modification. the program just announced that takes the vantage of one of the charts that we took -- talk to an earlier the historic low interest rates but to many homeowners pay interest rates are above the current rates and they are stuck period they are responsible and current payers and this program would allow those gse's the month those mortgages owned by fannie and freddie and also non-mts sees to refinance to take advantage of the historic rates. . .

>> good morning, everybody. the committee this morning welcomes secretary defense leon panetta and chairman of the joints chief of staff, general martin dempsey for the hearing on the department of defense's fiscal year 2013 budget request. the associated future years defense program and the posture of the united states' armed forces. the committee also welcomes under secretary defense controller robert hail joining the secretary and the chairman at the witness table. let me start by thanking all of you for your continued service to our nation and to the soldiers, sailors, airmen, and marines here at home and in harm's way around the globe and to their families. they are truly deserving of the

nation's affection and support. your testimony today marks the beginning of the committee's review of the fy2013 budget request for the department of defense. this year's request includes $525 billion for the base budget and $88.3 -- $88.4 billion for the overseas operations. the base budget request is $5 billion less than the fy2012 enacted level of $530 billion, and the oco request is $27 billion less than last year's enable #* acted level of -- enacted level. the base budget request conforms with the budget control act that congress passed last summer. the senator approved the budget control act on a bipartisan basis with 74 senators voting for it. the budget control act locked in

defense and non-defense discretionary spending caps over ten years. the defense caps reduced projected defense spending by nearly half a trillion dollars over ten years, and department responded with a new strategy and new program to meet the nation's security challenges and preserve our military capabilities. the budget control act including language requiring the congress to pass legislation with additional far-reaching deficit reduction. if congress does not come up with a deficit reduction package by next january, one that locks in another $1.2 trillion in deficit reduction over ten years, then automatic spending cuts will be imposed on defense and non-defense programs. the budget the president sent us yesterday avoids sentinal quest ration by meeting the $1.2 trillion additional defense

reduction target, approximately one-half further cuts in spending and one-half in additional revenues. the defense budget for fy2012 13* -- fy2013 reflects the results of the department's comprehensive and inclusive strategic review initiated by president obama in april of last year and the strategic guidance that resulted. we look forward to the witnesses' explanation of the process they went through to develop the new strategic guidance, their assessment of the guidance's most important features and potential risks relative to the current and anticipated security environment, and how this budget request supports its strategic priorities and manages strategic risk in the near and long terms.

the administration has called for two more base realignment and closure or barak -- back rounds. in my view, however, before we consider another round, the department ought to look at whether further reduction in bases can be made overseas, particularly in europe. while the department renounced removal of the two of the four combat brigades currently stationed in europe, even after the bring guides are withdrawn, there will still be over 70,000 u.s. military personnel deployed in europe. finding further reductions in consolidations in our overseas forced posture should be the first priority before another round. the fiscal year budget request reflects continuing conflict in afghanistan, but also reflects the fact that the process of transition has begun and continues at pace. afghan security forces are

assuming speedometer for securitying the afghan people and more and more areas throughout afghanistan. progress on security is real. the second round of areas to be transitioned to an afghan security lead will be completed later this year. then approximately 50% of the afghan population will live in areas where afghan security forces have the lead for providing a lead with the coalition forces. i long pressed for the forces to move increasingly into the combat lead and to assum responsibility for secures more and more afghan territory and communities as the size and capabilities of the afghan army and police are built up. the success of our mission in afghanistan depends on getting the afghan security forces in the lead with the support of the afghan people. there by putting the lie to th

taliban propaganda that the coalition is an occupying force. the afghan foreign ministry spokesman made clear there was full agreement on transition saying, quote, "we always maintained that afghan security is an afghan responsibility," close quote. last june, president obama said that the 33,000 u.s. surge force would be removed from afghanistan by the end of this summer. that means that 68,000 u.s. troops would remain in afghanistan after the draw down of the serge. he also said that after the reduction of the u.s. surge force, u.s. troops will continue to draw down, quote, "a a steady pace," close quote; yet, the fy overseas contingency budget request now before congress is based on an assumption that there's no additional reductions

in the 68,000 troop level in afghanistan throughout all of fy13. the question that i hope our witnesses will address this morning is whether they expect further reductions in u.s. troop levels in afghanistan during fy13, below 68,000, and what associated cost savings would result. if that decision has not yet been made by the president, what is the timetable for its being made? i hope secretary panetta clarifies surprising statements this month that, quote, "our goal is to complete all of the transition to a training advisory and assistance role in 2013," close quote and that, quote, he said, "hopefully by mid to latter part of 2013, we'll be able to make a transition from a combat role,"

close quote. there's many reports about reconciliation talks with the taliban. if taliban statements are true, that they will open a political office in qatar, it has the potential of being a positive development. i'm concerned, however, by reports that in exchange for the opening of this office, the administration is considering transferring five afghan taliban detainees from the guantanamo detention facility to qatar. such a significant step strikes me as premature and should be considered in my view only following positive discussions and not proceeding them. another concern i have regarding the progress of the reconciliation talks are the reported decision by the government of afghanistan to open a second channel in the dialogue with the taliban that would be in saudi arabia. it seems to me that this would

create the potential for confusion. the united states said it is committed 20 to an afghan-led process. that's the way it ought to be pursued through a single channel with both the afghan government and us fully coordinated and participating together whether it takes place in one or two venues. with respect to the real alignment of u.s. marines, senator mccain, webb, and i advocated changes in the current plan in ways that support the strategic goals the u.s. regional military posture while avoiding costs associated with large and elaborate new bases. the announcement last week that the u.s. and japan are reconsidering elements are welcomed news, but the steps are not yet adequate. there's other challenges. of course, there's strong bipartisan determination on this

committee and in congress to do all we can to counter the threat that iran poses including stopping iran from acquiring nuclear weapons. president obama has focused considerable diplomatic effort towards that goal because in his words, quote, "america's determined to prevent iran from getting a nuclear weapon, and i'll take no options off the table to achieve that goal. the administration is bringing the world together as it should to speak with one voice against iran's nuclear ambitions. relative to egypt, the relationship is under strain. in recent days, general dempsey traveled to cairo to engage the supreme counsel of the armed forces in egypt on the troubling decision by the egyptians to charge 19 americans and dozens of others individuals for operating programs in support of

an egyptian civil society. we're excited to hear the discoveries because the decision by the egyptians will negatively affect funding decisions congress makes in the coming months. relative to syria, the regime of president al-asad is waging war on the people of syria and in spite of all league of nations, they are preventing the security counsel from taking preventative action. if the situation is left as it is, there's also a significant threat that surrounding countries could be severely impacted. the witnesses will hopefully discuss options we have to help end the slaughter as limited as the options might be. on cybersecurity, the defense stray feejic guidance notes there's the capability and intent to conduct cyber espionage and the ain't to conduct cyberattacks on the united states with possibly

severe effectings on the economy and our security. the director of national intelligence in recent senate testimony placed the cyber security threat in the top tier alongside of terrorism and nuclear and proliferation of weapons of mass destruction. a recent report from the national intelligence executive stated operations within china and russia are responsible for the massive thet of u.s., commercial, and military technology that could threaten our national security and our economy. let china and russia know in no uncertain terms that cyber economic espionage has very negative consequences for normal trade relations and other relations. in the area of personnel, aimed

at slowing down the increase of personnel and health care costs that continue to rise at unsustainable rates this includes significant reduction in military and strength over the next five years, other personnel related forms, and a commission to review military retirement benefits. i agree with general dempsey, the service chiefs, and the services senior enlisted advisers who urged me in a letter dated january 25, 2011 to grandfather the retirement benefits of those currently serving. we owe it to the service members and their families to address any change in their compensation and benefits in a manner that acknowledges the commitment that we made to them when they volunteered to serve in our armed forces. secretary panetta, general dempsey, and dr. hail, we look forwards to your testimony, and i now call on senator mccain. >> thank you, mr. chairman, and

i join in welcoming secretary panetta and general dempsey to discuss the budget request for fiscal year 2013, the proposal to reduce the budget for the department of defense by $487 billion over the next ten years, and the impact of these reductions on future years defense programs for the department of defense. while the other members of this committee and i continue to scrutinize proposals, i'll say today i do not fully endorse this budget request. indeed, i'm seriously concerned about how we arrived at this point. on april 13th, 2011, the president of the united states announced his intention to reduce the department of defense budget by $400 billion through 2023. however, his announcement was unsupported by any type of comprehensive strategic review or risk assessment. in fact, then secretary gates testified before congress that

he only learned the night before about this massive proposed cut in our defense spending. now, the president proposes $487 billion in cuts over ten years and told the cuts are in the budget driven, but based on a review of the defense priorities. respectfully, this doesn't add up. unfortunately, this defense budget continues the administration's habit of putting short term political considerations over our long term national security interests. in afghanistan, our military commanders initially asked for a serge of 40,000 traps. the president disregarded that sending 30,000 troops instead and announced a date when to withdraw. the commanders recommended maintaining the full force throughout this year's fighting season, but the president, again, disregarded their advice and announced reductions to our force levels at the former

chairman of the joint chiefs of staff, admiral mullen said more aggressive and incurs greater risk than advisedment finally in iraq, the president disregarded the advice of the commanders again, dragged out negotiations with the iraqi government, with no intent to maintain a presence of u.s. troop, and now with the political and security situations unraveling, it is difficult to argue that iraq today is to use the president's phrase, "stable and self-reline." it seems as though many of the president's most significant decisions about the national defense have been fundamentally disconnected from "conditions on the ground" and the advice of the commanders including commanders that the president himself selected. i fear that this defense budget in the broader plan to cut $487 billion from the department of defense over ten years only continues this dangerous and

regrettable pattern. by any objective assessment, the worldwide threats to our nation, our interests and ideals are not diminishing. they are growing. yet, the defense budget before us would reduce the size of our force by more than 125,000 military personnel. it would jeopardize our nuclear modernization plan by making critical cuts to the nuclear weapons infrastructure programs. it would eliminate 20% of the army brigades combat teams, six marine battalions, four squadron, and seven air force combat squadrons, and 130 mobility aircraft. perhaps most concerning of all, in light of the administration's own identification of the asia-pacific region as the focus of u.s. defense strategy, this budget would require the navy to reduce shipbuilding by 28%.

retire seven cruisers and two amphibious ships earlier than planned, delay the next generation of ballistic missile submarine and postpone purchases of one virginia class submarine, two combat ships, and eight high speed transport vessels. further more, a list of defense strategy and related budget cuts clearly increase the risk to our national security objectives, there has been no formal risk assessment provided to congress. how can we and the american people determine whether the additional risks associated with this strategy are acceptable if we do not know the specific nature of those risks as defined by the u.s. military? these cuts pail in comparison to what the defense department would face under see quest traition, an outcome secretary panetta correctly stated would

be catastrophic for our national defense, and yet here, too, domestic poll sicks is taking -- politics is taking priority over national security with the president saying heat veto efforts by congress to eliminate sequestration that does not raise taxes. if it's as catastrophic as you state, why doesn't the president sit with us to work out a way to avoid what you and general dempsey described as catastrophic consequences for the national security of this country rather than sitting in the oval office saying he'll veto any bill that doesn't have tax increases in it? in short, we have come to a critical turning point when decisions of the utmost importance for our national security must be resolved and the consequences of those decisions for better or worse will forever shape our nation's destiny. defense spending is not what is

sinking this country deeper into an up steanble national -- unsustainable national debt, and if we act under the assumption that it is, we'll create something that is is truly unaffordable, the hollowing out of the u.s. military and the declean of u.s. military power. we can either take the easy route of dramatic cuts and increase risk or balance more modest and strategic reductions 234 defense spending with an aggressive plan to address the broader cultural problems plaguing our defense establishment. the waste and inefficiency with which the department buys goods and services under the undo influence of a non-competitive military industrial congressional come -- complex. we have to tackle this culture problem head on, cut congressional earmarks and pork barrel spenting on programs that the military does not request

and does not need, must have transparent and audible financial statements and eliminate the shameless cost overruns that characterize too many of our largest defense programs. from my review of the programs, this point is clear -- the phenomena of acquisition malpractice, which is senior penalty gone official -- pentagon official publicly described days ago, can be found in many more programs than just the joint strike fighter. it conveys the entire major defense acquisition program portfolio revealing a cultural problem in the acquisition of goods and services that is unsustainable. before the department further risks fore structure to achieve budget savings, practice like this must end now. now is the time to set poll kicks aside for the -- politics aside for the one issue that we have to agree on is non-negotiateble to the future health of the success of our

nation and national defense. start with goals, move to strategy, and allow that rigorous process to inform the budget we create. the administration's approach thus far has been too defined by short term domestic political consideration. the administration has not led. for the sake of our national security, congress should. thank you, mr. chairman, i look forward to the testimony of our witnesses. >> thank you, senator mccain, secretary panetta. >> thank you, mr. chairman, senator mccain, members of the committee. i ask my statement be made part of the record, and i'd like to summarize key points. >> it is part of the record, and the balance i did not give will be made part of the record. >> members of the committee, i appreciate the opportunity to appear before you to discuss the president's budget request for fiscal year 2013.

let me begin as always by thanking you for the support that you provide to service members and military families. these brave men and women along with the department's civilian professionals who support them have done everything asked of them and more, during more than a decade of war, and i want to thank you for the support that you have given them in the past, the present, and hopefully in the future. the fy13 budget request for the department of defense was the product of an intensive strategy review conducted by the senior military and civilian leaders of the department through advice and guidance of the president. the total request represents a $6.14 billion investment in the

defense requiring 4.45 billion for the didn't's based budget and 88.5 billion in spending to support the troops in combat. the reasons for this review are clear. first, the united states is at a strategic turning point after a decade of war, and after substantial growth in defense budgets. second, with the nation confronting a very large debt problem and deficit problem in this country, congress passed the budget control act of 2011 imposing a reduction in the defense budget of 487 billion over the next decade. we, at the department, decided to step up to the plate, that this crisis provided us an opportunity to establish a new strategy for the force we need

in the future. that strategy has guided us in making the budget decisions and choices that are contained in the president's budget. the fact is we are in an important turning point that would have required us to make a strategic shift probably under any circumstances. the u.s. military's mission in iraq has ended. we still have a tough fight on our hands in afghanistan. 2011 marks significant progress in reducing violence and transitioning to an afghan-led responsibility for security and we're on track to cleat in mission by 2014 in addition to the lisbon commitments. having just returned, i can assure you all the nato nations are in line with the strategy that we are approaching with regards to afghanistan.

we are in a transition. we are transitioning security to the afghan forces. our hope is that as we make the final transition in 2014, that they can take the lead on combat operations. we'll be there. we'll be in support. we'll be combat ready to support them through that process, and i want to assure you that nato is fully in agreement with the strategy we are moving in in afghanistan. last year, in addition, the nato effort in libya also concluded with the fall of gadhafi, and successful counterterrorism efforts have significantly weakened al-qaeda and decimated its leadership, but despite what we have been able to achieve, unlike past draw downs, when threats receded, the united states still faces a very complex array of security challenges across the globe. we are still a nation at war in

afghanistan. we face threats from the homeland with terrorism. there's a danger proliferation of lethal weapons and materials. the behavior of iran and north korea continue to threaten global stability. there is continuing turmoil and unrest in the middle east from syria to egypt to yemen and beyond. rising powers in asia are testing the international rules and relationships. there are growing concerns about cyberintrusions and attacks. our challenge, our challenge is to meet these threats, to protect our nation, and our people, and at the same time, meet our responsibility to fiscal discipline. this is not an easy task.

to build the force we need for the future, we develop new stray feejic -- strategic guidance that consists of five key elements. first, military will be smaller and leaner, but we want a military that's agile, flexible, ready, and technology advanced. second, we will rebalance our global posture and presence to emphasize asia-pacific and the middle east because those areas represent the threats for the future. third, for the rest of the world, we have to build innovative partnerships and strengthen reliances and partnerships from europe to latin america and africa. ..

strategy while shaping the strategy we didn't want to repeat the mistakes of the past. our goals are to maintain the strongest military in the world, to not hollow out the force, to take a balanced approach to budget cuts by putting everything on the table and not break faith with our troops and their families. throughout the review we also wanted to make sure this was an inclusive process. general dempsey and i work closely with the leadership of the services and combatant commanders and consulted

regularly with members of congress. as a result of these efforts, the department is strongly unified behind the recommendations that we are presenting today. consistent with the budget control act this budget reflects in the next five years savings of 259 billion. that's compared to the budget plan that was submitted obviously to congress last year. we think this is a balanced and complete package that follows the key elements of the strategy and adheres to the guidelines that we establish. the savings come from three broad areas, first efficiencies. we have redouble our efforts to discipline the use of taxpayers' dollars, and that has yielded we hope about one-quarter of the targeted savings that we have in this package. the second area is the force structure and procurement reforms and adjustments. we've made strategy japan changes in the structure of the

procurement programs to achieve roughly half of the savings in this package. finally on the compensation, we've made modest but important adjustments in personnel costs to achieve some necessary cost savings in this area this area represents about one-third of the budget. but here it accounted for a little more than 10% of the total reduction that we presented. let me walk through each of these areas. discipline in the defense dollars if we are going to tighten the force, then i like senator mccain believe very strongly we have to begin by tightening the operations of the department to better reduce excess overhead, eliminate waste and improve business practices across the department. the fy 12 budget as you know proposed more than 150 billion in the efficiencies, and we continue to implement those

changes but we also identified another $60 billion of additional savings over five years through the measures like streamlining support functions, consolidating the i.t. enterprise services, refusing military construction project, consolidating inventory and reducing service support contractors. as we reduce the force structure we also have a responsibility to provide the most cost-efficient support for the force. for that reason the president will request the congress to authorize the base realignment and closure process for 2013 and 2015. as somebody who went through the process in my own district i recognize how controversy will this process is for members and four constituencies. and yet it is the only effective way to achieve the needed infrastructure savings. to provide better financial

information we are increasing our emphasis on the audit readiness and accelerating the by time lines. in october 2011i directed the department to accelerate efforts to achieve fully audited financial statements. we were mandated to do it by 2017. what i have ordered is that we move that up to 2014. but efficiencies alone are not enough to achieve the required savings. budget reductions of this magnitude require that they make adjustments to the force structure and procurement adjustments. the choices that we may have to fit the elements of the strategy that we developed for the future military force. first we knew coming out of the war as i said for the military would be smaller. but our approach to accommodating these reductions has been to take this as an opportunity to fashion the agile and flexible military that we need for the future. that highly network and cable

joint force consists of a battle tested army that remains the force for the decisive action capable of defeating any anniversary of the land, and at the same time being innovative about how it deploys its forces. the navy that maintains the presence and is able to penetrate and enemy defenses. the marine corps that remains the expeditionary force with the reinvigorated amphibious capabilities the air and space and provides rapid mobility, global strike and persistent on ksr. in the national guard and reserve to continue to be ready and prepare for operations when needed to ensure the natural force we made a conscious choice not to maintain more structure than we could afford to properly train and equip. if we do it the other way we

guarantee a hollow force we wanted a force structure we could have effectively trained and maintained we are implementing the reductions and the new strategic guidance for the total savings of $50 billion over the next five years the adjustments include as i was pointed out a resizing of the active army of the 562,000 to 490,000 soldiers by 2017. this will transition down in a responsible way. we will gradually resize the active marine corps from about 202,000 to 182,000. we will reduce and streamline the air force airlift fleet and retired the c-130 but at the same time maintain a fleet of the 175 strategic airlift and 318 c-130 is, the fleet that would be more than capable of

meeting the airlift requirement for the new strategy. the navy will protect the highest priority and most flexible shifts but we also will retire the cruisers and the reason we are doing that is the cruises have not been updated with the ballistic missile capability and would require significant repair hence the reason the media chose to do that. second, the strategic guidance made clear that we must protect our capabilities needed to project power in the asia-pacific and in the middle east. to this end the budget maintains the current fleet, it maintains the aircraft carrier fleet and a long-term love for of ships it maintains the amphibious and maintains the army and marine corps structure and the pacific after the draw down from iraq and as we draw down in afghanistan while continuing to

maintain a strong presence in the middle east. our goal is to expand the rotational presence in both areas. the budget also makes selected new investments to ensure that we develop new capabilities to project power in the key territories and domains. we agree to put $300 million to fund the next generation air force bomber and we are putting $138 billion to develop the new air force tanker 18.2 billion for the procurement of the ten new ships and the class destroyers and the four combat ships and one high-speed vessel and one class aircraft carrier to increase the cruise missile capacity of the future virginia class submarines. the strategy makes clear even as asia-pacific and the middle east

represents the areas of the growing strategic priority the united states will continue to work to strengthen its key alliances to develop partnerships and ways such as the rotational deployment to sustain our presence elsewhere in the world. to that end we make the key investments and nato and other partnership programs for putting the to wondered million in fy 13 and nearly 900 million over the next five years on the nato alliance ground surveillance system, one that was just approved by the nato ministerial in this last meeting pitted 9.7 billion in fy 13 and about 47 billion to develop and deploy missile defense capabilities that protect the u.s. homeland and strengthen regional missile defense etd kuhl as well and in the changes to boost efforts to partner with other militaries. we are allocating the u.s. brigade to the nato response

force and rotate the base units to europe on a regular basis for training and exercises and increasing the opportunity as well for the special operations forces to advise and assist our partners in other regions. fourth, the u.s. must have the capability to fight more than one conflict at a time that we are in the 21st century and have to use 21st century capabilities that's the reason the budget invests in a space, cyberspace and long-range precision strike and the continued growth of special operations forces to ensure we can still come front and a defeat multiple lab for serious and force structure reductions that outlined earlier it also sustains the nuclear triad of the bombers, missiles and submarines to continue to ensure we have a safe and

reliable effective nuclear deterrent. even with some adjustments the budget sustains a military that i believe is the strongest in the world. an army of more than 1 million active and reserve soldiers with 18 divisions, approximately 65 brigade combat teams and 21 combat aviation brigades. the naval force of 285 ships the csis force that we have today that we ran the most powerful and flexible force on earth. a marine corps with the infantry battalions, ten artillery battalions and 20 tactical air squadron and an air force that will continue to ensure that their dominance with 54 combat fighter squadrons and the current bomber fleet. last, we can't just as i said cut. we have to invest today we have

to leap ahead of our adversaries by investments in the latest technologies. that's why this budget provides 11.9 billion for science and technology is. it includes 2.1 billion from atv to basic research it provides 10.4 billion to sustain the continued growth in the special operations forces and it provides 3.8 billion for unmanned air systems and invests 3.4 billion insider activities. at the same time the guidance recognizes the need to prioritize and distinguished urgent modernization needs from those that can be delayed to be particularly in light of schedule and cost problems there for the budget has identified 75 billion in savings over five years resulting from the canceled or restructure programs some examples 15.1 million in savings from restructuring the joint strike fighter by

dillinger aircraft purchases so we can allow more time for the development and testing. 1.3 billion in savings from delaying the default of the army ground combat vehicle deutsch a contract in difficulties. 4.3 billion in savings from delaying the next generation of the ballistic missile submarines by two years for the affordability and management reasons. in addition we terminate selective programs, the block 30 version of the global talks which it cost the point is simply no longer cost-effective. the weather satellite program because we can depend on the existing settlements resulting in the savings of 2.3 billion. we have to maintain the ability to mobilize and regrow the force if we have to. that means we have to maintain a

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

and finally, with regard to the most important element of the strategy and decision making process our people. this budget recognizes that monday for more than any other system of technology are the great strength of the united states military. one of the guiding principles and our decision making process is that we must try to keep safe with our troops and their families. for that reason we determined to protect family assistance programs to sustain these important investments in the budget that serves our troops and their families and continue to make efforts to ensure that these programs are responsive to their needs. yet in order to build the force needed to defend the country under existing budget constraints to growth and cost of military benefits must be put on a sustainable course this is an area of a budget that has grown by nearly 90% since 2001.

about 30% above inflation while it's only grown by 3% so this contains a road map to try to invest those costs for the military pay and health care retirement in ways we believe our fair, transparent and consistent with our fundamental commitment to our people. on military pay there are no pay cuts. we've created sufficient room to allow pay raises in 2013 and 2014. however, we will provide a more limited pay raises beginning in 2015 giving troops and their families fair notice and time before changes take effect. the budget devotes about 48 almost $50 million to help care -- health care costs and an amount that is more than doubled over the last decade in order to continue to control the growth of these costs for recommending

increases in health care fees and co-payments and deductibles that are to be phased in from the four to five years. none of these proposals will apply to active-duty service members and there will be no increases in health care premiums for families of active-duty service members under this proposal. we also feel it's important to address the military retirement cost croswell and we urges the establishment with authority to conduct a comprehensive review of military retirement but we've made clear the department the retirement benefits for those who currently serve should be protected by grandfather in their benefits. members of the committee putting this together, this kind of balanced package has been difficult and at the same time it has been an opportunity to try to think about what force do we need now and what force do we need in the future.

i believe we, the service chiefs, the combatant commanders have developed a complete package to try to address threats for the future and try to ensure that we achieve our strategic aims. as a result, the fy 13 request is balanced, it keeps america safe and we think it sustains u.s. leadership abroad. please take a look at each of the individual parts of this plan. i encourage you to review the entire budget. this has to be a partnership that has to be also to bear in mind the strategic trade-offs that are inherent in any particular budget decision. this is a zero sum game. there is no free money here. the need to balance competing strategic objectives is taking place in a resource constrained environment. we need to your support and partnership to implement this vision of the future military.

i know these are tough issues. this is the beginning. it's not the end of this process. but make no mistake, the savings that we are proposing are significant and broadbased and will impact all 50 states but this is what congress mandates on a bipartisan basis that we reduce the budget by almost half a trillion dollars we need the partnership to do this in a manner that preserves the strongest military in the world this will be a test for all of us whether reducing the deficit is about talk or action. let me be clear, let me be clear, you can't take half a trillion dollars out of the defense budget and not incur additional risks. we believe they are acceptable, but there are risks. we are going to have a smaller

force, we will depend on the speed of mobilization, depend on ingenuity in terms of new technology for the future. and very frankly when you go through this there is no margin for error. this is why congress must do everything possible to make sure that we avoid sequestration and we are more than prepared to work with the congress to try to develop an approach that will the trigger the sequestration. this will subject the department to another 500 billion in additional cuts the would be required to take action in the approach we are convinced that would result in hauling of the force for and inflict severe damage to the defense. the leadership of the department of military and civilian is unified behind the strategy that

we presented the and behind this budget, behind the need to avoid sequestration. i look forward to working closely with you in the months ahead. this is going to be a tough challenge. but it's what the american people expect of its elected leaders to be fiscally responsible in developing a force for the future, the force that can defend the country, the force that support our men and women in uniform and the force that is and always will be the strongest military in the world. thank you. >> thank you, secretary. general dempsey. >> thank you. senator mccain, a distinguished members of the committee, think he was always for this opportunity to discuss the president's defense budget proposal for fiscal year 2013. this budget represents a responsible investment in the nation's security. at its core is an investment in people, the sons and daughters of america that serve the nation and the military. allow me to open with a few

words about them and what they have accomplished. the last ten years of the war have been among the most challenging and the nation's military history. through all the joint force has persevered and prevailed. our families have stood with us deployment after deployment and so have you. together we have fulfilled our vow to protect and defend america, her citizens and her interest. as i sit with you today our service men and women remain globally engaged and they are deterring aggression, developing partners, delivering aid and defeating our enemies. the stand ready, ebullient swift in every domain every day. i had the privilege to be with a few of them while traveling to afghanistan and egypt the past week it was always i witnessed courage and skill in the soldiers just off patrol in the deep snow of the hindu kush and the men and women of the training mission damaging the afghan national security force and the brief and vigilant

marine security detachment in the embassy in cairo and the superb airmen who flew us to the right place at the right time to read the exemplify a professional military with a reliable record of performance. in just the past year we further crippled al qaeda. we helped protect the libyan people from the slaughter. while affirming nato's important role beyond the borders of europe, we brought to close more than 20 years of military operations in and over iraq, and we are steadily transitioning the responsibility for security on to the afghan soldiers. we also helped japan recover from the perfect storm of tragedy and destruction, and of course these are just the most visible accomplishments. behind the scenes and beneath the surface we defended against cyber threats, sustained the nuclear deterrent posture and worked with allies and partners to build capacity and prevent conflict across the globe.

we continue to provide the nation with a wide range of options for dealing with the security challenges that confront us. increasingly competitive dangerous and uncertain environment demand that would be alert, responsive, adopted and dominant. this budget helps us do that. it's informed by the strategy that makes choices. it maintains our military decisive edge and global leadership. moreover it insures we keep faith with the true source of the military strength and that is our people. allow me to add a few additional comments to those of the secretary, and first of budget should be considered holistically. precaution against doing its part in some isolations with representing a comprehensive and carefully divided set of decisions. it achieves balance among the structure, modernization, pay and benefits to be the changes that are not informed by this context risk of ending the balance and compromising the

forced. second is the budget represents the we point cannot be in the plate in the development of the joint force we will need for 2020 and beyond. it puts on a path to respond versatility at an affordable cost. specialist kebir blease once on margins become more central even while we retain conventional overmatch it built a global and network joint force that is ably led a and always ready and the benefits made some of it really it does keep faith with them. there are a freezes or reductions in pay and no lessening of the quality of health care received by the active-duty service members and medically wounded veterans. that said we cannot ignore the increasing costs of pay and benefits to manage cost we need pragmatic reform. this is done in a way to preserve and recruit and retain americans talent. finally all strategies and the budgets to resource them carry

risk. this is no different today in my judgment it lies not in what we can do what and how much we can do and how often we can do it. this budget helps by investing in our people and in the joint capabilities they most need. to close, thank you for keeping our military strong, thank you for taking care of our military family, for supporting those who serve and who have served and who will serve. i know you share my pride. i look forward to your questions. >> thank you congenital. >> , let's have a seven men and round. i doubt we will get to a second round but if there is any time after the first round because i expect a good turnout we will try a short second round. general, let me start with you. do you each of the joint chiefs of staff first of all fully support the new strategic guidance?

>> yes, senator, we do. do you and each of the joint chiefs of staff fully support the president's fiscal year 2013 budget request. yes, senator, we do. >> can you tell us why? >> we addressed in the order you present it with. sprigg and the reality of the new fiscal environment, we took a look at our strategy and we made what we thought were important adjustments not just based on the fiscal reality but based on the lessons of the war and we thought it would take us in the out years. as you know, i'm an advocate of looking beyond this particular budget submission out to 2020 wally the service chiefs and the combatant commanders and then having to decide on the strategy we built the budget to support it and so for that reason we support it. peery >> he made reference to the

risks that are increased when the budget reductions. would you expand on that as you did in your prepared testimony as to whether those risks are acceptable and why. >> i've never in my 38 years' experience any strategy that was completely on constrained. so i think it's important to note there is risk in every strategy and every budget to support it. there's too kind of risk we deal with, one is to the mission, can we accomplish the tasks given to us by the national command authority for the freedom of access to defeat our enemies to the tours aggression. in the other is the risk to force which gets at a phrase that would be familiar in terms of out tempo how much can we ask of the volunteer force in terms of its deployment and redeployment and in both cases we assess the risk to the mission and risk of force and found that there are portions of

capabilities that are more stressed. again and the past month we will continue to do is look for ways to mitigate those risks, of but we are confident because we worked this collaborative lead we can mitigate risks by adapting well since the last ten years of the war, new reemerging capabilities i mentioned to notable ones in the past and the special operating forces and cyber and the integration of all of those and the interdependence of the joint force is what allows us to mitigate the risk to our plans and to do so at a sustainable rate but there are risks because there's always uncertainty in the future. >> the overseas contingencies' operations funding levels is based on the assumption that there will be 68,000 u.s. troops in afghanistan for all of fiscal year 2013 and again you

reiterate that mr. secretary in your opening statement. >> that assumes there will be no further drawdown of u.s. forces from afghanistan during the 12 months after the 43,000 u.s. surge forces are withdrawn by the summer of this year, that the budget assumes. but last june but was a delete the president announced the plan for the forces and also said that after the reduction of those search forces, quote, our troops will continue to come home at a steady pace as afghan security forces moved into the lead, and of quote. first, general, are we on track to complete the withdrawal of the 33,000 surge force by this summer? >> yes, sir, we could.

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

security? >> as the president's stated we will continue that process, but at this point no decisions have been made as to how that will take place because we are focusing obviously on the job of the surge and the number that we have there is frankly the target number if support funding we would need for the future. >> will the decision be made as to when the reductions will be made from the 68,000 level and that ligon is going to be reached by the end of the summer when will that decision be made? >> further reductions after the 68,000 coal is achieved. >> i think the target right now is to focus on the reduction of the surge. as the general pointed out we haven't received the plan from general allen as to how we will complete the reduction in 23,000. once we've done that and we have learned the lessons from that i think then we would apply it to decide in the next steps with

regard to the further reduction. >> the will be done by the end of the summer. so when with the next decision be made on the reductions beyond the surge reduction? >> we will begin that in the latter part of this year. >> begin or make a decision by the end of next year? >> we will begin, and if we're fortunate we will be able to make that decision, but the first thing is to discuss the lessons that we've learned and what we should apply and what level of force are we going to need for 2013. >> do you assume there will be further reductions beyond the 68,000 during fiscal year 2013? >> will again, no decisions have been made. >> we assume they will be. >> i assume in line with the president said we will continue to make the transitions. >> would there be savings from any additional reductions below the 68,000? >> will there be savings?

of course whatever we decide to do we will achieve some savings. >> senator mccain? >> thank the witnesses. again, general, were you asked by the administration to perform a risk assessment to the national security interest as a result of the cuts? >> it is codified in the national defense authorization act i perform at the german's risk assessment annually. >> is the forthcoming? >> i have completed it. and as you know, they are also required to submit with it a risk mitigation strategy. >> so we haven't received the risk assessment? >> you have not, sir. >> i want to return for just a second, secretary panetta. you talk about the cataclysmic effect of sequestration. we are in total agreement. i hope you're meeting with the president you will sit down and see if there are ways the effects of this and have you made any plans yet to comply

with the effects of the sequestration in 2013? >> no, we haven't. is to begin your view, secretary panetta is iraq stable and a self-reliant nation? >> iraq is a nation that has the capability to govern and secure itself. does it continue to face a risk in that process? does it continue to face challenges in that process? it certainly does. >> do we still of u.s. military forces operating in iraq? >> we have a small number that are assigned there approximately i believe the number we are looking at is 600 military and civilians that are assigned to the security operations to

reduce the mick general dempsey, i know you just returned from egypt. all americans are concerned about the events they are concerned they've had to move to the u.s. embassy in order to preserve their safety and security. we realize the absolute criticality of the relationship with egypt and the role that egypt plays in the middle east. what advice, what recommendations do you have held the united states, our government should be handling this very, very tough situation. >> a planned the trip to egypt before the non-governmental organization and it is a crisis that occurred, so when i met with the field marshal, the general, the key leaders with whom we interactive have

attracted as you know for decades i explained i was coming there to talk to them about our relationship about syria, about lebanon, about the cyanide but that i couldn't do that because we had this issue that was an impediment to them and i spent about a day and half in conversation with them encouraging them in the strongest terms in the relationship to continue but i would like to result in those conversations. >> i'm convinced the potentially they were underestimating the impact of this on the relationship when i left there was no doubt that they understood the seriousness of it but by that of it like to ask i know of the amendment that is being proposed to break our military relationship and cut off and the fund would be a mistake to the estimate i want to assure you we are discussing that in ways to certainly avoid that action at this time but i felt that you explain to the

rulers who are military and leftovers from the mubarak regime that the situation is really not acceptable to the american people and our relationship with egypt is vital to the fact is low welfare of our citizens are even more vital. >> i completely agree and i did make that clear. >> general, do you think it is a good idea to trade the five high-ranking taliban as a, quote, confidence-building measure to move the negotiations with the taliban forward? >> why have some issues with the reconciliation bill generally speaking i am in support of the reconciliation but i am concerned about our ability to maintain vigilance and control of those individuals, so i am

supportive of the reconciliation >> i don't know of any living person who isn't. >> i joined that group. >> does that mean that at this particular moment in time you would support the trade to the understanding that the securities would be advisable at this time? >> the secretary has some certain requirements by law and i am supportive of the secretary of defense' approach supportive to ensure we have the certifications. >> what respect to whether you think it is a good idea or not this began to do you agree it is a good idea, secretary leon panetta?

>> stupak no decisions have been made on this line. i can tell you this, based on all that is passed by the congress i have to certify that anybody who leaves guantanamo cannot wending going back to the enemy, and i've got to be convinced those kind of are in place before i certify anything like that happens. >> finish, i'm sorry. >> i have made it very clear that unless i am from convinced this kind of situation those steps are taken to ensure that these individuals do not lend up going to the battlefield and by not going to certify that kind of transfer. >> even though approximately a quarter of those who have been released in the past and have gone back into the fight what is

the progress of our negotiations with president karzai on a longer-term security agreement that we failed to reach an iraq, what are the prospects of that and what are you expecting and can you give a timeframe? >> we are continuing to work with president karzai yet cowal buckson afghanistan to try to develop and agree on the strategic agreement. as you know there are two areas that we still have difficulties with one of which involves the transfer of the detention facilities, the other involves the ninth time rates, and we continue to try to see if we can work out some kind of compromise on those issues. as far as the basic agreement i think most of that element is frankly in place, so i'm confident that hopefully within the next few weeks we will be able to reach some kind of an

agreement. >> thank the witnesses. when the enemy thinks that you are leaving it is very unlikely in my study of history that they are ready to make an agreement coming and they certainly have that impression throughout that part of the world. thank you mr. chairman. >> senator lieberman. >> thank you mr. psychiatry, mr. dempsey, thank you for your service in your testimony. as i look at the budget that has been submitted and i heard your testimony today it seems to me that in this budget the u.s. military and our national security are being asked to pay the price for the fiscal irresponsibility of the government over the last decade. the bottom line is one that you are mandated to submit by the budget control act that congress

adopted and the president signed last summer but i must say as one member of the committee, one member of the senate as i look at what he would have to do is to meet the bottom line of the requirements for the budget control act and the risk to the national security. without proportionate changes in the threats that we face around the world this budget for the coming to the coming fiscal world would represent the reduction in spending believe what was planned in the five-year defense plan for the coming year, 9% reduction for a five years. and as we've discussed it would require the reduction of our army and marines when hundred

25,000 personnel. above call for the termination of or delay of several in my opinion critical defense equipment systems and it's hard for me to conclude there's any reason that you would make such a recommendation other than the fact you are required by law to do it. in other words, what drives the presentation as the budgetary pressure as i said the accumulated weight of the fiscal responsibility of the government over the last decade and the specific requirement of the budget control act, not the threat environment in the world as mr. secretary chu said and i agree this morning united states still faces a complex array whistled for -- stila at war and the materials and the behavior

of iran and mercury ethridge in the global study. there is continuing turmoil and unrest in the middle east but rising power is a major testing in the international relationships and growing concerns about the cyber intrusions' and a tax end of quote from you mr. secretary this morning. i agree with that and think in my context my conclusion i stayed again is that there is always a risk but the risk involved in the budget is unacceptable, and therefore i believe that we have to have the political courage both chasing the budget for fiscal year 2013 and the threat of sequestration to work together across party lines and with the president and the administration to reduce the impact of these proposed cuts and we've got to do it responsibly. we either have to find savings elsewhere, or we have to have

the political guts to raise revenue to pay for an adequate defense, to in my opinion fulfill the constitutional responsibility to provide for the common defense. you have complied with the budget control act in making the recommendation to us. but in my opinion if we accepted we are not fulfilling our responsibility under the constitution to provide for the common defense. so i hope we can work together to essentially alter what we require you to do in the act, and to do it in a fiscally responsible way. in response to senator mccain's question, you said you would be preparing the risk assessment, the german's risk assessment. the strategic guidance the department did issued in january really is the equivalence of a

follow-on to the quadrennial defense review in the quadrennial defense review of course we would require the chairman's risk assessment i hope mr. chairman, senator mccain, that we don't ask on this request and that the appropriations committees don't act on a budget request for the department of defense before we get the risk assessment, because i think it is that important. but for now, since, as a country, you said quite directly with the directives that we've come to expect of you that there is risk. you can't cut this much money out without risk so i want to ask you and general dempsey in advance of the formal report what are the two or three top risks you are concerned anonymous budget places on our military and on a national security? >> center, first of all the

volume of lighting by law, law passed by congress that requires the reductions the we've proposed the and just to your comment we love to step up to the plate and do our duty here. i think we know how you would address this issue you also have to take into consideration the national security threat comes from the huge deficits and the huge debt that we are running. at some point the congress and the president have to address that larger issue. what i am doing is basically doing my part as dictated by the contras. with regards to the threat as i said you cannot take half a trillion dollars of the defense budget and not incur the risk.

the main concerns i have for that we are going to have a smaller force and when you have a smaller force, the ability to move the forests where you have to is not going to be as easy as a would-be with a larger force. the ability to move quickly to be agile and be able to deploy them i think we can do it under the plan we have presented, but it is an additional risk. the risk on mobilizing. if we face a serious crisis and we have the need to mobilize our ability to mobilize quickly to pull the course together as we had to do frankly after 9/11, our ability to do that and respond quickly and to be able to deploy the force involves a risk and we have found a way to do that by keeping the strong guard and reserve but nevertheless that is an additional risk. we depend an awful lot on

technology. i think technology is very important that our ability to develop that technology to make sure that it works it we have that leap ahead keep the movie is something that involves risk and costly as i said when you shave the budget it leaves very little margin of error in the devotee is probably the biggest risk of all. as to the gift of time i would like to respond ha because i will page you my risk assessment and i do not assess unacceptable risk in my assessment and i do not believe this budget concurs unacceptable risk. i will tell you i am prepared to say that sequestration would pose an unacceptable risk and here's why. it's pretty clear that there's physics involved in this budget we have decided to off ramp a certain number of the servicemen and women and we've about maximizing our ability to do

that with the proper dignity and respect to the force set income of 15,000 in year as about as many as you can ask to leave and still have enough influence over how they do that. that's kind of maxed out right now. it's pretty clear we are going to have challenges with infrastructure changes whether this committee and others agree with our recommendation. so if we fix those variables in the sequestration, i can't get rid of the -- i can't ask the soldiers and sailors to the quicker than they are going to and i cannot of infrastructure. sequestration leaves me free places to go to find the additional money. operations, maintenance and trading. that is the definition of all hollow force. >> i think you both for your answers. they are helpful to me. with all respect i consider this budget to represent unacceptable risk to the national security, and i hope members of the committee across party lines will work together to reduce the

risk in the fiscally responsible way. thanks, mr. chairman. >> thinks mr. chairman. senator inhofe? >> let me just get on the record, secretary, that i would be one of them opposing another round for two reasons. one is i think that we have reduced the force and capability to an unacceptable level and to bring the infrastructure down to meet what i would consider to be is a member of the committee an unacceptable level is something i would not want to do. second is the problem we're facing now is an immediate problem. everything is on fire. we are trying to throw out the biggest fires. and i am going from memory now but as i recall all of these backrubs and i have been here since the first one you lose money in the first five years, it isn't going to gain anything in terms of that so there is going to be opposition appeared. secretary panetta, i saw you on

the 60 minutes, and i didn't envy you when you have to answer the question to stop and think about how many combat operations there are and you started thinking on your fingers so it is something we've been thinking about and something that is very serious. but when you talk about the budget i just want to get in here so that now that we have the president's new budget, if you -- if we keep hearing about, you know, inheriting deficits and all this, during the eight years of bush, the omb figures it was right at $2 trillion. this president in his budget that he has proposed, $5.3 trillion, just four years, so obviously you are talking about just a huge amount of money. i saw it in this morning's "washington post" talking about everything is growing in government accept, there is, military, and i agree with the statements of the previous speakers this is supposed to be

the number-one concern defending the country. so anyway, i just would like to not press the thing that's already been talked about on risk but i would ask the question when you meet with the chairman and come up with the risk assessment what would you say that would be? >> i anticipate by the end of the month. >> okay pooler one of the command doesn't get a lot of attention as africom and we remember that was decided in the commands everyone in this room knows we have done the right thing. however i kind of look at it as the forgotten command it didn't seem to get the attention. one of the things about africom is it gets its resources from the u.s. special forces that are in europe and right now accepting the fact that as the pressure gets on in the middle east and a lot of the potential terrorism is going down through the heart of africa and spreading out there.

so one of the great things that is happening with africom is the special forces are training the africans, and the number breaks down to about one special force by or gal that will be responsible for the 100 forces. and i have seen this down there. i know what is happening. so the question i would ask is do you think that there are impacts by moving out of the special forces in so far as africa is concerned? >> first, i agree with you on the benefits of having the command focused on those issues in that continent on that continent, and actually, we have sourced our requirements in to africa and elsewhere through the global force management process. and so it tends to be that europeans have a particular habitual relationship, but there could be special operating forces and for that matter the general purpose employed in africa we move the force are now

where it is needed, so i don't think the issue that you have described with you, would have any effect. >> i'm glad to hear that. i appreciate that. this is an issue that no one has talked about yet coming and i don't know why i am getting so close to it, but one of the -- a good friend of mine was killed over there and i was supposed to be meeting with him in afghanistan a month later, and of course he was killed. his wife has worked for me and we have become very sensitive to the redacted investigation reports and the families but i talked to the general odierno about this and we have made progress on this, but i am hoping that you will help us continue with that because we have some of them in the case of all the way from may of 2010 until just about a week ago and i would like to have some special attention given to that issue. the families of the specialists

and the second lieutenant were killed in july of 2011, eli think they should have the reports. so we are making progress, and i'm hoping that that is something that with all these problems we are dealing with he would be aware of and want to be of some help. >> could i respond briefly, senator? im aware of that and as you would recall i was up the funeral with you. i just want to make two points. one is the first conflict in which we have done a collateral investigation on everything. the first time in the ministry of warfare and we learned the hard way it is resource intensive and it's important to get it right. the timeline on which these investigations are provided the families have been gradually improving and as to know for the active guard and reserve so it's not the the a faster than the guard and reserve but it's a challenging task and one that

which we are addressing to this gimmick understand that and we went back and checked in the components and my question is actually meant to be a compliment because we are making great progress on that. >> then i withdraw my comment. [laughter] >> in looking at the reset, we are going to be looking at a problem after having gone through this for 12 years and it is going to be my concern is it comes from the right sources. it's not going to come from the base budget. is it your intention to have it come when this time is before us? >> duty will have a deteriorating effect on the budget on the reset, the cost of the recent? >> that is exactly why it tends to be as high as it is because they are not just looking at the cost of the operating forces, it is the recapitalization. is that a fair statement?

>> okay, because my time is expired, i want to -- i had the occasion to go down to fort worth and see the progress that is happening right now with the f35 and there's been a lot of delays, and i would hope we have a commitment from the two of you to progress on that program because that platform that we will be pursuing. >> senator, we need a fifth generation slider. it represents a fifth generation fighter. we are committed to it and we just want to make sure that it's done right to estimate thank you. >> senator reid? ..

will invariably catch the fbi, homeland security, tsa contracting and other fireworks -- functions. >> i think, senator -- national security is dependent on all of the things you just cited. frankly, it's dependent on more. we're talking about sequester on defense, but sequester also takes place on the domestic side of the budget, and frankly, our

national security is dependent not just on the national defense side of that ledger, it's dependent on the quality of life we provide for our citizens. so all of that could be impacted through sequester. >> one other aspect of this whole debate, as has been pointed out, has been -- particularly with respect to sort of -- decided are not affordable at this juncture. one of your calculations is not just the number of platforms about the capability of platforms. as you made reference to both aviation platforms and ships that you've made and your colleagues have made calculations about having increased capabilities with those remaining ships versus what you would have to do with

the -- and airplanes. is that accurate? >> it is accurate. we mapped the budget decisions to the strategy. fundmentally, are we going to give the strategy we described, and as we talked for years we are moving toward platform that are more capable and also multirole. for example, the a-10 -- the uniform i wear, i'm a huge advocate of the a-10, the wart hog, because it provides close-air support but we think it's prudent to force ourselfs into a more multirole capability. so we mapped the decisions to the strategy. >> thank you very much. one of the other aspects that has been brought up, and i think it goes to my initial question about the scope of national security -- is that pro-active engagement, i think one of the lessons of the last few years --

pro-active engagement is very helpful to us. had we been more engaged in some countries we might have mitigated the dangers we faced in the last decade. when you talk your meeting in egypt and multiple meetings in pakistan, a lot of that is, one might argue, just as critical to national security but is not gauged in terms of brigades or air -- airlift, et cetera, and it's not counterterrorism and training. can you comment how this budget will be -- encourage pro-active engagement in every level? >> we have accepted as a core capacity of all the services, building partner capacity so when you have an opportunity to

have odierno. he will tame about having general forces who have been completely consumed in iraq and afghanistan, and deploying them in a brigade. so africom has a brigade that can deplay in any number of ways, as headquarters, or teams, can re-organize itself to go and engage nations in a particular combatant command where it might be needed. so i think this budget does that and it's a way to mitigate risk, as you suggest. >> mr. secretary, you suggested -- in fact i think you say one of the largest costs is personnel cost, including healthcare costs. you have a very tight budget. and the idea of the defense

growing is not within anyone's purview. at some point, if you don't take effective steps with respect to personnel costs, it becomes so big in my view, that it eats into what is the great risk general dempsey sees, and it comes from training and you have a force that is not there but is not april -- is not capable. do you have an idea before these eat um costs? >> this is an area of the budget that has grown by 90% and consumes now close to half of the defense budget. right, bob? about a third. about a third of the defense budget is in the compensation area. and -- but the problem is, at

that rate of growth that's gone on, it's moving more and more into these other key areas of the defense budget, and crowding them out. and so if we -- if compensation is not touched, with we don't control the cost of growth in the compensation areas, it means we're going to have to take it out of force structure, out of training, take it out of other systems, and it's going to mean that ultimately we won't have a balanced approach to dealing with the defense savings that we need to deal with. so, even in talking with members and talking with the generals and talking with the chiefs, they acknowledge that, as tough as this is -- and it is tough because it affects obviously troops and their families and retirees -- but if we don't begin the process of develop something kind of cost control

in the out years and limiting the growth that is taking place, we're going to pay a very high price in the next few years. >> is that your conclusion, general? >> senator, it is. we talk about keeping faith, and often times that equated to how many dollars we're putting in a soldier, sailor, airman or marine marine's pocket but it's more than that. we have to have the best trained and the best equipped and we have to balance the budget to do that. >> thank you, general. >> senator wicker. >> thank you very much, mr. chairman, and i want to think both witnesses for their service. secretary panetta, i want to ask you about the article from february 2nd, and let me just read the way it agains: defense secretary leon panetta has a lot of his mine, from cutting the defense budget to managing the drawdown of u.s. forces in afghanistan but his biggest

worry is the growing possibility that israel will attack iran over the next few months. panetta believes there's a strong likelihood that israel will strike iran in april, may or june, before iran enters what israelis describe as a zone of immunity to commence building a nuclear bomb. mr. secretary, did mr. ignatius accurately characterize your view and would you like to comment on that? >> no. i usually don't comment on columnist's ideas about what i'm thinking. it's a dangerous game to get into. let me just express my thoughts that iran is of great concern. we have common cause with israel. we have common cause we the international community with regards to the concerns about iran. we have made very clear that

they are not develop a nuclear weapon. we have made very clear that they are not to close the straits or hormuz. we have made very clear they're not to export terrorism, and try to undermine other governments. those are areas that concern us, and it concerns the international community, and as a result of that, the international community has taken strong steps on sanctions on economic and diplomatic areas, to bring pressure on iran and to isolate them, and i guess my preference, my view, is that we ought to keep the international community together in applying that kind of pressure. >> do you believe there's a strong likelihood that israel will strike iran in april, may or june? >> i think as the president has suggested, we do not think that israel has made that decision. >> okay. were you misquoted -- miss characterized -- did you have a conversation with mr. ignatius?

>> as i said, the comments that are included in a column about what i'm thinking or what i'm possibly worried about is up to the columnist. >> did he interview you? >> we talked but we talked about a lot of things, frankly. >> were you trying to send some sort of signal to the international community, either to iran or israel? >> no. >> and so you do not have a position as to whether it is likely that israel will make such an attack? >> i do not. >> all right. well, thank you for clearing that up. and i will say that there were no quotation marks in that column, but it did sound a whole lot like a quote. as i understand it, in the budget, in compliance with the budget control act, mr. secretary, there's half a

trillion dollars worth of cuts. if we had the sequestration, that would be another half a trillion. now, what was your conversation with the administration and with onb within the dod about submitting a budget that doesn't comply with the statute? because see questions station is the law of the land right now as i understand it. and did you consider submitting a budget that outlined the catastrophic results if sequestration does go into effect? what what is your strategy to as you say, detrigger -- to work with this congress to detrigger sequestration, which is the law of the land as you knowledge. >> well, it is. obviously, our approach was to

deal with the budget control act that provided in terms of targeted savings in the defense budget, and we, frankly, developed the strategy we presented to you based on really trying to lay out a strategy about where our core structure needed to be between now and 2020 and do it in a responsible way to protect our military force and to be able to respond to the threats that are out there. sequestration has this, frankly, mindless formula that is already built into it, that basically cuts across the board. it's not as if we can take sequestration and make sense out of the damn thing. the fact is it's going to happen the way it's supposed to happen, through this kind of mindless formula that there is. so our approach was not to pay any attention to it. if it's going take place in january 2013 -- i hope that's not the case -- it will take place under its mindless

procedure. i don't think we ought to try to bring some kind of common sense to what is a crazy process. >> well, let me underscore what senator lieberman said, that this budget makes us worry about risks, and i understand what general dempsey said. he believes there are risk but they're not unacceptable, but the sequestration would prove unacceptable, and i hope there's a strategy to get that through. thank you, mr. secretary, for mentioning the industrial base. and we're at 8.3% unemployment right now. undoubtedly the president is going to send a spending bill to the congress which he believes, and the administration believes, will create more jobs.

it makes no sense to me, at a time when there's an effort to create more jobs with other spending -- to cut defense spending, which giveses us the two-fer of protecting the company and protecting the industrial base, which is a whole lot of americans out there working, to provide us with the infrastructure we need. it is a fact, is it not, that this budget will have an adverse effect on our industrial base? is that not right, mr. secretary? >> well, we have taken a lot of steps to try to protect against that happening because, as i said, we absolutely have to protect our industrial base, and those industries that support the defense budget. we can't afford to lose any more, and so for that reason, we've designed an approach that

will keep them in business with regards to the systems that we're trying to develop for the future. >> albeit with fewer industrial manufacturing jobs. >> well, there will be -- i understand that, and that does have some impact. >> thank you very much. >> thank you, senator wicker. i asked senator koch if he would allow more time. there's additional $3 trillion in deficit reduction before the trim which has been taken, which, if this budget were adopted as submitted, would avoid sequestration totally. half of the additional $3 trillion is in revenue increases, including the -- as the president's budget says, task reform including the

expiration of tax cuts for single taxpayers making over 200,000, married couples making over 250,000, by adoption of the buffet rule, and then the budget document says that the president is offering a detailed set of specific tax loop high schools -- loopholes would be sufficient to hit the $1.3 trillion target. which means if this budget were adopted and the revenue were included -- the revenue represents half of the deficit reduction -- you avoid sequestration. >> my understanding there is a plan to provide for the kind of additional deficit reduction that the country needs, but obviously if it were adopted it would trigger desequestration. >> that's not been stated here

this morning, the budget that was submitted to it says it clearly. >> that's the strategy. whether congress adopts it or not is a different issue, but sequestration can be avoided and hopefully will be and the president has submitted his way to avoid it in his budget. >> mr. chairman, i thank you for clarifying that, and i do look forward to the president's budget being brought to the senate floor for an up or down vote. >> thank you. and i think the republican alternative will also be brought to the senate floor if there is one. we look forward to seeing an alternative budget as well. so much for that. back to senator, injury thank you very much, mr. chairman. well, secretary panetta and general dempsey, thank you so much for your leadership and all you do for our country. mr. secretary, i notice that the

pga tour was just at pebble beach. had you chosen a different path you're on now, you could have been at home in carmel, playing in a pro-am with your friends. but knowing your dedication to continue serving our country puts you before us today. that says a lot about you and who you are. i've known you, as we know, since we served together in the house. in all seriousness, i really appreciate your dedication and your hard work, secretary. i add my appreciation to the brave men and women of the armed forces who lead -- and their families for their service and sacrifice.

secretary panetta, it is impossible to overstate the importance of our military engagement in asia pacific region. it's obvious there are many challenges in this area, given a new focus of this vital region. if you look at continuing developments in the pacific, all conventional adversaries are advancing, and it is critical we maintain our superiority in the region. given the many demands on the defense budget that you mentioned, and the unique mission and environment we have in the region, my question to you is, how does dod fy2013 budget impact our military readiness in the pacific region?

>> that's obviously a primary concern for us, because we do believe that it is important to maintain a strong presence in the pacific, and for that reason, we maintain the 11 carriers in the navy in order to ensure that we have sufficient forward presence. there's nothing like a carrier to be able to allow for quick deployment in that area, and that will give us a great capacity to be able to show our force structure in the pacific. in addition to that, we're going to maintain obviously a military presence. we already have one in korea. but we're going to maintain an additional rotational presence with our marines throughout that area. we've just developed an agreement with australia to do a rotational presence there.

working with the philippines on hopefully a similar arrangement there as well. and in addition to that, obviously, we have our air bases and the forward deployed air assets that will give us the capability to cover that area as well. so, we feel very good about the force structure we have in this budget, and our ability to maintain a real presence in the pacific. >> thank you. general dempsey, the u.s. has been attempting to engage china with military to military exercises and other cooperative opportunities, including humanitarian and disaster relief operations, and you've done well. general, how do you foresee these efforts at engagement proceeding as a u.s. focus of

resources in the pacific? >> i think the strategy is actually quite sound. by the way, it's important to note, we never left the pacific. so the idea of rebalancing ourselves globally is just that, it's rebalancing. it's not a light switch on or off or a pivot. that word got ahead of me a bit. so we're rebalancing our strategy and we're doing that based on the trends, demographic trends, military trends, economic trend inch so doing we have the opportunity to increase our engagement with the peoples republic of china because there are many things with which we have a common interest. they have been working on counterpiracy for some time in the gulf of adan. we have had military to military engagement. it hasn't been as consistent as we would like it. we have a chance to reemphasize it in the coming months, and that will assist us in

implementing our strategy. so this is an opportunity for us and we intend to take it. >> thank you. mr. secretary, i am a true believer in our special forces. having visited the seals conducting training operations, i've seen first hand the talent and dedication of our special forces personnel. special forces units are likely to do more in the future. i want to make sure that, as an end result, and numbers are reduced, that korea feels -- communication case and logistics as well -- would support and help the special forces complete their missions are not reduced to a point where -- which could

limit the readiness of special forces units, and, general, can you share your thoughts also on this. >> i can, sir. and to your point. one of the lessons of the last ten years, or certainly among the lessons of the last ten years, is that the special operating forces have demonstrated their versatility and they're capabilities, not just in the counterterror realm but also in the building partner and capacity surety force assistance. one thing we have been talking about with the service chiefs is finding a new paradigm where we will partner differently with special operating forces, to give us greater capability. the synergy. the sum is greater than the individual parts. and we're working on thatment the armis working on habitual relationships of the enablers,

medical, communications. so there will be no degradation to the special operations community, and i also want to assure you, we can't put all of our eggs in that basket because, as i said in previous testimony, special operating forces are just that, they're special, and if go too far in that direction, then the congestional force is special, and the special operating forces no longer have that capability. so we have to find the right balance and we're working on it. >> there's no question that special forces have, through their agility and they're ability to deploy quickly, i think represent a very important force for the future. they've been very effective, as we know, in terms of terrorism, but as the general pointed out, they've also been very effective at developing partnerships with other countries, working with them, doing exercises, providing at advise. we have great capability there. so the kind of force we are looking at is to obviously -- as

the general point out, maintain a strong army that can confront a land enemy and be able to defeat that enemy in a land war. but at the same time develop the kind of readditional capability using special forces, using the marines and elements of the army as well to be able to have a presence elsewhere in the world. that would give us the best of all things. >> thank you very much. >> thank you, senator. >> by the way, senator, we are increasing our special operations. i think the numbers -- we're going to increase them by 3,000. we're putting 10 empty 4 billion -- 10.4 billion more. >> mr. chairman, since you brought up the budget, certainly looking forward to voting again on the president's budget, and it's been over 1,000 days, as you know, since the senate's put out a budget, and i and the american people would like that

to be different and have that come up at some point. that being said, i have seven minutes, a lot of other questions. i'm going to submit some for the record. one of them will be discussing the globalblock 30 program, and i'm going to be asking about the cost compare sons between the u can 2 and the global, have they been reviewed particularly relating to sustainment and can u2 provide the recon since. and i live in an innovative state, massachusetts, and we have an innovative base in dealing with the cyber security threat. it's something -- and i agree with the chairman, before we talk about any black closures, i would hope that we would continue to work on the cybersecurity emphasis on areas and bases like that because i think that's the next real area where we need to focus on, as referenced in your earlier testimony, and taking at it step

further, the air force proposed restructuring the civilian work force to the tune of 16,000 civilian contracted employees. i ask you keep in mind these restructuring efforts at it affects small businesses, as senator wicker and others have referenced and you referenced in your comments. it effects bases around the done country. one of the things i had -- one of the observations i made as i served in afghanistan thing summer was -- obviously the drawdown -- i felt if we do it thoughtfully and methodically, can transfer authority and control over to the afghans but if we do it too quickly we'll be in deep trouble and we'll lose the benefits we had. one of the things i referenced and acknowledged in speaking and meeting with the generals and with general allen, is the fact we have so many audits going on right now with -- i mean,

without referencing any particular directorat, one general had 75 audits going on at once. said how can you expect to do the drawdown as general allen is doing and then continue to do your mission, keep our soldiers safe and secure, and then complete the audits? he says, we can't. something has to give. so, general dempsey, i ask you seriously look at that. if you're going to do the drawdown, we absolutely need to address these audit issues. many of them -- so much duplication right now, and it's just -- i think some agencies justifying their existence, so i'm hoping you can comment on that issue. >> well, point comment on them justifying their own existence because they'll audit me if i do that and i don't want to go there. >> i hear you. >> i've been on the receiving end of it, and there is clearly a need to be auditable, and because the nation is investing in credible -- incredible resources but i has gotten ute

of control, and my ja, the undersecretary for policy are both working to squeeze those audits to only -- and make sure they're not redundant. some or redundant. >> they're absolutely duplicates -- if you read them, which i have, they're the same exact there. there's got to be a central location or central effort to that because the troops couldn't do their jobs 24/7 on audits and then expect to perform the mission. which is obviously very serious. that being said, in iraq, with a lot of -- obviously us being out of there, is it accurate we now have over 100,000 civilian contractors there doing the job that ultimately our soldiers did and in fact if that is so, is the cost two to three times more than what we paying our soldiers and if that is the case, where is that money coming from? >> thanks, sir. i don't have the exact numbers. at one time toward the end of

the calendar year i was tracking those numbers on a daily basis. >> substantial. >> it is substantial, sir. >> paying two to three times more than we would pay the average soldier. >> you know, there is in some function wes are paying more security details are more expensive, but other places, logistics, transportation, we're not paying as much as you normally pay a soldier but we have that information. >> i'd like you to get in the record bought i'd like to know where that money is coming from and how it's being worked into the budget. general dempsey, understanding adverse -- how does the -- obviously being in the yard, i would think you would get more bang for the buck. is there a reel sincere effort

to in fact push a lot of the training responsibilities, mobilization, et cetera to the guard reserves? >> each service is -- this effort, the new strategy on the budget, has caused each service to relook at how they balance cross-components, active guard and reserve. i'll give you an example why that's an important conversation. senator mccain in his opening comment cited that we were reducing 20% of the brigade combat in the army. that's true but if you look at the to cat of brigades which will be 68, then the eight is really an 1% degradation or decline. so your point is an important one. we have to look what this total force and the joint force provide, not strictly what we're doing to any one of them, and we are doing that. >> i would ask you to pay

particular attention to the air guard and look at moving missions into the guard portfolio because you get a better bang for the buck, i argue. the other beg elephant in the room, aside from sequestration is the fact we have approximately one million service members expected to join the vans ranks in the next five years, and unemployment amongst young veterans is very high, and it's high also in the guard and reserves. is there a five-year plan to meet the expected demand? and how are we working with the v.a. to address these important issues. >> senator, you raised a very important point, because as we go through these additional drawdowns we absolutely have to make sure that a support system is out there as our men and women come back from service. we are working with the veterans department in a number of areas. number one, to try to provide a jobs pool so that these veterans will have the opportunity to get jobs in the private sector.

secondly week working with the veterans administration to try item prove the -- try to improve the seamless purchase so when it comes to health care and benefits that people can move without long delays and a lot of bureaucracy from coverage new the defense budget to coverage under the v.a. budget. and we're provide counseling and support to make sheer these families are supported once they come out so they can readjust. they want to go into education, the benefits are provided. if they want to get a job. jobs are provided. if they want to go into small business, we provide the small business loans to assist them. so there's a pretty solid package. we have to continue to work at and it make sure it's working and it's meeting the neat but we are very concerned that we have that support system for these troops when they get out. >> i'd be eager to offer my assistance on those issues. it's something we have been working on in massachusetts for a very, very long time and have

some real knowledge about that issue. mr. chairman, i'm presuming we'll have an opportunity to add the questions for the record and there will be time allotted to do so? response? >> yes there will be questions that are asked for the record and we'll ask our witnesses wito promptly responsibility. thank you, senator brown. after center nelson we're going to take a five-minute break. >> thank you, gentlemen, for your service. currently progress is being made toward the knew stratcom headquarters in nebraska. a new command and control complex for strategic command. the entire project has been authorized, but because of the nature of this project, the defense department will have to request phased-in or incremental funding as we move along over a multiyear construction project.

much has been said about cybertoday, mr. secretary, and general dempsey. could you explain the basis for the need for a new headquarters dealing with almost every aspect of our military, defense and offense? mr. secretary? >> senator, we think it's extremely important because stratcom is extremely important to defending the homeland, and in order to defend the homeland you have to develop the capabilities that we're facing right now, and cyberobviously is one of those areas. our ability to develop the latest technology, the latest abilities in order to not only defend ourselves but understand what that threat is about, is extremely important. we've got to be able to develop the kind of communication systems that are the state-of-the-art so they can

deal with quick communications. as you know, that area, everytime we face a threat there's an immediate response that has to take place quickly and effectively, and frankly, we need good systems in order to make sure that happens. so it's important to our future we develop that kind of capability there. >> it's safe to say that what the internal components are wind the structure would be equally important as the structure itself. in other words, it's going to be a high-tech complex to be able to deal with the modern challenges we have. general dempsey? >> well, without talking about the structure itself, i will tell you that the service combatant commanders and i have begun a series of strategic seminars to look at ways to better integrate, to learn lessons and ensure we can deliver our strategy with the force this budget will provide.

we know we can. we are looking at how to mitigate change. one of the emerges ideas is any regional conflict in the future -- we're looking at this budget to 2017. so, in 2017, any regional conflict will impact in the continental united states in the homeland, without doubt. that's to say the homeland is no longer sanctuary in 2017, and commands like cybercom and stratcom are more important. >> i have concern about our presence in iraq. we have had questions raised about the number of contract employees there, contractors, and i understand the state department is trying to decide what the mission is in iraq. we have the largest embassy in the world and it's growing, physically growing, but we don't

have established a mission. i know that part of this will be the state department. but i assume the department of defense also has a vital role in establishing that mission. can you fill us in on what progress is being made to establish a mission? we seems like we have the cart before he horse. >> dod has a pretty good plan that we're implementing. we have eight sitees we're located in. we're looking with foreign military sales that are being provided to the iraqis. we're providing training, support. it's both dod and contract individuals working in those sites. it's pretty limited but it's very help toll the iraqis in terms of their ability to develop a security for the future. in addition, we're open to continuing to discuss with them additional opportunities, particularly with regards to

other operations going after al qaeda, et cetera, that we think are important to continue as well. so we feel pretty good about the mission we're performing right now. >> absolutely, sir. we built the office of security cooperation in iraq based on the capabilities that the iraqi government wanted us to support them, how they wanted to be supported. notably with the program of record for foreign military sales and then institution billing, and -- institution building, and we have resources mapped to the functions and i think we have the office sized about right for now. if they were to choose to expand our relationship in any way, we could do so. >> well there seems to be room within that structure to expand, because of the size of the structure. i don't mean to minimize the necessity of having a presence in iraq, but seems like the structure is more than adequate to take care of whatever our

needs, and when i emphasize more than adequate, it's consistent with the inspector general's criticisms or observations about the size of the structure and continuing to expand without a stated mission, and i hope we can get to where we feel like we can state what that mission ultimately is. i'd like turn to iran for just a minute. it seems like everytime we check any of the news today, iran is involved in it. questions about iran engaging in terrorist activityies in two locations around the world in the last day or so. the plot to take out the saudi ambassador to the united states, and i wonder -- you said, secretary