speech was almost 50 minutes.

>> it is both an honor and a privilege to introduce the podium for his very first state of the state message. governor andrew cuomo. [ applause ] >> thank you. thank you. thank you very much. thank you. >> thank you very much. thank you. thank you. thank you. thank you. >> well, good afternoon, new york! oh, it is a better afternoon than that. 2200 people are here to talk about the government in a way they never have before. good afternoon, new york! >> good afternoon! >> okay. first, let me begin by acknowledging a truly extraordinary public service.

he was a great mayor of rochester. he is going to be -- that's rochester. he is going to be a phenomenal lieutenant governor. lieutenant governor bob duffy. to my colleague and congratulations to the re-elected controller thomas dinapoli. [ applause ] >> to our brand new right out of the box attorney general eric schneiderman. [ applause ] >> to majority leader dean scalos. thank you very much, dean.

assembly speaker sheldon silver. ♪ ♪ >> senate minority leader john sachlson. assembly minority leader brian cole. to the judges of our great court of appeals. it's an honor to be with you, and a special thank you to the young people behind me. these are high school students who represent new york's 62 counties. they are the future and the state that we are talking about preparing today is the state that we will leave them. we hope they do a good job and we thank them for being with us. thank you! [ applause ]

>> my friends, i believe this state is at a crossroads, and i believe there are two very different paths that this state may go down. certain factors are pushing us down one path. the national economic pressure and the costs of state govern iment that we're currently expanding and the function that the state government has been manifesting and the fact that people have lost trust in our government. they would dictate the state's course and there's an alternative. when you look at the assets of the state and when you look at the legacy of the tate and when you look at the 10 asset of our people and when you look at the quality of our people.

you have the very real sense that we can turn this crisis into an opportunity. what is the state of the state? this is a time of crisis for our state, a time when we must transform our government to once again become the progressive capital of the nation and to seize the moment of opportunity that is before us. what we do today, january 5, 2011, will determine the course of this state for decades to come. for new york, it is time to change, my friends, and that is what today is all about. this convening itself is a metaphor for change.

this convening itself says that change is possible in albany. believe it or not, and i say amen because we need change in albany. [ applause ] >> this is the first time since governor al smith that the state of the state is not given into capital. it's the first time that the legislative leaders who were asked to participate in the presentation. it's the first time that technology is actually going to be used in the presentation, and it's the first time the most important participants have actually been invited to participate, the people of the state of new york.

and we say welcome new yorkers for being here today because this is your government and no one is better suited to be here to hear this message than you. thank you all for coming. the state of the state begins with an honest analysis of the crisis that we face. in government, as in life, you can never solve a problem if you refuse to acknowledge it. the economic recession has taken an especially hard hit on the state of new york. 2009 we had a 26-year high in unemployment. roughly 800,000 new yorkers are now unemployed, helpeds of thousands more are underemployed. we had the worst business tax climate in the nation period. our taxes are 66% higher than

the national average. upstate is truly an economic crisis. >> in real gdp from 2001 to 2006 upstate new york grew by 1.7% per year while the average in the nation was 2.7%. the costs are of pensions are exploding. 1.3 billion in 1998 and 1999 projected for 2013, 6.2 billion a 476% increase and it's only getting worse. the state of new york spends too much money. it is that blunt and it is that simple. our spending has far exceeded the rate of inflation. from 1994 to 2009 inflation was

2.7% per year. medicaid went up about 5% per year and education went up over 6% per year. we just can't afford those rates of increase. state spending actually outpaced income growth. state spending increased just over 6% and personal income growth are 2.8% and most damaging, our expenses in this state far exceed revenue. we've been focusing on this year and the deficit this year which is a very large deficit, about $10 billion and it is a problem and it is a major problem. what's worse is it's want just about this year. next year, the problem goes on $14 billion. >> the year after, the deficit

goes on $17 billion. >> this is not a one-year problem, my friends. this is a fundamental economic re-alignment for the state of new york. you look at the chart and you look at the arrows and this is an unsustainable rate of growth and it has been for a long time. not only do we spend too much, but we get too little in return. we spend more money on education than any state in the nation and we're number 34 in terms of results. we spent more money on medicaid than any state in the nation and we're number 21 in results. we spend about $1.6 billion per year in economic development and we're number 50 in terms of results. we're spending more and government is growing more. we now have over 600 executive branch agencies and it's not just state government. the proliferation of local government and special districts all across the state, now over

10,500 driving that property tax rate up all across the state, and the large government we have is all too often responsive to the special interests over the people of the state of new york. the proof is in the pudding and new yorkers are voting. with their feet. 2 million new yorkers have left the state over the past decade. what does this is say? we need a radical reform and a new perspective and we need it no >> we must use this moment to transform our government. we currently have a government of disfunction, gridlock and corruption. we have to transform it to a

government of performance, integrity and pride. it is time that we speak to these issues and actually get results for the people of the state and stop offering rhetorical solutions. and i am going to present the budget in several weeks, but this year's budget discussion is not just about a budget exercise. that's what those numbers are saying. this is a fundamental re-alignment for this state. you can't make up these kinds of savings over this long a period of time through a budget cutting or trimming exercise. we'll have to reinvent government and we'll have to reorganize the agencies and redesign our approach because the old way wasn't working

anyway. let's be honest. [ applause ] we need literally a transformation plan for a new new york and we have new principles that will guide the new government. number one, we want a government that pays for performance. no more blank checks. number two, we want a government that actually gets results in realtime. number three, we want a government that puts the people first and not the special interests first. [ applause ] and number four, we want a government that is an icon for integrity where new yorkers can be proud of their government once again. >> we're going to start by transforming new york's economy because what made new york the empire state was not a large

government complex. it was a vibrant, private sector that was creating great jobs in the state of new york. that's what made us the empire state once and that's what will make us the empire state again. when you look at the beautiful state seal, at the heart of the seal in the middle of the shield are two ships on the hudson river. those two ships were put there when the seal was designed to symbol i symbolize intracoastal and international commerce that at the heart of this state is business and we have to re-learn the lesson our founders knew and we have to put up a sign that says new york is open for business. we get it and this will be a business-friendly state. [ applause ] we're going to establish economic regional councils

across the state. they're going to be chaired by a lieutenant governor bob duffy. the point -- these will be public private sector partnerships and the focus of which is to create jobs, jobs, jobs in those regions. it starts with the premise that there was no topdown template to create jobs and different regions in this state with different assets and different abilities and these plans will have to come from the bottom up and let them power the local communities to plan their future and help themselves. higher education will be the key economic driver and we look to partner with our great system especially across upstate new york in making this a reality. they will be -- they will provide -- they will provide

both intergovernmental and intragovernmental coordination and be one-stop shops and the local government will all be on one board and all of the state agency will be on that one board. if you need it to get something done in that region, it's a one-stop shop and the government will actually cooperate with each other rather than conflict with each other. >> these councils will have two main functions. first, they'll coordinate all of the existing economic development money that goes into that region primarily through esdc, but second, they will be able to come up with job development plans and then compete against the other councils to compete for up to $200 million in funding. competition works, let them come up with their best plans. compete against the other

regions and we will fund the most creative plans. next, we will have to confront the tax situation in our state. the property taxes in new york are killing new yorkers. 13 of the 16 highest tax counties are in new york when assessed by home value. in absolute dollars, westchester county, the highest property taxes in the united states of america. nassau county, the second highest property taxes in the united states of america. it has to end. it has to end this year. we have to -- we have to hold the line on taxes for now and reduce taxes in the future. new york has no future as the tax capital of the nation.

our young people will not stay. our businesses will not come. this has to change! [ applause ] put it simply, the people of this state simply cannot afford to pay any more taxes period. i would like to introduce you to miss geraldine sullivan. miss geraldine sullivan is a resident of monroe county. she is 81 years young. she has -- she's been retired from bausch & lomb. geraldine lives alone on social security and owns her own home. her own property value has gone down and her taxes have gone up.

geraldine could no longer afford to make ends meet. what did geraldine do? so at 81 years old she went back to work as a lunch monitor at the local high school just to be able to stay in her home and just to be able to stay in the state of new york. geraldine, we understand your problems. help is on the way. we will pass a property tax cap, geraldine, once and for all and we -- [ applause ] >> and geraldine, we applaud your spirit, your strength and tenacity. let's give geraldine a big new york round of applause.

[ applause ] we must transform our state government. the last time the state government was reorganized was 1927 under governor al smith. 1938, a reform was passed and the constitutional amendment that said there could only be 20 executive departments, 20. so what has happened since then? well, we couldn't create any more departments, but the law didn't say anything about creating councils, advisory panels and working group facilities with sports and committee. so what do we now have? the department of health only one department in compliance

with the law, however, there are 87 other organizations that had been added to the department of health and 46 councils and six committees and 17 boards and iks institutes and two tests and five facilities. it's time to organize the government and make it professional and make it efficient, make it it effective to undergo a comprehensive review. let's eliminate, transfer and consolidate the funds, i propose setting upstage and the efficiency commission and it would be styled by the berger commission where they would come up with the report that was submitted to the legislature and the legislature has 30 days to reject it it, otherwise it's passed. the charge to the commission would be operational improvements, metrics and targets, a reorganization plan due in six months and it would consist of private sector experts who could come in and

advise us on how to do it and incorporate members of the legislature. >> we need to transform our budget. we have to start with an emergency financial plan to stabilize our finances. we need to hold the line and we need to institute a wage freeze in the state of new york. we need to hold the line on taxes. we need a state spending cap and we need to close this $10 billion cap without any borrowing. [ applause ] we need to transform the budget process that we use in the state. the legislature is very familiar with the budget process, and we need to transform this process from partisan political theater which is what it is today to productive debate and compromise. right now, the budget process is

like ships passing in the night. wait a second, bring those ships back, i think i recognize someone. is that -- zoom in on that man on the battle ship. yes, it is. senate majority leader dean scalos. and, look! it's commander sheldon silver! oh, and there i am! and here are the special interest groups with the -- [ applause ] you notice how all of the missiles from the special

interest groups went into my battle ship. i would humbly suggest as the new governor that maybe, just maybe, we'll try doing it a different way this year. what do you say? we need to try a different approach and think of it this way. there are basically three flash points when it comes to the budget, the education-funded medicaid and state and local mandat mandates. we want to try a new approach. let's start with the medicaid program. the state of wisconsin actually used an interesting model. the governor had announced across the board cuts on the medicaid program. the industry said they couldn't live with the cuts and what wisconsin did was basically brought everyone in. it was a hybrid alternative dispute resolution meets binding arbitration process. and it actually worked fairly

well in wisconsin. the industry came in. they worked with the government and they arc accepted the budget target and redesigned the program to meet those targets. remember, this is not going to be a budget cutting or trimming exercise. we need to redesign the medicaid program. i can also tell you this, as the attorney general i audited the medicaid program for four years even without this budget problem. the medicaid problem needs a desperate overhaul. it has -- it is dysfunctional on many, many lechls. so this process has to be done anyway. our suggestion is to take a crisis management approach and put together a medicaid redesign team. the medicaid redesign team will start on january 7th. it will commit to reinventing in time for the april 1st deadline and it will assume the governor's budget target for the

medicaid cut and the exercise will be to find alternative ways to reach that cut. if we institute a cut in the normal budget process, it's basically through reducing the reimbursement rate. let's see if we can't actually find efficiencies in the program so we provide a better service for less money. the committee will include legislative executive and the state holders. dennis rivera from seiu, mike grisham, ken rasky, dan cisco, members of the legislature have agreed to participate in this process. we also have jason helgerson who is the former medicaid director who did this in wisconsin, who is responsible for designing the exercise. we have seduced him to come join

us in the state of new york which was not a difficult sell, obvious obviously and jim, who was a great veteran of state government and has done extraordinary work in health care and we asked to come back. let's welcome jason and jim. thank you very much, welcome aboard and welcome back, jim. we'll use the same approach when it comes to mandate relief. putting together a group that will start to january 7th and will have actions by the april 1 deadline and will propose eliminating any unnecessary state mandates and again, we'll include all our partners legislative executive and

stakeholders and labor groups and that group will be run by larry schwartz who is senior adviser to me and many of you know he was secretary to governor paterson and he's done extraordinary work and he'll be excellent heading up this group. thank you very much, larry schwartz. >> when it comes to education funding as i mentioned earlier, we're number one in spending and number 34 in times of results. that has to change. the crept education funding has formula grants meaning there were no performance incentives in the grant process and the school district gets the numerical formula and that's what they're going to get whether they do a good job, a bad job, it doesn't matter, they get the same level of funding every year. the federal government is more innovative in this area and they're doing it now in the area of education where they run competitions and, for example,

when they fund the state government if the state government wants to qualify for the federal money, they have to win the competition. we know in new york how effective those competitions were in making the state government actually move and pass the piece of legislation authorizing charter schools so we could qualify to the race to the top money. competition works. when i was in the federal government ten years ago we moved from blocked grants to competitive grants and everything was performance grants because when they just give people cash with no results you take the incentives out of the system. our suggestion is when it comes to education, have two competitive funds that reward performance. one is the school performance fund which would have a $250 million competition fund for districts that increase performance in the classroom. for example, improving grades of

historically underperforming children. if there is a school district that does stellar work, let them compete, let them be rewarded and let them be emulated. we would have a second competition for administrative efficiency. a $250 million competition for districts that confined administrative savings through efficiency, shared services et cetera. run those two competitions and actually incentivize performance and change the behavior through the funding mechanism. for those of you who are skeptical about performance and the ability to turn around to school. let me introduce brian rosenblum and brian is now the principal of the technical career high

school in manhattan. brian has been there for two years and has made a difference. in that time he's gone from 73% to 85% and listen to this, the pass rate on the regions went from 31% to 89%. that performance is what we want to incentivize. that performance is what we want to model and that is what we want to applaud. congratulations, principal. thank you for being with us today. i would also propose a consolidated congress.

we've seen some progress. i think we added financial incentives to the governments that actually consolidate you would see acceleration in the consolidation process and have a bonus fund for local governments that consolidate, merge, or share services with 50% of the bonus money going to direct property taxpayer relief for the people of that government. >> my friends, we have to transform the ethical environment and we have to clean up albany. we all have seen the headlines, headline after headline, month after month, year after year with no change. every time there's another headline there's another cut on the body politics and a little

more trust has bled out and this has gone on and on and on. i'm familiar with the situation because many of the cases that were in the headlines i was involved in. sometimes even in albany there is a black and white issue, and this issue, and this issue is black and white. there is no gray. the people of this state have lost trust in state government. this government has lost credibility with the people of the state. it is time to pass ethics reform and it is time to pass ethics reform now! we will propose a cleanup albany plan with real reform. this is not going to be a situation where the people of this state would have suffered for years and lost trust and now we're going to give them a

watered down or half-baked ethics reform bill. they're going to have real ethics reform. we're going to end pay to play and we'll have full disclosure of outside income and we'll have an independent monitor and we'll hear mayor ed koch who has gone all over the state and we applaud him talking about redistricting. congratulations, mr. mayor. and we need public financing of campaigns. >> we must also at the same time once again become the progressive capital of the nation. yes, we must deal with the fiscal realities and they are difficult and will be time consuming, but at the same time we also have to continue to achieve social progress that

made this date famous. when it -- you should applaud. >> i spent four years fighting wall street corruption, and i saw thousands and thousands of consumers victimized by the wall street corruption, and the question was where was washington? where was washington? where was washington? where were all of the federal regulators? where was the sec and foato, the whole alphabet soup of federal regulators? where are they? it was a good question. there was another question. where was albany? where was our banking department? where was our insurance department? where was our consumer protection agency and yes, i believe washington was primarily responsible, but i also believe new york could have done a better job, frankly. i believe our organization on eye believe our current

organization is not effective because it is not organized the way wall street works anymore.bn is not effective because it is not organized the way wall street works anymore. these divisions of insurance don't exist in the marketplace and much of the activity is falling between the cracks of our regulatory entities. we can have a win-win. we can son sol date them into a department of financial regulation that better protects the consumer and the consolidation will save the taxpayer money by reducing the cost of three separate organizations. >> we've been talking about green jobs and i believe new york has a great future in green jobs. we have a $100 million competitive grant program that will go to private sector

partnerships that come up with the best plans to create green jobs, reduce pollution and further environmental justice. let the private marketplace come in, let them work with the local governments and the local community groups to come up with the best plans. let's reward performance, let's incentivize performance and let competition run and let us fund the best. that's the green jobs proposapr. we believe in economic opportunity for all new yorkers, the minority in women-owned businesses and enterprise endeavor is a good one and it has a current goal of 10% of state business. i want to double that goal to 20% of state business. for those of us who are old enough to remember willowbrook, it brings back very bad

memories. when we think about our current juvenile justice facilities, i believe there are echoes of what we dealt with in willowbrook. you have juvenile justice facilities today when you have young people who are incarcerated in these state programs, who are receiving help assistance program treatment that has already been proven to be ineffective. recidivism rate in the 90 percent i' percentile. the cost to the tax payer is exorbitant. for one child over $200,000 per year. the reason we continue to keep these children in these programs that aren't serving them, but are bilking the taxpayers is

because we don't want to lose the state jobs that we would lose if we closed the facility. i understand. i understand the importance of keeping jobs. i understand the importance of keeping jobs especially in upstate new york. i also understand that that does not justify the burden on the taxpayer and the violation of civil rights of a young person who was in the program that they don't need where they're not being treated helpeds of miles from their home just to save state jobs. an incarceration program is not an employment program. if people need jobs, let's get people jobs. don't put other people in prison to get some people jobs. don't put other people in j

juvenile justice facilities to give people jobs and that's what this is about and that has to end the session. [ applause ] we believe in justis for all and we must pass marriage equality this year once and for all. we will from pose a program called the urban green market program which will be a win/win. we will set up green markets in urban areas all across the state to give good food to inner city communities and these markets will be a host for the new york agricultural products.

last point, we must seize this moment of opportunity. new york is not alone in this situation. as a matter of fact, there are eight states with fiscal conditions that are worse than new york. this is going to be a time of national transition. this is really an economic recalibration for states all across the nation, and that's what's really happening. as the economy is retrenched, states now have to recalibrate. they have been other times in our history where there have been trapsition periods and agricultural transition and the industrial transition and high-tech transitions. in all those transitions, new york led the way. and new york came out first. why? because we were fast and we were faster and more sophisticated and we won in the transition. we can win in the trapsition again. and we can make -- we can make

january 5, 2011, the day that we seized the opportunity and the state of new york strikes back. i want to leave you -- i want to leave you with one personal point, if i may. as the new governor. to my colleagues in the legislature, at one point in my life i wanted to join the clinton administration. i was a life long new yorker and bill clinton took office, and i had the opportunity to join the federal government, and i did. and it was a good experience. i needed it. i was one of those people who thought the new yorker cartoon

was the accurate depiction that the west coast was really new jersey. i was a real -- i was a real new yorker. so i went down in the beginning of the clinton administration, assistant secretary of the department of housing and urban development and i became a member of bill clinton's cabinet and it was a fascinating experience, and i got to work literally in every state in the nation. many times when you're in the president's cabinet your main utility is the president can't make an event, they scramble for a surrogate and they send someone from the cabinet to be a surrogate. that was actually a very tough duty, by the way. >> can you imagine having to go out to kansas to substitute for president bill clinton and get before a group that was expecting to see the president of the united states bill

clinton and instead they get the secretary andrew cucomo? but it was -- it was a learning experience for me. and literally every state and i would be talking about every topic and almost invariably, somehow they would figure out that i was from new york. i'm not really sure how because i never told them, but they would figure out i was from new york and at the end of the event they would come up to me and almost without exception, whatever the topic they'd say what are you doing about this in new york? it could be health care. it could be immigration. it could be taxation. what do you do in new york? and their eyes would be opened wide. what do you do about this in new york? why?

because we are new york and because our history, our legacy was we took these difficult problems and we solved them first, and the rest of the nation learned from us. the other state governments look to new york and they learned from us. i was running hud, the housing economic development. most of the federal programs were modelled on state programs. why? programs. why? because the new york government was the best. we were the most sophisticated. the most complex. the problems developed here first and we resolved them here first and we had the most caliber in our government. we were the best and we were the model for the nation. that's the history and legacy of new york. this has been an aberration, this recent past and the dysfunction of albany. the gridlock of albany.

this is not the true story of the new york state legislature. it's no who with we are. it's not what we do. it's not why we're here. the new york state legislature is the best legislature historically in the nation. the most talented people. that's who we are. that is who we are. and that's who we can be again. when i hear your leaders speaking about cooperation and a positive vision and change and doing things differently, i am so excited. because the people of this state desperately, desperately need it. they need the government to work in a way they haven't needed the

government to work in 20 years. they've seen the ugly and the gridlock. they've seen the corruption. let them see how beautiful the government can be when it cooperates and it's enlightened and it's functioning and it's performing and it's putting the people above the special interests. let this legislature be the legislature that stands up and says -- yes, we're democrats but we're new yorkers first. yes, we're republicans but we're new yorkers first. yes, we're from down state but that matters most and we're here as new yorkers, not as democrats or republicans or not as independents. we're here to help this state through the crisis.

let this 234th legislature stand up and write a new page in the history book of new york state government. let this 234th legislature solve these problems at a time of crisis and bring this state to a play that it's never been. we're not just going to build back. we're going to build back stronger and bigger than ever before. that's what we're going to do together. thank you and god bless you!w/

>> senate majority leader harry reid said yesterday that he will go forward with changing the rules for the filibuster in the senate even if republicans decide not to support it. he also weighed in on legislation to repeal the health care law that members of the house plans to debate later

today. senator reid's remarks are about 10 minutes. >> the lame duck showed that we can work together, reject extremism, and really accomplish a lot for the american people. but i do get concerned when i hear my republican colleagues say they want to focus on running up the deficit while taking things away from the middle class. that's really been proven that's what they want to do the last few days for sure. let's take health care, for example. this morning cbo came out with their score that the republicans doing what they are talking about doing would increase the debt by $230 billion, and in the second 10 years by well over a

trillion dollars. in addition to running up the deficit republicans plan just as it relates to health care, i'm only going to mention a few, but take away free preventive care, wellness program for seniors, it would take with a 50% reduction in health care costs for seniors continue filling the doughnut hole. it would take away the tax cuts for businesses that have health insurance for their employees. and it would get insurance companies the right to refuse coverage for those people of pre-existing disabilities. some have sent over there to have to take a lack of security. that they certainly believe that our wall street reform bill was wrong. they cited then with wall street, and doing it again. but republicans are not just talking there. they are even threatening to shut down the government to have

the united states of america default on its bill. you can imagine as well as i can be economic crisis this would cause. and not only what it would do internationally, but what it would do if at home. no more social security checks. troops wouldn't get their checks. veterans wouldn't get their checks. mortgage security, -- border security, fbi, all of the. we are focused as democrats in creating jobs by investing in education so our kids can compete in this new international economy that we have come and we want to move off oil which is now approaching $100 a barrel. we need to give up the middle class americans the tools they need to get ahead. not take benefits away from opportunities. okay, first question.

[inaudible] >> are you saying that you don't want -- >> say that again. >> mr. boehner said -- [inaudible] are you rejecting that idea? >> the system we had an effect was ours. we believe spending has to be? we believe that if you have new program just to pay for them either by cutting spending our increasing revenue. one thing i would agree with the new speaker, and this is his quote, we are going to have to deal with it as adults, talking about the deficit, the debt limit, whether we like it or not the federal government has obligations and we have obligations on our part. that's a direct quote from boehner.

[inaudible] >> i do believe the country is rife with tax reform. chairman baucus has this has won his first priorities. and he's going to hold hearings on that starting very, very soon. so in answer to question your question, yes, 100 times. our tax system is broken and needs to be fixed. i'm tired of the left. let's go to the right. >> every appropriations bill should include language specifically prohibiting the funding of health care law. if the house does that and sends the bill to the senate the funding any funds for the implementation of the health care law, would you be willing to shut down the government to save the health care law -- bill.

>> the republicans have to understand that health care bill is not going to be repealed. news commentators, not editorial writers, not pundits, the people who report the news recognize the bill will not be repealed. i've mention just a few of the things that we have going now with the new health care bill. it's really good for the american people are to show how misguided the new house republicans are, for a long, long time anything that was done that had any money connected with it had to have a cbo score. they rejected that. they said no longer are we going to be bound by the. that's why these numbers we got from cbo repealing health care, it's not going to save money. it's going to cost huge amounts of money. so are we saying the health bill is perfect? of course not. that's why the 1099, we work on

a bipartisan basis to fix some of those things. repealing health care, they should get a new lease on life and talk about something else. >> senator reid, there's been a lot of talk about state and city governments having fiscal troubles, and some experts are talking about a crisis. what is the mood your in congress for a possible bailout and would you be willing to support one if it came to that's because i don't think we have to worry about that right now. we just passed a law a matter of weeks ago that gives state and local governments significant relief. that's what the compromise is about. remember, the extension of the tax cuts in exchange for that. we have a lot of programs that do many, many things to help local governments who, state

governments, people are down and out, including unemployment compensation. i think it's early to start talking about bailouts now. >> how likely is it -- [inaudible] >> we just had a very, very good caucus. it's very clear that democrats want to change the rules. they believe as i believe the rules have been abused. as i said in my opening statement yesterday. and we will work towards that. we hope the republicans see the light of day and are willing to work with us. if not we will have to do something on our own. [inaudible] >> well, i'm not going to get into specifics but we have lots and lots of support to change the rules. [inaudible] >> we are not ready yet to talk

about the jobs, things we're going to do. as i indicated in my statement here. we are really fixated on doing something to help the beleaguered economy. i'm terribly disappointed in what was done today in the house or late last night, to violate really a public trust, a trust fund, a highway trust fund they have said the firewall is down. those monies, you go buy gasoline, at the pump, part of what you pay goes to a trust fund. the trust fund is to go to highways, bridges, roads and also goes to mass transit. they said oh, no. we're not going to do that. we're going to use that for other purposes. as a result of that, the chamber of commerce, the labor organization said what's wrong with them? are they out of their minds?

we have stocks of construction congress that are down today. to violate the law that created a trust fund for the american people, they ignore that. the same as they are ignoring cbo scores. [inaudible] >> you said you wanted to create -- [inaudible conversations] [inaudible conversations] your protection against

insurance companies denying you rage. it goes on and on and on. but i want focus >> including 47,000 troops in the army and marine corps. defense secretary robert gates and joint chiefs of staff admiral michael briefed histo

reporters on the plan. this is an hour and 10 minutes. because e cuts in this health care bill to help the middle class are used for giv credits to people when they buy insurance. people buy insurance, they get a tax credit, it is thegest e in history. let me say that again so youet replace general george casey. general dempsey is presently the commander of army trainmen the undock turned command and previously was acting commandern the ntral command history of this great nation. it will be worth $110 billion that they will take away from the middle class. now, a few weeks ago we passed a tax bill out of here and we had to give tax cuts to people who

make millions and millions of dollars. millions. they said, if you don't give the tax cuts to the rich, we are not going to give them to the middle class. the entire republican caucus voted against tax cuts. unless millionaires got it. well, we should have learned from that that this repeal will be just more of the same. take $110 billion away from the middle class by taking a repeal of this law. you don't have to take it from by the service leadership. third, i want this tribe i will follow through to completion it will make it to protect the sides cannot reach and fighting strength despite a declining rate of growth and eventually flattening the defense budget over the next five, years. n t is important tothat will beo present all these interconnected changes in full and in context.

so my opening remarks will be long. and i want to thank you and wor abnormal and for your patience in advance. and copies of the stain that will be passed out following the briefing. at the outset, i want to emphasize that while america is at war and confronts a range of th uture security threats, it is important not to repeat mistakes of the past by making drastic and ill-conceived cuts to the overall defense budget. pointint at the same time, it is imperative for the department to eliminate bracewell, excessive and unneeded spending, to do everything we can to make every defense dollarss count. as a reminder over the last two defense budget submitted by president obama, we have reformed and rebalanced thespeae department spending habits and my priorities, curtailing or canceling troubles or accessmont programs that would've cost moro than $300 billion have seen through to completion.an, the g at the same time, we increased

investments and proven capabilities, most relevant into the most likely and lethal future threats. this follows the overall approach to budgeting for by the president. he is precious taxpayer dollars to invest in key priority is criticalaf to mission, while cutting or reforming programs that are outdated, duplicate it for an affect. at this point, i should note the failure of the congress to pass the defense appropriations bill for fiscal years 2011.1.1 trilli operating significantly reduce funny novels under continuing full year would cause this. department of your problems.to . likely requiring us to curtail critical activities needed to support our national security mission. last spring, in recognition ofh the fiscal pressures the country is facing, we launched a campa comprehensive effort to reduce w the department's overhead expenditures. the goal was, and is, to sustain

the u.s. military's size and strength of the long-term bydin reinvesting those efficiency savings and force structure and other key combat b capabilities the military services were instructed to find at least $100 billion in savings thatk of they could keep n in shape to higher priority programs. lymentalretary ash carter, also launched an effort to get bettey value in the contracting arenaae for defense goods and services.t in august i announced a set ofeu initiatives aimed at reducing overhead costs and improvingr, e whatnc defense do supportingel bureaucracies that said the foreign military services. first, the military g department ratings.ti to achieve the savings target that last year, the uniformed service leadership conducted it were an vigorous scrub of our military is bureaucratic structures, business practices, modernization programs, civilians and military personnel levels and associate overhead

pass. identifying savingths are totald approximately $100 million over five years.ewe the air force proposed efficiency measures that will total some $34 billiones over fs years. among those proposals are wouldq consolidating to her operation centers in theui urenited datesd two in europe, consolidating three numbered air force has, reducing00 million by y to unction with ocemair mobility command, improving data and supply chaing business processes to sustain weapon systems is improving readiness of lower-cost and reducing the cost of communications infrastructure b 25%. fe army proposed $29 billion in savings over the five years.r these include reducing manning by more than 1000 civilian and military positions come by eliminating unnecessary tax versus in consolidating its installation management command center for.

saving one point or billion dollars in military construction cost by sustaining existing facilities and begin in of consolidating the services e-mail infrastructure and data centers, which should save $500 million over five years.the the department of the navy proposed savings of more than $35 billio,n over five years.n e some of their measures include e ducing manpower and reassign 6000 personnel to operational tosions at sea, he is a multiyear procurement to save more than $1.3 billion on they purchase of new airborne surveillance, jamie and fightern aircraft. disestablish and stats for submarine, patrol, aircraft and th -us, the staff when carrier strike group. the navy also proposes to disestablish the headquarters second fleet in norfolk. during the cold war, thisployee command had distinct and significant operational currenty

responsibilities. responsibility u training and mission preparation, a function that will be transferred to the navy's fleet forces command. this change would affect tha approximate 16t0 military positions and no ships will depart in norfolk as a result.n now we turn to dod wide savings. ills.so examined how the department has stopped, organized and operated as a pasd ole. special attention was paid to those dod headquarters administration in support of limits outside the fouric majort services. the office of the secretary of defense joint staff, combatant commands and the defense agencies and feel that dvds, all of which has seen significant growth and budget staff and contractors over the decade.ar this effort, combined with the governmentwide freeze on civilian salaries have yieldedtn about $54 billion in additional savings over the next five if years. ..y if

they are for our veteran military. madam speaker, in conclusion while these may seem like a small start compared to the big challenge we have ahead of us, it is a patway to -- pathway to start changing business as usual in washington and fulfill the promise we made on november 2 to the american people. with that i yield back the balance of my time. the speaker pro tempore: ms. kaptur of ohio. mr. mcclintock of california. the chair recognizes mr. mcclintock for five minutes. mr. mcclintock: thank you. madam speaker, i rise today to express my hope that historians will look back on the 112th congress', the session that restored american prosperity, and express my strong agreement with the new leaders of this house who declared that every action of this body must be measured against this goal. we speak of jobs, jobs, jobs duct to staff activities that could and should bend

discontinued. as a result of the reviews conducted since august several components are moving ahead with a significant reductions in contractor support.ugh the fr for example the osd policynd division and acquisition technology logistics office between them will cut nearly tor hundred 70 contractors, defense tricare agency more than 780 anp missile defense agency more than 360.on? overall we will cut the size of the staff support contractor cadre by ten per cent per yearle for three years and realize nearly $6 billion in total savings. third, since the beginning of this fiscal year which beganalue october 1st we've been operating under a freeze in the number of. positions with very limited exceptions such as the acquisition work force. within the office of the. secretary defense, the defense agency and field activities and the combatant command. these entities were also directed to conduct a clean sheet review to rebalanced

resources, staff and functions ithin and across the components to reflect the department's most pressing priorities. resulting review produced a dege number of opportunitiess, to trm the size of the workforcek, yielding more than $4 billion in savings over the next fivehese years. i will recommend to theces the u president that wee hold to thesh limits seemed over all dod staf. evels for the next three years. while new requirements may emerge that require furthers noy faff support those should be met by siftingai personnel from other less important activities within the organization. freedo fourth and consultation with the director of national to res intelligence, we extoamine the o defensere department sprawling intelligence apparatus. choi since september 11th the u.s. government has seen atet of proliferation of the new intelligence organizations manys that are excess and duplicative. many voters spread out among th different services, agencies, oask forces of various kinds ant combatant commands. kesed on this review i have approved a number of changes. wt

they include downsizing the newr intelligence organizations thati have grownnd up around a memberf the combatant commands in recenl years most of which are not directly engaged in the post-9/11 conflict. in place of having a largeg permanent organic apparatus must on the wartime level, the deep delete requirement to comee surge intelligence support as of needed from the defense of the intelligence agency.n the review also found many intelligence organizations across the department and among military services focus onnment counterterrorism and terrorism finance. theil consolidate the various redundant programs into two taso forces located within the dia.e. ofth, i aitpproved the elimination of more than 100 idneral officer and a flag officer procession's out of the 900 currently on the books. of those 28 were created after 9/11 primarily for the war in al iraq and afghanistan and they will be reduced as appropriate

as major troop deployments wind down. hoov, more than 80 general flag officers in the osd and combatant command will be g.dinated or downgraded. additionally i have directed the elimination are downgrading of nearly 200 civilian senior executive positions orovernmensw equivalent positions andss muste executives. the monetary savings from thesdn reductions in senior personnel will bple relatively modest andi mostly consist of the extraacts staff and immunities that by tradition follow high rank.u hap the primary purpose behind this is to create fewer flatteredssu more agile and more effective organizations.ro six and related pewe look at the organizational role,, command structures posture and base of arrangements. as announced in august the office of the assistanteds secretary defense for network te intelligence and information the business transformation agency and a joint force command are in the process of being eliminatedr

or disestablished. for the reduced number of the most essential functions transferred to otherd organizations.ribed on our in the case we have identifiedc thel number of missions since te ereof.announcement that should be retained in the north suffolk virginia area. we aree still refining the details but expect roughly 50% of the capabilities will be kept and assigned to other organizations. the other area focuses european command. based on the review is clear we have excess structure in europe. we are looking closely alternative courses of action, but none would be implemented before 2015 or without consulting with our allies. it is also no longer necessary to retain four-star service component headquarters for the army, navy and air force in european command. each ofkn which is too large and politica senior given the number ofeater, troops the lead and the militare operations they oversee. he commands will be reduced to

the three-star level with concord and streamlining in headquarters and personal staff. the change to the u.s. navy europe will take place over a longer period because of that command unique role in the nato transformation effort. eighth, we are eliminating nearly 400 internally generated reportsea that over the years he consumed vast amounts of staff timean and energy often to prodh documents that are questionable relevance can't tell you in many cases have been rarely read.tun nearly one-third of the totalepe wporting requirements are originatedhole decades ago and n some cases date back to theonsta 1950's. overall, this reduction in theru amentsorting internalle reportg burden about 60% of all non-statutory reports coupled with reduction and funding for studies reinpresents an estimatd $1.2 billion coin savings over e >> i'm also instructing that effective in april the requirement for any internalpri report with a commissioning date

prior to 2006 will be canceled.i n furthermore, starting in february every report must include the cost of itslude production. for all of these dod-widefo initiatives, a major objective beyond creating monetary savings is to make this department less cumbersome, less top-heavy ands more agile.ng as a result of these changes col over time, what had been a culture of endless money be -- for cost is rarely a consideration -- will become a culture of savings and restraint. i'll now turn to some of the significant program decisions included in the $100 billionn identified by the services for reinvestment that wille be incorporated in the fy-12 budget request. given the variety and complexity of the threats america faces, we need a portfolio of affordable, versatile military capabilities thatbe can be produced on a

reasonable schedule ask -- and in sufficient quantities. diggingame time we're deep for excess overhead, they were also taking a hard hook at their mod -- looking at theirpo modern portfolios, unsustainable cost growth or had grown less relevant to real-world needs.k as a result, the army has decided to cancel procurement of the slam ram surface to air missile. the army leadership also recommended terminating the nonline of sight launch system, the next generation missileion launcher originally conceived aa part of the future combat system. the joint strike fighter program received special scrutiny givens its substantial cost, ongoing development issues and itsir central place in the future oft the u.s. military aviation. in short, two of the jsf variants, the air force versionr and the navy's carrier-based version, are proceeding

istisfactorily. by comparison, the marine corps' short takeoff and vertical landing variant is experiencing testing problems. these issues may lead to ao redesign of the aircraft'se structure and come pulse, changes that could had morea weight and cost to an aircraft that has little capacity to absorb more of either. as a result, i am placing it ont a two-year probation. if we cannot fix this variant during this time frame and get it back on track in terms of on performance, cost and schedule, then i believe it should bed sc canceled.d we will also move the development of the marine variant to the back of thet overall jsf production sequence, and to fill the gap created by the slip in jsf production schedule, we will buy more navy fa-18s. today i'm also announcing my agreement with the recommendation of the secretary of the navy and the commandant of the marine corps to cancel

the expeditionary or fighting vehicle. this program is of great interest to the marine community, so i'd like toh explain the reasons behind what i know will be a controversialil decision.e the list has resulted in an 80,000-pound armored vehiclen that skims the surface of thee h ocean for long distances at higl speeds before transitioning to combat operations on land. meeting these demands has over the years led to significant technology problems, developmeny delays and cost increases. dfv, originally conceived during the reagan administration, hason already consumed more than $3 billion to develop and will cosl another $12 billion to build, all for a fleet with the capacity to put 4,000 troops abroad -- ashore.road if fully executed, the efv whic costs far more to operate and maintain than its predecessor, would swallow the entire marine

vehicle budget and most of its procurement budget. to be sure, if pursued to completion without regard to time and cost, be an enormously capable vehicle. however, recent analysis by thea navy and the marine corpsps suggests that the most plausible she their yores -- scenarios could be handled through a mix of air and sea systems along with new vehicles, scenarios that do not require the exquisite features of the efv. as with several other programs canceled in recent years, the mounting costs must be judged against other priorities and needs.r let me be clear, this decision call into question the marines' amphibious assault mission. we will budget the funds necessary to develop a more affordable and sustainable amphibious tractor to providet the marines a ship to shoree: capability in the future.

the budget will also propose funds to upgrade the existing amphibious vehicle fleet with new engines, electronics and armaments to insure that themame marines will be able to conduct ship to shore in missions untile next generation is brought online.line for some time i've spoken about health costs and in particular the benefits applied toe working-age retirees. many of these beneficiaries are employed full time while receiving their full pensionsre and often forgo their employers' health plan to remain with tricare. this should not come as a surprise given that the current enrollment fee was set at $460 e year for the basic family plan and has not been raised since.i during this time, insurancein premiums paid by the private sector and other government workers have risen dramatically. for example, the fees for ax comparable insurance program for federal workers costs roughly

$5,000 a year.a accordingly, with the fiscal year 2012 budget, we willp propose reforms in the area ofao military health care to betterae manage medical cost growth and better align the department with the rest of the country. these will include initiatives to become more efficient as wele as modest increases for working-age retirees with feesi index to adjust for medical inflation.al i potential savings from these initiatives could amount tont nearly $7 billion over the nexty five $ years. so now let me turn to the areas having identified $100 billion in savings on the services, let me turn to the areas wherea they're now going to invest those savings from overhead and weak programs. to recap, approximately $100 billion was identified by the services through improving business practices or troubled programs.ness another 54 billion in savings

was generated by dod-wide overhead efficiencies and freezes in civilian positions and salaries. of the $100 billion identifieda by the military departments, approximately 28 billion will be used over the next five years bl the army, air force, navy and marine corps to deal with higher-than-expected operating w costs. these costs include health care, pay and housing allowances,r sustainment of weapons systems, depot maintenance, base support and flight hours and other training. frankly, usingh these savings in this way was not my original intent or preference, but we have little choice but to deal with these so-called must-pay bills and better to confront them honestly now than through raiding investment accounts later. nonetheless, the military services reform efforts have left them more than $70 billion from overhead and program savings to spend on high-priority military capabilities. funds that would not otherwise be available.

i'll now summarize some of these new areas of investment.me for the air force, this processt made it possible to buy more of the most advanced reaper uavs and move essential intelligence surveillance and reconnaissancee programs from the temporary war budget to the permanent base budget.s going forward, advanced unmanned strike and reconnaissance capabilities must become ana integrated part of the air force's regular institutionallar force structure. the air force will increase procurement of the evolvedproc expendable launch vehicle to assure access to space for both military and other government agencies. air force will modernize the radars of f-15s to keep this key fighter viable well into the future. and it will also buy moreal simulators for joint strike fighter air crew training. finally, a major area of new it investment for the air force will be a new long-range,

nuclear-capable penetrating bomber. this aircraft, which will have the option of being remotely piloted, will be designed and developed using proveni technologies, an approach that should make it possible to it deliver this capability on schedule and in quantity. it is important that we begin this project now to insure thatt a new bomber can be ready beforw the current aging fleet o goesfe out of service. the follow-on bomber represents a key component of a jointp portfolio of conventional deep strike capabilities, an area that should be a high prioritya for future defense investment given the anti-access challenges our military faces. the army intends to use its savings, first, to provide improved suicide prevent andp substance abuse counseling foras soldiers, second, to modernize its battle fleet of abrams tanks and stryker-wheeled vehicles and to cert fielding to the soldier level of the army's new tactical

communications network.e de the grand commanders fors fo intelligence and surveillance assets continues to exceed the military's supply. in response the army will buy more mc-12 reconnaissance aircraft, accelerate procurement of the service's most advanced uavs and begin an unmanned system to support the army into the future. the department of the navy as a result of the efficienta efficiency savings is proposingc to accelerate the development or a new generation of electronic jammers to improve the navy'sne ability to fight and survive iny an anti-access environment. they'll increase the repair andi refurbishment of marine equipment used in iraq and afghanistan. they will develop a new generation of sea-born unmanned strike and surveillancence aircraft.t, th they will buy more of the latest model f-18s and extend thevice service life of 150 of theseh aircraft as a hedge against more

delays of the joint strike fighter, and finally the navy will pressure additional ships including a destroyer, an ocean, surveillance vessel and fleetanc oilers. in the area of missile defense,e i'm proposing more funding fornd long-range defense interceptors that will support the phased adaptive approach in europe ands extend that level of protection to the continental united states.ev in order to improve theater defenses, we will also purchase additional advanced radar systems that have been requested by combatant commanders in europe, pacific and the middle east.ay now let me close with a discussion of future budget projection. meeting real-world requirements, doing right by our people, reducing excess, being more efficient, squeezing costs, setting priorities and sticking to them, making tough choices, these are all things that we

should do as a department and aa a military regardless of the time and circumstance.of t but they are more important than ever at a time of extreme fiscal duress when budget pressures an scrutiny fall on all areas of a government, including defense. when every dollar spent on excess overhead or unneeded programs such as the extra engine for the jsf is a dollar not available to support our troops and prepare for threatsr on the horizon p. which brings me to the president's defense budget outlook.o the president's base budget request for fiscal year 2012id will be approximately $553 billion. this is some $13 billion less than we expected for fy-12 in last year's five-year budget plan but represents about 3% real growth over the funding the department would receive in fy-11 under the current continuing resolution and about 1.5% real growth over the

appropriations committee's defense bills for fy-11. the proposed budget plan willlan reduce real growth in the tope line in many fy-13 and fy-14 and provide zero real growth in fy-15 and 16.6. in this all, this budget proposal anticipates a total reduction of roughly $78 billion to the five-year defense planro submitted last year.de even with this top-linest y reduction we were able to adhere to the original intent of theade reform might betive and permit the military services to keep and reinvest the roughly $100p billion they identified for savings. so where did we come up with the 78 billion for the top-line reduction?nt com first, the approximately 54 billion in dod-wide overhead reductions and efficiencies i described earlier in this statement which include a freeze on all government/civilian

salaries.go second, roughly 14 billion reflecting shifts in economic assumptions and other changes relative to the previous five-year defense plan. for example, decreases in the inflation rate and projected pay raises. third, $4 billion in savings to the joint strike fighter program to reflect repricing and a more realistic production schedule given recent development delayso and fourth, more than $6 billion was saved by our decision toelay reduce the size of the active army and marine corps starting in fy-2015. under this plan the u.s. army's permanent active duty strengtha would decline by 27,000 troopsi while the marine corps would decline by somewhere between 15-20,000.s these projected reductions are based on an assumption thatprojc america's ground combat be commitment in afghanistan would be significantly reduced by the end of 2014 in accordance with the president's strategy.i ever since taking this post now

moresi than four years ago, i've called for protecting force structure and for maintaininge modest but real growth in thedet defense top line over the longe term. i would prefer that this continue to be the case.ul but this country's dire fiscal situation and the threat itis c poses to american influence and credibility around the worldic will only get worse unless the u.s. government takes its -- gets itsh finances in order.nmen and as the the biggest part ofr the discretionary federal budget, the pentagon cannote presume to exempt itself from the pressure faced by the rest of our government. no doubt these budget forecasts and related program decisions will provoke criticism on twowo fronts: that we are either gut g defense, or we have not cut nearly enough. as to the former, a reality check are in order. even after the projectedeven reductions in the active army beginning in 2015, the service'

permanent end strength wouldilur continue to be larger by nearly 40,000 soldiers than it was when i became defense secretary fourr years ago. and as i've described ined previous speeches, when it comei to striking power and global reach, the gap between the u.s.n military and the rest of the mil world -- including our biggestig potential rivals -- will continue to be vast, and in some key areas will grow even wider. we must come to realize that not even defense program is necessary, not every defense dollar is sacred and well-spentr and more i of nearly everythings simply not sustainable.e m under the proposed budget plan, the defense department willosed continue to see real, albeitcont steadily diminishing growth for the next three fiscal growth --t years before flattening out. what is important is to have a budget baseline with a steady,ed sustainable and predictable rate of that avoids extreme peaks and valleys in the defense spending

that can be enormously harmfulo to readiness, planning and financial management.d fi this budget proposal is such a plan. it represents a reasonable, responsible and sustainable level of defense spending for the next five years. but only with the continuedfi reform of business practices, reduction in overhead and smarter acquisitions can wen execute this plan and realize the savings for reinvestment pl without increase risk to america's security or hollowing out our military. this plan represents, in my view, the minimum level ofn defense spending that is necessary given the complex andn unpredictable array of security challenges the united statesx faces around the global.es global -- globe. global terrorist networks, nuclear-armed rogue states and much, much more. in recent weeks there have been calls from various quarters forr major reductions in defenseed spending to include substantial cuts in modernization, force

structure, troop levels and can overseas bases. i can such proposals risky at bs best and potentially calamitous. for more than 60 years, the. united states -- backed up by the strength, reach and the unquestioned superiority of our military -- has been theperi underwriter of security for moss of the free world. the benefits in terms of stability, prosperity and the steady expansion of political freedom and economic growth have accrued not only to our alliesed and partners, but above all, too the american people.a we shrank from our global --loba shrink from our global security responsibilities at our peril as it could well lead to costlier and more tragic consequencesm later. indeed, as they always have in the past. t surely, we should learnh from or own national ec since world war -- ebb appearance since world war i that drastic reduction in size of the military make armed conflict all

the more likely and with a high cost in american blood and treasure.r to maintain the kind of military needed requires not only adequate levels of funding, bute also fundamentally changing the way our defense establishment money and does business. that is why it is so important to follow through on the program of reform and overhead reduction that i've spoken about today.av this department simply cannot risk continuing down the samely path where our investment priorities, bureaucratic habits and lax attitudes towards costs are increasingly divorced from a the real threats of today, the growing perils of tomorrow and the nation's grim financial outlook.s these times demand that all of our nations' leaders rise aboveh the politics and parochialism that have too often plagued hav considerations of our nation'sth defense. whether from inside the pentagon, from industry ande interest groups and from one ens of pennsylvania avenue to the

other. i look forward to working through this next phase of the president's defense reform effort with the congress in thet weeks and months ahead to do what's right for our armed forces and to do what's right for our country.ur admiral, thanks for your patience. >> actually, i, too, want to thank you for your patience, and i know we've got about 20 or 25 minutes, and that's actually the length. of my remarks. [laughter]tes thank you.eng actually, i'll be very brief. thank you, from secretary, and b would only add that the chiefs d and i are in complete support of these decisions. these were decisions we helped the secretary make, and ions applaud the process that he led. this is the second time we've been this, through this sort ofc review with the secretary, and it's been managed in a most inclusive, detailed, deliberatea and thoughtful way.ct he gave us broad guidance, weghf helped craft the specifics, andn these are our decisions too.e i've been a service chiefto

myself. the way it typically works is wy get large bills at the end of a process, it forces bad decisions and offers absolutely no maneuvering room.fe that was not the case here. it was avoided here because of the up-front work by the secretary and by the services, and the ownership that we all took with respect to the efficiency initiatives. i believe it's our job in the military to eliminate security threats as best we can, and these reforms and budget proposals help us do exactlypens that. the secretary's right, we can't hold ourselves exempt from the belt tightening.e neither can we allow ourselves to contribute to the very debti that puts our long-term security at risk.pu this isn't about just cuttingsk our saving, it is about readiness. not only do reforms preserve essential capabilities which is the highest priority of thisg process, butto i believe we'll

actually improve oure readines, and we'll be able to do things smarter, more efficiently, and more in line with the challenges we face in the fiscal environment that we're in. the services have been able toi reinvest savings significantly into programs and capabilities most, that most meet their needs as they see and we see the future. finally, i want to strongly support the recommendation to nominate general marty dempsey. i don't think there's anybody more qualified, more in stephe with theam challenges and q opportunities facing our army and our military.ac he's an extraordinary leader with whom i've worked closelyhes and have great confidence ini him, and i look forward toos working with him throughout the confirmation process. thank you, sir. >> ma'am.u. >> for both of you, the cuts that you propose in the later years seem to presume that you'll need fewer troops

overseas total and that you canf end the war in afghanistan on time. given that that war and the one in iraq didn't, weren't something you planned for ahead of time and given the rise of new threats in the places like yemen, somalia and the persianp gulf, what assurances can yougu give that your successors won't come back in a few years' timeth and say, guess what, we weree wrong, we need more money?we >> well, i think that, you know, when you're looking out fivehi years, you have to accept theac reality that conditions around the world can change.und the fact is these are relatively modest reductions. in the case of the marine corps, both general conway and general amos have talked for some timeno about the need, their view thatb the marine corps is too large now that they're out of iraq ann so on, and they have talked for some time about getting back tod

some point between 175 -- between where they were before n increased the size of the mamafo lean corps, $marine corp., 1 75,000, and what brought them te 202,000. they see this as more of anp organic process in terms ofin t their prioritieser and their needs.it in the case of the army, this is a situation where the army is supportive of this decision.his i think it is a product of that support derived from understanding the importance of this in terms of their other priorities as well. and, again, i would emphasize both of these services will be larger after these cuts thanl they were when i became secretary.e the army almost 40,000 troopso larger, and the marine corps

anywhere from 7-12,000 troops is larger. so i think it's important toi keep some perspective here as well. >> a budget question.ll >> did you want to -- >> a point i would add to that is the risk. we've looked at the risk, and il think to your point, obviously, predicting the future's veryth difficult. but i would echo what the secretary said in terms of these are modest changes and ones that we think are well within the risk envelope as we understandtn things right now particularly given where we think we'll be with respect to afghanistan in 2015 when these force structure changes start to kick in. and with the, this world of of persistent conflict that we talk about and the need to have forces to be able to engage, bue an understanding of the total force, all services, that will be required to do that.

so, so the risk -- there'so certainly some risk there, buttn we think it's acceptable risksi right now. >> one of your primary goals wao to build research accounts by 2-3% real growth over the future year's defense planning. wasde that accomplished or not?a this it doesn't seem to be given that there's no growth, it looks like, in the budget.y >> what i -- let's be clear. when i talked about the $100 billion last year, it was in the recognition that the overall defense budget was not going to grow at 2-3% real growth a year. so the objective was by cutting overhead to insure that the investment accounts, force structure and taking care of oua people, that part of the budget would, in fact, grow at 2-3%. i think with this transfer ofi h $100 billion to that, we've accomplished that objective. >> the f-35 that's getting

special scrutiny, how close did the stoval come to cancellation, and how many of this $4 billionf in savings comes from delaying purchases beyond 2016?ond you cut 122 aircraft in this current five-year plan. is there more there coming? >> well, first of all, the plan is to -- what we will do in 2012 is keep the production rate at the same level as fy-11. so 32 aircraft. so we get a year further into the development before we really begin to ramp up production.in in terms of the internal process, you know, all of these things were everything i've talked about has been debated for hours over the last number of months.o i think that, i think that the marine corps made a compellingk case that they need, they need some time to try and get things right with the stove all, and wt

will give them that opportunityn >> secretary, regarding the 78oo billion in cuts over the next five years, how confident are you given the fiscal realities facing the hill and the administration that this isn't just the first shoe to drop,th that there will be pressure to cut more? >> well, i mean, you've got two ends to this debate as i've suggested in my remark.ve those who feel we've already gone too far and those who feely like we haven't gone nearly far enough.ar my view is that we've got it about right.ab and they'll clearly be a lot of debate on the hill about this. but let me be very clear about something. when we're tarting to talk -- ar lot -- starting to talk, a lotto of the stories last year werehe about how i was cutting thewas defense budget by $100 billion. i was not cutting the defense budget by $100 billion. m i was moving $100 billion from

what i i thought was waste and be unnecessary spending tot higher priority issues. what we are talking about over the next five years is a decline in the rate of growth. and zero real growth means we get inflation. z so the reality is every year fo. the next five years, according to our plan, because of inflation and the modest growth rate for the first three years the defense budget in absolute dollars will be bigger than thes year before.e so my message to both our allie and be to our friends and in light of what some of ourand closest allies have had to do in terms of their own military capabilities is that thiss president understands and accepts our globalt u responsibilities, and we will continue to invest in the defense capabilities that arentn necessary to sustain our military strength and meet our

global responsibilities. and so i think as you, as you write your stories the focus here is on a reduction in the rate of growth as opposed to absolute cuts. >> the only thing i would add to that is to one of the points in your question is, i believe that we're pretty close to the limit in terms of what we can do to sustain our force structure overall. and that, you know, any significant additional budget cuts can almost only be met -- keeping us whole, not hollowing us out -- can only be metu through i substantial reductions in force structure, and that'so against the national security requirements that we see in thea world we're living in. s we think this budget and this future and be its capabilities is about right. >> joe.b

>> i want you to talk a little bit more about the army cut. you'veli talked, as you mentiond before, you have cautionedbe against drastic declines in defense budgets after wars.e what it looks like here is after the afghanistan war is schedulei to wind down we'll have a dramatic force cut. so, a, why is that not a taking of a peace dividend and be, twoc a lot of the problems you confronted over the course ofo being defense secretary had to do with an overstretched army; suicides, extended tours, all ol which had to be solved in part by growing the army. why don't you -- are you -- how can you be confident that we're not going to need an army the size that we've had? because you've used all of your army that you've had, so why isn't this a peace dividend, and why aren't we inviting more problems by cutting the size of the army? >> well, first of all, over the

past year and a half we have brought 120,000 soldiers out ofh iraq. over that same period of time, we have increased the number of soldiers in afghanistan by about half that number. and we will begin a process of conditions-based, gradualdit drawdowns in afghanistan beginning next, beginning this coming july. as i say, i think perspective here is important. first of all, the numbers thatof we're talking about are relatively small, and the army is still left significantly larger than it was four yearsanl ago. and, you know, we've had, we've had several increments in the

increase in military and army strength partly to deal with the dwell time problem, partly to get rid of stop loss. in addition to the 65,000 increase in the army that i approved in 2007, i approved last year an additional 22,000. thats 22,000 was temporary, and the army itself acknowledged that that will begin coming out and, basically, be gone in 2013l so the army's planning for these things. you know, i mean, let's be realistic. looking five years into the future -- and the chairman t referred to this, and i referrer to it also earlier -- looking five years into the future is through a pretty cloudy crystalu ball. and any number of these decisions could be reversed or changed in some respect if the situation around the world were to change.a

in some dramatic way beyond what we see right now. we plan for -- we are the only place in government, i think, that plans on a five-year basis. but, obviously, the further out- in that five years you go the more uncertain things become. but you still have to do someai planning along thesen lines. because we are still engaged in the iraq, because we are still in afghanistan that's why we're not even going to begin thishy w process in our plan until 2015. that's a long time from now.ng t >> secretary, you seem to be saying two somewhat different things. on the one hand, the pentagon can't exempt itself from the belt tightening that's happening across the government. on the other hand, as yougove emphasize again and again, some of these are fairly modest cuts. the armyr and marine corps remaining bigger than when you took office, for instance. how do you square those?

if pentagon can't exempt itselff why not make bigger cuts? the deficit commission, these were serious people making serious recommendations, and the recommendations were for muchc deeper cuts than what you have outlined. and you've talked about theked force structure. our closest ally, the british,a obviously, have just gone through a similar review, and their decisions were quite different. they felt they could cut more. why is there this difference iny strategic and understanding between us and between our closest ally? >> first of all, we are having to tighten our belts. the fy-12 budget will be $13 billion smaller than we thought it would be a year ago. and overall defense spending for the next five years, that top line will be a total of $78 billion smaller. now, the '13, by the way, is included in the 78, so it's not additive.

so we are tightening, but we also have to realize that we are still engaged in a very active war in afghanistan and stilln have 50,000 troops in the iraq. in iraq. we confront the problems that we have in iran and in north korea we, obviously, have very ambitious military programs inwe both china and russia and modernization programs. so i think, you know, defense also needs to be looked at, ande i obviously have a very b parochial view here, okay? the defense of the republic is one very unambiguous o responsibility of the federal government. and we face a very complexwe f world. we think we are, have tightened up a good bit. we think that this is a

sustainable budget, but i wouldt say, you know -- and, again, i would go back to remind that last year we cut programs thatla had they been, gone to completion over a period of years would have cost the taxpayers about $330 billion. so it's not like we haven't been trying to be responsible in the management of this process. in terms of, in terms of the recommendations for much deeper cuts, i would respond the same way that i did a few weeks ago. as far as i'm concerned, that's math, not strategy. >> and with respect to our allies who have cut the defense' budget significantly beforean this, i would just pick up, i think, on what the secretary said in his remarks which is this budget and not just this

year, the '12 budget, but as weg look out for the next four or five years just reaffirms the responsibility, the global responsibility in the securityl environment that the unitedhe u states has held for a significant period of time. we're also at a time where we do this with our allies.we there's no question about thatl whether it's iraq or afghanistan or operating in the other parts of the world. we do routinely. w so certainly cognizant of that, but the united states leads in this and powers, i think, thein security environment globally ie ways that we have for the lasths 60 years. and we'll continue to do this. and in one other comment i'd make and, julian, you talked about peace dividend and you used the term drastic and we think it's modest, and in understand trying to frame it, but, you know, we have -- this budget has, basically, doubled in the last decade. and my own experience here is in that doubling we've lost our

ability to prioritize, to make hard decisions, to do toughr analysis, to make trades. we're now, i think, in a very good environment here in the building because of this effort to do exactly that. and that's the output that youa see that is this budget that meets national security needsdgt and at the same time recognizes the fiscal reality that this country in. and i think we can do both. >> the thing to stress and io mentioned it in the prepared remarks is that the only way we can realize the savings forn reinvestment is by the execution of the efficiencies and the changes in doing business. the two are integrally linked. there won't be any more moneyed coming from the outside, to fe those programs. we're going to have to do it ourselves. t

we think we can do it, but we've got to execute this program. >> there's a lot of speculation about whether you plan to step down this year, as you said in the past. does this budget mean that you plan to stay through the budget process, and can you assurances that you plan to -- give assurances that you plan to stay longer until the end of nextt year, the end of this termsome.m >> no. [laughter] >> you briefed the congress this morning on your initiatives. can we ask you what their reactions were, and how much ofa the total that you're presenting today hinges on congressional support? potentially, weapons programs could come back. howp much of that would impact your proposal and -- >> are well, i would say that, first of all, i think -- and i certainly don't want to speak for them, but i think the amounk information that we communicatet in a relatively short period of time was a little overwhelming.

and they're, clearly, going to need to take some time and look at our proposals in detail. and what i told them was that wi wouldn be prepared -- the president authorized me to go forward with these changes. obviously, there's a great deal more to do with the fy-12 budget than what i've talked about heri today. and getting into those details will have to await theti finalization of the budget and w presentation to the congress. on those aspects that i've talked about today, the services and the department are prepared to go up and start briefing the committees next week. and so they will begin to have greater understanding of the details of this. some, some aspects of this, the details probably won't be nailed down million the budget itself is finalized in a couple weeks or so.san but we will, we will go up

there. and i would say that i think a fair characterization of the meeting was that there were af h number of questions but very little editorial comment. >> how much of this will actually -- >> well, everything having to d. with the fy-12 budget will go through the regular congressional budget process.nga so a lot of these program changes that i talked about, clearly, will have to go througc that. >> it's been a few weeks since the repeal. can you give us an update how i anything has proceeded since then given the promise of -- [inaudible] >> yeah. our goal here is to move as quickly but as responsibly as possible. i see this as a, as a three-step process.th the first is to finalize changes in regulations, policies, get

clear definition on benefits. the second phase is to thenon prepare the training materialsa for use, first of all, with the experts, if you will, the personnel people, the chaplains, the judge advocate generals. and, second, the leaders, commanders and then, third, the troops. so the policy piece, the training/preparation piece and then the actual training. we're trying to get the first two phases of that process done as quickly as possible. pro my hope is that it can be doneo within a matter of a very few weeks so that we can then move on to what is the real challenge which is providing training to 2.3 million people -- 2.2 million people. and we will do that as expeditiously as we can, but to

use a term the to use a term th chairman used there is a certain element of physics associated with the number of peopleding h involved in this process. itutwe are moving it and i havet asked undersecretary stanley to accelerate the first two phases of this process as much as heuno possibly can so that we can get on with the training process. i was very struck by one of the chief comments that it's better to do this sooner rather thanot later so we are kind of approaching it with that philosophy in mind. t the other thing i would addee ishi to remind that the law hasn changed and won't until it is certified and the certification so nowde is not from my perspective now was not the time to come out if you will. we will get through this and do

it deliberately. we certainly are focused on this and we won't bottle. own budget >> thank you mr. secretary. the first is to china. what are the key messages you will be delivering to your chinese counterpart after such a rocky year with china?n >> well, it think, i think thati would say two things.ts first, i am here to explore where we can further develop and deepen a dialogue on a number of issues of mutual concern andhere where we have, where we both have interests. north korea's an obvious example, but iran, a number ofo other areas where we are engaged with the chinese and where there

are security issues involved, i think, expanding that dialogue is really important. the second is to explore areas where we might be able to do more in a military-to-military sense together as partners whether it's in training and exercising if for humanitarian assistance/disaster relief, counterpiracy, there are ar varian oi of -- variety of areas where i think we can explore working together as equalk partners and develop the relationship further. >> [inaudible]p >> okay. yeah, two more questions. >> i'm just curious, with regard to the jsf program, what has toh happen in the next two years for stoval to, you know, avoid termination, and do you still expect do -- [inaudible] for release in 2014. and finall

you've got a pressure to reduce per-unit cost but you might be pushing production back whichi will increase per-unit cost, soi how do you square that?i >> well, first of all,ke i think that we manage the costs, i think we've been able to -- the fourth production package weh were very successful, i think, in negotiating cost reductions. and so i think undersecretary carter is doing a really good job in that respect and better, better to get it right at thea front end. i think we will end up saving money by getting it right at the front end rather than having tot go back and refit planes that have already been produced.ha as we learn things in the development and test program. as far as the other twogs questions, i'll have to ask brian or somebody to get back to you from ash. i just don't know the answer.t' last question. >> mr. secretary, you talked about real growth verse is us

the continuing -- versus thee th continuing resolution. what would you say to those who argue that 553 in fy-12, 553 billion, would, in fact, be a cut versus us the plan and t program baseline? they argue that that's less thaa 1% growth over what you asked l for in fy-11 and less than 1% doesn't even keep up with inflation. >> well, you know, one of the things that i've learned in thin job is how, how you end up in -- how you answer a question like that givens on the number you start with -- begins with the number you start with. and i've got four numbers. so the first number is $530 billion. that's continuing resolution.i that's an $18 billion cut below -- that's $18 billionc below what our request, the president's request was. that will be a disaster forw usq we will have real problems. the second number is the number that the appropriations

committees mark to, and let me just go back. from the continuing resolution number of 530 to the 553 is 3% real growth. >> right. 3% >> so if you start with the appropriations committee's mark which was in the omnibus which was 538 to 553, that's a percent and a half real growth. if you go from our original budget request of 548 to 553, it's actually, i think, a little less than real growth. and, and then you've got the 566 of which is where we were lastu' year. you know, my point here is that we are, we are not exempt from scrutiny and from being asked to figure out how to do what we arg doing with less dollars.h

nobody has come to us and said stop doing something. so the only way we can continue toin do what we're doing in many materials of modernization, ine terms of our forces, in terms of our force structure is to take money out of overhead and to provide the 2-3% real growth in the part of the budget that really matters to executing ourg mission and that is the forces and capabilities. so i would argue overall pressure on the defense budget? absolutely. and that's not a surprise toely anybody, and it sure shouldn't be. and there are those on the hill in both parties saying that the defense budget ought to be cutbo more. and so my view is we have come down, i think, in a pretty good place in terms of responsibly dealing with less money than we thought we would have, butth l

figuring out a way to move money from overhead to the business end of the department of defense which t is our ability to fightp our capabilities. so, you know, my point is you're going to see all kinds ofo conclusions about these numbers because it'll all depend on where you start. and my view is, as i said and a the chairman endorsed, if we can get this budget, we believe we can do what we wanted to dot which is protect our force structure, protect our our modernization investments and take care of our people. and, and we think we've been pretty responsible in figuringe out how to do that and to insure that in those three categories we. have a real rate of growth thatg is where it matters. >> is it only, is it only correct to look at it the way you're doing, you know, when you say versus the continuinga resolution or the otherio

perspective also valid from -- >> well, as i, i actually put many here in my prepared remarks that you'll see that if you look at it from the standpoint of the appropriations committee marks, it's a percent and a half realer growth for fy-12. thank you. >> thank you.r [inaudible conversations] >> federal reserve chairman ben bernanke will be on capitol hill this morning testifying about what recent economic activity means for monetary policy. that's live before the senate budget committee on c-span2 at 9:30 a.m. eastern. >> this weekend on c-span2's booktv from monsoon, robert kaplan on the geopolitical importance of the indian ocean region, thomas daley on his experiences during the first month of the surge, a marine's

baptism by fire, and and on after words, eduardo porter says there's a price on every decision a person makes and most don't realize it's a motivating factor in shaping their lives. sign up to get our schedules e-mailed directly to your inbox with our booktv alert. >> house republicans are moving ahead to repeal what they call the job-killing health care law. debate begins this friday with a vote scheduled next wednesday. watch live coverage of all the house debate and the entire vote on c-span and view the bill online at c-span.org. >> the most senior officer in the british military today spoke at a forum about how his country's mill air is dealing with budget -- military is dealing with budget cuts. the atlantic council hosted this event in washington, d.c., it's just under an hour. >> hello and happy new year to everyone. what a great way to start the new year.appy i'm fred kempe, and i'd like to welcome you to our first publice

event of the year, commander series discussion with britain'f chief of defense staff, generalf sir david richards. this is the type of person foras which we launched this series. people who have done real jobs,n have done real dangerous jobs, people who have also had to apply their mind strategically to the most challenging issues of the day.t the londonh times said of him. that he's a seat of the pants soldier, quote, he is no peneat pusher, he believes in troop surges and action and making things happen. he's a field soldier beloved by his men, journalists, aid workers and, most importantly,h the people on the ground. i'll also add from the times he is outspoken, politically astute, chatty, and a journalisd nicknamed him gabby richards. [laughter] there are many faces in the audience who have attended

several, if not most of oure commander series events in recent years. welcome back. it's one of our flagship series. we've had supreme allied commander europe, admiral jim,pm supreme allied commander transformation, stephane, u.s. pacific commander, admiral tima keating, most recently the chief of the british royal air force, air chief marshal sir steven dalton.n we've hosted 16 military leadere from the united states and our friends and allies under the banner of this series, so we're proud, general richards, to add you to this list of impressive, impressive commanders.to a none of this would be, of course, possible without the generous support of saab north america and its president andpot ceo and a member of our board. i'm sorry he congress be here today, but i do -- he couldn't be here today but i do want toan

thank another boardot member, hn rick, where are you? hen rick, thank you so much for your support of what has beens one ofo our most successfulr ventures. it's of special importance to us because we advocate strong transatlantic relations to tackle 21st century global challenges and the strongest security relationship historically has been that of the u.s. and the u.k. furthermore, the recent release of the u.k. strategic security and defense review and with that the washington defense and security community has been very focused on outcomeses and whatut it means for british defense policy.r br we are also pleased to be able to host you to talk about not only these issues, but some ofol these little budget issues that play a role here and there. you earned your commission in the royal artillery in 1971. since then you've commanded

units at all levels of the british army, u.k. contingents of east timor in 1999 and sierra leone in 2000, tough and tryingi operations in this difficultns environments. commander of nato's international security assistance force in afghanistant 2006 and 2007 which is, i in believe, when we first rantan, across each other and appointed commander in chief of u.k. land forces 2008 and chief of the general staff in 2009. and you took up your currentchie duties in the late october of last year. just one last thing, before you decided on a military career -- we do some interesting research on people who spoke here, speakn here, you were considering becoming a woodworker, a race car driver or a journalist.or so ike think that defines a pers with a wide range of interests. also you're the first general we've had here who is also an t admiral of a yacht club. [laughter] so, general richards, the ship

is yours. thank you for being with us today.hi [applause] >> well, thank you very much for -- i didn't -- i say to the first seal when i'm discussing maritime affairs with him, admiral, very good to see you.ii it's not difficult, it's business. i'm an admiral, too, and so heu smiles rather pathetically, doesn't really likei it. [laughter] but also about the gabby richard z, i don't know if that was christina lam, but it was, actually, the case that in sierra leone we had to use the media to get messages to londong because the inconvenient bureaucrats, military and civilian between me, the deployed commander and tony blair, were preventing me fromwe doing what i felt was right, so i did use the media a lot ofy that time, but i've become more

cautious. a little, anyway. [laughter] anyway, thank you very much. i have to say having studied not very well international relations and things like that at university, i was aware even then of the atlantic council anf its importance, and it's greath treat for me to be here with you today. it's very significant for me. i promise you.t and i think, i understand this is the 50th anniversary of the atlantic council. i hope i'm right in saying i'm,n not the first u.k. chief oft defense to speak in the last 50n years, and i probably won't be the last. and and there's a good reason for that. you don't become the british cd without a healthy respect for this country and what we canwha achieve when we work together. w and i often, not so much today, but on previous visits would god to arlington and pay homage tod field marshal dill and that

error of close cooperation. it's been -- era of close cooperation. it's been something of an ambition that we shouldhoul rediscover that close affinity and understanding and individuals' personalities really do matter. and i had a, as it happens, an extremely good lunch yesterdayes with admiral mullen. not good in the british sense that there was much wine, by the way. in [laughter] but it was a very good conversation, and i think thatn relationship between him and me now for a while is extremely important because it allows yous to cut through a lot of way that isin a almost unique in its power. if you don't have that sort of relationship, then invariably thereha is often going to be cae for confusion. cau and given the pace of events inr the digital age, you just can't afford that. so being able to pick up a phone or today look at people on a little screen is really, really

important, knowing you actually know each other and have an empathy for each other. during the course of my clear, i've often served alongside the u.s. military, the most notably. as fred said when i was commanding the isaf mission in 2006 and '7.6 i'll come back to afghanistan later. first of all, i wanted to talkia about some of the changes ins british defense and what they mean for our preeminent security and defense relationship with the united states as well as oul unique network of alliances anda partnerships as a member of nato and the european union and, obviously, as a permanent member of the u.n. security council. now, as fred said, during the course of 2010 we conducted a strategic defense and security review which resulted in the biggest changes for a decade toe defense. we also signed, importantly, two defense treaties with france which are designed to make our

armed forces more interoperable and these decisions were our own responses to the challenges facing all nations, a dynamic global threat environment andall the need to increase -- sorry,e decrease the costs and increase the efficiency with which the government provides all services and whereas it may not be right to view security as a service in that rapt, i do -- respect, i do include security to itsi population.d and these challenges have direct relevance for the united states and for the rest of nato.to others will make their own judgments, but i'd like to explain why, briefly, we made ours. the decisions taken were taken on the basis of what i consider to be excellent analysis in the national security strategy.t this looks beyond the immediatet five years at the range of risks the nation faces.ra actually, the national security strategy or the nss has not been

given as much prominence in the u.k. and i think over here as the sdsr, and i think it should be given more. it's actually quite an impressive piece of work by a military and civilian team from several government departments. and as the prime minister said, the defense review flows from strategic thinking about britain's place in the world, about the threats we face ande n about how we can bring all of the government together to try toow deal with that. in military language the nss is what we might call ourge commander's intent.s it points to the themes thatrs rightly sit at the heart of our national security, not justw afghanistan or the threat of nuclear proliferation, but also less recognized issues; advances in the technology, biologicals science, climate change and social and democratic change art all taken into account, for example. the national security strategy lists the threats facing the

u.k., and it's worth remembering the most pressing.f they range from international terrorism, nuclearange proliferation, sabotage, espionage, dissident northern irish groups still, threats too energy security, natural hazards and a cyber attack on the economy. crucially, we judge that none oe the threats we face is at aof definitive tipping point. all are serious risks to our security, but none yet of suchh magnitude as to be the focus of all our national resources. and given this complex picture, the choices we make have to accommodate a wide spectrum of thoset threats. and two other factors also came into play when determining our defense posture. firstly, this government was determined that the u.k. should continue to play a leading role in the world, a reminder to the foreign secretary's word that this is not a time for strategic shrinkage.t in britain we've never shirked the international

responsibilities conferred on u' by our economic and military strength. and secondly, the need to reduci britain's defense budget, the top political priority of our coalition government. the economy is clearly part of the strategic context.rnm our economic strength underpins. our military strength.s the financial security of the nation must, therefore, be a primary consideration of any review. if you need an example of ay government failing to get this o formula right, please, justgo pause to recall the fate of the soviet union. moscow's attempt to match u.s. defense spending contributed to a bankrupt state which led to its collapse. and a plan is not a plan if it doesn't take into account thee resources available. it's a wish list. no general worth his salt would base his plan on wishful thinking. and clearly, the chiefs of staff did not go into the review go lobbying for reductions in the defense budget. but the government has prioritized spending in some

departments including defense have fared, undoubtedly, better than others.e more importantly, along with the real terms increase, the prime minister has spoken of on pacen foro 2015, we have enough to ta1 us towards a robust future force which enenables the u.k. to play a prominent role in international security affairs. the government's decision tof keep our defense spending above 2% of gdp reflects its appreciation of the importance of our armed forces and the importance we place many continuing to play a role arounc the world including alongside u.s. forces.nclu by looking at the range of threats, the u.k.'s resource ant our ambitions, we concluded that 2010 was not a moment fored t strategic realignment. what was needed was a balanced strategy to deal with a wide range of diverse threats, andl i i've listed some of them. that's why we decided to design what we call the adaptable forco capable of conducting the full range of missions.

now, adaptable is just a word, but it encapsulates the vigilance, flexibility, resilience and agility we will seek to maintain. it also speaks to the determination both morally and physically to insure that even when we may not know the future, we will structure our armed forces with the intellect and ability to meet it.t i'd like to emphasize thath point, if i may. critics have accused the government of failing to conduct a strategy-led review.g to this, in my judgment, couldn'teg be further from the truth.n m the government has not drawn thh same strategic conclusions asu some have lobbied for note go because there is a lack of strategic direction, but the reverse. this review has maintained our strategic freedom of maneuver.th we could have reconfigured the capabilities of our armed forcet towards the fence of europe and our immediate environs as some argued, but that choice was rejected. we could have reconfigured

towards peace keeping rather than war fighting, but thatthan choice, too, was rejected. we could have reconfigured towards counterterrorism ande domestic security. we rejected that choice. but these options and other scenarios were rejected because they were not supported by the analysis underpinning theby national security strategy and would not have enabled the u.k. to handle the range of threats we identified. the adaptable posture retains the ability of the u.k. to acttn at distance, independently where required, and across all do mains. -- domains.nd it provides capacity for prevention, for deterrence -- both conventional and nuclear -- for corergs and sewer vex. it is a rational extension of the national security strategy.l my reading of the u.s. th quadrennial defense review is that the u.s. has taken a similar review of it own circumstances, and the nato strategic concept is also based

on the need to deal with a wided range of threats than before.w where we've gone further, perhaps, is in the changes to our force structure to prepare ourself os to deal with a widere range of circumstances. w and 12 years on from our, in the our case, our last major defense review, that is, perhaps, nor de surprise. i'd like to spend the next few minutes describing what we intend our future force to bew capable of doing. we've targeted ten years outle the, o as it's called, the futue force 2020. now, our domestic newspaper headlines were dominated by stories of cuts, and to be suret we had some difficult choices tc make, and we expect our armed co forces to be smaller in the future. but we are planning to generateu extremely capable armed forces recognizing the changing character of conflict and the threats we face now and in the future.ats the defense review charts a path of longer-term transformation. future force 2020 will be, if we

get it half right, a formidable and powerful organization jointly and within each service linking service personnel with the other instruments of power,t diplomacy, development and assistance and insuringl interoperability with our allies and long-term strategic partners. what was absolutely necessary tc have in one's armory even ten years ago may not be so vital in the future. and understanding this dynamic is absolutely essential. itrs was --e [inaudible]s only one thing more difficult than getting a new idea into the military mind, and that istary getting an old one out.on if we stay as we are, we would not be successful ina 2020 and beyond, and i'm absolutely conu swings vinceed of it. we've turned the corner, and i would argue we have further to go for future warfare. if i were in the armed forces ii the 1930s, i would haverc

preferred to have been fighting from an aircraft or a tank than from a horse. those in 2020 will be grateful for our investment today inf intelligence, cyber operations, istar and remote technology.r it will be something of a quantum leap. future force 2020 will also maintain traditional,020 significant but high-tech ormain more high-tech fighting capabilities across all three services. the typhoon, the joint strike fighter and an updated strategic lift fleet are examples in thep case of the royal air force. a strike-astute destroyers and soon after 2020 the type 26 global combat ship for the royal navy, and the army will retain the manning equipment and human skills that i believe will remain so important in modernve warfare. and this will be complemented bm the investment in education which is vital to maximize our 21st century capabilities and our ever-increasing ability to

operate jointly with our allies. my aim is for my successors not to face the challenges we face today with aging capabilities across all three services thatdy are difficult to maintain. to generate,le deploy and sustain indefinitely a brigade-size force configured for a full range of missions, and on a one-off basis the u.k.e will continue to be able to put. a fully-formed division into tho fight. that is a substantial fighting force which few others can match. and we also concluded that we must retain the ability tot we command at theater level. with many of our forces leavinge germany, some argued that we should give up the allied rapid reaction call, for example. but that would mean a reduction in our ability to lead major nato operations. that would be in neither britain's, nor nato's interestsr and we will continue to be able to command multi-nationalle operations at core level.atio

reflecting a different i but very real threat, the sdsr also mandates the formation of a u.k. defense cyber operations group, and this is going to continue to develop. be all told, the u.k.'s informing around an extra onein billion pounds in cyber across government, and i've just actually come here today from aa excellent visit to the nsa. the detailed structure of thee cyber operations group has yet to be determined, but it will bs a fundamental part of our strategic operations and will br able to plug into other securite organizations outside defense, most importantly, obviously, thu gchq. and we're working very closely with the department of defense here to develop the cyber leg on the u.k./u.s. defense relationship. in this fast-moving digital age, information is a major part ofit conflict. in some respects it has to be viewed as a weapon in its own