt military personnel from the FY 2013 
sequester would produce a disproportionate impact on the remaining non-
exempt funding in the Marine Corps' operations, training, maintenance, 
and weapons modernization accounts. The Marine Corps is a manpower-
intensive force; the majority of its budget is dedicated to military 
personnel and it has the smallest equipment investment budget of all 
the Services. As such, exempting manpower from sequestration would have 
a severe impact on the Marine Corps and would be particularly 
devastating to non-manpower accounts, especially to modernization and 
equipment reset efforts. Even though sequestration would be 
proportionately applied to the Marine Corps, the net effects on the 
Marine Corps' portfolio of smaller investment programs would have a 
disproportionate impact on these programs and the Service's overall 
readiness.
    Sequestration would cut the defense budget an additional $55 
billion per year from the levels established by the Budget Control Act. 
This yields an additional $492 billion in cuts over the next nine years 
on top of the $487 billion reduction already being implemented by DOD. 
The decision to exempt military personnel would impose dramatic and 
disproportionate cuts across all other appropriations--procurement, 
research and development, military construction, and operations and 
maintenance would each be cut by approximately 9.4 percent.
    Marine Corps programs, by nature, are streamlined to achieve 
maximum effect for the taxpayer, and have little margin for large 
swings in funding levels. Thus, sequestration would cause the Marine 
Corps to cancel or delay many small modernization programs which are 
critical in ensuring our ability to equip our individual Marines for 
their warfare specialties. A secondary impact would be a delay in 
resetting equipment after a decade of combat, forcing Marines to train 
with obsolete or degraded equipment, in smaller quantities, for an 
extended period. The impact of sequestration to operations and 
maintenance funding would be a reduction in Marine Corps forward 
presence and training activities. Reset efforts would be slowed, 
resulting in war-weary equipment not getting the maintenance required 
to continue the mission. Units training at home station would have 
reduced training ammunition, fewer vehicle hours, degraded aviation 
support and decreased communications support.
    As military personnel are exempted from the cuts, the impacts to 
the other pillars of readiness would be dramatic and unquestionably 
lead to a hollowing of the force. The Marine Corps would be required to 
dedicate a significant portion of the budget to paying for manpower, 
yet would lack sufficient funding to properly train and equip this 
force. In short, this would result in a high degree of risk and a 
``hollow force.''
    Risk 3. Inability to Maintain Progress Toward a Rebalance to the 
Pacific.
    The Marine Corps is in the process of rebalancing to the Pacific 
after ten years of warfare in Iraq and Afghanistan; this effort seeks 
to strategically balance capabilities in Hawaii, Guam, Japan and 
Australia so that Marines can train, exercise and operate with allies 
and partners and simultaneously have the ability to respond to crises 
across the Pacific region. Sequestration will exacerbate delays in Guam 
construction, which in turn will increase the time required to reduce 
the Marine Corps' presence on Okinawa and slow the rebalancing effort.
    Forward presence builds trust that cannot be surged when conflict 
looms. With each delay in the Marine Corps' rebalance to the Pacific 
region, allies and potential partners must make strategic choices 
regarding their relationships with potential competitors in their home 
region. Opportunities for collective partnerships are stressed and 
relatively fleeting in these conditions. Reduced forward presence 
signals a reduced U.S. commitment to security partners in the Pacific, 
with a potentially detrimental effect to America's strategic global 
interests.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MS. TSONGAS
    Ms. Tsongas. Some have proposed a 3-month delay of the automatic 
cuts to defense spending. If the sequester eventually does take effect, 
but not until April 2, how would the DOD absorb a potential 10 percent 
reduction with only 6 months left in the fiscal year?
    Secretary Hale. By law, it would have to be absorbed within any 
unobligated balances from prior years and FY 2012 funds. This would 
pose some problems for the Department of Defense.
    Ms. Tsongas. Although under sequestration each program is intended 
to be cut by the same percentage, some programs could be disrupted more 
than others, depending on size and maturity. Can each of you comment on 
the potential scale of Nunn-McCurdy breaches which programs being 
developed by each of your services could be facing were sequestration 
to go forward?
    General Austin. Since we are not sure how much flexibility we will 
have to blunt the negative consequences of sequestration through 
reprogramming or other actions, at this time it is impossible to 
predict with any specificity the number, if any, of Nunn-McCurdy 
breaches that may occur.
    Ms. Tsongas. Although under sequestration each program is intended 
to be cut by the same percentage, some programs could be disrupted more 
than others, depending on size and maturity. Can each of you comment on 
the potential scale of Nunn-McCurdy breaches which programs being 
developed by each of your services could be facing were sequestration 
to go forward?
    Admiral Ferguson. If sequestration is triggered, automatic 
percentage cuts will be applied without regard to strategy, importance, 
or priorities, resulting in adverse impact to operations and many 
contracts within the Department. This could result in a Nunn-McCurdy 
breach if an acquisition program's funding execution is limited to the 
extent that production level becomes cost prohibitive and/or 
significantly delayed. However, a detailed review of each program, or 
family of programs, would be required to determine the specific impact 
since each contract contains unique and complex provisions, dates, and 
pricing. We have not completed that review. At this point, the 
Department has not begun planning for sequestration and any planning 
effort will be government-wide as guided by the Office of Management 
and Budget.
    Ms. Tsongas. Although under sequestration each program is intended 
to be cut by the same percentage, some programs could be disrupted more 
than others, depending on size and maturity. Can each of you comment on 
the potential scale of Nunn-McCurdy breaches which programs being 
developed by each of your services could be facing were sequestration 
to go forward?
    General Spencer. With regard to modernization impacts, 
sequestration would drive an additional reduction above the first phase 
of the Budget Control Act reductions to the Air Force Fiscal Year 2013 
budget request. The proposed budget is a balanced and complete package 
with no margin of error. Programs would need to be restructured, 
reduced, and/or terminated. All investment accounts would be impacted, 
including our high-priority Acquisition Category I modernization 
programs such as MQ-9, Joint Strike Fighter, and KC-46A. The Air Force 
has not conducted an assessment on how a 9.4 percent cut will affect 
each Air Force acquisition program, therefore, we do not know which 
programs would face Nunn-McCurdy breaches.
    Ms. Tsongas. Although under sequestration each program is intended 
to be cut by the same percentage, some programs could be disrupted more 
than others, depending on size and maturity. Can each of you comment on 
the potential scale of Nunn-McCurdy breaches which programs being 
developed by each of your services could be facing were sequestration 
to go forward?
    General Dunford. Sequestration will impact all of our investment 
programs through increased unit costs, schedule delays, and slowing of 
necessary research and development. If sequestration occurs, the 
Ground/Air Task Order Radar (G/ATOR) program will likely trigger a 
Nunn-McCurdy breach. The potential scale of such a breach includes a 
cost growth of up to 20% of the Program Acquisition Unit Cost and a 
delay into Low Rate Initial Production from FY13 to FY14. The G/ATOR's 
production transition, including timely semiconductor technology 
insertion, will also be significantly impacted leading to lost cost 
savings and misalignment of funding associated with a shift in 
schedule.

                                  
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