and we have to change. >> coming up on c-span2 #, defense secretary, leon panetta comes to capitol hill to talk about the administration's defense budget. then, the senate budget committee questions congressional budget office director, jeffrey zients, and a review of the nato commission in libya with the commanding general. >> defense secretary, leon panetta, talked about president obama's defense budget at a hearing of the senate arms services committee today. it would spend $525 billion in

fiscal 2013. secretary pa panetta joined by martin dempsey at this four hour hearing. [inaudible conversations] >> good morning, everybody. the committee this morning welcomes secretary defense leon panetta and chairman of the joints chief of staff, general martin dempsey for the hearing on the department of defense's fiscal year 2013 budget request. the associated future years defense program and the posture of the united states' armed forces. the committee also welcomes under secretary defense controller robert hail joining the secretary and the chairman at the witness table.

let me start by thanking all of you for your continued service to our nation and to the soldiers, sailors, airmen, and marines here at home and in harm's way around the globe and to their families. they are truly deserving of the nation's affection and support. your testimony today marks the beginning of the committee's review of the fy2013 budget request for the department of defense. this year's request includes $525 billion for the base budget and $88.3 -- $88.4 billion for the overseas operations. the base budget request is $5 billion less than the fy2012 enacted level of $530 billion, and the oco request is $27 billion less than last year's enable #* acted level of -- enacted level.

the base budget request conforms with the budget control act that congress passed last summer. the senator approved the budget control act on a bipartisan basis with 74 senators voting for it. the budget control act locked in defense and non-defense discretionary spending caps over ten years. the defense caps reduced projected defense spending by nearly half a trillion dollars over ten years, and department responded with a new strategy and new program to meet the nation's security challenges and preserve our military capabilities. the budget control act including language requiring the congress to pass legislation with additional far-reaching deficit reduction. if congress does not come up with a deficit reduction package by next january, one that locks in another $1.2 trillion in deficit reduction over ten years, then automatic spending

cuts will be imposed on defense and non-defense programs. the budget the president sent us yesterday avoids sentinal quest ration by meeting the $1.2 trillion additional defense reduction target, approximately one-half further cuts in spending and one-half in additional revenues. the defense budget for fy2012 13* -- fy2013 reflects the results of the department's comprehensive and inclusive strategic review initiated by president obama in april of last year and the strategic guidance that resulted. we look forward to the witnesses' explanation of the process they went through to develop the new strategic guidance, their assessment of

the guidance's most important features and potential risks relative to the current and anticipated security environment, and how this budget request supports its strategic priorities and manages strategic risk in the near and long terms. the administration has called for two more base realignment and closure or barak -- back rounds. in my view, however, before we consider another round, the department ought to look at whether further reduction in bases can be made overseas, particularly in europe. while the department renounced removal of the two of the four combat brigades currently stationed in europe, even after the bring guides are withdrawn, there will still be over 70,000 u.s. military personnel deployed in europe. finding further reductions in consolidations in our overseas forced posture should be the first priority before another

round. the fiscal year budget request reflects continuing conflict in afghanistan, but also reflects the fact that the process of transition has begun and continues at pace. afghan security forces are assuming speedometer for securitying the afghan people and more and more areas throughout afghanistan. progress on security is real. the second round of areas to be transitioned to an afghan security lead will be completed later this year. then approximately 50% of the afghan population will live in areas where afghan security forces have the lead for providing a lead with the coalition forces. i long pressed for the forces to move increasingly into the combat lead and to assum responsibility for secures more and more afghan territory and communities as the size and

capabilities of the afghan army and police are built up. the success of our mission in afghanistan depends on getting the afghan security forces in the lead with the support of the afghan people. there by putting the lie to th taliban propaganda that the coalition is an occupying force. the afghan foreign ministry spokesman made clear there was full agreement on transition saying, quote, "we always maintained that afghan security is an afghan responsibility," close quote. last june, president obama said that the 33,000 u.s. surge force would be removed from afghanistan by the end of this summer. that means that 68,000 u.s. troops would remain in afghanistan after the draw down of the serge. he also said that after the reduction of the u.s. surge force, u.s. troops will continue to draw down, quote, "a a steady

pace," close quote; yet, the fy overseas contingency budget request now before congress is based on an assumption that there's no additional reductions in the 68,000 troop level in afghanistan throughout all of fy13. the question that i hope our witnesses will address this morning is whether they expect further reductions in u.s. troop levels in afghanistan during fy13, below 68,000, and what associated cost savings would result. if that decision has not yet been made by the president, what is the timetable for its being made? i hope secretary panetta clarifies surprising statements this month that, quote, "our goal is to complete all of the transition to a training advisory and assistance role in

2013," close quote and that, quote, he said, "hopefully by mid to latter part of 2013, we'll be able to make a transition from a combat role," close quote. there's many reports about reconciliation talks with the taliban. if taliban statements are true, that they will open a political office in qatar, it has the potential of being a positive development. i'm concerned, however, by reports that in exchange for the opening of this office, the administration is considering transferring five afghan taliban detainees from the guantanamo detention facility to qatar. such a significant step strikes me as premature and should be considered in my view only following positive discussions and not proceeding them.

another concern i have regarding the progress of the reconciliation talks are the reported decision by the government of afghanistan to open a second channel in the dialogue with the taliban that would be in saudi arabia. it seems to me that this would create the potential for confusion. the united states said it is committed 20 to an afghan-led process. that's the way it ought to be pursued through a single channel with both the afghan government and us fully coordinated and participating together whether it takes place in one or two venues. with respect to the real alignment of u.s. marines, senator mccain, webb, and i advocated changes in the current plan in ways that support the strategic goals the u.s. regional military posture while

avoiding costs associated with large and elaborate new bases. the announcement last week that the u.s. and japan are reconsidering elements are welcomed news, but the steps are not yet adequate. there's other challenges. of course, there's strong bipartisan determination on this committee and in congress to do all we can to counter the threat that iran poses including stopping iran from acquiring nuclear weapons. president obama has focused considerable diplomatic effort towards that goal because in his words, quote, "america's determined to prevent iran from getting a nuclear weapon, and i'll take no options off the table to achieve that goal. the administration is bringing the world together as it should to speak with one voice against iran's nuclear ambitions. relative to egypt, the relationship is under strain. in recent days, general dempsey traveled to cairo to engage the

supreme counsel of the armed forces in egypt on the troubling decision by the egyptians to charge 19 americans and dozens of others individuals for operating programs in support of an egyptian civil society. we're excited to hear the discoveries because the decision by the egyptians will negatively affect funding decisions congress makes in the coming months. relative to syria, the regime of president al-asad is waging war on the people of syria and in spite of all league of nations, they are preventing the security counsel from taking preventative action. if the situation is left as it is, there's also a significant threat that surrounding countries could be severely impacted. the witnesses will hopefully discuss options we have to help end the slaughter as limited as the options might be.

on cybersecurity, the defense stray feejic guidance notes there's the capability and intent to conduct cyber espionage and the ain't to conduct cyberattacks on the united states with possibly severe effectings on the economy and our security. the director of national intelligence in recent senate testimony placed the cyber security threat in the top tier alongside of terrorism and nuclear and proliferation of weapons of mass destruction. a recent report from the national intelligence executive stated operations within china and russia are responsible for the massive thet of u.s., commercial, and military technology that could threaten our national security and our economy. let china and russia know in no

uncertain terms that cyber economic espionage has very negative consequences for normal trade relations and other relations. in the area of personnel, aimed at slowing down the increase of personnel and health care costs that continue to rise at unsustainable rates this includes significant reduction in military and strength over the next five years, other personnel related forms, and a commission to review military retirement benefits. i agree with general dempsey, the service chiefs, and the services senior enlisted advisers who urged me in a letter dated january 25, 2011 to grandfather the retirement benefits of those currently serving. we owe it to the service members and their families to address any change in their compensation and benefits in a manner that

acknowledges the commitment that we made to them when they volunteered to serve in our armed forces. secretary panetta, general dempsey, and dr. hail, we look forwards to your testimony, and i now call on senator mccain. >> thank you, mr. chairman, and i join in welcoming secretary panetta and general dempsey to discuss the budget request for fiscal year 2013, the proposal to reduce the budget for the department of defense by $487 billion over the next ten years, and the impact of these reductions on future years defense programs for the department of defense. while the other members of this committee and i continue to scrutinize proposals, i'll say today i do not fully endorse this budget request. indeed, i'm seriously concerned about how we arrived at this point. on april 13th, 2011, the president of the united states announced his intention to reduce the department of defense

budget by $400 billion through 2023. however, his announcement was unsupported by any type of comprehensive strategic review or risk assessment. in fact, then secretary gates testified before congress that he only learned the night before about this massive proposed cut in our defense spending. now, the president proposes $487 billion in cuts over ten years and told the cuts are in the budget driven, but based on a review of the defense priorities. respectfully, this doesn't add up. unfortunately, this defense budget continues the administration's habit of putting short term political considerations over our long term national security interests. in afghanistan, our military commanders initially asked for a serge of 40,000 traps. the president disregarded that

sending 30,000 troops instead and announced a date when to withdraw. the commanders recommended maintaining the full force throughout this year's fighting season, but the president, again, disregarded their advice and announced reductions to our force levels at the former chairman of the joint chiefs of staff, admiral mullen said more aggressive and incurs greater risk than advisedment finally in iraq, the president disregarded the advice of the commanders again, dragged out negotiations with the iraqi government, with no intent to maintain a presence of u.s. troop, and now with the political and security situations unraveling, it is difficult to argue that iraq today is to use the president's phrase, "stable and self-reline." it seems as though many of the president's most significant decisions about the national defense have been fundamentally disconnected from "conditions on

the ground" and the advice of the commanders including commanders that the president himself selected. i fear that this defense budget in the broader plan to cut $487 billion from the department of defense over ten years only continues this dangerous and regrettable pattern. by any objective assessment, the worldwide threats to our nation, our interests and ideals are not diminishing. they are growing. yet, the defense budget before us would reduce the size of our force by more than 125,000 military personnel. it would jeopardize our nuclear modernization plan by making critical cuts to the nuclear weapons infrastructure programs. it would eliminate 20% of the army brigades combat teams, six marine battalions, four squadron, and seven air force combat squadrons, and 130 mobility aircraft.

perhaps most concerning of all, in light of the administration's own identification of the asia-pacific region as the focus of u.s. defense strategy, this budget would require the navy to reduce shipbuilding by 28%. retire seven cruisers and two amphibious ships earlier than planned, delay the next generation of ballistic missile submarine and postpone purchases of one virginia class submarine, two combat ships, and eight high speed transport vessels. further more, a list of defense strategy and related budget cuts clearly increase the risk to our national security objectives, there has been no formal risk assessment provided to congress. how can we and the american people determine whether the additional risks associated with this strategy are acceptable if we do not know the specific

nature of those risks as defined by the u.s. military? these cuts pail in comparison to what the defense department would face under see quest traition, an outcome secretary panetta correctly stated would be catastrophic for our national defense, and yet here, too, domestic poll sicks is taking -- politics is taking priority over national security with the president saying heat veto efforts by congress to eliminate sequestration that does not raise taxes. if it's as catastrophic as you state, why doesn't the president sit with us to work out a way to avoid what you and general dempsey described as catastrophic consequences for the national security of this country rather than sitting in the oval office saying he'll veto any bill that doesn't have tax increases in it? in short, we have come to a

critical turning point when decisions of the utmost importance for our national security must be resolved and the consequences of those decisions for better or worse will forever shape our nation's destiny. defense spending is not what is sinking this country deeper into an up steanble national -- unsustainable national debt, and if we act under the assumption that it is, we'll create something that is is truly unaffordable, the hollowing out of the u.s. military and the declean of u.s. military power. we can either take the easy route of dramatic cuts and increase risk or balance more modest and strategic reductions 234 defense spending with an aggressive plan to address the broader cultural problems plaguing our defense establishment. the waste and inefficiency with which the department buys goods and services under the undo

influence of a non-competitive military industrial congressional come -- complex. we have to tackle this culture problem head on, cut congressional earmarks and pork barrel spenting on programs that the military does not request and does not need, must have transparent and audible financial statements and eliminate the shameless cost overruns that characterize too many of our largest defense programs. from my review of the programs, this point is clear -- the phenomena of acquisition malpractice, which is senior penalty gone official -- pentagon official publicly described days ago, can be found in many more programs than just the joint strike fighter. it conveys the entire major defense acquisition program portfolio revealing a cultural problem in the acquisition of goods and services that is unsustainable. before the department further

risks fore structure to achieve budget savings, practice like this must end now. now is the time to set poll kicks aside for the -- politics aside for the one issue that we have to agree on is non-negotiateble to the future health of the success of our nation and national defense. start with goals, move to strategy, and allow that rigorous process to inform the budget we create. the administration's approach thus far has been too defined by short term domestic political consideration. the administration has not led. for the sake of our national security, congress should. thank you, mr. chairman, i look forward to the testimony of our witnesses. >> thank you, senator mccain, secretary panetta. >> thank you, mr. chairman, senator mccain, members of the committee. i ask my statement be made part of the record, and i'd like to summarize key points. >> it is part of the record, and the balance i did not give will

be made part of the record. >> members of the committee, i appreciate the opportunity to appear before you to discuss the president's budget request for fiscal year 2013. let me begin as always by thanking you for the support that you provide to service members and military families. these brave men and women along with the department's civilian professionals who support them have done everything asked of them and more, during more than a decade of war, and i want to thank you for the support that you have given them in the past, the present, and hopefully in the future. the fy13 budget request for the department of defense was the product of an intensive strategy review conducted by the senior military and civilian leaders of

the department through advice and guidance of the president. the total request represents a $6.14 billion investment in the defense requiring 4.45 billion for the didn't's based budget and 88.5 billion in spending to support the troops in combat. the reasons for this review are clear. first, the united states is at a strategic turning point after a decade of war, and after substantial growth in defense budgets. second, with the nation confronting a very large debt problem and deficit problem in this country, congress passed the budget control act of 2011 imposing a reduction in the defense budget of 487 billion over the next decade.

we, at the department, decided to step up to the plate, that this crisis provided us an opportunity to establish a new strategy for the force we need in the future. that strategy has guided us in making the budget decisions and choices that are contained in the president's budget. the fact is we are in an important turning point that would have required us to make a strategic shift probably under any circumstances. the u.s. military's mission in iraq has ended. we still have a tough fight on our hands in afghanistan. 2011 marks significant progress in reducing violence and transitioning to an afghan-led responsibility for security and we're on track to cleat in

mission by 2014 in addition to the lisbon commitments. having just returned, i can assure you all the nato nations are in line with the strategy that we are approaching with regards to afghanistan. we are in a transition. we are transitioning security to the afghan forces. our hope is that as we make the final transition in 2014, that they can take the lead on combat operations. we'll be there. we'll be in support. we'll be combat ready to support them through that process, and i want to assure you that nato is fully in agreement with the strategy we are moving in in afghanistan. last year, in addition, the nato effort in libya also concluded with the fall of gadhafi, and successful counterterrorism efforts have significantly weakened al-qaeda and decimated its leadership, but despite what

we have been able to achieve, unlike past draw downs, when threats receded, the united states still faces a very complex array of security challenges across the globe. we are still a nation at war in afghanistan. we face threats from the homeland with terrorism. there's a danger proliferation of lethal weapons and materials. the behavior of iran and north korea continue to threaten global stability. there is continuing turmoil and unrest in the middle east from syria to egypt to yemen and beyond. rising powers in asia are testing the international rules and relationships. there are growing concerns about cyberintrusions and attacks. our challenge, our challenge is

to meet these threats, to protect our nation, and our people, and at the same time, meet our responsibility to fiscal discipline. this is not an easy task. to build the force we need for the future, we develop new stray feejic -- strategic guidance that consists of five key elements. first, military will be smaller and leaner, but we want a military that's agile, flexible, ready, and technology advanced. second, we will rebalance our global posture and presence to emphasize asia-pacific and the middle east because those areas represent the threats for the future. third, for the rest of the world, we have to build innovative partnerships and strengthen reliances and partnerships from europe to

latin america and africa. .. strategy while shaping the strategy we didn't want to repeat the mistakes of the past. our goals are to maintain the strongest military in the world, to not hollow out the force, to take a balanced approach to budget cuts by putting everything on the table and not

break faith with our troops and their families. throughout the review we also wanted to make sure this was an inclusive process. general dempsey and i work closely with the leadership of the services and combatant commanders and consulted regularly with members of congress. as a result of these efforts, the department is strongly unified behind the recommendations that we are presenting today. consistent with the budget control act this budget reflects in the next five years savings of 259 billion. that's compared to the budget plan that was submitted obviously to congress last year. we think this is a balanced and complete package that follows the key elements of the strategy and adheres to the guidelines that we establish. the savings come from three broad areas, first efficiencies. we have redouble our efforts to discipline the use of taxpayers'

dollars, and that has yielded we hope about one-quarter of the targeted savings that we have in this package. the second area is the force structure and procurement reforms and adjustments. we've made strategy japan changes in the structure of the procurement programs to achieve roughly half of the savings in this package. finally on the compensation, we've made modest but important adjustments in personnel costs to achieve some necessary cost savings in this area this area represents about one-third of the budget. but here it accounted for a little more than 10% of the total reduction that we presented. let me walk through each of these areas. discipline in the defense dollars if we are going to tighten the force, then i like senator mccain believe very strongly we have to begin by tightening the operations of the department to better reduce

excess overhead, eliminate waste and improve business practices across the department. the fy 12 budget as you know proposed more than 150 billion in the efficiencies, and we continue to implement those changes but we also identified another $60 billion of additional savings over five years through the measures like streamlining support functions, consolidating the i.t. enterprise services, refusing military construction project, consolidating inventory and reducing service support contractors. as we reduce the force structure we also have a responsibility to provide the most cost-efficient support for the force. for that reason the president will request the congress to authorize the base realignment and closure process for 2013 and 2015. as somebody who went through the process in my own district i

recognize how controversy will this process is for members and four constituencies. and yet it is the only effective way to achieve the needed infrastructure savings. to provide better financial information we are increasing our emphasis on the audit readiness and accelerating the by time lines. in october 2011i directed the department to accelerate efforts to achieve fully audited financial statements. we were mandated to do it by 2017. what i have ordered is that we move that up to 2014. but efficiencies alone are not enough to achieve the required savings. budget reductions of this magnitude require that they make adjustments to the force structure and procurement adjustments. the choices that we may have to fit the elements of the strategy that we developed for the future military force. first we knew coming out of the

war as i said for the military would be smaller. but our approach to accommodating these reductions has been to take this as an opportunity to fashion the agile and flexible military that we need for the future. that highly network and cable joint force consists of a battle tested army that remains the force for the decisive action capable of defeating any anniversary of the land, and at the same time being innovative about how it deploys its forces. the navy that maintains the presence and is able to penetrate and enemy defenses. the marine corps that remains the expeditionary force with the reinvigorated amphibious capabilities the air and space and provides rapid mobility, global strike and persistent on ksr. in the national guard and

reserve to continue to be ready and prepare for operations when needed to ensure the natural force we made a conscious choice not to maintain more structure than we could afford to properly train and equip. if we do it the other way we guarantee a hollow force we wanted a force structure we could have effectively trained and maintained we are implementing the reductions and the new strategic guidance for the total savings of $50 billion over the next five years the adjustments include as i was pointed out a resizing of the active army of the 562,000 to 490,000 soldiers by 2017. this will transition down in a responsible way. we will gradually resize the active marine corps from about 202,000 to 182,000. we will reduce and streamline the air force airlift fleet and

retired the c-130 but at the same time maintain a fleet of the 175 strategic airlift and 318 c-130 is, the fleet that would be more than capable of meeting the airlift requirement for the new strategy. the navy will protect the highest priority and most flexible shifts but we also will retire the cruisers and the reason we are doing that is the cruises have not been updated with the ballistic missile capability and would require significant repair hence the reason the media chose to do that. second, the strategic guidance made clear that we must protect our capabilities needed to project power in the asia-pacific and in the middle east. to this end the budget maintains the current fleet, it maintains the aircraft carrier fleet and a

long-term love for of ships it maintains the amphibious and maintains the army and marine corps structure and the pacific after the draw down from iraq and as we draw down in afghanistan while continuing to maintain a strong presence in the middle east. our goal is to expand the rotational presence in both areas. the budget also makes selected new investments to ensure that we develop new capabilities to project power in the key territories and domains. we agree to put $300 million to fund the next generation air force bomber and we are putting $138 billion to develop the new air force tanker 18.2 billion for the procurement of the ten new ships and the class destroyers and the four combat ships and one high-speed vessel

and one class aircraft carrier to increase the cruise missile capacity of the future virginia class submarines. the strategy makes clear even as asia-pacific and the middle east represents the areas of the growing strategic priority the united states will continue to work to strengthen its key alliances to develop partnerships and ways such as the rotational deployment to sustain our presence elsewhere in the world. to that end we make the key investments and nato and other partnership programs for putting the to wondered million in fy 13 and nearly 900 million over the next five years on the nato alliance ground surveillance system, one that was just approved by the nato ministerial in this last meeting pitted 9.7 billion in fy 13 and about 47 billion to develop and deploy missile defense capabilities

that protect the u.s. homeland and strengthen regional missile defense etd kuhl as well and in the changes to boost efforts to partner with other militaries. we are allocating the u.s. brigade to the nato response force and rotate the base units to europe on a regular basis for training and exercises and increasing the opportunity as well for the special operations forces to advise and assist our partners in other regions. fourth, the u.s. must have the capability to fight more than one conflict at a time that we are in the 21st century and have to use 21st century capabilities that's the reason the budget invests in a space, cyberspace and long-range precision strike and the continued growth of special operations forces to ensure we can still come front

and a defeat multiple lab for serious and force structure reductions that outlined earlier it also sustains the nuclear triad of the bombers, missiles and submarines to continue to ensure we have a safe and reliable effective nuclear deterrent. even with some adjustments the budget sustains a military that i believe is the strongest in the world. an army of more than 1 million active and reserve soldiers with 18 divisions, approximately 65 brigade combat teams and 21 combat aviation brigades. the naval force of 285 ships the csis force that we have today that we ran the most powerful and flexible force on earth. a marine corps with the infantry battalions, ten artillery battalions and 20 tactical air squadron and an air force that

will continue to ensure that their dominance with 54 combat fighter squadrons and the current bomber fleet. last, we can't just as i said cut. we have to invest today we have to leap ahead of our adversaries by investments in the latest technologies. that's why this budget provides 11.9 billion for science and technology is. it includes 2.1 billion from atv to basic research it provides 10.4 billion to sustain the continued growth in the special operations forces and it provides 3.8 billion for unmanned air systems and invests 3.4 billion insider activities. at the same time the guidance recognizes the need to prioritize and distinguished urgent modernization needs from those that can be delayed to be particularly in light of

schedule and cost problems there for the budget has identified 75 billion in savings over five years resulting from the canceled or restructure programs some examples 15.1 million in savings from restructuring the joint strike fighter by dillinger aircraft purchases so we can allow more time for the development and testing. 1.3 billion in savings from delaying the default of the army ground combat vehicle deutsch a contract in difficulties. 4.3 billion in savings from delaying the next generation of the ballistic missile submarines by two years for the affordability and management reasons. in addition we terminate selective programs, the block 30 version of the global talks which it cost the point is simply no longer cost-effective. the weather satellite program because we can depend on the existing settlements resulting in the savings of 2.3 billion.

we have to maintain the ability to mobilize and regrow the force if we have to. that means we have to maintain a capable and ready national guard and reserve. one of the things we are doing is that the army is going to retain the man agreed officers and in co so they can be there with the experience and structure we need if we have to move quickly to regrow the force. the reserve component has been demonstrated its readiness and importance over the past ten years of war and boston sure it remains readable, trained and equipped to serve in an operational capacity when necessary and preserving the body to quickly adopt and mobilized is maintaining a strong and flexible industrial base.

i am committed to make sure that our budget recognizes industry is our partner in the defense acquisition enterprise and we have to maintain a pace if we are able to mobilize and be prepared in the future. and finally, with regard to the most important element of the strategy and decision making process our people. this budget recognizes that monday for more than any other system of technology are the great strength of the united states military. one of the guiding principles and our decision making process is that we must try to keep safe with our troops and their families. for that reason we determined to protect family assistance programs to sustain these important investments in the budget that serves our troops and their families and continue to make efforts to ensure that these programs are responsive to their needs. yet in order to build the force

needed to defend the country under existing budget constraints to growth and cost of military benefits must be put on a sustainable course this is an area of a budget that has grown by nearly 90% since 2001. about 30% above inflation while it's only grown by 3% so this contains a road map to try to invest those costs for the military pay and health care retirement in ways we believe our fair, transparent and consistent with our fundamental commitment to our people. on military pay there are no pay cuts. we've created sufficient room to allow pay raises in 2013 and 2014. however, we will provide a more limited pay raises beginning in 2015 giving troops and their families fair notice and time before changes take effect.

the budget devotes about 48 almost $50 million to help care -- health care costs and an amount that is more than doubled over the last decade in order to continue to control the growth of these costs for recommending increases in health care fees and co-payments and deductibles that are to be phased in from the four to five years. none of these proposals will apply to active-duty service members and there will be no increases in health care premiums for families of active-duty service members under this proposal. we also feel it's important to address the military retirement cost croswell and we urges the establishment with authority to conduct a comprehensive review of military retirement but we've made clear the department the retirement benefits for those who currently serve should be protected by grandfather in their benefits.

members of the committee putting this together, this kind of balanced package has been difficult and at the same time it has been an opportunity to try to think about what force do we need now and what force do we need in the future. i believe we, the service chiefs, the combatant commanders have developed a complete package to try to address threats for the future and try to ensure that we achieve our strategic aims. as a result, the fy 13 request is balanced, it keeps america safe and we think it sustains u.s. leadership abroad. please take a look at each of the individual parts of this plan. i encourage you to review the entire budget. this has to be a partnership that has to be also to bear in mind the strategic trade-offs that are inherent in any particular budget decision. this is a zero sum game.

there is no free money here. the need to balance competing strategic objectives is taking place in a resource constrained environment. we need to your support and partnership to implement this vision of the future military. i know these are tough issues. this is the beginning. it's not the end of this process. but make no mistake, the savings that we are proposing are significant and broadbased and will impact all 50 states but this is what congress mandates on a bipartisan basis that we reduce the budget by almost half a trillion dollars we need the partnership to do this in a manner that preserves the strongest military in the world this will be a test for all of us whether reducing the deficit is about talk or action. let me be clear, let me be

clear, you can't take half a trillion dollars out of the defense budget and not incur additional risks. we believe they are acceptable, but there are risks. we are going to have a smaller force, we will depend on the speed of mobilization, depend on ingenuity in terms of new technology for the future. and very frankly when you go through this there is no margin for error. this is why congress must do everything possible to make sure that we avoid sequestration and we are more than prepared to work with the congress to try to develop an approach that will the trigger the sequestration. this will subject the department to another 500 billion in additional cuts the would be required to take action in the

approach we are convinced that would result in hauling of the force for and inflict severe damage to the defense. the leadership of the department of military and civilian is unified behind the strategy that we presented the and behind this budget, behind the need to avoid sequestration. i look forward to working closely with you in the months ahead. this is going to be a tough challenge. but it's what the american people expect of its elected leaders to be fiscally responsible in developing a force for the future, the force that can defend the country, the force that support our men and women in uniform and the force that is and always will be the strongest military in the world. thank you. >> thank you, secretary. general dempsey. >> thank you. senator mccain, a distinguished members of the committee, think he was always for this opportunity to discuss the president's defense budget

proposal for fiscal year 2013. this budget represents a responsible investment in the nation's security. at its core is an investment in people, the sons and daughters of america that serve the nation and the military. allow me to open with a few words about them and what they have accomplished. the last ten years of the war have been among the most challenging and the nation's military history. through all the joint force has persevered and prevailed. our families have stood with us deployment after deployment and so have you. together we have fulfilled our vow to protect and defend america, her citizens and her interest. as i sit with you today our service men and women remain globally engaged and they are deterring aggression, developing partners, delivering aid and defeating our enemies. the stand ready, ebullient swift in every domain every day. i had the privilege to be with a few of them while traveling to

afghanistan and egypt the past week it was always i witnessed courage and skill in the soldiers just off patrol in the deep snow of the hindu kush and the men and women of the training mission damaging the afghan national security force and the brief and vigilant marine security detachment in the embassy in cairo and the superb airmen who flew us to the right place at the right time to read the exemplify a professional military with a reliable record of performance. in just the past year we further crippled al qaeda. we helped protect the libyan people from the slaughter. while affirming nato's important role beyond the borders of europe, we brought to close more than 20 years of military operations in and over iraq, and we are steadily transitioning the responsibility for security on to the afghan soldiers. we also helped japan recover from the perfect storm of tragedy and destruction, and of

course these are just the most visible accomplishments. behind the scenes and beneath the surface we defended against cyber threats, sustained the nuclear deterrent posture and worked with allies and partners to build capacity and prevent conflict across the globe. we continue to provide the nation with a wide range of options for dealing with the security challenges that confront us. increasingly competitive dangerous and uncertain environment demand that would be alert, responsive, adopted and dominant. this budget helps us do that. it's informed by the strategy that makes choices. it maintains our military decisive edge and global leadership. moreover it insures we keep faith with the true source of the military strength and that is our people. allow me to add a few additional comments to those of the secretary, and first of budget should be considered holistically. precaution against doing its part in some isolations with

representing a comprehensive and carefully divided set of decisions. it achieves balance among the structure, modernization, pay and benefits to be the changes that are not informed by this context risk of ending the balance and compromising the forced. second is the budget represents the we point cannot be in the plate in the development of the joint force we will need for 2020 and beyond. it puts on a path to respond versatility at an affordable cost. specialist kebir blease once on margins become more central even while we retain conventional overmatch it built a global and network joint force that is ably led a and always ready and the benefits made some of it really it does keep faith with them. there are a freezes or reductions in pay and no lessening of the quality of health care received by the active-duty service members and medically wounded veterans. that said we cannot ignore the increasing costs of pay and

benefits to manage cost we need pragmatic reform. this is done in a way to preserve and recruit and retain americans talent. finally all strategies and the budgets to resource them carry risk. this is no different today in my judgment it lies not in what we can do what and how much we can do and how often we can do it. this budget helps by investing in our people and in the joint capabilities they most need. to close, thank you for keeping our military strong, thank you for taking care of our military family, for supporting those who serve and who have served and who will serve. i know you share my pride. i look forward to your questions. >> thank you congenital. >> , let's have a seven men and round. i doubt we will get to a second round but if there is any time after the first round because i

expect a good turnout we will try a short second round. general, let me start with you. do you each of the joint chiefs of staff first of all fully support the new strategic guidance? >> yes, senator, we do. do you and each of the joint chiefs of staff fully support the president's fiscal year 2013 budget request. yes, senator, we do. >> can you tell us why? >> we addressed in the order you present it with. sprigg and the reality of the new fiscal environment, we took a look at our strategy and we made what we thought were important adjustments not just based on the fiscal reality but based on the lessons of the war and we thought it would take us in the out years. as you know, i'm an advocate of looking beyond this particular budget submission out to 2020

wally the service chiefs and the combatant commanders and then having to decide on the strategy we built the budget to support it and so for that reason we support it. peery >> he made reference to the risks that are increased when the budget reductions. would you expand on that as you did in your prepared testimony as to whether those risks are acceptable and why. >> i've never in my 38 years' experience any strategy that was completely on constrained. so i think it's important to note there is risk in every strategy and every budget to support it. there's too kind of risk we deal with, one is to the mission, can we accomplish the tasks given to us by the national command authority for the freedom of access to defeat our enemies to the tours aggression. in the other is the risk to force which gets at a phrase

that would be familiar in terms of out tempo how much can we ask of the volunteer force in terms of its deployment and redeployment and in both cases we assess the risk to the mission and risk of force and found that there are portions of capabilities that are more stressed. again and the past month we will continue to do is look for ways to mitigate those risks, of but we are confident because we worked this collaborative lead we can mitigate risks by adapting well since the last ten years of the war, new reemerging capabilities i mentioned to notable ones in the past and the special operating forces and cyber and the integration of all of those and the interdependence of the joint force is what allows us to mitigate the risk to our plans and to do so at a sustainable rate but there are risks because there's always uncertainty in the future.

>> the overseas contingencies' operations funding levels is based on the assumption that there will be 68,000 u.s. troops in afghanistan for all of fiscal year 2013 and again you reiterate that mr. secretary in your opening statement. >> that assumes there will be no further drawdown of u.s. forces from afghanistan during the 12 months after the 43,000 u.s. surge forces are withdrawn by the summer of this year, that the budget assumes. but last june but was a delete the president announced the plan for the forces and also said that after the reduction of those search forces, quote, our troops will continue to come

home at a steady pace as afghan security forces moved into the lead, and of quote. first, general, are we on track to complete the withdrawal of the 33,000 surge force by this summer? >> yes, sir, we could. general allan has already reduced by 10,000. i don't yet have the plan for the reduction of the additional 23 but in a visit with him last week he assured me he would have that plan to us by about the first of april. >> do you continue to support the president's decision to withdraw the force by the end of the summer? >> i do and i will continue to do so unless general allen comes back and tells me we are incurring too much risk my own observation at this point is yes. >> how do you square the funding assumption that the troop level of 68,000 will remain in afghanistan through fy 13 the

president's statement the u.s. troops will continue to draw down after this summer at a steady pace as afghan security forces assumed the lead for security? >> as the president's stated we will continue that process, but at this point no decisions have been made as to how that will take place because we are focusing obviously on the job of the surge and the number that we have there is frankly the target number if support funding we would need for the future. >> will the decision be made as to when the reductions will be made from the 68,000 level and that ligon is going to be reached by the end of the summer when will that decision be made? >> further reductions after the 68,000 coal is achieved. >> i think the target right now is to focus on the reduction of

the surge. as the general pointed out we haven't received the plan from general allen as to how we will complete the reduction in 23,000. once we've done that and we have learned the lessons from that i think then we would apply it to decide in the next steps with regard to the further reduction. >> the will be done by the end of the summer. so when with the next decision be made on the reductions beyond the surge reduction? >> we will begin that in the latter part of this year. >> begin or make a decision by the end of next year? >> we will begin, and if we're fortunate we will be able to make that decision, but the first thing is to discuss the lessons that we've learned and what we should apply and what level of force are we going to need for 2013. >> do you assume there will be further reductions beyond the 68,000 during fiscal year 2013? >> will again, no decisions have been made. >> we assume they will be.

>> i assume in line with the president said we will continue to make the transitions. >> would there be savings from any additional reductions below the 68,000? >> will there be savings? of course whatever we decide to do we will achieve some savings. >> senator mccain? >> thank the witnesses. again, general, were you asked by the administration to perform a risk assessment to the national security interest as a result of the cuts? >> it is codified in the national defense authorization act i perform at the german's risk assessment annually. >> is the forthcoming? >> i have completed it. and as you know, they are also required to submit with it a risk mitigation strategy. >> so we haven't received the risk assessment? >> you have not, sir. >> i want to return for just a second, secretary panetta.

you talk about the cataclysmic effect of sequestration. we are in total agreement. i hope you're meeting with the president you will sit down and see if there are ways the effects of this and have you made any plans yet to comply with the effects of the sequestration in 2013? >> no, we haven't. is to begin your view, secretary panetta is iraq stable and a self-reliant nation? >> iraq is a nation that has the capability to govern and secure itself. does it continue to face a risk in that process? does it continue to face challenges in that process? it certainly does. >> do we still of u.s. military forces operating in iraq? >> we have a small number that

are assigned there approximately i believe the number we are looking at is 600 military and civilians that are assigned to the security operations to reduce the mick general dempsey, i know you just returned from egypt. all americans are concerned about the events they are concerned they've had to move to the u.s. embassy in order to preserve their safety and security. we realize the absolute criticality of the relationship with egypt and the role that egypt plays in the middle east. what advice, what recommendations do you have held the united states, our government should be handling this very, very tough situation.

>> a planned the trip to egypt before the non-governmental organization and it is a crisis that occurred, so when i met with the field marshal, the general, the key leaders with whom we interactive have attracted as you know for decades i explained i was coming there to talk to them about our relationship about syria, about lebanon, about the cyanide but that i couldn't do that because we had this issue that was an impediment to them and i spent about a day and half in conversation with them encouraging them in the strongest terms in the relationship to continue but i would like to result in those conversations. >> i'm convinced the potentially they were underestimating the impact of this on the relationship when i left there was no doubt that they understood the seriousness of it but by that of it like to ask i know of the amendment that is being proposed to break our

military relationship and cut off and the fund would be a mistake to the estimate i want to assure you we are discussing that in ways to certainly avoid that action at this time but i felt that you explain to the rulers who are military and leftovers from the mubarak regime that the situation is really not acceptable to the american people and our relationship with egypt is vital to the fact is low welfare of our citizens are even more vital. >> i completely agree and i did make that clear. >> general, do you think it is a good idea to trade the five high-ranking taliban as a, quote, confidence-building measure to move the negotiations with the taliban forward?

>> why have some issues with the reconciliation bill generally speaking i am in support of the reconciliation but i am concerned about our ability to maintain vigilance and control of those individuals, so i am supportive of the reconciliation >> i don't know of any living person who isn't. >> i joined that group. >> does that mean that at this particular moment in time you would support the trade to the understanding that the securities would be advisable at this time? >> the secretary has some certain requirements by law and i am supportive of the secretary of defense' approach supportive to ensure we have the certifications.

>> what respect to whether you think it is a good idea or not this began to do you agree it is a good idea, secretary leon panetta? >> stupak no decisions have been made on this line. i can tell you this, based on all that is passed by the congress i have to certify that anybody who leaves guantanamo cannot wending going back to the enemy, and i've got to be convinced those kind of are in place before i certify anything like that happens. >> finish, i'm sorry. >> i have made it very clear that unless i am from convinced this kind of situation those steps are taken to ensure that these individuals do not lend up going to the battlefield and by

not going to certify that kind of transfer. >> even though approximately a quarter of those who have been released in the past and have gone back into the fight what is the progress of our negotiations with president karzai on a longer-term security agreement that we failed to reach an iraq, what are the prospects of that and what are you expecting and can you give a timeframe? >> we are continuing to work with president karzai yet cowal buckson afghanistan to try to develop and agree on the strategic agreement. as you know there are two areas that we still have difficulties with one of which involves the transfer of the detention facilities, the other involves the ninth time rates, and we continue to try to see if we can

work out some kind of compromise on those issues. as far as the basic agreement i think most of that element is frankly in place, so i'm confident that hopefully within the next few weeks we will be able to reach some kind of an agreement. >> thank the witnesses. when the enemy thinks that you are leaving it is very unlikely in my study of history that they are ready to make an agreement coming and they certainly have that impression throughout that part of the world. thank you mr. chairman. >> senator lieberman. >> thank you mr. psychiatry, mr. dempsey, thank you for your service in your testimony. as i look at the budget that has been submitted and i heard your testimony today it seems to me that in this budget the u.s. military and our national

security are being asked to pay the price for the fiscal irresponsibility of the government over the last decade. the bottom line is one that you are mandated to submit by the budget control act that congress adopted and the president signed last summer but i must say as one member of the committee, one member of the senate as i look at what he would have to do is to meet the bottom line of the requirements for the budget control act and the risk to the national security. without proportionate changes in the threats that we face around the world this budget for the coming to the coming fiscal world would represent the reduction in spending believe

what was planned in the five-year defense plan for the coming year, 9% reduction for a five years. and as we've discussed it would require the reduction of our army and marines when hundred 25,000 personnel. above call for the termination of or delay of several in my opinion critical defense equipment systems and it's hard for me to conclude there's any reason that you would make such a recommendation other than the fact you are required by law to do it. in other words, what drives the presentation as the budgetary pressure as i said the accumulated weight of the fiscal responsibility of the government over the last decade and the specific requirement of the budget control act, not the threat environment in the world

as mr. secretary chu said and i agree this morning united states still faces a complex array whistled for -- stila at war and the materials and the behavior of iran and mercury ethridge in the global study. there is continuing turmoil and unrest in the middle east but rising power is a major testing in the international relationships and growing concerns about the cyber intrusions' and a tax end of quote from you mr. secretary this morning. i agree with that and think in my context my conclusion i stayed again is that there is always a risk but the risk involved in the budget is unacceptable, and therefore i believe that we have to have the political courage both chasing the budget for fiscal year 2013 and the threat of sequestration

to work together across party lines and with the president and the administration to reduce the impact of these proposed cuts and we've got to do it responsibly. we either have to find savings elsewhere, or we have to have the political guts to raise revenue to pay for an adequate defense, to in my opinion fulfill the constitutional responsibility to provide for the common defense. you have complied with the budget control act in making the recommendation to us. but in my opinion if we accepted we are not fulfilling our responsibility under the constitution to provide for the common defense. so i hope we can work together to essentially alter what we require you to do in the act, and to do it in a fiscally responsible way.

in response to senator mccain's question, you said you would be preparing the risk assessment, the german's risk assessment. the strategic guidance the department did issued in january really is the equivalence of a follow-on to the quadrennial defense review in the quadrennial defense review of course we would require the chairman's risk assessment i hope mr. chairman, senator mccain, that we don't ask on this request and that the appropriations committees don't act on a budget request for the department of defense before we get the risk assessment, because i think it is that important. but for now, since, as a country, you said quite directly with the directives that we've come to expect of you that there is risk. you can't cut this much money out without risk so i want to ask you and general dempsey in advance of the formal report

what are the two or three top risks you are concerned anonymous budget places on our military and on a national security? >> center, first of all the volume of lighting by law, law passed by congress that requires the reductions the we've proposed the and just to your comment we love to step up to the plate and do our duty here. i think we know how you would address this issue you also have to take into consideration the national security threat comes from the huge deficits and the huge debt that we are running. at some point the congress and the president have to address that larger issue.

what i am doing is basically doing my part as dictated by the contras. with regards to the threat as i said you cannot take half a trillion dollars of the defense budget and not incur the risk. the main concerns i have for that we are going to have a smaller force and when you have a smaller force, the ability to move the forests where you have to is not going to be as easy as a would-be with a larger force. the ability to move quickly to be agile and be able to deploy them i think we can do it under the plan we have presented, but it is an additional risk. the risk on mobilizing. if we face a serious crisis and we have the need to mobilize our ability to mobilize quickly to pull the course together as we had to do frankly after 9/11, our ability to do that and

respond quickly and to be able to deploy the force involves a risk and we have found a way to do that by keeping the strong guard and reserve but nevertheless that is an additional risk. we depend an awful lot on technology. i think technology is very important that our ability to develop that technology to make sure that it works it we have that leap ahead keep the movie is something that involves risk and costly as i said when you shave the budget it leaves very little margin of error in the devotee is probably the biggest risk of all. as to the gift of time i would like to respond ha because i will page you my risk assessment and i do not assess unacceptable risk in my assessment and i do not believe this budget concurs unacceptable risk. i will tell you i am prepared to say that sequestration would

pose an unacceptable risk and here's why. it's pretty clear that there's physics involved in this budget we have decided to off ramp a certain number of the servicemen and women and we've about maximizing our ability to do that with the proper dignity and respect to the force set income of 15,000 in year as about as many as you can ask to leave and still have enough influence over how they do that. that's kind of maxed out right now. it's pretty clear we are going to have challenges with infrastructure changes whether this committee and others agree with our recommendation. so if we fix those variables in the sequestration, i can't get rid of the -- i can't ask the soldiers and sailors to the quicker than they are going to and i cannot of infrastructure. sequestration leaves me free places to go to find the additional money. operations, maintenance and trading. that is the definition of all

hollow force. >> i think you both for your answers. they are helpful to me. with all respect i consider this budget to represent unacceptable risk to the national security, and i hope members of the committee across party lines will work together to reduce the risk in the fiscally responsible way. thanks, mr. chairman. >> thinks mr. chairman. senator inhofe? >> let me just get on the record, secretary, that i would be one of them opposing another round for two reasons. one is i think that we have reduced the force and capability to an unacceptable level and to bring the infrastructure down to meet what i would consider to be is a member of the committee an unacceptable level is something i would not want to do. second is the problem we're facing now is an immediate problem. everything is on fire. we are trying to throw out the biggest fires.

and i am going from memory now but as i recall all of these backrubs and i have been here since the first one you lose money in the first five years, it isn't going to gain anything in terms of that so there is going to be opposition appeared. secretary panetta, i saw you on the 60 minutes, and i didn't envy you when you have to answer the question to stop and think about how many combat operations there are and you started thinking on your fingers so it is something we've been thinking about and something that is very serious. but when you talk about the budget i just want to get in here so that now that we have the president's new budget, if you -- if we keep hearing about, you know, inheriting deficits and all this, during the eight years of bush, the omb figures it was right at $2 trillion. this president in his budget that he has proposed, $5.3 trillion, just four years, so obviously you are talking about just a huge amount of

money. i saw it in this morning's "washington post" talking about everything is growing in government accept, there is, military, and i agree with the statements of the previous speakers this is supposed to be the number-one concern defending the country. so anyway, i just would like to not press the thing that's already been talked about on risk but i would ask the question when you meet with the chairman and come up with the risk assessment what would you say that would be? >> i anticipate by the end of the month. >> okay pooler one of the command doesn't get a lot of attention as africom and we remember that was decided in the commands everyone in this room knows we have done the right thing. however i kind of look at it as the forgotten command it didn't seem to get the attention. one of the things about africom is it gets its resources from the u.s. special forces that are

in europe and right now accepting the fact that as the pressure gets on in the middle east and a lot of the potential terrorism is going down through the heart of africa and spreading out there. so one of the great things that is happening with africom is the special forces are training the africans, and the number breaks down to about one special force by or gal that will be responsible for the 100 forces. and i have seen this down there. i know what is happening. so the question i would ask is do you think that there are impacts by moving out of the special forces in so far as africa is concerned? >> first, i agree with you on the benefits of having the command focused on those issues in that continent on that continent, and actually, we have sourced our requirements in to

africa and elsewhere through the global force management process. and so it tends to be that europeans have a particular habitual relationship, but there could be special operating forces and for that matter the general purpose employed in africa we move the force are now where it is needed, so i don't think the issue that you have described with you, would have any effect. >> i'm glad to hear that. i appreciate that. this is an issue that no one has talked about yet coming and i don't know why i am getting so close to it, but one of the -- a good friend of mine was killed over there and i was supposed to be meeting with him in afghanistan a month later, and of course he was killed. his wife has worked for me and we have become very sensitive to the redacted investigation reports and the families but i talked to the general odierno about this and we have made progress on this, but i am hoping that you will help us

continue with that because we have some of them in the case of all the way from may of 2010 until just about a week ago and i would like to have some special attention given to that issue. the families of the specialists and the second lieutenant were killed in july of 2011, eli think they should have the reports. so we are making progress, and i'm hoping that that is something that with all these problems we are dealing with he would be aware of and want to be of some help. >> could i respond briefly, senator? im aware of that and as you would recall i was up the funeral with you. i just want to make two points. one is the first conflict in which we have done a collateral investigation on everything. the first time in the ministry of warfare and we learned the hard way it is resource intensive and it's important to get it right. the timeline on which these

investigations are provided the families have been gradually improving and as to know for the active guard and reserve so it's not the the a faster than the guard and reserve but it's a challenging task and one that which we are addressing to this gimmick understand that and we went back and checked in the components and my question is actually meant to be a compliment because we are making great progress on that. >> then i withdraw my comment. [laughter] >> in looking at the reset, we are going to be looking at a problem after having gone through this for 12 years and it is going to be my concern is it comes from the right sources. it's not going to come from the base budget. is it your intention to have it come when this time is before us? >> duty will have a deteriorating effect on the

budget on the reset, the cost of the recent? >> that is exactly why it tends to be as high as it is because they are not just looking at the cost of the operating forces, it is the recapitalization. is that a fair statement? >> okay, because my time is expired, i want to -- i had the occasion to go down to fort worth and see the progress that is happening right now with the f35 and there's been a lot of delays, and i would hope we have a commitment from the two of you to progress on that program because that platform that we will be pursuing. >> senator, we need a fifth generation slider. it represents a fifth generation fighter. we are committed to it and we just want to make sure that it's done right to estimate thank you. >> senator reid? ..

will invariably catch the fbi, homeland security, tsa contracting and other fireworks -- functions. >> i think, senator -- national

security is dependent on all of the things you just cited. frankly, it's dependent on more. we're talking about sequester on defense, but sequester also takes place on the domestic side of the budget, and frankly, our national security is dependent not just on the national defense side of that ledger, it's dependent on the quality of life we provide for our citizens. so all of that could be impacted through sequester. >> one other aspect of this whole debate, as has been pointed out, has been -- particularly with respect to sort of -- decided are not affordable at this juncture. one of your calculations is not just the number of platforms about the capability of platforms.

as you made reference to both aviation platforms and ships that you've made and your colleagues have made calculations about having increased capabilities with those remaining ships versus what you would have to do with the -- and airplanes. is that accurate? >> it is accurate. we mapped the budget decisions to the strategy. fundmentally, are we going to give the strategy we described, and as we talked for years we are moving toward platform that are more capable and also multirole. for example, the a-10 -- the uniform i wear, i'm a huge advocate of the a-10, the wart hog, because it provides close-air support but we think it's prudent to force ourselfs into a more multirole capability. so we mapped the decisions to the strategy.

>> thank you very much. one of the other aspects that has been brought up, and i think it goes to my initial question about the scope of national security -- is that pro-active engagement, i think one of the lessons of the last few years -- pro-active engagement is very helpful to us. had we been more engaged in some countries we might have mitigated the dangers we faced in the last decade. when you talk your meeting in egypt and multiple meetings in pakistan, a lot of that is, one might argue, just as critical to national security but is not gauged in terms of brigades or air -- airlift, et cetera, and it's not counterterrorism and training. can you comment how this budget will be -- encourage pro-active

engagement in every level? >> we have accepted as a core capacity of all the services, building partner capacity so when you have an opportunity to have odierno. he will tame about having general forces who have been completely consumed in iraq and afghanistan, and deploying them in a brigade. so africom has a brigade that can deplay in any number of ways, as headquarters, or teams, can re-organize itself to go and engage nations in a particular combatant command where it might be needed. so i think this budget does that and it's a way to mitigate risk, as you suggest. >> mr. secretary, you

suggested -- in fact i think you say one of the largest costs is personnel cost, including healthcare costs. you have a very tight budget. and the idea of the defense growing is not within anyone's purview. at some point, if you don't take effective steps with respect to personnel costs, it becomes so big in my view, that it eats into what is the great risk general dempsey sees, and it comes from training and you have a force that is not there but is not april -- is not capable. do you have an idea before these eat um costs?

>> this is an area of the budget that has grown by 90% and consumes now close to half of the defense budget. right, bob? about a third. about a third of the defense budget is in the compensation area. and -- but the problem is, at that rate of growth that's gone on, it's moving more and more into these other key areas of the defense budget, and crowding them out. and so if we -- if compensation is not touched, with we don't control the cost of growth in the compensation areas, it means we're going to have to take it out of force structure, out of training, take it out of other systems, and it's going to mean that ultimately we won't have a balanced approach to dealing with the defense savings that we need to deal with. so, even in talking with members and talking with the generals

and talking with the chiefs, they acknowledge that, as tough as this is -- and it is tough because it affects obviously troops and their families and retirees -- but if we don't begin the process of develop something kind of cost control in the out years and limiting the growth that is taking place, we're going to pay a very high price in the next few years. >> is that your conclusion, general? >> senator, it is. we talk about keeping faith, and often times that equated to how many dollars we're putting in a soldier, sailor, airman or marine marine's pocket but it's more than that. we have to have the best trained and the best equipped and we have to balance the budget to do that. >> thank you, general. >> senator wicker. >> thank you very much, mr. chairman, and i want to think both witnesses for their service. secretary panetta, i want to ask

you about the article from february 2nd, and let me just read the way it agains: defense secretary leon panetta has a lot of his mine, from cutting the defense budget to managing the drawdown of u.s. forces in afghanistan but his biggest worry is the growing possibility that israel will attack iran over the next few months. panetta believes there's a strong likelihood that israel will strike iran in april, may or june, before iran enters what israelis describe as a zone of immunity to commence building a nuclear bomb. mr. secretary, did mr. ignatius accurately characterize your view and would you like to comment on that? >> no. i usually don't comment on columnist's ideas about what i'm thinking. it's a dangerous game to get into. let me just express my thoughts

that iran is of great concern. we have common cause with israel. we have common cause we the international community with regards to the concerns about iran. we have made very clear that they are not develop a nuclear weapon. we have made very clear that they are not to close the straits or hormuz. we have made very clear they're not to export terrorism, and try to undermine other governments. those are areas that concern us, and it concerns the international community, and as a result of that, the international community has taken strong steps on sanctions on economic and diplomatic areas, to bring pressure on iran and to isolate them, and i guess my preference, my view, is that we ought to keep the international community together in applying that kind of pressure. >> do you believe there's a strong likelihood that israel

will strike iran in april, may or june? >> i think as the president has suggested, we do not think that israel has made that decision. >> okay. were you misquoted -- miss characterized -- did you have a conversation with mr. ignatius? >> as i said, the comments that are included in a column about what i'm thinking or what i'm possibly worried about is up to the columnist. >> did he interview you? >> we talked but we talked about a lot of things, frankly. >> were you trying to send some sort of signal to the international community, either to iran or israel? >> no. >> and so you do not have a position as to whether it is likely that israel will make such an attack? >> i do not. >> all right. well, thank you for clearing that up. and i will say that there were no quotation marks in that

column, but it did sound a whole lot like a quote. as i understand it, in the budget, in compliance with the budget control act, mr. secretary, there's half a trillion dollars worth of cuts. if we had the sequestration, that would be another half a trillion. now, what was your conversation with the administration and with onb within the dod about submitting a budget that doesn't comply with the statute? because see questions station is the law of the land right now as i understand it. and did you consider submitting a budget that outlined the catastrophic results if sequestration does go into

effect? what what is your strategy to as you say, detrigger -- to work with this congress to detrigger sequestration, which is the law of the land as you knowledge. >> well, it is. obviously, our approach was to deal with the budget control act that provided in terms of targeted savings in the defense budget, and we, frankly, developed the strategy we presented to you based on really trying to lay out a strategy about where our core structure needed to be between now and 2020 and do it in a responsible way to protect our military force and to be able to respond to the threats that are out there. sequestration has this, frankly, mindless formula that is already built into it, that basically cuts across the board. it's not as if we can take sequestration and make sense out of the damn thing.

the fact is it's going to happen the way it's supposed to happen, through this kind of mindless formula that there is. so our approach was not to pay any attention to it. if it's going take place in january 2013 -- i hope that's not the case -- it will take place under its mindless procedure. i don't think we ought to try to bring some kind of common sense to what is a crazy process. >> well, let me underscore what senator lieberman said, that this budget makes us worry about risks, and i understand what general dempsey said. he believes there are risk but they're not unacceptable, but the sequestration would prove unacceptable, and i hope there's a strategy to get that through. thank you, mr. secretary, for mentioning the industrial base. and we're at 8.3% unemployment

right now. undoubtedly the president is going to send a spending bill to the congress which he believes, and the administration believes, will create more jobs. it makes no sense to me, at a time when there's an effort to create more jobs with other spending -- to cut defense spending, which giveses us the two-fer of protecting the company and protecting the industrial base, which is a whole lot of americans out there working, to provide us with the infrastructure we need. it is a fact, is it not, that this budget will have an adverse effect on our industrial base? is that not right, mr. secretary? >> well, we have taken a lot of steps to try to protect against

that happening because, as i said, we absolutely have to protect our industrial base, and those industries that support the defense budget. we can't afford to lose any more, and so for that reason, we've designed an approach that will keep them in business with regards to the systems that we're trying to develop for the future. >> albeit with fewer industrial manufacturing jobs. >> well, there will be -- i understand that, and that does have some impact. >> thank you very much. >> thank you, senator wicker. i asked senator koch if he would allow more time. there's additional $3 trillion in deficit reduction before the trim which has been taken, which, if this budget were adopted as submitted, would

avoid sequestration totally. half of the additional $3 trillion is in revenue increases, including the -- as the president's budget says, task reform including the expiration of tax cuts for single taxpayers making over 200,000, married couples making over 250,000, by adoption of the buffet rule, and then the budget document says that the president is offering a detailed set of specific tax loop high schools -- loopholes would be sufficient to hit the $1.3 trillion target. which means if this budget were adopted and the revenue were included -- the revenue represents half of the deficit reduction -- you avoid sequestration.

>> my understanding there is a plan to provide for the kind of additional deficit reduction that the country needs, but obviously if it were adopted it would trigger desequestration. >> that's not been stated here this morning, the budget that was submitted to it says it clearly. >> that's the strategy. whether congress adopts it or not is a different issue, but sequestration can be avoided and hopefully will be and the president has submitted his way to avoid it in his budget. >> mr. chairman, i thank you for clarifying that, and i do look forward to the president's budget being brought to the senate floor for an up or down vote. >> thank you. and i think the republican alternative will also be brought to the senate floor if there is one. we look forward to seeing an alternative budget as well. so much for that. back to senator, injury thank you very much, mr. chairman.

well, secretary panetta and general dempsey, thank you so much for your leadership and all you do for our country. mr. secretary, i notice that the pga tour was just at pebble beach. had you chosen a different path you're on now, you could have been at home in carmel, playing in a pro-am with your friends. but knowing your dedication to continue serving our country puts you before us today. that says a lot about you and who you are. i've known you, as we know, since we served together in the house. in all seriousness, i really appreciate your dedication and your hard work, secretary.

i add my appreciation to the brave men and women of the armed forces who lead -- and their families for their service and sacrifice. secretary panetta, it is impossible to overstate the importance of our military engagement in asia pacific region. it's obvious there are many challenges in this area, given a new focus of this vital region. if you look at continuing developments in the pacific, all conventional adversaries are advancing, and it is critical we maintain our superiority in the region. given the many demands on the defense budget that you mentioned, and the unique

mission and environment we have in the region, my question to you is, how does dod fy2013 budget impact our military readiness in the pacific region? >> that's obviously a primary concern for us, because we do believe that it is important to maintain a strong presence in the pacific, and for that reason, we maintain the 11 carriers in the navy in order to ensure that we have sufficient forward presence. there's nothing like a carrier to be able to allow for quick deployment in that area, and that will give us a great capacity to be able to show our force structure in the pacific. in addition to that, we're going

to maintain obviously a military presence. we already have one in korea. but we're going to maintain an additional rotational presence with our marines throughout that area. we've just developed an agreement with australia to do a rotational presence there. working with the philippines on hopefully a similar arrangement there as well. and in addition to that, obviously, we have our air bases and the forward deployed air assets that will give us the capability to cover that area as well. so, we feel very good about the force structure we have in this budget, and our ability to maintain a real presence in the pacific. >> thank you. general dempsey, the u.s. has been attempting to engage china with military to military exercises and other cooperative opportunities, including humanitarian and disaster relief

operations, and you've done well. general, how do you foresee these efforts at engagement proceeding as a u.s. focus of resources in the pacific? >> i think the strategy is actually quite sound. by the way, it's important to note, we never left the pacific. so the idea of rebalancing ourselves globally is just that, it's rebalancing. it's not a light switch on or off or a pivot. that word got ahead of me a bit. so we're rebalancing our strategy and we're doing that based on the trends, demographic trends, military trends, economic trend inch so doing we have the opportunity to increase our engagement with the peoples republic of china because there are many things with which we have a common interest.

they have been working on counterpiracy for some time in the gulf of adan. we have had military to military engagement. it hasn't been as consistent as we would like it. we have a chance to reemphasize it in the coming months, and that will assist us in implementing our strategy. so this is an opportunity for us and we intend to take it. >> thank you. mr. secretary, i am a true believer in our special forces. having visited the seals conducting training operations, i've seen first hand the talent and dedication of our special forces personnel. special forces units are likely to do more in the future. i want to make sure that, as an end result, and numbers are reduced, that korea feels --

communication case and logistics as well -- would support and help the special forces complete their missions are not reduced to a point where -- which could limit the readiness of special forces units, and, general, can you share your thoughts also on this. >> i can, sir. and to your point. one of the lessons of the last ten years, or certainly among the lessons of the last ten years, is that the special operating forces have demonstrated their versatility and they're capabilities, not just in the counterterror realm but also in the building partner and capacity surety force assistance. one thing we have been talking about with the service chiefs is finding a new paradigm where we will partner differently with special operating forces, to

give us greater capability. the synergy. the sum is greater than the individual parts. and we're working on thatment the armis working on habitual relationships of the enablers, medical, communications. so there will be no degradation to the special operations community, and i also want to assure you, we can't put all of our eggs in that basket because, as i said in previous testimony, special operating forces are just that, they're special, and if go too far in that direction, then the congestional force is special, and the special operating forces no longer have that capability. so we have to find the right balance and we're working on it. >> there's no question that special forces have, through their agility and they're ability to deploy quickly, i think represent a very important force for the future. they've been very effective, as we know, in terms of terrorism,

but as the general pointed out, they've also been very effective at developing partnerships with other countries, working with them, doing exercises, providing at advise. we have great capability there. so the kind of force we are looking at is to obviously -- as the general point out, maintain a strong army that can confront a land enemy and be able to defeat that enemy in a land war. but at the same time develop the kind of readditional capability using special forces, using the marines and elements of the army as well to be able to have a presence elsewhere in the world. that would give us the best of all things. >> thank you very much. >> thank you, senator. >> by the way, senator, we are increasing our special operations. i think the numbers -- we're going to increase them by 3,000. we're putting 10 empty

4 billion -- 10.4 billion more. >> mr. chairman, since you brought up the budget, certainly looking forward to voting again on the president's budget, and it's been over 1,000 days, as you know, since the senate's put out a budget, and i and the american people would like that to be different and have that come up at some point. that being said, i have seven minutes, a lot of other questions. i'm going to submit some for the record. one of them will be discussing the globalblock 30 program, and i'm going to be asking about the cost compare sons between the u can 2 and the global, have they been reviewed particularly relating to sustainment and can u2 provide the recon since. and i live in an innovative state, massachusetts, and we have an innovative base in dealing with the cyber security threat. it's something -- and i agree with the chairman, before we

talk about any black closures, i would hope that we would continue to work on the cybersecurity emphasis on areas and bases like that because i think that's the next real area where we need to focus on, as referenced in your earlier testimony, and taking at it step further, the air force proposed restructuring the civilian work force to the tune of 16,000 civilian contracted employees. i ask you keep in mind these restructuring efforts at it affects small businesses, as senator wicker and others have referenced and you referenced in your comments. it effects bases around the done country. one of the things i had -- one of the observations i made as i served in afghanistan thing summer was -- obviously the drawdown -- i felt if we do it thoughtfully and methodically, can transfer authority and control over to the afghans but if we do it too quickly we'll be

in deep trouble and we'll lose the benefits we had. one of the things i referenced and acknowledged in speaking and meeting with the generals and with general allen, is the fact we have so many audits going on right now with -- i mean, without referencing any particular directorat, one general had 75 audits going on at once. said how can you expect to do the drawdown as general allen is doing and then continue to do your mission, keep our soldiers safe and secure, and then complete the audits? he says, we can't. something has to give. so, general dempsey, i ask you seriously look at that. if you're going to do the drawdown, we absolutely need to address these audit issues. many of them -- so much duplication right now, and it's just -- i think some agencies justifying their existence, so i'm hoping you can comment on that issue. >> well, point comment on them justifying their own existence

because they'll audit me if i do that and i don't want to go there. >> i hear you. >> i've been on the receiving end of it, and there is clearly a need to be auditable, and because the nation is investing in credible -- incredible resources but i has gotten ute of control, and my ja, the undersecretary for policy are both working to squeeze those audits to only -- and make sure they're not redundant. some or redundant. >> they're absolutely duplicates -- if you read them, which i have, they're the same exact there. there's got to be a central location or central effort to that because the troops couldn't do their jobs 24/7 on audits and then expect to perform the mission. which is obviously very serious. that being said, in iraq, with a lot of -- obviously us being out of there, is it accurate we now have over 100,000 civilian contractors there doing the job that ultimately our soldiers did

and in fact if that is so, is the cost two to three times more than what we paying our soldiers and if that is the case, where is that money coming from? >> thanks, sir. i don't have the exact numbers. at one time toward the end of the calendar year i was tracking those numbers on a daily basis. >> substantial. >> it is substantial, sir. >> paying two to three times more than we would pay the average soldier. >> you know, there is in some function wes are paying more security details are more expensive, but other places, logistics, transportation, we're not paying as much as you normally pay a soldier but we have that information. >> i'd like you to get in the record bought i'd like to know where that money is coming from and how it's being worked into the budget. general dempsey, understanding adverse -- how does the --

obviously being in the yard, i would think you would get more bang for the buck. is there a reel sincere effort to in fact push a lot of the training responsibilities, mobilization, et cetera to the guard reserves? >> each service is -- this effort, the new strategy on the budget, has caused each service to relook at how they balance cross-components, active guard and reserve. i'll give you an example why that's an important conversation. senator mccain in his opening comment cited that we were reducing 20% of the brigade combat in the army. that's true but if you look at the to cat of brigades which will be 68, then the eight is

really an 1% degradation or decline. so your point is an important one. we have to look what this total force and the joint force provide, not strictly what we're doing to any one of them, and we are doing that. >> i would ask you to pay particular attention to the air guard and look at moving missions into the guard portfolio because you get a better bang for the buck, i argue. the other beg elephant in the room, aside from sequestration is the fact we have approximately one million service members expected to join the vans ranks in the next five years, and unemployment amongst young veterans is very high, and it's high also in the guard and reserves. is there a five-year plan to meet the expected demand? and how are we working with the v.a. to address these important issues. >> senator, you raised a very important point, because as we go through these additional drawdowns we absolutely have to make sure that a support system

is out there as our men and women come back from service. we are working with the veterans department in a number of areas. number one, to try to provide a jobs pool so that these veterans will have the opportunity to get jobs in the private sector. secondly week working with the veterans administration to try item prove the -- try to improve the seamless purchase so when it comes to health care and benefits that people can move without long delays and a lot of bureaucracy from coverage new the defense budget to coverage under the v.a. budget. and we're provide counseling and support to make sheer these families are supported once they come out so they can readjust. they want to go into education, the benefits are provided. if they want to get a job. jobs are provided. if they want to go into small business, we provide the small business loans to assist them. so there's a pretty solid

package. we have to continue to work at and it make sure it's working and it's meeting the neat but we are very concerned that we have that support system for these troops when they get out. >> i'd be eager to offer my assistance on those issues. it's something we have been working on in massachusetts for a very, very long time and have some real knowledge about that issue. mr. chairman, i'm presuming we'll have an opportunity to add the questions for the record and there will be time allotted to do so? response? >> yes there will be questions that are asked for the record and we'll ask our witnesses wito promptly responsibility. thank you, senator brown. after center nelson we're going to take a five-minute break. >> thank you, gentlemen, for your service. currently progress is being made toward the knew stratcom headquarters in nebraska. a new command and control complex for strategic command.

the entire project has been authorized, but because of the nature of this project, the defense department will have to request phased-in or incremental funding as we move along over a multiyear construction project. much has been said about cybertoday, mr. secretary, and general dempsey. could you explain the basis for the need for a new headquarters dealing with almost every aspect of our military, defense and offense? mr. secretary? >> senator, we think it's extremely important because stratcom is extremely important to defending the homeland, and in order to defend the homeland you have to develop the capabilities that we're facing right now, and cyberobviously is one of those areas. our ability to develop the latest technology, the latest

abilities in order to not only defend ourselves but understand what that threat is about, is extremely important. we've got to be able to develop the kind of communication systems that are the state-of-the-art so they can deal with quick communications. as you know, that area, everytime we face a threat there's an immediate response that has to take place quickly and effectively, and frankly, we need good systems in order to make sure that happens. so it's important to our future we develop that kind of capability there. >> it's safe to say that what the internal components are wind the structure would be equally important as the structure itself. in other words, it's going to be a high-tech complex to be able to deal with the modern challenges we have. general dempsey? >> well, without talking about the structure itself, i will tell you that the service

combatant commanders and i have begun a series of strategic seminars to look at ways to better integrate, to learn lessons and ensure we can deliver our strategy with the force this budget will provide. we know we can. we are looking at how to mitigate change. one of the emerges ideas is any regional conflict in the future -- we're looking at this budget to 2017. so, in 2017, any regional conflict will impact in the continental united states in the homeland, without doubt. that's to say the homeland is no longer sanctuary in 2017, and commands like cybercom and stratcom are more important. >> i have concern about our presence in iraq. we have had questions raised about the number of contract

employees there, contractors, and i understand the state department is trying to decide what the mission is in iraq. we have the largest embassy in the world and it's growing, physically growing, but we don't have established a mission. i know that part of this will be the state department. but i assume the department of defense also has a vital role in establishing that mission. can you fill us in on what progress is being made to establish a mission? we seems like we have the cart before he horse. >> dod has a pretty good plan that we're implementing. we have eight sitees we're located in. we're looking with foreign military sales that are being provided to the iraqis. we're providing training, support. it's both dod and contract individuals working in those

sites. it's pretty limited but it's very help toll the iraqis in terms of their ability to develop a security for the future. in addition, we're open to continuing to discuss with them additional opportunities, particularly with regards to other operations going after al qaeda, et cetera, that we think are important to continue as well. so we feel pretty good about the mission we're performing right now. >> absolutely, sir. we built the office of security cooperation in iraq based on the capabilities that the iraqi government wanted us to support them, how they wanted to be supported. notably with the program of record for foreign military sales and then institution billing, and -- institution building, and we have resources mapped to the functions and i think we have the office sized about right for now. if they were to choose to expand our relationship in any way, we could do so.

>> well there seems to be room within that structure to expand, because of the size of the structure. i don't mean to minimize the necessity of having a presence in iraq, but seems like the structure is more than adequate to take care of whatever our needs, and when i emphasize more than adequate, it's consistent with the inspector general's criticisms or observations about the size of the structure and continuing to expand without a stated mission, and i hope we can get to where we feel like we can state what that mission ultimately is. i'd like turn to iran for just a minute. it seems like everytime we check any of the news today, iran is involved in it. questions about iran engaging in terrorist activityies in two

locations around the world in the last day or so. the plot to take out the saudi ambassador to the united states, and i wonder -- you said, secretary panetta, it's a red line for us and it's a red line obviously for the israelis if they have the able to deliver a nuclear weapon with a missile. what are your opinions about that -- if you might be able to enlighten us a bit more. >> well, as i said, we have a number of concerns here that we worry about with regards to iran, and those are concerns that we share not just with the israelis but with the entire international community. as the president himself has stated, we will not tolerate an iran that develops a nuclear weapon. and yet they continue obviously

to try to improve their nuclear enrichment capables. that's something that concerns us a great deal. they continue to threaten the possibility of closing the straits of hormuz, and have made very clear that's a red line for us. that the strait is very important to free commerce and shipping and the shipping lanes, and would have a huge economic impact if that were to happen. that, too, is acceptable -- is not acceptable and tolerance, we talked about iran and the terrorism and the fact they seek to undermine legitimate governments around the world. that, too concerns us. we think that the approach of the international community to apply sanctions and apply diplomatic pressure is having an impact. it has isolated iran.

it's made very clear to them that they have to change their behavior. and i think that we need to keep that pressure on. that's an important effort, i think the international community is unified in that effort, and i guess my hope would be that we could all stick together in ensuring that we continue to isolate iran and make very clear to them that they should choose to join the international community, the rules and laws and regulations of the international community and become part of that family. if they choose otherwise, then that would have serious implications. >> concern is more than just about their nuclear capacity, although that is a very important part. but is -- are the actions they're taking beyond being pesky in terms of what they are intending to do? >> it's far beyond being pesky.

it's deliberately supplying equipment and arms to others to engage in terrorist activity, and that, too, concerns us very much. >> thank you. thank you, mr. chairman. >> thank you senator nelson. we're going to take a five-minute break. strictly enforced. [inaudible conversations] >> come back to order, and senator portman has yielded to senator graham, and then we'll put senator portman back in his order when he returns, senator graham. >> if we could earmark ohio, i want to let rob know. i appreciate this very much. i have to run. secretary pa net -- pena a do you think is a viable option for the united states to contain a

nuclear-armed iran. >> yes indeed. >> the idea of containment. shouldn't we prevent them -- >> it's not just contain but doing everything we took prevent them from -- >> i guess my question more correctly asked is, should we -- if they gate nuclear weapon, do you think the idea of containment is a way to go? should we prevent them versus containing them? >> no. i think we have to prevent them. >> if they have a nuclear weapon, the damage is done other, nations follow suit, terrorist get the material. so, secretary of defense view is that the idea of containing a nuclear armed irans the way to go the idea is to prevent them to do it. hopefully through sanctions and diplomatic engagement. i hope we can. okay. china. general dempsey, there's a lot of media reports that the chinese routinely -- the people liberation army routinely engages in cyberattacks of our business and national security

infrastructure. do you believe that is a reality of the 21st century? >> i believe someone in china is hacking into our systems and stealing technology and intellectual policy, which at this time is a crime but i couldn't attribute it directly to the pla. >> let's say they were involved in hacking into the defense infrastructure infrastructure, would you consider that a hostile act by the chinese. >> i would consider it to be a crime. i think there are other measures that could be taken in cyber that would rise the level of a hostile act? what would that be. >> attack iing critical infrastructure. >> a hostile attack, allowing to us respond in okay. i'm having lunch with the vice president of china in about 20 minutes. what do you want me to tell him? >> happy valentine's day.

>> all right. >> senator graham, made very clear the cyberespionage from china has to stop and its mighty serious stuff so you can pass along, if you would, that commend as well. >> would you consider at it hostile act? >> i sure would. >> i sure would. >> so happen valentine's day. >> ought to be an interesting lunch. secretary panetta, 2014, the game plan is to transition to afghan security force control. they're in the lead. is that correct? >> that's correct. >> we'll have the training mission and providing intelligence gathering, providing capabilities. they're not capable of doing airlifts. >> that's correct. >> do you support the concept of a follow-on force past 2014 as part of a strategic partnership agreement that would have a military footprint, that would

allow americans to remain in afghanistan at the afghan's request? is that in our national security interests? >> i believe as the president stated, we have to have an enduring presence in afghanistan. we need to obviously discuss what those missions are. i think clearly ct operations, one of those missions, training and advising, is one of those nations, enablers providing enablers is one of the positions, and obviously providing air support is one as well. >> so you would agree with the concept that post 2014, if we had configuration of american forces with adequate air power to assist the afghan security forces, plus a special forces component, the taliban days are over in terms of military conquest. >> that taught -- ought to be the goal. >> and i think you could do this with 15 or 20,000 troops with several air bases spread

throughout the country and a war weary republic. we have air bases everywhere. and if we leave afghanistan and the issue is in doubt about the future of the taliban, well regret it. if we leave afghanistan in a way that creates a certainty about the taliban's future, i think we can hold our heads up high. do you think iran is watching what we're doing and afghanistan? >> i would think without question. >> okay. iraq. general dempsey. what is your biggest concern and your best hope about iraq? >> i'll start with the best hope and that is that they appear to be committed to resolving the contentious issues among them politically, not through violence, with the exception of a few of the violent extremist organizations which remain there. my biggest concern is that they will -- they could potentially come to a decision they no longer need our help. they might look elsewhere. that's why our office of

security cooperation there remains very vital part of our strategy. >> do you see the security situation in iraq getting worse or better? >> i see it as being in a sort of form of stasis right now. it is what its for the foreseeable future with of course the potential for -- based on political decisions they might make with increasing tension in the arab kurd region. >> when it comes to the military budget, don't see the department of defense as a job create are for america. that's one of the benefits but i don't think we should view the department of defense as a way to create jobs to deal with unemployment. we should have a defense capability. i feel it's appropriate to reduce defense spending and appropriate to consider another round of black. so just can't me in the process of having to make hard decisions, even in the defense area. when it comes come health care

premiums, is it sustainable? is the mandatory spending part of the budget sustainable without reform? >> no. >> so the question for the country is, if i don't get court-martials and get to be a retired colonel and receive my tri-care benefits when i'm 60, it's okay to ask a guy like me to pay more. they haven't been adjusted since then 1990s. is that correct. >> that's correct. >> and general demsey, you're willing to pay more? >> i am, sir. >> i guess the point is that we're so far in debt, no one group is off the table. and it's hard to ask those who have done the most to secure our freedom to give more. but i'm willing to do it. to the retired community. i'm willing to grandfather the current system but also willing to look outside the box because if we don't do something in terms terms of healthcare growth and entitlement retiree benefits you're going to compete the

retired force with operational needs and that's not where we want to go. so thank you both. i don't know if 487 is thing renumber but i'll work with you to get a number that is robust, and one last question. do you see a scenario in the next decade where 100,000 american troops could be involved over a sustained period of time, and if you do, how would reducing the army and the marines by 125,000 affect these operations? >> i don't know the answer to that, sir. i think we wouldn't want to shape a future where we completely ignored the possibility. the force we're building on the 1317 budget is capable, we assessed, of stability, long term stability for a prolonged conflict. the 150,000 come out of the guard and reserve.

>> thank you, senator graham. you have my proxy at lunch, by the way. >> senator webb. >> thank you, mr. chairman. mr. secretary general. first, let me just say that somebody who spent five years in the pentagon, one of them as a serving marine and the other as defense executive, i appreciate all the work that's gone into this presentation. we're going to have our disagreement but having set on the defense resources board for four. >> i know how much effort has gone into what you brought over here and there are already reports back in my office on the discussion to slash the army and the marine corps and i think for the record we ought to point out that what we're looking at here is historically consistent with the end point of these sustained ground operations if in fact -- if my numbers are correct, you go back to the pre9/11 military

and look at 2017, which you're projecting in your testimony, secretary panetta, the army is going to be about 9,000 higher than it was pre9/11, the marine corps is 19thousand higher than pre9/11. so i look forward to working with you on a lot of different issues and some which we may have disagreement bought i have great respect for all the energy that has gone into the preparation of this budget. i want to talk about basing in the pacific. the chairman levin mentioned this in his opening comments. we have spent a great deal of effort on this. i agree, general dempsey, with what you said. i don't see a pivot here. i think we have always needed to be there. i've been speaking for many years about the need for us to

reconfigure our prepares in -- our presence in a way not that downsizes or confronts or attempts to contain china but just as a way to strengthen our alliances and presence out there. there's a strong strategic dynamic in the region, and a political dynamic in japan. if we don't get it right soon. this has been going on for more than 15 years. we can't kick the can down the court and i'm not asking for your comment. this is more along the lines of getting your bank statement. there are couple things due to us, and they're very important in our consideration. one is the reporting requirement that is scheduled to come out of the independent study. it was mandated by the ndaa. there's a 90-day period for which the bill was signed, which i think was december 31st.

for the study to come to the secretary of defense and then the secretary of defense would have up to 90 days, not necessarily mandated to report to us on this independent evaluation of the basing structure. it's going to happen at the same time that there are environmental statements and other issues taking place on okinawa about the basing system and i want to see if we can move forward in a timely way to resolve this. the other one is the marine corps laydown. i've spoken with the assistant commandant about the numbers that they're using. i support this transitioning concept. i had many conversations with the marine corps and others about thisser early, but we do need to see it -- we need to see the laydown. it's part of the defense authorization bill. the question that i actually

have in this short period of time relates to the evolving situation in syria. and, general, i would like to ask if you might characterize for us the lack of a better term, the on the ground opposition that now exists to the syrian regime. what proportion of this is domestic, what proportion is foreign, what are your observations? >> my observations, senator, are that it is a much different situation than we collectively saw in libya, and i think that's an important point to make, because we don't have as clear an understanding of the nature of the opposition. we're working in the intelligence community to develop it. but as you know there's some significant differences, vis-a-vis syria. that's a chemical and biological

warfare threat. a very significant air defense system, a credible military. we're watching the trend lines on their military to see if they're still under the control of the regime there's big players and actors who have vested interests there, so this is one where we have to not only understand happening on the ground and look at the regional context. ...

the syrian army which is generally speaking the centerpiece of the opposition is for the most part domestic also we also know that other regional actors are providing support and that complicates the situation. >> so the reports over the weekend that al qaeda has been involved as a part of the opposition, the only confirmation? >> no confirmation. i saw the same report. >> have you discounted it? >> not at all. if you think about -- i know you have come about syria is an issue of sunni majority compelling against an oppressive shiite regime, and i mentioned this a moment ago all of the players in the region seems have a stake in this and so those who

put it like to foment the standoff, and you know who they are are all waiting and in syria. it is the last remaining piece in the puzzle of what you and i probably months ago would have described as the arab spring but this is an important moment in the region and all of the players are waging an. >> thank you. mr. sherman. >> senator portman. >> thank you mr. chairman and secretary and general dempsey thank you for being here this morning. i have told secretary panetta i was going back and forth between the committee and the budget committee, and it's interesting because i am seeing two different points of view and i commend both of you today and your comments about the need for us to deal with the

unsustainable growth on the entitlement or mandatory side of the spending in response to your question from senator gramm is the mandatory for the system but you gave the simple answer colin no. i will tell you to be honest, having just engaged in the budget committee of the president's budget that was submitted yesterday it not only adds another 11 or $12 trillion to our debt taking it up to over $25 trillion but it takes a pass on any tough decisions that have to be made on the biggest part of the budget and the fastest-growing part of the budget and that is the entitlement side to beat actually grows under the numbers from 64% of the total budget now this would be medicare, medicaid, social security on the debt to gross from 64% now to the largest part of the budget to 78% during the window of the president's budget, and get there is no mention of social security, no reforms, and on medicare, the only reform i can see on the beneficiary side happens after the next term of

whoever is president and that is on a slight means testing changes, so my concern is what you have outlined today, and i quote you from your overview document where you said the growing national debt if not addressed will hurt our credibility around the world and ultimately put the national security interest and you talked about that in the nomination hearing and i appreciate approach that you take and if we consider to be continued on the path we will all be your many more hearings like this one talking not about how to use the national security but instead talking about how the budgets have been crowded out by an unsustainable practices in the government and we cannot afford the force we need. with that if i can focus on two things in terms of the defense budget because there is room despite my concern about the bigger budget crowding out defense there is room within the defense to find savings and to

erie is the one to touch on the personnel in the theory of procurement. on the personal side, i appreciate the fact that you both again have focused on compensation, health care benefits, the retirement review, these are all tough issues and if we agree the men and women in uniform are the single greatest asset and need to be cautious on the personal side, and the other side we need to be sure we are not crowding out in the defense budget to ensure we have adequate resources in the maintenance, so i would ask you this. when you look at what you've proposed in essence you've taken out one issue to the commission on the retirement, again a very delicate issue, and you've got some suggestions on changing compensation in the military health system here although i would suggest more would have to be done to meet your own

criteria that you fleet of and my question to you is there a more holistic approach and this does relate to retention, and obviously our ability to attract the great professional force that we have now? >> we thought about bundling these issues together into as you described a holistic look at compensation, health care and retirement, and the chiefs and dhaka were of the opinion that we wanted to address the issue that we saw before us that we knew had to be changed, and that was to compensation and health care, but take the time to study the impact of retirement change because one of the things we are concerned about is although it is counter intuitive, you know that about 75% of the force retires or not retires that separates the for the retirement, but 100% of the force when asked even at the five year mark of the career

people say to you don't screw around with my retirement or a man of siggerud even though they know the chances of them actually retiring is only about 30%. so there's a psychological factor with retirement benefits that we don't fully understand yet. we want to take some time to understand what the impact of the retirement reform would be on both recruitment and retention, if that's why we all felt, the chiefs and i felt we should separate these. >> secretary panetta, any thoughts on this given your background on the budget issues? >> i think it's important, as you know as a former director as i was, that we have to approach this budget based on the fact that there is no ground here. you've got to get everything and you've got to question everything. and we approached it on that basis. we talked about allowances, we talked about pay, pay raises, we

talked about all the health care areas to be looked at a number of those areas. but just we felt we've got. we've got to take a step to make sure that compensation is part of the answer to what we have to achieve year in savings, and for that reason we selected the area that we looked at. i think it's important that all of this has to relate to the soldier the uniform by or woman who's there on the battlefield, how do we make sure the we provide the benefits that are necessary to attract the very best, and frankly, we have the very best operating on behalf of the united states today. how do we do that, how do we maintain that benefit based it's

important that the same time understand that we've got to control costs and out years and that was the della katella matteo with the cui approached it in the way that there's more that can be done properly. >> well i know that members of the committee know this but maybe for some watching, this is an increasing part of your budget just as it is for the federal budget as i mentioned if you look at your percentage of spending on the tricare for your overall budget. so one member of the committee to speak for a lot of other colleagues not just the one i heard speak earlier we look forward to working with you on that to be sick support it. i know my time is up but just again to focus on competition that for us may be to spend a little more up front to make sure we have a competitive process to save so much overtime and maybe follow-up the question in writing in that regard. thank you mr. chairman and gentlemen. >> senator mccaskill? >> thank you mr. chairman and to the service to the country. as some of you know, i've spent

a lot of time working on contract issues as a member of this committee and other committees, and i don't need to tell you what a huge piece of your budget contract and represents. the project on government oversight released a report last year that is the first in-depth analysis that has been done an ally of the cost of the personal services contracts as compared to the cost of a federal employee. the study showed that we are paying contractors 1.83 times more than the government pays federal employees, and that is including taking into account the benefits package that goes along with the cost of the personal cost of hiring the for allin -- the federal employees. we need to talk about freezing the employees' salaries but there's been very little

difficult work of trying to roll down the cost of the contracts. secretary leon panetta with the reductions of personnel contained in the budget, what are you doing to ensure that reducing what's happened over the years is why we tried to hold the line of the federal employees contract and has just ballooned and you are by far number one in that. number two, it is the part of homeland security. so, i would like to address that if you could. senator, you provided a tremendous leadership on this issue, and it is a great concern to me personally because it has -- it is an area that has expanded dramatically in almost everywhere i go in my new capacity to the and i see the contract employees providing a

lot of services. some of them i think are very important and they perform a very important role. some of them whether or not we could perform the same rule and be able to do it in a smaller price. we did look at this area as part of our efficiency approach to try to see if we could gain some savings and i would like to ask our country were to speak to that. >> briefly i think you know, senator mccaskill, we have a initiative a couple of years ago in source jobs where it was cost-effective. we are still looking at where it is cost-effective. i think with the budget cutbacks and we are looking at what the right mix is probably both contractors and civil servants are going to come down over the next few years in the budget. we have to find the right mix and i do not believe we have an easy formula but we are looking in that context which is the right one what is the most cost-effective way to get the work done. >> we will have a hearing on this on the contract in

oversight and what i will be looking forward to seeing is what kind of strict analysis is the department of defense in breezing to get a handle on the contract employees. it surprised me when i got here that not only do we not know how many contractors there were in their back, we didn't know how many contractors there were in the government buildings within 5 miles of where we are sitting right now. and that is a huge problem that the contractors just became task orders as opposed to kind of keeping a handle on how this monster dhaka out of hand. we also are going to have legislation coming from the wartime contract in commission that finished its work. i will look forward to the direct input from you about the legislation that we will be hopefully filing this week and we will be working with this committee to get the provisions included in the defense. as i look at afghanistan,

16 billion gdp, 2 billion of that is not from us. that is a huge impact on that country, and as some of you are aware i've also been looking at the way the funds have been used in terms of infrastructure and help for the first time in the budget there was an infrastructure fund and embedded in the budget coming from the military to do the things that traditionally the state have always done. that is larger, it is like steroids essentially is with the infrastructure was. and i'm going to quote what the counter insurgency advisory and assistance team which provided a report directly by general allan found that it wasn't achieving the counter insurgency goals and i'm going to quote this report. current incentives promote the spending funds without sufficient accountability.

there is no system for determining what projects are likely to let fans. no apparent desire to object if we evaluate whether the objectives were achieved. commanders of the areas and is of the spectrum are judged by the amount of the funds submitted complicated or spent over actual measures of the effectiveness to this situation is not only wasteful but it allows for corruption, insurgent resource capture and the legitimization of the afghan state. we retain primary responsibility for the project success or failure will the host government and population are spectators. i know that serve has been something that is held near and dear and now the afghanistan reconstruction fund is an outgrowth of that because we've gotten beyond the window for months to the large highway construction projects without the kind of rigorous analysis in terms of its sustainability. as we drove off a cliff and afghanistan in terms of what we

are giving the country's gdp aren't we creating a scenario that a lot of this money is going to go into the category that it went into iraq and that is a lot of wasted taxpayers' dollars on the afghanistan infrastructure? >> senator, the actual use of the fund on a share the concern that you have indicated, and as we do drawdown and turn over the race will devotees to the afghans, one of the issues we have to think long erhard about is the sustainability of these efforts. dysphoric sample and afghan forces that takes over and provides the principal security for the country what is the level that we need? is it sustainable? can this country provide the support system that has to? what kind of economic base will

the country have for the future? and the issues that you have raised all relate to that question what are we looking at in terms of the future of the country, and can it sustain itself? that's going to be something we have to get a lot of consideration to not only the united states, but obviously all with our allies have to take a hard look at what we try to do to assist in this country in the future if we are going to be successful. speed i will add, senator, the way that we -- personally i hope we don't drop off a cliff. one of the things we've been discussing is the blight slope. it's our funding wide scope if we drop off a cliff it will have the result he predicted. that is the reason i would suggest we can't fall off the cliff in afghanistan. we have to transition this responsibly. as for whether the have the capacity to deal with all of

this of this in several countries around the world to include iraq most recently and that is the most difficult part of these missions is building the capacity, the capability and in the capacity. it's really institution building. it's pretty easy to be builder infantry but elegance and to partner with them and the institution that sits above it all has to be developed and i would suggest that we have made some pretty significant progress in that regard since about 08 by share your concerns. i'm not sure that i share the understanding of the study cited because the pentagon when it was done and who did it and where they did it could have a very different outcome of the places we are you some information on that going forward

>> ai certainly -- i have to tell you i think some of the stuff we built in afghanistan we can go ahead and build the stuff. we can hire the people to build it. our know-how can provide the leadership to build it, but i don't -- the degette and wishful thinking will catch up in afghanistan that sitting there as an expensive extra power generator because they can't even use it and was hundreds of millions of dollars of american tax payer money. we just can't afford to do that. i have an amendment to move this money that the united states for infrastructure, and i think it's important that we do that because of the need of this country, and the real problem do end up in the bad guys' hands and we know that there have been

too many instances that we have found. i appreciate that and the more information you can give me about what kind of record you are bringing to the sustainability because i can find that and i have looked for it. thank you, mr. chairman pete >> thank you. >> thank you mr. chairman, psychiatry deinze, mr. hill, thank you for your leadership during a very challenging time in the department of defense. i appreciate very much we need to find savings in defense in a way that doesn't undermine our national security. no question. but please count me out when it comes to brac and here's why. i want to echo the concerns that secretary panetta himself having gone through the process released before the house committee in october where secretary, you said i went through and i know that all but dollars people looked for, you know, a huge savings, yet they didn't take into consideration the cleanup committee didn't take into consideration the work that had to be done.

they didn't take into consideration the needs that had to be addressed and in many cases it round up costing more. the reason the gao report found that it cost us for the 2005 background, 67% more than we estimated and in that we will not see any savings from the 2005 drug until 2018, 13 or 14 years of life as a way of serious questions whether we would save any money from the process, and particularly at a time we are still making decisions about the global posture and strength of the forces i don't think is the right time for the process where we may not save a dollar and frankly. that is what concerns me at the end of the day. i want to ask about our engagement rate at guantanamo. director clapper testified i believe it was last year in the spring that our real engagement

rate of those that have been released from guantanamo bay was 27 per cent. do you know what the number is now and has that percentage of 27% getting back up this fight gone up? >> i think 27% was over the long period stretching back into the last administration were the individuals were transferred. i believe under the ones that have been transferred under this administration that it's less. i can't remember the exact percentage. >> what ever administration released it, director clapper said the overall the engagement. >> that's true, and i think that number is correct and i will give back to you one of the specifics -- i want to go to the engagement rate increase at all

and the reason i asked is in the follow-up to senator mccain's question earlier about what we have heard could be the administration's potential release of gitmo prisoners in exchange to the taliban. i just wanted to raise concerns on a couple of friends. number one, as i see it of course in "the wall street journal" and "the washington post" of these five people let's be clear if these reports are accurate we are talking about individuals who the senior most television commander in northern afghanistan, someone who is an alleged war criminal, two of them are potentially involved in killing of a cia operative, an american cia operative. the remaining small will is alleged to have helped smuggle

weapons to attack the u.s. troops loyal to the haqqani network. another is vertically associated with osama bin laden and mullah omar and then the following me belong to al qaeda, and his release has been called highly problematic. all five of these individuals were characterized by the administration in 2010 if these reports are accurate about who these individuals or all five of them were deemed by this administration in 2010 to back the interest transfer but not feasible for the prosecution. i guess my question -- i know you have to certify, psychiatry, two years later is their something changed about these individuals that we are not aware of? and, my follow-up would be as light understand the administration's plan, this is an exchange for good will from the television. if we are going to release -- if these reports are the case, the

public reports with who these individuals are dangerous individuals who could get back and we engage with our troops who are not just soldiers the appear to be leaders among the taliban and the networks that if we are to release them in exchange for the measure of good will, it seems to me why aren't we getting the cease-fire if we are going to put of people that were so dangerous? so to questions. has something changed from 2010 of the assessment of these five individuals? in terms of being too dangerous to release? and second, do you think this is a good deal if we are only going to get a goodwill gesture from the taliban? >> let me reemphasize that, absolutely no decisions have been made with regards to the reconciliation. there are some discussions, but the conditions for the reconciliation have been made very clear that the taliban has

to lead down their arms. they have to renounce al qaeda, they have to read it please the constitution in afghanistan. as far as i know, none of those conditions have been met at this point, and obviously would be part of the discussions. as to whether or not as part of the for these discussions involved that there were a transfer that's part of that, under my obligations as the secretary i have to certify that these individuals will not return to the battlefield and i've got to be convinced that steps are taken to ensure that does not happen, and until i am assured that that is the case i am not going to certify. >> i appreciate that mr. secretary, and i would hope -- these are very dangerous individuals if they are as the been reported in the washington journal, and in particular, to transfer them to the so-called good will gesture, i appreciate your list of conditions of the

cease-fire laying down of arms, and i obviously am concerned to transfer these individuals that all given how the interest they have been in the past. and frankly we haven't always been right about this as you know. 27% wrong with what ever administration we are in. it was a medium risk. these guys were all high risk. medium risk and he was released and he is now leading the taliban forces citing the u.s. marines and the helmand province. so we do our best in these situations, but as a prior prosecutor, the best predictor of future behavior is prior year p.a.. these guys are not good. i appreciate you looking at the certification very carefully, and thank you all for being here today. >> thank you, senator. senator udall. >> thank you mr. chairman and gentlemen, i'm sure you can imagine you would rather spend

valentine's day with any groups other than the armed services committee, so thanks for being here. it's apparent that the fiscal challenges the dod faces are those that we face across the federal budget. we have had a respite given the end of the war in iraq but unfortunately more broadly, and i'm not speaking to you but more broadly we've mismanaged our finances across the board and we've put ourselves in a pretty tough on would say even on the tough financial position. if you look at our history, we have leverage our economic and military strength to accomplish our goals, and we cannot project our power abroad if we are weak at home and then we have also undercut our domestic and strategic goals by managing our finances so poorly. you both know we have to carefully sturgell the balance between the fiscal irresponsibility, strategic capability. we cannot haul out the force.

we have to get this right. i think we have a lot of history to guide us and we have to make sure that we incorporate the lessons learned from our success in both our failure as a non-clearer i always learn more when i was on the mound in the didn't climb as the ones i was successfully something. but in general, in that spirit i wanted to turn to the summary that i heard that the commitment to the research and development programs and the continued development of the alternative energy technologies. dod has always been an innovator in the research as created a number of products we now consider essentials to the everyday civilian life. at the same time they are concerns that they are operational needs that need to be addressed now can you discuss the thinking behind the focus on the future and how that decision affects the operations and those that might be just over the horizon? >> on the issue of energy, on a

can can petraeus began a broadly to the medical advances and i know you have a long list. >> we do, sir. in terms of looking at the joint force 20 slash 20 is why we want to protect ourselves out and then look back and find our way forward and this budget is the first step in it that. i will use the operation energy as an example. we lose soldiers, marines, notably airmen on the roads of afghanistan going from 5-5 and the supply missions and so forth. to the extent that we can create autonomous or semi thomas in terms of energy consumption power and energy or the organizations, you know, net is zero in terms of the consumption of power and energy we will actually save lives and become a lot more agile because we won't be as tight to some kind of traditional linear line of