initially investigation resulted in the last couple of years and if you look through these records you have here, the problem is they go back what two things we didn't know about. there is a lot here. >> i can't say that. i can only say we included this because we thought the time line was important for understanding of what went on and the timeline was back pretty far. >> but in september it was mr. melted constituting dereliction of duty. do you know anything about that? >> i'm going to tell you once again what we did and what we didn't do. what we didn't do is go back and look and detailed through the records to try to determine whether or not something had gone wrong. we knew that something had gone

wrong our charge was to look at what was going on now, figural how to move it forward and fix it. there's no doubt that you were correct. there were many things going wrong because the lack of command and technical oversight and policy oversight and coordination. so you get the last question. >> appreciate that. i guess i don't understand you were saying that you were looking forward but not back. but your appendix, these are all incidents, investigations, allegations of fraud, the settlement to this house of the marine or mental anguish, $25,000, these have not been made public. >> i don't know that they haven't been made public. >> and we would like to know more information about them.

>> it's not our -- we have records we've received from the force that we published there. >> are you releasing these in your appendix? >> the report has been released. >> for the memos -- >> no authority to release anything. you have to go to the air force to ask about those particular questions. but i am telling you in conclusion that you need to focus on these recommendations about whether or not they will strengthen accountability at the entire mortuary affairs system. i feel they will. i think they will strengthen the command oversight committee will strengthen technical oversight committee will strengthen the training, they will strengthen accountability and coordination between organizations and they will leave the groundwork this will never happen again and adopt a policy of the defect. historic kleeb it is not my

mission but historical you have to ask a question elsewhere. i can only say his prickly there were significant problems there. >> as an experienced military officer were you shocked by the fact that this happened the department already said it was a top priority to treat? how could it have happened? >> i'm not shocked. i've been in their forces for a long time. i've seen just about anything that can be seen. these are revelations to consider to be revelations. are they completely explainable? i think they probably are and i would say the number of cases that come through the mortuary

people doing 99% of the time we're talking about 1% of the time when things didn't go right and because there was no proper command oversight we didn't have the ability to get down and look at the organization and figure out how to fix it. i think what my panel does provide a path for the secretary of defense to fix those things that are wrong and i think that my panel did a very good job in doing that. i appreciate the fact that you may regard some of these things as being relevant tory. i did not. i regard them as issues that happened in an organization that didn't have the tougher mechanisms necessary to correct them and they happen to many times. that is why we are making these recommendations here. so, i very much enjoy that. i don't think you will see me again but this is a very important issue for the country. it's about confidence, these

organizations to care properly for our falling. we must restore that confidence people that are out there doing the work are good people, honest people, hard-working, patriotic who don't mean to do the wrong thing. they're constantly trying to do the right thing but it takes them at the mortuary to debate. it takes oversight from above all the way through the chain of command and that is what this weekend has to be fixed. >> in response to the investigation of the air force

base mortuary, u.s. air force leadership spoke to reporters about how they intend to implement the report's recommendations. this is 25 minutes. >> good afternoon. as you just heard from the general whose independent panel of the defense health board has provided the department of defense and the air force with its findings from its review of the corrective actions, the air force has taken with respect to mortuary procedures at the air force mortuary affairs operation at the dover air force base the panel was asked to review the effectiveness and propriety of the current policies processes and procedures that were put in place as a result of the air force inspector general's investigation and make recommendations about any additional changes that may be required. the men and women who serve

recognize what a secret mission to service our nation's fallen and their families and they've been working diligently to correct the deficiencies identified in the initial investigations and subsequent reviews. they will continue to do so as we implement the findings of the defense health board panel. the chief and i want to thank the general and the members of the panel for their candid review and assessment as well as recognizing the improvements the air force has already put in place. i'd like to highlight some of the findings and recommendations proposed by the independent panel specific to the air force as well as actions i directed to be implemented. first, i am directing that the commander be given ucmj

authority and the accountability as an essential tool in maintaining command discipline. second, general schwartz and i agree with the panel's recommendations for a better general officer command structure to oversee the mission and we've been done this missions on where to best align the general oversight. third, we strongly endorse the need for the tail third inspection program appropriate to afmao mission. there force is already working to create the needed inspection criteria and the first inspection under the new program is scheduled to take place this june. fourth, the conduct and will continue to conduct training exercises that cover the health and safety of their personnel. in addition, leadership will

solicit the air staff and a national industry professionals to provide recommendations on training that will be beneficial to our team. we support the panel's recommendations for the standing board of visitors including outside professionals. but then oversee and advice on the latest and best practices in addition the current leadership is working with the national association of directors to have them give recommendations on training that would be beneficial to the team. we also agreed the panel's recommendation to the right size the organization and build a surge capability to deal with larger incidents and contingencies should they occur and we will undertake a manpower study. all of this work will be coordinated with our service partners consistent with deputy secretary of defense carter and

general dempsey's direction. these are representative of actions we've taken and others under way that will further improve the operations in meeting the mission of providing dignity, honor and respect to the fallen and care, service and support to their families. i also want to take this opportunity to provide you with an update on the review of the disciplinary action changing at the conclusion of the air force ig investigation as well as an update on the status of the review of the office of special counsel investigation into the reprisal actions taken against some employees of the dove report mortuary. last december, provided to the secretary of defense and interim report assessing -- addressing the disciplinary actions taken in response to the air force ig

investigation, and into allegations made in the whistle-blower disclosure case. the interim report consisted of a comprehensive summary of the disciplinary actions taken to process used the legal basis for the actions and the factual record used in determining the appropriate action. the purpose of the report was to gather the facts to ensure there was a full and complete record of the disciplinary actions stemming from the disclosure case. it was the first step in a three step process initiated to conduct this review. the former officials that i appointed to provide an independent assessment of the military and civilian disciplinary actions taken at afmao in response to the allegations uncovered in the disclosure case have completed their review and they've reported to me that both of the military and civilian disciplinary actions taken last

summer in response to the disclosure obligations were legal, appropriate and well within the bounds of reason. however, on january 30 if they're forced receives the results and the separate office of special counsel the investigations into the potential reprisals taken against the whistle-blowers at dover. the report concluded that the reprisals' did in fact occur and this raised the need to consider additional disciplinary action. i appointed a to start officer to conduct this review and to take appropriate action and expect this would be completed around mid march. any action taken concerning civilian personnel will be coordinated with osd. it is a common belief in the importance of the whistle-blowers ability to report deficiencies without

reprisal. the individuals who reported the allegations in this manner performed an important service to the air force and to the nation. they continue in their positions and the air force is working cooperatively to make appropriate corrections to their record. throughout this review process, the air force remains committed to this mission as a solemn obligation and to its flawless execution. moreover, the professionals who work at afmao take this responsibly and consider it a privilege to care for america's fallen. the air force will continue to aggressively ensure the highest standards are meant to provide references, dignity and honor and respect to the fallen and the care, service and support owed to the families. at this time i will take your

questions. >> mr. secretary, regarding the revelation in the report about the 9/11 remains of several portions were cremated and incinerated in a landfill can you say whether those were done at dover, and when did the air force become aware of this and do you consider it appropriate? >> we intend to take a full and complete look at the report. this is why the panel was put in place. our focus is on from here forward we have acknowledged our culpability and responsibility for the lapses and performance in the last several years, and with respect to the issue that you've raised it's been three years since there was a change in policy recognizing that prior

practices were not appropriate, and we have taken steps since 2008 to move forward to replace and the panel offers even additional ideas has options to families going forward, so our focus is on we intend to review them fully the the focus is today going forward and that is where we're focused. >> to my knowledge they haven't been mentioned publicly and you consider this to be an inappropriate disposition of remains and when did you become aware of this? >> i would say we haven't had a chance to fully observe all of the findings come close to all the details in the abizaid report with a half recommendations that we are

focused on a plunging our intention is to move forward from here. >> you must know because the air force had to anticipate in this investigation whether those remains were disposed of through the mortuary and i guess that -- >> let me say the chief and i and the investigations that we've undertaken today have not gone back to this period. >> have not taken issue with that finding in the report that some unidentified remains of the 9/11 victims were disposed of at the dover marjorie? >> we haven't had a chance to review all of the details and appendices show source of the panel together. that's why they were pulled together. that's why the panel was established to work through these issues, and i think the history that the panel provides is a good context for a long

standard series of problems and challenges and executing the mission, so i think it has context to the recommendations the panel has made for how to correct and continue to improve our process going forward and that is where we are focused. >> on the previous conference we were told that the record only went back to 2008 or two years before that. succumb somehow the panel has gotten access to the records that go back substantially longer a decade or more. how is that possible? >> i will just say we haven't had a chance to review all but details and all the material the panel has put together. >> are you back to the question and what's in the report? you can't even confirm the records show your air force? >> we haven't had a chance to review all of the records of the panel and understand completely where the information came from. so we will go into all of this

in more depth going forward. >> whether you approve of this practice that outlined in the report you don't know if it happened or you are not aware of it? >> we've both been on capitol hill for the last four hours. allow us at least the opportunity to go through the report ourselves. >> for one reason it may be perfectly logical but until now you have not been aware of this you seem to be saying. >> let me just ask q. it's confusing to me what role the army plays with the marjorie operation. what is your understanding and what is that going to be as you move forward? >> it's why we continue to work with our service partners in this effort.

there are four different organizations involved in supporting the mission areas. afmao and the port mortuary operation at dover but they are supported at that location by a armed forces medical examiner, fme for which the army is the executive agent, and that organization actually reports to an army medical command. in addition, there is a joint personnel depo, an organization that manages the personal effects not only of the fallen but also the wounded personnel or other u.s. nationals or other sort of operations in which u.s. personnel were unable to take ownership of the personal effect. so there is that. that reports to a separate organization as well. and a fourth element of the

mission is the service liaison officers assigned by the army navy marine corps and course air force to serve as liaison to the depo and to the liaisons with the family. those liaison officer's report to their respective services and they get training that is different perhaps across services. so the point of general abizaid 's finding here is there is more than one service involved and there is an executive agent. there is a joint mortuary affairs board but is intended to oversee this board and to develop the policies and procedures that provide for commonality and coordination of the seams between these organizations as they perform the mortuary work together, so that is an important finding from the panel.

that is a good description of what it takes to perform this mission. >> can i just ask a quick follow-up the medical examiner's to dover, could that possibly cause problems and confusion? >> may be the chief has some additional insight. i would say that the activity level at dover and some of the issues and challenges that we faced in managing operations did relate to the change and organizational structure, the arrival of the armed forces medical examiner mission changes, construction programs afmao was very busy during that period come and hear unlike in a civil organization where the county coroner is at one

location and a funeral home is at another location, these organizations are side by side and working the seams and the accountability of the remains with these organizations intermingled have been a challenge. >> looking at the whistle blower complaints to the review of the discipline when you learned your earlier investigation, how far back did you ask people to look? are you today satisfied with that or do you think the air force needs to do a full accounting of the last decade of problems? >> the air force investigation were focused on the allegations made by the whistle-blowers concerning the current operations. that was our focus.

>> but my question today is do you think that a fall backward historical accounting of the problems or potential problems are necessary or is the counterproductive? >> i think we will make that judgment after we have had the chance to take in the full scope of the panel's record. >> you mentioned that you had a review team regarding whistleblowers, former officials provide independent assessment and you said they came back to you and said the actions taken by some were legal and appropriate and relevant. when was that that they came back to you? >> this was in december gentry timeframe. >> i guess the number of people in congress are upset that the air force hasn't taken stronger disciplinary action against the supervisors. so, you know, you didn't fire anybody the first round, you

have other officials review it and tell you what you did was appropriate and now it seems another office of the special investigation found the reprisal were in fact taken against the whistle-blowers. have you been slow to recognize the seriousness of how the whistle blowers were treated by their supervisors? >> the answer is no because the office of the special counsel investigation on reprisals was conducted separately from the air force ig investigation, so we had no inside knowledge of how that investigation would proceed or when it would conclude, so we always knew that they had a separate investigation going and that when i delivered its results we may have additional action to take. >> can i get a clarification mr. secretary and from you, general understanding that perhaps you haven't had a chance to look at the report, but in

regard to the portion where it talks about the remains from 9/11 from the pentagon and shanks bill disposed of in a landfill or both of you totally unaware of that previously? did it take you by surprise? is this the first that you are hearing of it or were you aware of that? >> this is new information. >> and in your opening statement, you called the handling of the nation's were a sacred mission. yet the report found that it was an inadequate command structure and you would know better than my but my experience is that there is no adequate command structure people responsible think the leadership is not taking this seriously, and therefore it could lead to mistakes like this. general, can you speak to that? >> the point is that we did not

have a commander working for the commander. and the arrangement that we have had since the early part of 2,009 has the commander at the affairs office working for a staff officer here in washington and his point is that it is not the ideal arrangement in other words do have a commander working for the staff. the issue for us at the time was that this was a significant enough mission that there was the sense that it needed to have washington involvement in the tension, and therefore there was a choice to put the supervision under our collective supervision his point is there needs to be a command chain, and we are -- we take this point, and we are in the process of deciding where that number of the air force

equivalent command should reside and with the arrangement would be. but again, these are matters of judgment whose recommendation is that there needs to be not a commander working for a staff officer but a commander working for a commander and we will make that happen. >> do you believe that the structure was adequate? >> i think certainly during our tenure i believe it was, but again, we asked for the best advice that general abizaid and his panel could provide and we accept that. i know the secretary of defense does. >> general abizaid called it isolated and orphaned. who should have been responsible during your tenure for recognizing that there was the lack of oversight at dover and

further there should be monumental respect and attention and paid to it. >> you're looking at it, me, i'm responsible. >> i've made the point before if i might interject here that i don't think given the circumstances the sensitive nature of this mission to the sensitive nature of this mission and how it is conducted within the confines of a very small organization subset of what is already very small organization we would not have heard of these problems were it not for the whistle-blowers' going outside the organization. i think the general abizaid's pond was the commander working for the commander gives the internal work force and option

of where to report trouble up the chain of command that is a little but perhaps more approachable or more available than it is if it is the headquarters staff in washington. so i think there was a part of general abizaid's thinking. >> mr. secretary, now that you have been made aware of these remains how high of eight priority would be for you to determine if they were cremated and if so, how many? >> again, i think we have to take in all of the results of the panel to understand the documentation and where it came from, and i think this is a decision that has to be worked with at the dod level. we certainly have expressed regret for the additional brief cost to families and loved ones whose remains were handled

perhaps at less than ideal or at some measures inappropriate standard prior to 2008. >> is the extent also to the families of 9/11? >> prior to 2008. we are not aware of all the details going back ten, 15, 20 years here, and there would be the decision i suppose at some point on what time should be invested in this work and i think the panel's focus on the current operations will be provided in appendix of material that provides a longer-term history and context, the panel's focus was on giving us the tools that we need to continue to improve operations moving forward, and that's really where we need to focus our time is

improving the current operations to make sure that this kind of event does not occur again, and the more time we spend on improving that, the better off we will be. >> just a housekeeping measure, could we ask the air force staff somehow to respond to the question as to whether the 9/11 victims were disposed of through dover. >> we could take that for the record. [inaudible conversations]

even a person who now is president of the united states faces a predicament when they talk about race. the face all sorts of predicaments, the fact that there are some an appreciable number of americans who were racially prejudiced. they face the fact that a much larger portion of the american populace wants to deny the realities of race even now. the president's annual budget request calls for

$525 billion in defense spending including 88.5 billion in more spending. defense secretary leon panetta and the joint chiefs chairman general martin dempsey testified at the pentagon budget at a hearing in the senate budget committee. this is two hours and 55 minutes

[inaudible conversations] >> the hearing will come to order. i want to welcome everyone to the senate budget committee. today's hearing will examine the president's defense budget request. our witnesses today are the secretary of defense, leon panetta, general martin dempsey, the chairman of the joint chiefs of staff also joining at the witness table is the undersecretary and controller of the department of defense robert hale. i want to thank secretary leon panetta for being here today. it's been a time since the secretary defense has appeared before the senate budget committee. as a former director and former house budget committee chairman secretary leon panetta understands the important role of the budget committee.

and we especially appreciate his willingness to appear today. secretary panetta gave me equipment that he would come and i very much appreciate his keeping that promise. we look forward to his testimony as well as that of general dempsey and the controller hale. we also very much understand the time constraints that you are under. we recognize that you have many issues on your plate, especially with what is happening in syria and iran in the middle east and of course north korea and china and russia and on and on it goes, so we do recognize the heavy burden that is on your shoulder and we will keep our commitment to get you out of here as expeditiously as possible. i want to begin by highlighting the budget crisis facing the country. despite the progress in the last summer's budget control act, we

remain an unsustainable course. admiral mullen, general deinze's predecessor as chairman of the joint chiefs of staff, described the national debt as our biggest national security threat. i understand general dempsey may not share that expect assessment and nonetheless recognizes this is a key challenge facing the country. we simply will not be able to remain a global superpower if we fail to stop the explosion of debt and we are now at a gross debt of 100% of gdp. what is of even greater concern is where we are headed because congressional budget office tells us if we stay on our current course we are headed for the debt will over 240% of gdp. under cbo's alternative fiscal scenario gross federal debt will reach 103% of gdp this year,

well above the 90% threshold that many economists believe as the beginning of the danger zone and it will continue rising to 120% by 2020 to, and well beyond that in the egg years beyond 2022. the reality is the defense spending both in the core defense budget and the core defense budget and the war cost has grown dramatically and has been a factor in contributing to the recent deficits. and 1997, we spent 254 billion on the department of defense, and 2012 when we include war cost we will spend about $645 billion on the department, which is down slightly from the peak in 2010. all of the decline from 2010 to 2012 came from the reduction in the war cost. the court department of the budget has been about flat since 2010 but remained at a very high

level. if we compare recent overall defense spending and budget function 03 coo 50 to the recent non-defense discretionary spending we can see that overall defense funding has remained at about $554 billion since 2010 not including the war cost. while bonn defense funding has fallen from 540 billion to $489 billion in a 2012. so, of the discretionary pact, basically defense is level, non-defense down slightly. looking forward to the president is proposing a small reduction in the department of defense funding in 2013, bringing it down from 530 billion in 2012 to 525 billion in 2013. over the next ten years the president's department of defense request would roughly match the level set in the

budget control act, not including the sequestered. as we can see from the blue line on this chart the president's request would provide a steady increase in the defense budget from 2013 on the. the red line on this chart shows what would happen to the department of defense founding of the sequestered were implemented. we would see a steeper drop in 2013 but then steady growth after that. i believe the steep drop in 2013 required by the sequester would be a mistake. but i also believe further reductions beyond the budget control act levels must be considered. the green line represents the department of defense funding under the so-called some symbols plan, which would provide a smaller drop in the 2013 than the sequester but slower growth in funding after that.

obviously all of these have to be reviewed in light of the defense threat that we face at the time of decisions are made. all of us understand budgets are taken at a point in time, and we all understand that there are threats facing this country that are unpredictable it dropped from 159 billion in 2011 to 115 billion in 2012. the president's budget provides 86 billion in 2013 for the war cost and then includes a number of 44 million a year for the remainder of the ten years. the next chart puts the defense spending in the historical perspective. the cost included in the president's budget the and very high by historical standards. near the peak of the korean war

the vietnam war matt and the reagan defense buildup during the cold war defense spending came down more dramatically following those conflict. now we all understand many of these can be easily compared because we face a different threat environment now than we faced after those conflicts. i want to conclude with a quote from the former defense secretary robert gates in an interview on cbs 60 minutes last year he said this, the budget of the pentagon almost doubled during the last decade but the capabilities didn't particularly expand. a lot of that money went into infrastructure and overhead and frankly i think a culture that had an open checkbook. i recognize the administration

has already taken steps to eliminate some inefficiencies in the defense department and some unnecessary wasteful programs, and we applaud that. but we know that we are going to have to do more. i have always been a very strong supporter of defense spending because i believe providing for the national defence is the government's core responsibility. and make no mistake, congress will continue to provide troops, everything they need to complete the missions that they are assigned come and to keep them safe. we have to of course recognize we still face very serious potential threats. i mentioned some earlier. i want to focus on iran, syria, the middle east, pakistan. these are all of deep concern to the members of this committee. i know they are of deep concern to you, secretary panetta and

your entire defense team. but given the fiscal crisis that we confront, we are going to have to find more savings in the core defense budget. we can't rely solely on the declining war cost proceedings and we need to ensure that every dollar going to defense is essential to promoting the country's national security. with that we will turn to senator sessions for his opening statement and then we will go directly to the secretary for his remarks and then we will open it to questions. >> thank you, mr. chairman. secretary, we are honored to have you with us today and general dempsey it is a pleasure to see you again. i've had the opportunity and the honor as he would applaud in iraq on more than one occasion and to work with you and your new position here. mr. hale, we are delighted to have you. america is blessed with.

i know that your honor, mr. secretary, to lead such a magnificent force the the defense is the core function of government and continued dominance of our military to tourist ret dandridge as peaceful resolution of conflict. - year, however, that the budget hearing today may not be a good use of your time. the senate democratic leadership is refusing for the third straight year to bring a budget plan to the floor. as a democratic majority forgotten the warning that admiral mike mahlon gave us, former chairman of the joint chiefs, who told us that the debt is the greatest threat to the national security. how will we be able to defend this country when we are broke? general dempsey, the sequester, i know that you feel it is too draconian on the defense department. i agree. but it is a direct result of

understand that and it does threaten our national-security if we don't break that cycle. america leads the western world in per person government debt. amazing to be that $44,000 for every man, woman and child, america's per-capita government debt is worse than greece. but the president has submitted a budget plan that will continue the unsustainable course and increase our gross federal debt by another 75% over the next ten years of about 15 trillion to 26 trillion in 2022. the president's budget also raises taxes buy almost 2 trillion cannot those taxes want to reduce the deficits but to pay for a 1.6 trillion spending increase above that that we just predicted above what we reduce spending just a few months ago. in other words, spending

1.6 trillion more than the level we agreed to in the august debt deal. though most shocking is the administration's unwillingness to tell the truth about our situation to the country. i sent a letter to the president's budget chief asking him once again whether the budget plan increases spending to the current law is very simple question. i received the response last night, and once again, defuze to cancel this simple fact, the simple matter. if the administration thinks the can sweep this under the rug they are wrong. congress and the white house committed one print 2 trillion in spending reductions, about 3% reduction in the expected growth, not a reduction in spending but a reduction in expected growth over the next ten years resulting in a $45.5 trillion spending through 2022, total spending.

this is the new ceiling on how much we can spend and the starting point for much needed reductions. now after just a few months the president is proposing abandoning even those small cats. this doesn't mean we should not reorganize where the initial $2.1 trillion of cuts fall. under the budget control act, the defense spending, one sixth of the budget defense spending is we will experience a 20% reduction in real dollars over ten years the real adjusted for inflation dollars the defense department would take a 20% reduction over the president's budget over ten years. the other five to six of the budget with experience a 50% real dollar increase over that same ten year period it is critical that we reorganize the budget control act but also we must not reduce the size of the

total cut we promised the country just a few months ago increasing over the modest reduction that was agreed to we are taking a lawful actions to place this nation on its sound fiscal path to read the first step in the process is to dispense with some common myths about the defense budget. senator conrad made some points and may provide insight i would like to provide some points i think also provide insight into where we are. myth number one, the defense spending is at an all-time high. the truth, during the war montara mur it is averaged about for a percent of gdp. are now half of the post world war ii average to 50 years ago, national defence made up 48% of the budget while entitle misspending accounted for 26%. next year, entitlements will be

60% and the defense will amount to 19% of the total budget we can balance the steep cuts to the pentagon. the truth come over time and time of the obligations will consume an ever larger share of the federal spending. and 2030 amazingly, just eight years outside of our budget window, in a 2030, entitlement obligations will be as much as six times greater than the defense spending rising from their. even eliminating defense and its entirety wouldn't come close to balancing the budget. if you eliminated entirely. met number three, defense spending has seen the fastest growth of any item in our budget. the truth, while the pentagon base budget has increased 10% since 2008, three years, it's increased 3% a year, non-defense

discretionary spending increased 24%, not counting the stimulus during the just the first two years of president obama's presidency. so the cuts that showed in the non-defense discretionary are impacted as a part of the budget control act agreement that are projected out there but it's exhilarated levels on spending that serves. of the last three years, medicaid has increased 47% while the defense department has increased ten. spending at the department of education grew 70% over 2009 through 2011 compared to the previous three years of education to read through stamps have seen a 300% increase since 2001. myth number four, the war in iraq and afghanistan have been leading contributors to the

deficit. while the war on terrorism has imposed substantial costs, this year's deficit alone, 1.3 trillion comer equals the entire cost of the war in afghanistan and iraq. war spending represents only 4% of total government outlays in the last ten years. so i share these numbers because it is essential that washington engages in fact based budgeting. every department, agency and every part of government will have to experience reductions including defense. i know you are working on that now and it's a very important priority for you and the united states congress. but these decisions should be guided by an honest assessment of the facts and the fact is that the only thing the president seems willing to cut sycophant the is defense. the rest of the budget will continue to surge out of control by the year 2013 nearly every

penny of revenue the government receives will go to the entitlements and interest payments leaving no money outstanding for defense education highway and other winners. so we should try a different course. control the growth of government, and in power the

some did not vote for it but the fact is the vast majority of the senate did, 74 votes in the senate for that. the house passed it, signed by the president. the budget control act also provided for special powers to the special committee to deal with entitlements, to deal with revenue. they did not succeed. so that leaves us with a sequestered which was also passed as part of the budget control act that says we've got to cut an additional, general devotee tells me $535 billion or roughly that amount over the next ten years on top of the other almost 500 billion of savings out of defense.

the other thing i think we should remind ourselves is when we talk about cuts in washington , kutz relate to a baseline. i think this is sort of the point that you work, part of the point you were getting at, senator sessions. the cuts relate to a baseline. a baseline is inflated by historic experience. and so, you know, i think most people when they think about cuts the that you are going to get less money than you got the year before. other than this next year, what we are seeing is increases are being slowed, increases in spending being slowed rather than getting less money than you got the year before. in the case of defense for the next year we do see a 5 billion-dollar reduction in the president's proposal. 5 billion less than they got the previous year. so, with that, mr. secretary,

welcome back to the budget war. i know you spent a lot of time in this room. i spent a lot of time in this room. i don't think anybody is given more distinguished service to this country in so many different roles and have you. i think that you are outstanding as the chairman of the house budget committee you were outstanding at the office of management and budget and you're outstanding as the president's chief of staff and president clinton played a key role in getting as the balanced budget in those days and the last time we had in the balanced budgets around here is when you were at the helm, and i was a very willing ally in your efforts and then at the cia where you did such an outstanding job, and now here we get a lot of confidence in you but we also know you've got tremendous challenges facing you and please, proceed. >> mr. chairman, just keep in mind i think you gave a nice summary of what the situation is that we are facing on the defense department looking at

almost $500 billion of cuts they are working hard to achieve that and they've saluted yes we are going to do this, and that would put you in the leading part of the entire government in reducing spending. however, the sequester language put in at the last minute without any real debate driven by the president i guess the democratic negotiators added another $500 billion in cuts as you know. it's that cut that i think is risky, and i believe the secretary believes with the devastating as he said defense but come and i would say we agree to the cuts there is no debate about where they would occur i just truly believe that we shouldn't give those up and say just because it couldn't be placed additionally on the

defense department that the remaining five, six of the government, about half of it, totally protected from any cuts i do believe we need to look at maintaining the level of spending that we agree to in the budget control act and not back away from that. so that's -- maybe we are in agreement, maybe we are not. but i see that as a challenge we face today. >> senator sessions, we may not be in agreement exactly how to accomplish it, but we are very much in agreement that we have got to maintain that level of savings. we have to find that level of savings. >> mr. secretary, please proceed. >> mr. chairman, senator sessions, members of the committee, i want to thank you for the opportunity to have a chance to appear before you to discuss the president's budget request for fiscal year 2013 for the department of defense. ennis point knows as a former chairman of the house budget

committee and the former omb director, i have a very deep appreciation for the important role that is played by this committee having spent a lot of time in this room on the budget conference is over the years, and your basic rule is to try to achieve the fiscal discipline and help set the government's overall priorities. as you know, as you pointed out, mr. chairman, i had the honor of working on most of the budget summit's and proposals during the 80's and 90's that ultimately helped produce a balanced federal budget. believe me, i know firsthand what a very tough and critical job you have, particularly given the size of the deficits the unfortunately face our country again. it is no surprise that there is a vigorous debate in washington about steps have been taken to

try to come from these challenges. we went through many of the same debates in the 80's and 90's. thankfully the leadership of both parties are willing to make a very difficult decisions that had to be made in order to reduce the deficit. ..

>> congress passed the bucket control act of 20111 imposing spending limits that reduced the budget by $487 million over the next decade. we made the decision in that fiscal situation that was presented to us, and also

established a new defense strategy for the future. we developed the strategic guidance before making any budget decisions to make sure that budget choices reflecked the new strategy. we were driven by strategy, not simply by budget reductions. we agreed that we are at a key inflection appointment. military mission in iraq has ended. we're still in a tough fight in afghanistan. 2011 marked significant progress in trying to reduce violence and transitioning to an afghan-led responsibility. we and our nato allies have a strong commitment to continue this transition until the end of 2014. last year, there were successful nato operations that led to the fall of gadhafi, and we have had very targeted counterterrorism efforts that significantly

weakened al-qaeda and decimated its leadership. although we had these successes, unlike pass draw downs where threats receded, we still face app array of security challenges. the chairman referred to a number of those. we are still at war in afghanistan. we still confront terrorism. if not in north africa and elsewhere. there's still a proliferation of weapons of mass destruction in the world. iran and north korea continue to undermind stability in the world. there is continuing turmoil in the middle east. any one of those events in the middle east could be thrust upon us in the future. there are rising powers in asia and growing concerns about

cyberintrusions and attacks. we have to meet the challenges and threats if we are to protect the american people, and at the same time, as we try to protect the american people, we have a responsibility to fiscal discipline. this is not an easy task. we made the decision that we didn't want to repeat the mistakes of the past. we've gone through draw downs in the past in the defense budget. we decided to be guided by these guidelines. number one, remain the strongest military in the world. number two, we did not want to hollow out the force. in fact past when defense cuts were made across the board, in effect, what you did is weaken every area of defense, and that's what resulted in hollowing out the force. to not have that happen, we have to take a balanced approach to both budgets and put everything on the table. lastly, of course, we didn't

want to break faith with the troops and their families, those deployed time and time and time again over ten years of war. the president's budget request $525.4 billion in fy13 for base budget and $88.5 billion to support the war efforts. in order to be consistent with title i of the budget control act, our budget request had to be roughly $45 # billion less than anticipated under last year's budget plan. over the next five years, defense spending will be $259 billion less than plannedded for that we had in the fy12 budget, a difference of nearly 9%, and over ten years starting in fy12, it's reduced by $487 billion. to meet the new budget targets and national security responsibilities, we had to fundamentally reshape our defense spending priorities

based on a new strategy. the department of defense stepped up to the plate to meet its spojts under the budget control act, but with these record deficits, no budget can be balanced on the back of defense spending along, and for that matter, no budget can be balanced on the back of discretionary budget alone, based on my own budget experience, i strongly believe all areas of the federal budget have to be put on the table, not just discretionary, but mandatory spending and revenues. that's the responsible way to reduce deficits and the responsible way to avoid sequester provisions contained in title iii of the budget control act. it was pointed out it cuttings $500 billion over ten years and inflights damage to the national

defense. the president's budget does put forward a plan to try to avert sequestering and reduce deaf fits by $4.3 trillion. whether you agree or disagree with the proposal, i encourage the committee to look closely at the president's approach and hopefully adopt a large balanced package of savings that triggers sequestering, reduce the deficit, and maintain the strongest national defense in the world. the $487 billion in ten year savings we propose come from four areas of the defense budgets. sufficiencies, structure reductions, procurement adjustments, and compensation. let me, if i can, summarize each of the areas. first of all, efficiencies, more disciplined use of defense dollars. on top of $150 billion in efficiencies that were proposed by my predecessor as part of the fy12 budget, we added another

$60 billion primarily from streamlining support functions, consolidating i.t. enterprises, rephasing military construction programs, and consolidating inventory and reducing service support court court contractors. as we reduce fore structure, something that secretary gates pointed out increased as a result of large budgets over the the last ten years, we have responsibility to provide the most cost official support for the costs we need. for that reason, the president requests the congress to reauthorize the reclosure process for 2013 and 20 # 15. look, as somebody who's been through the brack process, we had it in my area that constituted 25% of the local economy. i've been through this. i know what is means and impact it has on people as well as your

local communities. at the same time, i don't know of any other effective way to achieve infrastructure savings in the long term. that's the reason we ask you to consider that. achieving audit readiness is another key initiative helping the department achieve greater discipline in the use of defense dollars. as you know, i've directed the department to achieve audit readiness by the end of calendar year 2014, but efficiencies are not enough to achieve the necessary savings that we're mandated. budget reductions of this magnitude require significant adjustments to fore structure, prociermt investment, and, yes, to compensation. the choices we made reflected five key elements of the defense strategic guidance that we developed at the department with the support of the service chiefs, under secretary, and the secretaries. let me describe the key elements of the strategy and the decisions that follow, some of

the decisions. one, a force of the future will be small e and it will be leaner. that's a fact. at the same time, it should be agile, flexible, ready, and it should be technology advanced. we knew coming out of the wars, the military would be smaller, we would be doing a draw down in the military, but in order to assure an agile force, we made a conscious force not to maintain more fore structure than we could afford to properly train and properly equip. implementing fore structure reductions consistent with the new guidance for total savings of $50 billion over the next five years. gradually resizing the active army from 562,000 to 490,000 by 2017. that's a level slightly higher than where we were prior to 9/11. doing the same thing with the marine corp. from 202,000 to

182,000 marines in 2017. we are streamlining the air lift fleet. in addition, the air force eliminates seven air squaw drains and maintain a robust force of squadrons to maintain air superiority and strategic air lift that we need. the navy will maintain and protect our highest priority and most flexible ships, it retires seven lower priority cruisers that have not been upgraded with ballistic missile defense capability. second area in our strategy was that we wanted to rebalance our global posture to focus on emphasizing asia pacific and the middle east. those are the two areas where obviously we could con front challenges in the future. the strategic guidance made

clear that we have to do everything to project power in the pacific and the asia pacific region and in the middle east. to this end, the budget maintains our current bomber fleet, maintains our aircraft carrier fleet, maintains the big deck amphibious fleet that we need, and we do enhance our army and marine corp. structure presence both in the pacific as well as in the middle east. thirdly, we have to deal with our responsibilities elsewhere in the world as well. to do that, we recommend building innovative partnerships and strengthening key alliances and partnerships in europe, latin america, and in africa. this strategy makes clear that even though asia pacific and the middle east remit areas of growing strategic priority, the united states must work to strengthen its key alliances.

build partnerships, and what we recommend is the development of innovative ways to have a rotational deployments by the army, by the marines, by special operations to sustain a u.s. presence elsewhere in the world. fourthly, we wanted to ensure, as we must, that we can confront and defeat aggression from any adversary any time anywhere. this fourth area means we have to have maintain the capability to defeat more than one enemy at a time. in the 21st century, recognize our add veer tears come out -- adversaries come at us with 21st century technology. this is the world we live in. we have to spot with 21st century technology as well. we have to invest in space, cyberspace, long range precision strike capabilities, and in special operations forces to ensure that we can still confront and defeat multiple

adversaries even with the fore structure reductions that i outlined earlier. with some adjustments 20 fore structure, this budget sustains a military that is the strongest in the world. it's capable of quickly confronting aggression wherever and whenever necessary. lastly, the strategy was to protect and prioritize key investments. it just can't be about cuts. it has to be in what do we want to invest in for the future? our capacity to be able to grow, to adapt, and to mobilize. we evade recommendations to invest in science, technology, and basic research, special operations forces, and unmanned air systems, and in cyber. at the same time, we recognize that we got to be able to look at our modernization needs and make decisions about those that can be delayed.

this budget identifies $75 billion in savings resulting from canceled or restructured programs. they include $15.1 billion from restructuring the joint strike fighter, $15.1 billion in restructuring, $2.5 billion in terminating one expensive version of the global hawk, $2.3 billion from terminating weather satellite programs. key to this strategy is making sure that we, as we do this, we maintain a very strong reserve and a strong national guard. if then one of the very important factors in our ability to conduct this over the last ten years, the national guard and reserve fought alongside the active duty, and they've done a great job gaining tremendous experience. i want to be able to maintain that for the future so that we can mobilize quickly if we have to, and i also want to maintain a strong and flexible industrial

base. finally, the most fundamental element of our strategy and decision making process is not our technology or weapon systems, but for our fore structure, it is our people. they, far more than any pep weapons system or technology, are the great strength of our military. determined to sustain the programs that help our families, help the troops, help wounded warriers, and that meet their needs. yet, to build the force needed to defense this country under existing budget constraints, cost, growth, and military pay and benefits has to be put on a sustainable course. that part of the defense budget, by the way, has grown by nearly 90% since 2001. for that reason, we felt an ole gages to see how we can control costs in the area. military pay, there's no pay

cuts, and we'll provide pay raises the next two years. we'll try to limit the pay raises in the outyears. there's ways to increase fees for tricare costs. health care in the military costs close to $50 billion right now. there has to be ways to try to control those costs as well. as you know, we've recommended a retirement commission to look at that area for savings, although we do want to grandfather those who are serving so that they don't lose the retirement benefits promised to them. so, that in summary is the message. this is not been easy. this is a tough process. obviously, we need your support to review the proposals we've made and to give us your best guidance as well. i'm a blesser as someone who comes from the congress that we need your partnership in order to try to implement the

strategy, and as you know, this committee in particular, this is 5 zero-sum game. if you're going to restore cuts, you have to find places to cut it, and there's a very narrow margin here for mistakes. you're going to destroy funding in one area, restore another structure. if you restore compensation, cult in weapons systems. that's the process we went there. also, make no mistake, there is no way i can reduce the defense budget by a half a trillion dollars and not have an impact on all 50 states. that's a reality. in addition to that, i can't reduce the budget by half a trillion dollars, and fang frankly, not increase risk. bottom line is we think these are acceptable risk, but they are risks. you'll have a smaller force. you'll going to depend on mobilization. you're going to development of new technologies. we've got to meet the needs of

troops as they return home, find jobs, find support systems in their communities. as i said, there's no margin for error here. congressman dated as pointed out on a bipartisan basis that we reduce the budget by $487 billion, and that's what we've done. this is going to be a test. everybody talks a good game. everybody talks about putting off. this is a test of whether or not this is about talk or about action. whether or not we do this right and whether we walk away from that responsibility. mr. chairman, as a former member and chairman of the budget committee, this committee must never cease being the conscious of the congress when it comes to fiscal

responsibility and doing what's right for this nation. i look forward to working with all of you closely in the months ahead to do what the american people expect of their leaders. fiscally responsible in developing the force of the future, force that can defend the country, the force that will support our men and women in uniform, but more importantly, a force that is and always will be the strongest military in the world. thank you, mr. chairman. >> thank you, mr. foreman secretary. i understand, general dempsey, that you have a statement. we'd welcome you to make that at this point, and then we'll go to questions. first of all, i want to thank you, general dempsey, for your service. there's a distinguished service, very much appreciated the visit you paid to me several weeks ago. i think that was about as frank and forthcoming a discussion as could be had, and that's what has to happen. we are all going to have to be part of a solution if we're

going to actually produce one. welcome, general dempsey, and please proceed. >> thank you, senator conrad, and thank you, senator sessions. it's great to put this uniform op every day, and i commit to you to continue to have the frank conversations as we collectively try to do what's right for the nation. the budget represents a responsible investment in our nation's security, strikes a purposeful balance between succeeding in today's conflicts and preparing for tomorrow's. it also keeps faith with the nation and with the source of our military's greatest strength, which as you heard secretary panetta say moments ago, america's sons and daughters who serve in uniform. as we sit here, they are out there, well beyond our shores doing everything that our nation asks them to do. in just this past year, our soldiers, sailors, and marines further crippled our enemy's

al-qaeda, shifted responsibility on to afghan shoulders, protected the libya people from near certain slaughter, helped japan recover from a trammingic disaster, and they brought to a close more than 20 years of military activities over and in iraq. behind the scenes, they defended against cyber threats, sustained our nuclear deterrent, and partnered globally to prevent conflict. what's even more remarkable is they've been doing this for the past ten years, the way they've been doing this the last ten years in one of the most sering periods in our nation's military history. they doo it with uncommon professionalism and pride. they do it with moral courage backstopped by unsurpassed skill, and they do it with the unassailable support of their families so it's truly a privilege to serve with each and every one of them. they are our nation's pride, and our responsibility to keep faith with them, and i think our budget does that.

one way the budget keeps faith is by being strategy based. our new defense strategy draws on lessons of the past ten years of war and also acknowledges a new fiscal reality, anticipates a dangerous and competitive security environment, and it affirms our need for a joint force that is always ready and always dominant. this budget helps us build just such a military. it restores versatility at an affordable costs, retains the match on main lines capabilities like signer. it puts us on a path in 2020 that's global, networked, and responsive and prereceivers options for the nation and keeps faith by reducing risk ini inherent in all strategies that resource them. the risk here lies not in what we can do, but how much and how often we're asked to do it. this budget helps vie down that risk.

it does this in part by prereceiverring a strong re-- preserving a strong component and the joint capabilities we need for an uncertain future. this budget continues to invest in our people. it ensures our troops have the best equipment, trains, and leadership. to me, this is a non-negotiateble budget for the nation. it's how we win wars. in order to do this, we had to achieve the right balance among fore structure, modernization, operations training, pay and benefits, not just within each service, but overall. i want you to know that this budget is a budget for 5 joint force, not the aggregate of individual service budgets. the context risks up end the balance and could compromise the entire force, and up discriminant changes like the cuts looming on the hoer rye san through sequestering causes solve inflicted wounds to the

security. timely, this honors commitments by honoring the military family with the care they deserve. there's no freezes or reductions in pay as the secretary mentioned, no lessening in the quality of health care and for active duty members in particular and medically retiredded and wounded warriors. family support and child care are safeguarded, but we can't ignore reality. it's one-third of defense spending. we had to act to slow the growth. pay raises over time and retirement reform gets a look. we adopt modest increasing in health care fees to retirees. we must act now to make our health care systems sustainable. if we don't, it's very viability will soon come into question. i know there's concerns that these changes and about others, and believe me, i've heard the concerns. our troops, our veterans, and their families, you have my

commitment to continue to work on these things, make sure we recruit and retain the very best. in closing, i offer my sincere thanks to this committee and to the entire congress. thank you for keeping our military strong. thank you for continuing to take care of our military family. thank you for supporting those who serve, who have served, and importantly, who will serve. i know you share my pride in them, and i look forward to answering were questions. >> thank you very much for that excellent statement, and we're going to go to questions. we're going to do 5-minute rounds because there's a number of people given the need for the secretary and the chairman to leave here at an appropriate hour. first of all, this is a challenge for all of us to face a circumstance in which we borrow 40 cents of every dollar we spend. our revenue is at or near a

60-year low in terms of share of the comply. our spending is at or near a 60-year high in terms of share of our spending. our gross debt is now 100% of our gross domestic product. these are hard facts. secretary pa panetta, having worked with you before, as i indicated earlier, being an ally and your efforts to get a balanced budget before, and last time we've actually seen success in accomplishing that, you know, i think, better than almost anyone in this town, maybe almost better than anyone in this country, how really hard it is to get the job done. what is interesting to me is how many speeches are given, how many brave statements are made when the hard choices are made,

how many few people are left at the table because it's not popular. the regard reality is doing what has to be done. reform entitlements. it's not popular. to reform the revenue system. that creates its own challenges. to face up to costs in every part of the federal government. there's a constituency for every dollar. nobody knows that better than you do, so let's start with this question. the budget control act asked for $487 billion in savings over ten years. that's in the president's budget, that's in train. budget control act also called for sequester if the special committee did not come up with a specified level of savings. the special committee failed. that's the hard reality we're left with. they did not succeed, and so

we're left with a sequester which calls on additional savings out of the defense of, i think, general dempsey used the number as $535 billion. our number is slightly different than that, but almost the same. the question is this, and we've heard you loud and clear, sequester goes too far. is there a place in between? i say this, and i know you know you don't want to negotiate against yoirgs. i understand that. i was part of the simpson-bowles committee and they had savings almost as big as the sequester amount in addition to the other savings in the budget control act. other bipartisan commissions in trying to bell this cat called for similar levels of savings, and i understand again, loud and clear, we hear you, that that,

from your perspective, goes too far, but let me understand is there no additional savings that can be derived beyond those imposed in the first tranche of the budget control requirements? >> mr. chairman, having been through this process a great deal, $487 billion, almost half a trail dollars, is the largest amount ever included in any budget agreement or summit that i ever worked on. it's a big number, and yet, i thought it was very important to work with the service chiefs and others to develop a strategy that would be able to implement those savings in a way that would still protect the kind of force we need for the future, and i think we've done that. we tried to do this in a responsible way, and i guess

what i need to have in order to make this work, frankly, is a degree of stability with regards to the defense budget, and as to where we're going over the next ten years. particularly in light of the threats we're confronting. i mean, this is not like the past. we got some very significant threats that are still out there in the world, any one of which could have us immersed in a new conflict, and anyone of which demands we have a presence in the world. my view is that what we have presented here is a strong budget. it is fiscally responsible. it sets the right path for the future. at some point in the future threats reduce, if there are areas of efficiencies we can gain additional savings, of course, we'll look at those additional savings, but for now, what we have put in place, i think, remits an important step

that we should stake -- stick to. >> all right. let me just say to you. i want to be very honest and direct. i don't know how to write a budget that achieves the kind of deficit and debt reduction we need, and by the way, i'd go further than what the president's presented. i actually would go further than simpson-bowles, and i tried to convince simpson-bowles to $6 billion of deficit reduction to balance the budget on that amount. there was not support from the commission ongoing that far so i think you know where i'm coming from. i'd like to achieve a balanced budget in ten years given the level of debt that we have. i don't know a way to do that without fundamentally reforming entitlements, without fundamentally reforming the tax system asking those who are the best off among us who enjoy

certain tax preferences to give them up, and i don't know any way to do it without asking for additional defense savings. let me ask this. before the simpson-bowles commission, i asked about their assessment, and what they reminded of us is 51% of all federal employees are at the department of defense. they also reminded us that did not count contractors. when asked how many contractors, they couldn't give a number. i asked for a range. they said 1-9 million. do you have a better assessment today how many contractors there are at the department of defense? >> i don't know where the 1-9 came from, mr. chairman. we have limited data, but it's

more like 300,000 full time contractor equivalents. the 1-9, maybe including multiplier effects in the budget. i'm not sure. that's our rough estimate thousand. >> can you tell us, what is the cost per soldier, maintain a soldier in a year in afghanistan. >> right now, about $850,000 per soldier. i'd be careful with that number because there's fixed costs built into the number, and the decisions you make about the fixed cost affect that. >> no, i understand that. i do say this to you. when people back home ask me and when i give the number i have $600,000, and when i tell them that, that takes their breath away. can you help us understand why

that cost is so? $850,000 a year per soldier >> let me try. the extra costs in afghanistan are higher operating costs for weapons. when you're in a war, you operate on a much higher tempo. that's a good part. that's probably 50% of the budget. there's special pays and allowances, and there's all enabler costs, for example, that cost for explosive devices, all of those are in the 850 and 600,000 might be a variable cost just looking at an operating cost. it's mainly operating at a very high tempo in a war zone. >> i think that did reflect the variable tasks. i've gone over the five minutes, but we'll go to senator sessions. i just want to conclude the

round on my part by saying i think at the end of the day before we're done, it's not going to be possible absent some other thing happening, and goodness knows that can happen, and we all understand that, but budgets have to be based on what we know at the time we write them. we have to have additional savings if we're really going to deal with the debt threat confronting the country. >> mr. chairman, can i comment on that? look, this congress proposed, as part of the budget control act, a billion off savings off the discretionary budget. you can't meet the challenge you're facing in this country by continuing to go back at this discretionary spending. that's less than a third of

federal spending. now, if you don't, if you're not dealing with the two-thirds entitlement spending, not dealing with revenues, keep going back to the same place, frankly, you're not going to make it. you're going to hurt this country's security, not just by cutting defense, but by cutting discretionary spending that deals with the quality of life in this country. >> i couldn't agree morement i don't know what can be more clear, and you understand it because you wrote budgets around here, as have i, and it's not possible. we -- in fact, it's almost bizarre, suspect it, what the strategy's been so far? the strategy so far is to go after discretionary spending. it is the part of spending that's going down as a share of gdp. we don't go after the part of spending that's going up as a share of gdp and going up markettedly. those are the entitlements.

we have to be honest with people, and we have to help them understand what is the place we're spending over time is really rising dramatically. it is in the entitlement accounts, and on the revenue side, the fact is, the revenue's the lowest it's been in 60 years. this is reality talking. i'm glad you gave us a dose of it here. senator sessions. >> thank you. mr. secretary, thank you. as we wrestle with the challenge, i would have to say that the discretionary spending in this country is embarked on non-defense, has grown substantially, 24% in the first ten years of the president's tenure and not counting the stimulus package that was almost a trillion dollars in addition to that. we are over a trillion in the

other stimuluses we've had sense. we're spending a lot of money there. i would also note that food stamps as an entitlement increased 300%. there's a lot of fraud and abuse and waste in the program. medicaid increased 37% in three years. defense department base budgets up 10% while the war costs have been dropping over those years. medicaid is a huge growing program. medicaid, social security, medicare, increasing at almost 8% a year whereas our economic growth is projected to be about 3% over the next ten years. that's why that's unsustainable. would you agree, mr. panetta? that's an unsustainable path. >> there's a lot of unsustainable paths. >> it's an unsustainable path. i guess what i say to my colleagues, and i hope that we understand this, that food

stamps, medicare, medicaid, social security are exempted from any cuts on the sequester. not a dime. the bill cuts dramatically on other discretionary and the defense, and defense had not had as much increase prior to these cuts taking place as the other discretionary did, so i think that defense being a core function of government, this is a dangerous path for us to be in. we've got to get off of it. mr. secretary, we talk about the money short fall. admiral mullen says that threatens our national security inevitably just as crunching it down as we did. do you agree that it does threaten our national security?

>> i do. >> with regard to the sequester, and the situation we're in, the president's budget calls for an welcome $2 trillion in new taxes. as a reality, that's not going to happen. he also basically abandons the sequester increases spending about $1.6 trillion over where we were with the sequester in place, so i'm worried we may not reach a conclusion of this satisfaction before you face financial challenge of great significance. do you have plans now to deal with the eventually an agreement

will not be reached and you have to go forward with the sequester reductions? >> senator, we are not and have not made plans with regards to sequester. the problem is this -- that sequester has this mean ax approach for formulas across the board that, you know, frankly, you can't do a hell of a lot of planning for. secondly, it would truly be a disaster. i have to take the strategy i just presented to you and throw it out the window if sequester happens, and for that reason, i just i urge the congress to come together. we will work with you to try to develop some approach that can detrigger sequester before it happens. >> i'll work with you on that. i believe that's what we have to do. we have multiple threats around the world. i just returned from a trip with the senator mccain, bloom

bloomenthal from afghanistan, i egypt, libya, israel, and you never know when danger breaks out next. there's obligations in the pa civic, and that's -- pacific, and that's very important. there's budges that have to be maintained sufficiently to meet the challenges we face, and i do believe that the remaining five sticks of the budget almost half of it not touched at all with any reduction in spending have got to be a little more than half. that is really just a challenge to us. we just can't balance the budget on the back of the defense department, and if we break faith with those fabulous men

and women deployed repeatedly away from their families, placing their lives at risk, if they see what we've done as this proportionally targeting them for the wasteful washington spending that's been going on, we would have broken faith with the best people this country produced, and i hope and pray somehow, mr. chairman, we can work this out, and i know you share on those concerns. >> thank you. senator sanders. >> thank you, mr. chairman, and mr. secretary and general dempsey, and thank you very much for being with us today. i'm beginning to pick up on -- i'm beginning to pick up on a slightly different tangent from my friend in alabama and suggest to you everybody in the country understands our country faces huge economic challenges, middle class collapsing, more people living in poverty than any modern time of the country, which is the reason medicaid and

food stamps are up, 50,000 people without health insurance and millions of families struggle to send their kids to college to pay for child care, and how we deal with every aspect of the budget, including the military, impacts every other. now, the reality is, as i understand it and correct me if i'm wrong, military spending tripled from 1997, tripled, and we now spend more on defense, as i understand it, than the rest of the world combined. i want to start off by asking you, mr. secretary, is my understanding is that the united states still operates 268 military operations in germany and 124 in japan. in germany, people have health care, germany, their kids go to college without having to pay for this as a matter of fact. i'm kind of interested to know why we have 268 million military bases sending germany -- i

thought that war was won years ago. can somebody help me out on that one? >> yield to general dempsey on this. 268 must remember is high. we cut almost 140 bases out of europe over the last few years, and as a result of bringing down two additional bring gids in -- brigades in europe, we bring the structure down more. >> i may be wrong, but by the way, why are we over there when it's been over for a few years? who are we defending? why do we have the presence in germany when we have 50 million people in the country who have no health insurance? >> i can't answer the latter part of your question, senator, but i'll say i'm an advocate of main taping the relationship with nato. they did great work around the world, have a $300 billion budget in the aggregate.

if we go to war tomorrow, chores the -- >> who are we going to war with in europe? >> that's not the point. the first people we ask to go with us are europeeps. >> does that answer the question of why we have that type of -- 268 military -- >> i'll get you the data. i spent 12 years in germany, and i never counted anywhere near 268 installations, but we'll take that one for the record. >> i want to pick up on another question that the chairman asked about defense contractors. my understanding is that in the past, the dod estimated that we have some 500,000 or 600,000 people who are military contractors and that the gao estimated the number at 900,000. >> you know, i think i have to

see the definitions of what we are including. are we including private sector contractors supporting others, the multiplier effect? >> i suspect we are. >> the numbers, they are rough in number, the portion, the full-time equivalents we pay is around $# 00,000. >> i had an interesting experience. i was in afghanistan a year and a half ago and we were taken aaround by two fellows, one with u.s. military, one was a private contractor, both doing basically the same work. the guy who was the contractor was making substantially more than the fellow who was in the army. does that make sense? can you talk about that? >> let me just say, senator, that the area you pointed out is an area that frankly needs attention at the defense department. one of the reasons we are looking at $60 billion in trying to make the place more efficient

is going after contractors and trying to reduce the numbers, and so i just wanted to assure you that i am aware of the problem. secretary gates at one point basically said he didn't know how many contractors he had at the defense department much it's a large number. frankly, it's too large, and we have to do what we can to reduce that. >> i appreciate that. one last question. you were dealing -- huge budget dealing with thousands and thousands of defense contractors, ect.. my understanding is that the top three defense contractors paid over a billion dollars of fines over the 10-year period to settle for allegations. that's just the top three. there's massive amounts of fraud going on in terms of defense contractors dealing with the dod. are we moving aggressively to try to address that issue? >> that is part of the effort

to -- two ways. one, to be able to go after those kinds of fraudulent activities. in the various contracts that we have to try to achieve savings there, but in addition to that, the auditing, i mean, we're a department that still cannot audit all of our books. that's crazy. >> that is crazy. i would just say, and thank you for raising the point. we hear people talking about we need more money, and what you just told us is we don't know what we're spending and how we're spending it. >> we don't have audittability, and we owe that to the taxpayer. >> i'd think so. >> one last -- >> no, we have to stop there. we're a minute over and with the number of senators, if we don't impose the discipline, we don't get done on time for the senator to meet his requirements. senator enzi. >> thank you, mr. chairman. i congratulate you on the

historic hearing, and i really appreciate it. i know you've been here in number of other capacities, and k of course, i come from wyoming, very patriotic state, probably has the highest percentage of people serving or have served in the military, and there's a rumor attributed to the president there's one base in each state eliminated, and wyoming, we only have one base. it's by shyian, and it's an integral part of the city of 56,000 and the two work together and it appreciate the military doing a number of tests of intermilitary cooperation there which have been very successful, and so i appreciated your comments that you'd be going through a brack process, and we have no problem with if and know it's been difficult, but fair in the fast, and most people, and i just want your reassurance that's the process you'll be

using? >> that's correct. >> thank you very much. i also was the co-founder of the air force caucus and former member of the air national guard. i noted your comments about the reduction in strategic air lift, and so i -- am i correct in assumes that that will rely more on air national guard units then? you were very first time at -- very efficient at providing that. would that be a fair assumption? >> the chief of the air force, of course, who is responsible for two of the legs of the triad are looking at the balance of capabilities both active guard and reserve. i don't have the answer committed to memory on how it affects the guard, but i'm sure we can get you the answer, senator. >> again, i hope you look at the cooperative efforts we've had in combining regular air force and air national guard in wyoming. my third concern, i mentioned we

just have one base in wyoming, a missile base, and senator conrad and i share another caucus that worries about the nuclear capability of this country, and we're wondering if -- there's rumors the departments preparing unilateral reductions and nuclear forces beyond the requirements of s.t.a.r.t., and so is that the future of the icbm force? are there really any significant budget savings from icbm reductions? >> senator, one of the things in our budget is to maintain the triad, the nuclear triad and deterrents that we have. we think we need to maintain our missiles, maintain our submarines, maintain our bombers that are part of our depercent, and we'll continue to do that. the one thing you're referring to is a review that was being conducted, i think, pursuant to legislation from the congress to review our nuclear stockpile and

nuclear issues, and there were, you know, a number of options that were discussed. there is been no decisions on that, and frankly, one of the options that was presented was maintained in the status quo. >> i appreciate that, particularly in light of what's happening in iran now, deterrents may be absolutely necessary, and my final area of concern, because i got a letter just this week from a man in the military who is about to retire, and his family has been a part of tricare, and he appreciates thattings but he's heard these comments about how the cost for tricare, the participation was going to have to go up, and the reason he wrote me is because he has a sister that's on welfare, and his sister pays nowhere near the cost that he he does, and so he's not sure that the military is such a good deal compared to welfare. that, to me, seems to be a

terrible comparing's. is that something to be taken into consideration as you look at the additional costs? >> well, in the recommendations, we do base it on income levels and with regards to retirees and what they are asked to provide in additional fees. the problem we have, senator, is that the costs in health care have grown dramatically as they have elsewhere, about 50 -- $50 billion in the budget in terms of health care, and looking at ways to see if we could provide additional cost control and increasing the fees is one of the recommendations that we've made, and we do it, still, recognizing that the try care program is a much more -- a much more -- in terms of cost, is a much less in cost than the private sector in terms of the

same health care benefit, and so it's still a pretty good deal that we provide for retirees although we ask for additional fees. >> i'd appreciate the brevity of your answers and the clarity of them. thank you, mr. chairman. >> thank you, senator. senator nelson. >> mr. secretary, thank you for your long and distinguished record of public service. even when i had the privilege of serving with you when we were both young congressmen, and you were the head of reconciliation in the budget committee in the house, and nobody understood what reconciliation was, and you were trying, and here we are some three decades later still talking about reconciliation, so thank you. i want to call to your attention on subject matter not directly

in your jurisdiction, but i have filed what the administration has requested of veterans' conservation corp. for unemployed veterans, to bring them into the federal employee for one year, these are veterans coming home that are unemployed, to do projects helping the environment, teachers aides, ect., and give these veterans a chance to get over the hump, and that indirectly affects you. it certainly, even though it's going to be run through the department of the interior and with the concurrence of department of veterans' affairs. i wanted to ask you about this sequester. now, let's remember what the sequester was.

it was an attempt to try to create a guillotine to hang over the heads of the super committee so that the super committee would have a significant incentive in order to come to agreement, and, of course, the soup committee did not on a vote of 66, and now we are having to deal with the sequester, which is law unless we change the law, and so what do you do? you talk about what you need is certainty, and in budgeting for the defense department, and yet, you've got this guillotine hanging over the head of the defense department that would go into effect in january of 2013. how do you deal with this in your budgetary planning? >> well, senator, it, you know,

it is very unfortunate because frankly, it sends a dark cloud over the defense department, and frankly, our defense department contractors that worry about the possibility of sequester and what it means for their employment force as well, and so there are a lot of very concerned people looking at the prospect that it may happen, and for us, as i said, obviously, we are not planning. we have made no plans for sequester because it's a nutty formula, and it's goofy to begin with, and it's not something, frankly, that anybody who's responsible ought to put into effect. it was designed as a gun to head. >> yes, it was. >> and, you know, i was disappointed that the super committee failed in its job. i have to tell you, you know, having been in the budget

process for a long time, there was a time when we had to be in a room negotiating with the administration on dust reductions, and frankly, we were not allowed to leave the room until we resolved the issue, and that's what should have happened here. >> it should have. i>> i know i'm taking up your time, senator, but, chairman conrad, you showed the time line, or senator sessions, the times in the past of draw downs, and you mentioned a moment ago to plan for what we know. well, one of the things we know is this draw down is occurring not in an era of peace and stability following conflict, but in an era that's more dangerous than the era we're just leaving. that's a big difference in terms of how we deal with this. secondly, on sequestering and our ability to plan for it. we'd have to change the strategy

without question. third, the thing you have to understand is some of the variables that we can effect are fix. the manpower, already justify ramping 125,000 notably soldiers and ma reaps. we can't -- marines. we can't speed that up. infrastructure's fix because if congress did another round, that takes time to implement. there's four places to go for money if we have to go for more money. operation, maintenance, training, and modernization. that's it. that's all we can go. if i can look for money in this environment? no, sir, absolutely not. ..

>> senator johnson. >> thank you mr. chairman and general dempsey, mr. hale bought into for your service. i mean that sincerely. i'd like to reinforce a couple point senator sessions made earlier with a couple grafs. the first one, i think it's -- i would like to dispel the notion contrary to popular belief that the war in iraq and afghanistan have been the primary cause of the deficits. it's not true. the last ten years we spent a total about $1.3 trillion, and this graph shows the spending on the war in blue and the deficit

is in red, and so i think just to make that point because i think so many people believe that it's the war spending causing deficits it's not the case. last year we spend about $115 billion on the war and we had a 133 trillion-dollar deficit. so, that is the first point. second, i am new to town and i'd like looking at history and numbers come in and i was really surprised when you take a look at the average spending on defense over the last number of decades during my lifetime which declined. we've gone from an average of about 8% in the 60's down to 5.6% in the 70's and 80's, 3.8% in the 90's, 3.6% in the last decade, a record low during my lifetime and not the last three years it's been about 4.8% as well as if total budget it went from 43% in the 60's to 28, 25%.

the last three decades it's been 18 to 19%, and now the fiscal 2013 budget would have it at 16 per cent. so, to me i believe it just makes common sense the defense of the nation is the top priority of government, and looks like our federal government has changed its focus from defending the nation to protecting entitlements. let me start first by asking why is it the case president obama and all five democrats picked up defense first for addressing the fiscal situation? that is the first thing they want to cut. i don't understand that. do you have an explanation on that? >> senator, first of all that is not true. the fact is that it was the congress through the budget control act that mandated the reductions in defense. i'm following wall and the

congress past that. >> went to the defense cuts really pushed by the democratic side and by the president? let's face it, that was the hammer the republicans had to come to the table with is the sequestration which you refer to as mindless and i agree with that. >> my understanding is however you did it was about $1 trillion in discretionary savings. the congress made a decision that you were going to cancel those funds for the national security as well as the non-defense discretionary that automatically established a number of post a $500 billion that we would have to reduce defense. i think it's unfair to say that somehow the democrats were pushing for but it's basically a bipartisan deal. >> next question then i think as the chairman pointed out and ask you agreed with in the entitlement spending it's really what is driving our deficit

especially long-term. can you explain why the president hasn't proposed any kind of reform for saving social security and medicare? there's been no proposal whatsoever and even now admitted that there is no plan to try to save social security. why is that? >> if i were a director i could engage with you on that, but i'm the defense secretary and that's what i focus on. but i'm sure that the president has indicated that if there's a willingness to come together and look tall elements of federal spending including the entitlements that there would be the willingness to be altogether the kind of comprehensive solution that i've always been a part of in my budget history that needs to happen now. >> understand a comprehensive and balanced the fact is it true that you recognize as social security and in particular medicare is driving the problem there's been a proposal to use

the political football that's basically true, correct? >> well, you know, it's the old game. on one hand, -- that's the problem, it's a game. >> that's unfortunate, it is a game because on one side people will defend not touching revenues which need to be part of the deal. on the other side there are those that will defend not touching entitlements which have to be part of the deal. if you want a deal with the size of deficits this country is facing, you better put everything on the table. >> one quick question. when we are asking the military to increase their contributions and tricare we are not asking any other government employee to do that. why is that? why ask the military and not i guess maybe unionized members of the federal workforce? >> i'm dealing with the defense budget, not other elements of

the budget, and we felt that in order to control our health care cost, this was one way to try to do that. >> thank you, mr. chairman. >> senator begich? >> before i ask my questions or comments, i would like to give a little bit of good news. i do this on a regular basis because where we were three years ago and where we are today reaching headlines from just yesterday the u.s. when seals data from housing trends make home depot a buy because people are remodeling, spending the homes the levin, home sales rise to a near two year high. the economy moving in the right direction. national was a season for business economics forecasts have raised their expectations for employment in home construction and business spending. why? because the economy is moving in the right direction. consumer confidence is up for the sixth straight months to build along with that today if i

recall the numbers unemployment claims are at the lowest level for the most consecutive level since march of 08. i like to do that because this is a budget committee meeting. we want to talk about not only cuts but where we are in this economy. is it where we want it to be? no. kanaby bigger? yes. is it better? absolutely. so i want to put it in context here. i do want to come to my colleagues on the other side, i can answer your question on the insurance premiums, not that i want to see any premiums increase but they pay a lower premium, lower co-payment than the folks that work in the federal government as a civilian worker. that's just the facts. that's why there's an adjustment. without the charges want to make sure that's clear. the other point of the chart what's interesting but the expenditure is to include state department, cia and by the way, the va.

the would-be trillions to the extent of the war. we cannot forget that. i know i serve on the veterans committee and a couple of my other members do. that is an ever-growing cost to us that we must bury and we are responsible. they serve our country. they did it at call. we can argue over the war but the va must be taken care of and the veterans must be taken care of so i want to be sure when we talk about the numbers everything is included in to the future because it's important the public watches or is subjected to watch this in the opportunity they get the facts. i want to ask you specifically i want to be little parochial but i do want to follow for one question that was asked earlier and leads to my question about the air force base in alaska. first before i do that i can't have the details. another was to be a debate over how many bases in germany and so forth there's over 600 military bases overseas and i guess my concern is as we look at a

realignment especially now that we've identified asia-pacific as an important asset that we need to protect and be engaged in and of course i am by yes, alaska is by year and i see the closest of the van hawaii despite how they put alaska down by california all the time no disrespect to your state but to get a little confused on the math. but we are closer in a lot of ways. so i'm a little confused on why we have the 600 plus spaces with limited -- i now understand now you are thinking about the brigade to read two years ago we asked for this and i know you were not there but we ask for this and now there's some discussion. at the air force base which seems to be in the right location the f-16 is planning to move on the same debate we had come exact same debate. we are not doing it right. the folks are just doing it. so, first question is did the department of defense legal counsel look at this and how it conforms or not conforms to what may be required, and this seems

to be kind of going around the system. >> senator i think the reason the president would be requesting is to basically go through the process of what infrastructure should we reduce in this country, and so that's the process i would expect we would go through. >> but here's what they've done come here is what gets me very concerned. they said we are going to move these and now the air force is to the analysis that it's going to save money versus the army which i will use fort wainwright and others in alaska they are going through a process before they determine what they are going to do. i don't -- i don't get this to be very frank with you that it's almost like they've picked the location, many locations i will say. some of my colleagues in the states, but they are now

starting the analysis. does that seem -- this is the same debate we have on the same location. >> i strongly urge that you talk with the air force chief. >> we have. general schwartz and alaska and we will have the same questions. that's when you were here today and i'm asking you today. >> and i guess i have to ask the same. can i look forward to having the response back? the would be important. the last thing i will say, we will put in for the record in this committee a year ago and it was with the chair bringing folks in front of us we discovered some expenditure that we think is not the best use of the money i need more definition one your funding that and i have some other questions i will submit into the record in keeping with my time as the chair restricted psp but i appreciate that and people get a full response back to you. but the problem is if we don't need our funding requirement that the obligation that we made

will incur an even larger fine for not putting -- >> i will end on this. every contract you signed and every contract to beat could department science is under no appropriation knowing that this body could not appropriate -- we never exercise that. it's like a fate. no fines then because they signed a contract on that obligation. >> hi understand and appropriations alternately make those decisions. one way or another we will pay a price if we don't meet that obligation. >> senator? >> thank you, mr. chairman. thank you, mr. secretary. thank you, chairman, secretary hale. secretary, excuse me, chairman dempsey, i have great respect for you and your service to the country and the important role that you play, but i have to ask you about the interview that you

gave with cnn because i need to understand. when you were asked about what we were counseling our is really partners with respect to iran and you said you were counseling them not to attack iran and then you also said that he believed the administration believes i assume that the regime is a rational actor can you help me understand why you would have said that particularly in a public interview about one of our closest allies? and i'm really concerned that in doing that then you're sending the wrong signal to iran. can you help me with that? >> you beat senator gramm to the punch line.

honestly i want to clear up some things. first of all i didn't council israel not to attack. we had a conversation with them about time, the issue of time canada will require a much larger conversation but on the issue of irrationality, look, i agree that iran is a regime that is dangerously misguided and look at its decatur it protects itself and lowercase its neighbors and interferes it threatens its neighbors and disregards its own citizens so none of that is acceptable to us. our way of thinking and our way of the rationale it does fit the pattern of thinking in a 30 year history of conduct so my view of this is we can't afford to underestimate our potential adversaries by writing them off as irrational. that is kind of the position of the phrase, and i personally

don't mistake iran's rhetoric for a lack of reason. i think the issue here for us all is we have to decide what global pressure including the use of force if and when necessary can turn that regime away from its nuclear ambitions, its nuclear weapons and vision so thanks for letting me clear that up. >> as i understand your testimony you wouldn't take force as an option off the table? >> absolutely not. one of the things i'm concerned about when you think about with the description as the way that it can across in the interview with cnn as describing iran as a rational actor is this issue that if they acquire a nuclear weapon it's not just about their using but also the possibility they are a great state sponsor of terrorism that they could provide that nuclear weapon and let others use it on their behalf is that not a real risk? >> that is a real risk as is the risk of nuclear proliferation among others who are feeling

threatened to acquire their own nuclear weapons. >> i think when we hear those types of possibilities we just heard today that that is a real risk if iran acquires a nuclear weapon but most of us think that can't be irrational act from our perspective of terms of looking at in the world and the number of innocent lives that can be lost if a terrorist group acquires a nuclear weapon in iran provides a trader was group you would agree with me that understand that media by their calculations it's rational but by our it would not be. >> i think that is exactly the point and as we seek to influence their behavior we have to understand their way of thinking. the was the only point i was making. >> i appreciate your testifying about that today, and i would ask secretary leon panetta just as a follow-up to the question senator johnson asked really is this the bigger question and the president's budget you are

recommending increases to our active duty and veterans in terms of health care costs. but it doesn't seem the president is proposing any increases as i can see it effectively none to the civilian work force. and i think that is a hard asked of the military when they were already making so many sacrifices when we aren't making sacrifices on the civilian side, too. do you think that is fair and you think that really we should also -- and putting myself but we, members of congress have with the civilians have i think that all of us should be sacrificing and i worry we are asking them to the first to the understanding that i know health care costs are a big issue. >> senator, you know, again, if i was and omb director i think i would give you an answer that dealt with the entire budget the president presented, but as the defense secretary, had to deal with what i was responsible for and that's why we approached it based on where we thought the savings could be achieved. islamic i just worry about your

ability to go to our military and ask them to do this to make the sacrifice when civilian employees of the federal work force, including members of congress because we get the same health plan or not making a similar sacrifice and then you as the leader of the department of defense i worry about what message we're sending to our military with that so that's where i worry and a you as a leader having to go and sell that. >> one of the great things about our men and women in uniform is they go where they are told to go and do with their response to do and they salute and do the job, and that's what they're doing here. >> we have a responsibility for them. >> senator, senator whitehouse? >> thank you, chairman. >> mr. secretary, welcome. we are gearing up towards

another background, maybe two of them i gather. the last as understand only address to american bases. you just said the question in the upcoming would be what infrastructure should we reduce in this country is there a way to and should we in the next round of domestically and overseas bases, particularly given the extent to which so much of it is done can now be done from the remote location because of our electronic capabilities. we fly aircraft from remote locations far away from theaters of operations for instance. >> senator, we have the authority that we need to close the bases abroad. wheat closed about 140 bases in europe and we are looking at another 40 to 50 basis will be closed. so, we do -- we do have the authority to look at the

infrastructure abroad and try to reduce that. when it comes to this country, the only way we can do it obviously is with the approval of the congress, and that's why the process was developed. >> and i get that is a political difference between the is a gift and offshore base and a requirement that congress approve over to the rate but none the less when you are looking at our posture with the military and try to figure of were the most effective basing his is a need a bit artificial to have at only look at american bases and not overseas bases shouldn't it be included into an affect global brac? >> i think congress certainly if it proceeds with the process as every right to ask the administration in this department to present our rationale for what we are doing with regards to infrastructure

abroad and how that fits the larger picture. i agree with that. >> let me jump to cybersecurity putative owsley understand your testimony since $3.4 billion for cyber command, which i applaud, which i think is necessary frankly we are behind the curve, and we are in a race and the threat vector is developing at a far greater rate than our defense capability is growing against. could you speak a little bit about military supply chain security against planted cyber threats? we have supply chain security for textiles, thank god for the rhode island industries and aircraft flying around that have components that are built overseas. if you need more resources now that it's become great to make

sure our supply chain securities protected against cyber intrusion? >> it has been pointed out we are seeing increasing attacks, cyberattack not only in the public sector of the private sector as well, and i think this country has a responsibility to develop the defenses that have to be there in order to ensure that this country is not vulnerable to those kind of attacks. the money that we have in our budget is to improve our to the blaze within the defense department within the nsa but i would suggest that part of that consideration has to be what we need to do to make sure that the equipment and the technology that we are getting all of that has adequate protection against the cyberattack. islamic let me make a request for the record if i may since my time is starting to run out.

one is that if you could break out for me what in your budget is related to the security and to the extent that you can make that specific to the cyberattack from the chinese if you go that far i would like to get that putative the second thing i would like to do is have a discussion with whoever in the department of defense is focusing on health care reform for the department defense you are a very big by writing to some $50 billion in health care to read a lot of the gets delivered overseas but a lot of it gets delivered here. that is the kind of money that can make a difference in how people behave, and there's a significant reform movement that is taking place and i just want to be connected with whoever is engaged in that for the department of defense to disconnect i will have our undersecretary responsible for the health care or get in touch

with you and go through the issues that we are dealing with. >> i appreciate it. thank you mr. psychiatry and gentlemen for your service. >> senator portman to the estimates before mr. chairman. i'm going to start with undersecretary hill. first to thank him for working with us to insure the cfo's are on the government and have the standing they deserve and appreciate his conversations with me in that regard and ensuring that legislation kept them as confirmed individuals in their various departments and agencies in putting the dod. auditing. as we begin the downsizing it seems to me that most of the critical things are to be sure that we are doing it right, whether it is the first $87 billion or whether we have to go to something beyond that and i am concerned we still don't have that kind of sound of it that we would like to have of the department. can you give a report and what your matrix of the reach of the audit to devotee given the

sacrifices they have to make? >> i can first thing to for your help on this. appreciate it. we have a plan we set up a couple of years ago to move towards the audit statements in a cost-effective manner focusing on the information the department moves to use to manage, pick a budgetary information and counseling and location of our assets. a secretary panetta has accelerated particularly the budget portion of it because it is a key seeking the readiness the 2014 with all of the statements being audited ready by 2017 as the law requires. we've set aside a fair amount of resources and have the government process as i mentioned we have a plan and we have some near-term success. the marine corps i should say is going through a process known for its budget statement. they are close in terms of getting an opinion and a variety of other appropriations which are the fund's distribution

process. we are trying to do near-term fangs that show progress frankly to ourselves and to the congress. we are not there yet. but we are committed to meet. i think secretary panetta has a golden opportunity for us and we will leverage in every way we can to move forward on this important area. >> thank you. appreciate your efforts and appreciate having the former omb to get attention on it. finally, what the director to make good, congratulations leon for continuing to exceed expectations with the wendi directors. quickly on this issue of the sequester. first you said, and i was here listening to your testimony that it creates risk and that is the for under $87 billion. you also said those were acceptable risks and explain why. this must mean that there are additional risks with step two which was an additional

$335 billion. how would you describe those risks and should we move forward on the sequestered as currently planned? >> they would be devastating because the cuts would be made according to the formula across the board. so it would come out of the structure and readiness and i assume compensation would be on the table as well, and would come out of every area in the defense budget and the danger is that when you do it that way, you automatically hollow out the force. because what you're doing is you are weakening every area of the defense budget by some kind of a blind formula. and it means even though we will have a smaller force structure as a result of those cuts, they will be ill-equipped and ill trained and ill-prepared to be

able -- >> when do you need to start making the changes? in other words, january 1st is when the sequester goes into effect but wind would you have to start making the changes at the dod? >> i'm waiting for the guidance on that one would assume sometime in the summer. >> so you are looking for at least something from congress prior to the summer. we are now into the spring and we would need that quickly. you talked about health care quickly. let me give you a statistic i have come a 17.4 billion is what you spend on health care in 2002 said they were spending 50 billion a day. is that correct? you have seen a huge increase and it's the biggest increase in a budget as understand. are you doing enough and what more can be done? >> i think there are other steps we have to look at it as we look at the kind of health care costs generally, would we thought the first step would be to try to increase these tricare fees' and

then continue to kind of look at health care delivery in the future. islamic may i add to that? we are doing a number of things in the health care area. it's not just tricare, trying to improve the quality, and again i think that the personnel and readiness could address this better but we have looked at provider costs and we receive the fodor for example to use federal pricing schedules for the pharmaceuticals which is significantly reduced the cost to use medicare payment rates for outpatient payments which also significantly reduce the cost. we really did a number of those things before. we looked at the tricare fees' last year and this proposal we made this year so we are looking across the board of health care to hold down the cost while maintaining the quality-of-care which is critical. >> can i add one thing mr. chairman? it's already beginning to have a effect on the base of the we can

wait until the summer appear that there are some corporations and the defense industrial base who with the specter of sequestration hanging over them are already making decisions about their work force, and so this is an immediate problem for them that will become a problem for us eventually. >> thank you. i know my time is up but it's critical as we are downsizing to make sure we do it right and deal with this health care cost because that takes away from readiness and operations and i know the chairman talked about putting a budget together. we need to do something quickly it sounds like to prevent the further of the industrial base and making the decisions would be detrimental to this and devastating as the secretary said. thank you mr. chairman. >> senator murray. >> secretary panetta, i spent a lot of time last year on the joint select committee on the deficit reduction working with democrats and republicans to tackle the issues you're talking

about today. we went into the meeting knowing sequestration would be a terrible outcome, and we understood that across-the-board cuts to these programs as well as middle class families and americans depend on would be bad policy that was the point of the trigger that senator reid and the speaker agreed to. they were supposed to be painful to push us toward a compromise so i was disappointed despite the fact the we put a lot on our side, some pretty painful cuts we couldn't get to an agreement because we couldn't come to that shared sacrifice moment. i am still willing to make the compromises needed to get to that i hope everyone on both sides are because i think we are all really concerned where that's going to go but i didn't want focus on that today on my time i wanted to question, ask a question about an issue that is becoming very important and recently come to light at the army medical center in my home state of washington. a number of soldiers had their

behavioral health dalia custis changed from ptsd to other behavioral health disorders they didn't come with the same level of benefits. however, falling as you may know an independent review at walter reed and number of the diagnosis with unchanged at two ptsd. obviously this is troubling. though it is even more troubling to me and many service members and their family members in my home state and i know a lot of people i've been talking to is the allegation that the decision to strip those soldiers of the ptsd diagnosis came from a unit ed madigan that seems to have been taking the cost of a ptsd diagnosis into account when they were making their decision. there's an investigation going on in to this, but really to me one of the things that's clear is that oversight with the r-tn of the department allowed this break from the standard diagnosis to go unchecked.

so i am really concerned about how the services handle the bg journal health conditions like adjustment disorder where the service members are administratively separate instead of going through the physical disability process. and i wanted to ask you given that an adjustment disorder is comprehensible by eva dod is required to use the va reading schedule what is the reason for them treating adjustment disorders differently? >> i was very concerned when i got the report about what happened at madigan and reflects the fact we have not learned how to effectively deal with that and we have to. we need to make sure that we of the psychiatrists, psychologists and the medical people who can

make these evaluations because these are real problems. i've met with men and women who have suffered the problem and just met with a couple last night and they had to go through hell to get the diagnosis that was required here and that should not have been to reduce we are investigating what took place, but i've directed our personnel under the secretary to look at this issue and to correct it because it is unacceptable to have the process we have in place. >> i appreciate the attention given. it's going to take a lot of work and i am deeply concerned when someone comes home from a war and the have to go through a diagnosis like this it's hard enough after you've been told to man up during your time of service to then face the fact you have ptsd and then to have that reversed and changed back and told there's nothing wrong with you is devastating to these men and women and their

families. as of this is something i'm going to be following closely i want your personal attention and i think the issue was raised at man again really needs to have a more -- shows us we need to have a more clear, consistent guideline for clinical practices for diagnosing and treating ptsd. >> you're absolutely right. >> i never want your anybody in any service say we are not plan to give you a diagnosis of ptsd because we have a budget problem. >> that's for sure. >> thank you very much to bid >> senator thune. >> thank you mr. chairman, secretary, thanks for being with us. general, mr. hale. i also want to welcome the kernel that commanded one of the finest air bases in south dakota. mr. secretary, i think that you've touched on this once already, but i just want to maybe put a fine point on it did you recommend in your budget to more brac rounds in the seems to

me like a lot of that excess capacity among the domestic bases can be filled by closing the bases in europe and bringing troops home from the bases in the continental u.s. and in particular given the fact that it seems we've had a military presence for a long time obviously this seems to make a convincing sense so if you could kind of elaborate on why you haven't recommended closing overseas bases in the budget especially in parts of the world where it's perhaps no longer necessary to have that kind of military footprint. >> we have made recommendations with regard to reduced infrastructure abroad. it's an area where we have the authority to be about to make those reductions, and as i pointed out, we've closed about 140 pieces abroad. we are going to close additional bases particularly as a result of reducing the number of brigades in your up from four

down to two but at the same time, i do have to tell you that operations, particularly in the middle east have required some of the key bases in europe to be important launching points for the air force and for travel and for supplies to that area. so, there is a need to try to maintain those basic areas, and in addition to that, obviously our nato requirements and partnership require that we engage in exercises and in a rotational presence to work with nato so that we can build up that partnership to make it capable of dealing with its responsibilities as well. but having said that, we are in the process of looking at additional reductions abroad when it comes to the united states and the kind it infrastructure reductions that have to take place here, frankly there is no other way to do it

than through the process. >> mr. secretary, the president has said that he would veto any attempt by congress to prevent the effect of the sequestration on the military spending, and i want to share with you some things that you set for example with the security conference last month you and the president quote are not paying attention to the sequestered from it's crazy, you also said he strongly urged congress to be able to come forward and try to trigger that amount because frankly it's not the amount it's also the way it's been done, the formulas built on a sequestered and would cut across the board and as said it would certainly virtually divested the national defence. now, so essentially i'm trying to figure out because there's conflicting messages coming out or urging the congress to do away at the same time the president has said he's threatened to veto the legislation would do away with. so how do you sort of reconcile and square those? >> senator, i think what the president stated was that if

there were just an effort to be trigger the defense part of the sequestered that he would oppose that and he thinks that sequestered across-the-board vote on the defense and nondefense is severe enough that both areas ought to be addressed in trying to feature the sequestration. >> there is a question, too much about whether or not if there were a sequestered in the defense how we would be applied and section 302 of the budget control act speaks of the sequestration and enforcement in terms of accounts does not dictate the sequestered cuts must be applied in equal percentages to each program projected activity as the cleaned in a letter november 14 to senators mccain and gramm on the effect of sequestration for example, you can choose to apply the amount to be sequestered from the procurement entitled to one activity to that account. so, how would you approach this issue in terms of the flux of

the you're suggesting this would be implied across the board? >> let me ask our controller. >> we are trying to work to understand it to bid this is an arcane law that goes back to the 1985 budget act. our lawyers believe that would be a low level that was in that letter i think the we need to work with the wendi lawyers to see exactly what would be the case. but make no mistake, i don't think anybody questions that the account level the army and navy shipbuilding would have to be equal in percentage terms, and i think that fits the description pretty well with you have to do it every account by the same percent. so this is a bad idea. it's bad policy and i really hope that the congress will take the steps to the trigger at psp address my time is expired. i'm getting the gaffe also think you mr. chairman. >> i thank the center. we are trying to adhere closely to the five because we promised

the secretary to get him out by noon. islamic thank you, mr. secretary, and your colleagues, and let me get right to it pitted on want to talk mr. secretary, first of the guard and reserve. you and i have talked about this in the past. in my view there unique expertise and particularly their ability to adapt rapidly the mission requirements. it's one of the reason we ought to be especially careful in this time of making tough choices with respect to what happens with the guard and reserve. this year you all are going to get four separate studies were going to provide in-depth analysis to the cost comparison between the research, complement military members and those on active duty, and what the studies are going to find, all of them without a chance to hear about them is strong evidence about how much less expense of the guard is compared to the active duty so the question, mr. secretary, for you this

morning is wouldn't it make more sense to wait until you have an accurate model to compare costs before you go forward with disproportionate cuts to the air guard? what we've tried to do is look at the air force and try to look at the guard come in and it just seems to me that while all of the traces you have in front of you are tough ones, they are in an easy one there wouldn't it make more sense to hold off until you get the studies before there would be dead but disproportionate cuts made to the guard? >> cementer compostable i strongly agree that we have to depend on a strong reserve and a strong national guard to assist us particularly when it comes to mobilization and as we reduce the force, frankly we are going to need to have that back up and that's why frankly when it comes to numbers in the national guard and the research we pretty much

maintain the force we have now and we will continue to maintain it. the one area there were reductions is in the air guard reserve and it was done pursuant to the recommendations of the air force chief. and the basis for that was in the past we have reduced the airlift in the active force but we did not touch the reserve and to achieve the savings we had to achieve under this budget control act that there were areas in the reserve where he could achieve some savings by reducing some of the airlift capability that wasn't multi mission and that is why the decision was made to reduce those areas. at the same time i have to tell you i met with the governors yesterday. the have the same concerns you have come in and i indicated to them we would work to determine whether we could try to do this in a way that could achieve the same savings but provide some

ability to relieve some of the impact that some of this would have. >> thank you on that point mr. secretary. if you will stay open on that and we could continue to have some discussion on that i think as we look at those four separate studies, and that what you've done on this is to try to make this a data driven debate that is what has release one noss if we can continue the discussion i would appreciate it. one of really i want to get into and that is energy. you all at the department of defense are one of the largest single users of energy in our country and sometimes it just takes your breath away when you take through the implications on a recent tour when we were in afghanistan we heard about the fact that it cost in some instances hundreds of dollars to get a gallon of gas to someone before the four were operating basis. so, what do you envision in this

budget is actually getting accomplished in terms of making us more energy independent? >> i'm going to have the general speak to the particulars of what you just pointed out. energy is an important element in driving the national defense. but at the same time, we have made a strong improvements to be filled the efficiency particularly in the navy as well as other elements, and here the goal is to try to continue the investment in energy efficiency because it does save money in the long run to be given to do that. >> for me it's part efficiency and part effectiveness. the better we can do it self sustaining at the point of need the less we keep -- we put soldiers, sailors, airmen, marines on the network so there's a real operational

requirement. there's places in afghanistan where you can't get anything by way of resupply except by air dropping it and that drops the cost of the commodity when that is the condition that we place our armed forces. to the sec to respond, we've got a commitment in the budget, we have plans, milestones. >> thank you. >> senator grassley. >> senator wyden brought up the issue that i was going to start with on the air guard so i don't expect you to say more than what you said to him, but i would like to make a little comment about your answer, and that would be this, you probably correctly quoted the secretary of the air force that the active trade duty had taken what they could but we got the distinct impression of the body what obligation in regard to the des moines and 132nd fighter wing

being removed that will last time it went through cuts, the air force did it and now it's the guard term as opposed to what senator wyden is having the data driven. so we asked for a lot of this data but we are not getting anything. and we heard from the national guard bureau of which fighter wing to cut after the decision had been made to take the cut out of the air national guard. so we are looking for the statistical basis, the databases, but never this come and we are having a hard time getting it and we would like to have it, not just chuck grassley the the whole delegation to meet my second point would be to read a statement and not have you comment because i gave you a letter that's going to have the basis of what i want to talk about, but just so you know this isn't something that i give little concern to. for the last three years, we

have in my office we have read each year 120 audits done by the inspector general, and you want to remember we paid about $100 million a year in this area. so my letter is about 16 of the 120 of its of the last year. we have uncovered a egregious waste and misconduct at the dod. these reports were issued by the office of inspector general last year. i discovered them during the course of my ongoing oversight review of the audit quality where i'm about to issue my third annual report. if i had to use two words to characterize what i found in these 16 reports, these would be scandalous and disgraceful. this is some of the worst i've ever seen. the 16 reports tell me two things: first all the waste in the money needs to be recovered and second, responsible persons held accountable. you said you ought to save $500 billion. welcome to the acting inspector general is serving a savings on

the silver platter close to a billion dollars worth. unfortunately without high level of intervention, i feel all of the good audit work and savings will go for naught. i your buddy accountability not like it happened anytime soon. all the information that i see tells me the hard hitting recommendations contained in the reports are being quietly ground down to nothing by the pentagon bureaucracy. so i respectfully ask that he would take a moment and read the summary of the 16 reports i picked out of the 120 which you will find in my letter and then tell me whether you are distorting her by what you read. if you see what i see then please initiate a review of all allegations laid out in these reports. please urge those assigned that task to search for the reasonable path forward on all of the unresolved recommendations, for audits,

recommendations or a point of this year. they are the bottom line and they are about to fall through the cracks. may i remind you that these of its cost as i said $100 million. given the strength of the evidence that i presented i believe it is incumbent upon all of us to act on waste and i will just use one example and only one sentence from my letter. one of these reports calls for a preview of the actions of officials responsible for approving pt projects that were not cost-effective and take the administrative action as needed. this is the navy's response was to january 17th of this year. it stated, quote, it is not necessary to take administrative action against officials responsible for selecting the projects and consider the recommendations close.

i will close with this i want to compliment on another issue, but to complement the defense department reopening the project flicker investigation, project flickter was supposed to have allegations government employees including dot personnel had pursued child pornography on the government computers some of those involved were reported to have a sense of security clearances. after learning the defense criminal investigations service garbage early shutdown doesn't station i wrote your predecessor circuitry gates on november 5th, 2010 and i wanted to raise questions about why the investigation was allowed to go dead and i recently learned after review the cases are now flowing from the d.c. ips to the court for prosecution. that is good news and i hope that the employees purchase in child pornography while on the job are held accountable. thank you. >> senator grassley -- connect you can respond if you want to but you don't have to.

>> i'd like to. first of a way to think you for your leadership on these issues. you and i have known each other a hell of a long time going back on the house side and i've always respected your work in going after waste in the federal government. i want you to know a couple things. number one, on those reports i do not take this lightly direction to my department is we will implement the recommendations contained in those reports and i get a report on that and i happy to share that with you as to what progress we are making in implementing those recommendations to revive required when ig makes that kind of report recommendations we don't just put it in a drawer we have to implement the recommendations come as a that's something i believe in to be a second, our ability to develop our own audit capability i hope will give us the ability to get ahead of the game rather than behind it where we are now.

stat think you very much, and i know you are very sincere and i would appreciate your following through. >> thank you, senator. let me put this chart up because , you know, secretary panetta, you gave a charge to this committee in your earlier testimony that we have to be the conscience of the congress and in these committees in the house and the senate. you are that when you were chairman. i tried i must say i don't feel i've had great success in convincing my colleagues to face up to these matters. i was proud to be part of the fiscal commission and part of the group of six. i think we made serious responsible suggestions to do things on a balanced way. yes, discretionary spending has to be addressed.

yes, we have to reform the entitlements and yes, we have to address revenue as well. but as i listen to this morning, i hope the conclusion is not -- that there is no additional savings that can be derived from defense, not another nickel because i don't believe it. i spent a great deal of time looking at places we could save responsibly and i don't think at the end of the day we are going to have an alternative. in fact if we don't find a way to come together around a comprehensive plan to have additional savings, what's ultimately going to happen here it's great to be forced on us and will be forced on us at the worst possible time when we are in crisis. i can't think of a worse outcome for this country, and the problem is none of these things

are very popular with the american people. reforming entitlements over 70% say no to revenue, about 65% say no, don't do that. further savings on program after program that have already had significant savings looking ahead over the next ten years people say don't do any more there. but the only thing that they support on the spending side is cutting foreign aid. mr. chairman, mr. secretary, former mr. chairman, you know that's not going to do it. that's less than 1% of the budget and about the only thing the support on the revenue side is taxing those who have incomes over a million dollars, and i have no question in my mind we are going to have to asked some of them to do more. but when i look at -- here it is.

here is the spending in dollar terms under the president's budget there is a little bit, but then it goes up for the remainder of the budget period. when people say that it's being cut to the bone really? there's more spending every year beyond this next year than we have had. every year more spending and i compare it to the sequester that is harsh. i don't think this is a wise course, certainly not. i absolutely agree with you that this trajectory and the sequestered in a means of doing it across-the-board cuts we share your view that's what would have to be done that really doesn't make sense.

some symbols, that's the only place we've had a bipartisan agreement around here to read more savings initially in overtime and the president's budget but not the kind of cut we see in the sequester so i just say this to you. i hope we don't conclude it's not your testimony today there's not another to be derived in defense. i just had an analyst briefing that was talking about the way that we manage our navy and we keep them tied to ships and that means when they are deployed and the crew comes back, the ship comes back.

there's been analysis done that if we kept the ship deployed and shared the crew we could derive significant savings. i don't know if that level of detail is something mr. secretary that you've looked at, but i would be very interested. do you believe or have you looked at the notion of having cruce share ships so that when the crew returns -- mr. chairman, i'm not sure that is the case anymore because of what deutsch pointed out and let me get back to you to make sure that that is the case. but no, i agree that is an area that we need to reveal.