[Senate Hearing 112-]
[From the U.S. Government Publishing Office]



 
       DEPARTMENT OF DEFENSE APPROPRIATIONS FOR FISCAL YEAR 2013

                              ----------                              


                        WEDNESDAY, JUNE 13, 2012

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:30 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Daniel K. Inouye (chairman) 
presiding.
    Present: Senators Inouye, Leahy, Harkin, Durbin, Feinstein, 
Mikulski, Kohl, Murray, Reed, Cochran, Hutchison, Collins, 
Murkowski, Graham, and Coats.

                         DEPARTMENT OF DEFENSE

                   Office of the Secretary of Defense

STATEMENT OF HON. LEON E. PANETTA, SECRETARY OF DEFENSE
ACCOMPANIED BY HON. ROBERT F. HALE, UNDER SECRETARY OF DEFENSE, 
            COMPTROLLER


             OPENING STATEMENT OF CHAIRMAN DANIEL K. INOUYE


    Chairman Inouye. This morning, I would like to welcome the 
Honorable Leon E. Panetta, Secretary of Defense, and General 
Martin E. Dempsey, Chairman of the Joint Chiefs of Staff, to 
testify on the administration's budget request for fiscal year 
2013.
    Gentlemen, you assumed these positions during a very 
challenging moment in history. Our economy, our country is 
facing a budget deficit, and you have been tasked with 
significantly reducing the Department of Defense's (DOD) budget 
plans in an effort to cut down spending.
    These budget reductions come at an occasion when we are 
fighting a war in Afghanistan and the counterterrorism threat 
worldwide. At the same time, the world is changing rapidly, and 
DOD is being called upon to respond to threats ranging from 
cyberspace, weapons proliferation, rising powers, and 
instability in key regions, such as we have witnessed with the 
Arab Spring.
    DOD's fiscal year 2013 budget request totals $604.5 billion 
that this subcommittee oversees. This is a decrease of $28.8 
billion over last year's enacted budget, mainly due to the 
drawdown of operations in Afghanistan and Iraq.
    However, over the next decade, the Budget Control Act of 
2011 (BCA) sets limits for DOD, which is $487 billion less than 
what the Department had planned to spend.
    In order to meet the new fiscal realities, you have 
produced a defense strategy to help guide these budget 
reductions. This strategy moves from having a capability to 
fight two major theater wars, to instead defeating a major 
adversary in one theater while denying aggression or applying 
unacceptable costs on another aggressor.
    In addition, it shifts the military's focus to increase 
emphasis on the Pacific and Middle East regions. Furthermore, 
it commits the Department to institutionalize capabilities to 
deal with what were once considered nontraditional or 
asymmetric threats, such as increasing counterterrorism 
capacity, enhancing cyber operations, and countering antiaccess 
threats.
    Most importantly, the strategy reaffirms the 
administration's support of the All-Volunteer Force and 
maintaining the readiness of this force as a vital component of 
our national security. The defense strategy does not, however, 
take into consideration another component of the Budget Control 
Act known as ``sequestration''.
    As you know, beginning on January 2, 2013, if a deficit 
reduction agreement is not reached, DOD will take its first 
increment of an across-the-board reduction of nearly $500 
billion over the next 10 years.
    Gentlemen, I look forward to having a candid dialogue this 
morning on this issue, as well as others I have highlighted.
    We sincerely appreciate your service to our Nation, and the 
dedication and sacrifices made daily by the men and women of 
our armed services.
    We could not be more grateful for what those who wear our 
Nation's uniform and those who support and lead our military do 
for our country each and every day.
    Mr. Secretary, General, your full statements will be made 
part of the record, and I wish to now turn to the Vice 
Chairman, Senator Cochran, for his opening remarks.


                   STATEMENT OF SENATOR THAD COCHRAN


    Senator Cochran. Mr. Chairman, I'm pleased to join you in 
welcoming our distinguished panel of witnesses this morning to 
review the President's budget request for the Department of 
Defense, and to give us an overview of the needs and challenges 
facing our national security interests.
    We thank you very much for your willingness to serve in 
these important positions. They really are complex and couldn't 
be more important.
    We appreciate the dedication and the years of experience 
that you bring to the challenge as well, and we expect to have 
an opportunity today to find out some of the specific details 
that need to be brought to the attention of the Senate.
    Thank you very much.
    Chairman Inouye. I thank you very much. May I now call upon 
the Secretary.


               SUMMARY STATEMENT OF HON. LEON E. PANETTA


    Secretary Panetta. Thank you, Mr. Chairman. Senator 
Cochran, and members of the subcommittee.
    It is a distinct privilege and honor to have the 
opportunity to appear before this subcommittee of the Senate 
Appropriations Committee.
    First and foremost, let me express my personal thanks to 
all of you for the support that you provide our men and women 
in uniform and the Department.
    I've had the honor of working with many of you in other 
capacities, and I just want to thank you for your patriotism in 
providing very important public service to this country, but 
from my point-of-view right now, providing the support that we 
absolutely need at the Department of Defense in order to keep 
this country safe.


                             DEFENSE BUDGET


    I'm here to discuss the President's budget request for 
fiscal year 2013. I also want to comment as well on the 
problems associated with sequestration that faces us in January 
2013, and mention also some of the budgetary challenges that we 
still face in fiscal year 2012 as a result of fuel costs and 
other contingencies that we're facing.
    With regards to the fiscal year 2013 budget request, this 
was a product of a very intensive strategy review that was 
conducted by senior military and civilian leaders of the 
Department under the advice and guidance of the President.
    The reasons for the review are clear to all of us. First 
and foremost, we are at a strategic turning point after 10 
years of war, and obviously, a period when there was 
substantial growth in the defense budgets.
    Second, we are now a country that is facing very serious 
debt and deficit problems. And the Congress did pass the Budget 
Control Act of 2011 which imposes spending limits that reduce 
the defense base budget by $487 billion over the next decade.
    And I've always recognized, based on my own background, 
having worked on budget issues, that defense does have a role 
to play in trying to get our fiscal house in order.
    For that reason, we looked at this as an opportunity to 
develop a new defense strategy for the future, not to simply 
have to respond to the budget requirements that were here, but 
to do it in a way that would provide a strong defense for the 
country in the future.
    The defense strategy that we developed does reflect the 
fact that as we end the war in Iraq and draw down in 
Afghanistan, we are at a turning point that would have required 
us, frankly, to make a strategic shift, probably under any 
circumstances.
    The problem is that unlike past drawdowns, where the 
threats that we confronted receded, after wars, after the 
Vietnam war, after the fall of the Soviet Union, the problem is 
we continue to face very serious security challenges in the 
world of today.
    We are still at war in Afghanistan. We still confront 
terrorism even though there's been significant damage to the 
leadership of al Qaeda. The reality is, we confront terrorism 
in Somalia, in Yemen, in North Africa.
    We continue to see the proliferation of weapons of mass 
destruction. We continue to see threats from Iran and North 
Korea. We continue to have turmoil in the Middle East. We see 
the rising powers in Asia that represent a challenge in terms 
of stability in that region as well.
    And there are growing concerns about cyber intrusions and 
cyber attacks. We have to meet all of these challenges, and at 
the same time, meet our responsibility to fiscal discipline.
    I don't think we have to choose between our national 
security and our fiscal security. But, at the same time, this 
is not an easy task.
    To build the force we need for the future, we developed 
strategic guidance that consists really of five key elements 
that were the elements that guided us in terms of the budget 
recommendations we made.
    First of all, we know that the military is going to be 
smaller, and it's going to be leaner in the future. But it has 
to be agile, and it has to be flexible. It has to be quickly 
deployable. Yet, it also has to be technologically advanced.
    Second, because of the world we live in, and where we 
confront some of the most serious problems that face us, we 
have to rebalance our global posture and presence to emphasize 
the Asia-Pacific region and the Middle East. Those are the two 
areas where we confront the most serious challenges.
    Third, we have to build for the rest of the world that we 
deal with, we have to build innovative partnerships and 
strengthen key alliances and partnerships elsewhere in the 
world, so that we maintain a presence in Latin America, Africa, 
Europe, and elsewhere.
    Fourth, we have to ensure that we have a force that can 
confront and defeat aggression from any adversary, anytime, 
anywhere.
    And, last, this can't just be about cutting the budget. It 
also has to be about investments--investments in new technology 
and new capabilities, as well as our capacity to grow, adapt, 
and mobilize as needed.
    In shaping this strategy, we did not want to repeat the 
mistakes of the past. Our goals were the following: Number one, 
maintain the strongest military in the world. That's what we 
have now. That's what we want to have in the future.
    We do not want to hollow out the force, where you maintain 
a large force, less spending, and the result is that we weaken 
everything at the Defense Department by our failure to be able 
to address the needs of that kind of force.
    And that was a mistake that's been made in the past. We 
don't want to make that mistake again today or in the future.
    That means we have to take a balanced approach to budget 
cuts. We have to look at every area of the budget and put 
everything on the table. And it also means that we do not want 
to break faith with the troops and the families, particularly, 
the troops that have been deployed time and time and time 
again.
    As a result of these efforts, the Department, both our 
military and civilian leaders, strongly unified behind the 
recommendations that we presented. Consistent with the Budget 
Control Act, this budget reflects that in the next 5 years, 
we'll achieve savings of almost $260 billion, with 10-year 
savings of $487 billion.
    The savings come from four areas: One, efficiencies; two, 
force structure; three, procurement reforms; and, last, 
compensation.
    Let me walk through each of these areas. First, on 
efficiencies. Efficiencies yield about one-quarter of the 
targeted savings that we have in this package. On top of the 
$150 billion in efficiencies that were proposed in the fiscal 
year 2012 budget, we've added another $60 billion, primarily 
from streamlining support functions, consolidating information 
technology (IT) enterprises, rephasing military construction 
programs, consolidating inventory, and reducing service support 
contractors.
    As we reduce force structure, we also have a responsibility 
to be cost efficient in terms of the support for that force. 
And that's the reason that the recommendation has been to 
authorize another base realignment and closure process for 2013 
and 2015.
    And as someone who has gone through base realignment and 
closure (BRAC), I realize how controversial this process is for 
the members and for the constituencies.
    And yet, we do need, if we're going to bring the force 
down, we have got to find an effective way to achieve 
infrastructure savings. And that's the reason that 
recommendation was made.
    Efficiencies are still not enough to achieve the necessary 
savings. Budget reductions of this magnitude, almost half of $1 
trillion, require significant adjustments to force structure, 
procurement investments, and compensation as well.
    We achieve those in the context of the elements of the new 
strategy that I discussed, so let me just walk through each of 
those.
    First, we obviously have a force that is smaller and 
leaner, but it has to be more agile and technologically 
advanced. We knew that coming out of the wars, the military 
would be smaller. And to ensure an agile force, we made a 
conscious choice not to maintain more force structure than we 
could afford to properly train and equip.
    We're implementing force structure reductions consistent 
with this new strategic guidance. It will give us a total 
savings of about $50 billion over the next 5 years.
    So, those recommendations are to gradually re-size the 
Active Army. We're at about 560,000 now. We would bring that 
down over 5 years to 490,000, about a 70,000 reduction over 
that period.
    It's a force that would be flexible, would be agile. It 
would be ready. It would be lethal. We would still maintain 18 
divisions, 65 brigade combat teams, and 21 aviation brigades.
    We would do the same with the Marine Corps. We're at about 
202,000 in the Marine Corps. We would bring them down to 
182,000 over the next 5 years. That's a reduction of about 
20,000.
    Again, they would still remain the strongest expeditionary 
force in the world. They would have 31 infantry battalions, 10 
artillery battalions, and 20 tactical air squadrons.


                      AIR FORCE AND NAVY INVENTORY


    We would also reduce and streamline the Air Force's airlift 
fleet. In addition, the Air Force would eliminate seven 
tactical air squadrons, but we still would retain a robust 
force of 54 combat-coded fighter squadrons.
    The current bomber fleet would be maintained. We obviously 
have the Joint Strike Fighter in production, and we're also 
going to develop a new generation bomber that we look forward 
to in the future.
    We also have a fleet of 275 strategic airlifters and 318 C-
130s along with our refueling tanker capabilities.
    The Navy would retire seven lower priority Navy cruisers. 
And the reason they focused on that is because these cruisers 
have not been upgraded with ballistic missile defense 
capability. They're old. They need repairs. And so that was an 
area that they decided to try to achieve savings.
    That would still maintain a force in the Navy of 285 ships, 
11 carriers, 9 large deck amphibs, 82 cruisers and destroyers, 
and 50 nuclear-powered attack submarines. And we would achieve 
a naval number of about 300 ships by 2020.
    Second, in rebalancing our global posture to emphasize 
Asia-Pacific and the Middle East, we made clear that we've got 
to protect capabilities needed to project power in Asia-Pacific 
and in the Middle East.
    To this end, the budget, as I said, maintains the current 
bomber fleet, maintains our aircraft carrier fleet, maintains 
the big deck amphibious fleet, and it restores Army and Marine 
Corps force structure, particularly in the Pacific.
    We're looking at, we've already provided for a rotational 
deployment of Marines in Darwin in Australia. We're looking at 
doing the same thing in the Philippines as well as elsewhere.
    And the same thing is true with regard to a strong presence 
in the Middle East. Because of the threats in that region, we 
have maintained a strong presence of troop strength in that 
area as well.
    We're building innovative partnerships and trying to 
strengthen our alliances throughout the world. And the way we 
are doing this is by developing this innovative, rotational 
presence where troops will go into an area, exercise with them, 
provide guidance and assistance, develop alliances, develop 
their capabilities, and build key alliances and partnerships 
for the future.
    That's the message I delivered to the Pacific on this last 
trip. It's well received. I delivered the same message to Latin 
America. It's well received. These countries want to develop 
their capabilities.
    This is not a question of the United States going around 
basically exerting our own power and telling these countries 
we'll defend them. They've got to develop their capabilities to 
be able to secure themselves for the future. And that's what 
this proposal provides for.
    Fourth, we ensure that we can confront and defeat 
aggression from any adversary, anytime, anywhere, and that, 
obviously, goes to the force structure that would sustain a 
military that's the strongest in the world, capable of quickly 
and decisively confronting aggression wherever and whenever 
necessary.
    In the 21st century, our adversaries are going to come at 
us using 21st century technology. That's the world we live in. 
And we've got to be able to respond with 21st century 
technology.
    So, we must invest. We've got to invest in space. We've got 
to invest in cyberspace. We've got to invest in long-range 
precision strikes. We've got to invest in unmanned vehicles. 
We've got to invest in special operations forces. We've got to 
invest in the latest technologies to ensure that we can still 
confront and defeat multiple adversaries.
    And the last area is to protect, obviously, and prioritize 
key investments, and have the capacity to grow and adapt and 
mobilize. I talked about some of the areas that we want to 
invest in. This budget provides almost $12 billion of 
investment in science and technology, $10.4 billion in special 
operations forces, about $4 billion in unmanned air systems, 
and about $3.5 billion in cyber.


                    NATIONAL GUARD AND RESERVE UNITS


    The last point I would make is we have got to maintain a 
strong Reserve and a strong National Guard that can respond if 
we have to mobilize quickly. That's been a key to our ability 
to mobilize over these last 10 years.
    And today, I have to tell you, when you go out to the 
battlefield, you can't tell the difference between Active Duty 
and National Guard and Reserve units. They're out there. 
They're fighting. They're developing great experience, great 
capabilities. I don't want to lose that for the future. I want 
to be able to maintain that.
    The last area I will mention is obviously an area that is 
extremely important. It's fundamental to our strategy, which 
are our people. That, frankly, is the biggest strength we have 
in the United States.
    For all the weapons we have, for all the technology we 
have, frankly, it's the men and women in uniform that are the 
strongest weapon we have for the future.
    And so, we want to sustain the family assistance programs, 
the programs for wounded warriors, the basic support programs 
for our troops and their families. But at the same time, I've 
got to focus on some savings in the compensation area.
    This is an area that's grown by 90 percent. And, frankly, 
we have got to be able to find some cost constraints in that 
area. So it's for that reason, that, you know, when it came to 
military pay, we provide pay raises these next 2 years, but we 
try to limit those pay raises in the out years in order to 
provide some limits.


                            HEALTHCARE COSTS


    We also do the same thing with TRICARE costs. And I 
recognize that that's sensitive, and controversial, but 
healthcare costs us almost $50 billion a year at the defense 
budget. I've got to do something to control healthcare costs in 
the future.
    We've also looked at the idea of a retirement commission to 
look at retirement provisions for the future. We'd like to 
grandfather, obviously, benefits for those that are presently 
in the force, but we do need to achieve savings in this area as 
well for the future.
    So, that's the package. This is not easy. It's tough, and 
we need your support. We need your partnership in trying to 
implement this strategy. I know these cuts are painful, and the 
fact is, they impact on all 50 States.
    But there is no way you can cut a half of $1 trillion out 
of the defense budget and not have an impact on States. That's 
just a reality if you do it right.
    So the key here is to try to do this in a way that relates 
to a defense strategy. That's important. The committees that 
have marked up our budget, in many ways, they've accepted the 
recommendations we've made for investment changes, and we 
appreciate that.
    But some of the committees have also made changes with 
regard to our recommendations that we're concerned about. Some 
of the bills seek to reverse the decisions to eliminate aging 
and lower priority ships and aircraft.
    My concern is that if these decisions are totally reversed, 
then I've got to find money somewhere in order to maintain this 
old stuff, which has me literally in a situation where I've got 
to hollow out the force in order to do that.
    We've got to be able to retire what is aged and what we can 
achieve some savings on.
    The same thing is true, there's been some proposals to 
basically not provide for the measured and gradual reductions 
in end-strength that we've proposed for the Army and the Marine 
Corps.
    Again, if I have a large force, and I don't have the money 
to maintain that large force, I'm going to wind up hollowing it 
out because I can't provide the training, I can't provide the 
equipment.
    So that's why, if we're going to reduce the force, then 
I've got to be able to do it in a responsible way.
    The last point I would make is with regard to overhead 
costs in military healthcare and in compensation.
    Again, I understand the concern about that, but if I 
suddenly wind up with no reductions in that area, I've got to 
reach some place to find the money to maintain those programs. 
And that too, somebody's going to pay a price for that.
    There's no free lunch here. Every low-priority program or 
overhead cost that is retained, will have to be offset in cuts 
in higher priority investments in order to comply with the 
Budget Control Act.
    I recognize that there's no one in this subcommittee that 
wants to hollow out the force or weaken our defense structure. 
So I would strongly urge all of you to work with us to reach a 
consensus about how we achieve our defense priorities 
recognizing your concerns.
    Our job is to responsibly respond to what this Congress has 
mandated on a bipartisan basis with regard to reducing the 
defense budget. And I need to have your help and your support 
to do this in a manner that preserves the strongest military in 
the world.


                             SEQUESTRATION


    Let me just say a few words about sequestration. Obviously, 
this is a great concern. The doubling--I mean, this would 
result in a doubling of cuts, another $500 billion, that would 
have to be cut through this kind of formulaic, meat-axe 
approach that was designed into that process.
    And it would guarantee that we hollow out our force and 
inflict severe damage on our national defense. I think you all 
recognize that the sequester would be entirely unacceptable. 
And I really urge both sides to work together to try to find 
the kind of comprehensive solution that would detrigger the 
sequester, and try to do this way ahead of this potential 
disaster that we confront.
    I know the members of this subcommittee are committed to 
working together to stop the sequester, and I want you to know 
that we are prepared to work with you to try to do what is 
necessary to avoid that crisis.
    The last point I would make is on fiscal year 2012. We have 
some additional needs that have developed during fiscal year 
2012. Just to summarize a few.
    With regard to fuel costs. Because of the increase in fuel 
costs, we're facing almost another $3 billion in additional 
costs with regard to that area. Obviously, if the price goes 
down, that will provide some relief, but right now, that's the 
number that we're facing.
    We've also had the closure of these ground lines, the so-
called ground lines of communication (GLOCs) in Pakistan. And 
the result of that is that it's very expensive because we're 
using the northern transit route in order to be able to 
drawdown our forces and also supply our forces.
    I think the amount is about $100 million a day--a $100 
million a month because of the closure of those GLOCs.
    Iron Dome, a system that we're trying to provide for the 
Israelis, is another additional cost that we would like to be 
able to provide. And also, we have had to provide additional 
forces in the Middle East because of the tensions in the gulf.
    And so because we've increased both our naval and land 
forces there, those are additional costs as well.
    So we've got some unbudgeted needs that we would ask for 
your support. I'll present to you an omnibus reprogramming 
request, and we hope to work with you to resolve these issues 
in the current fiscal year and do what the American people 
expect of all of us to be fiscally responsible in developing 
the force we need, a force that can defend the country and 
defend our Nation and support the men and women in uniform that 
are so important to the strongest military in the world.
    These last 2 weeks, I had the opportunity to travel 
throughout Asia Pacific, and I consulted with a lot of our key 
allies and partners. I think they're very receptive of the 
strategy that we're proposing and are enthusiastic, certainly 
about our engagement in the region.


                           PREPARED STATEMENT


    And I think I've been able to reassure our allies and 
partners, that we have a strategy-based approach to dealing 
with national security. I come from this institution of the 
Congress, and I have great respect for you and for this 
institution.
    And I look forward to a partnership here to try to develop 
the approaches that are going to be necessary if we're going to 
meet our responsibilities to national security and fiscal 
responsibility at the same time.
    Thank you.
    [The statement follows:]

                 Prepared Statement of Leon E. Panetta

    Chairman Inouye, Senator Cochran, and members of the subcommittee. 
I appreciate the opportunity to appear before you to discuss the 
President's fiscal year 2013 budget. I also want to address the looming 
problems associated with sequestration as well as our budgetary 
situation in fiscal year 2012.
    But let me begin by first thanking you for your support for our 
servicemembers and our military families, including your responsiveness 
to the urgent needs of our men and women in the battlefield over the 
last decade of war. Our brave men and women, along with the 
Department's civilian professionals who support them, have done 
everything asked of them and more.

                        DEFENSE STRATEGY REVIEW

    The fiscal year 2013 budget request for the Department of Defense 
(DOD) was the product of an intensive strategy review conducted by the 
senior military and civilian leaders of the Department with the advice 
and guidance of President Obama. The total request represents a $614 
billion investment in national defense--including a $525.4 billion 
request for the Department's base budget and $88.5 billion in spending 
for overseas contingency operations (OCO).
    The reasons for this review are clear: First, the United States is 
at a strategic turning point after a decade of war and substantial 
growth in defense budgets. Second, with the Nation confronting very 
large debt and deficits, the Congress passed the Budget Control Act of 
2011 (BCA), imposing limits that led to a reduction in the defense 
budget of $487 billion over the next decade.
    Deficit reduction is a critical national security priority in and 
of itself. We at the Department decided that this crisis presented us 
with the opportunity to establish a new strategy for the force of the 
future, and that strategy has guided us in making the budget choices 
contained in the President's budget. We are at an important turning 
point that would have required us to make a strategic shift under any 
circumstances. The United States military's mission in Iraq has ended. 
We still have a tough fight on our hands in Afghanistan, but over the 
past year we have begun a transition to Afghan-led responsibility for 
security--and we are on track to complete that transition by the end of 
2014, in accordance with the commitments made at Lisbon and reaffirmed 
last month at the North Atlantic Treaty Organization (NATO) summit in 
Chicago. Last year, the NATO effort in Libya also concluded with the 
fall of Qadhafi. And successful counterterrorism efforts have 
significantly weakened al Qaeda and decimated its leadership.
    But despite what we have been able to achieve, unlike past 
drawdowns when threats have receded, the United States still faces a 
complex array of security challenges across the globe:
  --we are still a Nation at war in Afghanistan;
  --we still face threats from terrorism;
  --there is dangerous proliferation of lethal weapons and materials;
  --the behavior of Iran and North Korea threaten global stability;
  --there is continuing turmoil and unrest in the Middle East and North 
        Africa;
  --rising powers in Asia are testing international relationships; and
  --there are growing concerns about cyber intrusions and attacks.
    Our challenge is to meet these threats and at the same time, meet 
our responsibility to fiscal discipline. This is not an easy task.
    To build the force we need for the future, we developed new 
strategic guidance that consists of these five key elements:
  --First, the military will be smaller and leaner, but it will be 
        agile, flexible, ready, and technologically advanced.
  --Second, we will rebalance our global posture and presence to 
        emphasize Asia-Pacific and the Middle East.
  --Third, we will build innovative partnerships and strengthen key 
        alliances and partnerships elsewhere in the world.
  --Fourth, we will ensure that we can quickly confront and defeat 
        aggression from any adversary--anytime, anywhere.
  --Fifth, we will protect and prioritize key investments in technology 
        and new capabilities, as well as our capacity to grow, adapt, 
        and mobilize as needed.

                  STRATEGY TO FISCAL YEAR 2013 BUDGET

    We developed this new strategic guidance before any final budget 
decisions were made to ensure that the budget choices reflected the new 
defense strategy.
    While shaping this strategy, we did not want to repeat the mistakes 
of the past. Our goals were to maintain the strongest military in the 
world and to do our share of deficit reduction, recognizing that no 
country maintains its military might if its economy is weakened. We are 
determined to not break faith with troops and their families, to not 
``hollow out'' the force, to take a balanced approach to budget cuts, 
and to put everything on the table. Throughout the review we made sure 
this was an inclusive process, and General Dempsey and I worked closely 
with the leadership of the Services and Combatant Commanders, and 
consulted regularly with Members of Congress.
    As a result of these efforts, the Department is strongly united 
behind the recommendations we have presented to the Congress. 
Consistent with title I of the Budget Control Act, this budget reflects 
$259 billion in savings over the next 5 years and $487 billion over the 
next 10 years compared to the budget plan submitted to the Congress 
last year. Under the 5-year budget plan, the base budget will rise from 
$525 billion in fiscal year 2013 to $567 billion in fiscal year 2017. 
When reduced war-related funding requirements are included, we expect 
total U.S. defense spending to drop by more than 20 percent over the 
next few years from its peak in 2010, after accounting for inflation.
    This is a balanced and complete package that follows the key 
elements of the strategy and adheres to the guidelines we established. 
The savings come from three broad areas:
  --First, efficiencies--we redoubled efforts to make more disciplined 
        use of taxpayer dollars, yielding about one-quarter of the 
        target savings.
  --Second, force structure and procurement adjustments--we made 
        strategy-driven changes in force structure and procurement 
        programs, achieving roughly one-half of the savings.
  --Finally, compensation--we made modest but important adjustments in 
        personnel costs to achieve some necessary cost savings in this 
        area, which represents one-third of the budget but accounted 
        for a little more than 10 percent of the total reduction.
    Changes in economic assumptions and other shifts account for the 
remainder of the $259 billion in savings. Let me walk through these 
three areas, beginning with our efforts to discipline our use of 
defense dollars.

                MORE DISCIPLINED USE OF DEFENSE DOLLARS

    If we are to tighten up the force, I felt we have to begin by 
tightening up the operations of the Department. This budget continues 
efforts to reduce excess overhead, eliminate waste, and improve 
business practices across the Department. The more savings realized in 
this area, the less spending reductions required for modernization 
programs, force structure, and military compensation.
    As you know, the fiscal year 2012 budget proposed more than $150 
billion in efficiencies between fiscal year 2012 and fiscal year 2016, 
and we continue to implement those changes. This budget identifies 
about $60 billion in additional savings over 5 years. Across the 
military services, new efficiency efforts over the next 5 years 
include:
  --The Army proposes to save $18.6 billion through measures such as 
        streamlining support functions, consolidating information 
        technology (IT) enterprise services, and rephasing military 
        construction projects.
  --The Navy proposes to save $5.7 billion by implementing strategic 
        sourcing of commodities and services, consolidating inventory, 
        and other measures.
  --The Air Force proposes to save $6.6 billion by reducing service 
        support contractors and rephasing military construction 
        projects.
    Other proposed DOD-wide efficiency savings over the next 5 years 
total $30.1 billion, including reductions in expenses in the Office of 
the Secretary of Defense and the Defense agencies.
    Additionally, we are continuing the initiative to improve the 
Department's buying power by seeking greater efficiency and 
productivity in the acquisition of goods and services. We are 
strengthening acquisition support to the warfighter, executing 
acquisitions more efficiently, preserving the industrial base, and 
strengthening the acquisition workforce. This budget assumes that these 
policies produce savings of $5.3 billion over the next 5 years.
    In terms of military infrastructure, we will need to ensure that 
our current basing and infrastructure requirements do not divert 
resources from badly needed capabilities.
    As we reduce force structure, we have a responsibility to provide 
the most cost-efficient support for the force. For that reason, the 
President is requesting that the Congress authorize the base 
realignment and closure (BRAC) process for 2013 and 2015. As someone 
who went through BRAC, I realize how controversial this process can be 
for members and constituencies. And yet, it is the only effective way 
to achieve infrastructure savings.
    Achieving audit readiness is another key initiative that will help 
the Department achieve greater discipline in its use of defense 
dollars. The Department needs auditable financial statements to comply 
with the law, to strengthen its own internal processes, and to reassure 
the public that it continues to be a good steward of Federal funds. In 
October 2011, I directed the Department to emphasize this initiative 
and accelerate efforts to achieve fully auditable financial statements. 
Among other specific goals, I directed the Department to achieve audit 
readiness of the Statement of Budgetary Resources for general funds by 
the end of calendar year 2014, and to meet the legal requirements to 
achieve full audit readiness for all Defense Department financial 
statements by 2017. We are also implementing a course-based 
certification program for defense financial managers in order to 
improve training in audit readiness and other areas, with pilot 
programs beginning this year. We now have a plan in place to meet these 
deadlines, including specific goals, financial resources, and a 
governance structure.
    These are all critically important efforts to ensure the Department 
operates in the most efficient manner possible. Together, these 
initiatives will help ensure the Department can preserve funding for 
the force structure and modernization needed to support the missions of 
our force.

        STRATEGY-DRIVEN CHANGES IN FORCE STRUCTURE AND PROGRAMS

    It is obvious that we cannot achieve the overall savings targets 
through efficiencies alone. Budget reductions of this magnitude require 
significant adjustments to force structure and investments, but the 
choices we made reflected five key elements of the defense strategic 
guidance and vision for the military.

Build a Force That is Smaller and Leaner, but Agile, Flexible, Ready, 
        and Technologically Advanced
    We knew that coming out of the wars, the military would be smaller. 
Our approach to accommodating these reductions, however, has been to 
take this as an opportunity--as tough as it is--to fashion the agile 
and flexible military we need for the future. That highly networked and 
capable joint force consists of:
  --an adaptable and battle-tested Army that is our Nation's force for 
        decisive action, capable of defeating any adversary on land;
  --a Navy that maintains forward presence and is able to penetrate 
        enemy defenses;
  --a Marine Corps that is a ``middleweight'' expeditionary force with 
        reinvigorated amphibious capabilities;
  --an Air Force that dominates air and space and provides rapid 
        mobility, global strike, and persistent intelligence, 
        surveillance, and reconnaissance (ISR); and
  --National Guard and Reserve components that continue to be ready and 
        prepared for operations when needed.
    To ensure an agile force, we made a conscious choice not to 
maintain more force structure than we could afford to properly train 
and equip. We are implementing force structure reductions consistent 
with the new strategic guidance for a total savings of about $50 
billion over the next 5 years.
    These adjustments include:
  --gradually resizing the Active Army to 490,000, eliminating a 
        minimum of eight brigade combat teams (BCTs) and developing a 
        plan to update the Army's brigade structure;
  --gradually resizing the Active Marine Corps to about 182,100, 
        eliminating six combat battalions and four Tactical Air 
        squadrons;
  --reducing and streamlining the Air Force's airlift fleet by retiring 
        all 27 C-5As, 65 of the oldest C-130s and divesting all 38 C-
        27s. After retirements, the Air Force will maintain a fleet of 
        275 strategic airlifters, and 318 C-130s--a number that we have 
        determined is sufficient to meet the airlift requirements of 
        the new strategy, including the Air Force's commitment for 
        direct support of the Army;
  --eliminating seven Air Force Tactical Air squadrons--including five 
        A-10 squadrons, one F-16 squadron, and one F-15 training 
        squadron. The Air Force will retain 54 combat-coded fighter 
        squadrons, maintaining the capabilities and capacity needed to 
        meet the new strategic guidance; and
  --retiring seven lower priority Navy cruisers that have not been 
        upgraded with ballistic missile defense capability or that 
        would require significant repairs, as well as retiring two dock 
        landing ships.
    The strategy review recognized that a smaller, ready, and agile 
force is preferable to a larger force that is poorly trained and ill-
equipped. Therefore, we put a premium on retaining those capabilities 
that provide the most flexibility across a range of missions. We also 
emphasized readiness. For fiscal year 2013, the Department is 
requesting $209 billion in the base budget for Operation and 
Maintenance, the budget category that funds training and equipment 
maintenance among other aspects of operations. That represents an 
increase of 6 percent compared to the enacted level in 2012, even 
though the overall base budget will decline by 1 percent. Striking the 
right balance between force structure and readiness is critical to our 
efforts to avoid a hollow force, and we will continue to focus on this 
area to ensure that we make the right choices.

Rebalance Global Posture and Presence To Emphasize Asia-Pacific and the 
        Middle East
    The strategic guidance made clear that we must protect capabilities 
needed to project power in Asia-Pacific and the Middle East. To this 
end, this budget:
  --maintains the current bomber fleet;
  --maintains the aircraft carrier fleet at a long-term level of 11 
        ships and 10 air wings;
  --maintains the big-deck amphibious fleet; and
  --restores Army and Marine Corps force structure in the Pacific after 
        the drawdown from Iraq and as we drawdown in Afghanistan, while 
        maintaining persistent presence in the Middle East.
    The budget also makes selected new investments to ensure we develop 
new capabilities needed to maintain our military's continued freedom of 
action in face of new challenges that could restrict our ability to 
project power in key territories and domains. Across the Services, this 
budget plan requests $1.8 billion for fiscal year 2013, and a total of 
$3.9 billion over the next 5 years, for enhancements to radars, 
sensors, and electronic warfare capabilities needed to operate in these 
environments.
    Other key power projection investments in fiscal year 2013 include:
  --$300 million to fund the next generation Air Force bomber (and a 
        total of $6.3 billion over the next 5 years);
  --$1.8 billion to develop the new Air Force tanker;
  --$18.2 billion for the procurement of 10 new warships and associated 
        equipment, including two Virginia-class submarines, two Aegis-
        class destroyers, four littoral combat ships, one joint high 
        speed vessel, and one CVN-21-class aircraft carrier. We are 
        also requesting $100 million to develop the capability to 
        increase cruise missile capacity of future Virginia-class 
        submarines;
  --$2.2 billion in fiscal year 2013 for the procurement of an 
        additional 26 F/A-18E/F Super Hornet aircraft;
  --$1 billion in fiscal year 2013 for the procurement of 12 EA-18G 
        Growler aircraft, the Navy's new electronic warfare platform 
        that replaces the EA-6B; and
  --$38 million for design efforts to construct an Afloat Forward 
        Staging Base planned for procurement in fiscal year 2014. This 
        base can provide mission support in areas where ground-based 
        access is not available, such as countermine operations, 
        Special Operations, and ISR.

Build Innovative Partnerships and Strengthen Key Alliances and 
        Partnerships
    The strategy makes clear that even though Asia-Pacific and the 
Middle East represent the areas of growing strategic priority, the 
United States will work to strengthen its key alliances, to build 
partnerships, and to develop innovative ways to sustain United States 
presence elsewhere in the world.
    To that end, this budget makes key investments in NATO and other 
partnership programs, including:
  --$200 million in fiscal year 2013 and nearly $900 million over the 
        next 5 years in the NATO Alliance Ground Surveillance system. 
        This system will enable the Alliance to perform persistent 
        surveillance over wide areas in any weather or light condition;
  --$9.7 billion in fiscal year 2013, and $47.4 billion over the next 5 
        years, to develop and deploy missile defense capabilities that 
        protect the U.S. homeland and strengthen regional missile 
        defenses;
  --$800 million for the Combatant Commanders exercise and engagement 
        program. Jointly with the State Department, we will also begin 
        using the new Global Security Contingency fund that was 
        established at our request in the fiscal year 2012 legislation;
  --$401 million for the Medium Extended Air Defense System (MEADS). 
        These funds are necessary to complete the Proof of Concept 
        program that was agreed to between the United States, Italy, 
        and Germany. Completing the Proof of Concept fulfills an 
        important obligation to our international partners, lays the 
        groundwork for strengthened NATO air defense, and will provide 
        demonstrated technologies to enhance U.S. air defense 
        capabilities in the future.
    The new strategy also envisions a series of organizational changes 
that will boost efforts to partner with other militaries. These 
include:
  --Allocating a U.S.-based brigade to the NATO Response Force and 
        rotating U.S.-based units to Europe for training and exercises;
  --Aligning an Army BCT with each regional Combatant Command to foster 
        regional expertise; and
  --Increasing opportunities for Special Operations Forces to advise 
        and assist partners in other regions, using additional capacity 
        available due to the gradual drawdown from the post-9/11 wars.

Ensure That We Can Confront and Defeat Aggression From Any Adversary--
        Anytime, Anywhere
    The strategic guidance reaffirmed that the United States must have 
the capability to fight more than one conflict at the same time. Still, 
the strategic guidance recognizes that how we defeat the enemy may well 
vary across conflicts.
    This budget invests in space, cyberspace, long range precision-
strike, and the continued growth of special operations forces to ensure 
that we can still confront and defeat multiple adversaries even with 
the force structure reductions outlined earlier. It also sustains the 
nuclear triad of bombers, missiles, and submarines to ensure we 
continue to have a safe, reliable, and effective nuclear deterrent.
    Even with some adjustments to force structure, this budget sustains 
a military that is the strongest in the world, capable of quickly and 
decisively confronting aggression wherever and whenever necessary. 
After planned reductions, the fiscal year 2017 joint force will consist 
of:
  --an Army of more than 1 million Active and Reserve soldiers that 
        remains flexible, agile, ready, and lethal across the spectrum 
        of conflict, with 18 Divisions, approximately 65 Brigade Combat 
        Teams, 21 Combat Aviation Brigades, and associated enablers;
  --a Naval battle force of 285 ships--the same size force that we have 
        today--that will remain the most powerful and flexible naval 
        force on Earth, able to prevail in any combat situation, 
        including the most stressing anti-access environments. Our 
        maritime forces will include 11 carriers, 9 large deck 
        amphibious ships (although we should build to 10 such ships in 
        fiscal year 2018), 82 guided missile cruisers and destroyers, 
        and 50 nuclear-powered attack submarines;
  --a Marine Corps that remains the Nation's expeditionary force in 
        readiness, forward deployed and engaged, with 31 infantry 
        battalions, 10 artillery battalions, and 20 tactical air 
        squadrons; and
  --an Air Force that will continue to ensure air dominance with 54 
        combat-coded fighter squadrons and the current bomber fleet, 
        with the Joint Strike Fighter in production and the next-
        generation bomber in development. Our Air Force will also 
        maintain a fleet of 275 strategic airlifters, 318 C-130s, and a 
        new aerial refueling tanker.

Protect and Prioritize Key Investments, and the Capacity To Grow, 
        Adapt, and Mobilize
    The force we are building will retain a decisive technological 
edge, leverage the lessons of recent conflicts, and stay ahead of the 
most lethal and disruptive threats of the future.
    To that end, the fiscal year 2013 budget:
  --provides $11.9 billion for science and technology to preserve our 
        ability to leap ahead, including $2.1 billion for basic 
        research;
  --provides $10.4 billion (base and OCO) to sustain the continued 
        growth in Special Operations Forces;
  --provides $3.8 billion for Unmanned Air Systems by funding trained 
        personnel, infrastructure, and platforms to sustain 65 USAF MQ-
        1/9 combat air patrols with a surge capacity of 85 by fiscal 
        year 2016. We slowed the buy of the Reaper aircraft to allow us 
        time to develop the personnel and training infrastructure 
        necessary to make full use of these important aircraft. We also 
        protected funding for the Army's unmanned air system Gray 
        Eagle;
  --invests $3.4 billion in cyber activities, with several initiatives 
        receiving increased funding relative to last year. The scale of 
        cyber threats is increasing and we need to be prepared to 
        defeat these threats, mitigate the potential damage, and 
        provide the President with options to respond, if necessary. We 
        are investing in full spectrum cyber operations capabilities to 
        address the threats we see today and in the future. The 
        Department strongly believes that congressional action is 
        needed on cyber legislation and is supportive of the bipartisan 
        legislation introduced by Senators Lieberman, Collins, and 
        Rockefeller; and
  --provides $1.5 billion to fund the Department's Chemical and 
        Biological Defense program.
    At the same time, the strategic guidance recognizes the need to 
prioritize and distinguish urgent modernization needs from those that 
can be delayed--particularly in light of schedule and cost problems. 
Therefore this budget identifies about $75 billion in savings over the 
Future Years Defense Plan (FYDP) resulting from canceled or 
restructured programs. Key modifications and associated savings over 
the FYDP include:
  --$15.1 billion in savings from restructuring the Joint Strike 
        Fighter by delaying aircraft purchases to allow more time for 
        development and testing;
  --$1.3 billion in savings from delaying development of the Army's 
        ground combat vehicle due to contracting difficulties;
  --$2.2 billion in savings from curtailing the Joint Land Attack 
        Cruise Missile Defense Elevated Netted Sensor System (JLENS) 
        due to concerns about program cost and operational mobility;
  --$4.3 billion in savings from delaying the next generation of 
        ballistic missile submarines by 2 years for affordability and 
        management reasons; and
  --$0.8 billion in savings from delaying selected Army aviation 
        helicopter modernization for 3 to 5 years.
    We will also terminate selected programs, including:
  --the Block 30 version of Global Hawk, which has grown in cost to the 
        point where it is no longer cost effective, resulting in 
        savings of $2.5 billion;
  --upgrades to High Mobility Multipurpose Wheeled Vehicles (HMMWVs); 
        we will focus our modernization resources on the joint light 
        tactical vehicle, resulting in savings of $900 million; and
  --the weather satellite program, because we can depend on existing 
        satellites, resulting in savings of $2.3 billion.
    We have also invested in a balanced portfolio of capabilities that 
will enable our force to remain agile, flexible, and technologically 
advanced enough to meet any threat. We will ensure that we can 
mobilize, surge, and adapt our force to meet the requirements of an 
uncertain future. To that end, ground forces will retain the key 
enablers and know-how to conduct long-term stability operations, and 
the Army will retain more mid-grade officers and noncommissioned 
officers. These steps will ensure we have the structure and experienced 
leaders necessary should we need to re-grow the force quickly.
    Another key element is to maintain a capable and ready National 
Guard and Reserve. The Reserve component has demonstrated its readiness 
and importance over the past 10 years of war, and we must ensure that 
it remains available, trained, and equipped to serve in an operational 
capacity when necessary. We will maintain key combat support 
capabilities and ensure that combat service support capabilities like 
civil affairs are maintained at a high-readiness level. We will also 
leverage the operational experience and institute a progressive 
readiness model in the National Guard and Reserves in order to sustain 
increased readiness prior to mobilization.
    In keeping with the emphasis on a highly capable reserve, this 
budget makes only relatively modest reductions in the ground-force 
Reserve components. Over the next 5 years, the Army Reserve will be 
sustained at 205,000 personnel, the Army National Guard will marginally 
decrease from 358,200 to 353,200 personnel, and the Marine Corps 
Reserve will sustain an end-strength level of 39,600 personnel. The 
Navy Reserve will decrease from 66,200 to 57,100 personnel over the 
next 5 years. Over the same span, the Air Force Reserve will decrease 
from 71,400 to 69,500 personnel, and the Air National Guard will 
decrease from 106,700 to 101,200 personnel.
    Another key part of preserving our ability to quickly adapt and 
mobilize is a strong and flexible industrial base. This budget 
recognizes that industry is our partner in the defense acquisition 
enterprise. A healthy industrial base means a profitable industrial 
base, but it also means a lean, efficient base that provides good value 
for the taxpayers' defense investments and increases in productivity 
over time.

              ENSURING QUALITY OF THE ALL-VOLUNTEER FORCE

    Now to the most fundamental element of our strategy and our 
decisionmaking process: Our people. This budget recognizes that they, 
far more than any weapons system or technology, are the great strength 
of our United States military. All told, the fiscal year 2013 budget 
requests $135.1 billion for the pay and allowances of military 
personnel and $8.5 billion for family support programs vital to the 
well-being of servicemembers and their families.
    One of the guiding principles in our decisionmaking process was 
that we must keep faith with our troops and their families. For that 
reason, we were determined to protect family assistance programs, and 
we were able to sustain these important investments in this budget and 
continue efforts to make programs more responsive to the needs of 
troops and their families. Yet in order to build the force needed to 
defend the country under existing budget constraints, the growth in 
costs of military pay and benefits must be put on a sustainable course. 
This is an area of the budget that has grown by nearly 90 percent since 
2001, or about 30 percent above inflation--while end strength has only 
grown by 3 percent.
    This budget contains a roadmap to address the costs of military 
pay, healthcare, and retirement in ways that are fair, transparent, and 
consistent with our fundamental commitments to our people.
    On military pay, there are no pay cuts. We have created sufficient 
room to allow for full pay raises in 2013 and 2014 that keep pace with 
increases in the private sector. That means for 2013, we propose a pay 
increase of 1.7 percent for servicemembers. However, we will provide 
more limited pay raises beginning in 2015--giving troops and their 
families fair notice and lead time before changes take effect. Let me 
be clear: Nobody's pay is cut in this budget nor will anyone's pay be 
cut in the future years of this proposal.
    This budget devotes $48.7 billion to healthcare--a cost that has 
more than doubled over the last decade. In order to continue to control 
the growth of these costs, we are recommending increases in healthcare 
fees, copays, and deductibles to be phased in over 4 to 5 years. None 
of the fee proposals in the budget would apply to active-duty 
servicemembers, survivors of servicemembers who died on Active Duty, or 
retirees who retired due to disability. Most of the changes will not 
affect the families of Active-Duty servicemembers--there will be no 
increases in healthcare fees or deductibles for families of Active-Duty 
servicemembers. Those most affected will be retirees--with the greatest 
impact on working-age retirees under the age of 65 still likely to be 
employed in the civilian sector. Even with these changes, the costs 
borne by retirees will remain below levels in most comparable private 
sector plans--as they should be.
    Proposed changes include:
  --further increasing enrollment fees for retirees under age 65 in the 
        TRICARE Prime program, using a tiered approach based on retired 
        pay that requires senior-grade retirees with higher retired pay 
        to pay more and junior-grade retirees less;
  --establishing a new enrollment fee for the TRICARE Standard/Extra 
        programs and increasing deductibles;
  --establishing a new enrollment fee for the TRICARE-for-Life program 
        for retirees 65 and older, also using a tiered approach;
  --implementing additional increases in pharmacy copays in a manner 
        that increases incentives for use of mail order and generic 
        medicine; and
  --indexing fees, deductibles, pharmacy copays, and catastrophic caps 
        to reflect the growth in national healthcare costs.
    These changes are important. I am therefore disappointed that the 
Authorization Committees did not support the proposed TRICARE fee 
initiatives that seek to control spiraling defense healthcare costs. We 
also feel that the fair way to address military retirement costs is to 
ask the Congress to establish a commission with authority to conduct a 
comprehensive review of military retirement. But the President and the 
Department believe that the retirement benefits of those who currently 
serve should be protected by grandfathering their benefits. For those 
who serve today, I will request there be no changes in retirement 
benefits.

                 FULLY SUPPORTING DEPLOYED WARFIGHTERS

    The costs of overseas contingency operations (OCO) are funded 
separately from the base budget in a stand-alone fiscal year 2013 
request of $88.5 billion. That funding level represents a decrease of 
$26.6 billion from the fiscal year 2012 enacted level.
    This year's OCO request, which ensures that deployed troops have 
all the financial resources they need to conduct their challenging 
missions, primarily supports operations in Afghanistan, but also 
requests relatively small sums for the Office of Security Cooperation 
in Iraq (OSC-I) and the repair or replacement of equipment redeploying 
from Iraq.
    Our fiscal year 2013 OCO request includes funding for added 
personnel pay and subsistence for deployed forces; communications; 
mobilizing Reserve component units; transportation; supplies; 
deployment and redeployment of all combat and support forces; force 
sustainment; and sustainment and replenishment of war reserve stocks.
    For fiscal year 2013, we request $5.7 billion in funding for the 
Afghan National Security Forces (ANSF). It is critically important that 
we maintain sufficient financial support to ANSF so that they can 
ultimately assume full security responsibility across Afghanistan.
    Much tough fighting lies ahead in Afghanistan, but the gradually 
improving situation permits the remainder of the United States surge 
force to redeploy by the end of September 2012, leaving 68,000 United 
States troops in Afghanistan at that time. The fiscal year 2013 OCO 
request assumes a continued level of about 68,000 troops in 
Afghanistan. While future changes in troop levels may be implemented 
during fiscal year 2013, those decisions will be based on advice from 
field commanders about conditions on the ground.
    In Iraq, OCO funding supports continued security assistance and 
cooperation with Iraqi Security Forces through the OSC-I in the areas 
of common interest, including counterterrorism, counterproliferation, 
maritime security, and air defense. This funding is critical for the 
United States to strengthen its long-term partnership with Iraq. 
Additionally, to ensure that United States forces redeployed from Iraq 
are ready and equipped for future operations, this funding replenishes 
equipment and stocks for these forces.

                           A BALANCED PACKAGE

    Members of the subcommittee, the fiscal year 2013 request is a 
carefully balanced package that keeps America safe and sustains U.S. 
leadership abroad. As you take a look at the individual parts of this 
plan, I encourage you to do what the Department has done: To bear in 
mind the strategic trade-offs inherent in any particular budget 
decision, and the need to balance competing strategic objectives in a 
resource-constrained environment.
    As the fiscal year 2013 budget request has worked its way through 
the relevant Committees, I am pleased to note that many of our changes 
have been sustained. In particular, most Committees have accepted a 
number of the investment changes we recommended, which are consistent 
with our new defense strategy and the budgetary limits imposed by the 
Budget Control Act.
    However, some Committees of Congress have not supported certain 
choices that are critical to the long-term viability of a defense 
strategy that lives within the constrained resources of the Budget 
Control Act. For example, some Committee bills are seeking to reverse 
decisions to eliminate aging and lower priority ships and aircraft. If 
these decisions are totally reversed, it would be harder to invest in 
newer, multipurpose, and higher priority platforms for the future, and 
we would be burdening the services with excess force structure that 
would risk hollowing out the force.
    There has also been opposition to the measured and gradual 
reductions in end strength we have proposed for the Army and Marine 
Corps. The Department has made it clear that we prefer a smaller ready 
force to a larger force that lacks sufficient training and equipment to 
perform the mission assigned to it. If we are prevented from making the 
full-planned reductions in the size of our ground forces, that's what 
we'll get.
    Similarly, some bills would reverse our efforts to slow overhead 
costs, particularly by slowing the growth of military healthcare costs. 
By making it harder to get these costs under control, the Congress is 
making it more difficult to balance and maintain investments in 
readiness and equipment, which is essential to the overall health of 
the All-Volunteer Force.
    In reversing difficult decisions and restoring funds to those areas 
that achieve necessary savings, the Congress risks upending the careful 
balance we have sought to achieve in our strategy.
    There is no free lunch here. Every low-priority program or overhead 
cost that is retained will have to be offset by cuts in higher priority 
investments in order to comply with the Budget Control Act.
    I know that this subcommittee does not want to hollow out the 
force. Therefore, I would strongly urge the Congress to work with us to 
reach a consensus about our defense priorities, recognizing your 
concerns. Obviously, our job is to responsibly respond to what this 
Congress mandated, on a bipartisan basis, with regard to reducing the 
defense budget. We need your partnership to do this in a manner that 
preserves the strongest military in the world. This will be a test of 
whether reducing the deficit is about talk or action.
    Now that we have seen the sacrifice involved in reducing the 
defense budget by almost half $1 trillion, I want to remind the 
Congress of its important responsibility to make sure that we avoid 
sequestration. That would be a doubling of the cuts, another roughly 
$500 billion in additional cuts that would be required to take place 
through a meat-axe approach, and that we are convinced could hollow out 
the force and inflict severe damage on our national defense. All of us 
recognize that sequester would be entirely unacceptable, and both sides 
and both chambers in the Congress must work urgently to find a 
compromise that will allow us to head off this disaster.
    I know that the members of this subcommittee are committed to 
working together to stop sequester, and to ensuring that our men and 
women in uniform have the resources they need to perform the hard work 
of defending this country.

                   FISCAL YEAR 2012 BUDGET SITUATION

    On that note, let me close by pointing to some difficult budgeting 
problems for fiscal year 2012 that will require your help and support 
to solve. Our fiscal year 2012 budget was prepared several years ago. 
Changes in funding needs since then have resulted in shortfalls and 
excesses in particular areas.
    To start, we have a significant shortfall in fuel funding for 
fiscal year 2012. The situation will improve if fuel prices remain at 
current lower levels, but the shortfall will still be substantial.
    There are also additional Army manpower costs due to greater 
Reserve mobilizations than expected, Navy OCO operating costs that are 
higher due to the need for more ships than planned for Afghanistan 
support, Air Force flying hours that exceeded projections, and Army OCO 
transportation costs that are higher due to closures of ground lines of 
communications (GLOC) in Pakistan.
    In terms of excesses, we know that our budgets for the Afghan 
Security Forces Fund (ASFF), both for fiscal year 2011 and for fiscal 
year 2012, are higher than are needed to provide full support to the 
Afghanistan National Security Forces.
    We need the Congress to permit us to realign funds to meet our 
shortfalls. As a start, on June 1 we asked for authority to move $1 
billion from the category for ASFF funding to the defense working 
capital fund. This will enable us to maintain cash reserves while 
paying higher fuel costs.
    Thank you for approving our request which represents a first step 
toward resolving our fiscal year 2012 budgetary problems. Remaining 
issues will be addressed by an omnibus reprogramming request which we 
plan to submit for your review around the end of June.
    As part of our efforts to confront fuel costs and also enhance our 
war-fighting capabilities, we are looking to make our installations and 
operations more fuel efficient and to diversify our energy sources, 
including with alternative fuels. I oppose efforts by the Congress to 
limit the Department's options for using alternative fuels. These 
efforts could deprive commanders of the flexibility they need to meet 
tactical and operational needs and make us more exposed to potential 
supply disruptions and future price volatility of petroleum products.
    I will work closely with you to resolve these issues for the 
current fiscal year, and to do what the American people expect of their 
leaders: Be fiscally responsible in developing the force for the 
future--a force that can defend the country, a force that supports our 
men and women in uniform, and a force that is, and always will be, the 
strongest military in the world.
    Over the past 2 weeks, I had the opportunity to travel extensively 
throughout the Asia-Pacific region, where I consulted with key Allies 
and partners and explained our new defense strategy both publicly and 
privately. I was struck by the enthusiasm and the support for America's 
continued engagement in that region, and the reassurance that our 
Allies and partners felt by the strategy-based approach we are taking 
to our national security.
    This trip has convinced me that we are on the right track, but I 
recognize that we are still at the very beginning of a long-term 
process that will unfold over the next decade and that we must continue 
in future budget requests.
    With our fiscal year 2013 budget, we have laid the groundwork to 
build the military we need for the future. But we need to work with the 
Congress to execute this strategy, and that means implementing the 
proposals we have presented this year, and pushing ahead with the hard 
work of maintaining the strongest military in the world and meeting our 
fiscal responsibilities.

    Chairman Inouye. Mr. Secretary, I thank you for your candid 
and painful testimony. May I now call upon General Dempsey.

STATEMENT OF GENERAL MARTIN E. DEMPSEY, CHAIRMAN, JOINT 
            CHIEFS OF STAFF
    General Dempsey. Thank you, Chairman, Senator Cochran, and 
distinguished members of the subcommittee: Thank you for this 
opportunity to discuss the President's defense budget proposal 
for fiscal year 2013.
    This budget represents a responsible investment in our 
Nation's security. It maintains our military's decisive edge, 
and it sustains America's global leadership. Moreover, it keeps 
faith with the Nation and the true source of our military 
strength which is, of course, America's sons and daughters who 
serve in uniform.
    I'd like to open with a few words about them and their 
accomplishments. In just this past year, our soldiers, sailors, 
airmen, and marines further crippled al Qaeda. They brought to 
a close more than 20 years of military operations in and over 
Iraq.
    They continued the steady transition of security 
responsibility in Afghanistan. They helped protect the Libyan 
people from a regime's brutality, and they helped Japan recover 
from a tragic natural disaster.
    They also worked professionally and quietly behind the 
scenes defending against cyber threats, sustaining our nuclear 
deterrent posture, and working with allies and partners around 
the globe to build capacity and prevent conflict.
    They didn't just do it last year. They've been doing it 
year after year after year. During a decade of continuous 
combat, our service men and women and their families have 
persevered and prevailed.
    It is a genuine pleasure and honor to serve with each and 
every one of them. They remain a great source of pride for our 
Nation. We need to keep faith with them just as they work to 
keep faith with the Nation.

                             DEFENSE BUDGET

    One way to do this is by making sure our defense budget is 
informed by a real strategy. This past January, we released a 
new defense strategy that reflects the lessons of war and 
anticipates a more competitive security environment in the 
future.
    It also acknowledges the realities of the new fiscal 
environment. It sets priorities for investment and it 
establishes a strategic focus. This budget resources that 
strategy.
    It ensures we retain our conventional overmatch while 
divesting capabilities not required in the Active Force or at 
all. It takes advantage of emerging capabilities as the 
Secretary said such as Special Operating Forces, intelligence, 
and cyber.
    It restores versatility and readiness. Overall, it's an 
important stepping off point on our path toward the joint force 
we assess we will need in 2020, a military that is always ready 
to provide options for the Nation.
    Keeping faith also means appropriate compensation for our 
troops. This budget proposes modest reforms to military pay and 
benefits. However, it does not place the burden of budget cuts 
on the shoulders of our men and women in uniform.
    There are no freezes or reductions in pay, and there is no 
decrease in the quality of healthcare received by our active-
duty members and medically retired wounded warriors.
    That said, we can't ignore some hard realities. We need 
practical reform to deal with escalating personnel costs, 
particularly in healthcare. We must make our healthcare system 
more sustainable. Otherwise, we risk both the quality and the 
continuity of care. We can ensure its viability in ways that 
are fair and modest.
    Last, keeping faith also means managing risk to our 
interests and to our institutions. To be sure, we are assuming 
some risk in this strategy. All strategies in all budgets that 
resource them have to accept some risk. That risk is not in 
what we can do, but in how much we can do and how often.
    The budget helps buy down that risk by investing in our 
people and in the joint capabilities we need most. We have 
achieved balance in this budget.
    Keep in mind, please, that this is a budget for a joint 
force. It should not be thought of as a set of separate service 
budgets but as a comprehensive and carefully devised set of 
choices; choices that reflect the right mix among force 
structure, modernization, readiness, pay, and benefits.
    Different choices will produce a different balance. So 
before giving us weapons we don't need, or giving up on reforms 
that we do need, I'd only ask you to make sure it's the right 
choice, not for our Armed Forces but for our Nation.

                             SEQUESTRATION

    Sequestration is absolutely certain to upend this balance. 
It would lead to further end-strength reductions, the potential 
cancellation of major weapon systems, and the disruption of 
global operations.
    We can't yet say precisely how bad the damage would be, but 
it is clear that sequestration would risk hollowing out our 
force and reducing its military options available to the 
Nation.
    We would go from being unquestionably powerful everywhere 
to being less visible globally, and presenting less of an over 
match to our adversaries. And that would translate into a 
different deterrent calculus, and potentially therefore, 
increase the likelihood of conflict.

                           PREPARED STATEMENT

    In closing, I offer my sincere thanks to this subcommittee 
and to the entire Congress of the United States. Thank you for 
keeping our military strong.
    Thank you for taking care of our military family, for 
supporting those who serve, who have served, and who will 
serve, I know you share my pride in them. I look forward to 
your questions.
    [The statement follows:]

            Prepared Statement of General Martin E. Dempsey

    Chairman Inouye, Senator Cochran, and distinguished members of the 
subcommittee: It is my privilege to update you on our Armed Forces and 
the President's budget proposal for fiscal year 2013. The context for 
this year's posture testimony is unique. Our military has transitioned 
many of our major operations. We have new defense guidance that sets 
strategic priorities. And we are facing real fiscal constraints and an 
increasingly competitive security environment. The President's proposed 
fiscal year 2013 defense budget accounts for these realities. It 
provides a responsible investment in our Nation's current and future 
security.

                       GLOBAL MILITARY OPERATIONS

    Today, our Armed Forces stand strong. We are proud of the 
performance and accomplishments of our men and women in uniform over 
the past year. They have carried out far-ranging missions with much 
success. They have defended our homeland, deterred aggression, and kept 
our Nation immune from coercion. And despite a decade of continuous 
combat operations, our troops and their families remain resilient.
    Our U.S. Forces in Iraq completed their mission in December. More 
than 20 years of military operations in and over Iraq came to a 
conclusion. The security of Iraq is now the responsibility of the Iraqi 
people, leaders, and security forces. We have transitioned to a normal 
military-to-military relationship. Diplomats and civilian advisors are 
the face of the United States in Baghdad. To be sure, Iraq still faces 
challenges to its future. But as we look to that future, we will 
continue to build ties across Iraq to help the people and institutions 
capitalize on the freedom and opportunity we helped secure.
    In Afghanistan, we are seeing the benefits of the surge in combat 
forces begun in early 2010. The security situation is improving. The 
Taliban are less capable, physically and psychologically, than they 
were 2 years ago. Afghan and International Security Assistance Forces 
(ISAF) have wrested the initiative and momentum from them in much of 
the country. The Taliban, however, remain determined and continue to 
threaten the population and the Government. Combat will continue.
    Key to long-term stability in Afghanistan is the development and 
sustainability of the Afghan National Security Forces (ANSF). In 2011, 
the Afghan National Army grew by 18 percent. The Afghan National Police 
grew by 20 percent. These forces, combined with the ever-more-capable 
Afghan local police, are steadily assuming responsibility for Afghan 
security. The process of transition began last July, and after nearly 
completing the second of five ``tranches'' of transition, Afghan 
security forces are now responsible for the day-to-day security of 
almost one-half of Afghanistan's population.
    Developing the ANSF, degrading insurgent capabilities, and turning 
over responsibilities have allowed us to begin a measured draw down of 
our forces in Afghanistan. We withdrew more than 10,000 of the surge 
troops and will withdraw the remaining 23,000 by the end of this 
summer. By that time, we expect the ANSF to achieve their initial 
operating capability and to be responsible for securing nearly 75 
percent of the Afghan population. They are on track to meet the goal of 
assuming lead for security in mid-2013 and full responsibility for 
security throughout Afghanistan by the end of 2014.
    Sustaining progress in Afghanistan requires dealing with some 
significant challenges. The ANSF and other national and local 
government institutions require further development. Corruption remains 
pervasive and continues to undermine the capacity and legitimacy of 
government at all levels. Insurgent sanctuaries in Pakistan remain 
largely uncontested. And ultimately, much more work remains to achieve 
the political solutions necessary to end the fighting in Afghanistan.
    The recent North Atlantic Treaty Organization (NATO) Summit in 
Chicago affirmed an international commitment to dealing with these 
challenges. Together, we will work to strengthen Afghan institutions 
through the end of 2014. And 2015 will mark the beginning of a decade-
long commitment to solidify our relationship with and support to the 
Afghan Government and people.
    Our military has been vigilant and active in other areas and with 
other missions to keep America and our allies safe. We decimated al 
Qaeda and pushed this terrorist network decidedly closer to strategic 
defeat. We supported NATO in its United Nations (UN) mission to protect 
civilians in Libya, allowing them to end Muammar Qaddafi's tyrannical 
rule. We responded quickly to the devastating earthquakes and tsunami 
that struck Japan, saving lives and acting on our commitment to this 
key ally. We fended off cyber intrusions against our military's 
computer networks and systems. And we helped counter aggression and 
provocation from Iran and North Korea.

                          A TIME OF TRANSITION

    While our military continues to capably and faithfully perform a 
wide array of missions, we are currently in the midst of several major 
transitions. Any one of them alone would be difficult. Taken together, 
all three will test our people and our leadership at every level.
    First, we are transitioning from a war-time footing to a readiness 
footing. With the end of our operations in Iraq and Libya and the 
ongoing transition of security responsibilities in Afghanistan, our 
troops are steadily returning home. From a peak of more than 200,000 
troops deployed to combat 2 years ago, we have fewer than 90,000 today. 
This shift cannot lead us to lose focus on on-going combat operations. 
But, it does mean we must give attention to restoring our readiness for 
full-spectrum operations. We need to reset and refit, and in many cases 
replace, our war-torn equipment. We need to modernize systems 
intentionally passed over for periodic upgrading during the last 
decade. We must retrain our personnel on skills that may have 
atrophied. And, we will have to do all of this in the context of a 
security environment that is different than the one we faced 10 years 
ago. We cannot simply return to the old way of doing things, and we 
cannot ignore the lessons we have learned. As described in the 
Department's recently released strategic guidance, we should adjust our 
missions, our posture, and our organizational structure in order to 
adapt to ever evolving challenges and threats.
    Second, our military is transitioning to an era of more constrained 
resources. The days of growing budgets are gone, and as an institution 
we must become more efficient and transparent. We must carefully and 
deliberately evaluate trade-offs in force structure, acquisition, and 
compensation. We must make the hard choices, focus on our priorities, 
and overcome bureaucratic and parochial tendencies. In sum, we must 
recommit ourselves to being judicious stewards of the Nation's 
resources.
    Third, tens of thousands of our veterans--and their families--are 
facing the transition to civilian life. Many enlistments are coming to 
their normal conclusion, but we are also becoming a leaner force. As we 
do this, we must help our veterans find education opportunities, 
meaningful employment, and first-class healthcare. We must pay 
particular attention to those bearing the deepest wounds of war, 
including the unseen wounds. We must help those who have given so much 
cope with--and where possible, avoid--significant long-term challenges 
such as substance abuse, divorce, depression, domestic violence, and 
homelessness. We must reverse the disturbing, continuing trend of 
increasing suicides. Addressing these issues is not the exclusive 
responsibility of the Services or veterans organizations. How we 
respond, as a military community and as a Nation, conveys our 
commitment to our veterans and their families. It will also directly 
affect our ability to recruit and retain our Nation's best in the 
future.
    I have outlined several priorities for the Joint Force to help us 
anticipate and navigate the challenges these transitions present. We 
will maintain focus on achieving our national objectives in our current 
conflicts. We will begin creating the military of our future--the Joint 
Force of 2020. We will also confront what being in the Profession of 
Arms means in the aftermath of war. And above all else, we will keep 
faith with our military family. In doing all these things, we will 
provide an effective defense for the country and strengthen the 
military's covenant of trust with the American people.

                        A RESPONSIBLE INVESTMENT

    The President's fiscal year 2013 Department of Defense base budget 
of $525 billion and overseas contingency operations (OCO) budget of $88 
billion represent a responsible investment in our Nation's security. 
The decisions underlying them flow from the strategic guidance the 
Department of Defense issued in January. This guidance set priorities 
for assessing our programs, force structure, and spending in the 
context of a persistently dangerous and increasingly competitive 
security environment. With those priorities in mind, the budget 
proposal strikes an appropriate and necessary balance between 
succeeding in today's conflicts and preparing for tomorrow's 
challenges. It accounts for real risks and real fiscal constraints, 
marrying versatility with affordability.
    The tradeoffs were complex, and the choices were tough. They will 
produce $259 billion in savings over the next 5 years and a total of 
$487 billion over the next 10 years. This savings does not portend a 
military in decline. Rather, this budget will maintain our military's 
decisive edge and help sustain America's global leadership. It will 
preserve our ability to protect our vital national interests and to 
execute our most important missions. Moreover, it will keep faith with 
the true source of our military's strength--our people.
    The merits of this budget should be viewed in the context of an 
evolving global security environment and a longer term plan for the 
Joint Force. Coming on the heels of a decade of war, this budget begins 
the process of rebalancing our force structure and our modernization 
efforts and aligns them with our strategy. Essentially, we are 
developing today the Joint Force the Nation will need in 2020, and our 
plans to build this force will unfold over the course of several budget 
cycles. This budget is the first step--a down payment. If we fail to 
step off properly, our recovery will be difficult, and our ability to 
provide the Nation with broad and decisive military options will 
diminish.
    It is worth addressing head-on some of the major changes we are 
planning. These changes must be viewed in the context of our evolving 
force. They represent a comprehensive package of decisions that strike 
a careful balance. They are not, and cannot be viewed as, individual, 
isolated measures. In all cases, needed capabilities are preserved or, 
when necessary, generated, through one or several programs.
    This budget makes critical investments in our future force. Certain 
specialized capabilities, once on the margins, will move to the 
forefront. Networked special operations, cyber, and intelligence, 
surveillance, and reconnaissance will become increasingly central.
    Of these, cyber represents both a potent capability and real 
vulnerability. The threats emanating from cyberspace have evolved 
faster than many could have imagined. This budget allows for us to 
expand many of our nascent cyber capabilities and to better protect our 
defense networks. Similarly, bipartisan cyber legislation under 
consideration in the Senate is a good first step in developing 
protection for our Nation's critical infrastructure. With much work to 
be done, we look forward to working on cyber with agencies across the 
Government and with our allies and partners.
    While some additional capabilities for our Joint Force will be 
needed, others will not. The budget divests some outdated ships, 
planes, and equipment, particularly single-function systems. Each year 
that we delay retiring unneeded systems adds several years of 
additional costs. And, it hampers our ability to achieve the desired 
mix of military capabilities.
    Moreover, we will no longer be sized for large-scale, prolonged 
stability operations. As a result, we expect to draw down the Army from 
562,000 to 490,000 by the end of fiscal year 2017, and the Marine Corps 
from more than 202,100 to 182,100 by the end of fiscal year 2016. Some 
of this reduction was planned several years ago when the Congress 
authorized temporary end strength increases to support our operations 
in Iraq and Afghanistan.
    In making ourselves leaner, we will not make the mistakes of 
previous draw downs. We will not retain organizational structures that 
lack the people, training, and equipment necessary to perform the 
assigned mission. We will be realistic about the organizations we keep, 
while also maintaining our ability to reconstitute and mobilize forces. 
This means retaining capacity in our Reserve components and our 
industrial base. We will maintain the Army Reserve end-strength at 
205,000 and reduce the Army National Guard by only 5,000 down to 
353,200. The Marine Corps Reserves will be retain their current 
strength.
    Another major concern among our troops, their families, retirees, 
and with the American public is military compensation and benefits. I 
want to make it clear that cuts in spending will not fall on the 
shoulders of our troops. There are no proposed freezes or reductions in 
pay. There is no change to the quality of healthcare our active-duty 
members and medically retired wounded warriors receive. But we cannot 
ignore some hard realities. Pay and benefits are now roughly one-third 
of defense spending. Pay will need to grow more slowly in the future. 
We are also proposing a commission to review of military retirement.
    To control the growth of healthcare costs, we are also recommending 
changes to TRICARE. These adjustments include modest, new or phased-in 
increases in healthcare fees, copays, and deductibles largely for our 
retirees--but not our active-duty servicemembers. These increases would 
help ensure TRICARE remains one of the finest medical benefits in the 
country. Each year we delay addressing rising healthcare costs puts 
further strain on readiness and modernization which are critical to the 
health of the future force.
    The result of these changes will be a Joint Force that is global 
and networked, that is versatile and innovative, and that is ably led 
and always ready. This force will be prepared to secure global access--
even where it is contested--and to respond to global contingencies. We 
will be a military that is able to do more than one thing at a time--to 
win any conflict, anywhere.
    Overall, these changes value both the demands of military service 
and our duty to be good stewards of the Nation's fiscal resources. They 
will sustain the recruitment, retention, and readiness of the talented 
personnel we need. Most importantly, they will sustain our enduring 
commitment to our troops and their families--we must never break faith 
with them. I want to note, however, that keeping faith with our service 
men and women is not just about pay and benefits. It is also about 
ensuring we remain the best-trained, best-equipped, and best-led force 
in the world.
    The last, and perhaps most critical issue, is risk. This budget and 
the strategy it supports allow us to apply decisive force 
simultaneously across a range of missions and activities around the 
globe. But like all strategies, it also accepts some risk. The primary 
risks lie not in what we can do, but in how much we can do and how fast 
we can do it. The risks are in time and capacity. We have fully 
considered these risks, and I believe they are acceptable. In fact, we 
will face greater risk if we do not change from our previous 
approaches. I am convinced we can properly manage this risk by ensuring 
we keep the force in balance, invest in new capabilities, and preserve 
strong Reserve components.
    Our ability to manage this risk would be undermined by changes to 
the budget that disrupt its carefully crafted balance. Sequestration 
would do this. It could have serious effects on our readiness and 
disrupt essential programs and contracts. We cannot predict precisely 
how bad the damage would be, but it is clear that sequestration would 
reduce the military options available to the Nation.

                               CONCLUSION

    In the upcoming year, our Armed Forces will build on the past 
year's achievements, adapt to emergent challenges, seize new 
opportunities, and provide for our common defense. We will continue to 
face threats to our security, whether from aggressive states or violent 
non-state actors. Our Joint Force will be ready, and our response will 
be a source of pride for the American people. In all of our efforts, we 
will aim to maintain strength of character and professionalism--at the 
individual and institutional level--that is beyond reproach.
    As we embark on this critical new course, we will need Congress's 
support to help us build the Joint Force the Nation needs and to 
strengthen our relationship with the American people. As I stated 
before, this budget and the choices that underlie it should be 
understood in the context of the comprehensive, carefully balanced, 
multiyear plan they support. We ask the Congress to support this budget 
while working to avoid the deep cuts that sequestration would impose.
    I thank this subcommittee, and the entire Congress, for all you 
have done to support our men and women under arms and their families. 
Your resolute attention to their needs and to our security has been 
both invaluable and greatly appreciated.

    Chairman Inouye. Thank you very much.
    Mr. Secretary, your description of sequestration I believe 
is a candid, but frightening one. You've indicated that you 
would reduce training at a time when you should be increasing 
training.
    It would mean deferral of maintenance of equipment, and 
it's getting pretty bad. You have fewer purchases of aircraft 
and ships. There's something else you didn't mention, and I'd 
like to have your comment on that.
    This sequestration, coupled with projected discretionary 
defense spending, could add 1 percent to the national 
unemployment rate from job losses in Government, military, and 
the private sector within the defense industrial base.
    Does that description make sense?
    Secretary Panetta. Mr. Chairman, I think that is the 
estimate that we've seen in terms of the impact that would 
have.
    Now, you know, again, I just stress, look, the Defense 
Department is not a jobs program. It's a program to defend the 
Nation. But clearly, that kind of sequestration cut across the 
board would have a serious impact not only on men and women in 
uniform but on our personnel and the contractors who serve the 
Defense establishment.
    Chairman Inouye. When you speak of deferral of maintenance 
of equipment, can you give us something beyond that?

                             SEQUESTRATION

    Secretary Panetta. Yes, let me have Bob Hale, our 
comptroller, speak to that.
    Mr. Hale. Mr. Chairman, we haven't done a detailed plan, 
but I think one of the options we would have to look at is 
cutbacks in depot maintenance and that would mean we would push 
out the availabilities of ships, for example, or planes.
    We would try to do it in a sensible manner, but I think it 
inevitably would delay some of the maintenance activities. I 
can't give you details, but I think that's an almost inevitable 
result of sequestration.
    Secretary Panetta. I mean, the way the formula works under 
sequestration is it takes a percentage across the board out of 
every area of the Defense budget. And it means that, you know, 
it's almost about a 20-percent cut in a weapon's system.
    It would be a 20-percent cut with regard to training 
equipment. It would impact on every area of the Defense budget. 
That's the way it was designed. It was designed as a meat axe. 
It was designed to be a disaster, because the hope was, because 
it's such a disaster, that the Congress would respond and do 
what was right.
    And so I'm just here to tell you, yes, it would be a 
disaster.
    Chairman Inouye. Now, the across-the-board cut that you've 
indicated will not impact upon pay and health programs. 
Anything else?
    Secretary Panetta. It would.
    Mr. Hale. The President has the authority, Mr. Chairman, to 
exempt military personnel. He'll have to decide whether he does 
that. If that were the case, then it won't affect military 
personnel.
    But the other accounts would have to be cut by larger 
amounts so that the total remains the same. It would affect our 
ability to pay healthcare. It's in a separate account. And as 
the Secretary said, it gets its meat-axe share of this cut, and 
we would face a serious problem of potentially not being able 
to pay all our TRICARE bills, for example.
    General Dempsey. Mr. Chairman, could I add something?
    Chairman Inouye. Please do.
    General Dempsey. Because it's important also to note that 
overseas contingency operations (OCO) is now subjected to 
sequestration. That would roughly be about $8 billion. And of 
the $88 billion or so, $88.5 billion that we've requested to 
sustain our operations globally, mostly in the gulf region.
    But we have to fund that. So that money will have to be 
taken, will have to come to you for some reprogram activity to 
move money from base to cover those war-related costs.
    That in combination with the potential freeze in the 
manpower account, in other words, exempting manpower, means 
that a service chief, and I was a service chief, can only go 
back to find this money to about three places, training, 
maintenance, and modernization.
    That's it. There's no magic in the budget at that point. 
And those three accounts will be subjected to all of the cuts 
mandated by sequestration.
    Mr. Hale. May I add one more point, Mr. Chairman?
    I would not look at reprogramming as a way to solve this 
problem. We have some legal limits. Unless you change them on 
the amount we can reprogram, and we wouldn't have the authority 
to offset all of those changes, at least not readily, in OCO, 
without some major changes.
    So we could do some, but they'll be very little flexibility 
if this goes into play or into effect as it's currently 
designed.
    Chairman Inouye. Thank you very much.
    Before I call upon my colleagues, I'd like to note that 
because of the good attendance, we will have to limit the 
questioning period to 5 minutes.
    With that, Senator Cochran.

                                 SHIPS

    Senator Cochran. Mr. Chairman.
    Let me ask you, Mr. Secretary, what your impression is of 
the need for amphibious ships?
    We've heard that the Navy and Marine Corps have determined 
a minimum force of 33 amphibious warships is the limit of 
acceptable risk in meeting the amphibious force requirement.
    What's your assessment of the risk that we are assuming, if 
any, with our current shipbuilding plan as proposed and 
requested for funding by the Department?
    Secretary Panetta. I'll ask General Dempsey to comment as 
well.
    But one of the things I'm really trying to do is to 
maintain our industrial base in the Defense Department. If we 
lose more shipyards, if I lose, more of the industry that 
supports our Defense Department, it makes it very difficult to 
mobilize in the future.
    And so my goal is to try to design a budget here that 
maintains the shipyards that we have, that maintains the 
industrial base that supports our defense system.
    On the amphibs, the reason they're important is because of 
the agility issue that I talked about, because we are going to 
have a smaller force. These ships allow us to be very agile, to 
be quickly deployable, to be able to move quickly if we have 
to.
    And that's the reason that we want to maintain those as 
part of our Defense structure.
    General Dempsey. And just to add, Senator, the number that 
you cited as based on the existing war plans and a particular 
phase in which the amphibious warship capability is under most 
stress.
    And what we're doing as a result of our defense strategy is 
we're opening up our operation plans in concept format 
(CONPLANs) or our operation plans (OPLANs) to look at the 
assumptions we made, and to see if we can adjust the way we 
conduct operations in order to mitigate that risk.
    And at this point, the commandant and I are content that 
the budget proposal and the number of amphibs in that budget 
proposal are adequate to the task. But it means we'll have to 
adjust the way in which we conduct operations.
    Senator Cochran. Well, there's a suggestion that the 
current 30-year shipbuilding plan projects an inventory that 
will fall to 28 ships in fiscal year 2015.
    And I wonder, General, if this is below the level required 
by the Department, and whether or not this is an increase in 
the assumption of risk? Do we need to revise that upward? What 
do you suggest we do when we review the requirements being 
submitted by the Marine Corps and the Navy?
    General Dempsey. What I'd ask to do, Senator, is take that 
question for the record, because there is a bit of it that 
would cross over into classified information related to war 
plans, but I'd be happy to answer that for you.
    [The information follows:]

    Each year, the combatant commanders submit force requirements to my 
staff, which include capabilities that reside in all Services. Some of 
these requirements routinely exceed the Services' capacity to meet 
them. Within the Navy, this includes not only demand for amphibious 
platforms, but also aircraft carriers, cruiser/destroyers, coastal 
patrol boats, and frigates. The strategic risk associated with these 
capacity shortfalls is balanced among the combatant commanders based 
upon Secretary of Defense policy and guidance, which reflect the 
National Military Strategy.
    Specific to the issue of amphibious ship capacity, the Navy remains 
committed to providing 30 operationally available amphibious ships to 
meet Naval amphibious ship demand. With some risk, 30 amphibious 
landing ships can support a two-Marine Expeditionary Brigade (MEB) 
forcible entry operation. This force accepts risk in the arrival of 
combat support and combat service support elements of the MEB, but this 
risk is appropriately balanced with the risk in a wide range of other 
important warfighting requirements within today's fiscal limitations.
    Navy can achieve this operational availability goal by sustaining 
an inventory of about 32 amphibious ships in the mid- to long-term. The 
32-ship amphibious force being procured to meet this need will 
optimally be comprised of 11 landing helicopter assault (LHA/D), 11 
landing platform/dock (LPD) 17 and 10 landing ship, dock (LSD). To 
support routine forward deployments of Marine Expeditionary Units 
(MEUs), the amphibious force will be organized into nine, three-ship 
CONUS-based Amphibious Ready Groups (ARGs), and one four-ship ARG based 
in Japan, with an additional big-deck amphibious ship available to 
support contingency operations worldwide. Two LSDs will be taken out of 
commission and placed in reserve status allowing Navy to reconstitute 
an 11th ARG as required in the future, or to build up the number of 
ships in the active inventory, if necessary.

    Senator Cochran. Thank you. Thank you, Mr. Chairman.
    Chairman Inouye. Thank you very much. Senator Leahy.
    Senator Leahy. Thank you, Mr. Chairman.
    Secretary Panetta and General Dempsey and Mr. Hale, thank 
you for being here. I appreciate the chance we had to talk 
before the hearing.
    One thing I didn't mention then was something you're well 
aware of, that during the last 10 years, we've depended more 
than ever on our Guard and Reserve.
    And, Secretary Panetta, I appreciate what you said during 
your testimony. I know we could never have supported two 
simultaneous wars without men like you.
    General Dempsey, anytime I've visited areas where we're in 
combat, you don't see a difference between the Active Guard and 
Reserve. They're all out there doing their job, putting their 
lives on the line.

                            AIR FORCE BUDGET

    I think your strategies echo this reality from the 
President's guidance in the last Quadrennial Defense Review 
(QDR). As a result, it surprised many of us in the Congress, 
including Senator Graham and I as co-chairs of the Guard 
caucus, when the Air Force presented a fiscal year 2013 budget 
plan that disproportionately cut the Guard.
    I know there will be cuts and we all understand that, but 
it appeared here that you were going after your least expensive 
manpower to save money. That did not make a lot of sense, 
especially since manpower costs are more and more of the 
defense budget as you said.
    So I don't know how you shrink the Guard and maintain a 
ready and capable force. So my question is, does DOD stick with 
its earlier strategies to increasingly depend on the Guard and 
Reserve, or is there an alternative?
    Because the Air Force budget does not appear to follow that 
idea.
    Secretary Panetta.
    Secretary Panetta. Senator, you know, again, what the Air 
Force was asked to do is based on the new strategy, try to 
develop an approach that provided a kind of multimission 
support for the force.
    And, as a result of that, made decisions with regards to 
some areas that could be reduced in order to achieve obviously 
the savings that we were required to achieve.
    I recognize, you know, the controversy involved here 
because it impacts on constituencies, it impacts on the Guard.
    Senator Leahy. I'm afraid it impacts on readiness too. 
That's my biggest concern.
    Secretary Panetta. Yes, I understand that.
    But, you know, obviously, we don't want to take it out of 
the Active Force because that is a force that's there ready to 
deploy quickly.
    What I've suggested is to try to see if there's a way that 
we can work to provide some restoration. So I think I suggested 
putting some additional 130s back in place to try to assist 
some of these areas with regards to the impact that might be 
there.
    Let me just say this for the record. I'm fully prepared to 
work with this subcommittee and to work with the staff of this 
subcommittee to try to see if there's a way to do this that can 
minimize the impact, but at the same time, hopefully achieve 
some of the necessary savings that we have to do in order to 
achieve it.
    Senator Leahy. I hope you will. And you've worked with 
Senator Graham and me in the past on these issues. I know we 
can again.
    On another matter related to the budget, I was one of those 
on the subcommittee who opposed the Iraq war from the very 
start. President Obama also did. I opposed it because I didn't 
think it was the right decision for our national security. And 
we basically ran that war on a credit card.
    Now we're making decisions how we address the national 
deficit. It is not just sequestration. We voted earlier, the 
majority of us did, that sequestration should happen only if we 
were unable to reach consensus on deficit reduction.
    The understanding was we would put everything on the table. 
But now we find people who are calling for more military action 
in other parts of the world. At the same time, they do not want 
to consider any way of paying for it, unlike what we've always 
done in the past.
    What would be the impact of going to war again without 
committing to pay for that war with upfront taxes, something we 
did not do in either Iraq or Afghanistan, for the first time in 
the history of the country?
    Secretary Panetta. Well, obviously, if we repeated the 
mistake of not paying for the war that we decide to engage in, 
whatever that might be, the result would be that you would 
simply add more to the deficit and to the debt of this country 
for the future. You just put that burden on our kids for the 
future.
    And, you know, look, I think we always have to be careful 
when you make the decision to put our men and women in uniform 
into harm's way. That's number one.
    But number two, if that decision is made, then I think for 
the sake of the country, it's important that we recognize the 
costs that are involved and that, frankly, all of us bear some 
responsibility to pay those costs if we're willing to engage in 
war.
    Senator Leahy. Thank you very much. Thank you, Mr. 
Chairman.
    Chairman Inouye. Thank you.
    Senator Hutchison.
    Senator Hutchison. Thank you, Mr. Chairman. And thank you 
for your service, all three of you.

                   NORTH ATLANTIC TREATY ORGANIZATION

    Secretary Panetta, since the end of the cold war, North 
Atlantic Treaty Organization (NATO) has grown from 16 to 28 
members, and yet we know that the threat of a Soviet invasion 
into Europe has virtually disappeared, with only five alliance 
members spending the obligatory standard of 2 percent of their 
Nation's gross domestic product (GDP) on defense.
    And several countries as we know refused to participate in 
combat assignments or limit what they will do.
    We're contributing 23 percent of the military construction 
(MILCON) for NATO which is approximately $254 million this year 
alone. And then virtually the same amount of percent of 
expenditures for operations of NATO.
    My question is, are you looking at the NATO alliance and 
determining if it is serving the function for which it was 
intended, and if there is a commensurate effort by all of the 
members? Or whether, perhaps, we are paying more than our fair 
share for what we are getting in return?
    Secretary Panetta. Senator, you've raised a legitimate 
concern here, you know, with regards to the responsibility of 
NATO nations to assume a greater responsibility for developing 
their capabilities and improving their defense posture.
    One of the things that came out of the NATO meeting in 
Chicago was developing greater capabilities for NATO with 
regards to missile defense, intelligence, surveillance, and 
reconnaissance (ISR), with regards to other areas, to try to 
ask them to assume greater responsibilities in those areas.
    But I also think as I stated to my fellow defense 
ministers, we have great concerns because of the budget 
situation that faces many of those nations in Europe that one 
of the dangers here is that they'll constantly go back to 
defense and seek further savings there, which I think would be 
dangerous.
    Right now, for example, when it comes to a NATO deployment, 
Libya is a good example, I think we provided probably about 60 
percent of the support for the forces that went into Libya. Now 
they tell me that if we were to engage, the United States would 
probably have to pick up 80 percent of that responsibility.
    You know, that's not something that really makes clear to 
those nations the responsibility they have to be able to 
develop their own capability. So I think it's very important to 
continue to stress to those countries that they have to 
continue to invest in their basic security.
    There are some countries that are doing that. There are 
some countries that are investing well over 2 percent of their 
GDP in the defense budgets. We commend them for that.
    But other countries have to recognize that the last thing 
that we need right now is for them to do further cuts in the 
defense budgets that they have because that will put more of a 
burden on our shoulders in the future.
    Senator Hutchison. Well, let me just take Germany as an 
example. And Germany is certainly going through the hard times, 
and we understand, and they're burdened with regard to the rest 
of Europe.
    But on our side, representing our interests, Germany, in 
military construction, Germany contributes 7 percent to the 
infrastructure costs that we would make in their country, as 
compared, for instance, to Japan, which provides at least 40, 
and sometimes more, percent.
    Germany has refused to contribute any resources into Libya. 
In Afghanistan, they limit what they will do, and their number 
of troops has been around 5,000.
    Now, the army is planning this year to spend 7 percent of 
its military construction budget in Germany, that's on top of 
the NATO part. It will be about $243 million this year, to 
build Landstuhl, which is fine, that's a priority of ours. I'm 
for that.
    But the other half, a $113 million, is for new schools, 
elementary and high schools. Now, obviously, if our troops are 
there, we need to furnish the schools that are good.
    But my question is, the troops that are there. Are we 
overspending the military construction for the amount of troops 
that we have there?
    And are we looking at the future on whether, in fact, it 
might be the rotational forces that you mentioned, is more of 
the strategy in the Pacific, that maybe we would start doing 
that in Germany and other places and cut back on this enormous 
military construction cost?
    Secretary Panetta. I'll ask General Dempsey to comment on 
this as well.
    But we're doing exactly that. We're bringing two brigades 
home from Europe. One of the things we intend to do is to 
emphasize more of the rotational presence that we have there, 
and to be able to do exercises.
    We do have some important infrastructure there. It's very 
important to our deployments to the Middle East and to the war 
zone, and that's the reason some of that is continuing.
    But I think you're right. I think we've got to increase our 
rotational deployments. We've got to ask them to make a greater 
contribution to the infrastructure needs to do this.
    At the same time, let me make very clear, the NATO alliance 
is extremely important to our ability to deal with some of the 
challenges in the world. We can't do it alone.
    We've got to be able to have alliances like NATO, be able 
to work with us in confronting the many challenges that we face 
in the world.
    General Dempsey. Yes, we're out of time, Senator.
    But what I would offer is a briefing to you on what we 
consider to be the enormous and important benefits of being 
part of that alliance. And I know some of them are self-
evident.
    But we've got initiatives, Baltic Skies, allied ground 
system, the activities in Kosovo, things that are kind of 
behind the scenes that we really need to expose to you so that 
you understand the reason we're still so deeply integrated into 
the NATO command structure.
    And acknowledging your point about their investment and the 
fact that it's declining. But let's, if I could, take that one 
as a task.
    Senator Hutchison. I appreciate it, and thank you, Mr. 
Chairman.
    I do just hope we're looking at an equalization of effort 
according to the return that we're getting. Thank you.
    Chairman Inouye. Thank you.
    Senator Mikulski.
    Senator Mikulski. Thank you very much, Mr. Chairman. 
Secretary Panetta, General Dempsey, and Mr. Hale.
    First of all, we want to welcome you, and we want to thank 
you for your service.
    Mr. Panetta, you came to the House of Representatives in 
1976. We came together. We were part of the bicentennial year. 
And the way we're going, we're going to be here for the 
tricentennial.
    And, General Dempsey, you graduated from West Point just 
about the time Secretary Panetta and I were getting started in 
the Congress.
    But you two represent close to 70 years, 35 years in each 
military and through a variety of exemplary civilian posts. So 
we thank you for your dedication and your service to the 
country.
    And, Mr. Hale, your being here, shows what is often 
overlooked when we talk about national security, the role of 
the civilian work force in supporting our military, its 
commanders, and the Secretary of Defense and the Commander in 
Chief. So we want to thank the civilian work force.

                                 CYBER

    I want to raise some questions about new priorities and new 
threats, acknowledging that Maryland has really a strong 
military presence from the Naval Academy to Walter Reed, Naval 
Bethesda, helping those with the wounds of war, to Fort Meade, 
our new cyber command, the 10th Fleet, Pax River, Andrews, 
Aberdeen, Fort Detrick, we're really proud of the presence 
here.
    But I want to go to the issues of cyber. Mr. Secretary, 
you've said publicly, and even at our debriefings, that you 
viewed cyber as the potential digital Pearl Harbor.
    And, General Dempsey, you, and again, at meetings, 
briefings and our cyber exercise, talked about the great sense 
of urgency. Could you talk about what you mean when you say a 
digital Pearl Harbor?
    Do you feel that, as you indicate on page 6 in your 
testimony, Sir, you have the right money? And do you also have 
the authorities that you need to do to protect the Nation?
    You have here, in addition to the Appropriations chair 
Senator Inouye and Ranking Member Cochran, but you have the 
chair of the Intelligence Committee, you have one of the co-
authors of the Lieberman-Collins bill.
    So we want to make sure that we don't have a digital Pearl 
Harbor. So could you elaborate on what you meant? Do you have 
what you need? And should we have a greater sense of urgency in 
getting some things done, and what would you say they'd be?
    And, General Dempsey, I'd like your comments as well, Sir.
    Secretary Panetta. Senator, I appreciate the question.
    I think there has to be a greater sense of urgency with 
regards to the cyber potential, not only now, but in the 
future.
    I think this is a, obviously, it's a rapidly developing 
area. The reality is that we are the target of, you know, 
literally hundreds of thousands of attacks every day. It's not 
only aimed at Government; it's aimed at the private sector.
    There are a lot of capabilities that are being developed in 
this area. I'm very concerned that the potential in cyber to be 
able to cripple our power grid, to be able to cripple our 
Government systems, to be able to cripple our financial 
systems, would virtually paralyze this country.
    And, as far as I'm concerned, that represents the potential 
for another Pearl Harbor, as far as the kind of attack that we 
could be the target of, using cyber.
    For that reason, it's very important that we do everything 
we can, obviously, to defend against that potential. I feel 
very good about our capabilities in terms of defending our 
systems with the help of the National Security Agency (NSA) and 
their great technological capabilities.
    I do think that authorities, and the ability to try to not 
only, it's not only in the defense sector, it's in the civilian 
sector, that we have to improve this. And I think that's the 
area where we have to deal with the additional authorities.
    And I think the Lieberman-Collins bill is one that 
addresses that, and we support the Congress enacting that in 
order to try to facilitate that capability.
    General Dempsey. I would just add, Senator, that we've seen 
the world go from distributed denial of services, you know, 
just hackers overwhelming a Web site, to incredible 
intellectual property theft and technology theft, to now 
destructive cyber.
    It's in the open press. And that has all happened in a 
matter of a few years. And this particular domain, the cyber 
domain, is changing rapidly.
    And so to your question about sense of urgency, I can't 
overstate my personal sense of urgency about that.
    Second, I'd like to pile on to the Secretary in support of 
the pending legislation that encourages information sharing and 
takes a good necessary but only first step.
    And then, third, I'll tell you on the issue of authorities. 
The President does have the authorities he needs. What we need 
to develop are some rules of engagement, if you will, because 
these things occur at network speed.
    This is not something where we can afford to, you know, 
convene a study after someone has knocked out the east coast 
power grid. So, we're working on that.
    Senator Mikulski. So, I know my time is up, but what you 
say is that you feel that there's enough money in the DOD 
approach to meet the protection of the .mil.
    What gives you heartburn and concern is the protection of 
.com.
    Secretary Panetta. That's right.
    Senator Mikulski. And as you develop rules of engagement, 
the Congress now has to really have a sense of urgency at 
developing the legislative framework, starting with Lieberman-
Collins, in the protecting of .com.
    Does that sound right?
    General Dempsey. If I could just, maybe just sharpen that a 
bit.
    I don't have any intention of, you know, the .com would 
include your personal email address. I'm fine with you doing 
what you do in your own personal email domain.
    But I'm concerned about the defense industrial base, and 
I'm concerned about the critical infrastructure of this 
country. That's where we should focus our efforts.
    Senator Mikulski. Thank you very much.
    Mr. Chairman, I know my time is up. I have other questions 
related to military medicine, and if I could, one final note.

                                COMFORT

    Mr. Secretary, I wouldn't be the Senator from Maryland if I 
didn't raise the ship, the Comfort. Today's the beginning of 
our sail, tall ships coming into Baltimore Harbor.
    As ancient ships come in, we're saying goodbye to the 
hospital ship, the USNS Comfort. I take no comfort in that. 
Could you take a look at it and see if I could keep the 
Comfort, or Maryland can keep the Comfort.
    Thank you.
    Chairman Inouye. Thank you very much.
    Senator Durbin.
    Senator Durbin. Thank you very much, Mr. Chairman. Mr. 
Secretary, General Dempsey, and Mr. Hale.

                                 BUDGET

    Mr. Chairman, you recalled your time in the House of 
Representatives, and at one point you chaired the House Budget 
Committee, and I was one of your loyal acolytes.
    You set the stage in our budget deliberations for us to 
reach a balanced budget, which I'm very proud of that 
achievement, and I know it wasn't easy.
    I asked the Appropriations Committee staff to compare 
spending when our budget was in balance to where it is today, 
in three categories, using constant dollars, and here's what 
they came up with.
    Going back to 2001, in domestic discretionary spending, 
there has been zero increase in spending. When it comes to 
entitlement spending, there has been 30-percent increase in 
spending since we were in balance.
    With the budget we are proposing, the base budget, not the 
OCO, but the base budget we're proposing for the Department of 
Defense, it will be a 73-percent increase over what we were 
spending when we were in balance in constant dollars.
    I might also say to you though I think the sequestration 
clearly hits hard, maybe too hard, and too fast, at the end of 
the day under sequestration, Defense would end up with the same 
percentage of the gross national product (GNP) that it had when 
the budget was in balance.
    So my question to you is one to take a step back, perhaps 
from your role, and go back to your history with the budget. 
What is a fair number for us when it comes to the defense of 
this country and security?
    I know we need every dollar it takes to be safe. But if we 
are going to cut back in healthcare and education to provide 
more money on the military side, isn't that going to have an 
impact on the men and women who volunteer to serve in our 
military, and whether they are qualified to serve?
    Secretary Panetta. Well, first and foremost, you know, with 
regards to the defense budget, I do believe we have to play a 
role. And the fact is that we're going to be cutting half of $1 
trillion from the defense budget over the next 10 years.

                             SEQUESTRATION

    Senator Durbin. Under sequestration.
    Secretary Panetta. And this is part of----
    Senator Durbin. In addition to sequestration.
    Secretary Panetta. And then if you add sequestration to 
that, you're looking at another chunk, $500 billion, on top of 
that.
    So, I think, defense, it does have to play a role. At the 
same time, I think we have a responsibility, obviously, to 
protect the strongest military in the world, and to help defend 
this country.
    On the larger issue, Senator, you know this as well as I 
do, and I think every member of this subcommittee knows it, 
you're dealing with a very serious deficit issue and debt 
issue. And you can't keep going back to the same well to try to 
resolve those issues.
    You can't keep going back to domestic spending. You can't 
keep going back to the discretionary side of the budget in 
order to solve a multitrillion dollar problem that faces this 
country.
    I mean, if you're serious about taking this on, it's what 
we had to do, frankly, beginning in the Reagan administration, 
that's what we did in the Bush administration, it's what we did 
in the Clinton administration.
    If you're serious about taking this on, you got to put 
everything on the table. You've got to look at mandatory 
spending. You've got to look at revenues. You also have to look 
at, you know, how you cap domestic discretionary.
    But you're not going to solve this problem with the 
domestic discretionary budget. You're just not.
    Senator Durbin. May I ask you this question?

                   DEPARTMENT OF DEFENSE CONTRACTORS

    When we brought--in the Simpson-Bowles Commission, when we 
brought the experts in to talk about the Department of Defense 
and where we might save money, the most startling testimony 
came when we asked about private contractors who work for the 
Department of Defense.
    The basic question we asked is, how many are there? And the 
answer was, we don't know. We really don't know.
    Estimate somewhere, you know, maybe Governmentwide, some 7 
million. There are 2 million Federal civil service employees, 
to give you some context here.
    And when you look at the dollar amounts that are being 
spent in the Department of Defense for contractors, as opposed 
to the civilian work force at the Department of Defense, and 
those in uniform, it is substantially higher.
    For many of us, this outsourcing just became a passion, and 
people stopped asking the most basic question: Is this serving 
the Nation well? Is it saving us money?
    I notice that you are in-sourcing more. You're bringing 
some jobs back into the Department of Defense. And in your 
earlier testimony, you said you need to reduce the service 
support contractors.
    So it seems to me that there has been documented waste when 
it comes to these service contracts. When it comes to the 
contracts for big ticket items, I will tell you the cost 
overruns on the F-35 equal 12 Solyndras.
    I haven't heard too many press conferences on those, but 
it's an indication to me that there is money to be saved there, 
and I know that you would take that personally and want to do 
it.
    How much is built into your cost savings and cuts when it 
comes to this potential overspending on contractors and cost 
overruns on projects?
    Secretary Panetta. Well, obviously, on the efficiency 
front, this is an area of principal focus. We did $112, or $125 
million last year?
    Mr. Hale. On service contracts.
    Secretary Panetta. On efficiencies.
    Mr. Hale. $150 billion.
    Secretary Panetta. $150 billion last year with regards to 
those efficiencies. We're adding another $60 billion on top of 
that. A lot of that is aimed at trying to reduce the 
contractors, and to try to gain greater efficiencies there.
    Look, I'd be the last one to say that we can't find those 
savings in the Defense Department budget. We can, and that's 
what we did.
    But the goal is not simply to whack away at it without 
tying it to a strategy about what kind of defense system do we 
need for the future in order to protect the country.
    As long as we can tie it to that strategy, as long as we 
can make sense out of how we achieve these savings, then we can 
achieve, as I said, the $500 billion in savings that we've been 
asked to do by the Congress, and we can achieve and be more 
efficient in the future.
    But don't think that Defense alone is going to solve the 
bigger problem that you're facing in this Congress and in the 
country.
    Chairman Inouye. Senator Harkin.
    Senator Harkin. Thank you very much, Mr. Chairman. Mr. 
Secretary, welcome back.

                             DISCRIMINATION

    I have two kind of disparate issues I wanted to cover with 
you.
    One, last November, we had a short conversation about what 
I was hoping to be perhaps the next step in breaking down the 
discrimination against people with disabilities in our country.
    And that was allowing people with disabilities to serve in 
our Armed Forces. We had a unique case of a young man who had 
gone through Reserve Officers Training Corp (ROTC) in 
California, had done extremely well in all of his tests, all of 
his scores and stuff, but was denied entry into the military 
because he was deaf.
    And I reported to you at that time perhaps having a pilot 
program, of bringing people in to the military, who could add 
to the defense of this country, who would be exemplary 
employees, but they might not be able to be the Chairman of the 
Joint Chiefs of Staff. They may not be a pilot in the Air Force 
or other things they might not be able to do, but they can do a 
lot of other things.
    And so, since that time, I must tell you that we've had 
some problems with the Department of Defense in moving ahead on 
this. You even requested, Mr. Secretary, a briefing on this 
from people down below, but nothing is happening.
    I can tell you that my staff has tried to work on this 
since the first of this year. Numerous phone calls and meetings 
have been cancelled. We could never get any response on this 
about setting up such a pilot program until a couple of days 
ago when they found out that I was going to ask you about this, 
and we now have a meeting set up next week, which is fine, I 
understand all that.
    I'm just saying that I know that you were going to look at 
that. I just think this is one place where again, we've got to 
break down some of these barriers. There's a lot of people with 
disabilities that want to serve their country, can serve in the 
Air Force, Army, Navy, Marines.
    They may not be able to do exactly everything that people 
can do, but they can do within their abilities. They can 
provide a lot of support. And then I would just ask you, 
please, once again, to really take a look at this and set up a 
pilot program.
    And, if you can't do it, Mr. Secretary, if you can't do 
this, if something is prohibiting you from doing that, let me 
know, and we'll try a legislative approach on it.
    Secretary Panetta. No, I appreciate your leadership on this 
issue. You've led on this issue for a long time during your 
career here on the Hill, and I respect it, but, more 
importantly, I agree with you.
    And for that reason, you know, I think we can try to set up 
a pilot program. I mean, look, right now, when we have wounded 
warriors, and let me tell you, wounded warriors come out of 
there with new legs, new arms, and sometimes they're back at 
duty, and they're doing the job, and they're doing it well.
    Senator Harkin. Exactly.
    Secretary Panetta. So if we can do it for wounded warriors, 
I think we can reach out and do it for others as well that can 
be part of it. So you have my assurance, we'll look at 
something.
    Senator Harkin. I appreciate it. Especially looking at some 
of these young people that are coming through schools right now 
and stuff who have a lot of abilities and want to serve.
    That was one. The second one had to do with another issue 
that I briefly raised with you. In Afghanistan, the Department 
of Defense has been involved in a program of spurring small 
businesses in Afghanistan.
    Obviously, you get people off of the drug business and 
stuff. And one of that was in the carpet industry. The Afghan 
law, there's an Afghan labor law. There's U.S. law. There's 
International Labor Organization (ILO) Convention 182 about 
child labor, using child labor in this thing.

                           INSPECTION SYSTEM

    We asked that you work with the Department of Labor, our 
Department of Labor, on this to incorporate, to use a 
nongovernmental organization (NGO), in terms of monitoring this 
and setting up an inspection system, an independent, third-
party inspection and verification system to make sure that no 
U.S. taxpayers' dollars are used to support businesses that 
employ children in the worst forms of child labor.
    Now, we've had some progress in that, but as we tend now, 
as we're going to turn this over to them, we're not setting up 
a mandatory verification system, and that bothers me.
    So, in other words, we were kind of doing a pretty good 
job, but now that we're handing it over in our agreement, we're 
not making an agreement to make sure that they adhere to the 
independent third-party verification system there.
    I know it's a small thing. You got a lot on your plate, Mr. 
Secretary. You're talking about all of our budgets and stuff 
like that, but to me, this is just again, one of those areas 
where we can do a lot of good while also supporting an industry 
in Afghanistan.
    And, again, I would ask you to look at those contracts that 
we have to safeguard that verification, and that third-party 
verification system in Afghanistan.
    Secretary Panetta. I know we're aware of your concerns in 
this area. Let me ask Bob Hale to comment on that.
    Mr. Hale. Senator Harkin, I think you're referring in part 
at least to some contracts through the Task Force for Visits 
and Stability Operations.
    Senator Harkin. That's the name.
    Mr. Hale. They did do some delays trying to make sure that 
there were appropriate safeguards on child labor. It's a 
difficult area to work in, a country that has different rules 
and standards than we do.
    Senator Harkin. No, there's an Afghan law.
    Mr. Hale. Say again?
    Senator Harkin. There's a law in Afghanistan. We just want 
them to adhere to their own law, that's all.
    Mr. Hale. Okay. I hear you. They are aware of the concerns, 
and I think they have made some steps in the right direction, 
but I promise you, I'll go back and make sure that we're doing 
all we can.
    Senator Harkin. Thank you. If you could just give me a 
point person to work with in your office down there, because my 
staff and I know this pretty well, and we know what needs to be 
done in terms of that verification. That's the big sticking 
point.
    Mr. Hale. Okay. We'll do that.
    Senator Harkin. Thank you. Thank you, Mr. Chairman.
    Chairman Inouye. Thank you very much.
    Senator Collins.
    Senator Collins. Thank you, Mr. Chairman.
    First, let me thank my colleague from Maryland for bringing 
up the very important issue of cyber security. She along with 
Senator Feinstein, Senator Lieberman, Senator Rockefeller, and 
I have been working very hard and agree that it's absolutely 
critical that we set standards for critical infrastructure, and 
that that has such important consequences.
    And I very much appreciate the endorsement of our efforts 
that I heard this morning. I also appreciate, Mr. Secretary, 
your urging as to act sooner rather than later to avert what 
would be the disastrous consequences if sequestration were 
allowed to go into effect.
    I think it would be a huge mistake for us to wait until the 
lame duck, that's too late, and we do need to tackle that issue 
now. We really do.
    And I think it would help if you provide us with even more 
detail, and I know the Armed Services Committee has asked for 
that.

                              SHIPBUILDING

    Let me turn to another issue that refers to our priorities. 
As I review the Department of Defense's budget, I'm very 
concerned that the ship building account is significantly 
undervalued.
    Shipbuilding represents a mere 2.2 percent of the budget 
requested by the Department of Defense. Sixteen ships were 
eliminated or delayed outside the 5-year budget window.
    And just to put this in perspective, our country currently 
spends as much on interest payments on the national debt every 
month than we do for shipbuilding in the entire year.
    Further, the executive branch as a whole spends slightly 
more than the equivalent of the entire shipbuilding budget, $15 
billion a year, on Federal agency travel and conferences.
    Now, I know the administration's trying to address travel 
and conferences, but that really says something about our 
priorities.
    I'm concerned that the combatant commanders have testified 
repeatedly about the increasing importance of the maritime 
domain and their areas of responsibility.
    I recently returned from a conference in Southeast Asia, 
and I know Secretary Panetta, you were over there as well, in 
which I heard about China's aggressiveness in the South China 
Sea, and its maritime claims, its harassment of vessels from 
the Philippines, for example.
    The importance of our Navy and to our ability to project 
power, particularly with the pivot to the Asia Pacific region, 
cannot be overstated.
    So I'm concerned that the budget projects only 285 ships by 
fiscal year 2017 when every study I've seen, whether it's 
within the Department or outside of the Department, independent 
reviews, have said that we need a minimum of between 300 and 
315 ships.
    And the fact is that while our ships are increasing in 
their ability, that quantity still counts, if you're going to 
try to project power.
    So I would ask you to address my concern and how the 
Department settled on 285 ships when virtually every study 
calls for 300 to 313.
    Secretary Panetta. Senator, I appreciate the concerns that 
you've indicated.
    And what I asked the Navy to do, and the Navy Chief to do, 
is to make very certain that we have the ships we need in order 
to project the power we have to project in the Pacific, in the 
Middle East and elsewhere, and be able to do that effectively.
    And their recommendation was that based on, you know, the 
number of ships that are in line to come on, the ones that we 
are already producing, that to do this and do this in a way 
that meets our needs, that the 285 ship approach is a good 
baseline, and we're ultimately going to move to 300 ships by 
2020.
    You know, we're maintaining 11 carriers. We're going to 
maintain, you know, a number of the amphibs. We're going to 
maintain our destroyer and our key fleets. With regards to the 
Pacific, we're obviously going to maintain a strong submarine 
force as well.
    And I'm convinced based on the Navy Chief's 
recommendations, that we can do this, you know, obviously 
meeting our fiscal needs here, but we can do this in a way that 
protects a strong Navy for the future.
    Now, I'm willing to keep going back and looking at those 
numbers to make sure that we're in the right place, because I 
share the same concern. If we're going to have a strong 
presence in the Pacific, if I'm going to have a strong presence 
in the Middle East, I have got to have a Navy that's able to 
project that.
    And right now, I think everybody I've talked to in our shop 
and in the Joint Chiefs says, we've got the force we need to be 
able to make that happen.
    General Dempsey. Senator, I know we're over time, but I 
really feel obligated to comment on this, because I mentioned 
in my opening statement that the budget we submitted is a joint 
budget.
    It's not the individual service budgets kind of bundled 
together. We really worked this as a joint team.
    We were faced with the Budget Control Act, $487 billion. 
And so every service paid a bit of that bill. I will tell you 
the Navy paid least of all because we prioritized exactly the 
issue you're talking about.
    But, you know, quantity counts, not only at sea, it counts 
in the air, and it counts on the land.
    Senator Collins. Thank you, Mr. Chairman.
    Chairman Inouye. Thank you.
    Senator Feinstein.
    Senator Feinstein. Thank you very much.
    Welcome, Mr. Secretary. It's good to see you. I've known 
you for a very long time. I was sitting here thinking. Your 
first appearance before the Intelligence Committee when you 
became Director of the Central Intelligence Agency (CIA), you 
were somewhat tentative, somewhat reserved.
    And today, I saw you at full volume. Totally in control. 
So, it's been quite an evolution.
    Let me begin by thanking you for the help you gave us on 
our intelligence congressional delegation (CODEL) to 
Afghanistan. It's very much appreciated.

                      GROUND LINE OF COMMUNICATION

    I wanted to see what I might be able to talk with you a 
little bit about on the ground line of communication (GLOC) 
subject. You were good enough to facilitate a meeting with 
General Allen, and the four of us had an opportunity to spend 
some time.
    He was most impressive. And I think we learned a great 
deal. And one of the things that came up was the incident in 
November. And it became rather clear to me that there were 
mistakes made on both sides.
    And General Allen, much to his credit, has taken at least I 
think it's six or seven steps to remedy some of the problems. 
Here enter the GLOCs.
    You raised the question of the GLOCs. It is my information 
that Pakistan wants most of all some civilian announcement that 
mistakes were made on our side. And I think mistakes were made 
on their side as well as I've looked into this.
    And that the GLOC problem could be solved. As a matter of 
fact, I think there was a meeting on the 11th, a day or so ago, 
unless it was cancelled. And so, they are prepared to rather 
dramatically lower the cost.
    But the apology is all important. As we have discussed, and 
I think the position is, that the national security of this 
Nation is best served if we can develop a positive relationship 
with Pakistan.
    And both you and I and others know what the road has been. 
And that there might be an opportunity to make a change in that 
direction, particularly with the new head of the Inter-Services 
Intelligence (ISI), as well as some other things.
    So my question of you, and I guess my lack of 
understanding, is why there can't be some form of statement 
that in essence says, if it's believed, I happen to believe it, 
that mistakes were made on both sides.
    And, of course, the United States apologizes for any 
mistakes that we made, and we have taken steps to correct that 
and see that it will never happen again.
    Secretary Panetta. Senator, I appreciate your concern, and 
you understand these issues by virtue of your chairmanship of 
the Intelligence Committee and the dealings that we've had to 
have with Pakistan.
    You're right. I mean, it's a complicated relationship, but 
it's also a necessary relationship by virtue of our security 
needs in that area.
    This is an issue that is still under negotiation. There are 
discussions that continue with regards to how we can resolve 
this. The issue you discussed is one of those areas. I think 
General Allen, the United States, has made clear that mistakes 
were made and they were made on our side. They were also made 
on the Pakistani side.
    And that we expressed condolences for the mistakes that 
were made. We've made that clear, and we certainly have 
continued to make clear the mistakes that were made.
    I think the problem is that, at this point, they're asking 
not only for that, but there are other elements of the 
negotiation that are also involved, that have to be resolved.
    So that alone, isn't the only issue that's being discussed 
and that needs to be resolved in order to get the GLOCs opened.
    Senator Feinstein. All right. Thank you for that answer.
    Do you believe that the Afghan military will be fully ready 
to take over come 2014?

                              AFGHAN ARMY

    Secretary Panetta. I was just there in Afghanistan on this 
last trip and had a chance to meet with Minister Wardak.
    Every time I go there, I get the opportunity to see the 
Afghan army and the improvements in terms of their operations. 
There's no question, right now, they're at about 346,000. 
They're going to go to 352,000. They're way ahead in terms of 
achieving the target that they want to achieve.
    They are doing an incredible job in terms of maintaining 
security, particularly in the transition areas that we've 
provided. I think that they are improving.
    Our goal over these next 2 years is to continue to train, 
continue to assist them in their capabilities. And I have to 
tell you that I am confident that we're going to be able to 
complete all of the transition in the areas that we have as 
part of General Allen's plan.
    That we can do this because we have the Afghan army in 
place, but also because we continue to have ISIF in places well 
to provide the support necessary. So I think the combination of 
an Afghan army that's able to do the job plus the kind of 
enduring presence that we need to have there as well in order 
to assure that the training and assistance continues.
    I think that combination does make clear that they're going 
to be able to govern and secure themselves at that point.
    Senator Feinstein. Thank you very much. I know that my time 
is up.
    Chairman Inouye. Thank you very much.
    Senator Coats.
    Senator Coats. Thank you, Mr. Chairman.
    Just two things I would like to raise in the time that I 
have.
    One is, Mr. Secretary, as CIA Director, you had operational 
control over the bin Laden raid. As you know, three of us on 
this Committee also serve on the Senate Intelligence Committee 
which Senator Feinstein chairs.
    And we've been alarmed, I think it's fair to say, with this 
recent spate of leaks that have occurred. We are working 
together in a bipartisan way to try to address this.
    But one of the areas of concern is over the question of 
this accommodation with Hollywood filmmakers regarding the bin 
Laden raid. It's been alleged that the name of one of the 
participants in that, one of our uniformed participants in 
that, has been made public.
    We are wondering, the question is whether other details 
have been shared about that. This comes on the heels of a 
series of devastating leaks that have compromised very 
sensitive operations, put peoples' lives at risk.
    Devastating negative consequences going forward in working 
with sources, et cetera, et cetera. You're well aware of all 
that.
    I guess my question here is simply the role of the 
Department of Defense relative to this Hollywood situation and 
other situations where your forces are involved.
    And I think it's just fair to say, the Chairman would 
agree, that we're looking at every possible avenue to try to 
minimize, mitigate, eliminate these types of leaks.
    And so working with you and your people in your Department 
I think is going to be helpful as one of the areas that we're 
going to need to work with in a comprehensive way of trying to 
get a handle on this.
    I'm really not asking you for details regarding all this. 
We all love to go see these Hollywood movies. They're exciting 
and so forth.

                         CLASSIFIED OPERATIONS

    But to the extent that information is shared relative to 
classified operations and personnel to make the movie a little 
more exciting and realistic and so forth and so on, contributes 
to the problems that we have.
    And so I think we want to make sure that each department, 
whether it's the agency or whether it's the intelligence 
community or whether it's the Department of Defense is aware of 
the fact that we need to thoroughly investigate all this and 
put in place measures which will prevent this from happening in 
the future.
    Whether you want to comment on that or not, I'll leave that 
to you.
    Secretary Panetta. Thank you. Thank you, Senator.
    Look, let me first say as a former Director of the CIA, I 
deplore the unauthorized disclosures of classified information.
    Senator Coats. I know you do.
    Secretary Panetta. I think that this is something that does 
have to be fully investigated, and it has to be very clear that 
this is intolerable if we're going to try to protect the 
defense of this country. We've got to be able to protect those 
who are involved in clandestine operations.
    Having said that, I also want to make clear that, you know, 
no unauthorized disclosures were provided to movie producers or 
anybody else. What we do have is we do have an office at the 
Pentagon that almost every day deals with people that want to 
do something about, you know, either a movie or a book or an 
article or something related to our defense.
    And we want to make sure that the information that they do 
use is accurate. And we do assist them with regards to the 
accuracy of that information. But I can assure you, I've asked 
that question, in this instance, nobody released any 
information that was unauthorized.
    Senator Coats. Well, I hope you would join us in a thorough 
review of procedures just to make sure that our policies are 
straight on this.
    Secretary Panetta. We will. Absolutely.
    Senator Coats. Thank you.
    And, General Dempsey, you and I were posted to Europe 
during the same timeframe, and I do agree with Senator 
Hutchison that, you know, with this rebalancing and global 
posture and with our financial fiscal issues, we have to be 
very careful with taxpayers' money.
    And I think she raised some legitimate questions in terms 
of infrastructure and MILCON money going to that. By the same 
token, I'd just like to get your take and make sure that we're 
not rebalancing too far.
    I mean, as you look across this arc of terrorism and arc of 
threats starting in Pakistan and Afghanistan and coming across 
to Iran and Israel and Syria, the Arab Spring, all those 
countries involved and so forth, everything from the Khani 
network to Al-Shabaab in Somalia.
    I mean, there are a lot of threats out there. And the 
question is, some of these threats require a rapid response.
    And Germany has always been a place where we have 
facilities to house and train those people who can be that 
rapid response to emergency situations and as well as just 
normal operations.
    Have we gone too far? Or, I mean, are we on the cusp of 
leaving too much too fast?
    And then when you also add the NATO component in terms of 
our need to continue to utilize and keep that organization 
dynamic and vibrant and effective as a partner. What is your 
take on all that?
    General Dempsey. Well, as you know, Senator, former 
Ambassador, I've had 12 years of service in NATO, and so I tend 
to see the world in many cases through our North Atlantic 
Alliance.
    And, in fact, I think that's legitimate because it is the 
track record of this country that when we enter into conflict, 
the first people we turn to to be partners with us in that 
regard are the members of the North Atlantic Alliance.
    Second, you know, we shouldn't discount the benefit of 
being there to also build partners, build their capacity. And 
we do that at places like Hohenfels and Grafenwoehr and 
elsewhere.
    And I think that building their capability makes it certain 
that we won't always have to be in the lead, even if sometimes 
there is some political reluctance that has to be overcome to 
do that.
    I mention the Allied Ground Surveillance System which is a 
SMART defense initiative. I didn't mention the European phase, 
adaptive approach, ballistic missile defense cooperation. We've 
just gone through a NATO command structure review and shrunk 
the number of headquarters from about 12 to about 6.
    So, I mean, I will just tell you that I tend to be very 
strong on our relationship with NATO, notwithstanding the 
Senator's concerns about the investment.
    Senator Coats. Thank you, Mr. Chairman.
    Chairman Inouye. Thank you very much.
    Senator Graham.
    Senator Graham. Thank you, Mr. Chairman.
    Thank you both for your service. I think we have a vote on 
so I'll try to cover as much ground as possible.

                             SEQUESTRATION

    Mr. Secretary, if we do not change the sequestration 
dilemma, if we don't do something about it before the election 
as a Congress, when can we expect layoff notices to hit?
    Secretary Panetta. Well, obviously, industries make that 
decision, but under the law, I think they've got, they got to 
do it at 60 days.
    General Dempsey. The Worker Adjustment and Retraining 
Notification (WARN) Act, anywhere from 60 to 90 days.
    Secretary Panetta. Yes, 60 to 90 days before it takes 
effect.
    General Dempsey. So, September.
    Senator Graham. Will you have to lay off any civilian 
employees as a result of the sequestration?
    Secretary Panetta. I suspect that if in fact it ultimately 
takes effect, we're going to have to do the same thing, sure.
    Senator Graham. Well, would you do the same thing, 60 to 90 
days before? I would urge you to do it sooner rather than 
later.
    Secretary Panetta. We have to. We have to.
    Senator Graham. Well, I just want you to make it real to 
us.
    It seems like the biggest bipartisan accomplishment we've 
had in recent memory is to destroy the Defense Department. It's 
not something I'm very proud of, and it's going to take 
bipartisanship to undo this.
    So the sooner you can tell us about the number of jobs to 
be lost and how it will affect our Defense base, I think the 
better for the Congress as a whole.
    Now, you're telling us about TRICARE. You're telling us you 
have a budget problem. When is the last time TRICARE premiums 
have been adjusted for the retired force?
    General Dempsey. 1993.
    Secretary Panetta. 1993.
    Senator Graham. Okay.
    Now, members of this subcommittee and I know we all love 
our retired military members, and I hope to be one one day, but 
isn't it unsustainable for you, if we do not bring this program 
into some kind of a sustainable footprint, you're having to 
compete with retiree healthcare against modernization, against 
benefits for today's force, against the ability to fight and 
win wars; is that correct?
    Secretary Panetta. I mean, as I said, we're paying $50 
billion now in the healthcare arena, and if we don't control 
those costs, it's going to eat up other areas that are vital 
for our defense.
    Senator Graham. So, you're telling the Congress, it's 
unsustainable.
    Secretary Panetta. Exactly.
    Senator Graham. You're having to make choices between the 
retired healthcare costs and fighting this war and future wars.
    Secretary Panetta. That's correct.
    Senator Graham. And I hope we can find a way to be fair to 
the retired force, but also to maintain a sustainable military 
budget.
    When it comes to retirement, you're talking about reshaping 
retirement benefits in the future not for people who exist 
today, right?
    Secretary Panetta. That's correct.
    Senator Graham. Because if you retire at 38, you get half 
pay for the rest of your life. Maybe that's something we need 
to revisit. I want to be generous, but I want it to be 
sustainable.
    That's the message to the Congress, right?
    Secretary Panetta. That's correct.
    Senator Graham. Okay. And your message about sequestration 
is, I'm doing my best to handle $450 to $500 billion. If you 
want to double that, you're going to destroy the best military 
we've ever had.
    Is that simply put?
    Secretary Panetta. That's right.
    Senator Graham. Okay.

                         GROSS DOMESTIC PRODUCT

    Now, GDP spending on the military. What's been the 
historical average for the last 45 years of GDP spent on the 
military?
    General Dempsey. Back to the last 20 years, maybe 4 or 5 
percent.
    Senator Graham. Okay. It's 5.5 percent over the last 45 
years.
    General Dempsey. You knew the answer.
    Senator Graham. September 11, 2001, it was 3 percent. 
Today, it ranges from 4 percent to 5.78 percent. In World War 
II, it was 5.72 to 42 percent. The Korean War was 8.25 to 18 
percent. Vietnam, 7.65 to 10.86.
    I would argue to my friends on both sides of the aisle, 
that you're right. We're not going to get out of the debt by 
lowering the military spending alone.
    I'm all in for reforming the way we spend money. Costs plus 
contracts seem to be a bad idea. Do you agree?
    Secretary Panetta. That's correct.
    Senator Graham. The longer it takes, the more you make. The 
more it costs, the longer it takes for the contractor, the more 
they make.
    You're looking at doing a fixed-price contract for future 
weapons acquisitions, right?
    Secretary Panetta. That's right.
    Senator Graham. Where everybody's got skin in the game. Go 
down that road. I applaud you tremendously for doing that.
    Aid to Pakistan. Do you consider the Foreign Ops budget a 
benefit to the military? The Foreign Operations account, the 
State Department's role in the world.
    Secretary Panetta. Yes.
    Senator Graham. Okay. Would you recommend to us to stop aid 
to Pakistan right now?
    Secretary Panetta. I'd be very careful about, you know, 
just shutting it down.
    What I would do is look at conditions for what we expect 
them to do.
    Senator Graham. What about Egypt?
    Secretary Panetta. No, I would not, I think, at this point 
in time, support that----
    Senator Graham. Could you and General Dempsey write me a 
letter recommending to the Congress what we should do about our 
aid programs to the Pakistani military, the Pakistani 
Government, to the Egyptian military and to the Egyptian 
Government?
    Secretary Panetta. Yes.
    Senator Graham. Okay.
    The last thing I want to talk to you about very briefly is 
you said something that just kind of went over everybody's head 
I think. That there's a Pearl Harbor in the making here.
    You're talking about shutting down financial systems, 
releasing chemicals from chemical plants, releasing water from 
dams, shutting down power systems that could affect the very 
survival of the Nation.
    What's the likelihood in the next 5 years that one of these 
major events will occur?
    Secretary Panetta. Well, you know, all I can tell you is 
that----
    Senator Graham. Is it a high probability or low 
probability?
    Secretary Panetta. All I can tell you is that, 
technologically, the capability to paralyze this country is 
there now.
    Senator Graham. Is there a growing will to use that 
capability by our enemies?
    Secretary Panetta. I think the more this technology 
develops, the more the will to potentially use it is going to 
dictate the will.
    Senator Graham. Would you say there is a high probability, 
that the capability, and the will?
    Secretary Panetta. I think there's a high risk.
    Senator Graham. Okay. Thank you both for your service.
    Chairman Inouye. Thank you.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman. I will be 
brief. Gentlemen, thank you.

                          AIR FORCE IN ALASKA

    Secretary Panetta, you have mentioned that this budget 
needs to relate to the full-defense strategy. We certainly 
understand that with the attention to Asia and the Pacific. We 
think that Alaska plays a large and a significant role. We 
have, historically.
    But we think going into the future, that that role actually 
accelerates. There has been a proposal by the Air Force to move 
the F-16 Aggressor Squadron from Eielson. We've raised many, 
many questions.
    Unfortunately, it seems that there are more questions that 
are being raised after we receive some of the information from 
the Air Force.
    We just got the site activation task force review that was 
assigned to look at the feasibility of this move. The concern 
that we have is in addition to additional questions being 
raised, you've got a situation where the other forces are, I 
think, are impacted.
    You've mentioned that this needs to--this budget needs to 
be a balance between all forces. We're looking at the impact to 
the Guard which has the 168th Refueling Wing, and how it will 
be impacted if Eielson is put to reduced hours.
    We look at the incredible Army training ranges that we have 
up north that could be comprised. At J-Bear, we've got some 
very serious housing issues that need to be assessed.
    We are in a situation now where we are trying aggressively 
to get some very concrete answers from the Air Force on this. 
We have determined that this proposal is going to cost us this 
next year $5.65 million in fiscal year 2013, which does not 
fall in line with the President's budget.
    The very direct question that I have to you, Secretary 
Panetta, General Dempsey, is whether or not you will encourage 
the Air Force to abandon this plan for Eielson Air Force Base 
in 2013.
    Take this proposal back to the drawing board, give it the 
thorough, very comprehensive vetting that it must have, to 
ensure that in fact we are operating with the focus, the vision 
towards the Asia Pacific, and that this truly does reflect the 
new defense strategy.
    Secretary Panetta. I will have General Dempsey respond to 
this as well.
    Let me make clear that, you know, the Air Force was looking 
for, obviously, ways to save money because of the 
responsibility to respond to the Budget Control Act.
    There are F-15s located at Eielson. There's F-15s located 
at Elmendorf, and they felt that it was better to try to unify 
those.
    I just want you to know, and I've shared this with your 
colleague as well, that we have no intention of closing down 
Eielson. It's a very important base for us. It's important in 
terms of air refueling. It's important in terms of the role 
that we want to be able to play with regards to the Pacific.
    And so nothing that is being recommended here in any way is 
intended to impact on Eielson itself as a future base for the 
Air Force.
    General Dempsey. I'll just add.
    I know that you and Senator Begich are in contact with the 
Air Force. I won't commit to going back and talking the nut of 
their plan. I will commit to you to go back and make sure I 
understand their plan better. And then, I'll engage with you on 
it personally, you and Senator Begich.
    Senator Murkowski. Well, I appreciate that.
    I do recognize though that part of the proposed savings 
that the Air Force is looking to is demolishing several 
buildings within Eielson. The replacement value of these is 
about $150 million.
    So it puts it in a situation where it would appear to be a 
backdoor BRAC, and that is the concern, the consideration.
    So again, if I can ask you to do a very comprehensive 
review, work with us, General Dempsey, I will look forward to 
your conversation.
    Mr. Chairman, I thank you. And I will conclude my comments 
with just a direct appeal. The focus, as we look at the 
infrastructure is all very keen, but it always comes down to 
our human assets.

                                SUICIDE

    I remain very, very troubled with the high level of suicide 
that we are seeing with our military, also with our veteran 
population. I think most are staggered to learn that we're 
actually seeing more deaths due to suicide than we are actually 
out in theater in Afghanistan.
    How we deal with this reflects on how we are as a Nation 
and our commitment to those who serve us. So I know you are 
focused on that, but I felt compelled to raise it here.
    Secretary Panetta. Senator, I thank you for pointing that 
out.
    I'm very concerned by the high rate of suicides. Talking 
with the Service Chiefs, they share that concern. And, as a 
matter of fact, highlighted the fact that they were seeing, you 
know, a higher rate in suicide than they had seen in the past.
    And what I've asked all of them to do, plus the 
undersecretaries that are responsible for this, is to 
immediately look at that situation and determine what's behind 
it, what's causing it, and what can we do to make sure it 
doesn't happen.
    Chairman Inouye. Thank you very much.
    Senator Murray.
    But before you do, we'll be leaving because there's a vote 
pending.
    Senator Murray [Presiding]. Okay. Thank you very much, Mr. 
Chairman. I appreciate that.
    Mr. Secretary, I want to continue the thought process of 
Senator Murkowski. I, too, am very alarmed by the suicide rate 
among our servicemembers and our veterans.
    New analysis is showing us that every day in 2012 one of 
our servicemembers committed suicide, and as you just 
commented, outpacing combat deaths. In our veteran population, 
we know a veteran commits suicide every 80 minutes, every 80 
minutes.
    Now, I think we can all agree on two things. First of all, 
our servicemembers and their families have risen to the 
challenge. They have done everything this country's asked of 
them throughout the wars in Iraq and Afghanistan. We're all 
eternally grateful.
    Second, the Pentagon and the Department of Veterans Affairs 
(VA) are losing the battle on mental and behavioral health, 
conditions that are confronting a lot of our servicemembers, 
loved ones and as we just talked about, resulting in such 
extreme things as suicides.
    Secretary Panetta, our servicemembers and veterans can't 
get needed treatment or access to needed resources without 
correct diagnosis. As you know, this has been a major problem 
for soldiers in my home State of Washington.

                     POST-TRAUMATIC STRESS DISORDER

    At Madigan, to date, more than 100 soldiers and counting, 
have had their correct post-traumatic stress disorder (PTSD) 
diagnoses now restored after being told they were exaggerating 
their symptoms, lying, and accused of shirking their duties.
    So, understandably, a lot of our servicemembers' trust and 
confidence in the disability evaluation system has been 
seriously shaken in the wake of these events.
    As you know, I have continually raised concerns about the 
consistency and accuracy of behavioral health evaluations and 
diagnosis within the entire disability evaluation system and 
have offered my recommendations on how to improve the system.
    And, as you also know, the Army has now taken some 
critically important steps forward in beginning to address 
these concerns.
    Secretary McHugh has announced a sweeping, comprehensive 
Army-wide review of behavioral health evaluations and diagnosis 
back to 2001 to correct the errors of the past and to make sure 
our servicemembers get the care and services that they need and 
that they deserve.
    But I wanted to ask you today, because this is not just an 
Army disability evaluation system; this is a joint Department 
of Defense and VA program, covers all the services. So I wanted 
to ask you why the Department has not taken the lead in 
evaluating and making improvements to the entire system.
    Secretary Panetta. Senator, we are.
    What I've asked is the other service chiefs' view, 
implement the same approach that the Army's taking here.
    Senator Murray. To go back to 2001 and review all cases?
    Secretary Panetta. That's correct.
    Senator Murray. Throughout the entire system?
    Secretary Panetta. That's correct.
    Senator Murray. Okay.
    So they are all following the Army's lead now, and we will 
be told the evaluations and the progress of that.
    Who's heading that up?
    Secretary Panetta. Our Under Secretary for Personnel and 
Healthcare. That's the individual that you need to contact.
    Senator Murray. Well, I would very much like to be kept 
informed as I'm sure all of our Members of Congress would. I 
think this needs to be transparent and clear.
    We need to make sure that people are accessing the system, 
getting back if they need it, and the only way to do that is to 
be clear, open, and honest with everyone.
    So I didn't know that we were looking at all the other 
Services, and I'd like more information and to be informed on 
that as soon as possible about how that's taking place and what 
the timetable is, and how that's going to occur.
    Secretary Panetta. I appreciate your leadership on this, 
Senator, and I'm not satisfied either.
    I think, you know, the misdiagnosis that took place, what's 
happening in this area between, look, we're doing everything we 
can to try to build a better system between the Pentagon, the 
Department of Defense, and VA.
    But there are still huge gaps in terms of the differences 
as to how they approach these cases, how they diagnose these 
cases, and how they deal with them. And, frankly, that's a 
whole area that we've just got to do much better on.
    Senator Murray. Well, you can't imagine what it's like to 
talk to a soldier who was told he had PTSD. His family was 
working with him, and then when he went through the disability 
evaluation system was told he was a liar, or a malingerer. He 
was taken out of it, and then he went out into the civilian 
world, not being treated.

                      DISABILITY EVALUATION SYSTEM

    That is a horrendous offense. You know, I'm chair of the 
Veterans Affairs Committee, and I recently held a hearing on 
the joint disability evaluation system. And I just have to tell 
you, I am really troubled by what I'm hearing.
    Enrollment is continuing to climb. The number of 
servicemembers' cases meeting timeliness goals is unacceptably 
low. The amount of time it takes to provide benefits to a 
servicemember who is transitioning through the system has risen 
each year since we began this.
    In response to these problems, we heard from DOD and VA 
together about how 5 years after, 5 years after the Walter Reed 
scandal, and this program was piloted, they're just now 
beginning to map out business processes to find room for 
improvement.
    You know, that's just unacceptable. The public, all of us, 
really believe that this was being taken head on, that we were 
dealing with it. At 5 years out, unacceptable numbers that 
we're seeing.
    So I wanted to ask you what you are doing at your level to 
deal with this, 5 years into this program, and we're still 
hearing statements from Army leaders about how the disability 
evaluation system is fundamentally flawed, adversarial, 
disjointed.
    Tell me what we're going to do.
    Secretary Panetta. Let me do this.
    Secretary Shinseki and I have been meeting on a regular 
basis to try to do what we can to implement improvements. And, 
very frankly, we're not satisfied either by the progress that's 
being made here.
    Part of it is bureaucratic, part of it is systems, part of 
it is just the complicated and----
    Senator Murray. You can't image what it sounds like to hear 
that.
    Secretary Panetta. Pardon me?
    Senator Murray. It's bureaucratic. I mean, if you're in 
this system, that's not the word you want to hear.
    Secretary Panetta. Yes, okay.
    And, you know, I see it every day. I'm in charge of a very 
big bureaucracy. And the fact is that sometimes just the 
bureaucratic nature of large departments prevents it from being 
agile enough to respond and do what needs to be done.
    And so a large part of this is just making sure that people 
are willing to operate out of the box, and do what needs to be 
done in order to improve these systems.
    What I would offer to you is let Secretary Shinseki and I 
sit down with you and walk through the steps we're taking to 
try to see if we can try to shake the system and make it do a 
better job.
    Senator Murray. Mr. Secretary, I really appreciate that 
commitment.
    I know you have not been there the entire 5 years, but I 
will tell you this, we've been told for 5 years that DOD and VA 
are sitting down on a regular basis addressing this.
    Secretary Panetta. I know. Yes.
    Senator Murray. And I'm talking to soldiers that are stuck 
in this disability evaluation system. There are bureaucratic 
delays. The people that are supposed to be helping them, 
they're training them because they've been in the system longer 
than the trainers who are supposed to come in and work with 
them.
    Their families are facing, you know, horrendous challenges 
as they try and figure out what the future brings, months on 
end. You know, people at the top are saying this is 
fundamentally flawed. You ought to hear what the people at the 
bottom who are in it are saying.
    Secretary Panetta. Yes.
    Senator Murray. So I totally appreciate your saying that to 
me today, but sitting down and talking with Secretary Shinseki 
is something we've been hearing for a long time. We need some 
recommendations. We need to move forward. We need this to be a 
top priority at the Pentagon.
    As we transition now out of Afghanistan, this is not going 
to get more simple.
    Secretary Panetta. I agree with you. No, you're absolutely 
right.

       POST-TRAUMATIC STRESS DISORDER AND BEHAVIORAL HEALTH CASES

    Senator Murray. Add to that, the complexities of now going 
back and reviewing all of these PTSD and behavioral health 
cases, you have people who are in the IDs system right now who 
are saying, what's going to happen to me while you go back and 
review all these people?
    Are we putting more personnel in to deal with this? Or, now 
am I going to take another back seat as we deal with that? This 
is complex. It's hard. It's problematic, but it needs every 
single effort from top to bottom.
    Secretary Panetta. Listen, I share all of your 
frustrations, and my job is to make sure that we don't come 
here with more excuses, but we come here with action. I 
understand.
    Senator Murray. And I truly appreciate that comment, and I 
want to work with you. All my efforts are at your disposal. We 
do a fantastic job of training our men and women to go into the 
service. We still today have not gotten this right after this 
war in making sure that they transition back home.
    We have families and soldiers and airmen throughout the 
Service who are really stuck in a process that they shouldn't 
be stuck in. We've got to get this right, and we got to get it 
right now, and we need every effort at it.
    And I will sit down with you the minute you tell me you are 
available, but I want more than a meeting.
    Secretary Panetta. Okay. I agree.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Murray. Okay. All right. I believe, is Senator 
Shelby on his way?
    I understand that Senator Shelby is on his way. We have a 
second vote. I have to get back for that. If I would just ask 
you gentlemen patience for him to return so that I can return 
for the second vote, I would appreciate it.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

            Questions Submitted to Secretary Leon E. Panetta
               Questions Submitted by Senator Tom Harkin

    Question. Mr. Secretary, the Department of Defense (DOD) has become 
increasingly concerned over the past few years regarding our military's 
dependence on petroleum-based fuels. These concerns relate to both the 
ready availability of fuels during times of conflict and to the 
increasing costs of such fuels.
    For example, it's been reported that the Pentagon spent $17.3 
billion on petroleum in 2011, a 26-percent increase from the previous 
year with practically no change in the volume purchased.
    It has also been reported that for every $0.25 increase in the 
price of jet fuel, the DOD must come up with an extra $1 billion 
annually.
    Relative to future supplies and prices, we can all see that global 
fuel demands will continue to increase steadily as the economies of the 
BRIC nations--Brazil, Russia, India, and China--and similar nations 
grow and demand more fuel for transportation and industrialization.
    Obviously, some of our leaders in the Pentagon see these future 
threats as well, and I commend the Department of the Navy for signing a 
memorandum of understanding (MOU) with the Department of Energy (DOE) 
and with United States Department of Agriculture (USDA) for the 
development of commercial biofuels production capabilities. I 
understand that under this MOU, the DOD intends to fund multiple drop-
in biofuel production facilities under the Defense Production Act.
    Could you please speak to DOD's long-term strategy for assuring 
future fuels supplies and the role that you believe domestic biofuels 
can and should play in that? More specifically, could you comment on 
the role that this joint Navy/DOE/USDA procurement activity plays in 
DOD's longer term fuels security strategy?
    Answer. In DOD's ``Operational Energy Strategy,'' our goal is to 
ensure our forces have the energy they need to protect the Nation. The 
``Strategy'' rests on three principles:
  --reducing demand;
  --diversifying supply; and
  --building the future force.
Reducing demand, or getting more military output for our energy input, 
is the top energy security priority for the Department. Ninety percent 
of the Department's investment in operational energy improvements in 
fiscal year 2013 will go toward these sorts of energy efficiency and 
performance gains. Improved energy efficiency not only benefits the 
Department's bottom line, but more importantly, helps produce forces 
that are lighter, more mobile or flexible, and have greater range or 
endurance. Building an energy-efficient future force means that the 
Department needs to integrate operational energy considerations into 
the full range of planning and force development activities.
    The second principle of diversifying supply is where domestic 
biofuels and other similar efforts are important. The Department needs 
to diversify its energy sources in order to have a more reliable and 
assured supply of energy for military operations. We are going to have 
ships, planes, and vehicles designed to use liquid fuels for decades to 
come so we have an interest in the ability of drop-in biofuels to, over 
the long term, provide the Department with new, sustainable, and 
reliable sources of the fuel we need to accomplish the defense mission. 
We are looking for fuels that are compatible with existing equipment 
and storage infrastructure, exploring where and how biofuels will be 
available and affordable to our forces, and leveraging the expertise of 
other Federal agencies where appropriate.
    The Army, Navy, Air Force, and Marines have been certifying 
aircraft, ships, tactical vehicles, and support equipment to use 
alternative liquid fuels. Such activities represent a relatively small 
but important investment in drop-in alternative fuels--less than 0.6 
percent of the more than $15 billion the Department spent on petroleum 
fuel last year. This investment ensures that our equipment can operate 
on a wide range of alternative fuels, which is important to ensuring 
our military readiness over the long term.
    To aid the Military Services in this effort, on July 5, 2012, the 
Department of Defense Alternative Fuels Policy for Operational 
Platforms was released. The policy, which was required by the National 
Defense Authorization Act (NDAA) for fiscal year 2012, states that the 
Department's primary alternative fuels goal is to ensure operational 
military readiness, improve battlespace effectiveness, and further 
flexibility of military operations through the ability to use multiple, 
reliable fuel sources. It makes clear that all DOD investments in this 
area will be subject to a rigorous, merit-based evaluation. The policy 
also lays out clear guidance for our future fuel certification efforts, 
field demonstrations, and ongoing purchases. Of note, the policy 
formalizes what is already the practice for all the Services: That DOD 
will not make bulk purchases of alternative drop-in replacement fuels, 
outside of certification and demonstration activities, unless they are 
cost competitive with petroleum products. With this policy, the 
Department will continue to steward its alternative fuels investments 
wisely as we ensure the long-term readiness and capability of our joint 
force.
    Another important component of the Department's longer term fuels 
security strategy is the Defense Production Act Advanced Drop-In 
Biofuels Production Project, which is focused on creating public-
private partnerships to incentivize private-sector investment in cost-
competitive biofuel production capability. The U.S. Navy and the 
Departments of Agriculture and Energy developed the initial strategy 
for this project, which is now under the oversight and technical review 
of an interagency team that will ensure the best value for the taxpayer 
and the Department.
    Question. As DOD has worked to strengthen the Afghan carpet 
industry, for the past 2 years, I have been raising with the Department 
the need to ensure that DOD funds do not, either directly or 
indirectly, support child labor in the carpet industry. I've not been 
wholly satisfied with DOD's efforts in this regard. The contract into 
which DOD entered to prevent the use of child labor in the carpet 
industry stopped short of mandating an independent third-party 
monitoring and certification system. Subsequent to that, the contractor 
offered a no-cost extension of the contract to do just that, but DOD 
refused.
    Quite frankly, I think the Department needs direction from the top 
that it should examine all of its efforts in the Afghan rug industry to 
make sure that it's doing all that it can to ensure U.S. taxpayer 
dollars are not being used to exploit children in any sector of the 
economy. Mr. Secretary, we have a legal and moral obligation to require 
that no child labor be used when U.S. tax dollars are paying for 
economic development projects. What actions will you take moving 
forward to ensure that relevant DOD contracts will include safeguards 
so U.S. funding does not subsidize child labor?
    Answer. DOD is committed to promoting stability in Afghanistan 
responsibly through strategic business and economic activities. DOD 
takes this issue very seriously and is committed to our treaty 
obligations under the International Labor Organization Convention No. 
182 on child labor and receives policy guidance from the U.S. 
Department of State as the U.S. Government's lead on these issues. The 
DOD, through the Task Force for Business and Stability Operations, will 
continue to work with the Departments of Labor, Commerce, and State on 
the issue of child labor in Afghanistan should it arise in future 
projects.
                                 ______
                                 
            Questions Submitted by Senator Richard J. Durbin

    Question. How is the Department ensuring that critical, Government-
owned and -operated facilities in the Nation's organic industrial base, 
like Rock Island Arsenal, are properly and strategically modernized so 
that these facilities have the equipment and skillsets they need to 
respond to wartime needs?
    Answer. Section 2476 of title 10, United States Code, sets forth a 
congressional mandate for minimum capital investments for certain 
depots of the Department, including the Rock Island Arsenal. 
Specifically, section 2476 dictates each military department shall 
invest in each fiscal year in the capital budgets of those depots a 
total amount at least equal to 6 percent of the average total combined 
maintenance, repair, and overhaul workload funded at all the depots of 
that military department for the preceding 3 fiscal years. The Army, 
for example, has exceeded the 6-percent threshold with an investment in 
its facilities of approximately $290 million from fiscal year 2009 
through fiscal year 2012.
    The Army has developed an Organic Industrial Base Strategic Plan 
that provides a disciplined framework for ensuring that all the Army's 
arsenals and depots remain viable and relevant in a post-war funded 
environment. The plan addresses a Capital Investment Strategy that 
includes investment in new technology, training, and plant equipment at 
the same rate that the Army modernizes its weapon systems. The plan is 
in the final stages of approval by Headquarters Department of the Army 
(HQDA).
    Further, the Department is mandated under 10 U.S.C. 2464, to 
maintain a core depot-level repair capability. The purpose of the core 
requirement is, among other things, to ensure a ready and controlled 
source of technical competence and resources needed to respond to 
military mobilization, contingencies, and other emergencies. The 
Department applies and enforces the core requirement through an annual 
and biennial capability and workload review, completed by the Services, 
and reviewed by the Office of the Secretary of Defense. To efficiently 
maintain maintenance capabilities, DOD facilities, equipment, and 
personnel accomplish a broad range of workloads in support of peacetime 
operations. Most of these workloads involve the maintenance, repair, 
and overhaul of combat weapons systems and components ensuring a 
defined skill set and wartime repair capability. Additionally, the 
preservation of core capability requires ongoing capital investments 
consistent with section 2476 as well as the introduction of new weapon 
systems.
    Question. The Senate and House versions of the National Defense 
Authorization Act (NDAA) for fiscal year 2013 each carry authorizations 
for some of the reforms you announced earlier this year to combat 
sexual assault in the military. Is the Department planning for the 
implementation of those authorized authorities, assuming they are 
signed into law? If so, please describe the Department's implementation 
timeline.
    Answer. The Department is prepared to review and expeditiously 
implement the provisions of the fiscal year 2013 NDAA once it is in 
effect. The proposed Leadership, Education, Accountability and 
Discipline on Sexual Assault Prevention Act of 2012 (LEAD Act) contains 
six major elements, each requiring a unique timeline and implementation 
plan. Assuming the bill is passed, we offer an approximate timeline for 
each element as follows:
  --Establish Special Victim's Capability within each of the services 
        comprised of specially trained investigators, judge advocates 
        and victim-witness assistance personnel. Each service have 
        identified and are already training investigators and judge 
        advocates to establish this capability. Following passage, 
        victim witness liaisons will be identified and trained to 
        complete this capability. Once the fiscal year 2013 NDAA is 
        passed, it will take approximately 6 months to 1 year for all 
        of the services to have a functioning Special Victim's 
        Capability for each service.
  --Require that all servicemembers have sexual assault policies 
        explained within 14 days of entrance into active service, 
        educating our newest members right away to understand our 
        culture will not tolerate sexual assault. Once the fiscal year 
        2013 NDAA is passed, this element will take approximately 3 
        months for full implementation.
  --Require a record of the outcome of disciplinary and administrative 
        proceedings related to sexual assault be centrally located and 
        retained for a period of not less than 20 years. Once the 
        fiscal year 2013 NDAA is passed, it will take approximately 6 
        months to 1 year to implement this requirement.
  --Require Commanders to conduct an annual Organizational Climate 
        assessment, obtaining information about the positive and 
        negative factors that impact unit effectiveness and readiness. 
        Once the fiscal year 2013 NDAA is passed, this element can be 
        implemented within a 6-month time period.
  --Provide Reserve and National Guard personnel who have been sexually 
        assaulted while on active duty to request to remain on active 
        duty or return to active duty until line of duty determination 
        is done, allowing servicemembers who file an Unrestricted 
        Report to receive services and/or complete a line of duty 
        investigation. Once the fiscal year 2013 NDAA is passed, this 
        element will take approximately 6 months to 1 year to 
        implement.
  --Require greater availability of information on Sexual Assault 
        Prevention and Response resources to include DOD workplaces, 
        dining facilities, healthcare, and residential facilities will 
        have prominently placed Sexual Assault Prevention and Response 
        resources information to assist servicemembers, military 
        dependents, and civilian personnel. Once the fiscal year 2013 
        NDAA is passed, this element will take approximately 6 months 
        to implement.
    Question. Recently, the Department opened up approximately 14,000 
battalion-level combat-related positions to female servicemembers. What 
is the Department's timeframe for examining and possibly reclassifying 
other combat-related provisions in order to permit women to serve on a 
broader basis?
    Answer. In March of this year, the Department eliminated the co-
location restriction that opened more than 13,000 combat support 
positions to both men and women, as well as opened more than 1,000 
positions at the battalion level in direct ground combat units in order 
to evaluate the performance of women in these positions and inform 
policy. I have directed the Secretaries of the military departments to 
advise me on their evaluations of women's performance in these 
positions, as well as any additional positions that can be opened and 
assessment of remaining barriers to full implementation of the policy 
of allowing all servicemembers to serve in any capacity, based on their 
abilities and qualifications. This assessment will occur no later than 
November 2012.

                            VISION RESEARCH

    Question. In the fiscal year 2013 budget submission, the President 
requested $21.374 million for core vision/eye research and all sensor 
systems.
    Would you discuss the importance of this funding?
    Answer. Research to improve the prevention, mitigation, treatment, 
rehabilitation, and restoration of military eye and vision trauma is 
critically important since most human activity is visually guided. In 
current conflicts, eye injuries account for approximately 15 percent of 
all battlefield trauma, and have resulted in approximately 183,000 
ambulatory and more than 4,000 hospitalized cases involving eye injury. 
In addition to injuries that blind or impair vision immediately, hidden 
injuries such as retinal breaks, iris disinsertion, lens damage, and 
optic nerve trauma have been found to go undetected at the time of the 
battlefield trauma and dramatically increase the risk of future vision 
loss. Even in the absence of direct eye injury, blast exposures, 
concussions, and traumatic brain injuries (TBI) cause visual and 
associated vestibular neurosensory dysfunction in 75 percent of exposed 
individuals. All of these problems negatively affect the ability of 
servicemembers and veterans to reintegrate in both military and post-
service employment and life skills.
    The DOD/Veterans Affairs (VA) Vision Center of Excellence has been 
a leader in the analysis of research gaps in blindness and vision 
impairment, including TBI-related vision syndrome. Under the aegis of 
its Vision Research Portfolio (VRP), DOD has developed a comprehensive 
inventory of needed research in blindness, vision impairment, and TBI-
related visual neurosensory dysfunctions caused by military trauma. The 
range of these research topics spans:
  --the discovery of better methods of protecting deployed individuals, 
        improved battlefield treatments that will save the sight of the 
        wounded;
  --development of long-term treatments for chronic visual 
        dysfunctions;
  --the need for better surveillance tools for as yet undetected 
        problems; and
  --developing valid approaches to the restoration of sight.
At present, vision restoration is in its infancy compared to other 
areas of prosthetics, such as amputations, where dramatic strides are 
continually being made. We are fortunate that VRP funding announcements 
are being met by research proposals of the highest quality, which will 
greatly benefit the care of our servicemembers and veterans. We have an 
obligation to our servicemembers and veterans to ensure that they have 
access to our best possible solutions for their readiness, ocular 
health and visual quality of life. Maintaining and enhancing funding of 
DOD research targeted to these areas is a critical need.
                                 ______
                                 
            Questions Submitted by Senator Dianne Feinstein

                UNITED STATES RELATIONSHIP WITH PAKISTAN

    Question. Last month, at the full Committee mark-up of the fiscal 
year 2013 State and Foreign Operations appropriations bill, this 
Committee cut $33 million in Foreign Military Financing for Pakistan to 
protest the 33-year prison sentence for Doctor Shakil Afridi, who 
helped the United States track down Osama bin Laden.
    What are your current views on United States foreign assistance to 
Pakistan and how do you see the United States-Pakistan relationship at 
this time?
    Answer. The United States-Pakistan relationship is fundamental to 
our vital national security interests. We need to cooperate with 
Pakistan on defeating al-Qaeda, supporting Pakistani stability, and 
reaching a lasting peace in Afghanistan. I support assistance to 
Pakistan that is targeted at achieving our core interests and 
sustaining our engagement--civilian and military--with the Government 
of Pakistan. By comparison, cutting off assistance to Pakistan in 1990 
led to an era of decreased engagement which still adversely affects our 
relationship today.
    The Department of Defense (DOD) programs--especially Coalition 
Support Fund reimbursements--will play an important role in re-starting 
our engagement with Pakistan as we seek a way forward on advancing 
broader United States national security interests. Passing amendments 
limiting assistance to Pakistan will jeopardize our ongoing discussions 
on all avenues of cooperation, including the ground lines of 
communication (GLOC) negotiations. If we can restart the relationship, 
the next year would require that we be flexible enough to respond to 
potential additional strains that may occur, and to take advantage of 
any improvement in Pakistan's willingness to cooperate on issues that 
advance United States national interests. Any conditions applied to DOD 
programs for Pakistan should, therefore, be designed to support these 
interests. Funding restrictions or unachievable certification 
requirements for those programs would have direct, negative 
consequences on our core interests, our strategic posture in 
Afghanistan, and long-term regional stability.
    Question. What do you see happening with the border situation in 
Pakistan? Are we able to resupply our troops in Afghanistan without 
using the Pakistani border?
    Answer. We--and our North Atlantic Treaty Organization (NATO)/
International Security Assistance Forces (ISAF) partners--have been 
able to support our forces in Afghanistan during the closure of the 
Pakistan-based GLOC since late November. However, we have done so by 
relying heavily on northern distribution network (NDN) lines of 
communication as well as costly, multimodal shipments using rail and 
air. Maintaining redundant supply routes into Afghanistan, including 
the Pakistan GLOC, will enable logistics flexibility at a critical time 
for coalition forces. Working with Pakistan to open the GLOC will 
reduce the burden on the United States taxpayer, will allow us to 
transit supplies to forces more quickly, and will be important for 
United States and coalition retrograde from Afghanistan and equipping 
of Afghan National Security Forces (ANSF).
    Question. When will the administration finally declare the Haqqani 
Network a Foreign Terrorist Organization (FTO)?
    Answer. The authority to make FTO designations rests with the 
Secretary of State. I understand that Secretary Hillary Clinton is 
undertaking a review of an FTO designation of the Haqqani Network, and 
I defer to her on the results of that review.

                            SOUTH CHINA SEAS

    Question. Secretary Clinton has stated that the peaceful resolution 
of disputes in the South China Sea is in the ``national interest of the 
United States,'' and that multilateral solutions should be pursued. In 
response, the People's Liberation Army insisted that China had 
``indisputable sovereignty'' over the sea, though it would allow 
freedom of navigation.
    What is your assessment of China's behavior in the South China Sea?
    Answer. My assessment is that China should clarify the nature of 
its claims in the South China Sea and resolve disputes through 
diplomatic means consistent with international law without coercion or 
the threat or use of force. We encourage China to work with Association 
of Southeast Asian Nations (ASEAN) on developing a binding code of 
conduct for behavior in the South China Sea and to work toward the 
peaceful settlement of territorial disputes. It is long-standing U.S. 
policy that we do not take a position on specific territorial disputes, 
and we have consistently called upon all parties to clarify their 
claims in the South China Sea in terms consistent with international 
law. Finally, it is important that China recognize and respect the full 
breadth of high seas freedoms in its exclusive economic zone (EEZ), 
which includes the freedoms of navigation and overflight and other 
internationally lawful uses of the seas related to these freedoms.
    The region and the world are watching the situation in the South 
China Sea carefully, and forming impressions based on how claimant 
states manage these disagreements.
    Question. Who is driving this assertiveness, the military or 
civilian leadership?
    Answer. We have questions about the level of coordination between 
the political and military leadership in China, and suspect there are 
areas of friction between them. However, we believe that recent actions 
taken in the South China Sea are in accordance with the broader goals 
of the civilian leadership and do not represent a rift within China's 
leadership. The People's Liberation Army's (PLA) top decisionmaking 
body, the Central Military Commission, remains subordinate to civilian 
leadership. China's consensus driven decisionmaking process continues 
to prevent one entity from challenging the status quo.
    Question. How concerned are you that an incident in the South China 
Sea, such as the current standoff between China and the Philippines 
over the Scarborough Shoal, could erupt into a wider conflict that 
could drag in the United States?
    Answer. We are watching the situation in the South China Sea 
closely, and support a collaborative diplomatic process by all 
claimants to resolve disputes. The United States opposes the use or 
threat of force or coercion by any claimant in pursuing its claims. We 
support ASEAN and China's efforts to negotiate a full code of conduct 
that:
  --is based on the principles of the U.N. Charter, customary 
        international law as reflected in the Law of the Sea 
        Convention, the Treaty of Amity and Cooperation, and the 
        Declaration on Conduct; and
  --creates a rules-based framework for managing and regulating the 
        conduct of parties in the South China Sea, including preventing 
        and managing disputes.
    To reduce the risk of conflict in the South China Sea, I believe 
the United States should use its position in several regional 
organizations, including the East Asia Summit, the ASEAN Regional 
Forum, and the ASEAN Defense Ministers Meeting Plus, to facilitate 
initiatives and confidence-building measures that will help claimant 
states reach an agreement on a binding code of conduct in the South 
China Sea. Additionally, the United States should continue serving as a 
positive example of a nation that adheres to recognized international 
norms of behavior through policy implementation, effective training, 
and proper accountability. These include the ``rules of the road,'' 
such as the International Regulations for Preventing Collisions at Sea 
(COLREGs), the International Convention for the Safety of Life at Sea 
(SOLAS), and other established international safety and communication 
procedures, such as the Code for Unalerted Encounters at Sea (CUES). 
The United States should also encourage all South China Sea claimants 
to abide by these behavioral norms to ensure greater operational safety 
and reduce the risk of dangerous incidents at sea.
    Question. What lines of communication do we have with China's 
military in a crisis situation and are they sufficient?
    Answer. DOD maintains contact with the PLA through a variety of 
mechanisms, including China's Defense Attache Office at its Embassy in 
Washington and the U.S. Defense Attache Office at the U.S. Embassy in 
Beijing. Additionally, in 2007, a Defense Telephone Link (DTL) was 
established between the United States and China, intended for exchanges 
between the United States Secretary of Defense and China's Minister of 
National Defense. Secretary of Defense Gates made the first call to his 
counterpart in April 2008. We seek a military-to-military relationship 
with China that is healthy, stable, reliable, and continuous--these 
lines of communication, which are sufficient, help us meet that goal.

                              AFGHANISTAN

    Question. The number of U.S. forces will be reduced to 68,000 by 
September, down from a peak of approximately 100,000 in June 2011. 
President Obama has said that further reductions will continue ``at a 
steady pace'' until the end of 2014 when Afghan forces will assume full 
responsibility for the security of their country.
    What factors will influence the pace of additional reductions?
    Answer. The recovery of the final 23,000 surge forces is expected 
to be completed by September 2012. Following the completion of the 
surge recovery, fewer than 68,000 U.S. military personnel will remain, 
as laid out in the President's surge plan. As DOD senior leaders have 
stated many times, any future decisions on force reductions will be 
conditions based. This fall, General Allen will prepare his 2012 
fighting season analysis, assessment of the Afghan National Security 
Forces (ANSF) readiness, and will develop and assess options for post-
surge force levels.
    General Allen's assessment and recommendations will inform, along 
with the Chairman's military advice, my recommendations to the 
President. Primary considerations include the capabilities of both the 
ANSF and the insurgency, the overall security situation across the 
country at the end of the 2012 fighting season, and the projected 2013 
security environment. Security must be considered along with other 
factors, such as progress in transitioning districts and Afghan 
governance development. The security transition process will be 
particularly important, as Afghanistan prepares for the final two 
tranches of Afghan districts that will enter transition. We must ensure 
we have the right mix of United States, International Security 
Assistance Force (ISAF), and ANSF units available to allow the Afghan 
forces to assume the lead in these last transitioning districts. 
Finally, General Allen will assess the required composition of U.S. 
forces on the ground in order to achieve the correct balance of 
conventional, security force assistance, special operations, and 
enabling forces for the future security environment.
    Question. Are Afghan forces still on track to take the lead in 
security matters by mid-2013?
    Answer. ANSF remain on schedule to assume the lead for security in 
Afghanistan in 2013 once Tranche 5 districts begin transition. The ANSF 
continue to grow in capability and size and are increasingly taking the 
lead in planning and conducting operations. Both the Afghan National 
Army (ANA) and Afghan National Police are becoming increasingly 
independent, and the ANA are in the process of establishing its first 
division-sized special operations forces unit.
    Tranche 3 districts will begin transition in July 2012 and at that 
time more than 75 percent of the Afghan population will live in areas 
where the ANSF are in the lead for security. We expect the Afghan 
Government to announce the districts composing Tranche 4 this winter 
and Tranche 5 in mid-2013. Additionally, security conditions are 
assessed as stable in locations where Afghan forces have assumed a lead 
security role. In 2012, enemy-initiated attacks in transitioning 
districts have fallen year to date overall by approximately 15 percent 
from 2011 levels.
    Question. How confident are you that they will be able to assume 
and sustain the lead for security matters?
    Answer. ANSF remain on schedule to assume and maintain the lead for 
security matters. The ANSF are on track to assume lead security across 
Afghanistan as Tranche 5 is implemented in 2013. The International 
Security Assistance Force (ISAF) will continue to train, advise, and 
assist the ANSF as transition process continues through the end of 
2014. At that Point, the Afghans will assume full responsibility for 
security in Afghanistan in accordance with the Lisbon transition 
strategy and timeline.
    However, the international community will not end its commitment to 
Afghanistan in 2014. The North Atlantic Treaty Organization (NATO) 
Summit in Chicago reaffirmed the international community's enduring 
commitment to Afghanistan. The United States remains committed to a 
mission that trains, advises, and assists Afghan forces post-2014, as 
expressed in the Strategic Partnership Agreement signed in May 2012. 
The United States and Afghanistan are committed to a series of 6-month 
reviews to assess the development and structure of the ANSF. These 
collaborative reviews will ensure that the ANSF size and force 
structure are suitable and sustainable for the projected security 
environment.
    Question. What is your current assessment of the ability of Afghan 
forces to assume full responsibility for security matters by the end of 
2014?
    Answer. ANSF are currently on track to assume full responsibility 
for security in Afghanistan by the end of 2014, in accordance with the 
timeline agreed to at the NATO Lisbon Summit, and as reaffirmed at the 
NATO Chicago Summit. The ANSF are on track to reach their October 2012 
goal of 352,000 personnel. The ANSF also continue to grow in 
capability. Currently, more than 90 percent of all combat operations 
are partnered between ANSF and ISAF forces, and the ANSF have the lead 
for more than 50 percent of these operations. Additionally, the ANSF 
have increasingly been accepting custody of detainees detained by U.S. 
forces and are taking the lead in the conduct of special operations.
     the united states-afghanistan strategic partnership agreement
    Question. The U.S.-Afghanistan Strategic Partnership Agreement 
would allow U.S. forces to remain in Afghanistan after 2014 for 
training Afghan security forces and targeting al-Qaeda.
    How many U.S. troops do you anticipate will remain in Afghanistan 
after 2014?
    Answer. The United States, along with its NATO allies, intends to 
maintain an enduring presence to support the continued training and 
development of the Afghan National Security Forces (ANSF), and to 
engage in counterterrorism efforts aimed at combating al-Qaeda and its 
affiliates. Future force-level requirements will be determined by 
taking into account what assets are needed to support those missions, 
and will be guided by the need to ensure that Afghanistan has the 
ability to secure itself against internal and external threats.
    Towards that end, an Afghanistan-U.S. Bilateral Commission was 
established under the Strategic Partnership Agreement (SPA) to advance 
cooperation and monitor progress toward implementing the SPA. A U.S.-
Afghanistan Working Group on Defense and Security will conduct regular 
assessments of the threat level facing Afghanistan, as well as 
Afghanistan's security and defense requirements. This working group 
will make recommendations about future cooperation between the United 
States and Afghanistan on Afghanistan's security and defense 
requirements. Recommendations will be made to the Bilateral Commission.
    The nature and scope of the future presence and operations of U.S. 
forces are expected to be addressed in a future U.S.-Afghanistan 
Bilateral Security Agreement.
    Question. How long will they be engaged in the missions described 
in the Agreement?
    Answer. The Strategic Partnership Agreement will remain in force 
through 2024. The United States is committed to seek funds on a yearly 
basis during that period to support the missions described in the 
Agreement. The duration and nature of our enduring presence will be 
determined through an examination of what assets are needed to support 
the sustainment of ANSF, and U.S. counterterrorism efforts against al-
Qaeda and its affiliates.
    Towards that end, an Afghanistan-U.S. Bilateral Commission was 
established under SPA to advance cooperation and monitor progress in 
the implementation of the SPA. A U.S.-Afghanistan Working Group on 
Defense and Security will conduct regular assessments of the threat 
level in Afghanistan as well as Afghanistan's security and defense 
requirements. The nature and scope of the future presence and 
operations of U.S. forces is expected to be addressed in a future U.S.-
Afghanistan Bilateral Security Agreement.
    The SPA was designed to provide a long-term political framework for 
relations between the United States and Afghanistan that promotes the 
strengthening of Afghan sovereignty, stability, and prosperity, and 
that contributes to the shared goal of defeating al-Qaeda and its 
extremist affiliates. The enduring partnership established by the SPA 
sends a clear signal to the Afghan people that they are not alone as 
they take greater responsibility for their country.
    Question. What will be the major challenges to concluding a 
Bilateral Security Arrangement to supersede our Status of Forces 
Agreement?
    Answer. As with other negotiations, we generally do not publicly 
discuss U.S. negotiating positions, nor those of our negotiating 
partners. The Bilateral Security Agreement (BSA) is expected to set the 
parameters for the nature and scope of the future presence and 
operations of U.S. forces in Afghanistan, and the related obligations 
of Afghanistan and the United States.
    There are a number of elements common to most status of forces 
agreements (SOFAs). SOFAs typically address the majority of day-to-day 
issues that may arise regarding the presence of U.S. forces in a host 
nation. As a result, SOFAs generally include provisions addressing 
criminal and civil jurisdiction over U.S. forces and DOD civilian 
personnel, use of agreed facilities and areas, movement of vehicles, 
tax and customs exemptions, contracting procedures, access to and use 
of utilities and communications, and entry into and exit from the host 
nation, among others.
    The BSA will also take into account the particular circumstances 
and requirements of U.S. forces in Afghanistan, such as continued 
access to and use of Afghan facilities for the purposes of combating 
al-Qaeda and its affiliates, training the ANSF, and other mutually 
determined missions to advance shared security interests. The transfer 
of U.S. detention facilities and the conduct of special operations, 
currently guided by U.S.-Afghanistan memoranda of understanding, may 
also be issues that are discussed during the BSA negotiations.
    Question. The Agreement requires the administration to seek funding 
from the Congress for the ``training, equipping, advising and 
sustaining of Afghan National Security Forces, as well as for social 
and economic assistance.''
    How much will this cost?
    Answer. Preliminary plans for the long-term training, equipping, 
advising, and sustaining of the ANSF call for an estimated annual 
budget of $4.1 billion. The plan calls for the ANSF to achieve a surge 
strength of 352,000 personnel by October 2012, which would be sustained 
through 2015 before drawing down to a sustainable long-term force by 
2017. We have received commitments and pledges from the Afghan 
Government and the international community to assist in funding the 
ANSF, and we will continue to pursue international contributions in the 
future. We will also continue to work closely with the Government of 
Afghanistan and our allies and partners to evaluate the security 
conditions on the ground that may alter the assessment of future ANSF 
structure and the associated budget estimate.
    Question. How confident are you that our NATO partners will 
contribute and the United States will not be left with the whole bill?
    Answer. At the 2012 NATO Summit in Chicago, our NATO allies and 
other international partners reaffirmed their strong commitment to an 
enduring partnership with Afghanistan that will last beyond the 
transition of full security responsibility to the Afghan forces by the 
end of 2014. The Afghan Government pledged to provide at least $500 
million a year for the ANSF beginning in 2015 and to increase this 
amount progressively over time as its economy continues to grow. The 
international community also recognized Afghanistan's current economic 
and fiscal constraints and pledged to provide significant additional 
funding.
    Additionally, over the past 6 months, Afghanistan has signed 
partnership agreements with a number of other countries around the 
world, many of them NATO allies and ISAF partners, including:
  --the United Kingdom;
  --France;
  --Italy;
  --Germany;
  --Norway;
  --Australia; and
  --India.
Afghanistan is also negotiating a long-term partnership agreement with 
the European Union. We believe this web of long-term partnerships will 
help support Afghanistan after the security transition, ensuring that 
the international community remains engaged in support of the Afghan 
people in the years following the conclusion of ISAF's mission.
    The international community continued to show its support at the 
recent conference on Afghanistan's continued economic and social 
development after 2014, the Tokyo Conference, agreeing to provide $16 
billion in civilian aid over 4 years.

                     AFGHANISTAN--COUNTERNARCOTICS

    Question. The drug trade is a major source of Taliban funding, with 
the U.N. Office on Drugs and Crime estimating that in 2009, the Taliban 
earned about $155 million from the drug trade by taxing farmers, 
shopkeepers, and traffickers in return for security protection. The 
Helmand Food Zone is generally regarded as a success in reducing poppy 
cultivation. The administration has indicated support for expanding 
this program; however, this depends on international funding, local 
political will, and especially security.
    With the 2014 U.S. departure date, what steps is your Department 
taking to limit poppy cultivation and drug profits to the Taliban 
following the U.S. withdrawal?
    Answer. We continue to build the Afghan capacity to counter the 
drug trade and reduce drug-related income to the Taliban. United States 
forces have trained units within the Counternarcotics Police of 
Afghanistan that are currently capable of conducting counternarcotics 
(CN) operations with limited enablers from Coalition forces. We have 
built aviation enablers for the CN effort that will be merged with 
aviation assets to support the Afghan counterterrorism effort. Training 
for this unit includes operations that insert CN forces under the cover 
of darkness.
    United States forces in Afghanistan do not directly support poppy 
eradication efforts other than to provide in extremis support to 
eradication teams under attack, consistent with North Atlantic Treaty 
Organization (NATO)/International Security Assistance Forces (ISAF) 
policy. The U.S. Department of State supports the Afghan Government's 
``Governor Led Eradication'' (GLE) program. While final, verified 
results are not available for the GLE at this time, the program is on 
track to more than double last year's result of 3,810 hectares of poppy 
eradicated.
    I believe that the eradication effort must be carefully planned to 
inflict the most damage on major drug producer's poppy crop and include 
alternative livelihood efforts to provide poor farmers with an 
alternative to poppy cultivation. This requires a whole-of-government 
approach led by the Afghan Government with enabling support from the 
U.S. Government.
    Question. What programs and methods do you see as most effective in 
curbing Afghan drug production and Taliban involvement in the drug 
trade given the security situation in Afghanistan and the impending 
departure of international troops?
    Answer. I believe the most effective method in reducing the Afghan 
illicit drug production, and the Taliban's involvement in the drug 
trade has been conducting joint military and law enforcement operations 
against key nexus targets and involving the Afghans in these 
operations. The counter narco-terrorist effort, however, must engage a 
whole-of-government approach. All of the tools to engage the drug trade 
must be coordinated to achieve the greatest effect. The Afghan 
Government outreach to farmers occurs in the fall when farmers are 
determining what crops they will plant for the next season. The Afghan 
Government should strongly push tribal elders and farmers to not plant 
poppy. Alternative development needs to be available to farmers so they 
have support for other options over growing poppy. Eradication needs to 
target wealthy land owners that gain the most profit from poppy 
production. Corrupt Afghan Government officials involved in the drug 
trade and those police forces establishing unauthorized road 
checkpoints and harassing farmers as they try to get their licit 
produce to market, should be arrested and tried in a court of law 
without political interference. We need to continue to train and mentor 
Afghan CN forces so they can take on this responsibility. Security will 
be key, and the Afghan security forces need to be up for the task.
    The U.S. Government will need to continue to support the CN effort 
in Afghanistan post 2014 including continuing to build the Afghan CN 
capacity and providing enabling support.
    Question. As the Chair of the Senate Caucus on International 
Narcotics Control, I have concerns that illicit drug organizations will 
proliferate and increase aggression towards remaining United States and 
Afghan CN personnel following a military withdrawal.
    Given the link between drug trafficking organizations and terrorist 
organizations, can you advise the future role the Department of Defense 
(DOD) will have in a ``post withdrawal era'' in supporting CN efforts 
in the Afghanistan region?
    Answer. Over the past 8 years, DOD has worked closely with other 
U.S. departments and agencies to build the Afghan CN capacity primarily 
with specialized units. We seek to expand that capacity to the 
provincial-level forces for greater effect. We have also built 
enablers, specifically an aviation capacity, that is currently being 
merged with Afghan counterterrorism efforts. U.S. Special Operations 
Forces are expected to continue to operate in Afghanistan beyond 2014 
and could support training and mentoring the Afghan CN forces.
    DOD has also been building CN capacity within the region, 
specifically in Central Asia. This support has focused on border 
security operations in an attempt to interdict drug shipments from 
Afghanistan into and through Central Asia. DOD's CN efforts in Pakistan 
have been limited lately, although we have supported the U.S. Drug 
Enforcement Administration's efforts to build the capacity of 
Pakistan's Anti-Narcotics Force. I look forward to the potential of 
providing more support to the Pakistan coastal forces and assisting 
them with training and equipment in support of drug interdiction 
operations at sea.
    Subject to funding being provided, DOD will continue to support CN 
efforts in Afghanistan and the region.

                            TAIWAN AND F-16S

    Senator Cornyn agreed to lift his hold on the nomination of Mark 
Lippert to be the next Assistant Secretary of Defense for Asian and 
Pacific Security Affairs after he received a letter from the 
administration indicating that it would give ``serious consideration'' 
to a proposal to sell Taiwan 66 new F-16 fighters. Last year, the 
administration declined to sell the new F-16s to Taiwan and, instead, 
agreed to a $5.8 billion upgrade of Taiwan's existing fleet of F-16s. 
Senator Cornyn and others denounced the administration's decision 
arguing that Taiwan needed the newer F-16s to better match China's air 
superiority. China strongly opposes the sale of new F-16s to Taiwan.
    Question. What does ``serious consideration'' mean?
    Answer. The Taiwan Relations Act provides that ``. . . the United 
States will make available to Taiwan such defense articles and defense 
services in such quantity as may be necessary to enable Taiwan to 
maintain a sufficient self-defense capability.'' The Department of 
Defense takes this responsibility seriously and endeavors to work 
closely with the interagency to evaluate Taiwan's needs and provide 
recommendations to the President on what defense articles and services 
are appropriate for Taiwan.
    Recommendations are based on the projected threat from the mainland 
and an evaluation of the China-Taiwan relationship--political and 
military--which is an on-going process.
    Question. Has the security situation across the straits changed 
significantly since the administration agreed to upgrade Taiwan's 
existing fleet of F-16 A/B models?
    Answer. No. As detailed in the 2012 report to Congress on the 
Military and Security Developments Involving the People's Republic of 
China (PRC), the People's Liberation Army continues to focus on 
building the capacity to coerce Taiwan to reunify with the PRC. In 
light of China's continued development and deployment of advanced 
weapons systems to the military regions opposite Taiwan, we judge that 
the military balance continues to shift in the mainland's favor.
    Question. I understand that there is not much difference in 
capabilities between the upgraded F-16 A/B models and the new F-16 C/D 
models.
    What new capabilities would the C/D models provide?
    Answer. The U.S. Government-approved F-16 A/B retrofit capabilities 
are very similar to those featured in new F-16 C/Ds. The F-16 A/B 
retrofit will enhance avionics, survivability, combat effectiveness, 
and the cockpit environment of Taiwan's current fleet of F-16s, as well 
as contribute to the refurbishment of aging structural airframe 
components. F-16 C/D has a more robust engine and an option for 
conformal fuel tanks providing additional fuel capacity.
    Question. What threats would they respond to?
    Answer. The F-16 is a combat aircraft capable of providing air-to-
air combat and air-to-surface support. F-16s provide Taiwan the 
capability to defend the island against air attacks.
    Question. What significant action could China take to ease its 
military posture in the strait in a manner that was substantive enough 
for you to consider or reconsider the future arms sales to Taiwan?
    Answer. The Taiwan Relations Act provides that ``the United States 
will make available to Taiwan such defense articles and defense 
services in such quantity as may be necessary to enable Taiwan to 
maintain a sufficient self-defense capability.'' Evaluation of the 
China-Taiwan relationship--political and military--is an on-going 
process; sales of arms and defense services to Taiwan are evaluated in 
this context.
    DOD along with other U.S. departments and agencies provide 
recommendations to the President on what defense articles and services 
are appropriate for Taiwan. DOD bases its recommendations on the 
projected threat from the mainland. This threat is steadily increasing 
across multiple mission areas.
    China's Anti-Secession Law, expansive military, and extensive 
doctrine and plans to invade Taiwan leave little doubt about China's 
intentions. China would need to make significant and permanent changes 
to its military that would reduce the threat to Taiwan. DOD has not 
seen any indications that would imply that China is currently making 
the necessary changes that would cause DOD to reconsider future arms 
sales to Taiwan.

                       AL-QAEDA THREATS IN AFRICA

    Question. For the past few years, al-Qaeda in the Islamic Maghreb 
(AQIM) has been almost an afterthought, but obviously DOD is actively 
working to defeat al-Qaeda wherever they find a safehaven.
    What threat does AQIM pose in light of the current instability in 
North Africa?
    Answer. AQIM is a regional affiliate of al-Qaeda and the Department 
takes the threat it poses very seriously. DOD works to build the 
capacity of front line states, like Mauritania, Niger, and others, to 
counter the threat posed by the group. The fluid political situation in 
North Africa and the Sahel--and the limited ability of governments to 
control their territory--raises the possibility that AQIM could enjoy 
greater freedom of movement. That freedom of movement might enable the 
group to more effectively target local, U.S., and other Western 
interests.
    Question. Do you see indications of links among AQIM, al-Shabaab in 
Somalia, and al-Qaeda in the Arabian Peninsula (AQAP) in Yemen?
    Answer. We are always concerned about the possibility that regional 
terrorist organizations will cooperate and share capabilities. A 
classified answer to this question is being provided separately

                            NUCLEAR WEAPONS

    Question. The House fiscal year 2013 Defense Authorization bill 
contains a number of troubling provisions related to nuclear weapons:
  --if the President does not spend $88 billion to upgrade our nuclear 
        labs and $125 billion over 10 years to replace aging bombers, 
        submarines, and land-based missiles our reductions to our 
        nuclear stockpile mandated by the New Strategic Arms Reduction 
        Treaty (New START) would be halted;
  --it places significant restrictions on reducing or withdrawing 
        tactical nuclear weapons in Europe and mandates a report on re-
        introducing these weapons in South Korea; and
  --it would provide $160 million for a new plutonium facility the 
        National Nuclear Security Administration (NNSA) says it does 
        not need.
    If the United States ceased complying with the terms of the New 
START agreement, how would Russia respond?
    Answer. I can only speculate how Russia might respond if, for some 
reason, the United States were forced to cease complying with the terms 
of the New START. Russia might choose to delay or halt its own 
compliance activities. This would leave open the possibility that 
Russia might act to increase the size of its nuclear forces above the 
New START Treaty (NST) limits.
    Question. What would be the long-term impact on our strategic 
relationship with Russia?
    Answer. The most probable long-term impact of withdrawing from the 
NST would be a weaker and more unpredictable strategic relationship 
with Russia because of the increased uncertainty that would come from 
reduced transparency. NST provides both the United States and Russia 
with a degree of transparency that helps promote strategic stability. 
For both the United States and Russia, accurate knowledge of each 
other's nuclear forces helps to prevent the risks of misunderstanding, 
mistrust, and worst-case analysis and policymaking.
    It is important to note that greater instability in the United 
States-Russian relationship would have an impact on others, including 
our allies (who highly prize strategic predictability) and China (which 
might perceive a need to significantly increase its forces).
    Question. What would be the impact on our ability to convince Iran 
and North Korea to forgo their nuclear programs?
    Answer. It is unclear what, if any, impact a hypothetical United 
States withdrawal from NST would have on Iran and North Korea. Both 
countries desire to possess weapons of mass destruction not because of 
U.S. nuclear capability, but because of the conventional superiority of 
the United States and its allies and partners. However, as we negotiate 
to encourage both Iran and North Korea to abandon nuclear weapon 
programs, a hypothetical United States withdrawal from its NST 
commitments could work against efforts because it would create a 
negative image of the United States' commitment to its own 
international obligations.

                             SEQUESTRATION

    Question. Secretary Panetta, I'm going to paraphrase some points 
you made in a letter you sent to Senator McCain this past November as 
follows:
  --``. . . the reduction in defense spending under maximum 
        sequestration would amount to 23 percent if the President 
        exercised his authority to exempt military personnel.''
  --``. . . Under current law, that 23 percent reduction would have to 
        be applied equally to each major investment and construction 
        program and would render most of our ship and construction 
        projects unexecutable--you cannot buy three quarters of a ship 
        or a building.''; and
  --``. . . We would also be forced to separate many of our civilian 
        personnel involuntarily and, because the reduction would be 
        imposed so quickly, we would almost certainly have to furlough 
        civilians in order to meet the target.''
    Secretary Panetta, has Office of Management and Budget (OMB) 
provided further clarification on how the cuts would be applied to our 
accounts and do you still believe if the President does exempt our 
military personnel that the reductions would still amount to 23 
percent, and we would need to furlough civilians?
    Answer. As of June 13, 2012, OMB has not provided further 
clarification. Should the President exempt military personnel, our best 
estimate at this time is the reductions will amount to around 23 
percent. We strongly believe the Congress should act to halt 
sequestration. We have not announced reductions-in-force or furloughs 
and will make that decision if and when we have to implement the 
sequestration reductions.

                        PRESCRIPTION DRUG ABUSE

    Question. The Department of Defense (DOD) has utilized the Pharmacy 
Data Transaction Service (PDTS) that records information about 
prescriptions filled worldwide for Defense Department beneficiaries. 
However, I understand that DOD does not currently share this 
information with State Prescription Drug Monitoring Programs (PDMP) at 
Defense Department hospitals and facilities. Sharing of this 
information would help to prevent an individual from obtaining a 
prescription from a private hospital then receiving that same 
prescription at a Defense Department hospital.
    When does DOD plan to implement guidelines to allow prescription 
drug information sharing with state prescription drug monitoring 
programs?
    Answer. PDTS records information about prescriptions filled for DOD 
beneficiaries through medical treatment facilities (MTFs), TRICARE 
Retail Network Pharmacies and the mail order pharmacy (MOP) program. 
PDTS conducts on-line, real-time prospective drug utilization review 
(clinical screening) against a patient's complete medication history 
for each new or refilled prescription before it is dispensed to the 
patient. The clinical screenings identify potential patient safety, 
quality issues, or drug duplication issues which are immediately 
resolved to ensure the patient receives safe and quality care.
    DOD is currently sharing data with PDMP through the TRICARE Mail 
Order Pharmacy and Retail Network Pharmacies. However, the MTF 
pharmacies, in general, have not been sharing information with State 
PDMPs due to lack of information technology (IT) capability to 
interface with the 50 different programs and 50 different sets of 
requirements for accessing the States' systems. The challenge remains 
that there is not a national standard for PMDPs, and the State programs 
are at varying levels of maturity, operationally and technologically. 
Each State controls who will have access and for what purpose. Since 
the State PMDPs requirements are inconsistent, DOD as a single, Federal 
entity, cannot conform to 50 different PMDP standards. In addition, 
information sharing is limited because access to PDMPs is usually 
limited to providers who are licensed in the State. Since MTF providers 
who work on Federal facilities are only required to have one State 
license, and generally not licensed in the State in which the facility 
is located; therefore, they typically do not have access to the PDMP 
prescription data.
    TRICARE Management Activity (TMA) Pharmaceutical Operations 
Directorate (POD) is currently assessing various technical approaches 
and levels of effort (i.e., funding requirements) to determine the best 
solution for MTF data sharing with State PMDPs. TMA is looking at the 
best file format and data transfer mechanisms to support this effort 
and what the costs to DOD will be. TMA and the services are assessing 
current policies, Federal legislation, and privacy considerations 
(i.e., Health Insurance Portability and Accountability Act (HIPAA)) to 
determine the best approach for participation in the various PMDPs by 
MTF pharmacies. In addition, TMA POD and the contractor that supports 
PDTS are currently working on an approach to support the State PMDPs 
and determine if there are any privacy and legal requirements/
implications. Once the Government approves the approach, a rough order 
of magnitude cost estimate will be developed. The TMA POD anticipates 
determination of the level of effort for supporting PDMPs by October 
2012.

                   EVOLVED EXPENDABLE LAUNCH VEHICLE

    Question. Secretary Panetta, I am concerned that the Air Force is 
entering into an acquisition strategy on the Evolved Expendable Launch 
Vehicle (EELV) program that will prevent new entrants to compete prior 
to fiscal year 2018.
    Have you looked at the terms and conditions of this proposed 
contract structure and can you guarantee the Government can walk away 
without any liability from the contract if new entrants become 
certified prior to fiscal year 2018?
    Answer. The terms and conditions of the proposed contract have been 
reviewed. The Air Force's plan expects new entrants, as soon as they 
are certified, to compete for National Security Space launch missions 
not covered under EELV's Phase I minimum commitment. Thus, there is no 
need for the Government to ``walk away'' from its existing contractual 
commitments.
                                 ______
                                 
                Question Submitted by Senator Herb Kohl

    Question. The administration has announced a new strategy focused 
on Asia and the Pacific Ocean. Part of this strategy includes deploying 
the USS Freedom to Singapore. The Freedom is the first of what we hope 
will be many littoral combat ships (LCSs) built in Wisconsin.
    The Navy has on many occasions described the LCS as one of the 
backbones of our Nation's future fleet. Do you believe, as I believe, 
that the LCS is indeed a key part of executing our new defense 
strategy?
    Answer. LCS is a key component of the Navy's current and future 
force and will fulfill multiple mission requirements of the Defense 
Strategic Guidance (DSG). LCS will meet warfighting needs in the areas 
of mine countermeasures, anti-submarine warfare, and anti-swarm defense 
to counter adversary anti-access/area-denial efforts. Beyond the 
warfighting demands, these ships will also be called upon to defend the 
homeland by conducting maritime intercept operations; providing a 
stabilizing presence by building partner capacity, strengthening 
alliances and increasing U.S. influence; and conducting stability and 
counterinsurgency operations through security force assistance and 
other engagement missions. Owing to their speed, smaller size, and 
relatively shallow draft, these ships offer partner navies compatible 
ships with which to operate on a more equivalent basis.
                                 ______
                                 
             Questions Submitted by Senator Mitch McConnell
    Question. Please list the 15 oldest hospitals that are still in use 
at domestic U.S. Army installations.
    Answer.

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                   Name                           Acquisition date
------------------------------------------------------------------------
Ireland Army Community Hospital...........  1957 (Fort Knox).
Irwin Army Community Hospital.............  1957 (Fort Riley).
Martin Army Community Hospital............  1958 (Fort Benning).
General Leonard Wood Army Community         1965 (Fort LW).
 Hospital.
Darnall Army Medical Center...............  1966 (Fort Hood).
Weed Army Community Hospital..............  1968 (Fort Irwin).
William Beaumont Army Medical Center......  1972 (Fort Bliss).
Moncrief Army Community Hospital..........  1972 (Fort Jackson).
Eisenhower Army Medical Center............  1975 (Fort Gordon).
Keller Army Community Hospital............  1977 (West Point).
Blanchfield Army Community Hospital.......  1982 (Fort Campbell).
Winn Army Community Hospital..............  1983 (Fort Stewart).
Bayne-Jones Army Community Hospital.......  1983 (Fort Polk).
Evans Army Community Hospital.............  1986 (Fort Carson).
Madigan Army Medical Center...............  1990 (Joint Base Lewis
                                             McCord).
------------------------------------------------------------------------

    Question. Please also provide clarification on the criteria the 
Army uses for determining the need for replacing hospitals on U.S. 
military installations. What thresholds need to be met to justify a 
hospital replacement?
    Answer. The TRICARE Management Activity (TMA) uses a Capital 
Investment Decision Model (CIDM) to support validation of facility 
requirements, ensure that facility investments are aligned with the 
Military Health System priorities and strategic goals, and improve 
inter-service and inter-agency collaboration. CIDM criteria include:
  --Mission change needs (e.g., change in scope of clinical services to 
        be provided, increases or additions to programs, implementation 
        of new care delivery models). Externally imposed changes, such 
        as population changes in the Army stationing plan or unit re-
        stationing plans, are considered when identifying locations 
        that require facility projects.
  --Collaborative synergies (e.g., the extent that the facility is a 
        constraint to achieving greater collaboration and integration 
        among the Departments of Defense (DOD), Veterans Affairs (VA), 
        other Federal agencies, or the private sector).
  --Location constraints (e.g., remoteness, medically underserved).
  --Effectiveness of infrastructure (e.g., physical and functional 
        deficiencies).
  --Life, health, or safety issues that cannot be addressed through 
        Sustainment, Restoration and Modernization resources.
    The CIDM provides the multi-faceted threshold for facility scoring 
that is used by a tri-service Capital Investment Review Board (CIRB) to 
derive an Order of Merit list (OML). The OML supports the determination 
of which hospital will be replaced and in what order.
    Question. Last, when analyzing a hospital's usage data, does the 
Army also take into account the number of military patients who would 
prefer to receive care at a medical facility on-base, but who are 
unable to do so because services and specialists are not currently 
available?
    Answer. The Army medical planning process is designed to support 
the mission of the medical facility by focusing on the staff and the 
space available to support the population and workload demand. A market 
analysis is conducted to review the availability of healthcare 
providers and services in the market, as well as the utilization of 
these services by the beneficiary population. The combination of site/
facility and market analysis drives the requirements for facility 
planning. Market utilization serves as a proxy for health services 
demand. Beneficiary preference is not explicitly considered as part of 
this process.
    Question. I am told that the Navy has not modernized the Mk 45 
large caliber naval gun--designed in the mid-1970s--although it was 
apparently intended to have an overhaul after 15 years of service.
    Can you please explain why the Navy has modernized similarly aged 
guns on Destroyer ships, but has not overhauled or upgraded Mk 45 guns 
on Cruiser ships?
    Are there any plans to overhaul or upgrade these guns?
    More generally, is the Navy concerned about maintenance of large 
caliber naval gun capability?
    Answer. Beginning in 2008, the Navy has been actively overhauling 
and upgrading the Cruiser Mk 45 guns, via the Cruiser Modernization 
Program. To date, gun overhauls and upgrades have been made on nine 
Cruisers. Additional Mk 45 gun overhauls and upgrades are being 
executed on two Cruisers.
    Outside of the planned overhauls in the Cruiser Modernization 
Program, the Navy continues to overhaul and upgrade Mk 45 guns from 
decommissioned ships for installation on DDG-51 new construction ships. 
The Mk 45 guns that remain in service in their as-built configuration 
will continue to receive regular pier-side maintenance availabilities 
at 5-year intervals.
    The Navy plans to keep the guns in service to the end of the 
service life of the ships and will continue to maintain the guns 
through an effective pier-side maintenance program.
    Question. Does the Navy have any plans to enhance the capability of 
the Mk 45 gun system to execute ship to shore missions in the future?
    Answer. We are reviewing our options to develop a precision guided 
munitions program for our 5-inch projectiles. The Center for Naval 
Analysis is conducting a follow-on study to the Joint Expeditionary 
Fires Analysis of Alternatives. This study will analyze the 
contributions of all joint and fleet fires to support Navy science and 
technology efforts, existing campaign analysis and the development of a 
long-term Naval Gun transition plan. This study is expected to be 
complete this fall and will ultimately contribute to an extended range, 
precision guided munitions program. Our desire is to augment Naval 
precision fires with viable and cost-wise 5-inch naval gunfire 
solutions.
    Question. Does DOD support the co-production and participation of 
the U.S. aerospace industry in the Iron Dome defense program? If so, 
what plans does DOD have to incorporate the U.S. aerospace industry 
into co-production of this program? Has DOD communicated any such plans 
to its counterparts at the Israeli Ministry of Defense?
    Answer. Yes, DOD supports fully Iron Dome co-production and 
participation of the U.S. aerospace industries in the Iron Dome defense 
program. In an Exchange of Letters with the Israeli Ministry of Defense 
concerning Iron Dome funding, the United States specifically requested 
Israeli support for exploring co-production opportunities.
    The Israel Missile Defense Organization (IMDO) recently engaged 
with its prime contractor and potential U.S. sub-contractors to develop 
an acquisition strategy supporting U.S. co-production of Iron Dome 
interceptor components.
    Question. Is there precedent from the Arrow and David's Sling 
programs for such an arrangement?
    Answer. There is precedent for both dual-source component 
production and for U.S. industry being the sole supplier of missile 
components to an Israeli prime contractor's production line.
    Under the terms of the Arrow System Improvement Program (ASIP) 
memorandum of understanding, IMDO directed Israeli Aerospace Industries 
to establish itself as a dual-source supplier with U.S. industry for 
Arrow-2 booster motors and major subcomponents to increase missile 
production capacity. U.S. industry completed deliveries of Arrow-2 
components in 2010.
    The David's Sling Weapon System and Arrow-3 production agreements 
are still being discussed, but the development programs for both of 
these systems assume that the Israeli prime contractors will establish 
subcontract agreements with U.S. suppliers for certain components to be 
built in the United States, including motors, guidance computers, 
launch systems, and batteries.
    Iron Dome is an Israeli-developed and produced system used solely 
by the Israeli military. Israeli industry has subcontracted with U.S. 
firms for some subcomponents. The Missile Defense Agency (MDA) has 
asked IMDO for a list of those firms and subcomponents as part of our 
effort to explore co-production opportunities. This effort is ongoing.
    Regarding co-production of Iron Dome for U.S. defense purposes 
(including the Tamir interceptor), there is no U.S. operational 
requirement for this weapon system. MDA intends to pursue data rights 
and technical data packages (TDPs) that would enable production of the 
Iron Dome weapon system should a U.S. operational requirement arise in 
the future. Additional acquisition steps would need to be taken to 
execute a co-production program, even if the United States had TDPs and 
data rights. MDA would have to develop an acquisition strategy, 
determine a production decisionmaking authority, establish source 
selection, and budget funds for procurement, operations, and 
sustainment. These activities are not currently planned due to the lack 
of a U.S. operational requirement.
    Question. Would a second source of U.S. manufactured interceptors 
and launchers provide greater supply chain readiness in the production 
of this system and better support for the inventory objectives of our 
ally, Israel?
    Answer. Although a second source of inventory is typically 
preferred, Israel has not raised improved Iron Dome supply chain 
readiness and support for inventory objectives as a concern. Moreover, 
the cost to establish or maintain a second source was not included in 
Israel's funding profile, and Israeli Ministry of Defense (IMOD) 
officials have stated that their industry can meet their Iron Dome 
production needs.
    Question. Admiral Gary Roughead provided a plan to sustain the 
Phalanx Block 1B Close-in Weapon System (CIWS) in a December 2010 
letter, stating ``a seven-year overhaul cycle provides the most 
efficient path to maintaining operational availability . . . our CIWS 
Program Manager assesses that 36 overhauls per year will be needed 
beginning in FY12.''
    I am told that the Navy later determined a more affordable 20-year 
plan would necessitate 20 overhauls per year coupled with 52 
reliability, maintainability, and availability (RMA) kits per year, 
beginning in fiscal year 2013, to maintain the required operational 
availability.
    To date, I am informed that the Navy has not made funding requests 
sufficient to meet the requirements outlined in either plan above.
    What will be the overall impact of this shortfall across the Future 
Years Defense Program?
    Answer. Based on the President's budget for fiscal year 2013 CIWS 
maintenance funding profile, which established a threshold of 52 
Reliability, Maintainability and Availability (RM&A) kits and 20 Class 
A overhauls, there will be no overall impact across the Future Years 
Defense Program. In fiscal year 2013, our funding request includes 24 
RM&A kits and 8 Class A overhauls. The profile then ramps up to exceed 
the threshold for RM&A kits in fiscal year 2015 and to exceed the 
threshold for Class A overhauls in fiscal year 2016.
                                 ______
                                 
              Questions Submitted by Senator Daniel Coats

    Question. How does the Department of Defense (DOD) plan on 
commemorating the 100th anniversary of World War I and the 75th 
anniversary of World War II?
    Answer. Looking ahead to the 75th anniversary commemoration of 
World War II and the centenary of World War I, DOD anticipates a range 
of activities to honor the men and women who served in those immense 
conflicts. As with previous commemorations, we expect to work closely 
with organizations that share our commitment to these events, including 
veterans groups, educational institutions, and State and local 
governments. Because the dates for these observances are still several 
years away (2016 for World War II and 2017 for American involvement in 
World War I), plans have not yet taken shape.
    Question. A December 2011 Navy Inspector General (IG) report 
concluded ``. . . the history and heritage of the U.S. Navy is in 
jeopardy.'' Is the Naval History & Heritage Command (NHHC) the only 
military history program in DOD that stores its collection of 
documents, photographs, art works, and artifacts in facilities with 
broken or nonexistent temperature and humidity controls or is this 
common throughout the history programs of the Marine Corps, Air Force, 
and Army? Is our Navy's history and heritage worth preserving in your 
view?
    Answer. The Air Force Historical Research Agency is the official 
repository for some 750,000 historical documents. Following the 
installation of an archival-quality heating, ventilation, and air 
conditioning system in 2010, its archival material is currently stored 
in a facility with highly effective, archival-standard temperature and 
humidity controls. The system also screens particulate matter. In 
addition, the lights have ultraviolet light screens to limit damage to 
documents. The Air Force Art Program, which contains more than 10,000 
pieces, stores its art in climate controlled conditions as well and 
requires that items on loan be properly protected while on display. The 
National Museum of the Air Force, certified by the Association of 
American Museums, maintains its heritage collection of artifacts and 
photographs in climate controlled conditions. Although the most 
valuable of the aircraft collection are indoors, some aircraft because 
of their large sizes, are displayed outdoors and maintained under clear 
guidelines for the protection and preservation of these artifacts.
    The Army also has a large collection of documents, photographs, art 
works, and artifacts, but the facilities for such activities are, on 
the whole, sufficient to preserve them. The U.S. Army Museum Support 
Center at Fort Belvoir, Virginia, was recently opened as a state-of-
the-art facility for conserving and preserving the Army's central 
artifact collection worth approximately $1 billion and its priceless 
Army Art Collection comprising more than 12,000 works of original 
soldier art. The facility was built with an heating, ventilation, and 
air-conditioning (HVAC) system that maintains the proper humidity and 
temperature to preserve them in an optimal state. Many of the other 
artifact collections in the Army museum system, some 107 museums and 
historical holdings throughout the world, have less effective 
preservation means at their disposal, but the U.S. Army Center of 
Military History constantly monitors their status and assists in their 
preservation to the extent permitted by always scarce resources. No 
significant collections are currently at risk. As for document and 
photograph holdings, the Army Heritage and Education Center and its 
component Military History Institute, which are part of the Army War 
College at Carlisle Barracks, Pennsylvania, serve as the Army's 
principle archives for non-official records, photographs, and 
documents. Those items are housed in a facility with temperature and 
humidity controlled space specifically designed for such collections.
    We believe that our service history and heritage is worth 
preserving. Our service history is the thread that connects our 
soldiers to those who have preceded them. It forms the foundation for 
all of our soldiers. As such, our service history and heritage is 
eminently worth preserving for future generations of soldiers and 
Americans to enjoy and become inspired.
    As noted, the December 2011 Navy IG report identified significant 
facilities issues at NHHC, particularly at its headquarters at the 
Washington Navy Yard. Since November 2011 the command has engaged in 
removing its most at-risk collections to environmentally adequate 
locations, and where that is not possible, has worked with the local 
public works office to perform repairs to provide adequate 
environmental conditions for particular collections. (CNIC) has 
provided funding to develop a facilities plan to ultimately house NHHC 
HQ's collections in fully compliant facilities. [NHHC cannot provide 
information on Marine Corps, Air Force, and Army facilities.]
    The Navy's history and heritage is worth preserving. Information 
about past naval operations is valuable not only to historians, but to 
modern-day naval decisionmakers and to our future naval leaders. In 
addition, naval history provides an important reminder to the American 
people about the timeless maritime nature of this country and its 
economy, and therefore of the necessity of a strong Navy to protect it. 
Historical artifacts provide a direct connection to past events that 
complements documentary history, and for some audiences is a more 
effective vehicle for telling the Navy's story. Historical items--
archives, artifacts, artwork, photographs, digital media--require 
careful management if they are to relate the Navy's history to future 
generations of citizens and scholars. Appropriate facilities are a 
fundamental necessity for proper stewardship of these important and in 
some cases irreplaceable resources.
    The Marine Corps takes considerable pride in our heritage and is 
invested in preserving our historical records, photographs, oral 
histories, and objects related to that heritage. These items inform the 
training and education of our Marines, and provide material and 
information that can be applied to new programs, such as weapons and 
uniforms. Marine Corps heritage is an organizing principal and source 
of information necessary for scholarly efforts within the formal 
schools, including the Marine Corps War College. Historical collections 
also assist in developing written histories, case studies, and student 
master's theses, all of which are published by Marine Corps University. 
Further, the pictorial, written, and material history of the Corps is 
used to support outreach and recruitment efforts necessary to maintain 
good public relations and a well-staffed force.
    In 2006, the Marine Corps Heritage Foundation opened the National 
Museum of the Marine Corps, a state-of-the-art facility that is the 
centerpiece of the Marine Corps Heritage Center. This facility houses 
approximately 10 percent of the total collection. While the majority of 
the Marine Corps' historical objects, including our records and 
photographs, are stored in satisfactory conditions at Marine Corps Base 
Quantico and at other locations, the Marine Corps houses some objects 
in spaces with inadequate temperature and humidity controls. To the 
extent possible, items stored in less-than-ideal conditions include 
more durable objects, such as ground vehicles and aircraft. Works of 
art are in excellent storage at a rental facility near the Museum.
    The Marine Corps has developed a comprehensive long-range plan for 
the care of its collections. Existing storage buildings have been 
improved in recent years and will continue to be maintained. Some of 
these have potential to be further improved to provide long-term 
solutions; however, there remains a requirement for additional climate-
controlled space to house collections and provide work space for 
conservators. A large museum support facility has been recommended as a 
potential solution. Marine Corps Base Quantico and the Museum are 
working proactively on interim solutions that promise improved 
conditions and accessibility. The Marine Corps Heritage Foundation 
remains committed to building a second and final phase of the National 
Museum, which will extend the Marine Corps story from Beirut to 
Afghanistan and provide a home for some additional artifacts and works 
of art. The Marine Corps remains committed to preserving our history 
and heritage that we have invested so much in since 1775.
    Question. The competition for the C17 Globemaster's F117 engine 
sustainment supply chain fails to apply better buying guidelines to 
gain readily apparent savings. This engine is more than 90 percent 
common with the commercial PW2000 engine family, yet the United States 
Air Force (USAF) has neither accepted Federal Aviation Administration 
(FAA) certifications for common repairs and parts, nor established a 
source approval request (SAR) process to review and certify alternative 
sources to enable competition, despite informing the Congress that it 
has had the F117 maintenance technical data via a General Terms 
Agreement with the OEM since last December. Consequently, the USAF has 
essentially disqualified alternative vendors, since the OEM remains the 
only approved source. The annual savings from competing the F117 supply 
chain would likely be $200 million per year; yet, the USAF's 
sustainment strategy would gain no efficiencies from supply chain 
competition until 2018.
    What process is being used to identify and pursue opportunities for 
efficiencies, such as competition for the F117 supply chain, and how 
did this program escape oversight for cost accountability by the USAF 
and OSD?
    Answer. In the case of the F117 (C-17) engine, officials of the 
Office of the Under Secretary of Defense for Acquisition, Technology 
and Logistics (AT&L) participated in reviews of the proposed costs and 
negotiation strategy for C-17 sustainment. In the process of doing so, 
AT&L learned of the Air Force's plan to break out engine sustainment 
into a separate contract from the Boeing Globemaster III Integrated 
Sustainment Program in order to reduce costs. While current acquisition 
plans call for the transition to competition for overhaul and supply 
chain management of F117 in the 2016 to 2018 timeframe, the Department 
is exploring opportunities to reduce costs further by accelerating the 
transition. The Department is working to improve the opportunity for 
competition and improved cost oversight of C-17 sustainment.
    Question. Has OSD evaluated whether a more robust and immediate SAR 
process could result in greater savings for the Air Force?
    Answer. As part of the ongoing Office of the Secretary of Defense 
review of the acquisition strategy for F117 sustainment, the Department 
is reviewing the Air Force Source Approval Request process to seek 
opportunities for greater savings.
    Question. Has OSD evaluated the savings associated with 
accelerating competition for F117 repairs and parts ahead of the Air 
Force's proposed timeline, which unnecessarily accepts the OEM as the 
only qualified supply chain source for at least the next 5 years?
    Answer. The Department is exploring opportunities to reduce costs 
by accelerating the transition to a competitive engine overhaul and 
supply chain management construct.
    Question. The Senate version of the fiscal year 2013 National 
Defense Authorization Act (NDAA) as reported by the Senate Armed 
Services Committee contains a bipartisan provision requiring you to 
submit a report detailing the effects of budget sequestration on DOD by 
August 15. There is also a similar standalone bill in both the House 
and Senate that would require similar transparency concerning the 
scheduled sequestration for both defense and non-defense cuts.
    Do you support this reporting requirement in the Defense 
authorization bill to allow a full understanding where the defense cuts 
will occur and to what degree?
    If the Defense authorization bill has not yet been enacted by 
August, would you pledge to still submit such a report to the Congress 
by August?
    Answer. The Department has no official comment about this 
particular legislation pending before the Congress.
    Question. Absent the provision in the fiscal year 2013 NDAA bill 
and the freestanding bills in the House and Senate that would provide 
important transparency about such cuts, do you currently have this 
level of detail internally at DOD now that we are less than 6 months 
away from these cuts being carried out?
    Answer. The Department has no official comment about this 
particular legislation pending before the Congress. While the Office of 
Management and Budget (OMB) has not yet officially engaged agencies in 
planning, the OMB staff is conducting the analyses needed to move 
forward if necessary. Should it reach the point where it appears the 
Congress does not do its job and the sequester may take effect, OMB, 
DOD, and the entire administration will be prepared.
                                 ______
                                 
            Questions Submitted to General Martin E. Dempsey
                Question Submitted by Senator Tom Harkin

    Question. General Dempsey, the Department of Defense (DOD) has 
become increasingly concerned over the past few years regarding our 
military's dependence on petroleum-based fuels. These concerns relate 
to both the ready availability of fuels during times of conflict, and 
to the increasing costs of such fuels.
    For example, it's been reported that the Pentagon spent $17.3 
billion on petroleum in 2011, a 26-percent increase from the previous 
year with practically no change in the volume purchased.
    It's also been reported that for every $0.25 increase in the price 
of jet fuel, the DOD must come up with an extra $1 billion annually.
    Relative to future supplies and prices, we can all see that global 
fuel demands will continue to increase steadily as the economies of the 
BRIC nations--Brazil, Russia, India, and China--and similar nations 
grow and demand more fuel for transportation and industrialization.
    Obviously, some of our leaders in the Pentagon see these future 
threats as well, and I commend the Department of the Navy for signing a 
memorandum of understanding (MOU) with the Department of Energy (DOE) 
and with United States Department of Agriculture (USDA) for the 
development of commercial biofuels production capabilities. I 
understand that under this MOU, the DOD intends to fund multiple drop-
in biofuel production facilities under the Defense Production Act.
    Could you please speak to DOD's long-term strategy for assuring 
future fuels supplies and the role that you believe domestic biofuels 
can and should play in that? More specifically, could you comment on 
the role that this joint Navy/DOE/USDA procurement activity plays in 
DOD's longer term fuels security strategy?
    Answer. DOD's strategy for operational energy is focused on 
ensuring our armed forces have the energy resources required to meet 
21st century security challenges. Our strategy includes efforts 
designed to reduce demand, protect, and secure access to energy 
supplies and to integrate operational energy considerations into the 
full range of planning and force development activities. Each of our 
services recognizes the important role energy plays in support of 
national security and is pursuing initiatives designed to better 
understand how much energy is being consumed, where, and for what 
purposes in order to reduce demand and minimize risk to the warfighter.
                                 ______
                                 
                Question Submitted by Senator Herb Kohl

    Question. To help with this transition, we are expanding job 
training programs for veterans and studying how military skills can be 
maximized in civilian occupations.
    General Dempsey, the programs available to troops transitioning to 
civilian life are spread out across several different Federal agencies. 
How is the Department of Defense (DOD) making sure that servicemembers 
know how to access the programs that are available to them when they 
leave the military?
    Answer. The Department has many efforts to ensure our 
servicemembers know how to access transition programs. Three such 
noteworthy efforts are:
      The Transition Assistance Program Re-Design.--The new re-designed 
        Transition Assistance Program (TAP) provides an individualized, 
        servicemember specific series of modules that assist the 
        servicemember in preparing for civilian life. It also includes 
        our interagency partner's aid in preparing all servicemembers 
        for a successful transition into our Nations' communities and 
        their civilian life.
      The Presidential Task Force.--In August 2011, the President 
        called for the creation of a Task Force led by the DOD and 
        Veterans Administration, with the White House economic and 
        domestic policy teams and other agencies, including Department 
        of Labor to develop proposals to maximize the career readiness 
        of all servicemembers. The vision of moving TAP from an end of 
        career event to the Military Life Cycle was used as a partial 
        response to President Obama's call to improve education and 
        training of military members to make them career ready. On 
        December 27, 2011, the Task Force submitted a report outlining 
        and conceptualizing its 28 recommendations to improve the 
        career readiness of military members. The President accepted 
        the recommendations and encouraged the Task Force and the 
        agencies to carry forward in implementing the recommended 
        programs.
      Long-Term Goal.--The Department's long-term aim of the new 
        transition service delivery model is to embed the 
        servicemembers' preparation for transition throughout their 
        military lifecycle--from accession through separation, from 
        service and reintegration, back into civilian life. This will 
        require thoughtful goal setting and planning to apply military 
        experience to longer term career goals in the civilian sector, 
        whether after a single enlistment term or a 20-plus year 
        military career. Servicemembers and military leadership will be 
        engaged in mapping and refining development plans to achieve 
        post-military service goals--a significant culture change.
                                 ______
                                 
              Questions Submitted by Senator Thad Cochran

                       AIRSTRIKES IN AFGHANISTAN

    Question. General Dempsey, on June 12 in Afghanistan, President 
Karzai clarified his position on airstrikes stating ``. . . an 
agreement has been reached clearly with NATO that no bombardment of 
civilian homes is allowed for any reason'', that coalition forces could 
not use airstrikes ``even when they are under attack.'' Is this the 
correct interpretation of the agreement with Afghanistan? And how does 
this impact our ability to protect our forces who come under fire?
    Answer. As always, Afghan and coalition forces retain the inherent 
right to use aerial munitions in self-defense if no other options are 
available. On June 12, 2012, the Commander, International Security 
Assistance Force and United States Forces-Afghanistan, gave the order 
to coalition forces that no aerial munitions be delivered against 
civilian dwellings with the exception of the self-defense provision. 
This order was in accordance with an understanding made with Afghan 
President Hamid Karzai. This measure was taken to protect the lives of 
Afghan civilians.

                 AMPHIBIOUS WARSHIPS--OPERATIONAL RISK

    Question. General Dempsey, as you are putting together your 
thoughts to address my question on the level of risk being assumed with 
amphibious lift capability and capacity, it might be helpful to the 
subcommittee if you touch on operational availability. Again, the Navy 
and Marine Corps agreed on a fiscally constrained minimum force of 33 
amphibious warships to meet a 38 amphibious warship force requirement. 
Currently, there are 29 ships in the Navy's amphibious fleet, and a 
common planning factor is that 10 to 15 percent of warships are in 
overhaul and unavailable at any given time. Just doing the straight 
math, it is obvious that the number of operationally available ships is 
well below the requirement acknowledged by the Department of the Navy. 
What other class of warship is the Department accepting this level of 
risk? And if any, are those ships in as high demand by the combatant 
commanders? Secretary Panetta talked to the agility of these ships; I 
understand that the combatant commanders ask for these ships because 
they are agile and can address a multitude of missions and situations.
    Answer. Each year, the combatant commanders submit force 
requirements to my staff, which include capabilities that reside in all 
services. These requirements, in total, routinely exceed the services' 
capacity to meet them. Within the Navy, this includes not only demand 
for amphibious platforms, but also aircraft carriers, cruiser/
destroyers, coastal patrol boats, and frigates. The strategic risk 
associated with these capacity shortfalls is balanced among the 
combatant commanders based upon Secretary of Defense policy and 
guidance, which reflect the National Military Strategy. In general, the 
military sizes to strategy-based requirements, not on operational 
availability. It manages availability based on threat.
    Specific to the issue of amphibious ship capacity, the Navy remains 
committed to providing 30 operationally available amphibious ships to 
meet Naval amphibious ship demand. With some risk, 30 amphibious 
landing ships can support a two-Marine Expeditionary Brigade (MEB) 
forcible entry operation. This force accepts risk in the arrival of 
combat support and combat service support elements of the MEB, but this 
risk is appropriately balanced with the risk in a wide range of other 
important warfighting requirements within today's fiscal limitations.
    Navy can achieve this operational availability goal by sustaining 
an inventory of about 32 amphibious ships in the mid to long-term. The 
32-ship amphibious force being procured to meet this need will 
optimally be comprised of 11 LHA/D, 11 LPD 17, and 10 LSD. To support 
routine forward deployments of Marine Expeditionary Units (MEUs), the 
amphibious force will be organized into nine, three-ship CONUS based 
Amphibious Ready Groups (ARGs), and one four-ship ARG based in Japan, 
with an additional big-deck amphibious ship available to support 
contingency operations worldwide. Two LSDs will be taken out of 
commission and placed in reserve status allowing Navy to reconstitute 
an eleventh ARG as required in the future, or to build up the number of 
ships in the active inventory, if necessary.
                                 ______
                                 
               Question Submitted by Senator Daniel Coats
    Question. Why is there no definition of ``victory'' in Joint 
Publication (JP) 1-02: Department of Defense Dictionary of Military and 
Associated Terms?
    Answer. JP 1-02 supplements common English-language dictionaries 
with standard terminology for military and associated use. The term 
``victory'' does not require inclusion in JP 1-02 because it is 
adequately defined by Merriam-Webster as:
    1. The overcoming of an enemy or antagonist.
    2. Achievement of mastery or success in a struggle or endeavor 
against odds or difficulties.

                          SUBCOMMITTEE RECESS

    Senator Murray. I would put the subcommittee into recess 
until Senator Shelby appears.
    Secretary Panetta. We aren't going anyplace.
    Senator Murray. Good. You want to meet now, Mr. Secretary?
    Thank you very much. And with that, the subcommittee is in 
recess until Senator Shelby arrives. Thank you very much.
    [Whereupon, at 12:30 p.m., Wednesday, June 13, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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