[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                         [H.A.S.C. No. 113-53] 

                       INITIAL CONCLUSIONS FORMED 

                    BY THE DEFENSE STRATEGIC CHOICES 

                         AND MANAGEMENT REVIEW 

                               __________

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                             AUGUST 1, 2013
                                     
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                      COMMITTEE ON ARMED SERVICES
                    One Hundred Thirteenth Congress

            HOWARD P. ``BUCK'' McKEON, California, Chairman

MAC THORNBERRY, Texas                ADAM SMITH, Washington
WALTER B. JONES, North Carolina      LORETTA SANCHEZ, California
J. RANDY FORBES, Virginia            MIKE McINTYRE, North Carolina
JEFF MILLER, Florida                 ROBERT A. BRADY, Pennsylvania
JOE WILSON, South Carolina           ROBERT E. ANDREWS, New Jersey
FRANK A. LoBIONDO, New Jersey        SUSAN A. DAVIS, California
ROB BISHOP, Utah                     JAMES R. LANGEVIN, Rhode Island
MICHAEL R. TURNER, Ohio              RICK LARSEN, Washington
JOHN KLINE, Minnesota                JIM COOPER, Tennessee
MIKE ROGERS, Alabama                 MADELEINE Z. BORDALLO, Guam
TRENT FRANKS, Arizona                JOE COURTNEY, Connecticut
BILL SHUSTER, Pennsylvania           DAVID LOEBSACK, Iowa
K. MICHAEL CONAWAY, Texas            NIKI TSONGAS, Massachusetts
DOUG LAMBORN, Colorado               JOHN GARAMENDI, California
ROBERT J. WITTMAN, Virginia          HENRY C. ``HANK'' JOHNSON, Jr., 
DUNCAN HUNTER, California                Georgia
JOHN FLEMING, Louisiana              COLLEEN W. HANABUSA, Hawaii
MIKE COFFMAN, Colorado               JACKIE SPEIER, California
E. SCOTT RIGELL, Virginia            RON BARBER, Arizona
CHRISTOPHER P. GIBSON, New York      ANDRE CARSON, Indiana
VICKY HARTZLER, Missouri             CAROL SHEA-PORTER, New Hampshire
JOSEPH J. HECK, Nevada               DANIEL B. MAFFEI, New York
JON RUNYAN, New Jersey               DEREK KILMER, Washington
AUSTIN SCOTT, Georgia                JOAQUIN CASTRO, Texas
STEVEN M. PALAZZO, Mississippi       TAMMY DUCKWORTH, Illinois
MARTHA ROBY, Alabama                 SCOTT H. PETERS, California
MO BROOKS, Alabama                   WILLIAM L. ENYART, Illinois
RICHARD B. NUGENT, Florida           PETE P. GALLEGO, Texas
KRISTI L. NOEM, South Dakota         MARC A. VEASEY, Texas
PAUL COOK, California
JIM BRIDENSTINE, Oklahoma
BRAD R. WENSTRUP, Ohio
JACKIE WALORSKI, Indiana

                  Robert L. Simmons II, Staff Director
                 Alex Gallo, Professional Staff Member
                 Mike Casey, Professional Staff Member
                           Aaron Falk, Clerk



                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2013

                                                                   Page

Hearing:

Thursday, August 1, 2013, Initial Conclusions Formed by the 
  Defense Strategic Choices and Management Review................     1

Appendix:

Thursday, August 1, 2013.........................................    45
                              ----------                              

                        THURSDAY, AUGUST 1, 2013
    INITIAL CONCLUSIONS FORMED BY THE DEFENSE STRATEGIC CHOICES AND 
                           MANAGEMENT REVIEW
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

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

                               WITNESSES

Carter, Hon. Ashton B., Deputy Secretary of Defense..............     4
Winnefeld, ADM James A. ``Sandy,'' Jr., USN, Vice Chairman, Joint 
  Chiefs of Staff, U.S. Department of Defense....................     8

                                APPENDIX

Prepared Statements:

    Carter, Hon. Ashton B., joint with ADM James A. ``Sandy'' 
      Winnefeld, Jr..............................................    51
    McKeon, Hon. Howard P. ``Buck''..............................    49
    Smith, Hon. Adam.............................................    50

Documents Submitted for the Record:

    Statement on Strategic Choices and Management Review by Hon. 
      Chuck Hagel, Secretary of Defense, dated July 31, 2013.....    95

Witness Responses to Questions Asked During the Hearing:

    Mr. Franks...................................................   106
    Ms. Hanabusa.................................................   105
    Mr. McKeon...................................................   105
    Mr. Nugent...................................................   106
    Mr. Wilson...................................................   105

Questions Submitted by Members Post Hearing:

    Mr. Castro...................................................   116
    Mr. Langevin.................................................   110
    Mr. Loebsack.................................................   113
    Mr. Nugent...................................................   116
    Mr. Shuster..................................................   114
    Mr. Wilson...................................................   109
    INITIAL CONCLUSIONS FORMED BY THE DEFENSE STRATEGIC CHOICES AND 
                           MANAGEMENT REVIEW

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                          Washington, DC, Thursday, August 1, 2013.
    The committee met, pursuant to call, at 10:07 a.m., in room 
2118, Rayburn House Office Building, Hon. Howard P. ``Buck'' 
McKeon (chairman of the committee) presiding.

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

    The Chairman. The committee will come to order.
    Good morning, ladies and gentlemen. The committee meets 
today to receive testimony on the Defense Department Strategic 
Choices and Management Review.
    This committee has frequently encouraged the Pentagon to 
fully plan for sequestration and to make the consequences of 
several rounds of budget cuts known. With that in mind, I 
welcome this review and what it seeks to achieve.
    I note that the President has directed the Department to 
maintain his 2012 defense strategy even though his senior 
commanders have testified that the strategy would have to be 
revised in the face of additional budget cuts. Any further 
consideration of strategy has been deferred to the Quadrennial 
Defense Review, which will not report out until next February 
at the earliest, which is actually after the next budget is 
supposed to be presented.
    In the meantime, the report makes clear that the Department 
will proceed with changes in force structure, compensation, and 
further efficiencies without a new strategy. The most 
optimistic scenario has the President requiring DOD [Department 
of Defense] to find another $150 billion on top of the $487 
billion that has already been cut.
    To make matters worse, even if all of the options in this 
report were adopted, it would only address 10 percent of the 
true budget shortfall in the next year or two. The math simply 
does not add up.
    This report also makes clear what I have been warning about 
for over 2 years: Further cuts will cause catastrophic 
readiness shortfalls. We will lose our workforce and ability to 
recruit and retain the All-Volunteer Force, and our influence 
around the world will continue to diminish.
    There is agreement on both sides of the aisle and both 
sides of the Potomac that these cuts embolden our enemies and 
jeopardize U.S. national security. We often talk of risk, but I 
hope that today we will have a frank discussion about how this 
funding profile for defense limits the ability of this country 
to protect our national
security interests, not simply that we are accepting more risk,
but what that means for the Nation and our men and women in
uniform.
    I look forward to hearing the testimony, and I thank both 
of our witnesses for being here today.
    Mr. Smith.
    [The prepared statement of Mr. McKeon can be found in the 
Appendix on page 49.]

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

    Mr. Smith. Thank you, Mr. Chairman. I appreciate this 
hearing; as well, our witnesses being here.
    This is an incredibly important topic, and, really, it all 
comes down to sequestration.
    The plan, the strategy that the President and the DOD laid 
out a couple years ago based on the reductions in the budget 
was challenging, to be sure, but manageable. And I think the 
strategy matched the amount of money that was reasonably 
available and also matched our national security challenges and 
threats as best as they could.
    Now we have sequestration coming down at us, and there is 
really no, you know, end in sight to that. 2013 has been 
difficult, 2014 is coming, and there are 8 years after that. 
And the impact on our defense budget and the impact on what we 
can do in terms of national security is deep and profound. It 
has already had an impact on the readiness that is available 
for this year, and then we are only, what, 3, 4 months into the 
first year of sequestration. It is going to keep getting worse.
    And I really hope our witnesses drive home that point 
today, that if Congress does not act, if we don't do something 
to shut off sequestration, we have a very bleak future in terms 
of our national security.
    And that is not to say that the defense budget can't take 
cuts. It can. I think there are a lot of places where you could 
find greater efficiencies. There are a lot of places where we 
could reduce the budget responsibly and meet our national 
security needs. But saying the defense budget can take cuts and 
saying that it can take 10-percent, across-the-board cuts every 
year for 10 straight years are two entirely different things.
    And the impacts of those cuts are deep and devastating and 
would fundamentally alter our commitments to the world and our 
commitments to our own national security and would also have a 
devastating impact on the industrial base. And by ``industrial 
base,'' I mean jobs. I mean manufacturing jobs, good jobs that 
really help our economy, protect our workforce. And while a lot 
of that is defense-focused to begin with, we build skills and 
expertise that then helps us in the commercial sector, as well. 
We would lose that also. This is caused by sequestration.
    Now, our budget deficit for 2013 and 2014, the projections 
on that have come down significantly in recent months. 
Personally, if I could do it, I would simply turn off 
sequestration. It was done as a threat, and so we never really 
wanted to implement it; we just figured it would be so bad, it 
would force broader deficit reduction. Well, it didn't. So why 
do we keep it on, when we see the impact that it is having on 
our national security, our defense, and, by the way, on a whole 
lot of other discretionary programs, as well?
    But since there appears to be no appetite for simply, you 
know, stepping back from the blind threat that we made a couple 
years ago, it is incumbent upon Congress to come up with some 
sort of plan to find savings and tax increases that can cover 
the costs so that we don't have to do sequestration and further 
devastate the discretionary portion of the budget, of which 
defense is over half.
    And, sadly, it seems like the appetite to do that is 
lessening instead of growing around here. And I know people 
say, well, you know, the sky didn't fall, the economy didn't 
completely collapse when sequestration happened, but the final 
point I will make is that sequestration is the classic, you 
know, ``boiling the frog in the water.'' It is a slow process; 
it doesn't happen overnight. But when you look at the outyears, 
the charts as we go forward as these cuts get piled on top of 
each other, you know, the impact is deep and profound.
    And it is something that I would urge every member of this 
body, not just of this committee, to really take seriously when 
we look at how we deal with sequestration. Whatever the plan is 
to come up with savings as an alternative, we have to put it on 
the table. Because the impact of this is really, really going 
to be deep in all of the ways that I have described and others 
as well.
    I can't say that I look forward to the testimony. I don't. 
It is not going to be pleasant. But I hope everybody hears it 
and it motivates people to act.
    I yield back. Thank you.
    [The prepared statement of Mr. Smith can be found in the 
Appendix on page 50.]
    The Chairman. Thank you.
    Every member of this committee, I am sure, is very 
frustrated. Our job is to look after the national defense of 
the Nation. Both of you gentlemen, that is your job also. We 
work in tandem. At times, we get frustrated because you come 
from the Pentagon, we come from the Hill. And I know we will 
have tough questions. I understand Mr. Smith's comment about he 
doesn't look forward to the testimony, because it is tough and 
we are going to have to some way get through it.
    But I want to say at the outset, we are all on the same 
team. We are all signed up to look after the defense of this 
Nation. We just come from different parts of the city. And, 
some way, we have to come together to get this problem 
resolved.
    Today was the first I learned that we--I guess we had been 
so involved with the sequestration, I didn't notice the $150-
billion cut in the outyears that the President had already 
included in his budget on top of the $487 billion and on top of 
the $100 billion that Secretary Gates had had cut through 
efficiencies and had said that most of it we would be able to 
get back, and that turned out that we weren't able to.
    So we are fortunate to have with us today Dr. Ashton 
Carter, Deputy Secretary of Defense, and Admiral James 
Winnefeld, the Vice Chairman of the Joint Chiefs of Staff.
    Thank you, both of you, for being here.
    And, Dr. Carter, the time is yours.

STATEMENT OF HON. ASHTON B. CARTER, DEPUTY SECRETARY OF DEFENSE

    Secretary Carter. Great. Thank you, Mr. Chairman, 
Congressman Smith, all the members of the committee. We do 
appreciate the opportunity to be here with you to discuss the 
results of the Strategic Choices and Management Review.
    And to get to something the chairman just said, you know, 
we are all Americans, and we very much appreciate the support 
this committee gives to our people in uniform. It really comes 
from the heart. It matters a lot to us. And we thank you for 
taking the time, which you have to devote to so many topics, to 
devote to us and our Department. So thank you.
    And, also, before I get started with a brief recap of what 
the SCMR [Strategic Choices and Management Review] was about, 
if I could, I just want to emphasize something the chairman 
said at the very beginning which is very important, which is 
the need to act strategically in a time of budget transition.
    We face two great transitions which are occurring 
simultaneously. One, and the most important one, and I think 
what the chairman's point was, is the strategic transition from 
the first post-9/11 decade, where we have been so preoccupied, 
of necessity, with the wars in Iraq and Afghanistan, to a new 
era and to facing and dealing with the problems and 
opportunities that are going to define this Nation's security 
future.
    That is a transition we have to make irrespective of 
budget, but it happens to coincide with a very turbulent time 
in terms of our budget and our ability to plan; hence, the 
SCMR, Strategic Choices and Management Review. And it has two 
parts to it, Mr. Chairman. It has the strategic part and it has 
the management part, as you said.
    Now, the management part is not strategic. That is about IT 
[information technology] efficiencies, overhead reduction, 
compensation reform. And none of that is strategic, but if we 
don't address those issues, which we did in the SCMR, then we 
would have to take all of any budget cuts out of investment, 
modernization, and force structure, which we don't want to do. 
So we wanted to look at both, and in the SCMR we did look at 
both. I will make some brief remarks about both.
    But to your point, Mr. Chairman, you are absolutely right. 
And we did take a strategic look at those budget reductions, 
but there is a very important finding, which was that, when you 
took a strategic view and you tried to build your future 
strategically, we were unable in that strategic approach to 
fill the sequestration gap in the early years. I think that is 
what you meant about the numbers don't add up. They don't add 
up in the early years, because the things we have to do under 
sequestration are not strategic; they are dumb. And so you 
can't make it add up in the early years.
    That is an important finding of the SCMR. I will say a 
little bit more about that later, but I think that that is 
exactly right.
    And, of course, the SCMR is the preparation for the budget, 
as you mentioned, fiscal year 2015. And we do need to make 
these plans and these changes now and not wait for the 
Quadrennial Defense Review, as you said, which will be a help 
to us and which we do need to conduct, but it does come late in 
the process, as you said.
    Let me begin by saying, you know, we, of course, support 
the enactment of the President's 2014 defense budget proposal 
because it does support the goal of deficit reduction while 
providing, as we will see and as the SCMR indicated, an 
adequate level of resources to maintain a strong national 
defense in a rapidly shifting and highly complex global 
security environment.
    But, since March 1st, sequestration has been the law of the 
land. Secretary Panetta and I began warning about the negative 
impacts of sequestration on the Defense Department almost 2 
years ago. And, in fact, it was 1 year ago today that I 
testified before this committee that sequestration would have 
devastating effects on the Department, both because of the size 
of the sequestration cuts and because of the mindless way that 
the law requires them to be allocated. And, as predicted, 
sequestration's impacts on the Department's operations have 
been very unfortunate and far-reaching.
    And in the absence of an overall longer-term budget 
agreement between Congress and the President, we have concluded 
that we must prepare and plan for the possibility that 
sequestration-level budgetary cuts imposed by the Budget 
Control Act will remain in effect, as Congressman Smith said, 
for the years ahead and not just for this year.
    And, accordingly, in March, Secretary Hagel asked me, 
working with the Chairman of the Joint Chiefs of Staff, the 
Vice Chairman of the Joint Chiefs of Staff, and all the 
Department's civilian and military leadership, to conduct the 
Strategic Choices and Management Review in order to prepare the 
Department for a range of budget scenarios.
    And, as its title suggests and as I mentioned, the SCMR had 
two parts, one focused on strategic choices and one focused on 
managerial ones, and a unified view was necessary.
    The scenarios, budget scenarios, we considered in the SCMR 
reflect today's budget debates. They range from the President's 
fiscal year 2014 defense budget proposal, which included, as 
the chairman has noted, an additional $150-billion reduction in 
defense spending over fiscal years 2014 through 2023, most of 
those cuts occurring later in that period, to the Budget 
Control Act sequestration caps, which would cut $52 billion 
from defense in fiscal year 2014 and then 50 again and 50 again 
and 50 again and 50 again for 10 years.
    The formal process of the Strategic Choices and Management 
Review is now complete, and its findings are sobering. We hope 
we will never have to make the most difficult choices that 
would be required if the sequestration-level budgetary caps 
persist. But the SCMR formulated and framed these kinds of 
choices for us, and now we are at least prepared if confronted 
with this scenario.
    You can read the details about our findings in the written 
testimony that the Vice Chairman and I submitted to this 
committee, which I would request be entered into the record. 
Let me just share with you the three key findings of the SCMR.
    First, in all of the budget scenarios we considered, 
savings from reducing DOD's overhead, administrative costs, and 
operating expenses, which we refer to as ``efficiencies,'' as 
well as serious reforms to compensation for civilian and 
military employees, both are crucial.
    Compensation alone makes up more than half of the defense 
budget. If overhead and compensation continue to grow as the 
overall budget shrinks, then all of the impact of the cuts will 
fall on the other parts of the defense budget--on force 
structure, on training for readiness, and on investment in new 
technologies--resulting in reduced combat power and increased 
national security risk.
    These reforms are difficult and painful, but we have to do 
them. And to do them, we need the partnership of Congress and 
the lifting of many legislative restrictions under which we now 
operate.
    And we also found, however, that even the most aggressive 
and ambitious packages of efficiencies and compensation reform 
that we mapped out in the SCMR are not, by themselves, enough 
to meet the budget reductions called for in any of the 
scenarios we analyzed. The SCMR showed that cuts in combat 
power, force structure, readiness, and investment will be 
necessary in all three of the budget scenarios.
    The second finding regards sequestration. The SCMR found 
that over time a combination of carefully chosen efficiencies 
and compensation reforms, combined with various carefully and 
strategically chosen alternative approaches to cuts in force 
structure, investment, and readiness, could achieve 
sequestration-level cuts over time. But there is no 
strategically and managerially sound approach to budget cuts 
that can close the gap within the next few years.
    I think that is your point, Mr. Chairman, about the numbers 
not adding up.
    We simply cannot downsize the force prudently in a few 
years. Ten, yes; in a few, no. It takes time to downsize 
forces, to cut employees, to close bases, to reap savings from 
reforms. These strategic adjustments take time.
    If sequestration-level cuts must be implemented in the 
meantime, drastic measures that are not strategically or 
managerially sound are the result. And you see this already in 
fiscal year 2013, this year, where we had sequestration applied 
immediately, resulting in such actions as readiness standdowns 
and furloughs. Flexibility in time is essential.
    And the third major finding of the SCMR concerns strategy. 
The SCMR showed that the President's fiscal year 2014 budget 
proposal allows the Department to still implement the main 
tenets of the President's defense strategic guidance. Force 
reductions in this scenario are necessary but, if accompanied 
by efficiency and compensation reforms, can be made in a way 
that incurs only minimal risk in our strategy, cutting parts of 
the force that are in a sense excess to our strategic needs--in 
particular, for example, reducing the size of our ground and 
tactical air forces as we draw down from more than a decade of 
stability operations in Iraq and Afghanistan.
    But, in contrast, the BCA [Budget Control Act] budget, or 
sequestration budget, if mandated over the full 10 years, 
would, in addition to the drastic measures in the early years 
just noted, force the Department to make such significant 
changes to the force that we would have to change parts of the 
Nation's defense strategy--changes that would mark a 
significant departure from the missions our Nation has been 
accustomed to being able to accomplish.
    The SCMR examined two illustrative strategic options to 
reach sequestration levels that bracket our choices in each 
force element and various choices in between: one bracket that 
seeks to preserve a modernized force by sacrificing capacity 
and one that preserves a larger force at the expense of 
modernization. Neither is compatible with the current strategy, 
as defined in the President's defense strategic guidance. Under 
sequestration, a large number of critical modernization 
programs would be at risk, and we would see significant 
reductions in force structure.
    So, to reiterate, the SCMR did not make final choices among 
these possibilities because we hope never to have to face them, 
but it did map out various options to reach each budget 
scenario. The SCMR produced options that would prepare the way 
for these large cuts, but I have to emphasize that plans alone 
cannot avoid serious damage to our military capabilities.
    Tragically, this prospect of serious damage to national 
security, detailed in the written testimony we have submitted, 
is not the result of an economic emergency or a recession that 
makes a sudden reduction in expenditures necessary. It is not 
because defense cuts are a mathematical answer to the Nation's 
overall fiscal challenge or because paths of revenue growth and 
entitlement spending have been explored and exhausted. It is 
not, surely, because the world has suddenly become more 
peaceful. It is not due to a breakthrough in military 
technology or a new strategic insight of some sort that makes 
continued defense spending unnecessary. It is purely the 
collateral damage of political gridlock.
    And friends and potential enemies around the world are 
watching our behavior. To be sure, America will remain the 
world's strongest military power, but we are accepting 
unnecessary risk.
    Secretary Hagel and I also fully support the President's 
overall budget plan in his fiscal year 2014 budgetary proposals 
for other Federal agencies.
    DOD depends on a strong education system to provide 
qualified recruits for our All-Volunteer Force; an unrivaled 
science and technology base and a strong manufacturing base to 
maintain our decisive technological edge; infrastructure that 
surrounds our bases and installations; and other agencies of 
law enforcement, homeland security, intelligence, and diplomacy 
to complement the military instrument of power; and, more 
generally, on a strong economy to buttress our role in the 
world.
    We in the Department of Defense are prepared to make 
difficult strategic and budgetary choices, but in order to 
sustain our military's unrivaled strength, we need the cloud of 
uncertainty dispelled and not just moved to the horizon.
    Along with budget stability, we need time to make changes 
strategically, and we need the support of Congress to make 
budget cuts in a managerially sensible way. We need to return 
to normal budgeting and a deal that the Congress can pass and 
the President can sign. And then, together with Congress and 
this committee in particular, we can continue the strategic 
transition upon which we need to be embarked with certainty and 
stability.
    Thank you.
    [The joint prepared statement of Secretary Carter and 
Admiral Winnefeld can be found in the Appendix on page 51.]
    The Chairman. Thank you.
    Admiral.

 STATEMENT OF ADM JAMES A. ``SANDY'' WINNEFELD, JR., USN, VICE 
  CHAIRMAN, JOINT CHIEFS OF STAFF, U.S. DEPARTMENT OF DEFENSE

    Admiral Winnefeld. Chairman McKeon, Ranking Member Smith, 
members of the committee, and I would allude to the chairman's 
remark, I would say teammates in supporting our national 
defense, good morning. And thank you for the opportunity to 
appear today on this important topic.
    I was confirmed for this position the same day that the 
Budget Control Act was passed in 2011. I have had the 
opportunity to participate in every effort since then within 
DOD to cope with this unfortunate mechanism for reining in our 
spending in support of the national security imperative of 
deficit reduction. This includes the initial BCA cuts that 
year, and it also includes the carnage of the fiscal year 2013 
sequester in its timing, its magnitude, and its mechanism.
    As we look toward an uncertain future, I helped Deputy 
Secretary Carter lead the SCMR as we stared into the chasm of 
what we call ``sequester forever.'' And so I would make the 
following points this morning, many of which will underscore 
what Deputy Secretary Carter said.
    First, I want to assure you that the SCMR process was very 
collaborative, with the Services and combatant commanders and 
other DOD components participating at every stage. This was a 
deep and painful internal look at every corner of our 
institution. All the stakeholders were involved in the process, 
and the process has made us better.
    Second, the SCMR was not an academic exercise. We looked at 
everything, and we did it from the viewpoint of balancing 
strategic ends, ways, and means. As you may recall, the defense 
strategic guidance published a year and a half ago was our 
first bite at this apple, because all three elements of that 
equation had changed. The potential for additional cuts now 
further upsets that balance, and the SCMR offers us choices on 
how to restore it.
    When the means come down drastically, something else in the 
equation has to give, or we will face a strategic say-do gap. 
With reduced means, we will work as hard as we can on the ways 
we use in order to preserve the ends we need to meet at 
acceptable risk. But, in the end, we could face a serious 
decline in our ability to protect this Nation and our allies.
    Third, the most damaging element of this whole process, as 
Deputy Secretary Carter has alluded, is the speed at which the 
reductions hit us. They are sudden and deep rather than 
backloaded and gradual.
    For a variety of reasons--for example, how fast we can or 
should get people out of the service, and the legislative 
limits on the ways we can cut--at the BCA level of reductions, 
they simply happen faster than we can digest them in a balanced 
and sensible way. On that profile, all we will be able to do in 
the early years is grab money wherever we can, mostly out of 
the modernization and readiness accounts, which is particularly 
disruptive to our ability to defend this Nation.
    Fourth, again, as the Deputy said, we need the freedom to 
find savings in our structural costs and our compensation 
first, or the structure, modernization, and readiness of the 
force that defends our Nation will have to be reduced even 
more.
    I can tell you Chairman Dempsey and I are very concerned 
that most of that could come on the back of readiness. And, 
indeed, no matter what happens with the fiscal year 2014 
budget, we will begin next year trying to dig out of the 
readiness hole that sequester created for us this year. Imagine 
trying to be in a swimming race where you have lead weights on 
your legs and starting that race when you are already out of 
breath. That is the situation we will be facing in fiscal year 
2014. And this is a real problem that is getting worse every 
day, and we ignore it at our peril.
    Fifth, I want to emphasize that this effort was about 
teeing up choices. No decisions have been made, because they 
cannot yet be made, because we don't know how much money we are 
going to have, and we don't know when we are going to know how 
much money we are going to have, and we don't know what the 
rules are going to be when we find out. And so it is very hard 
to produce a strategy when one leg of the ends, ways, and means 
stool is so uncertain.
    Moreover, I am concerned, and Chairman Dempsey shares my 
concern, that as Members begin to understand what these cuts 
mean in real terms, we will end up with legislation or 
amendments that foreclose bit by bit the levers that we need to 
shape this force strategically, and they will funnel us in to 
principally taking the only thing that is left, and that is 
readiness, which really has no constituency other than the 
young soldier, sailor, airman, or marine putting his or her 
life on the line for our Nation's security interests. And we 
are already seeing this.
    It will be truly shameful if we allow this force to travel 
further down the path to becoming hollow than it already has 
over the course of this year. I believe the members of this 
committee can help fix this by reaching a compromise that 
changes the magnitude, the profile, and the mechanism of these 
cuts and avoids a destructive continuing resolution with the 
sequester mechanism riding on top of it.
    So, to the degree that we must cut, we ask you to support 
expanded reprogramming flexibility so we can shape the force 
strategically. Allow us to make needed but fair adjustments to 
the way we compensate our people, and allow us to shed 
unnecessary structure and infrastructure.
    In short, we have enough uncertainties among the many 
security risks facing this Nation today. We need your help in 
removing the risk of the financial uncertainty that faces your 
Department. It is the least we can do for the magnificent young 
men and women who stand on the front lines for our Nation and 
who, no matter what happens, will always strive, supported by 
our fabulous DOD civilians, to remain the finest fighting force 
in the world.
    So I would like to thank you for your continued support of 
those wonderful people, and we stand ready to support you with 
whatever information you need to get this done.
    I look forward to your questions, and thank you very much.
    The Chairman. Thank you.
    You know, I have been struck by the news reports that have 
suggested that senior defense leadership saw this review as an 
effort to, ``set clear strategic priorities to implement the 
President's defense strategic guidance at a time of huge 
financial challenges.''
    Indeed, our briefings yesterday that some of us were able 
to attend made it clear that the President directed the DOD to 
retain the defense strategy and not to use the SCMR to 
contemplate alternative frameworks.
    Yet, last April, General Dempsey testified, ``We adjusted 
our strategy after the lessons of 10 years of war and our 
projection on what the Nation would need in 2020, and we mapped 
the 2013 to 2017 budget to it, absorbing the $487 billion cut, 
and that if we have to absorb more cuts, we have to go back to 
the drawing board and adjust our strategy. What I am saying to 
you today is that the strategy we would have to adjust to 
would, in my view, not meet the needs of the Nation in 2020.''
    This February, he went on to say, ``The question I would 
ask this committee: What do you want your military to do? If 
you want it to be doing what it is doing today, then we can't 
give you another dollar.'' That said after the $487 billion in 
cuts. Since then, we have had sequestration piled on top of 
that, which is another $500 billion, after he said, we can't do 
this strategy if we give you another dollar--$500 billion and 
$150 billion. That is $650 billion on top of it.
    Now, I know the President took the $500 billion out of his 
budget, he put the $150 billion, but the $500 billion is law. 
And until it is changed, we have to consider that that is the 
law.
    Admiral Winnefeld, do you agree with these statements of 
General Dempsey?
    Admiral Winnefeld. Chairman McKeon, what I do agree with is 
that the President never directed us to not depart from the DSG 
[Defense Strategic Guidance], as far as I can remember. 
Basically, we used the defense strategic guidance as the 
baseline, and it was something that we strove to protect as 
best we could with potential budget cuts.
    What we discovered as we went through this is the deeper 
those budget cuts go, and particularly under the BCA cut 
levels, the $52 billion forever, that it is going to be very 
hard to execute that strategy. There are areas where it will 
break. And I would say that we can't write a new strategy until 
we know what the bottom line is going to be, what level of cut 
we would have to take.
    So we are sort of trapped in this strategic no man's land 
of--we now understand, based on the SCMR, what choices we might 
have to make, which would certainly inform a new strategy if we 
had to write one. But we don't know which choices we are going 
to have to make until we know what the level of funding is 
going to be. So we are really sort of trapped there in that 
regard.
    And I would also add that, you know, this was a very deep 
and painful process. In it, we really, really strived, as 
Secretary Carter mentioned, to find more efficiencies. It is 
just something we always try to do; it is where we want to turn 
first. And when you can do that, and if you look at 
compensation, those things don't really start to add up until 
the outyears. And that is why you see a greater willingness to 
maybe take some of that step but have it backloaded, because 
that is where we can get it. We can't get that upfront.
    The Chairman. You know, I guess we just look at this 
strategy a little differently. We had a strategy that has been 
good for this Nation since World War II, where we would be able 
to fight two major conflicts at a time, a lesson that we 
learned in World War II. And that strategy has stood us well up 
until a little over a year ago, and we were forced to cut $487 
billion out of defense. We cut almost a trillion dollars out of 
our domestic spending, and half of that came out of defense, 
even though defense only accounts for about 17, 18 percent of 
the overall spending. Defense got the big hit. And as a result 
of that, the strategy changed. And like I say, that was just a 
little over a year ago.
    I have always felt like what we would expect of our 
military leaders is, you tell us the threats that we have, you 
set a strategy to meet those threats and then how much it is 
going to cost to do that, then we have to someway come up with 
the money, instead of, this is how much money we have and then 
how do we devise a strategy to fit the amount of money.
    With further sizeable cuts, will a new defense strategy be 
required because the President's 2012 defense strategy can no 
longer be supported with acceptable risk? You know, in the 
discussion yesterday, we didn't talk about any different risk 
or how much more risk we are going to have to accept.
    If not, will we see an updated chairman's risk assessment? 
You know, the last QDR [Quadrennial Defense Review] really 
didn't do an adequate job of really telling us what the risk 
would be out 15, 20 years. I hope the one that we get next year 
will do a better job of that.
    If we are going to see--if we are going to keep the 
President's current strategy and resource it less, because the 
last one already described significant risk, where does that 
leave us? How are we going to find out what additional risk we 
are asked to assume if we follow through with all of these 
cuts?
    Admiral Winnefeld. So, a couple of things.
    First of all, in the initial part of your question, I share 
your frustration. We would like nothing more than to be able to 
state the ends first and then naturally have the means appear. 
But, in the real world, we really can't do that. It really is a 
balance of ends, ways, and means. And we have to look at the 
ways we have, we look at the ends we are trying to achieve in 
the world, the means we have, and try to be as innovative as we 
possibly can to try to achieve balance, achieve an equilibrium 
among those things. We have to have our strategic work informed 
by means.
    Now, we would love, again, to do that, just set the ends 
and give us the money, but that doesn't really work very well--
--
    The Chairman. You know, Admiral, the real world can change 
on a dime. When Pearl Harbor happened, I am sure everything 
changed, and we changed our focus, and all of a sudden we found 
whatever resources we needed to meet the threat, and everybody 
bought in. The problem is now everybody isn't buying in with 
everything we have got. But I understand what you are saying 
about the real world.
    Admiral Winnefeld. If I could, just very briefly on the 
defense strategic guidance, the chairman, when we submitted 
that this year, did hold out that if the financial situation 
gets worse, we might have to provide an update. And we are 
considering at this moment whether we are going to do that.
    And we reframed the chairman's risk assessment this year. 
Rather than being sort of a regional tour d'horizon, we tried 
to frame it in what we call, you know, national security 
interests or national defense priorities. And that is the 
approach we would take if we were to provide an update, sort of 
a midterm update.
    Secretary Carter. Mr. Chairman----
    The Chairman. You know, I really think that is needed, 
because we try to go and explain this dilemma to the other 
Members of Congress, who right now are sitting in other 
committees, they are studying other issues, they are not 
focused on this issue. And when we just say, we are really 
cutting the military too much, they don't understand. But if we 
were to say, a third of our air force is grounded, we could not 
right now do another Desert Storm, we could not do--what are 
the things we cannot do with the $487 billion cuts we already 
have and if the sequestration continues? We need to be able to 
tell the world.
    I think the world is watching, but I am not sure all the 
American people are, and I am not sure all the other Members of 
Congress are. Because I don't think people are quite grasping 
the real significance and the real importance of what these 
cuts are doing, the devastation that they are causing to our 
ability to defend our
Nation.
    Secretary Carter. Mr. Chairman, if I can just add one thing 
to what the Vice said and just reinforce, the President's 
strategic guidance--in the testimony we submitted is the letter 
that Secretary Hagel signed kicking the SCMR off, and the 
phrase he used in there was that the President's strategic 
guidance would be the ``point of departure.''
    And so it was recognized from the beginning that if we get 
big budget cuts relative to the strategy that we designed a 
year and a half ago, there is an impact on strategy, there is 
no question about it. I think that is what the Chairman was 
saying to you previously, and that is what the Vice said, and 
that is certainly true. I just want to be absolutely clear 
about that.
    Now, when you make those strategic choices, you can make 
them in different directions. You pointed to the question of 
capacity for simultaneous conflicts. That is an important 
ingredient of strategy. There are others: nuclear deterrence, 
counterterrorism, and so forth. But as the Vice said, as the 
budget is disrupted and reduced, there are going to be things 
we can't do any longer.
    And we adumbrated that in the Strategic Choices and 
Management Review. And we continue to work on how to adjust to 
that circumstance. We know the world is watching. It is 
embarrassing and unsafe to be in the situation we are in, which 
is scrambling in this way.
    The Chairman. Thank you.
    Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    Just an observation at the start of mine. I mean, it is a 
matter of budget choices. I mean, if we want to say to the 
Defense Department, you know, tell us what you need to do and 
then we will get you the money, then we need to make choices in 
other parts of the budget, both on revenue and on spending.
    And then the choices we have made in the last decade, you 
know, have been to, you know, dramatically cut taxes and 
dramatically increase spending. You know, even on entitlements, 
we passed a prescription drug benefit and we have cut taxes by 
some $6 trillion, $7 trillion over the course of the last, you 
know, 10 years. And here we are.
    So if you take the isolated portion of the defense budget, 
you can argue for more money for it, but if you really want to 
argue for more money for it, then you have to argue for less 
someplace else or, as I have advocated, for more revenue. And 
that is what is really missing from the discussion, is that, 
you know, sort of, grand-bargain approach to better align where 
our spending is at.
    And don't get me wrong. As I have said earlier, I certainly 
think the defense budget--the chairman and I probably don't see 
eye to eye on this--can take a portion of that. There could be 
some cuts there and we could still meet our strategy.
    The problem is, what the Budget Control Act did is it put 
everything on the discretionary budget, you know, and it put 
all of the cuts, you know, not just on defense but on 
transportation, infrastructure, research. Some of my colleagues 
on other committees have been getting, you know, similar 
briefings to this about NIH [National Institutes of Health] 
funding or about infrastructure funding that, trust me, are 
just as devastating in terms of the priorities and in terms of 
protecting our country.
    So that brings me back to the original point, that if we 
want to stop sequestration, we have to honestly address those 
other issues.
    Dr. Carter, I wanted you to elaborate a little bit on the 
personnel side of it. Because that is the other problem, is 
that Congress has restricted you; not just that we said 10 
percent across the board, we then also restricted where you can 
make those cuts in ways that make it even more difficult.
    The committee is adamantly opposed to base closure, so you 
have no flexibility where that is concerned. Personally, I 
support base closure. I think if we are going to bring down the 
size of the force, it is completely logical. We have refused to 
do anything except the modest increase we did on TRICARE 
[Department of Defense health care program], I think, a couple 
years ago. And on the personnel side, you know, we continue to 
exempt that.
    Can you walk us through those numbers a little bit and how 
being able to have some more flexibility in those and perhaps 
other areas could help you?
    Secretary Carter. I absolutely can.
    Let's start with compensation. Compensation, both military 
and civilian, makes up about half of our budget. Nobody, in my 
judgment, none of our soldiers, sailors, airmen, marines, or 
DOD personnel, is overpaid. We value these people. We want 
them, and, particularly those who are fighting for us, we value 
what they are doing.
    But we cannot continue to have compensation grow in the way 
it has over the last decade, or it won't be half of the budget, 
it will be 55 percent, 60 percent, and so forth. So, at some 
point, the rate of growth in pay needs to slow.
    We have made, as you indicated, proposals that would do 
that that we think both adequately honor our forces, are 
effective in the labor market in keeping really good people 
coming into our military--because that is what makes our 
military great--and are fair. And we have not been able to make 
those changes.
    Likewise with health care. Health care in DOD, like health 
care in the rest of the economy, is growing in such a way that, 
once again, it will engulf the rest of the budget. We have made 
some proposals that we thought were fair, reasonable, we 
thought about them very hard, and were not able to get them 
enacted.
    In the SCMR, we identified--I am looking at the numbers 
here--over the 10-year period, $63 billion over that period in 
additional efficiencies that we think we can get and $97 
billion in compensation changes that we would recommend. So 
that is 160 out of the 500; that is about a third of the cuts 
we are required to take,
out of more than half of our budget, so it is still not cutting 
in
proportion.
    But we need support for these things. You mentioned BRAC 
[Base Realignment and Closure]. That is another popularity 
winner. But I can't tell you anything else but that we need to 
do that. Otherwise, we will be all ``tail'' and no ``tooth'' to 
our military.
    So these aren't strategic questions, as I said at the 
beginning; these are managerial questions. But they have 
strategic consequences, because we will end up with these bills 
overwhelming investment and everything else. So we really do 
appeal for understanding and support here.
    We intend, as part of the fiscal year 2015 budget, as we 
did in 2014, as we did in 2013, and back when I was with 
Secretary Gates in 2010 and 2011, then also, appealing to be 
able to make these changes.
    Mr. Smith. Well, you are kind of----
    Secretary Carter. That is the smart and sensible way to 
take a bite out of budget cuts if we do face them.
    Mr. Smith. Yeah, you are kind of trapped in the middle 
here, in that, you know, collectively, Congress is doing 
nothing about sequestration, but, individually, we all want to 
imagine that it is not going to happen, so that we look at, you 
know, cuts that impact our districts or impact programs that 
are important to us, and we fight them just like it was 8 years 
ago, you know, when we had a big defense budget.
    And it is like Congress has kind of got to choose. I mean, 
if we don't like sequestration, if we want to, you know, 
preserve these bases and preserve all these other things, then 
we had better stop sequestration. But as long as it continues 
to roll on, we are way behind the curve on adjusting to the new 
reality and giving you the flexibility that you need if, in 
fact, sequestration is the way of the world.
    And, as I said, I would turn it off tomorrow, but we don't 
have the votes for that. So if it is what it is, we have to 
start legislating within that reality.
    Thank you. Appreciate the testimony.
    I yield back.
    The Chairman. Thank you.
    Mr. Thornberry.
    Mr. Thornberry. Thank you, Mr. Chairman.
    Dr. Carter, just to be a little more specific on what you 
and Mr. Smith were talking about, I am looking at a chart that 
shows fiscal year 2014 in particular. And it shows the specific 
recommendations that you all have made on pay and health care 
and retaining aircraft and ships, and it ends up being about $5 
billion worth of difference in fiscal year 2014. But that 
leaves about $47 billion worth of difference that it doesn't 
touch.
    And so, to me, I take your point. It is a little bit like 
my constituents who argue, I know how to balance the budget, 
just cut foreign aid.
    Well, there are proposals you all have made. We have not 
agreed with them all, absolutely. But, at the same time, the 
huge portion that shows on this chart is not touched at all by 
the recommendations you all make for 2014.
    I understand, a lot of this is in the outyears and the 
savings grow, is part of the answer. But looking at what is 
right in front of us, under sequestration, there is $47 billion 
that you all don't have a plan for, right?
    Secretary Carter. Well, we don't have a strategically and 
managerially sound way to make those cuts. That was the point I 
made at the beginning. That whole orange pie has to be filled 
in with things that you and I would never sit in a room and 
think about doing as sensible things.
    The little red wedge, yes, is the beginnings of some of the 
efficiencies that we were just discussing with Ranking Member 
Smith.
    What you see there in orange--it is ironic, because orange 
is the color we have used in our own review for dumb gaps--that 
is a gap that can't be made up in a strategically and 
managerially sensible way.
    That is what we have been doing this year. That is why you 
see furloughs. Would you furlough somebody if you thought about 
it in advance and could take time? Would you stand down 
readiness so that you didn't have units flying, you didn't have 
ships sailing? We wouldn't do any of that stuff----
    Mr. Thornberry. Yeah.
    Secretary Carter [continuing]. If we had our----
    Mr. Thornberry. The only point I would emphasize is, I 
think it is important that we all work to put this in context. 
And so, for the Administration to continue to emphasize the 
request it makes that we may disagree with, I think it is a 
fair point to make it, but put it in context, that it doesn't 
deal with the overwhelming majority of the problem that we have 
in front of us.
    Similarly, base closing, it costs money for 2014. It would 
make that problem worse. And, certainly, given the recent track 
history of 2005 base closing, it would make it much worse. It 
is going to take 15 years before you ever break even, et 
cetera, et cetera.
    Let me just move to Admiral Winnefeld, because I want to 
ask one other question.
    I understand that the combatant commanders have been 
instructed to update their operational plans 18 months ahead of 
schedule. And we probably can't talk about this in great detail 
here, but I would like to know why.
    And it looks to me like we are again getting the cart 
before the horse, because that basically is the strategy. The 
demand signal on the people and the stuff that we need to carry 
out operations in certain theaters, you are telling them ahead 
of time to go ahead and update that now before any of the rest 
of this is settled.
    Admiral Winnefeld. There are a lot of really good reasons, 
Congressman, for taking a look at our OPLANs [Operation Plan]. 
We don't do it often enough to start with. We don't want to 
fight the last war. We are always accused of fighting the last 
war; I don't want to do that.
    There are a lot of things that can change that will 
influence how you fight. One is evolutions in the threat. And 
almost every threat we face in our major planning scenarios--
and you can imagine what they are in the Western Pacific and in 
Iran and that sort of thing--those threats are changing 
rapidly. So we need to account for that.
    Our own technology is changing. Those plans, in many cases, 
are written based on old technology that we have. Congress has 
given us the funds in the last few years for new technology. We 
need to update those plans. The world is changing very quickly.
    And I would also say that if we can find a better, more 
innovative way to execute those plans, that will take some of 
the pressure off of the uncertainty in the financial world that 
we are feeling right now. But that is not the only purpose for 
asking them to take a look at their plans. In fact----
    Mr. Thornberry. My time is running out. So it is changes in 
the world, or is budget included in the reason that they are 
asking for doing it 18 months ahead?
    Admiral Winnefeld. It is everything, Congressman.
    Mr. Thornberry. Including budget.
    Admiral Winnefeld. Ends, ways, and means, including budget. 
But mostly the fact that our technology has changed, the threat 
trajectory has changed, the world has changed, and I don't want 
to fight the last war.
    The Chairman. Thank you.
    Ms. Davis.
    Mrs. Davis. Thank you, Mr. Chairman.
    Thank you, both of you, for being here.
    I really appreciate the comments that my colleague just 
made, but the reality is that, even though the Congress can't 
maybe change all of that and close the gap, there are things 
that we can do. And so I think that we need to look at that 
within the context, as well. Because some of those changes, 
with thoughtful discussion, might lead to some differences that 
might be helpful to you. And I hope that we can do that.
    I also wanted to ask about if these furloughs continue. If 
we don't solve the problem of sequestration, will you be forced 
to continue to furlough civilian employees?
    Secretary Carter. First, with respect to furloughs for this 
year, that is, fiscal year 2013----
    Mrs. Davis. So I am looking at, yeah----
    Secretary Carter. I understand.
    Mrs. Davis [continuing]. For fiscal year 2014.
    Secretary Carter. As I understood, you had a question both 
about 2013, the continuation, and whether we need to do it in 
2014.
    With respect to 2013, we hope that we will be able to 
adjust the furlough level. We have set it at 11 days. Furloughs 
are under way. In most organizations, they are going at about 1 
day a week. That means 1 day, a payday, per week lost for an 
individual and their family. This is not a joke. It is very 
serious and no way to treat people. And, therefore, we are 
looking in every way, as we reach the end of the fiscal year, 
can we find money somewhere?
    I will give you some examples. Some of our war costs 
associated with Afghanistan--it is a war, so you don't know 
exactly how much you are going to spend. If, by the end of the 
fiscal year, we have money left over, so to speak, we want to 
be able to see that in advance and apply that to furloughs.
    Mrs. Davis. Uh-huh.
    Secretary Carter. Fuel prices are a little different, 
changing in our favor.
    So we are looking around as part of our general effort to 
manage under sequestration in the smartest way possible, given 
that it is a dumb thing. And if----
    Mrs. Davis. What about freezes on civilians?
    Secretary Carter. If we do find funds between now and the 
end of the year, we have two priorities. One is to restore 
maintenance, and the other is to relax furloughs. So that is 
what we are doing.
    In 2014, if we have sequestration in 2014, and I think the 
Secretary has indicated this, it goes beyond sequestration to 
the possibility of RIFs [Reduction in Force]. It goes to the 
possibility of involuntary separations of service members. 
Because it just gets worse and worse and worse over time. 
Obviously, we hate to do that kind of thing, but that is the 
kind of thing that becomes necessary if sequestration 
continues.
    Mrs. Davis. While it is difficult to, I think, see the 
impacts as yet--and I think you mentioned this earlier--what do 
we know about those impacts, though, in terms of, you know, 
have you established some metrics? What do we know about 
retention, recruitment? What do we know about performance, 
productivity? What do we know about these that might be helpful 
to us and instructive?
    Secretary Carter. Well, we know quite a bit, and we are 
trying to use the experience of operating under sequestration 
in 2013 to do better if we have to in 2014, even though the 
problem gets worse.
    But I will just give you a few examples of how it is 
different. Let's take an investment program, an acquisition 
program. You know, you all, very rightly, and I, especially 
when I was Under Secretary for Acquisition, Technology, and 
Logistics, get so frustrated with poorly performing programs, 
weapons programs. Well, sequester makes well-performing 
programs into poorly performing programs. It drives up unit 
costs, it causes schedule delay, all the things we hate, 
because it is a poor use of taxpayers' money.
    I have already said the impact on people. On readiness--and
Admiral Winnefeld can chime in on this if he wishes, but our
readiness problem will get even worse in 2014 because we have 
deferred some expenses into 2014 in the hopes that we wouldn't 
face sequestration.
    So we have looked at this very carefully. We are as 
prepared as it is possible to be for sequestration in 2014. How 
we are doing it is outlined in a very long letter that 
Secretary Hagel sent to Senators Levin and Inhofe 2 weeks ago, 
and I commend that to your attention. It is attached to Admiral 
Winnefeld's and my testimony. And it gives our plan for fiscal 
year 2014.
    But, you know, again, being prepared and having a plan 
doesn't mean it is not really unconscionable.
    Mrs. Davis. Uh-huh.
    Admiral Winnefeld. And just very briefly, you asked about 
the effect on retention and recruiting. Retention and 
recruiting are a very complex animal that depend on a lot of 
factors--the economy out in the rest of the country and so on. 
But I know that the Chairman and I are both fond of saying that 
today's readiness crisis is tomorrow's retention crisis. These 
folks want to be in, and they will not stay if they are not 
training.
    Mrs. Davis. Thank you.
    The Chairman. The gentlelady's time has expired.
    Mr. Jones.
    Mr. Jones. Mr. Chairman, thank you very much.
    And, you know, I sit here and listen to you very carefully. 
Yesterday, we had John Sopko, the Inspector General for 
Afghanistan Reconstruction, in a hearing in the Oversight 
Committee. You know, it is almost like we have two different 
worlds up here. We have the Washington world, and then we have 
the world of 49, 50 States out here.
    Down in Jacksonville this past week, the Jacksonville 
paper, ``Furloughs to Impact Mental Health Treatment,'' 
``Marines React to Mental Health Furloughs.'' I don't have time 
to read some of the comments to you. I would like to.
    You know and you have been talking about the problem. And 
the chairman made the comment, and he is right, that when we go 
to the floor and we talk about all the problems that will hit 
the military and the defenses of our Nation, a lot of Members 
don't believe it. Well, they can't believe it, because we keep 
sending money to Afghanistan, billions of dollars. In the two 
wars of Iraq and Afghanistan, we spent over $1.7 trillion, and 
we cannot even adequately take care of the wounded coming back 
home. Here I gave the example of the mental-health cuts down at 
Camp Lejeune.
    I think that this Administration and the Congress needs to 
face the facts. The facts are, when you have to borrow money as 
a government to pay your bills, then you need to reconsider how 
much of the world do you want to build empires in. And I do not 
understand why the President feels the obligation, or the State 
Department, to have a bilateral strategic agreement with 
Afghanistan. Karzai is going to leave one day; the Taliban will 
take over Afghanistan. He will be smiling from his castle 
somewhere that Uncle Sam and the poor taxpayers built for him.
    Dr. Carter, I know you don't make policy, I understand, as 
far as foreign policy. But we need the leadership in this 
country, both in Congress and outside of Congress, to start 
speaking clearly and honestly to the American people. And the 
situation is that if we are going to rebuild our military--
which right now we can't do because we don't have the money; we 
are in sequestration--somewhere along the way, policymakers 
have got to start speaking out, that we have to change our 
strategy.
    And that is what I hope that Secretary Hagel is doing. I 
have great respect for him. I think he is a man of integrity. 
He is a man that I have the greatest respect for. And maybe 
that is what we are headed to.
    We have to get smarter with our policies. Because we are 
going to be in sequestration a little bit longer, maybe a year 
or 2, and you are going to continue to have to take these cuts, 
furloughs. The chairman and ranking member are going to have to 
hold these hearings. But we are not going to move forward. We 
are just going to have these discussions and stay in the same 
status quo that we are in today.
    So I hope--and I am going to stop, I want to listen to you 
and the Admiral--but I hope at some point in time somebody will 
start saying, listen, America, you no longer can police the 
world, nor should you police the world. Help us rebuild America 
first and rebuild the military. And that is where we are.
    Do you have any comments?
    Secretary Carter. Thank you. Just two things to note.
    One is that, whatever any of the Members think of 
Afghanistan and the campaign in Afghanistan and the rationale 
for it and the success of it and so forth, one thing is for 
sure, which is of great importance to the Department, as you 
note, which is that we are winding down our involvement in the 
war in Afghanistan. And people are still debating how fast and 
how much and so forth, but no question about it.
    And that has some real consequences for us. And it gets 
back to the very first thing I talked about here, which is: We 
are and must be, as a department, embarked on a major 
transition from the era we are coming out of, anchored in Iraq 
and Afghanistan and the first post-9/11 counterterrorism focus, 
to what we are going to do in the future and what we can do in 
the future given our level of resources.
    That is more important than anything about the budget, to 
make that strategic transition. And, in that regard, I very 
much identify with what you were saying.
    Mr. Jones. Thank you.
    The Chairman. The gentleman's time has expired.
    Ms. Bordallo.
    Ms. Bordallo. Thank you, Mr. Chairman. And thank you for 
holding this hearing.
    And thank you, Dr. Carter and Admiral, for your honest and 
forthright testimony today.
    I continue to find it deeply concerning that Congress has 
placed the Department of Defense in the position you are in 
today, to make these tough, tough choices. And I fully support 
having a robust military to defend our Nation and our 
interests, but we in Congress must do our part to ensure you 
have the resources to meet current and emerging challenges.
    I support ending sequestration immediately and in its 
entirety. Finding a comprehensive solution to sequestration 
will allow DOD to properly plan and prepare for potential 
conflicts of the future.
    And that is the bottom line here. We are not allowing the 
world's greatest fighting force to effectively and efficiently 
maintain pace. And it is a message that will see some action in 
the near future. And we in Congress are the problem.
    Dr. Carter, I would like to know if you can discuss the 
SCMR results with respect to the rebalance to the Asia-Pacific 
region. I met earlier this week with the Senior Vice Minister 
of Defense for Japan, and I understand that you met him as 
well. While we had a good discussion on the Marines' 
realignment from Okinawa to Guam, I know we both had concerns 
about the timing of these moves.
    So can you elaborate on the impact of the Guam realignment 
and if you foresee any changes from the previous testimony 
provided by yourself and others on the commitment to the 
Pacific region? And how does the results of the SCMR exercise 
impact the realignment, if at all?
    Secretary Carter. Thank you. And thank you for meeting with 
Minister Eto during his visit here.
    The rebalance to the Asia-Pacific theater is a central 
tenet of our strategy. I think it is so obviously a part of the 
world that will be central to America's future that we will 
always have that high on our priority list. And it remains high 
on our priority list, and we are doing everything we can under 
sequestration and in all of these budget scenarios to protect 
investments in the rebalance in the Asia-Pacific.
    Now, at the extreme ends, where you get sequestration for a 
decade, we are not going to be able to do everything that we 
have planned to do in the Asia-Pacific. We are just not going 
to be able to do it. But it will still be a priority, and we 
will still be able to do much of it.
    And it is important that people in the region, both our 
friends and potential opponents, understand that we have the 
capacity and will to do that.
    And there are two reasons for that. One is that we are now 
able to shift a lot of the weight that we have had in Iraq and 
Afghanistan to the Asia-Pacific theater. Some of that equipment 
and those people are showing up already. And, second, in our 
budget, whatever our budget level is, and as we went through 
these various scenarios, we attached priority to the things 
that are most relevant to keeping the peace in the Asia-Pacific 
theater.
    We have done that for 60 years. It had been good for 
everybody, including us. If they think about it, it is good for 
China, it is good for India. It is the environment in which 
Japan, South Korea, Southeast Asia, all these economies have 
arisen. There is no NATO [North Atlantic Treaty Organization] 
over there. There is no law of nature that says that there is 
going to be peace in the Asia-Pacific. It is the pivotal role 
of the American military power which has done that for 60 
years. We need to keep doing that and do as much of it as we 
can in any budget scenario.
    Ms. Bordallo. Well, thank you. Thank you very much, Mr.
Secretary.
    And I have another quick question. I believe the long-range 
strike capability is of critical importance, not only in the 
Pacific region but for any future conflict we may be involved 
in. As a co-chair of the House Long-Range Strike Caucus, I am 
interested to know how the Air Force next-gen bomber is 
addressed in the SCMR.
    Maybe Admiral?
    Admiral Winnefeld. The Long-Range Strike Bomber is a very 
important program for us for a number of reasons. Principally, 
the two of: It is a vital leg of our strategic deterrent, of 
the triad; and, second, it is a very important element of 
potential future warfighting concepts that we would need from a 
standoff capability and also a penetrating capability. So we 
are certainly committed to that program.
    As far as I can tell--and I would have to defer to the 
Under Secretary of Defense for Acquisition, Technology, and 
Logistics, but I pay very close attention to this program--it 
is currently on track.
    Now, as far as the SCMR goes, you know, the deeper you go, 
the tougher some of this gets. And at the BCA levels, you know, 
it could impact that program in terms of timing or what have 
you. And it also would depend a little bit on whether you 
emphasized capacity or capability, in terms of how many you 
might buy or whether you would do the program.
    But, at the moment, we remain committed to that.
    Ms. Bordallo. Thank you, Admiral. My time is up. But thank 
you very much.
    I yield back.
    The Chairman. Thank you.
    Mr. Forbes.
    Mr. Forbes. Thank you, Mr. Chairman.
    And, Mr. Secretary, Admiral, thank you so much for your 
testimony today on the dire consequences of these cuts.
    You know, hindsight is always 20/20. And I would hope that, 
had the President had the benefit of your testimony, he would 
not have began the massive defense cuts that he started when he 
first came into office over 4 years ago. And make no mistake 
about it: The President began these massive defense cuts.
    The second thing I would hope is the President, listening 
to your testimony and in hindsight, would not have suggested 
sequestration. And make no mistake about it: It was the White 
House's suggestion we do sequestration, which, Mr. Secretary, 
you said was a dumb idea. Many of us told them it was a dumb 
idea then.
    I would hope in hindsight, too, the President, hearing your 
testimony, would come back and not have signed that into law, 
which, make no mistake about it, the President signed it into 
law.
    But what concerns me most is not what the President has 
already done but the fact that we hear over and over it is 
Congress' problem, but the President has come out even recently 
and said, unless he gets all the increases in spending, all the 
increases in taxes he wants across Government, that he will not 
support any effort Congress makes to fix this for national 
defense, no matter how reasonable and no matter how sensible.
    So I hope that behind the scenes there will be some folks 
in the Pentagon who are trying to be reasonable voices to 
suggest to the President that that course of action is wrong 
and perhaps even dead-wrong.
    And, Admiral, you mentioned in answering the chairman's 
question that budget impacts strategy. Is that a fair 
statement?
    Admiral Winnefeld. I think any experienced strategist would 
say that it is a balancing of ends, ways, and means.
    Mr. Forbes. So would it be fair to say, if you have a 
smaller budget, your strategy is going to change, than if you 
have a larger budget?
    Admiral Winnefeld. You either change the ends of the 
strategy or you accept more risk in executing it. I would say 
that every strategy has a band of risk in it. You would like to 
be in the low-risk band of any strategy. But as the resources 
drift away, you start getting into a higher and higher risk 
area of that strategy. And, at some point, you are going to 
have to change your strategy.
    Mr. Forbes. The reason I say that is because, for the last 
4 years, this committee, the chairman, many of us have been 
saying that the budget was really having an impact on the 
strategy and driving the strategy, but, over and over again, we 
were hearing people from the Pentagon coming over and dipping 
their hands in some sort of mythical bowl and saying, no, no, 
no, this strategy is driving our budget, and the budget is not 
driving the strategy. So I believe, very clearly, many of these 
cuts have driven our strategy and will drive us to a dangerous 
strategy.
    But let me come back to that hindsight being 20/20. If I 
look back over the last 2, 3 decades, one of the things that I 
can see is that there were some game-changing technologies that 
took place, some of them--stealth technology, unmanned systems, 
precision-guided munitions.
    I am going to ask you to, kind of, look out to 2040 and 
take a look back. What do you think some of our game-changing 
technologies would be that maybe we need to fence off and make 
sure we are protecting?
    And one of those, specifically, talk about the Navy's 
UCLASS [Unmanned Carrier Launched Airborne Surveillance and 
Strike] system. Do you see this as a game-changing technology 
that will define the future of the carrier air wing?
    Admiral Winnefeld. First of all, I would say there are a 
number of technologies out there that we have to pay attention 
to, and it is why both Under Secretary Carter and I have worked 
hard to do the best we can to protect our ``seed corn,'' which 
is our R&D [research and development] budget, you know, science 
and technology. You can't protect all of it, but it is terribly 
important that we continue this work. Any company would tell 
you that in a downturn they have to continue their research and 
development so they can come out at the other end with a 
product that works. And that is the same thing for us.
    There are a number of these things. One would be cyber, 
making sure that we are continuing to advance on that front 
technically, as well as training and infrastructure. There 
are----
    Mr. Forbes. Admiral, I have 60 seconds.
    Admiral Winnefeld. Okay.
    Mr. Forbes. Can you tell me about UCLASS?
    Admiral Winnefeld. The UCLASS, I have been personally 
driving the requirement on that because I believe in the 
program.
    In terms of whether it is a game-changer that totally 
transforms warfare, I wouldn't go so far as to say that, but it 
is a very important element of what we would put on the flight 
deck of an aircraft carrier in the future. It has a lot of 
potential capability for us that we would want to employ in a 
more dangerous world.
    Mr. Forbes. Mr. Chairman, thank you, and I yield back.
    The Chairman. Thank you very much.
    Mr. Loebsack.
    Mr. Loebsack. Thank you, Mr. Chair and Ranking Member.
    I want to thank both of you for your service, of course, 
and for being here today. This is a critical hearing, I think, 
to understanding the long-term impacts that allowing 
sequestration to continue would have on our men and women in 
uniform, on our readiness, and, indeed, on our national 
security. So, again, thank you for being here.
    I do believe, as I think everyone on this committee does, 
and I believe very strongly that we have to replace 
sequestration. And I think the hearing today outlines the long-
term consequences of sequestration and the, I guess, height of 
irresponsibility that really would be the case if we were to 
allow sequestration to go on.
    But I have two particular issues I want to address today 
with you.
    First, Secretary Carter, can you outline the impact the 
scenarios explored in the strategy would have on the health of 
the industrial base? And here we are talking about the organic 
industrial base--arsenals, ammunition plants, depots, 
shipyards, et cetera.
    And, in particular, what would be the impact on the 
workforce within the industrial base, including the civilian 
workforce? And we have already talked furloughs a little bit, 
but specifically our ability to surge capacity when needed to 
respond to a national security contingency?
    Secretary Carter. Absolutely. It is a very important 
matter. There will be an impact on the industrial base, organic 
and the rest of our industrial base. I worry about it a great 
deal as Deputy Secretary. I worried about it a lot more when I 
was Under Secretary of Defense for Acquisition, Technology, and 
Logistics.
    We, just to take people, employ, as I am sure you know, 
about 800,000 civilian employees at the Department of Defense. 
A lot of people in Washington think they are people who get up 
in the house next-door and drive to a building that has a four-
letter name on it and sit at desks. Not true. Our civilians, 
for the most part, don't live anywhere near Washington, as you 
know. And they fix things. They fix vehicles, they fix 
airplanes, and so forth.
    And, as I said earlier, furloughing them is no way to treat 
people. The only reason that it was safe from a mission point 
of view to furlough depot workers was that we couldn't afford 
to do the work, so we didn't have work for them to do--also a 
consequence of sequester.
    Going forward, we are looking at the backlog at each of our 
depots. As you well know, I am sure, we manage that backlog to 
create, as best we can, an even workflow. There is no question 
about it that if our budget is cut, we are not going to be able 
to do as much maintenance as we had planned. And those 
installations will be affected, like everything else is 
affected. We will try to manage that in the most intelligent 
and humane way we possibly can, but it is a consequence of 
lower budgets.
    Mr. Loebsack. It is the human effect that we talk about. 
With respect to the furloughs, it is the human effect, when it 
comes to reduced workload and all the rest, but also it is also 
a national security issue. If we are not keeping the arsenals, 
for example, warm and we have a contingency, it is going to 
take much longer to get those folks back online and make sure 
that those products are available, those things are available 
for our troops in the event of another conflict.
    Secretary Carter. It is true. Anywhere I see in the 
industrial base what I will call irreversible change--that is, 
something that we are ramping down that we couldn't re-create--
I get worried about that. Because things, once you bring them 
down, once you eliminate a skill set, it is very hard to bring 
that back.
    Mr. Loebsack. That is right.
    Secretary Carter. And so it gets back to what Admiral 
Winnefeld was saying about protecting our future. One of the 
things we try to do is to make sure that we don't make 
irreversible changes, wherever that is possible for budgetary 
reasons, so that we don't destroy something that would be very 
time-consuming and expensive to re-create.
    Mr. Loebsack. And, Admiral, I think I will take your answer 
for the next question for the record, if we could. We will 
submit that question to you.
    But it has to do, of course, with going into more detail in 
terms of implementation of end-strength reductions as reviewed 
in the strategy and, in particular, looking at total force and 
the balance between Active Duty and Reserve Components. I am 
almost out of time, so I will submit that to you. And if you 
could get back to us in writing, I would appreciate that very 
much.
    All right, thank you.
    Thank you, Mr. Chair.
    The Chairman. Thank you.
    Mr. Wilson.
    Mr. Wilson. Thank you, Mr. Chairman.
    And thank you both for being here today.
    I share the concern of Congressman Forbes, and I appreciate 
that you are raising the issue of sequestration. I am very 
grateful that, with the leadership of Chairman Buck McKeon, the 
House voted twice last year to address this issue. We, in our 
most recent budget, voted to address the issue.
    This has a catastrophic effect. When we hear the word 
``furlough,'' the American people need to know what that means. 
It is a 20-percent pay cut. We all know, in running our homes, 
that we have planned mortgage payments, car payments, tuition, 
and utility costs. And so ``furlough'' sounds too nice. Twenty-
percent pay cut.
    This needs to be addressed. And I sincerely hope--I have 
always been concerned that it was, indeed, Secretary Panetta 
who said, this will hollow out the military. So I am very 
concerned, and I hope every effort will be made to address 
this. Also, reprogramming and to be ever-vigilant in regard to 
our readiness.
    But having that in mind, this committee has supported the 
statutory 1.8-percent pay increase. The President had 
recommended 1 percent. By September the 1st, there is the 
potential of the Secretary making a recommendation to the 
President to reduce the pay increase to 1 percent. What will be 
the recommendation by the Secretary?
    And I am also concerned that there was a statement that pay 
increases have been, ``40 percent above inflation since 2001.'' 
Where did that figure come from, and how was it calculated?
    Secretary Carter. Thank you.
    Let me start with the furlough question. I, too, hope that 
we are able to change that. You are right, ``furlough'' is too 
nice a word. I have talked to too many of our folks who are 
missing a fifth of their pay in the last quarter of the year. 
That is what it amounts to, and that is a real impact on people 
and their families. And it is no way, as I said earlier, no way 
to treat people who are serving their country, too, even though 
they are civilians.
    And, by the way, I will just mention that more than half of 
our civilian workforce are veterans on top of that. So they are 
doing it because they love the work, because they love the 
country, and they like to be part of defense. It is no way to 
treat them.
    And thank you and everybody on this committee for 
supporting reprogramming. That is essential for us to try to 
adjust to this abrupt circumstance.
    With respect to military pay and the rest of compensation, 
you are right, we asked for a slower rate of increase in 
military pay, and Congress did not--Congress denied that. That 
is an example of what I said earlier about we need help if we 
are going to do this.
    And we will be making proposals in fiscal year 2015. We 
haven't fully formulated them. In fact, we have asked the Joint 
Chiefs of Staff, in particular, and the senior enlisted leaders 
of the Department to help us make that decision and make a 
recommendation to the President. But we will be making a 
recommendation in that area.
    The 40-percent number, I am not sure I am familiar with it, 
but I think the number that might be the one you are thinking 
of is the increase, total increase, in real military pay over 
the period of the last decade. That----
    Mr. Wilson. If you could get----
    Secretary Carter. I can certainly get back to you.
    Mr. Wilson [continuing]. Some documentation, I would 
appreciate it.
    Secretary Carter. You bet.
    [The information referred to can be found in the Appendix 
on page 105.]
    Mr. Wilson. And then do you anticipate--again, we are here, 
it is August. Will we be--when will we learn about the 
President's decision relative to the pay increase?
    Secretary Carter. With respect to the fiscal year 2015 and 
beyond?
    Mr. Wilson. Yes.
    Secretary Carter. That will be when he submits his budget, 
which will be in February.
    Mr. Wilson. But, yet, this year, there could be a 
determination of 1.8 to 1 percent. And so what do you 
anticipate for our service members this month?
    Admiral Winnefeld. If I can weigh in, the President's 
budget as submitted for the fiscal year 2014 was at 1.0 
percent. So that is where the position stands. I know that in 
various committee action and the like that that has not been 
approved; it has been taken at 1.8. So I think there will be a 
conferencing at some point where that would be determined.
    I would just say that you would think the Joint Chiefs 
would be the last group that would want to slow the rate of 
compensation, but we have taken a very, very hard and close 
look at this, and we are going to have to slow the rate of 
increase. It is not decreasing anybody's pay; it is slowing the 
rate of increase.
    But we are going to just run out of money to provide the 
tools that these troopers need to do their job.
    Mr. Wilson. Okay.
    Admiral Winnefeld. The most important thing for them, the 
most important compensation for them is to come home alive. The 
best way to bring them home alive is to get them the stuff they 
need.
    Mr. Wilson. Well, thank you both. But I truly am concerned 
that we need to show how much we appreciate the young people 
making a difference for our country.
    Thank you.
    The Chairman. Thank you.
    Ms. Hanabusa.
    Ms. Hanabusa. Thank you, Mr. Chair.
    Secretary Carter, the Secretary of Defense made a public 
statement yesterday, and I just want to have your confirmation. 
He said that the $487 billion reduction over the next decade is 
to satisfy the initial caps of the BCA. And I have been always 
asking, what is the 487? So it is to satisfy the caps that are 
contained in the BCA; is that correct?
    Secretary Carter. Correct.
    Ms. Hanabusa. So what we are now talking about, since we 
know that that is taken care of, is the impact of 
sequestration.
    One of the things that you stated, both of you stated in 
the SCMR is that it is not intended to define the exact 
compensation of, basically, the future forces or what we are 
going to do. It is sort of, I think you used the word, a 
``decision space'' faced by the Department, and it is going to 
guide you. One of the areas that it is also going to guide is 
in the QDR. And that, of course, is what many of us are looking 
at to see what the view is into the future.
    Now, how does the QDR and what you intend to do with the--
as you state in the SCMR, because the QDR, of course, comes 
from the Department originally--how is that going to interface 
with that which we have done in terms of the NDAA [National 
Defense Authorization Act]?
    For example, we have said no BRAC, and one of the proposals 
is a potential BRAC. We have said no civilian furloughs, 
assuming that goes through, and one of the things that is very 
obvious from all of this is that we may be faced with that.
    So can you tell me how we are going to play and what we do 
with the NDAA into not only how you view the SCMR working 
forward but also the QDR?
    Secretary Carter. Absolutely. The same people who did the 
SCMR, the senior leadership of the Department, will do the QDR, 
so it will be informed by the SCMR. And, of course, we are 
required by law to do a Quadrennial Defense Review. A lot of 
the work for that is, in a sense, already done. And the QDR, on 
its schedule, comes late. We will probably be pretty close to 
finalizing the next budget by that time.
    With respect to pieces of legislation contained in the 
NDAA, obviously we will abide by the law. Where we think that 
change is required, we will ask for it. And when we do, we will 
try to give you the whole picture.
    Because I think this was mentioned by Ranking Member Smith 
earlier; when people look at individual pieces of the budget, 
of course you don't want to cut any of these things. There are 
real people involved. They are doing real work. They wouldn't 
be here in the first place if they were doing something that 
was not essential. So it is really hard. But you can't--we 
can't, at least, look at things that way. We have to look at 
the whole picture. And so we may indeed come back to you and 
say, when we have looked at the whole picture, we need to take 
this step.
    I think BRAC is an example of that. We need to do that. We 
need to do it even more when our budget is being reduced more, 
because the excess overhead is even more excess in that 
circumstance. So we need that authority. Otherwise, we are 
going to end up taking only ``tooth'' and not ``tail.''
    Ms. Hanabusa. I understand that, but, of course, you will 
also face from us, on this side, the fact that the BRACs don't 
pencil out for maybe 16 years down the road, and the joint 
basing hasn't exactly worked the way it has.
    But, in addition to that, on page 13 of your testimony, 
both of you say, ``To meet these severe caps in the long term, 
the SCMR examined two illustrative strategic options.'' One is 
basically to seek to preserve a modernized force by sacrificing 
capacity, and one to preserve the larger force capacity at the 
expense of modernization programs.
    So it seems like with both--these are the two options you 
have come down with, but both have an upside and a downside. 
Are we reading this correctly?
    Secretary Carter. Exactly, yes.
    Ms. Hanabusa. And the last one, I am running out of time, 
but I will submit it and ask you to respond for the record.
    On the follow page, you talk about reducing end strength. 
And it is severe for Army, from 490,000 to between 380,000 and 
450,000; and Marine Corps, from 182,000 to between 150,000 and 
175,000.
    So you seem to be focusing on those two Services; is that 
correct?
    Secretary Carter. No, that is not correct.
    Ms. Hanabusa. Okay, so could you respond to me in writing? 
I am out of time.
    Secretary Carter. Absolutely. Similar changes in every 
force element were considered----
    [The information referred to can be found in the Appendix 
on page 105.]
    Ms. Hanabusa. Thank you.
    Secretary Carter [continuing]. Not just the Army and the 
Marine Corps.
    Ms. Hanabusa. Thank you.
    Thank you, Mr. Chair. I yield back.
    Mr. Wittman. [Presiding.] Thank you, Ms. Hanabusa.
    Dr. Carter, Admiral Winnefeld, thank you so much for 
joining us. We appreciate all that you do.
    I wanted to talk a little bit about the figures that you 
bring up, especially for 2014. I think we have a slide to put 
up here that puts it in perspective about what we are talking 
about.
    If you look at the slide here, you see that the actions 
required by Congress to make reductions of about $5 billion get 
us down to $47 billion in 2014. You spoke of about an 
additional $12 billion in the SCMR recommendations that get us 
down to about $35 billion. That is still a long way short in 
2014 to the full $52 billion in reductions.
    Can you tell me how we would get to make up the remaining 
portion of that balance? I understand that the step in that 
first year is the most precipitous one. Can you tell me how we 
would get to $52 billion? And would that affect readiness, and, 
specifically, which readiness accounts it would affect?
    Secretary Carter. Absolutely, I can. And it will affect 
readiness.
    What you have to do in these early years under 
sequestration is go where money can be had quickly. And there 
are some places where money can't be had quickly--for example, 
military compensation. Even if you wanted to cut that, you 
can't do that quickly. If you wanted to reduce the size of the 
force quickly, you don't save money, because even if you 
involuntarily separate a service member, there is a process for 
doing that under the law, and you end up paying as much as they 
are leaving to them as you would if they had stayed. So you 
don't save money that way.
    So how can you save money? You save money by curbing 
readiness, because you can do it quickly. So you will see 
readiness changes, more severe than in 2013. And I am going to 
ask Admiral Winnefeld in a minute to detail some of that. You 
will see us taking money out of investment programs, which 
means we won't be issuing contracts that we had planned to 
issue to people who are building things for us, people who are 
accomplishing services for us. You will see bases that aren't 
maintained the way that they should be and are planned to be. 
All of that stuff, which is not good government, is not good 
management, you just have to go where the money is.
    And some of this is detailed in our written statement and, 
in particular, in the letter that we wrote to Senators Levin 
and Inhofe, which is kind of a very--I think it is eight or 
nine single-spaced pages of what we have to do in fiscal year 
2014.
    Admiral Winnefeld. So there are three areas that, the 
Deputy Secretary said, you have to grab the cash wherever you 
can. And we can't, as he said, easily get people out of the 
Services, so if you want to take it out of the personnel 
accounts, the only other things you can do--and this is what 
the Services will have to do under those numbers. They will 
stop bringing people into the military. They will stop their 
promotions. And they will stop moving them on PCS [Permanent 
Change of Station] moves.
    So that is one slice of this thing. And you can imagine 
that bump going through the snake over 20 years of a year when 
you just don't take anybody in. It is very, very harmful to the 
force.
    Mr. Wittman. Right.
    Admiral Winnefeld. Another one is the modernization 
programs. You can grab cash there. But, as the Deputy Secretary 
mentioned earlier, that starts to break programs. We find unit 
costs of JSFs [Joint Strike Fighter] going up. We find, you 
know, things like Nunn-McCurdy violations when that occurs.
    And then, finally, the most important thing to us, of 
course, is readiness. And readiness is the elephant in the 
room. If you have an F-15 [Eagle fighter jet] squadron in your 
district, a lot of people don't care if it is flying or not, 
they just want it to be there. And that is why they call it a 
hollow force. It looks good on the outside, an F-15 is sitting 
on the ramp, but they are not flying.
    Mr. Wittman. Right.
    Admiral Winnefeld. And so we will definitely see that very 
harmful effect next year if we have to meet those numbers.
    Mr. Wittman. Gotcha.
    Let me ask this. When you talk about those effects on 
readiness, can you qualify for us what that means as far as the 
risk this Nation assumes, both currently and then potentially 
if we face another conflict or another instance where we have 
to deploy somewhere around the world?
    Admiral Winnefeld. I have a very good classified slide that 
demonstrates that. I have shown it to Chairman McKeon. I would 
be happy to show it to any Member.
    But it outlines basically the supply side. It shows you how 
many forces you have and the readiness state of those forces. 
And on the right side, it shows the demand side. And that 
demand side, it is what we are actually using day-to-day 
today--forward presence, you know, what we are doing in the 
Arabian Gulf and Korea, that sort of thing. And then it shows 
what the demand signal could be for various contingencies. And 
it is not a pretty story, but I can't go into it in an 
unclassified environment.
    Mr. Wittman. Can you just give us a very brief, one-
sentence assessment about what that increased risk means to the 
men and women that serve this Nation and put themselves in 
harm's way?
    Admiral Winnefeld. Well, one thing it means is that if you 
did have to do a contingency and you ended up deploying forces 
that are not ready, you know, that is something we don't like 
to do. One of, we believe, the most important ways to not break 
faith with our people is to make sure that when we send them 
into harm's way that they are fully ready to fight.
    Mr. Wittman. Gotcha.
    Admiral Winnefeld. And we would not want to be in a 
position where we had to violate that.
    Mr. Wittman. And if perchance they were not ready to fight, 
does that mean more men and women die on the battlefield?
    Admiral Winnefeld. Either that or we don't go into the 
contingency.
    Mr. Wittman. Gotcha. Very good.
    Thank you, gentlemen. We appreciate it.
    Mr. Barber.
    Mr. Barber. Thank you, Mr. Chairman.
    In regard to your last question and the response, I just 
took a meeting a few minutes ago with the upcoming commander of 
the 12th Air Force at Davis-Monthan Air Force Base. And he was 
talking about having to stand down pilot training for 3 months. 
And I asked him what the ratio of standing down to lack of 
readiness looked like. He said it is at least two to one. You 
know, 3 months down, you got to have 6 months to get back up to 
speed. So we are already doing irreparable harm, I believe, to 
our readiness by having to take these actions.
    I want to talk about something a little bit different in 
regard to how sequestration is affecting our current and future 
force. I think Chairman McKeon stated it quite well when he 
said that, within this committee, there is an acute awareness 
of what this is doing to us, but with our colleagues who are 
also facing their challenges in other committees, not so much; 
in fact, in many cases, not at all. And across the country, the 
American people really don't get this yet. But our regional 
commanders know, as do our local commanders. And they cite all 
the time the adverse consequences that sequestration is having 
on morale and is having an effect, morale effect, also on 
military spouses and families.
    You know, I grew up in an Air Force family. We never saw 
anything like this, indiscriminate cuts that just absolutely 
make no sense. And so I have no personal experience with it. 
But over the last several weeks and months, I have met with a 
lot of families and military men and women at Fort Huachuca in 
Arizona, at Davis-Monthan at the 162nd Air National Guard. And 
almost to a person, they reflect that morale is really 
declining. And then I talk to businesses in those communities, 
and they are affected, obviously, by the lower buying power. 
People don't want to buy things when there is uncertainty.
    So I just want to ask this question, Mr. Secretary. Given 
the
current fiscal constraints and the negative impact that 
sequestration is having on morale of both service members and 
their families, how will the military--and I think we also know 
that our service members are often some our best assets when it 
comes to
recruitment.
    How is the Department ensuring that recruitment to meet our 
future needs is being sustained in a time like this? I mean, 
surely, it has to have had an effect or an anticipated effect.
    Secretary Carter. Well, we are monitoring that very 
carefully. We count on having the best people of any military 
in the world. And since it is an All-Volunteer Force, we have 
to look at the labor markets and see, are we going to be able 
to recruit and retain the kind of people we need?
    We are doing okay so far. I think the morale change might 
have an effect on us, and we are watching that. So, also, does 
the overall economic situation, the labor markets in general.
    And so, also, as far as retention is concerned, is the 
quality of service life. If you joined because you want to be 
tip-top in your military profession and you are not allowed to 
train this year, you are just allowed to sit around, because we 
don't have the money to let you train, that is very dispiriting 
for people, and that is the kind of thing that will make them 
leave. So I am very concerned about that.
    This is something that is so concerning to us that we watch 
it very closely. It is very concerning to me. But I want to ask 
Admiral Winnefeld if he has anything to add to that, because 
this is something that really cuts to the heart for us.
    Admiral Winnefeld. Sir, I think you are asking a very good 
question, because, as the Deputy says, at the moment, perhaps 
because of the job market, what have you, we are doing okay in 
recruiting and retentionwise.
    But it is a complex animal, and there is no question in our 
mind that, as the readiness of the force declines, that these 
people aren't going to be doing what they came in to do, and 
they are going to be less inclined to stay. Some of them will 
stay anyway, but there will be less inclination to stick 
around.
    And the real morale piece--I wouldn't say the morale of the 
force is terrible right now. Our young men and women are doing 
great. But this has introduced a level of uncertainty in their 
lives as to whether they are going to have a future.
    And sometimes I will talk to audiences, and I look at them 
and I will say, look to your left and look to your right. If we 
can't agree that we can absorb a slower rate of increase of 
compensation, then one of you guys is going to be gone in a 
couple years, assuming we are allowed to do that. So there is 
some uncertainty out there in their lives.
    Mr. Barber. Well, let me just comment, in my remaining 
time, in regard to my earlier conversation with the General. He 
has told me that re-upping is also becoming a problem. Men and 
women who are trained to fly potentially an F-22 [Raptor 
fighter jet] are saying they don't want to continue. That is a 
tremendous impact, negative impact, on our future readiness.
    And I appreciate all you are doing to try to make us manage 
this through. I hope Congress will come to its senses and find 
a better way. Thank you.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. [Presiding.] Thank you.
    Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    Admiral, thank you for your service. Most of my questions 
will be for Dr. Carter, simply because of the two bases that I 
represent, but I certainly appreciate your service.
    And, Dr. Carter, I represent Robins Air Force Base, and I 
also represent Moody Air Force Base in Valdosta. And, 
obviously, the furloughs are of great concern to us. And I 
appreciate your comments in that--I believe I have your quote 
right--that you wouldn't furlough anybody if you had your 
choice and that you are hoping to adjust from 11 days down.
    Secretary Carter. Correct.
    Mr. Scott. And I hope that we will know soon what that is. 
Because I will tell you, a 20-percent pay cut for the men and 
women that are out there working to make sure that our 
warfighters have the equipment that they need when they go into 
battle is doing a lot of damage to the morale and, quite 
honestly, I think, is extremely inefficient.
    And I want to ask you a couple of questions about the 
organic depots, if I could, and the impact of the furloughs and 
the efficiencies and the competitiveness of our depots as we go 
forward and we start to compete for new business as that 
backlog is
created.
    Furloughs were mandated across the board. I didn't support 
the sequester, didn't support the furloughs. I offered 
alternatives that had flexibility in it, as you suggested. 
There is no business case analysis that suggests that the 
furloughs help in any way, shape, or form long-term. But they 
are creating inefficiencies and they are creating deferred 
maintenance, and that makes our depots less efficient and 
increases the cost per unit.
    And my question is, what adjustments will be made to 
compensate for things that are being done because of 
Washington, not because of the men and women at the depot, as 
we go forward to compete for that business, to try to get it 
into the organic depots?
    Secretary Carter. Your analysis is absolutely right, both 
as regards the effect on the efficiency of those installations 
and, most importantly, as regards the people.
    And in this, as in everything else that we have had to do 
in fiscal year 2013, it has effects. Even if sequestration goes 
away, we are going to be living with the residue of what 
happened in fiscal year 2013 for a while, in readiness, in 
depots, in all kind of ways.
    For the depots, as we go into 2014, we are looking at the 
backlog at each of the depots and trying to manage that to a 
reasonable level. If the backlog falls too low, then if there 
is a further budget reduction, it risks layoffs, which we don't 
want. So we want the workload to be managed above a level where 
it risks that. On the other hand, we don't want it too high 
either. So, at each of those, the relevant service is trying to 
manage the backlog in a smart way in view of what is happening 
in sequestration.
    We will have to see what happens in 2014 and manage the 
workload accordingly. We won't be able to afford to do all of 
the maintenance that we had planned to do before the Budget 
Control Act, no question about it. And that will have a long-
term effect on each of our facilities, as it has on all of the 
extramural maintenance companies also.
    Mr. Scott. But just to recap, you do agree that the 
furloughs that are occurring at the depots are creating 
artificial inefficiencies, that when we go to compete for the 
business in the future, we simply want to make sure that that 
playing field is leveled so that we are judged based on our 
capacity without the damaging things that Washington has done.
    Secretary Carter. I understand exactly what you are saying, 
yes.
    Mr. Scott. One last question I have with regard to the 
furloughs and maintenance. Has there been consideration into 
more joint depot work, where Air Force depots would be able to 
compete for Navy business, for example?
    Secretary Carter. Yes, there is. And that is an important 
source of efficiency. There has been some opposition to that, 
but it is more efficient.
    Let's take helicopter engines. A lot of helicopter-type 
model series are multiservice; different Services maintain 
those helicopters. Why not have one place where a certain model 
of helicopter is maintained?
    We are looking at that. That is a move we should make and I 
hope we get the flexibility to make.
    Mr. Scott. One final question real quick, just as to the 
choices. One concern that I hear from some of our people with 
regard to readiness is that the choices--I mean, we are going 
to continue to fly the Thunderbirds, it appears. And just from 
the standpoint of putting that as a priority above combat 
readiness, could you speak to that very quickly?
    I know I am out of time, Mr. Chairman.
    Secretary Carter. Yes. And let me ask Admiral Winnefeld to 
speak to that also.
    The particular matter of the Thunderbirds flying is they 
are not flying in order to make shows. They are flying in order 
to keep the proficiency of those pilots, who are also pilots 
who are part of forces that would participate in operations 
plans if there was a crisis around the world. So it is 
incidental that they are members of the Thunderbirds.
    Sandy, do you want to say any more about that?
    Admiral Winnefeld. Just very briefly, because I know the 
chairman wants to get moving.
    They are flying at a low, very low, restorable proficiency 
that, if we are able to get money next year, would cause their 
on-ramp to actual readiness to be more shallow. And as the 
Deputy points out correctly, they are deployable as a 
warfighting contribution if they need to be.
    Mr. Scott. Thank you, sir. Thank you for your service.
    The Chairman. Thank you.
    Ms. Duckworth.
    Ms. Duckworth. Thank you, Mr. Chairman.
    Mr. Secretary, it is good to have you here.
    And, certainly, we have the power to end sequestration. We 
should end it. That would take away a lot of the problems that 
we are facing right now, although it does not solve a lot of 
the long-term problems.
    I want to go back to the discussion on the reductions to 
end strength and specifically with the Reserve forces, both the 
Reserves and the National Guard. Could you address where this 
is going to go underneath some of the proposals that you have 
in terms of end strength for the National Guard, the 
proficiency, the training?
    You know, I don't want that hollow force. I don't have any 
bases in my district, but I certainly want the National Guard 
to not just be sitting there with pretty aircraft on the tarmac 
and nobody proficient to fly them.
    So could you speak a little bit to maintenance of the 
operational force and the Guard?
    Secretary Carter. I will. And then, again, I will ask 
Admiral Winnefeld if he wants to add to it.
    I mean, first of all, the whole Reserve Component, Guard 
and Reserves, have made an enormous contribution over the last 
10 years. They have been necessary because of the length of the 
Iraq war and the Afghanistan war. So we have had to call upon 
them, and they have answered the call.
    But the Reserve Component, like all the rest of everything 
we do in defense, is going to have to accept some of the 
reductions. And I think what is important is that each and 
every Guard or Reserve unit have a mission that is clear to 
them and clearly needed either by us or for the Guard for 
defense support to civil authorities, in particular the States, 
in an emergency.
    And, in that connection, we are beginning just this year--
in fact, I have a meeting on it this afternoon--to have a way 
of defining the requirements for the Guard, defense support to 
civil authorities. We have never done that in 250 years of 
having a National Guard, defined requirements for what they 
need to do for the States, the way we have requirements defined 
for the Pacific Command, the Northern Command, the Central 
Command, and so forth. We are just beginning that now. That 
will give a lot more clarity to the future need for and size of 
and composition of our Guard and Reserve force.
    We took a first look at that in the SCMR. I would say it 
was a good, solid look, but we are trying to refine that 
through the process I just described.
    And let me ask Admiral Winnefeld if he wants to add 
anything about the Reserve Component.
    Admiral Winnefeld. I would simply reiterate what the Deputy 
Secretary said about the value of the Guard and Reserve. They 
have been tremendously important as a component of the entire 
DOD and we very much value them.
    As the sequester cuts occur, depending upon the depth, if 
it is the full sequester, what have you, the entire business is 
going to have to come down, to include the Guard and Reserve 
along with the Active.
    I don't want to speak for the service chiefs, but I know 
that General Welsh and General Odierno are very concerned about 
this. They are paying very close attention to it. Having spoken 
to General Odierno--and I don't want to put words in his 
mouth--I know he would likely--and probably Secretary McHugh, I 
think, is along with him, but I haven't spoken to him--bring 
the Active Component down at a larger rate than the Guard. But 
that remains to be seen, depending on what the Services come in 
with their budget submissions.
    But make no mistake that we value the contributions of the 
Guard and Reserve.
    Ms. Duckworth. Mr. Secretary, so in your meeting later 
today talking about what the requirements are for defense 
support of civil authorities, are the Governors going to have 
any say in this meeting?
    Secretary Carter. That is what is really novel about this 
process. For the first time, we will have the TAGs [The 
Adjutants General] representing the Governors. And I will then 
meet with the Governors, as I have done now several times over 
the last few years on this very subject, because I know it is a 
difficult thing. This is an area where we, at the Federal 
level, provide and pay for something that the Governors then 
use. That has an issue of federalism in it, and we need to 
resolve it in a thoughtful way.
    And having seen the chaos of 2 years ago when we began 
making budget changes in the Air National Guard, I think we 
need to do better than that. We need to have a clear sense of 
what the Governors need and what the role of the Guard is in 
that capacity. And then the Guard and Reserve also play a role, 
if mobilized, in foreign conflict, as well. And we need to 
define all that.
    Ms. Duckworth. Thank you. I am out of time.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Franks.
    Mr. Franks. Well, thank you, Mr. Chairman.
    And thank both of you for being here. There is certainly a 
great deal of respect on this side of the room for both of you.
    And, Admiral Winnefeld, if it is all right, I will start 
with you, sir. You know, in the debate in this House, sometimes 
there are things that are--the function of the debate is a 
political one-upmanship, and then sometimes there is really the 
sincere commitment to try to do the right thing, and sometimes 
there is an amalgamation of both. And so I am going to ask you 
a question that has a political dimension to it, and I don't 
ask to you address that at all. Just an honest, professional 
military point of view, even though the question will become 
obvious.
    In your best professional military judgment, would there be 
greater risk to this country's ability to meet our current 
national security commitments under sequestration or under the 
funding approved by the House in its budget deliberations, 
which would restore the $52 billion cut in national defense in 
fiscal year 2014?
    Admiral Winnefeld. Well, sir, if you are asking me whether 
I think we would be able to meet our commitments under a $52-
billion cut or no $52-billion cut, I would have to answer that 
we would be a lot more likely to meet them under the ``no $52 
billion cut.'' So I would----
    Mr. Franks. I hated to put you through that exercise, but I 
appreciate you answering honestly. And that is--I am not 
shocked at it, but oftentimes--I know sometimes civilian 
command structure makes it difficult to do that. So I 
appreciate that, Admiral, and appreciate your commitment to the 
cause of defending this country.
    Dr. Carter, I have had the privilege of spending the last 
11 years in Congress on the Strategic Forces Subcommittee, 
focusing on our strategic nuclear deterrence and our homeland 
missile defense apparatus. And you may recall saying in a 
recent speech at the Aspen Security Forum--I will just quote 
it. It says, ``You may all be surprised to know that nuclear 
weapons don't actually cost that much. Our annual spending for 
nuclear delivery systems is about $12 billion per year. This is 
out of around $525 billion, and so it is not a big swinger of 
the budget. You don't save a lot of money by having arms 
control and so forth.''
    And just for the record, I couldn't possibly agree with you 
more. But tell me, if you would, your conclusions related to 
the SCMR, what conclusions it came to in regard to our nuclear 
deterrence as well as our missile defense capabilities.
    Secretary Carter. Absolutely. And for the record, I want to 
associate myself with the Vice Chairman. I will take the $52 
billion, too.
    Mr. Franks. You think the $52 billion would help.
    Secretary Carter. Yes.
    Mr. Franks. Okay, we have established that. Yes, sir.
    Secretary Carter. With respect to the cost of nuclear 
forces, what I said in Aspen was that we, this year, protected 
the operations of the nuclear forces under sequester. We did 
not want to not send nuclear submarines to sea, not have our 
missiles on alert. We didn't want to do that, so we protected 
that. Obviously, that pushed sequester off onto other accounts. 
But it, like the war in Afghanistan and a few other things, we 
protected because it is so important to our security.
    The point about cost is this: The SCMR looked at nuclear 
forces, but the point I was making was and the way I said it in 
Aspen was nuclear weapons deserve our deepest respect and 
constant attention because of the awesome, destructive power 
that they have. However, they are not a big swinger in our 
budget. That is just a fact.
    Mr. Franks. Yep.
    Secretary Carter. And so, as we go forward, we will make 
decisions about nuclear forces on the basis of a lot of 
factors, but budget will not seriously drive the composition of 
the nuclear forces. They are just not a huge part of the 
budget.
    Many of you, of course, understand that, but many people 
don't realize. They think that they are a large part of our 
budget. In fact, they are not. But they are, obviously, very 
important.
    Mr. Franks. Yeah. Well, and I appreciate you making that 
clear, because, as you know, as you say, most folks, it is just 
one of those things that we don't have in the forefront of our 
consciousness, that while they represent the pivot of most of 
our capability in the foundational sense, they are not the cost 
factor that some think they are.
    So let me try to get one last question in. In the overall 
conclusions of the SCMR, let me ask you if you can articulate--
and I will ask both of you, because my time is just about gone 
here--what are the things that you think are most significant 
that we can't do under the conclusions that you have come to, 
those things that you think that are most important that we 
can't do that we should be able to do and we should focus on as 
a committee and a country?
    The Chairman. The gentleman's time has expired. Can you 
please take those responses for the record?
    Secretary Carter. Absolutely.
    [The information referred to can be found in the Appendix 
on page 106.]
    The Chairman. Thank you.
    Mr. Cooper.
    Mr. Cooper. Thank you, Mr. Chairman. I had almost given up 
hope here.
    I appreciate the witnesses.
    I just wanted to make an announcement that, in an effort to 
be constructive, Congressman Paul Ryan and I have introduced 
today a bill that would give the Pentagon complete flexibility 
in making spending decisions. Now, we would not reduce the 
extreme diet that you are on. And I personally would like to, 
you know,
eliminate sequestration entirely. But at least we want to give 
you
flexibility.
    Now, this has been an unduly controversial issue on the 
committee, as the chairman knows. I introduced such an 
amendment during the markup. It passed by a voice vote. But 
then when a recorded vote was called, people put on their team 
jerseys again, and it turned out that both parties were against 
flexibility.
    So I don't know how far this bill will go, but I hope that 
more Members of Congress and even more members of this 
committee--because this has not been the best attended of our 
hearings--will pay attention to the extraordinary upheaval that 
is going on in the Department of Defense right now as a result 
of our own actions. This is not a foreign threat; this is a 
self-inflicted wound. And Congress needs to behave much, much 
better when it comes to funding our military priorities.
    So I am not asking our witnesses to comment and get in 
trouble, because you are always reluctant to bite the hand that 
feeds you. Now you are even reluctant to bite the hand that is 
not feeding you. It is a crazy situation that you have been put 
in. But we on this side need to be doing a much better job.
    So I thank the chairman. Yield back the balance of my time.
    The Chairman. Thank you.
    Mr. Nugent.
    Mr. Nugent. Thank you, Mr. Chairman.
    And I certainly do appreciate your service, both of you, to 
this country.
    And I guess one of the--and this is not directed to you, 
just a comment. As our Commander in Chief, you would think, as 
we move forward, particularly when we talk about at least 
turning off the sequester as it relates to our Department of 
Defense--which, without it, we have no freedom or security.
    And so, you know, as we move forward, you heard it already, 
about the $52 billion, the President has come out and, you 
know, issued a veto threat in regards to that, which is 
unfortunate because that takes away the dialogue that you could 
have in regards to the rest of sequestration and what it is 
doing to the country but, more importantly, what it is doing to 
our national security.
    You know, having three sons that currently serve, I hear 
firsthand the effects of sequestration in regards to training 
and readiness, but they are good troopers. You know, they stand 
ready to serve. They stand ready to protect this country. But 
it is disheartening, as a dad, to hear them because their mom 
and I worry. When we have had them deployed to Afghanistan and 
Iraq, we knew that they were the best-trained, best-equipped 
force and they had a good opportunity to come home. By the 
grace of God, they did. But now I am worried about the effects 
of sequestration and a Commander in Chief that says the right 
things but doesn't
necessarily do the right things, particularly as it relates to 
our
military.
    You have talked about retention. I think that should be a 
huge issue for you in the armed services. Because we have one 
of the best-trained groups right now. They have experience in 
combat, which is not something you can teach.
    How do you see a way forward to retain those that have 
served their country? I mean, how do we do that in 
sequestration without just, you know, RIF'ing just rafts of 
folks?
    Secretary Carter. Well, I think one of the tragedies of 
sequestration is that there will be people who, if 
sequestration continues, who joined to serve, who have served 
honorably, and whom we won't be able to afford to retain. That 
is a reality and a tragedy.
    And to get back to something that----
    Mr. Nugent. But, I mean, did we not learn from the Vietnam 
era, when we went through the same issues of RIF'ing people, 
that it is so difficult to train that? I mean, it is almost 
impossible to train that experience.
    And are there other areas that we could look to instead of 
always looking at personnel? And I know it is a huge part. I 
ran an agency. It is the largest, typically, the largest part 
of your budget. But, you know, you talk about modernization and 
making--it is either modernization or a larger force. Is there 
an in-between that we can reach if we can't get the President 
to work with us on sequestration as it relates to the military 
in particular?
    Secretary Carter. Well, we are going to try to make the 
most balanced approach we can to those cuts if we have 
sequestration in fiscal year 2014.
    But the reality is--and this gets back to what Congressman 
Cooper was saying about flexibility. Flexibility doesn't help 
us that much, because we have to go where we can go and get 
money in the near term. And there is much of the defense budget 
that we cannot access in the near term. That is why we end up 
doing ruinous things to readiness, for example, because those 
are accounts we can get our hands on. So flexibility in that 
sense doesn't help us much.
    The kind of flexibility we need is the kind, as we 
indicated earlier and the SCMR shows, we need flexibility in 
time and we need the----
    Mr. Nugent. Not----
    Secretary Carter [continuing]. Latitude to do things like 
BRAC----
    Mr. Nugent. Not to cut you off, but I have----
    Secretary Carter [continuing]. And so forth that----
    Mr. Nugent [continuing]. 19 seconds.
    One last question. When we are talking about CENTCOM 
[Central Command] and SOCOM [Special Operations Command], the 
Secretary talked about reductions in force there. CENTCOM 
already had talked about reducing that force by 1,500 in 2014. 
The additional reductions that the Secretary talks about, is 
that on top of that number?
    The Chairman. The gentleman's time has expired. Can you 
please take that one for the record?
    [The information referred to can be found in the Appendix 
on page 106.]
    Mr. Nugent. Thank you. I appreciate it.
    The Chairman. Thank you.
    Mr. Cook.
    Mr. Cook. Thank you, Mr. Chair.
    I know some of this has been addressed, but I quickly want 
to go over this again. And this is about readiness and training 
and everything like that.
    And it seems as though we dance around this over and over 
again, but the--and correct me if I am wrong in the way I am 
getting this, but the bottom line is that, basically, what we 
are ending up with is all the units are C-4, not combat-ready, 
not deployable.
    And it is like, I don't know, maybe it is just my 
impression that we are almost afraid to come out and say that. 
And, yes, it is because of the sequester and other things, but 
the bottom line is, you know, somebody who has been an 
infantryman and everything--and that is, like, the worst thing 
that can happen to a unit, is to be a C-4 or not combat-ready.
    And that is what we are. And you have just added to that 
argument by talking--and it is not your fault; it is our fault. 
Because of the depots, about all the gear we still have in 
Afghanistan that we still have to get back, that they are going 
to probably have to drag it out of there; it is not going to be 
running. And yet we are supposed to meet all these 
contingencies.
    And if you can comment on that. If you already have, I ask 
for your patience in addressing this. Thank you.
    Admiral Winnefeld. No, it is a very, very important and 
good question.
    One of the frustrations we have in articulating this 
precisely is that, if you articulate it precisely, it is 
classified. So you would be telling an adversary, you know, 
where you are. So we have been speaking out, though. We have 
been saying, hey, we are getting hollow, we are losing 
readiness, we have grounded nine fighter squadrons. 
Fortunately, thanks to the reprogramming action by Congress, 
they are back flying at a very low level again. But, you know, 
if we get into specifics, we are telling the bad guys where we 
are.
    So I share your frustration. And believe me, that is part 
of the contribution to hollowness, is not being able to talk 
about it precisely in public.
    Mr. Cook. No, I agree with you. But, yet, you know, 
everybody who watches this hearing here has got to hear the 
same things that everyone, when we hear these doom and gloom 
reports. And, of course, the old unit rep FORSTAT [Force Status 
and Identity Report] reports, some of them were classified, 
some of them weren't.
    But in terms of all the contingencies, you know, all the op 
plans and everything else, it is like, God, you got to just 
wrap them up and put them--because we can't basically carry out 
any of them. And I don't know whether I am speaking in a 
classified mode or not, but I think it is something that 
everybody in the world knows right now, and it is sending a bad 
signal.
    You talked about, yeah, maybe we got the nukes, but in 
terms of conventional warfare right now, God, if the Members of 
the Congress and the public don't get it, this is the most 
serious threat that I think we face.
    But I have one more question before we run out of time, and 
this is about one of the comments made about the Secretary has 
asked Secretary Carter to identify an individual from outside 
the Department who is deeply knowledgeable about the defense 
enterprise and eminently qualified to direct implementation of 
the OSD [Office of the Secretary of Defense] reductions and 
report directly to the Deputy Secretary.
    This kind of scares me, about this person who, he or she, 
right after they solve world peace, they are going to solve 
this mess and be the guru on how we are going to--so can you 
comment on where we are going to find this messiah that is 
going to straighten us out?
    Thank you.
    Secretary Carter. I don't think it will be a messiah, but 
we do need to reduce the size of the Office of the Secretary of 
Defense. The Secretary feels strongly about that; I feel 
strongly about that. We can't ask people all over the country 
and our military people and civilian employees all over the 
world to make sacrifices if we are not willing to make 
sacrifices ourselves. So what this is about is showing the way.
    And Sandy has a great expression that he always tells me, 
which is, ``the pig won't slaughter itself.'' And applied to 
OSD, not that they are bad people or anything, but I can't 
staff out the reduction of that organization. And so I am going 
to have someone to come in to advise me and the Secretary--we 
will make the final decisions--on how we can streamline the 
Office of the Secretary of
Defense.
    It is just a reasonable thing that I can't go to my staff, 
which is the Office of the Secretary of Defense, and say, how 
would you streamline the Office of the Secretary of Defense? I 
won't get a good answer. I will put them in a bad position. So 
I am going
to get somebody who knows enough about the Department and 
management----
    Mr. Cook. Yeah----
    Secretary Carter [continuing]. To advise us, and that is 
how we will make those decisions.
    Mr. Cook. Yeah, I am running out of time. I just want to 
thank you very much for--it has been a long day. And I wasn't 
trying to put you on the spot about whether it is classified. 
But we do dance around that, and I think everybody knows the 
answer already.
    Thank you.
    The Chairman. Thank you.
    Mr. Smith.
    Mr. Smith. I just have a couple of comments based on some 
of the questions that transpired.
    I mean, first of all, on the flexibility point, if 
sequestration happens, I really want to underscore what Dr. 
Carter said, flexibility has very, very limited benefit. And I 
worry a little bit that this has sort of taken on a life of its 
own, as if this would be a solution to the problem. And I 
really thank you for pointing out the limitations on what you 
can cut where.
    If you have to take these $52-billion cuts every year going
outward, no flexibility in the world is really going to 
fundamen-
tally change the dire scenarios that you laid out. We need to 
end sequestration.
    Secretary Carter. Right.
    Mr. Smith. The second thing I would like to point out, 
regrettably, Admiral Winnefeld, you don't have the $52 billion 
that Representative Franks made you think you had, because the 
defense appropriations bill that was passed does have $52 
billion more in it than sequestration would allow, but it does 
not change sequestration law.
    So, yes, if we can imagine a world where this appropriation 
bill exists independent of sequestration, then it is all good. 
We passed our DOD authorization bill based on that same 
premise.
    The trouble is, as you have heard today and as you have 
witnessed, nothing is on the table to stop sequestration. So 
you pass this lovely appropriations bill, and then you come in, 
you cut $52 billion out of it. It doesn't really change the 
equation much.
    And, lastly--and this is the most political point I will 
make, so I apologize a little bit in advance. But it is really 
just in response to Mr. Forbes' comment that somehow 
sequestration was all the President's idea and why on earth did 
he have such a dumb idea and why has he put us in this place. 
It is an interesting selective amnesia. But the reason for 
sequestration was because of the House Republicans' refusal to 
raise the debt ceiling.
    So, basically, if the President had vetoed that bill--and I 
voted against it, but I have enormous sympathy for the people 
who voted for it--if the President had vetoed that bill, we 
would have breached the debt ceiling and been unable to pay a 
good many of our bills and probably collapsed our economy. 
Sequestration was only forced upon us because of the refusal to 
raise the debt ceiling.
    And this is not just sort of a historical point, as we 
drift toward another option of raising the debt ceiling. I hope 
people will remember that outcome as we get close to the debt-
ceiling issue and simply raise it. Once we have incurred the 
debt, once we have passed the spending bills, once we have 
passed the tax cuts, to then come along and say, oh, gosh, 
really, we don't want to pay those bills, is just wrong.
    If you want to do something about the debt, you know, 
increase taxes, cut spending, put something on the table. But 
don't once again take our country to the brink of not raising 
the debt ceiling so that we can pay our bills.
    What we see before us, what we have heard for the last 2-
plus hours is directly as a result of the brinksmanship over 
the debt ceiling that happened in the summer of 2011. And I 
just don't want people to forget that as we go into another 
series of budget fights.
    I thank the chairman for his indulgence. I yield back.
    The Chairman. I will expound a little bit upon what the 
ranking member just said.
    I think many times when we go out and respond to our 
constituents, we can talk about a vote, and they don't always 
understand that a vote may be containing several different 
items. It is not one item and a ``yes'' or ``no'' vote.
    That particular vote on the Budget Control Act, the very 
first thing it did was raise the debt-ceiling limit. Then it 
also cut about a trillion dollars, half of which came out of 
defense and half came out of other domestic spending.
    Then it set up a ``super committee'' [Joint Select 
Committee on Deficit Reduction] that was supposed to find an 
additional trillion dollars in savings out of mandatory 
programs. We all know now the history of that. They were unable 
to do that, so sequestration did kick in. And that trillion 
dollars, instead of being taken out of mandatory programs, 
which are the real driver in all of this--because if we 
eliminated all domestic spending, we would still be running a 
deficit of over a half-trillion dollars. And that comes out of 
the mandatory side that we have no vote on and really needs to 
be addressed.
    So the sequestration kicked in, and that took another half-
trillion dollars, $500 billion, out of defense on top of the 
$487 billion and the part of the $100 billion that was done 
earlier under Secretary Gates that came out of defense also. So 
it has been a culminating effect.
    And the gentleman is absolutely correct; we will face on 
September 30th a very important decision about moving forward. 
Probably half of the Congress now does not know what regular 
order is like. They have never had it.
    You have never had in your--like you said, you were sworn 
in on the day we voted for that fateful bill. So none of the 
members of the Joint Chiefs have ever served under a regular 
budget.
    I don't think the Senate has passed an appropriation bill 
since 2009. They did pass a budget this year, although it is so 
far different from the House budget that there is no way to 
reconcile the numbers. And we have become pretty dysfunctional 
as a Congress. It is unfortunate, but some way, at some point, 
we need to get our act together and get something done.
    I do have one final question. Title 10 of U.S. Code 
codifies the permanent requirement for an independent panel to 
review the QDR process--and we have talked earlier about the 
QDR--and also provide alternative assessments. The law provides 
that the panel may request whatever information they require 
from the Department, DOD, to conduct their work.
    Given that last year's QDR is expected to be heavily 
informed by the SCMR, to what extent do you intend to make 
available to the NDP [National Defense Plan] the proceedings or 
conclusions of the SCMR? You will give them the same support 
that you give to the QDR?
    Secretary Carter. Yes, absolutely. We were very pleased and 
fortunate that former Secretary Perry and General John Abizaid 
have agreed to chair that panel. They will get all the 
information they want for their deliberations, including the 
SCMR.
    The Chairman. Great. They did an outstanding job last time.
    The members of the NDP were required by law to be appointed 
by February 1st. We have appointed ours. The remaining members 
have been appointed. The Secretary has yet to appoint his co-
chairs. Do you know the reason for that delay?
    Secretary Carter. I will get back to you on that.
    [The information referred to can be found in the Appendix 
on page 105.]
    The Chairman. Okay.
    And now that the SCMR is over--and maybe that was taking 
the time--I would like to ask that the Secretary comply with 
the law and get the NDP operational as soon as possible. So if 
you could carry that message back.
    Secretary Carter. Will do.
    The Chairman. Thank you very much.
    Anything else?
    Mr. Smith. No.
    The Chairman. No further questions.
    Thank you very much for your time, your patience, and your 
willingness to answer our questions.
    This hearing is adjourned.
    [Whereupon, at 12:25 p.m., the committee was adjourned.]
      
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                            A P P E N D I X

                             August 1, 2013

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

              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             August 1, 2013

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

              Statement of Hon. Howard P. ``Buck'' McKeon

              Chairman, House Committee on Armed Services

                               Hearing on

    Initial Conclusions Formed by the Defense Strategic Choices and 
                           Management Review

                             August 1, 2013

    This committee has frequently encouraged the Pentagon to 
fully plan for sequestration, and to make the consequences of 
several rounds of budget cuts known. With that in mind, I 
welcome this review and what it seeks to achieve.
    I note that the President has directed the Department to 
maintain his 2012 defense strategy, even though his senior 
commanders have testified that the strategy would have to be 
revised in the face of additional budget cuts. Any further 
consideration of strategy has been deferred to the Quadrennial 
Defense Review, which will not report out until next February 
at the earliest. In the meantime, the review makes clear that 
the Department will proceed with changes in force structure, 
compensation, and further efficiencies without a new strategy. 
The most optimistic scenario has the President requiring DOD to 
find another $150 billion on top of the $487 billion that has 
already been cut. To make matters worse, even if all of the 
options in this report were adopted, it would only address 10% 
of the true budget shortfall in the next year or two. The math 
simply does not add up.
    This review also makes clear what I have been warning about 
for over 2 years. Further cuts will cause catastrophic 
readiness shortfalls, we will lose our workforce and ability to 
recruit and retain the All-Volunteer Force, and our influence 
around the world will continue to diminish.
    There is agreement on both sides of the aisle and both 
sides of the Potomac that these cuts embolden our enemies and 
jeopardize U.S. national security. We often talk of risk, but I 
hope that today we will have a frank discussion about how this 
funding profile for defense limits the ability of this country 
to protect our national security interests--not simply that we 
are accepting more risk, but what that means for the Nation and 
our men and women in uniform. I look forward to hearing the 
testimony and thank both of our witnesses for being here.

                      Statement of Hon. Adam Smith

           Ranking Member, House Committee on Armed Services

                               Hearing on

    Initial Conclusions Formed by the Defense Strategic Choices and 
                           Management Review

                             August 1, 2013

    I would like to thank our witnesses for appearing before us 
today. You have extremely hard jobs, and I am afraid that we in 
Congress have not made them any easier by allowing 
sequestration to take effect.
    The single biggest takeaway from Strategic Choices 
Management Review is that Congress, by allowing sequestration 
to continue, is abdicating its constitutional responsibility to 
responsibly fund the military and to provide for the common 
defense. Through sequestration, Congress is forcing the 
Department of Defense to make some extremely difficult 
decisions that will undermine military readiness and put more 
unneeded stress on our troops, civilian employees, and military 
retirees.
    I hope our witnesses today can help us understand the pain 
that sequestration will cause next year and into the future. I 
would ask them to walk us through those choices that will have 
to be made and those risks that will be imposed. And we should 
be clear--when we talk about risk in the context of the 
Department of Defense, we mean that military conflicts will go 
on longer or our response will be slower and smaller and those 
translate to greater loss of life.
    Without a doubt, the Department of Defense must become more 
efficient, and Congress will have to help them do that. But 
sequestration will continue to force the Department to make 
unacceptable cuts to force structure, modernization, and 
benefits for our military personnel and retirees, creating 
significant readiness shortfalls. The SCMR drives home the 
point that continued budget policies of fiscal austerity and 
intentionally starving the Federal Government of revenue put 
our national security at risk.
    We are already on a path to significant deficit reductions. 
I am in favor of simply lifting sequestration and ceasing to 
impose these dramatic costs on our military. Those who refuse 
to end sequestration have the responsibility of proposing a 
balanced package of revenue increases and spending cuts that do 
not harm our national security. Those who refuse are allowing 
sequestration, and the significant harm it causes, to persist. 
In particular, those who continue to insist on tax cuts above 
all else have a responsibility to answer the question: How much 
military risk are you willing to take to preserve your tax cut?
    Thank you Mr. Chairman, and again, I very much appreciate 
the witnesses appearing here today.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
      
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                   DOCUMENTS SUBMITTED FOR THE RECORD

                             August 1, 2013

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

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
      
=======================================================================

              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                             August 1, 2013

=======================================================================
      
              RESPONSE TO QUESTION SUBMITTED BY MR. MCKEON

    Secretary Carter. There were extraordinary circumstances this year 
that delayed the appointment of the National Defense Panel (NDP) co-
chairs. First, Secretary Hagel did not take office until February 27, 
2013. In addition, the Department was facing significant budget cuts 
whose long-term impact urgently needed to be understood. Secretary 
Hagel therefore directed the Strategic Choices and Management Review 
(SCMR) to develop potential options for managing these cuts. The 
defense strategy must be appropriately informed by the resources 
available to implement it; thus, Quadrennial Defense Review (QDR)-
related work, including NDP appointments, was deferred until the SCMR 
was complete.
    Upon completing the SCMR, Secretary Hagel appointed former 
Secretary of Defense William Perry and retired General John Abizaid as 
the co-chairs of the NDP. Congressional staff was informed of these 
appointments on June 27th and 28th. The Department also hosted the 
NDP's inaugural, day-long meeting at the Pentagon on August 20th.
    The QDR will review the Department's strategic priorities and 
define its missions, capabilities, and programs over the long term, 
taking into account the future security environment and priority 
missions for which U.S. forces must prepare. The work undertaken for 
the SCMR will facilitate and inform the QDR. [See page 43.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. WILSON
    Secretary Carter. When Secretary Hagel said, ``[o]verall, personnel 
costs have risen dramatically, some 40 percent above inflation since 
2001,'' he was referring to the increase in Military Personnel funding 
from 2001 to 2013. In 2001, the Department spent $112B (in FY14$) from 
the Military Personnel account, while in 2013, DOD spent $156B (in 
FY14$) from that account. This is an increase of 40% above inflation. 
Not all of this increase is due to pay increases. There are more active 
duty personnel and more activated reserves serving today than there 
were in 2001, increasing the cost to the Department. There are also 
other items in the account beyond pay for current military personnel, 
such as retired military pay accrual and Medicare-eligible Health Care 
accrual, which experienced cost growth. Additionally, there was growth 
in the costs of some of the benefits provided to Service members (e.g., 
housing) that also contributed to the increased costs in the Military 
Personnel account beyond inflation. [See page 26.]
                                 ______
                                 
             RESPONSE TO QUESTION SUBMITTED BY MS. HANABUSA
    Secretary Carter. The Strategic Choices and Management Review 
(SCMR) looked at the entire Department, and all of the Services are 
facing end-strength cuts as well as severe reductions in funding as a 
result of sequester-level cuts. We typically talk about capacity cuts 
for the Army and Marine Corps in end-strength terms, and cuts in Navy 
and Air Force in terms of numbers of ships and aircraft squadrons.
    The Services are now in the midst of determining exactly what a 
smaller military would look like and what it would be capable of doing. 
I hope the results of the SCMR indicate why we need the cloud of 
budgetary uncertainty and turbulence to be dispelled so that we can 
continue the strategic transition upon which we have embarked with 
certainty and stability.
    The Department strongly supports the President's Budget Submission 
for Fiscal Year 2014 and the long-term budget plan for the entire 
Federal Government that makes critical investments to strengthen the 
middle class, create jobs, and grow the economy while continuing to cut 
the deficit in a smart and balanced way. I urge Congress to develop a 
comprehensive and balanced deficit reduction package that the House and 
Senate can pass, and that the President can sign. [See page 28.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. FRANKS
    Secretary Carter. The Strategic Choices and Management Review 
(SCMR) was never intended to be definitive in describing the future 
force under various budget scenarios. Rather, it was intended to inform 
the decision space senior leadership faced, and, in turn, guide the 
Services and Defense Agencies in developing their budgets. They are now 
in the midst of determining exactly what a smaller military would look 
like and what it would be capable of doing. This work will dovetail 
with the Quadrennial Defense Review (QDR), which will look at the 
options for adjusting the current strategy and the implications of that 
assessment.
    That said, the SCMR showed in the starkest terms that 
sequestration-level budget constraints are incompatible with sustaining 
the current defense strategy. Sequester is irrational, mindless, and 
damaging. The $37 billion in FY13 sequestration cuts are having a 
damaging impact on readiness, which limits the United States' military 
options when responding to crises. The Services are planning now for 
how they would implement their plans if sequester remains in FY14, and 
the result could be a compounding of this year's damage. The Department 
will still have an obligation to defend the country and maintain global 
responsibilities. Accordingly, DOD will preserve the best possible 
force to do so in the long term, but sequestration-level caps will 
limit what is possible--now and in the future. The budgets that the 
Services are developing, combined with the results of the QDR, will 
position the Department to say with more clarity which missions it will 
no longer be able to
afford. [See page 37.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. NUGENT
    Secretary Carter. Much of the growth seen in Central Command 
(CENTCOM) was due to a temporary increase in manpower associated with 
the war effort. Most of the reductions for CENTCOM in 2014 are tied to 
the winding down of the war effort.
    The reduction Secretary Hagel is implementing at all major 
headquarters, based on the results of the Strategic Choices and 
Management Review, is a 20% reduction in the 2013 baseline. This is in 
addition to previously planned reductions, such as the plans to reduce 
CENTCOM in 2014. [See page 39.]
?

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


              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             August 1, 2013

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

      
                   QUESTIONS SUBMITTED BY MR. WILSON

    Mr. Wilson. 1) The Strategic Choices and Management Review 
determined that the Army could be reduced from the plan of 490,000 to 
somewhere between 420,000 and 450,000 for the Active Component and from 
555,000 to between 490,000 and 530,000 for the Reserve Component.
    a. In what timeframe would these reductions take place?
    b. How much risk does the Army incur with respect to strategic 
capacity in case the United States is drawn in to a more traditional 
war mission instead of a protracted counterinsurgency operation?
    c. How does this impact the Army's ability to pivot a focus to the 
Pacific and maintain a presence in Europe, Africa, and the Middle East?
    d. With this large of a reduction can we assume that it would 
require an additional BRAC since it would leave the Army with too much 
infrastructure for the force size?
    Secretary Carter. a. SCMR assumed that the Active Army would be 
reduced from 490,000 to 420,000 by FY19 and the Reserve would be 
reduced from 555,000 to 490,000 by FY23.
    b. SCMR determined that, at end-strength of 420,000 to 450,000 
Active Duty and 490,000 to 530,000 Reserves, the Army has the capacity 
to execute overlapping traditional wars and defend the homeland, with 
acceptable risk. At these end-strength levels, the Army would be more 
strained to support a large, protracted counterinsurgency operation.
    c. The reduction in Army end-strength provides sufficient forces to 
prioritize DOD focus in the Pacific, while also maintaining some 
presence in Europe, Africa, and the Middle East.
    d. The Secretary stated that the Department would benefit from an 
additional Base Realignment and Closure (BRAC) round to align 
decreasing manpower with infrastructure; accordingly, the Department 
requested a BRAC in the President's Budget Submissions for FY13 and 
FY14.
    Mr. Wilson. 2) The plan for reform of the Administration of the 
Military Health System includes a proposed increase in the personnel in 
the Office of the Assistant Secretary of Defense for Health Affairs 
from the current level of 45 to 121 to include retaining the four 
Deputy Assistant Secretaries. The plan calls for this plus-up by 
October 1, 2013. How does this personnel increase meet the requirement 
to reduce headquarters by 20 percent? Despite the continuing assertion 
by DOD officials that health care costs are negatively affecting the 
overall DOD budget, the cost growth of the Defense Health Program from 
FY 13 to FY 14 is $300 million, an increase of just under 1 percent. 
The cost of care in the Military Treatment facilities rose by $175 
million, less than 1 per cent. The cost of Private Sector Care 
decreased by $650 million. Over the last 3 years DOD has requested 
authority to reprogram in excess of $1.2 billion from the DHP to non-
health-care-related activities. What do you anticipate will be 
unexpended in the DHP for this fiscal year?
    Secretary Carter. The plan to reduce management headquarters by 20% 
will be executed against an accurate baseline of headquarters personnel 
accounting, regardless of potential realignments among headquarters 
elements. It is important to note that the referenced proposed increase 
of personnel in the Office of the Assistant Secretary of Defense for 
Health Affairs (HA), from the current level of 45 to 121, is actually a 
realignment from the current TRICARE Management Activity (TMA) 
personnel who support headquarters functions as part of the current 
dual-hatting organizational structure between HA and TMA. There is no 
net increase in personnel in the Military Health System headquarters 
elements as a part of this realignment.
    Given the size of the Defense Health Program's appropriation and 
the variability inherent in the beneficiary population's demand for 
health care, it is impossible to predict with great accuracy, as of 
this writing, what the Department's final financial position will be, 
to include unobligated/unexpended funds. Fiscal Year 2013 was
further complicated by a Continuing Resolution as well as a reduction 
due to
sequestration.
    Mr. Wilson. 3) Secretary Hagel recently visited a commissary at 
Naval Air Station Jacksonville and, as I understand, he is the first 
Secretary of Defense to visit a commissary and I thank him for taking 
the time to personally view this important benefit and meet the 
families it supports. According to a recent Resource Management 
Directive, the Defense Commissary Agency has been told to study the 
feasibility of focusing its operations mostly or entirely overseas and 
cut its budget by 33%. The study was due to the Secretary of Defense by 
1 July. Is it truly the intent of the Department to eliminate CONUS 
commissaries and deprive military families on CONUS bases of this very 
important non-pay compensation benefit? If so, has the Department 
determined how much it would have to spend on maintaining overseas 
commissaries due to the loss of nearly 70% of surcharge funds generated 
by CONUS commissaries that currently support those overseas? Has the 
Department calculated potential impacts on readiness and retention if 
the cuts and closures are implemented? Finally, what is the net effect 
monetarily of implementing the RMD after adding other costs that are 
offset by the commissaries, such as maintenance of overseas 
commissaries, COLAs, unemployment compensation, adverse impacts to 
readiness and retention, etc.?
    Secretary Carter. At the outset, let me assure you that the 
Department continues to explore the future of military commissaries. In 
addition, the Resource Management Directive (RMD) report has not been 
delivered to the Secretary or me, so I am unable to comment about its 
contents at this time.
                                 ______
                                 
                  QUESTIONS SUBMITTED BY MR. LANGEVIN
    Mr. Langevin. 4) I understand that much of what you have to say 
today is very broadly couched and that many difficult decisions remain 
to be made as you choose from, as the Secretary said, a menu of options 
to deal with the mindless cuts that sequestration imposes. I applaud 
the Department's willingness to seriously examine reducing DOD's 
overhead and administrative costs, and share the view that this is an 
important route to cost savings, despite the backloading of the 
savings. But as the Department continues to dive into the very stark 
options that you have laid out and make some budgetary choices, I would 
simply emphasize the importance of having discussions with Congress 
sooner rather than later. I would also emphasize that I am very 
concerned over any degradation in our cutting-edge capabilities and our 
investments in the fundamentals of a strong national defense, such as 
STEM and R&D. Our vulnerabilities, and the interest of our adversaries, 
in these leading-edge capabilities would make any reduction penny-wise 
but pound-foolish. I am particularly concerned given that cuts in R&D 
show immediate budget effects but their more pernicious effects take 
years to set in, whereas personnel and other savings are much more 
backloaded. To that end, how did the Department look at second- and 
third-order effects of reductions--the effects on future workforce, 
other agencies, and other such groups outside the DOD?
    Secretary Carter. During the Strategic Choices and Management 
Review (SCMR) the Department worked to consider the impacts to the 
future workforce and others outside of DOD. For example, the Department 
leveraged previous studies on recruitment and retention to evaluate 
impacts to pay and compensation. However, the timeline that SCMR was 
working under did not permit a detailed quantitative assessment of the 
second- and third-order effects resulting from sequester-level cuts. 
That said, sequester-level cuts would harm missions across Government 
that support a vibrant economy and a strong national defense. The 
Department depends on a world-class education system to maintain a pool 
of qualified recruits, as well as on a domestic infrastructure that 
surrounds our bases and installations. DOD also counts on scientific 
breakthroughs funded by R&D grants joined with a strong manufacturing 
base to maintain our decisive technological edge. All of these 
aforementioned areas are threatened by sequestration. The Department 
must work with other impacted agencies to make the case for ending 
sequestration and assessing the second- and third-order effects that 
have yet to materialize. If the sequester
remains the law of the land, I agree that the potential repercussions 
are very
concerning.
    Mr. Langevin. 5) During the out-brief of the CSBA ``strategic 
choices exercise,'' all four teams generally characterized the current 
budgetary constraints due to sequestration as unsustainable for 
securing U.S. interests and fulfilling our international obligations. 
Do you agree with that assessment?
    Secretary Carter. The Department agrees with this assessment. The 
abrupt, deep cuts caused by the Budget Control Act of 2011 (BCA) caps 
force DOD to continue to make the sort of nonstrategic choices made 
this year. The Services are currently planning for how they would 
implement their plans if sequester remains in fiscal year 2014, and the 
result could be a compounding of the current damage. If the cuts 
continue, the Department will have to make sharp cuts with far-reaching 
consequences, including limiting combat power, reducing readiness, and 
undermining the national security interest of the United States. 
Sequestration-level caps will limit what DOD can do--both now and in 
the future.
    Mr. Langevin. 6) Dr. Auslin from the American Enterprise Institute 
mentioned at a recent hearing that the ``U.S. should find it worrisome 
that every nation in the Asia-Pacific that can afford more weapons is 
buying more weapons.'' Additionally, ADM Roughead stated at the same 
hearing that the real power of Asia is the ``economy'' and that we need 
to maintain stability within the region so no ``one'' nation is 
dominant. Under the scenarios in the SCMR, are we able to conduct the 
pivot to the Asia-Pacific region? If so, what costs and risks may be 
incurred elsewhere in the world if we do?
    Secretary Carter. No matter the fiscal scenario, the Department 
remains committed to executing the rebalance to the Asia-Pacific. 
Indeed, the Secretary made his second trip to the Asia-Pacific this 
month. What the SCMR did reveal was that, at sequestration-level caps, 
the Department is unable to completely implement the planned rebalance. 
DOD will have to make adjustments. The Quadrennial Defense Review will 
take a closer look at the options for adjusting the current strategy 
and the implications on the Department's global activities.
    Mr. Langevin. 7) One of the assumptions made during SCMR was 
changes in the law that would grant the DOD flexibility in implementing 
the reductions. What happens if you don't get this flexibility?
    Secretary Carter. The SCMR did not assume that Congress grants the 
Department flexibility in meeting sequester-level budget caps. DOD 
fully recognized the challenges in gaining approval to implement 
statutory changes, which is why some proposals were characterized as 
more risky. That said, the Department must cut more deeply into its 
force structure without this flexibility.
    DOD needs Congress to be a full partner. Specifically, it needs 
Congress' help on:

      Remove restrictions that limit DOD's ability to manage 
efficiently. For example:

          The rate at which the Department can draw down ground 
        forces is capped by law. At sequestration levels, DOD may want 
        to come down faster, to gain savings earlier and shift 
        resources back into readiness and modernization as quickly as 
        possible.

          The law presently restricts the Department's ability to 
        rebalance the military/civilian mix in the medical field, which 
        precludes DOD from lowering costs without impacting the ability 
        to perform its mission.

          The Department still does not have authority to conduct 
        another Base Realignment and Closure round. DOD knows it has 
        excess installations today, and sequester will only add to that 
        excess.

      Compensation Reform. The Department must slow growth in 
military pay raises in manner that still supports the All-Volunteer 
Force. DOD must also be able to raise fees for health care programs for 
retirees while still maintaining the generous benefits they deserve. 
The force is healthy and recruiting and retention numbers are 
excellent--we can make some adjustments here. These proposals were made 
in the President's fiscal year 2014 budget submission.

    Still, although flexibility would of course help, it is not a 
panacea. Flexibility alone would not permit the Department to 
accommodate these very large and abrupt reductions without causing 
serious harm to DOD's mission. Even with flexibility, readiness would 
at best remain at current degraded levels and many investment programs 
would be seriously disrupted.
    Mr. Langevin. 8) If the Budget Control Act's sequester-level caps 
remain in Fiscal Year 2014 then what impacts will this have on DOD's 
modernization portfolio? What major defense acquisition programs will 
be curtailed or even terminated to achieve this cap level?
    Secretary Carter. This decision holds enormous complexity, and 
there is no simple answer. If current sequester level caps remain in 
place, the ability to modernize Department of Defense portfolios will 
decrease significantly. As budget levels are established, requirements 
will be prioritized for execution in the Planning, Programming, 
Budgeting, and Execution cycle. Until exact budget levels are known, it 
will be nearly impossible to forecast which programs in the 
Department's modernization portfolio will remain unchanged, will 
experience reduced funding and/or schedule delays, or will be cut 
outright.
    The Department's Senior Acquisition Executives reinforced this in 
recent testimony to the Subcommittee on Tactical Air and Land Forces, 
United States House of Representatives. Fiscal Year 14 funding level 
will impact all Air Force investment programs. Program disruptions will 
cost more taxpayer dollars to rectify contract breaches, raise unit 
costs, and delay delivery of critical equipment. Sequestration will 
potentially impact every Navy program and system, forcing reductions in 
procurement quantities, delays in schedules (delivery and initial 
operational capability), deferral of costs to future years, and 
unnecessary cost growth. The budget pressures will create significant 
risk to Army aviation modernization efforts. Multiyear contract 
efficiencies are jeopardized as quantities of UH-60 and CH-47 
helicopters may be reduced across the Department. Planned upgrades and 
modernization of combat vehicles would also be affected if 
sequestration occurs in FY14, potentially resulting in delays to 
scheduled upgrades to the Abrams tank and Bradley Infantry Fighting 
Vehicle. Over time, we will assume significant risk in planned 
modernization of combat vehicles, to include the Army's next-generation 
infantry fighting vehicle.
    Ultimately, if needed, termination or curtailment of major defense 
acquisition programs will be a result of careful consideration of 
Warfighter requirements balanced with fiscal constraints. The current 
fiscal environment may result in a potential decrease of up to 20 
percent in both investment and research and development accounts. As 
demonstrated, this will have momentous near- and far-term implications.

    Mr. Langevin. 9) I understand that much of what you have to say 
today is very broadly couched and that many difficult decisions remain 
to be made as you choose from, as the Secretary said, a menu of options 
to deal with the mindless cuts that sequestration imposes. I applaud 
the Department's willingness to seriously examine reducing DOD's 
overhead and administrative costs, and share the view that this is an 
important route to cost savings, despite the backloading of the 
savings. But as the Department continues to dive into the very stark 
options that you have laid out and make some budgetary choices, I would 
simply emphasize the importance of having discussions with Congress 
sooner rather than later. I would also emphasize that I am very 
concerned over any degradation in our cutting-edge capabilities and our 
investments in the fundamentals of a strong national defense, such as 
STEM and R&D. Our vulnerabilities, and the interest of our adversaries, 
in these leading-edge capabilities would make any reduction penny-wise 
but pound-foolish. I am particularly concerned given that cuts in R&D 
show immediate budget effects but their more pernicious effects take 
years to set in, whereas personnel and other savings are much more 
backloaded. To that end, how did the Department look at second- and 
third-order effects of reductions--the effects on future workforce, 
other agencies, and other such groups outside the DOD?
    Admiral Winnefeld. The SCMR did its best to consider impacts to the 
future work force and others outside the Department. For example, it 
leveraged previous studies on recruitment and retention to evaluate 
impacts to pay and compensation. Although we discussed the potential 
impacts of reduced funding on collaborative efforts that DOD has with 
other agencies, such as Department of State and Department of Homeland 
Security, the SCMR timelines didn't permit a detailed quantitative 
assessment.
    Mr. Langevin. 10) During the out-brief of the CSBA ``strategic 
choices exercise,'' all four teams generally characterized the current 
budgetary constraints due to sequestration as unsustainable for 
securing U.S. interests and fulfilling our international obligations. 
Do you agree with that assessment?
    Admiral Winnefeld. I agree with the assessments that the current 
constraints with regard to the manner in which sequestration must be 
executed, are unsustainable for securing U.S. interests and fulfilling 
our international obligations. The most damaging element of the whole 
process is the speed at which the reductions hit us. They are sudden 
and deep, rather than gradual and backloaded. For a variety of reasons, 
for example, how fast we can or should get people out of the service, 
and the legislative limits on the ways we can cut, at the BCA level of 
reductions, they simply happen faster than we can digest them in a 
balanced and sensible way. With these constraints, all we will be able 
to do in the early years is grab money wherever we can, mostly out of 
the modernization and readiness accounts, which is particularly 
disruptive to our ability to defend this Nation.
    Mr. Langevin. 11) Dr. Auslin from the American Enterprise Institute 
mentioned at a recent hearing that the ``U.S. should find it worrisome 
that every nation in the Asia-Pacific that can afford more weapons is 
buying more weapons.'' Additionally, ADM Roughead stated at the same 
hearing that the real power of Asia is the ``economy'' and that we need 
to maintain stability within the region so no ``one'' nation is 
dominant. Under the scenarios in the SCMR, are we able to conduct the 
pivot to the Asia-Pacific region? If so, what costs and risks may be 
incurred elsewhere in the world if we do?
    Admiral Winnefeld. SCMR, used the January 2012 Defense Strategic 
Guidance (DSG) to guide our analysis. As you are aware, the DSG guides 
our rebalance to the Asia-Pacific. All of the SCMR ``scenarios'' used 
during the strategic choices review maintain our Asia-Pacific rebalance 
while accounting for fiscal realities going forward.
    As Secretary Hagel said in his Shangri-La speech, ``it would be 
unwise and short-sighted . . . to conclude that our commitment to the 
rebalance cannot be sustained . . . like the employment of all 
resources, it is always a matter of the wise, judicious, and strategic 
use of those resources that matters the most and has the most lasting 
impact.''
    While sustainable over the long term, the rebalance may take longer 
to fully execute due to budgetary constraints caused by sequestration. 
Time and fiscal realities afford us an opportunity to ensure we are 
putting the right resources in the right places. We will continue our 
steady, thoughtful, and measured rebalance to the region--although some 
new and key relationships will take longer to develop and deepen 
because of sequestration (de-scoped exercises because of reducing 
steaming and flying hours).
    We will strive to ensure risk incurred in other areas of the world, 
as a result of sequestration and the rebalance, will remain at 
acceptable levels. We will continue to monitor the risk throughout the 
rebalance and keep you apprised through the Chairman's Risk Assessment, 
which we submit to Congress every spring.
    Mr. Langevin. 12) One of the assumptions made during SCMR was 
changes in the law that would grant the DOD flexibility in implementing 
the reductions. What happens if you don't get this flexibility?
    Admiral Winnefeld. If we don't get flexibility, our choices will be 
greatly limited. We must have flexibility to appropriately reshape the 
Department if we will absorb another nearly half-trillon dollars in 
budget reductions. Flexibility is required in three main areas. The 
first area includes elimination of restrictions on reducing or 
adjusting force structure. Cuts at the sequestration level require us 
to reduce personnel and equipment. Limiting reductions in these areas 
will cause disproportionate cuts to readiness and modernization--it is 
zero-sum. Second, we need to work with Congress on establishing 
flexibility in our pay, compensation, and medical accounts. Without 
this flexibility, we will lock one area of our budget, in this case 
personnel costs, while forcing disproportionate cuts to procurement, 
readiness, R&D, and operations. Finally, we need your support for 
reducing excess infrastructure through BRAC in 2015. The previous five 
rounds of BRAC eliminated excess infrastructure and save $12B per year 
that is invested in our joint force.
    Mr. Langevin. 13) If the Budget Control Act's sequester-level caps 
remain in Fiscal Year 2014 then what impacts will this have on DOD's 
modernization portfolio? What major defense acquisition programs will 
be curtailed or even terminated to achieve this cap level?
    Admiral Winnefeld. Abrupt, deep cuts caused by the BCA caps in FY 
2014 will force the Department to make nonstrategic changes that impact 
the Department's modernization portfolio. The Department remains firmly 
committed to enactment of the President's defense budget for FY 2014 
because it provides the right level of resources to maintain a strong 
national defense.
    Still, I recognize that a contingency plan must be developed in the 
event that the sequester-level budgetary caps currently imposed by the 
BCA remain in effect year over year. Although the specifics are still 
in development, DOD would be forced to make disproportionate reductions 
in procurement, research and development, and military construction. 
The Department will seek to protect most or all funding for a few 
programs that are most critical to our military strategy; however, 
funding for hundreds of program line items, large and small, will have 
to be cut significantly. This translates to buying fewer ships, planes, 
ground vehicles, satellites, and other weapons, and sharps cuts to 
modification programs and research funding.
                                 ______
                                 
                   QUESTION SUBMITTED BY MR. LOEBSACK
    Mr. Loebsack. 14) Admiral Winnefeld, please provide additional 
detail regarding the implementation of end-strength reductions as 
reviewed in the strategy. Did the strategy look at the total force and 
the balance between the Active Duty and Reserve Components? What 
conclusions, if any, did the review come to regarding the balance 
between the two components?
    Admiral Winnefeld. The strategy encompasses the total force. The 
Services use an established, comprehensive, and transparent process to 
determine the optimal number and mix of Active and Reserve Component 
forces balanced with the National Military Strategy. As we work through 
the process of sequestration-level force structure reductions, we have 
put everything on the table, but at this time, we do not have 
conclusions on the mix of Active and Reserve forces.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. SHUSTER
    Mr. Shuster. 15) What steps are being taking to ensure that future 
budget constraints are not mitigated through the use of future 
furloughs that impact readiness, morale, and financial security of the 
civilian workforce?
    Secretary Carter. As the Department contends with FY 2013 funding 
reductions and the prospect of continued sequester-level Budget Control 
Act (BCA) caps resulting in a cut of $52 billion in funding in FY 2014, 
Operations and Maintenance (O&M) funds cannot be protected. Cuts in O&M 
funding would also affect DOD's civilian workforce because many 
civilians are paid with O&M dollars. To minimize adversity to our 
valued civilian workforce, the Department will continue current hiring 
freezes (as appropriate), minimize the use of temporary and term 
employees, and encourage the liberal use of Voluntary Separation 
Incentive Pay (VSIP) and Voluntary Early Retirement Authority (VERA), 
both of which are valuable in reducing involuntary separations and 
associated costs.
    I am hopeful that Congress will pass a deficit reduction package 
that the President can sign and detrigger sequestration. A 
comprehensive solution of this nature would do much to support the 
mission of the DOD and prevent the need for sharp reductions in the 
funding supporting the civilian workforce.
    Mr. Shuster. 16) If sequestration remains, as a result of the 
President's failure to work with the legislative branch, what are the 
DOD plans to ensure that the organic industrial base will survive 
budget cuts to support the future needs of the warfighter?
    Secretary Carter. The Department recognizes that maintaining an 
organic industrial base provides readily available base and surge 
capabilities that enable DOD forces to respond to mobilization, 
national defense contingency situations, and other emergency 
requirements. Supporting an organic industrial base, as well as a 
commercial industrial base, will be a very difficult challenge in the 
face of severely restricted budgets. Industrial activities are 
competing with operational components for scarce resources.
    The Department is taking proactive steps to mitigate these 
challenges. Existing authorities, such as public-private partnerships 
under 10 U.S.C. 2474, will be leveraged to the maximum extent possible. 
However, without authorization for a new round of Base Realignment and 
Closure, the Department may not efficiently align the military's 
infrastructure with the needs of its evolving force structure, which is 
critical to ensure limited resources are available to support the 
highest priorities of the warfighter and national security.
    Mr. Shuster. 17) How is utilizing a BRAC round as a near-term 
solution for current budget shortfalls justified when previous rounds 
have proven more costly upfront and the potential savings are not 
realized beyond a 10-year window? What changes does the DOD plan to 
make to ensure a BRAC round would be beneficial? Are base closures and 
realignments overseas being looked at prior to domestic sites?
    Secretary Carter. While there are upfront costs for BRAC, in the 
long term there are significant savings. The previous five BRAC rounds 
('88, '91, '93, '95, '05) closed 121 major bases and resulted in 
hundreds of other realignments and minor closures, saving a total of 
$12 billion annually.
    I agree the Department of Defense cannot afford another $35 billion 
BRAC round similar to 2005. However, the key factor that drove the cost 
of the last BRAC round was the willingness to accept recommendations 
that were not designed to save money. Nearly half of the 
recommendations from the last round were focused on taking advantage of 
opportunities only available under a BRAC process to move forces and 
functions to where they made sense, even if doing so would not save 
much money. They were pursued because the realignment itself was 
important, not the savings. This ``Transformation BRAC'' cost just over 
$29 billion and resulted in a small proportion of the savings from the 
last round. Even so, it allowed the Department to improve the 
distribution of forces within its infrastructure in ways that are 
difficult to achieve outside of a BRAC round, while also recapitalizing 
aging infrastructure. This was an opportunity that the Department could 
afford when budgets were higher and the Department was experiencing 
growth.
    The remaining recommendations made under BRAC 2005 paid back in 
less than 7 years, despite experiencing cost growth. In contrast to the 
``Transformation BRAC,'' these ``Efficiency BRAC'' recommendations only 
cost an estimated $6 billion, with an annual payback of approximately 
$3 billion. This part of BRAC 2005 paid for itself speedily and will 
produce savings for the Department in perpetuity. If the Department 
receives authority to conduct another BRAC round, it anticipates 
undertaking a similar ``Efficiency BRAC'' (lower costs and savings with 
quicker payback and a focus on efficiency). A BRAC round that is 
focused on efficiency recommendations can succeed and makes eminent 
sense in today's fiscal climate.
    The Department has initiated a comprehensive infrastructure 
analysis to identify potential opportunities for consolidation in 
Europe. The process will ultimately result in a validation of DOD's 
enduring European infrastructure requirements, providing an analytical 
basis to support sustainment funding and future recapitalization. By 
the end of this calendar year, we plan to have a Department-vetted list 
of European infrastructure options from which the DOD leadership can 
make strategic investment decisions. But given the size of the budget 
cuts, it is unrealistic to expect that DOD can make all reductions via 
overseas bases and installations alone.
    Mr. Shuster. 18) Missile Defense remains a significant priority. 
When will the Service Branches bring members of the HASC into the 
planning phase of future funding plans to ensure that cuts aren't 
arbitrarily made in programs considered priority of the HASC?
    Secretary Carter. The Prioritized Capabilities List guides program 
priorities and the development of the missile defense budgets. The 
Department of Defense will continue to work with Congress through the 
annual authorization and appropriations processes to ensure adequate 
funding for defense programs are submitted as part of the President's 
Budget submission and also to ensure congressional priorities are 
included.

    Mr. Shuster. 19) How is utilizing a BRAC round as a near-term 
solution for current budget shortfalls justified when previous rounds 
have proven more costly upfront and the potential savings are not 
realized beyond a 10-year window? What changes does the DOD plan to 
make to ensure a BRAC round would be beneficial? Are base closures and 
realignments overseas being looked at prior to domestic sites?
    Admiral Winnefeld. DOD cannot afford to keep excess infrastructure 
in an era of budget and security uncertainty. The tax on our 
warfighters is unacceptable as each dollar spent on excess 
infrastructure cannot be spent on maintaining our superb joint force. 
Absent BRAC, the Department will continue to support unnecessary 
infrastructure, so BRAC must be an essential part of any overall DOD 
reshaping strategy.
    Given the force structure reductions on the horizon and the budget 
constraints we face, we have every expectation that a future round will 
be far more similar to the first four BRAC rounds than the most recent 
round in 2005 in terms of costs and savings. The first four rounds of 
BRAC (1988, 1991, 1993, and 1995) are producing a total of 
approximately $8 billion in annual recurring savings with an average 
payback of less than 7 years, and BRAC 2005 is producing an additional 
$4 billion in annual recurring savings.
    It's important to note that the 2005 BRAC round was very different 
than the first four rounds. BRAC 2005 had two components with the major 
component focused on ``transformation.'' The other component, 
``closure,'' was more traditionally aligned with previous BRAC rounds 
which eliminated excess infrastructure. The major, or 
``transformation,'' component of BRAC 2005 cost about $29 billion with 
military construction accounting for over $11 billion of this cost. In 
addition, the transformation component of BRAC 2005 included 
recommendations that had no savings or produced limited savings to 
include infrastructure consolidation. The more traditional or 
``closure'' component of BRAC 2005 cost about $6 billion to implement, 
paid for itself in less than 7 years, and is now generating $3 billion 
in annual savings. The next BRAC round would be squarely focused on 
closure and eliminating excess
capacity.
    A 2004 survey found that the Department had 24% aggregate excess 
capacity, while BRAC 2005 only reduced capacity by 3.4%. Thus, the 
Department believes we have about 20% excess capacity at the aggregate 
level today. With today's force structure declining relative to 2005 
levels, our excess capacity will continue to grow. No successful 
business would carry the amount of excess infrastructure that DOD 
currently is forced to maintain.
    While we clearly have excess capacity, many have asserted that we 
should look first at our overseas infrastructure for reductions. We 
have been reducing our overseas infrastructure for years. Since 2003, 
the Department returned more than 100 sites in Europe to their 
respective host nations, and we reduced our overseas personnel strength 
by one-third. The remaining overseas force structure provides enormous 
dividends to this country in terms of presence and responsiveness. 
Ongoing force structure changes should produce additional opportunities 
for reducing infrastructure both at home and abroad while preserving 
the best joint force that is ready and postured for full-spectrum 
operations.
    Mr. Shuster. 20) Missile Defense remains a significant priority. 
When will the Service Branches bring members of the HASC into the 
planning phase of future funding plans to ensure that cuts aren't 
arbitrarily made in programs considered priority of the HASC?
    Admiral Winnefeld. The restructuring of DOD under the Strategic 
Choices and Management Review, and the subsequent decisions from the 
QDR, will be a comprehensive process that will only succeed with mutual 
coordination and cooperation between DOD and Congress. In accordance 
with standard budgeting procedures, the explanations for all 
adjustments in key defense programs will be outlined in the budget 
justifications and associated briefings the DOD will present to 
Congress with the FY 2015 budget and associated FYDP.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. CASTRO
    Mr. Castro. 21) and 22) During the hearing you discussed that 
another round of sequestration cuts could result in potentially not 
taking in new recruits into the Services. Can you describe the kinds of 
impacts that would have on our short-term/long-term recruitment and 
retention in an All-Volunteer Force and how that impacts national 
security?
    Secretary Carter and Admiral Winnefeld. Another round of 
sequestration cuts could impact force structure and drive a reduction 
in the number of military personnel. Services will consider the best 
way to lower overall personnel numbers with the least impact on 
readiness, while attempting to maintain a positive tone. Although we 
have force management tools that allow us to reduce personnel strength 
on the current force, we also may reduce accession numbers to maintain 
balance in the overall force.
    Additionally, the negative impact of another sequestration on 
operations and training will discourage the best and brightest from 
joining the military and discourage retention of our most talented 
Service men and women. Any impacts to recruitment and retention will 
impact the ability of our Service members to execute our national 
security strategy which is hinged upon being the most technologically 
advanced, best equipped, and most highly trained force in the world.
    In addition to the impact on operations and training, the 
uncertainty surrounding sequestration cuts has a corresponding 
intangible impact on the morale of our Service members. In our All-
Volunteer Force we rely on retaining the highest quality force. With 
further cuts and an improving economy retaining quality will become 
more difficult as our Service members look outside the military for 
opportunities to work or serve.
                                 ______
                                 
                    QUESTION SUBMITTED BY MR. NUGENT
    Mr. Nugent. 23) Secretary Hagel described the Strategic Choices and 
Management Review as ``a menu of options.'' With the drawdown of forces 
planned at the conclusion of our second war in the Central Command Area 
of Responsibility, CENTCOM has already announced plans to reduce their 
headquarters personnel at MacDill by 1,500 by the end of 2014. Just to 
clarify, when you consider a 20% reduction in major headquarters, is 
that measured in dollars or manpower? Does the menu of options 
presented in this review account for the reductions that are already 
planned? In other words, when the option of reducing headquarters by 
20% is considered, does that mean another reduction for CENTCOM below 
the 1,500 personnel already planned?
    Secretary Carter. Much of the CENTCOM growth was due to a temporary 
increase in manpower associated with the war effort. Most of the 
reductions for CENTCOM in 2014 are tied to the winding down of the war 
effort.
    The reduction Secretary Hagel is implementing at all major 
headquarters, based on the results of the Strategic Choices and 
Management Review, is a 20% reduction in the 2013 baseline. This is in 
addition to previously planned reductions, such as the plans to reduce 
CENTCOM in 2014.

                                  
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