into the state department in 2003 and no one was quite sure what it meant that it never went anywhere in the push of administration. and again, at one point in the discussion with the europeans when the iranians said that they were willing to not give up uranium enrichment but only in rich in accord with their needs for energy, which would have put a significant limit on it are going they believed that everyone every one of these options had been in jordan that is what president obama tried to reverse with his early outreach. ..

>> i mean, i think what you're asking is in relation to iran, you know, the chinese obviously need -- feel that they need and our customers to the oil production with iran and other economic agreements that go on. so they are in a very difficult position here of how do they support not having a weapon be developed and not undermine their need for the energy

resources that they are buying there. and shying to do the calculation of cost benefit right now as with other countries, what they'd like to see happen as a diplomatic solution to this activity, probably even if it included some sort of nuclear capability, whether it be for energy or more, if that gets foreclosed, and they have a very hard decision and they have to think their way through that and to the extent they have to go someplace else for that energy in the future, if i were to happen come and i put pressure in the south associate. >> they clearly have their need for energy sources very high on their lives. they have another issue, too. that is the adversity or a version to activity by nations that could be not all some with

internal affairs. so they certainly want to maintain the status quo inside of china and one of the things that is clearly appealing to them as the activity that is destabilizing to the population. so if they see your perceived that people are ganging up to instigate similar chart when iran, iran today, maybe china tomorrow. who knows. but i think that is a drag, a brake on activity that we would like to see move forward to get china to be more cooperative in how china decide, okay, we look at our oil somewhere else, a huge additional turn of the screw is here with iran, whether they are ready to do that or not they think is probably up in the air. >> the obama administration tried pretty hard in 29, 2010 to

come up with alternatives for china. they the one attacked the saudi's and from other suppliers. obviously iraq now is giving up to production with libya. but it is not clear that any of that is really going to be in the chinese that the soil. in fact commit chinese now see a great opportunity because i think they believed the iranians are going to have to sell their oil at a significant discount given the sanctions. and so, a lot of the behind-the-scenes diplomacy and from what happened when who should team was here last week was to try to get the chinese not a backfill and by the oil that the u.s. and the european allies that are cut off so far. and that is going to be the big struggle at the next two months. >> one thought here and i will show that. there are different ways to approach this. one is to grab the alleged prone by the neck and beat on them,

which is kind of taken their rhetorical screaming today into it that way. another is to look around and see how many tools you can bear. but things are changing. there are more things we can do with other countries to help out in their economic needs, and availability of natural gas. a lot of things are in play here and emphasizing those things, as things that could be helpful in this situation, rather than just we're going to beat him or not, blow it up or not seems it could be more useful for us. >> china man, thank you also much. and thank you on behalf the csis and tcu. [applause] [inaudible conversations]

the blunted that was tabled in a fit you want to not 48 vote. your comments for majority leader harry beat and minority i your mitch mcconnell. this is 15 minutes.ological amed >> today the senate will vote on an extreme ideological amendment to the bipartisan transportation bill. this amendment takes women's access to health care. it will allow any employee orviy orange shirt to that coverage for virtually any treatment, for

virtually any reason. i repeat, it will allow any employer coverage for virtually any treatment for virtually anys reason. i was face to your senators snowe and tends to oppose this measure. i read that last time. the memos designed to restrict access to contraception it would also limit all americans access to essential health care. e here are just a few of life-saving treatments employers could deny this amendmentat somf passes. try to comprehend but here's a mimicry in another cancer screenings. childod prenatal care, flu shots, republican diabetes screens, childhoodan vaccinations, to make matters worse, republicans held upit progress on an importantic job spill to extract this political vote as an economy is finally te republicans have tried to force congress to take his foot off bt the gas.

every member of this body knows the blunt amendment has nothing to do with highways or bridgesid or train tracks in this amendment has no place in a transportationh bill.fford there were 2 million jobs theeay state senate cannot afford to delay progress on soa job creatv measure no longer is the democrats agree to vote on on. senator blunt amendment so they can hopefully move on. this once the senate disposes of this partisan political amendment i rnest hope b will be able to resume in earnest bipartisan work on a transportation bill. m >> mr. president. >> republican leader is recognized. >> i spent a lot of time in myen

first amendment and most of thet time to focus on the part that deals with free speech.present'e the recent actions by the obama administration related to the president south carolina have prompted manyou others here in freedom many across the country to stand up in defense of another freedom covered in the first amendment. and that is religious freedom. t let me just say at the outset that most of us didn't expect is who would ever have to defend this right in a body which every one of us a is sworn to uphold d constitution. were most of us probably assumed that if religious liberty were ever seriously challenged in this country we could always expect a robust bipartisan defense of the, at least from within the congress so. find but unfortunately, that's not the situation we find ourselvest in. democrats have evidently decided they would rather defend a president of their own party regardless of the impact of hiss policies. so rather than defend the firstd

amendment in this particular case, they decided to engage ini a campaign of distraction as aiu way that skewing the larger her. issue, which is at stake here. and if democrats no longer sees the value in defending the first amendment because they don't think it's politically expedient to do so, or because they want to protect the president, then republicans will have to do it ar them. is and we're happy to do that than because this is an issue that ii greater than any short-termca oo political gain. it gets right at the heart of who we are as a people and we welcome the opportunity to makea hafirm what this country is allt about. what makes america unique in the world is the fact that it was f anblished on the basis o idea. the idea that all of us havewith been endowed by their creator with certain unalienable rights. another words, right better confirm not baking or a president, or save the congresse

but by the creators themselves.. the state protects these rights, but it does not grant them. and what the state doesn't grant, the state can't take away.rote now the first of these rightshae according to the men who wrote the u.s. constitution is the interfer have one's religious beliefs protected from government interference. the first amendment couldn't be clearer on this point. the government can either it establish religion nor can it e prevent its free exercise.lausee and if the free exercise oft religion of the first amendment and anything at all, it means to that it is not within the power of the federal government to tell anybody what p to believe r to punish them for crack theand same those beliefs. is and yet it's precisely what the obama administration is trying to do through the president south carolina.ker we all remember that speaker pelosi said we have to pass the health care bill to find out what the o senate.

well, this is one of the things we found. it empowers bureaucrats here in tend to decide which tenantituts can't adhere to. if they don't get in line, they'll be penalized. according to a congressional testimony delivered this week but is not good enough the becket fund for religiousdentedn liberty, this is not onlyut unprecedented federal the, the broader in scope and narrower id its exemption on the 28th state mandate that pointed to ie and it evisceration's defense. moreover, even in states with se strict mandates, religious of institutions can either opt-out. self-insure.ry that ft if they try that now, and nw they run into this new federalis mandates make it impossible forn

the first time for religious institutions to avoid punishment for practicing what they preach. some of the proponents of this mandate state that in this case, we should just ignore the first amendment. that is what the proponents are saying.ey this just ignores the first s q' amendment. they say the certain religious beliefs in question are particularly popular, so they don't really deserve first amendment protection. ament? but isn't that the entire pointo of the first amendment? to protect rights regardless ofe who or how many people hold them? isn't that the reason people came to this country in the first place? who has a bright future governmenti. majority line? on the proponents of the mandate of also said they're willing to offer a so-called compromise that would respect what theytitt call the core mission of religious institutions.

but here's the catch. they want to be the ones to tell these religious institutions with the core mission is.n is. the government telling theent religious institution with the core mission is.ot a that is in a compromise. thi that is another government takeover. only this time it isn't the banks where the car companies. it is religion.sp o i mean, who do you think has a better grasp of the mission of ce catholic church? preside's the cardinal archbishop of new york or the president's campaigo manager? w who arhee you going to listen to on the question of whether thist religion? the president of one of the largest seminaries on the planet or some bureaucrat intself. washington? the question answers itself. look, this is precisely the kind of thing the founders feared. gt

danger of a government intrusiol into religion like this one that they left us the first amendment in the first place so that we say, no government, no government, no president has that right. religious institutions are free to decide what they believe and the government must respect their right to do so. and remember, as many as i said during the debate on the president health care bill, thig is just the beginning. if the government is allowed to compel people to buy health care, it won't stop there. belis now it's telling people what what they religious practices ought to be.t's lely wonder what is next. c let's be clear. this is in about one particular religion. it is about the right americans of any religion to live out p

their faith without the government picking and choosing which type turns they are allowed to follow. when one religion is threatened, our religions are threatened and allowing this particular infringement would surely please this is something my constituents understoodn immediately in this debate. and i've received a lot of letters from religious leaders and o o concerned citizens to know that an attack on the belief of ones religionof is attack on the beliefs of any religion. and many of them make the case a lot better than i can. so i'd like to share for aents n moment from thoughts from my constituents on this issue. i will start with the catholic archbishop, archbishop joseph curt. here's what he wrote. the federal government, which claims to be out, by and for thy people has just dealt a heavy blow to almost a quarter of those people, the cat that the

population.holic the millions more served by the catholic people. conitution the administration has cast aside the first amendment to the states denied to catholic finishes first and most relig fundamental freedom, that of religious liberty. we cannot, we will not complyaw. with this unjust law.f people of faith cannot be made second class citizens.hat here's what they should ronaldc gainer of lexington had to say. civil law and civil structures should recognize and protect the church is right and obligationtp to participate in society without expecting us were forcing us to abandon or compromise our work diction. eys teach to give eyewitness to moral values that shape our lives and inspire our society,

ohen there is a corresponding obligation that we will be expre allowed to ssfile an express freely those religious values. anything short of government an protection for freedom represent the non-warranted that of government interference.nt of taylor.eigion it is disappointing.ng. the choice to interfere with chi religious hospitals, charitiesel and schools at the mandate violated religious views isabilb disconcerting and well and all probability be totally is. further polarizing this nation. and finally, i want to read a letter from rl moder junior. i mentioned her earlier. he's the president of the southern baptist theological s seminary, the flagship school of the southern baptist convention that the largest seminaries in the world.

i'm going to quote in fullhere'a minute like to submit for thead record. here's what dr. mohler had to say.re i write to express my deepestsse concern regarding the recent policy announced by the department of health and human l services. that will require religious institutions to provide mandate a conscious that did ann antiabortion service says toemp. employees. this policy announced by trample t the religious liberty of college american christians who are now informed in our s,co both, hospitals and other service organizations must c vioarlate conscience in order to comply with the affordable care act. annou the exemption announced by the n obama administration is sow, s intentionally narrowed that ites

will cover only congregations and religious institutions that employ and serve only members on our own fates. this exemption deliberately excludes christian institutionse that have served this nation anu its people through education, social services and health care. the new policy effectively tells christian institutions that if we want to remain truer convictions and and ourving consciences, we will have to cease serving the public.ons upo this is a policy that would be very require millions upon millions of americans to accept their gross and deliberateo violation of religious liberty were to accept the total secularization and social formed b services.y and in a matter of grave theological and moral significance.

it's not a catholic issue. ofth con and forms of birth control, such as emergency contraceptivesng wh millions and millions of christians along with those who share the convictions. our brigade and centuries to believe that moral instruction. he goes on to, this policy is an outrage other deepest liber contribution to liberty under the feet of the liquorgovern government we can not comply with this policy.is a the one-year extension offered by the obama administration is a further insult, providing a year in which we are by governmente,o mandate to prepare to sacrificee our validate conference.erican

i humbly request that the congress of the united states provide an immediate remedy tool this intolerable validation of religious liberty. please do not allow this abominableab policies that are t protection of our most basic and fundamental liberties now rests in your hands., i'll so mr. president, i will conclude with this. it's that there's one good thing about opu this debate. it's that it has given us in all an opportunity to reaffirm what we believe.er and it gives us an opportunity to al say for about. this is what makes america unique. this is what makes america be great. that's all be voting for the tha bloc amendment. is my sincere hope that those in this admin is aeration come down

if they come to realize from the outpour over the past several fe weeks from across the country exercise of religion in this country has always been one of our nations greatest asset and one of those things that truly sets us apart i hope thereconsid presidenter reconsiders this misguided policy in reverse of that. it must be reversed but if you doubt that, either congress or the courts will surely act.

>> if you have set in 2006 do with the world would be begging for the united states to force the middle east within three and a half years, everyone would've said you were crazy. >> i've been writing for years actually a lack of continuity in american foreign policy in more than we expect a lot of broad consensus and i think what you're seeing here is the kind of consensus that exists in the foreign policy and there is a lot of overlap three parties.

>> housing secretary shaun donovan said today the federal housing administration has the resources to back its portfolio of home mortgages. the fund which has been depleted by the housing crisis would be replenished through increased fees and money from the recent legal settlement with big banks for their lending practices. secretary donovan testified before the senate appropriations subcommittee and housing and urban development at this hour-long hearing. [inaudible] -- 2013 budget request for a department of housing and urban development. as he began iraq on next year's budget, there are encouraging signs that our economy is moving in the right direction although we are moving quickly enough for families they continue to

struggle and they certainly got a long way to go, the private sector is now demanding jobs for almost two years. businesses are growing in confidence is that. we seem to have said that imus in the precipice come which of course is good news for the housing market, which depends on a strong and stable economy to recover. despite the positive science we still face significant challenges. over 22% of homeowners are underwater. the recent sentiment announced among the five largest banks in the federal government is an important step. it was banks accountable and provides relief to homeowners. the settlement also paves the way for banks to proceed with foreclosures that have been stalled in the pipelines. poet is important to reduce the excess inventory distressed housing, increase sales of these properties that reduce prices and a further depress values. jaime back from the housing crash will not be easy i'm interested in hearing your views on how we can increase the stability of the market.

the depress housing market is only taken it: at bj. this is made clear in the president's budget. the budget indicates for the first time, fha may require federal funding to cover its losses. i've long been concerned about the solvency of fha's mutual mortgage insurance on and applaud the efforts of the administration to strengthen fha's risk control. many of the financial problems facing fha are related to older books of business and shared at the height of the housing. some other changes to strengthen the program are important and long overdue, but will also be important to recover or prevent expect its losses from older loans. i'm pleased the recent mortgage settlement includes money for fha and other settlement, most notably bank of america will provide money to cover losses related to improper mortgage origination. the settlement should help avoid the need for taxpayer funding

and i hope you will continue to look for opportunities to recoup losses from fraudulent or poorly underwritten modes. additional changes to fha premiums contained in the budget as well as those in a monday represent your continued efforts to improve the solvency of the mmi fund and protect the tax payer from having to cover his losses. beyond fha, today we examine other aspects of the administration's request, which is 44.8 billion engross resources to support the programs. while this represents an increase of 3%. it is largely current services of the nervous offsets in the fiscal year 20 told bill. as a secretary's testimony notes and 83% of the budget is dedicated to providing housing to the nations most vulnerable in these programs require annual adjustment. as we continue on to control light this presents us with difficult choices.

we were tired to protect hud's core rental assistance program. doing so meant difficult cuts to more programs like cbc tv, home and housing for elderly. the kaiser began in fiscal year 2011 are widely sold today. cities and towns are cutting services, laying off workers or delaying critical investments in their communities. this year's budget faces many of the same challenges we struggled with last year. how do you craft a budget that protects low-income residents who rely on how to keep a roof over their heads, makes the economic development in affordable housing investments to strengthen our communities and kids cut the tools they need to effectively manage its programs? of the administration's fiscal year 2013 budget balances priorities and concerned about some proposals. the proposed budget for project-based rental assistance for managed to request at that level by intentionally not

pending contracts were full 12 months. iciness may be manageable in the short run i'm concerned we will have the resources when it becomes. and the rental assistance account i'm concerned the funding of a requested three vouchers is a fact of the flat. they renewed vouchers for the first time through the budget relies on savings from a were a policy changes which are not without controversy. as they make the difficult choices in this budget, not to be sure we're making decisions with an understanding of the consequences and nine towards the future. despite my concerns are some bright spots in this budget. the request again seeks 75 million for new fab five vouchers which should help to reduce homelessness among veterans by 12% between 2010 and 27. the administration is returned to develop a plan to

homelessness and very by the request for programs reflects the continued commitment to that plan. at a time and resources are scarce, oversight of subtype programs becomes even more important. i look forward to continuing to work with the department and my colleagues to find additional ways to improve subsites programs. what's with nausea date than the inspector general, mr. montoya with us today. i welcome his vision for hud internal check on work with them to protect taxpayer dollars and improve the agency of subsites program for the fiscal year 2013 budget once again requires difficult choices to be made. as they work with my colleague, those on the subcommittee put together this bill, i will be mindful of the millions of americans who rely on some sites program for a place to sleep each night. mr. secretary come out for two or discussion today at work in the two as we develop the budget. we appreciate everyone

accommodating us into the miss hearing that and senator collins, thank you for accommodating us as well. we have a vote in about an hour 20 minutes as senator collins and i both need to be on the floor. when he turned over to my colleague, senator collins, thank you for being here. >> thank you very much, senator murray. please let me say how much i enjoyed working with the last year as we crafted this important appropriations bill. we did so when a truly bipartisan fashion. we share a lot of the same priorities and it was also a great pleasure to work with secretary donovan and i appreciate his being here today as we discuss how to meet the housing and economic development needs of families and communities across the nation. as we begin to construct the fiscal year 2013 budget, where mindful that we are once again operating under very difficult

fiscal constraints. that is even more challenging when one considers that more than 80 cents out of every dollar of the budget request is required just to continue serving those who currently rely on hud for just housing support. addressing the ongoing challenge of homeless is remains a top priority of mine. chairman murray and i continue to share this commitment, particularly foreign nations and we worked very fired last year for funding for the hud program. one out of every six minimum in homeless shelters are veteran and unfortunately veterans are 50% more likely to fall into homelessness compared to other americans i'm pleased the budget

request continues funding for the hud -- program to $75 million. this level of funding should help us serve an additional 10,000 veterans who would otherwise likely be homeless. veterans homelessness style by nearly 12% in the year 2010, demonstrating that these programs work. i've also always supported funding for the homeless assistance grants programs to prevent and end homelessness. the budget proposes $2.2 billion for this programs. that is an increase of approximately 230 million over the previous fiscal year. it is, however important that we focus on what works. one of the models that i've seen work in the state as the housing

first model for aiding those who are homeless. we need better data to ensure the effect goodness of all housing programs. this particular model is proving its effect to miss in my home state of maine through the foreign spouse, a comprehensive center for homeless women in portland. in addition to programs that effectively serve the homeless has eight cores support for affordable rental housing, but budget proposes more than 19 billion for the rental assistance program of which 1.6 billion is available for administrative programs. that is an increase in direct response to some public housing agencies are having a difficult time in administering their voucher programs and it actually turned back vouchers as a result

of that is very troubling. we don't want to overpay them for their administrative expenses, but they need to have sufficient expenses to efficiently in effect they run the program. another important issue that i would like to address is hud's oversight of the housing authority, section eight voucher program. a series of recent newspaper stories reveal troubling codes and cases of code violations and other poor conditions in oxford county maine. contact the local fire chief that he produced letter to my office asking for my help. hud has an obligation to oversee federal funds for public housing agencies nationwide to ensure that these funds are not supported substandard property. i just want to share briefly

with my colleagues and the people from hud here and the inspector general one of the particular unit, one of the apartments that was cited in this newspaper series. hud is actually paying $600 a month in federal subsidies for an apartment that had septic backups in the kitchen sink, a damaged fire escape and back and rodent infestation, totally unacceptable. it is bad enough that taxpayers were charged for substandard units, but it is appalling that residents were forced to do in such horrible conditions. the welfare and safety of tenants must be guarded and federally subsidized must represent should both the time and taxpayer light. i requested the inspector general to oversight of this

subsection and having state housing authority administration of the program has clearly federal that the property of safety and quality standards and i want to commend the secretary for taking my commands very seriously and for asking the maine state housing authority for corrective action plans and i'm also very pleased that the ig has stepped in and is investigating this problem. i too want to let go senator murray's can turn said that the federal housing authority -- administration, which play such a critical role in affordable home ownership. the decline in the housing market over the past several years has had a tremendous and had done families and communities throughout the nation, as well as our economy as a whole.

while i understand that hud has taken a number of steps to increase b. serves, it remains troubling that the capital reserve ratio remains below the congressionally mandated level of 2%. i am not a mistake that we will hear some good news as a result of the settlements, but that is still of concern. i also want to discuss in the question. but the secretary what can be done to ensure that greater use of what palate teasing systems in maine that have not qualified for assistance under the fha program and those are increasingly popular, an alternative to fossil fuels that is fairly heavily dependent on home heating oil, the price of which is paid. finally, the level funding for the community for the block grant program propose at about

$3 billion is disappointing. this popular program supports the economic growth strategies of communities nationwide and enables key investments in their long-term economic growth. it is programs like cdbg that help build a foundation for future prosperity. these are just some of the issues before a senate committee and again, madam chairman, i look forward to working very closely with you again this year. >> thank you very much, senator collins. that will turn over to secretary donovan. >> thank you, madam chair, ranking member for the opportunity to be here today. i would like to discuss how hud budget proposal that is built to last all directly support 700,000 jobs. madam chair, and developing the proposed budget would follow for principles. first to continue her support for the housing market while bringing private capital that.

the critical support sha provided the last two years has helped nearly 2.8 million families buy a home and more than 1.7 million homeowners refinance interest able affordable products with average monthly saving of more than $125. at the same time we've taken the most significant steps in sha history to reduce risk to the taxpayer and reform fha premium structure. with the premium increases of 10 basis points recently enacted by congress coupled with additional premium increases on jumbo loans reflected in the budget, sha projects to add an additional $8.1 billion in receipts to the capital reserve account in 2013. and just this week we announced a series of additional premium changes will increase receipts to fha about those arty in the budget by over $1 billion in fiscal year 2012 and 2013. we have also taken significant steps to increase accountability for fha lenders continue to seek

expanded authority via legislation that will further enable us to protect the fund. as with the recent settlement with america's five largest servicers through which fha will receive approximately $900 million to compensate for losses associated with love originated or service in violation of fha requirements. but fha's current market share declining since 2009, these reforms will further help private capital return while ensuring that fha remains a vital source of financing for underserved borrowers and communities. just as importantly will have fiscal year 2013 request is 44.8 billion gross budget authority because of fha and jenny may receive the cost of the tax they are is only 35.35 billion, only 7.3% below the fiscal year 2012 enacted level. more than meeting our deficit reduction target while still

allowing us to approve oversight of our core programs. the second principle we used to develop our budget buster protect current president can improve the programs that serve them. the 5.4 million gamblers who have been assisted housing earn $10,200 per year as the median and more than half are elderly or disabled. that despite 83% of our budget if you both recognize keeps these presidents in their home and provides basic upkeep to public housing will also continue to serve our most vulnerable populations are homeless programs. as you know, inflation and stagnant incomes put real pressure on the cost of these programs each year. this year we redoubled efforts to minimize an even reverse these increases, not just for this year, but the years to come. for instance, we are working with your colleagues to the next section eight reform legislation that would save $1 billion over the next five years while also supporting the ability of public housing authorities in small towns and rural areas to better serve the working poor.

the budget receives savings in the project-based rental assistance program by improving oversight of french studies, capping certain annual subsidies cannot set as the reserves. even still, protecting her families required us to make choices we would not have made a different physical environment. requesting a $.7 billion for the pv array program allows us to say the same number of families, the required us to provide the sinfulness of funding for the majority of contracts. in addition, he let the budget maintains hardship exemptions, the budget raises minimum rents throughout our core rental assistance programs to a uniform $75 per month. these very difficult decisions by the kinds of steps we were required to take in this difficult budget. a continuous investments to leverage private dollars and create jobs so important. your choice neighbor has

programs for helping communities engage a broad range of public partners for neighborhoods to ensure children are prepared for the 21st century economy. economy. as the president headed for going to compete with china and india, we can't leave anyone on the sidelines. likewise are sustainable communities grants challenge communities to creatively use existing resources that help them in source and bring jobs back to our shores. in memphis, which is using hud cranky state resources and neighborhood surrounding the international airport, fedex's arty crated 3000 jobs and companies like electrolux are poised to create another 1500. at a time in the physical environment has required us to make tough choices about cdg bn homes, dollar for dollar the most effective job creating a budget, grants are essential because they leverage resource is the core programs, even more sprightly and efficiently. indeed reducing burdens and

increasing efficiency is the fourth and final principle we used to formulate this budget. for example the budget provides flexibility to better manage its physical environment and to hold our partners accountable for the funding they receive it also continues her transformation initiative. with your help we both continue the next generation management system that will improve monitoring and oversight of our largest rental assistance program and launching across cutting technical assistance initiative targeted for pha said they have the capacity to manage their budget. t.i. research allows us to propose increase investments in programs we know work at permanent supportive housing and method we have seen that and the homelessness and save money. that is why even in this difficult environment at both of you have championed, we propose additional funding for assistance grants and the hud-vash program to end homelessness by 2015.

despite the choice is it allows us to serve 27,000 more vulnerable families. it recognizes our housing market with essential to broader economic recovery and expresses our belief that every american should get a fair shot, do their fair share and play by the same rules. thank you for having me here today. >> thank you are a much secretary. then he began by asking you about the status of the fha ritual mortgage insurance funds. given the seriousness of the housing crisis, it is not surprising that fha sustained significant losses in the capital account has served its purpose by covering those losses, but i was concerned when the president's budget stated that $680 million would be needed to cover fha losses in fiscal year 2012, but the recent settlements and announced increases are acted to improve and the financial position, but i wanted to do update us on the financial conditions of the mmi

find, at the fha phenomenon. >> as you correctly stated, the information in the budget is allocated on the tape was published. and in fact, we were reading to make final decisions about premium increases until we knew the outcome of the settlement. i wish that had been resolved before the budget was finalized, but it was then. that is the reason for what was shown in the budget. having said that, with the $900 million that i described, it is the result of our work to recover for bad loans in the fha program in the settlement. and in addition, the premium increases that we've announced this week, we do expect that the fund will remain positive this year. in addition, because of those steps that we've taken, the fund will be in a stronger position

when the next actuarial study is done in the fall. that is the most comprehensive book that we know, looking forward. and we do expect that they will put us -- these changes he made will put us in a significantly better position, follow. but again, we have to be vigilant and will take additional steps if necessary. the single most determining of the health of the fund is where house prices this year and beyond. and so we will continue to be vigilant and watch carefully to make sure it if we have additional steps we need to take that we can work with the committee to take those. >> so what are the risks and opportunities for me to look at the housing crisis this year? what other things quite >> specifically for the re-estimate this year, the only things that will affect the number by the premium increase a sense of this very quickly is critical and the levels of blood volume that we have this year. our estimates are that it would

take loan volumes more than 20% below our expectations to threaten the fund through the re-estimate this year. more importantly for next year as we go toimportantly for nextr as we go to do the new actuarial study, the single most important fact or his house prices. our estimates last year showed that it would take greater than a 4% reduction in house prices this year. our base case predicted a 1% increase in a 4% reduction in house prices this year to push to find negative. was before we implemented. it would take a much larger decline in house prices, much larger than 4% to put the fund in a negative position for the rest of the next year. >> you decided to increase the up front. can you tell me how that will affect the borrowers trying to access credit?

>> as you know, congressman the decision to include a 10 basis point increase in our single-family programs as part of the bill that extended the payroll tax deduction. in addition, we included a 75 basis point increase in the upfront premium. the 10 basis point equates for the average loan to about $9 a month for a firewire and the upfront premium increases about $5 a month for the typical borrower. the only places are increases are significantly larger as for jumbo loans. over $625,000 or that it is prudent to include a larger increase. so for those barbers because the average size of the loan is much larger and because he increases more, increases would be significantly larger. >> thank you. the joint service that element

and with bank of america represent not only the significant monetary award, but also send a message to fa program participants that there were serious consequences to not following the rules. just last week, settlements with two additional lenders were announced and since most of the losses to the mmi funds stand prior to the reforms implemented in 2009 come it is really important to pursue opportunities to prevent recovered losses from those books of business. whether additional measures that fha can take to improve the outlook for riskier loans at a party have on this book quite >> there are. first of all, let me just comment the inspector general and his team for their remarkable work to lead to both the servicing supplement and its its additional sediments. it partnered very, very closely with us and doj to allow us to make this recovery is not just in the settlement but from citibank and flagstar. these are very important steps

and i just want to compliment him and his team. the additional steps we could take. there are a number of them that require legislation change. i'm happy to say we're working closely with your colleagues on the operating side as well as members of the house. there is a bill in the house that includes a number of the steps that would allow us to step up our enforcement and those build on the recent regulation on indemnification that we put out, which will allow us to further hold lenders accountable for those prior loans that didn't meet fha standards. the mac will you know, we all think fha's current offside rule and the market is unsustainable. there's no one who doesn't think differently, that still remains difficult for qualified americans to the market share in the marcus recovery as we know it's a very fragile. if fha steps to quickly it could have serious consequences not only for overall economy as a non-outcome of the solvency of the mmi find.

i want to ask you how you don't continue to eat for fha provide access to credit with making room for private capital to return to the market. >> senator, you have asked the $64 trillion question. this is what keeps me up at night and this is exactly the key question that we have to balance. and frankly, it is not just helping the broader market recover. but if we are to take steps to increase premiums too quickly to take steps that would hurt the market recovery, we actually hurt the fha fun and taxpayers because old investments, the trillion dollars portfolio will perform much worse. and so, in the steps that we've taken in the last exactly the right question. what's the step for the average homeowner, we saw $14 a month on average was acceptable, particularly given with record

low interest rates. we honestly feel the biggest barrier holding back landing and a privy to you, too many qualified borrowers unable to get landing today. it isn't the pricing that is the biggest barrier. it would be if we went to quickly and raising a premium. the biggest challenge is the uncertainty sellout their and how we will enforce rules. we have to make clear what the rules will be on our indemnification and clarifying. it's a think fha is a means to put out a clear policy on buybacks that allow fannie and freddie lenders to know what to expect and that's why the service settlement was important as well. it created a single clear strong set of servicing standards and clarified foreclosure processes around the country so the market can move forward with greater certainty. again, always hard to get the balance perfectly. i wouldn't say we are ever done. i sleep on this every night.

but it's a critically important nonscientist thank you in the ranking member for your understanding of that balance. very good. i appreciate that. >> thank you, not of chairman. i want to go back to initiate that senator murray touched on in her opening statement. i am concerned by the administration's proposal to fund thousands of project-based rental assistance contracts for less than 12 months. and the reason i am concerned that these contracts may create a perverse incentive for landlords not to invest in maintenance to cut expenses to reserve because of the risk of whether or not the full approach creations at the years are going to come through. i'm also troubled that some owners may decide to leave the

program altogether rather than take that risk. i know this had to be a difficult decision and it clearly was budget driven, but how is hud going to mitigate these risks to the program into the residence? >> senator, first of all them if they thank you for recognizing this issue. this is one of the most difficult decisions we make in our budget. personally for me having run the programs, my first time at hud is particularly difficult. but i would say it is there are two real risks here. one is an operational risk that we will not be will to mechanically get the contracts funded with the shortcoming. that has been in past. when these contracts were short

funded. and i can assure you that i and my team have worked very hard to make sure that the operational processes are improved and effect over the last for years we haven't had the same kinds of issues that might bring up with the short funding. but also operationally have taken a lot of steps to make sure we have auspices in place to monitor the unit. so you're concerned about will this lead to decreased maintenance, we have new risk ranking on reporting that we do on these units. we have quality control around her rehab process that we have set out. those are all things that are critical to make sure that the kind with talk about john have been. the other risk is an uncertainty around funding. you mention that as well. and that is one where frankly because there is private capital units, it is critical that we do not create too much uncertainty from his programs.

what is important as we work together to make clear as congress has always done is available for these units. we sign contracts knowing they are dependent on appropriations each year in the market has been confident that the funding will be there. we want to make clear despite the finding that we will do everything on our site and i know you will as to continue the funding and make sure it is available in subsequent years. >> let me now turn to the issue that i mentioned in my opening statement about the poor living conditions and son of the sub type unit in maine. i have traveled it is not only because tax payers should be paying for poorly maintained unit, but the hulk and save you the people living there is

clearly a risk. say something dramatically went wrong with the oversight inspection process. i have also traveled last year when they learned of the outright fraud and some of the public housing agencies. at least one in philadelphia in particular was found to have fraud. so what investments is hud making in this budget to ensure that you have quality controls, internal controls, a very close relationship with the ig to ensure that we are not wasting taxpayer dollars on substandard unit that are unsafe for the tenants or outright fraud where people are stealing money that belongs to the taxpayers and is

not benefiting those who need it most. yeah first, senator, let me just thank you for your direct miss an focus on these problems, both you and senator murray. further issues, where we've made mistakes and this was clearly mistakes made on this unit. you have been direct and hamas accountable to correct those. i hope you'll agree that when you discovered these problems that we worked very closely with you, with david montoya and i want to really recognize him and his team. we are taking steps specifically a named but i think will lead to better management going forward. the contracts with the effect tears, companies doing the inspections had been rescinded or those are brought back in-house to improve the inspections there and we have a various civic plan for correction though there could troll with an the housing

authority of lessons can we learn more broadly for the work we are doing across the country? were really three things there. one is we have to make better use of our existing resources, staff and our partnerships with the ig to improve oversight. we have in our budget proposes shifting, public housing staff into field offices and direct oversight. we also made sure that we are previously didn't use work as close as public housing authorities. just in 2011 and so far in 2012 we have used 140 public agencies across the country and so that is a better use of existing resources. the second we have to do better in coordinating our inspection systems. today we have one of action system using react for a project

this units in public housing. we have a separate system for voucher unit. what we have started now as a pilot to use our react inspections for quality control, where they go behind local inspect yours and make sure that the result they are getting are in fact accurate and that is something we plan to expand and potentially in the future to merge those two systems so we have a single set of strong standards for actions across our program. but earthiness with your help, the investments are making in information technology. the next generation management system for voucher program will allow us to do things, just to give you one example, right now we don't have the ability to look at the photograph that are taken on this inspections. there is nothing that replaces actually seen with your own eyes what happened and this system will help us download and view anywhere in the country the

digital photographs taken on the inspections that local inspectors are doing. and that is just one example, but this will of things in the next generation management system. that has been one of the biggest priorities to have had in utah this accountable to invest in a store information tech elegy. we couldn't agree more that that is a critical step we have to take in investing. >> thank you. i do want to loot you and the inspector general for your responsiveness to the problems in maine and across the country. it's amazing that you don't, photographs. i could lend you my black. to do it. if even i can do that, it is clearly a feasible step that can be taken. just one very quick point. another thing that i think the department really needs to look at is if you have bad actors out

there, you do have available to use suspension and department tools, where you can prohibit an individual or even an agency being involved and i would encourage you to make more use of those tools and egregious case. thank you. >> thank you here but it's a time limit on being able to download the stitchers. we will follow up at the detailed information on all the different steps. those first piece says that the next generation management system for going into place this year. i think it is with then a few months that we have the photographic capability that i talked about. >> some people that they are accountable in bigger ways that makes a difference. i appreciate that at the senator collins concerns about short funding on a budget base

contract. so we will follow that very closely from iran. >> in no company mentioned in your opening remarks that the programs that directly promote the housing to income americans, mostly you are utterly disabled about the budget would make continued difficult challenge in constrained resources, i know those programs face a lot of pressure on the budgets. the largest of those space programs, which of course comes to section eight vouchers used by residents to find housing in the present market. and this is budget the level of funding requested is essentially flat. it does approve savings and does not appear to be sufficient as inflation and a million incremental vouchers for the first time. i want to ask you how you expect p.j. to maintain their existing voucher portfolios without those

adjustments. >> so, two things i would say about this, not in shared. and i think you all had been very focused on this for a number of years and how do we balance making sure we protect every family with sort of been in the cost curve if you will of renewals on these programs? if we are the budget are proposed in a whole series of steps that would allow a to serve the same number depo and keep the cost relatively flat. some of those are choices i think that we can all agree on one center, and sent it easy. some of those are tougher decisions and obviously need to does best with the committee and get your views and input from others some of those make sense. specifically in the tent of,

there are over $200 million of savings that we are proposing to achieve. this eco-biggest is to change our income targeting rural communities to make sure some of the working poor can be eligible when it's part of the reform act and we are hopeful well past and that house in the coming week and nobody would be able to implement. i think there is broad support for, but we also have proposed changes in the medical expense deductions as well as the minimum rent that would allow us to serve the same number of people appear to be very clear, we are maintaining to serving all families they are, but it did require a number of steps to lower costs next year to keep those flat and allow us to have lower renewal costs in the out years. the other thing i would just say briefly is that an important

piece here, as you both recognize is what it takes to manage these programs. and we have been very concerned that we had to housing authorities that actually turned back last vouchers. i've never seen that before. can you imagine the idea that we can serve anywhere homeless veterans? just in january alone, we had 13 different housing authorities had made the decision to turn back their broader voucher programs. >> because they were concerned about the inability to find those. last year's budget made the very difficult decision to find the admin fees at just over 70% in terms of the overall made. we are proposing a significant increase to get about 80%, but we still think even with difficult choices they make, there's no sun risk housing

wouldn't have enough. so particularly, the line item of admin fees is a critical piece i think we will meet to discuss and work on this year in the budget. >> okay, let me ask you about this because your request as request administrative fees, which have been cut significantly in recent years. administered if these aren't exactly in sync. but they do find the basic operations. and i do struggle a lot of difficult choices as she puts this together. can you explain why to prioritize finance for administrative fees of our attorneys? >> clearly, the concerns we had today just mentioned about the number of housing authorities that have made the decision not to serve additional veteran, the number of housing authorities that just in january about how determined that they did not want to continue with their

voucher programs were critical in terms of that decision. and that may give you the precise numbers of what it has been happening to admin fees and what we are proposing. first of all, in 2012, it was a 70s or% proration that we estimated for the budget. for 2013, what we are proposing is an 81% proration. in 2011, or 2010 just to give you an example of where those fees were previously, it was a 90% proration in 2010. so even our 81% represents a reduction if you go back a few years. at least it's not the concerns i mentioned that even 81% were bound in difficult decision. they do have concerns they won't be enough for some housing

authorities. but i would also point out that it represents a significant reason absolute dollars from where we were last year and i'm just looking here for the fact number of what that is to make sure. let me get back to you in a moment. there's an exact number in terms of the increase we proposed this year the budget. >> have a couple more questions, but let me turn to senator collins. >> thank you, senator collins. i'm going to ask him a question because i've been called to the senate floor. but this one too is one that i referred to in my opening state and in this extremely important to the state of maine. maine is the most heavily dependent of any state in the nation on home heating oil. and you see the spikes in oil prices that we've seen this year in the cut backs in the low-income heating assistance

programs, it is causing tremendous hardship for so many of our families in maine. it is also very difficult week of maine has fueled his housing stock in the nation and that is there a lot of homes that are poorly insulated and that would benefit from weatherization project. that is something we have to invest more in as well. the large swings in oil have caused many of our residents to look to a tournament is in the wood of oil industry is growing rapidly and made in a house the potential to help out these families to allow them to convert from oil. but also to create thousands of new jobs in our state. what caught manufacturing, oil technology at pallet delivery

systems have progressed dramatically since the days when you had the scoop pellets from small bags into a small stove every couple of hours. now the industry has developed oilers that don't even require any human intervention during the day. there are appomattox deeds of pellets. and hera has-beens loathe to consider what it boilers systems as an acceptable conventional primary heating soars.

in terms of new technology. and i am happy to report, not just that we are looking at this, but just yesterday we updated our frequently asked questions on our website to tell all of our lenders that would paulist those are an acceptable heating system for homes under our insurance program as long as they meet the qualifications of any heating system, it is an acceptable technology. rear-ended process of updating

our handbooks to reflect exactly that, not only are we considering it, but we have considered it and made a decision that you're absolutely right and we should include these in our program. so thank you for bringing it to our attention. >> that is absolutely great news, and again, i think you so much for your willingness to look at that. technology has changed so dramatically, and that is going to be great news to a lot of homeowners. thank you very much. >> i will be to bar nearby perry later. [laughter] >> anytime. >> thank you very much, senator collins. mr. secretary, your budget assumes a savings as a city with dramatic changes including said based and project based section eight. you talked about this a minute ago, but many of those crossing measures require legislative changes which would involve rulemaking. what will happen if -- to your savings estimates, if all of the

proposed reforms are not enacted or if there are enacted late in the fiscal year and you still need to go through the rule making process. >> first of all, just to get back on the specific number of was looking for before, they increase we are proposing on had been fees is 200 to $5 million, so it is a substantial increase and one that we thought even in a tough environment was absolutely critical. and, as i said, we think it is the minimum necessary to try to get more confidence that housing authorities will actually be able to amidst the programs. specifically under question about legislative authority, i am happy to say that with your urgent we are working very closely with your colleagues in the house on the authorizing committee and in the senate here, and i am optimistic about getting that legislation passed. the large majority of those changes would not require extensive rulemaking.

there are very few that would require will making. really around the old route programs, but the large majority we can implement through notice to muzzle if we do get the legislation passed we can implement them quickly and be prepared for 2013, 2013 to be a will to implement them and get the savings that we are projecting. obviously if the legislation does not pass that would stop us from being a will to achieve some but not all of the savings. we do have a share that we could achieve without legislation, and i would be happy to follow up with a specific analysis that shows you precisely which we could do on a regulatory basis, the 900 million, 920 million we are proposing of a major programs, is significant share of it that we could do without any legislative change. >> okay. we can see that, that would be extremely helpful, but even if they're able to achieve these changes at the beginning of the

fiscal year, we have heard concerns that some of these proposals may harm owners and tenants alike, specifically some are worried by your proposal for owners to spend down their property reserves. so it would jeopardize maintenance and rehabilitation projects. i am also really concerned that raising minimum rents an increasing medical for tenants could put a real burden on some of these tenants in these tough economic times. can you please talk about that? >> i would be happy to. again, let me recognize at the outset, these are not decisions we would make in anything but very difficult fiscal times, making very difficult choices. and along with the project based rental assistance decision, the short funding we talked about earlier, this minimum rent increase, which, i think, is the single most of the decision in the budget plan that think what is critical is that we need to

clarify and make sure that a very strong exception policy for anyone with the hardship of that increase rent would resolve. we are expecting to do that, already working on clarifying that's policy. there is no question that the impact of this will have some real consequences for families that are struggling. we have analyze fully in which programs what percentage of families would be affected by this, the average rent increases that would come out of this, the impact of the minimum rate is about $150 million itself across all programs, and we would be happy to share with you is this a big impact and it has for the various tennant based-project based, all of the various

programs, what impact says would be. >> i would appreciate that. finally, let me discuss, i want to acknowledge your role in developing a helmet to of homeless as planned and posturing cornish across departments. it is important command at think we're making progress. i want to ask you about the housing program. designed to help homeless families, funding for the program ends this year. the emergency solutions grant program allows communities to continue this effort, but on a much smaller scale. can you talk a little bit about what the outcomes have been? >> absolutely, and i'm glad you asked. let me just say, first of all, what you ask about from hprp program, without your lead we would never have made the progress that we have made on reducing veterans homelessness. in just one year to have carper since you've -- your homeless

veterans, 18 percent you're sitting on the streets, that is a huge accomplishment, and your personal lead. >> cross is the coordination has been huge. so we are concerned about the ending of hprp and we are concerned because it has been so effective. we thought originally it would reach about 500,000 people. it is already reaching more than 1 million still counting. while the best things about it to miss 74 percent of the folks is reached on homeless families who have often been the hardest. why have we been able to? because we have realized through doing this, the data has shown us is that for far less money than we expected we have been able to us stabilize or rapidly rehouse families. might be one month's rent, a security deposit, just a couple months of utility bills. but that has allowed us to serve

far more people. really the most exciting thing about it is we have started to reorient many local responses to homelessness where for the first time they see that rapid rehousing in particular is a very beneficial step. it can be particularly effective with a small amount of money. our hope is that by continuing to invest through the emergency solutions grant, and i think one of the reasons that we proposed a $330 million increase this year for our homeless rant account is that we have to continue to invest. we have to grow the investment. but it is never going to be as much as we had in hprp. the hope is, and we are starting to see this in some areas to my washington has been a leader, shifting resources, taking them out of, for example, shelters, shifting them for medicaid funding that is going to emergency rooms and putting them into rapid rehousing.

is lowering costs overall, so we're hoping we see is with a continued increase investment in the sg, along with local the investments you will continue to see a focus investment. never stop pushing. and there you have been supporting it, but it's something i saw locally in new york to on prevention efforts, rapid rehousing, something we were willing to shift our own funding into which is something we want to encourage of the local level. >> i will be following them very closely to miss anything you can show us, i would appreciate it. thank you so much for your accommodation, and we are going to leave the record open for anyone who would like to ask additional questions. again, i appreciate the tremendous work of your entire staff-you pythias and hustle be really pays attention to the programs. there really are essential. actually appreciated. >> thank you for your leader in partnership. >> is hearing is adjourned until

thursday, march 8 at which several your testimony on the federal housing administration. [background noises] says -- >> next on c-span2, defense secretary leon panetta testifies about the been deion budget at a house hearing. then exemptions from the house carillon and housing secretary.

>> even a person who is a senator, even a person now who is president of the estate faces a predicament when they talk about race. they face the fact that there are some, an appreciable number of americans who are racially prejudiced. but face the fact a much larger portion of the american populace wants to deny the realities of race, even now. >> sunday harvard law professor and former law clerk to justice thurgood marshall, randall kennedy come on racism, politics, and the obama administration. the author of five books, and he will take your calls, he knows, and treats for three hours live on in-depth on book tv on c-span2. >> and with a firm confidence in justice, freedom, and peace on earth that will raise the hearts

and the hopes of mankind for the distant day when no one drags the chain. >> the campaign for president this year. we look back at 14 in iran for the office and lost. get to our website, c-span.org sliced the contenders to see video of the contenders who have a lasting impact on american politics. >> it is further republican, the understanding of man ever man in the world at large. it is our cause to dispel which have always been hard decisions, a delusion that a world of conflict will somehow discourage it itself into a roll of conformity. >> c-span.org / the contenders. >> at this hearing on the pentagon's budget defense secretary leon panetta said he is counting on congress to enact

further budget savings in order to avoid automatic spending cuts known as sequestration. those cuts would happen as part of the 2011 debt ceiling agreement. mr. panetta was joined by joint chiefs martin dempsey and defense comptroller david hale. this is just under three hours. as you see, you see the face in the budget committee room. i don't know when it is the last and the secretary has been in this room. you have respect on both sides of the aisle and i want to study how appreciative we are of your time.

this is a topic that is so much more relevant these days than ever run for in our present. examine the budget request to the department of defense and these were how the federal government would meet the highest per the writing for the common defense we have secateurs panetta year, no stranger to this committee. in addition to his a certain area background as secretary of defense, cia, chairman of this committee, we also want the work and the other two. general tmz has led troops in combat, served as a combat commander and most recently as chief of staff of the army. thank you for your service and broken to the committee. we also welcome the department

of defense comptroller, the hon. robert hale who is known for a service of the congressional budget office. rock and back. rototill last year's request the president's budget calls for a $480 billion reverses benning which comes on top of already planned spending reductions. the notices remains a nation of more and archer to raining gauged in a fierce and the overseas. is difficult to square this reality with the president's steel production in both japan levels and funding levels. raising serious concerns of decisions being driven as opposed to a strategic perris. i think you have a unique perspective on the tension between the national security requirements in getting spinning deficits and debt under control. all they have yet to offer a balanced budget

our perris and responsibilities as policymakers. defense spending should be executed with the efficiency and accountability. many fear the arbitrary and deep reductions that the president has proposed and the defense budget would lead to erratic production. i commend you for your efforts to fund various according to harvard kneele ferguson, the fall of great nations is the result of their excessive debt burden. there pat decline in defense spending is always the first casualty. the failure by the administration to deal honestly with the drivers of debt,

specifically when it comes to government spending on health care is a failure on economic security and national security that calls for crushing levels of debt and crowding out of defense by entitlement spending. the president's budget in my personal opinion charts about the decline. in addition to examining this deep defense production i hope today's hearing informs us of the consequences of our security that we look from the disproportionate cuts to defense spending under the budget control act spirit is obligation to ensure our troops fighting overseas have the resources they need to successfully complete their missions and to get here to our commitment to their service upon their return. every citizen both content @booktv debt of gratitude to the military families to continue to make until sacrifices to our security. and for the freedoms that we cherish. we are in deep gratitude. what to make sure we honor them with the right kind of

priorities, the right kind of defense policy and with that before hearing testify -- testimony i would like to yield to the ranking member. >> thank you, mr. chairman. >> welcome. bagram undersecretary. i think all of you for your dedicated service to the unit is its america. please extend our thanks and appreciation to the men and women who serve in our military in our country is secure and free because of the sacrifice they and their families make every day. the presidents of the department of defense the alarm services, a forces along with the state department intelligence committee and law-enforcement deserve a great deal of credit and import market have done over these last many years. we have successfully redeployed

actively carrying a tax we have ended the dictators brain including the lockerbie bombing that killed innocent americans. and we get the mastermind of september 11th which has strengthened our national security. they have to be driven by a strategy, not the other way around. during this difficult this time we must be much smarter and more efficient and now we shape our defense budget. the strength of our military defense and large part on the strength of our economy and a long-term shrek to our economy depends and large part on

principle of a plan to reduce our long-term deficits and debt in a credit to five criminal a predictable way. last year, ford chairman of the joint chiefs of staff, admiral mike mullen warned policy-makers of this growing risk as people here know he said ' our national debt is our biggest as a security threat. everybody must do their part from 2001-2010, the base pentagon budget separate from the war effort nearly doubled. in 2010 the unit is pence to study has since been more on defense and the best interest and by no more than half the amount spent by those 17 countries was for seven nato countries and for other allies. last year and inland argued the defense budget allowed the pentagon to avoid making difficult choices. he said with the increasing defense budget which has almost doubled it has not forced us to

make the hard trades. has not forced us to prioritized has not forced us to do the analysis. we can no longer afford to have taxpayer resources out doing the analysis without ensuring that every dollar is spent efficiently and effectively investing. defense spending must be on the table as we figured out how to get our finances back on track. even this committee rare agreement is sometimes difficult to come by bloated on an amendment to the budget that emphasize the defense spending should be considered as we strive to bring the deficit under control. last august the congress codified that consensus bypassing the budget control act which capped a discretionary spending including security spending.

today we find ourselves in a hard position, facing the prospect of an across-the-board sequestration beginning january 2nd 2013. if we do nothing the defense department will be cut by another 500 billion of the next nine years in addition to the cuts under the caps. i will believes across the board reduction is the preferred way to get our finances in order. however, any effort to turn off and replaced must be done responsibly by reaching agreement on a deficit reduction plan is balanced and plays a strong foundation for our security. if we have time the president's budget, 2013 budget provides an alternative and i hope it will become part of the discussion here in the house. the president's plan responsibly replaces with even greater deficit reduction to a balanced plan that calls for shared responsibility. it makes key investments in our long-term economic growth. it puts a priority on protecting

key investments rather than protecting tax loopholes for special interest and tax breaks for the very wealthy. the defense budget is built on a 4-looking strategy developed by our top civilian and military leaders that maintains our unparalleled military strength, as general dempsey has said. it is a military with which we can win any conflict anywhere. some have criticized the defense budget as being too deep. i think the banners reminding that under the president's budget the spending levels remain high historical. we will still spend more in 2013 in real terms for defense than during the peak years of the korean war, vietnam war, and the cold war, even if you exclude more funding, even if you exclude war funding, average annual defense expenditures under the president's budget we will still be higher in real terms than the average annual expenditures during the korean war, vietnam war, and cold war.

in addition the reductions in the president's defense and only half of the amounts recommended by the bipartisan some symbols commission. when you were sworn in as secretary of defense you said that a choice between fiscal discipline and a strong national defense is a false choice. i agree, and i am confident we can work together to get our fiscal house in order and ensure we have the strongest military in the world. thank you and i look forward to your testimony. >> thank you. us a rich year. >> senator ryan. >> make sure it your mike is on or police close. >> got it. chairman, members of the budget committee, it is a real honor

and pleasure to be able to have this up originally to appear before you. this is home. i spent 16 years in the congress and bigger chunk of those years in the budget committee. this is a place where we fought to a lot of the same battles that you're fighting through in the 80's and 90's. as a former chairman of the house budget committee and former director of have a deep appreciation for the very important role that is played by this committee in trying to achieve fiscal discipline and helping set the federal government's overall spending priorities. as you know, i have the honor of working on most of the budget summit's and proposals during the 80's and 90's with both republican and democratic presidents to reagan, bush, and clinton. the work of all of those efforts ultimately produced a balanced federal budget.

believe me, i know firsthand what a tough and critical job you have in this committee it is no surprise that there is a vigorous debate in washington about what steps should be taken to confront these challenges. to enter many of the same debates in the 80's and 90's thankfully there were willing to make some very difficult decisions that had to be made in order to reduce the deficit today we face the same difficult choices a duty, a duty to

protect our national and the security as elected members of congress, particularly marriage of this committee we take this too seriously. as i do as secretary of defense, i do not believe, as i have been quoted that we have to choose between fiscal discipline and national-security i do believe we can be part of a comprehensive solution to deficit reduction. the defense budget that we have presented to congress and the nation seeks to achieve those goals, fyi 13 budget request to the department of defense was a product of a very intensive strategy review conducted by senior military and civilian leaders of the department with the advice and guidance of the national security council of the

president. the reasons for this review a pretty clear. first of all, we are at a strategic turning point after a decade of war, and we have been through a decade of war. at the same time during that decade there was a substantial growth in defense budgets. second, congress to pass the budget control act of 2011 which did impose some spending limits that impacted on the defense budget to the tune of $4,807,000,000,000 over the next decade. we decided that this does situations that we were confronting presented as at the defense department with an average into the to establish a new defense strategy for the future. we develop strategic guidance before any budget decisions are made because we wanted those buds decisions to be based on strategy, not the other way around. we agree to that we are at eight

key inflation. the military mission in iraq has ended and we still have a tough finance in afghanistan. 2011 did mark significant progress in reducing violence and in choosing to an afghan lead responsibility for security , and we and our nato allies have can't -- committed to continue to position. last year's successful nato operations did lead to the fall of khaddafi. and as pointed out to my targeted counter-terrorism efforts now significantly weaken the and decimated. but even though we have had those successes, unlike past drawdowns, and let me stress that, unlike past drawdowns, and i have been through most of those in recent history, where the threats that we confronted

reseeded, the problem today is we still face the very serious a way of challenges of security challenge. we are still at war in afghanistan. we confront terrorism, even though we have reduced the threat in the fact that terrorism exists in somalia, yemen and north africa, and elsewhere and make no mistake, they still threaten to attack this country. we face the proliferation of weapons of mass destruction. we continue to face threats destabilizing the world. we have turmoil in the middle east, any one of those situations could explode on us in terms of conflict. we have rising powers in asia this continued to challenge international rules and international stability. a growing concern about cyber intrusions and cyber attacks.

we must meet these challenges and at the same time meet our responsibility to fiscal discipline. this is not an easy task. further, we did not want to make a mistake from the past where every time these drawdowns have occurred, what has happened is we have hollowed out the force. our decision was, we want to maintain the strongest military in the world, not to hollow out the force by just simply cutting across the board and weakening every element in defense, but requiring that we take a balanced approach to budget cuts and put everything on the table that we have at the defense department and most importantly, to not break faith with troops and their families, those that have deployed time and time again to the war zone. the president's budget requests 525 billion in fy13 for the base

budget and 88 and a half billion to support the war effort. in order to be consistent with title one of the budget control act our fy13 base budget request had to be roughly $45 billion less than we had anticipated under last year's budget plan. over the next five years of defense spending will be 259 billion last than planned for in the fy budget, a difference of nearly 9%. in a virginia starting in the flight 12 and we will be reduced by four and 87 billion. to make these budget targets and then as a security responsibility we have to fundamentally reshape our defense spending priorities based on any strategy. as department of defense, they stepped up to the plate, that our responsibilities and the budget control act.

no budget can be balanced on the back of defense spending alone. based on my own budget experience i strongly believe that all areas of the federal budget must be put on the table, not just discretionary alone, but mandatory spending and revenues. that is the responsible way to reduce deficits and a responsible way to avoid the sequestration provisions contained in tunnel three of the budget control act. cut another roughly $500 billion from defense over the next nine years. these cuts would charlie hall of the force and employed severe damage on our national defense. the president's fyi 13 budget does put forward a proposal to try to "reverse sequestration and reduce the deficit by

4 trillion over the next decade. i recognize that people did not agree disagree with those proposals. westerly urges working with those proposals come up with a large, balanced package of savings . that must be achieved button triggered sequestration, reduce the deficit, and maintained the strongest national defense in the world. the 487 billion in 10-year savings that we propose to come from four areas and the defense budget, efficiencies, trying to improve the way the defense department operates to make it more efficient, structure reductions coming at a manpower, but german adjustments a difficult area to confront the one that is run the defense

budget by almost 90 percent. the miwok theresa these areas. secretary gates, propose about 150 billion deficiencies in the air flights will budget, and we are in the process of implementing those efficiencies. we made a decision that we can add of a 60 billion tons of that , and primarily from the following, as in mining support functions and consolidating enterprises, refacing notes are construction programs, consolidating inventory and reducing support contractors. we have a responsibility to provide the most cost-efficient support. for that reason president's request the base realignment. as someone who went through it,

and i did, her clothes in my district and represented 20 percent of my local economy. i know what it means to get through that process. yet, as difficult as it is there remains the only effective way to achieve in for -- savings. another key initiative that will help the department tried to apply greater discipline in the use of defense dollars. we do not have a department-wide audit ability at the present time, and that is a shame. for that reason i have directed the department to achieve readiness by the end of calendar year 2014 so that we can speed up the process of being able to face the american taxpayers and tell them exactly how their funds are being used. efficiencies and not enough to achieve the necessary savings. budget reductions of this magnitude requires significant

adjustments to up structure, part german investments and the compensation. those choices reflect the strategic guidance and vision that we worked on and were the basis for the decisions that followed. let me just summarize those, if i can. me also make clear that this strategy has the full support of all of the service chiefs, service secretaries, the undersecretaries, the defense department's is unified in the presentation of the budget strategies that i am about to summarize. one, we know that the force of the future will be smaller and leaner. that is a reality by virtue of the drawdowns of rearing days in we have made the decision that that force must be agile, flexible, ready to be deployed, and it must be too costly advanced. we needed coming out of the wars

there would be a drawdown. we also knew that the force we wanted had to be truly adds al and mobile and in addition to that the force structure that we had, we wanted to be able to before -- afford to properly train and equip. the very definition of falling out is to maintain a larger force structure and then cut training and equipment and we can that force which is something we did not want to do. they're implementing force structure reductions consistent with strategic guidance for a savings of about $50 billion over the next five years. the adjustments include, and you have read these, resizing the active army, going from about 562,000 as a result of the ramp up during -- after september 11th, going to about 490,000 soldiers by 2017. we will transition down in a gradual weight and reach a level

that is still higher above the level we had prior to september september 11th. how we will gradually resize the active marine corps to about 180,000 to roughly 200 in 2000. he will still retain a robust force and maintain our capabilities on airlift is low we will retire seven lower priority naval cruisers that have not been upgraded and ballistic missiles as give ability we head to rebounds our global posture and focus on those areas that represent the greatest test of our national security. we will emphasize asia-pacific in the middle east.

strategic guidance made clear we must protect the capabilities need to project power. these of the areas where we obviously, as you know the, the places that can represent the greatest debt to our security. for that reason we maintain the current fleet, aircraft carrier fleets at a long-term level of 11 ships and in their wings. we maintain the big decem devious fleet. we enhance our army and marine corps force structure presence in the pacific command we also maintain a strong presence in the middle east. third, we have responsibilities elsewhere that we can't ignore. yorubaland america or africa. will we have recommended is that we build innovative partnerships and strengthen key alliances and partnerships in those areas and

it makes the strategy clear that even though asia-pacific represents areas of growing strategic parity, the united states will strengthen its key alliances, nato, the other alliances that we have in the pacific, build better partnerships, and one of the recommendations is to develop innovative ways such as rotational deployment using the marines, army, special forces to sustain u.s. presence elsewhere in the world. fourthly, we need to ensure that we can confront and defeat aggression from any adversary anytime anywhere. we have to add the capability to feed more than one and maritime. this is the 21st century, and our adversaries will come as using 21st century technology command for that reason we have got to be able the 21st century technology.

he must avesta's space, cyberspace, long-range precision strikes, and in special operations forces to ensure that we can still confront and defeat multiple adversaries, even with the force structure reductions that i outlined earlier. .. the last point i would make is

that this can't just be about pets. it also has to be about investments. and so we have targeted our investments in developing that technological sleep that we have to have if we are going to be able to get ahead of the rest of the world. or investing in science and technology in basic research and special up rations forces non-manned air systems and in favor. at the same time, we recognize the need to prioritize and distinguish urgent modernization is from those that could be delayed, particularly in light of the cost problems we confront. we've identified 75 billion in savings over five years to result from canceled or restructured programs. 15.1 billion from restructuring joint strike either programs, 13 by 1 billion by stretching investment in the procurement of ships. 2.5 billion from terminating an expensive version of the global hawk. all of these are important steps

to try to modernize this course and instructor way. an additional key to the strategy is making sure we maintain a strong reserve and a strong national guard. that has been one of the basic support systems for the last 10 years of war. we've relied on the national guard and the reserved. this he do it then to the battle zone note that these individuals are fighting alongside the duty. they are getting tremendous experience, making tremendous sacrifices, but they are an experienced and effective. we need to maintain that for the future. and also, i need to maintain a strong and flexible industrial base. if we started this in an base, and it impacts our shipbuilding capability, tank construction capability, plan development, if released those kratzer skills,

we will damage our national defense. we've got to maintain that industrial base at the same time. finally with compensation, those fundamental element of our strategy in the decision-making process is our people. they affirm with any weapon system or technology or the great strength of the united states. we are determined to sustain basic benefits that flow to the troops in to their families than 200 grams and yet at the same time, we have to look at the compensation area because it has grown by 90s% since 2001 we have to implement cost constraints in the future and in this area. for that reason, we have approached it in a way that we need is fair, transparent and consistent with their commitments to her people. on military pay there'll be no pay cuts and we will provide pay raises the next two years but then limit the pay raises in the out years.

i try care costs for health care, we have recommended increased fees and non-increases the level since 1990. we have looked at retirement commission to look at the retirement area with the proviso that we grandfather those in assets so that those serving will not lose the benefits promised to them. but at the same time try to look at what reforms can be made on retirement for the future. that is the package that we presented. this has not been easy. this is a tough and challenging responsibility but we need your support and someone who comes from the legislative ranch in the third in this congress and served in this room and in the congress. i believe in the partnership between the executive and legislative branches that comes to making these kinds of decisions. we need your partnership to try and implement the strategy. please make the mistake there is no way i can reduce the budget

by half a trillion dollars and not have it impacts on all 50 states. and also not have it increased risk. we think they are acceptable risk, but nevertheless there are risks. we've got a smaller force. we will depend on mobilization and will have to depend on our ability to develop new technologies for the future. we have troops coming home and we provide them jobs, provide an education and support so they don't wind up on the unemployment rolls. there is very little margin for error and that we have proposed. you have mandated the congress on a bipartisan basis that we reduce this budget by $487 billion. in many ways, this will be a test. as you know, better than i., everybody talks a good game about deficit reduction. this is not about talk. this is about action and doing

what is right for this country. mr. chairman and members of the committee as a former member and chairman of the budget committee, this committee cannot cease to being a conscience of the congress and the country when it comes to fiscal responsibility and doing what is right for this nation. i look forward to working with you closely in the months ahead to try to develop what this country expects that their leader to be fiscally responsible and developing a force for the future, force that can defend this country and support our men and women in uniform and most importantly, be the strongest military in the world. thank you. >> general dempsey, if you could summarize the best you can we have a lot of members who want to get to questions. >> thank you, chairman, distinguished members of the committee for the opportunity to be with you here today.

i will tell you this budget does represent a responsible investment in this nation security and strikes a purposeful balance between succeeding in preparing for tomorrow. it also keeps faith with the nation and with the greatest source of our military strength that is america's and submit the resume statement for the record. >> wow, that's pretty fast. were not used to that fast. >> okay. >> secretary panetta, as i mentioned, which meant his respect for you, for your past in service to our country. agreed with thoughts of what she said in your testimony, but it is as hard to get my mind around whether this says this tragedy driven budget or a budget treatment strategy. that is what we are getting down to here. the administration since february 2010 is reduce the base budget, the budget without the cost of the wars in iraq and afghanistan by $500 billion.

each time that these request from your predecessor now you have argued that this budget reflects the strategy driven budget. you have just set the world is not safer, the challenges are mounting. they mention debian d., koran, and on and on. so i don't how to reconcile this spirit is the world becoming safer and therefore we can trim our sails so much more? or are we our strategy for changing our defense and foreign policy to a much less ambitious goal? >> i think the fundamental problem is that mike mullins said that one of the key threats to our national security is national debt. in the effort to confront the national debt, obviously the congress came forward and propose the budget control act here the budget control that

provided a trillion dollars in reductions. you develop defense that was part of the to set aside national security and ensure that we would be required to reduce the budget by a must-have for trillion dollars. that is the law and that is to require me to have abided by. >> mr. chairman, could i take a stab at adding to that debate because they do wear the uniform around 38 years have gone through any number of strategic reviews. some of your questioning whether we could really make this as tragedy driven discussion relates to the amount of time we've taken. i'm a personal believer in parkinson's law. some of you may remember in 1955 in the economist magazine there is a postulate put forward the work extends to fill the time available. so i actually believe in the six months, five months we had to

take a very comprehensive look at strategy. we actually accomplish that task. >> so when we take away the budget 10 minutes, which is what we do in this committee, with a budget that i think that spending increase of $1.5 trillion. as a tax increase of 1.9 so it has 400 billion over 10 years. but sure dropping this category by 487. so from our perspective, this looks like a budget driven strategy, not budget driven strategy because there's no entitlement reform. no reform in the other parts of government and the only specify cuts are here. let me ask this way. we have this new defense strategic guidance that talks about increasing the asia-pacific region. most analysts who look at this strategy in the region say this means we need our naval and air forces. it's your budget the long-standing goal of a 313 ship

fleet and has very little to expand or modernize the air for us whether the chief of staff of the air force note is smaller and older than the air force at the end of the post-cold war drawdown. so how do we reconcile this rhetoric with this budget? >> first and foremost, some of the questions you're asking would probably be directed better to the omb. >> i can play any role, but today i'm secretary of defense. and so, i am dealing with the number handed to me and what we did to try to respond to that number. and the approach we took was to say okay, if we are going to emphasize the pacific and the middle east, that's the reason we've maintained by the carriers. some propose we had just cut back on a carrier force. we sit now, will it maintain of

the carriers because they are very important to our ability to project power. we will maintain our bomber fleet and more importantly we address any new bomber and develop a new bomber for the future. in addition we continue to invest in the joint strike fighter, which is a fifth generation fighter that we think is very important for the future. in addition to the ships in the navy, we will maintain the memberships we have now and our plan is in the next five years to meet the 300 ship navy that is important for this country. so we try to protect the key priorities that relate to the strategy we've developed, which is to stress the pacific, stress the middle east and maintain the kind of forces we need to confront any enemy in those areas. >> these are the only specific as we see. everything else is not increasing. but let me get too specific budgets about your budget. he did a good job of identifying budget gimmicks when you are here as chairman and trying to push them out of the budget when

agencies try to put them in the near omb director. as to i want to talk about here and i'll do this as fast as i can. he missed funding for the 64,900 soldiers and marines from the base budget cap under the bca to the war budget, which is uncapped. how is that not a circumvention of the budget cap? >> that is why have a comptroller you to have that kind of question. >> the local rules state that will budget for and strengthen the budget. we have now decided to look at it for in the marines between where we are now is no longer permanent. it is there because of afghanistan. >> is 92,000 soldiers, not 65,000. russia but the entire 92,000 budget? >> everything about 490 for the army and about 182 for the

marines is now primarily in the force because of afghanistan and therefore we think a properly budgeted and no go. i might have a clear photo with omb. >> first time this has ever been done and this is not normal. >> a number of years, mr. chairman is smaller. they've been there. >> i would say that. we usually have extra cost of having more zones covered. this includes the troops in the war budget. but i would say it's pretty impressive that. they met at about a billion to in the last budget and now fixed. this is an unprecedented change. we've made a decision to go to a much smaller army and the much smaller brickwork and brickwork and system at the new. >> the last administration that they spending into their supplementals as well. i just don't know how this is -- that, i don't know how you can say this is piling into

supplemental. let me ask this question. you mentioned the joint a striker. he got a large of restructuring this budget request. for the most part of a commute delay the acquisition of purchase. for example, i think you claim 15.1 billion from the joint strike better program over the next five years at the program of record has not changed. if you do a five-year budget but as you know we do tenure budgets, you are pushing it to the backend of a ten-year budget. so how is that achieve any taxpayer savings every tenure. and if you want getting programs, does that not violate the direction you're getting, to tighten the timeframe of these programs? >> the key barriers to produce a plane to go to full production, doesn't have to be changed time and time again, which does the very problems he pointed out, increase the cost and increases

the expenditures to the taxpayer, article here is having work with the joint strike fighter, that we felt as it goes to the task, let's be able to determine what changes need to be made now, not going to full production with what we have, but wait intro that out and when we've completed this task, when we know what is to be in the final product, book a wonderful production. it wasn't a simply on turning to achieve the savings, although fortunately when you extend it outcome mucous secretions. >> you take that takes another five years? acid makes it difficult to see this as a strategy different budget. i urge you to sometimes go down to some of our facilities and look at this plan technology involved. it is spectacular technology, but also requires a great deal of testing to ensure that it

works. >> a lot of members here not to be condescending of their time. >> thank you, mr. chairman. let me thank you offer testimony today. i wasn't going to down go down but i want to take a moment to discuss the map here because we are the budget committee. the director of the omb for the chairman criticized him for taking as part of this budget, we got the $487 billion worth of cuts for analyst at the congress did on a bipartisan basis. today the chairman's criticizing the administration for taking those same budget cut in this budget savings. you just can't have it both ways. i would also point out in addition to the security cuts made as part of the budget control act, which had very deep cuts at up to 10 years for nondefense discretionary

spending. those items are also on the chopping block as part of sequestration. i would just note as historical note that in designing the sequestered, the offer was made to our republican colleagues to say instead of having these particular defense cuts as part of sequestered, we get a lot of tax loopholes. they chose. they chose to put the defense cuts on the table before cutting tax loopholes and special interest tax breaks. that's a matter in a decision they have to make. i would also point out as part of the administration budget request there's over $300 million in savings in mandatory help about equivalent to the amount recognized by some symbols that category is for a nonhealth mandatory spending cuts. and of course the president's budget includes about

$1.6 trillion in revenue raised as part of a balanced approach coziness tax loopholes and asking folks the highest income levels attacked 2% go back to the same top marginal rate during the clinton administration, when the economy was moving. mr. secretary, i want to ask you about one of the proposals put forward in the chairman of the armed services committee. and what he proposed in the piece of legislation that i have read here is across-the-board cut in civilian personnel, both the defense department and outside the defense department. i think it is worth noting that 36% -- 36% of civilian employees are at the defense department. almost one in four civilian employees and the federal government work at the defense

department. that is 764,000 out of 2.1 million federal employees. so that proposal would result in the department of defense cutting over 80,000 civilian workers. over the budget. now as part of your budget, you have emphasized and to strengthen the defense acquisition workforce in order to save taxpayer money to make sure we are not wasting money, to make sure we have sufficient capacity and capability. in fact he say this workforce determines the quality of dod's acquisition outcome from the area of the budget we all agree is a need of improvement. mr. secretary and i would point out gao is highlighted as an important area as well and is pointed out in many cases we actually now higher contract is to oversee as part of the

acquisition process because we don't have enough in-house expertise come a practice that raises conflict of interest issue was chios pointed out to waste taxpayer money. i want to know if we were to mandate a 10% cut in mid-uv civilian workforce, what impact would that have with respect to strengthening the acquisition processing saving taxpayers money without harming the defense of this country? >> you know, let me respond by first saying that congressman mckeon as it was trying to make a good-faith effort to do something to avoid sequester and i commend them for that. but it also told him personally that the approach of simply going after the civil service side of it, particularly when it came to defense, we do have almost 700,000 civilians who work in the defense department

alongside the military men and men in uniform, that it could impact on our ability to implement our mission, particularly with regards to the area you have just described. what, i was director of the cia -- the cia is made up of civilian workforce and these are people who every day put their lives on the line in order to protect this country. it isn't to say that obviously some savings can't be achieved here, but i think to just put it all on the backs of the civil servants in this country i think would be not a wise step. >> thank you, mr. secretary. let me ask you a question with respect to your auto workforce and the defense department over the years, the defense department remains the federal agency that has not now passed a clean audit. the department of homeland security cleared that hurdle. so there is clearly room here

for improving the end of fact as part of you recommend increasing the auto workforce in order to save taxpayer money and not allow those dollars to be wasted. in fact, you recommend a 10% increase in the audit workforce so that we can get a handle on these things. i'm going to send that a 10% cut in that workforce when you asked for a 10% increase would make it more difficult for you to save taxpayer dollars in a wise way to auditing. >> i want to get to this issue of contractors because sometimes people in congress when they talk about we're going to reduce the civilian workforce, and they think it is going to save the taxpayer dollars. go back to your constituents and say we reduce the size of the civilian workforce, one effect in many instances, those same

tasks and responsibilities have to be or are contracted out. in fact, mr. secretary, if you could talk about that because one of your goals has been in part to reduce the number of contract tears. i would point out that the project on government oversight has a job to contractors paid 1.8 times more than the government pays federal employees for performing comparable services. so anybody who thinks that cutting federal civilian employees and contract out the work saves taxpayer money is just plain wrong. so if you could talk about that choice and that challenge. >> well, one of our efforts for the deficiencies is to try to reduce the number of contractors we have there. i think i secretary gates he basically said he didn't know how many contractors are at the

defense department because you are looking at members of contractors plus all the sides plus the others that i related to that. so it is a huge number. but there's a reason why we should know how many contractors we have. and frankly, there have been responsibilities that have been contracted out that i think should be performed within the civil service side of the defense department. so we're looking at the whole area as part of the efficiencies for 60 billion that we hope to achieve in savings that represents a good part of that. >> my last question deals with looking at our national security challenge in a comprehensive way. your predecessor, secretary gates often pointed out that we need to deploy the full scope of resources, focusing us on the military, but also on our diplomatic capabilities for development assistance capabilities. i would just like to read a quote from him that he gave a speech at the nixon center. he said and i quote, i never miss an opportunity to call for

more funding for it an emphasis on diplomacy and development. whatever we do should reinforce the state department legal in crafting and cannot in u.s. foreign policy to include foreign assistance on which building security capacity as a key part. proper coordination conference procedures to assure urgent military capacity and building requirements do not undermine americans overarching foreign-policy initiatives. admiral mullen stated in the letter to the majority leader in 2010 the diplomatic and development capabilities in the united states have a direct bearing on our ability to shape that it reduced the need military action. general dempsey has made similar statements in the past. i want to ask you because foster's budget -- republican budget cuts around $240 billion

from diplomacy and development assistance, which are predecessor and i bromelain and others have said are important to our overall national security. if you could comment on whether you share the views of secretary gates on this issue. >> look. i think we all understand that a strong national security cannot be just dependent on our military power and military weaponry and military men and women. a strong national security is dependent on having a strong diplomatic arm, strong development arm, strong intelligence arm, strong capability to try to have a strong economy in the world. all of this is related to our national security. i think if any one of these various factors as above and beyond others, it is going to damage our security just by virtue of the broad approach we need to have to maintain the leadership position we have in the world.

>> thank you. >> thank you, mr. chairman. mr. secretary, thank you for your service. i believe they're in the carmel monterey area that that has to be one of the most beautiful places on the planet. so i know you are enduring a big sacrifice being here. thank you very much. >> it does make a sanity subject to question. >> general, thank you for the 30 years of service. it may be her most critical time. secretary panetta, you publicly stated this sequestration is unacceptable. i agree with you and i'm concerned about devastating impacts of sequestration, but the method than the amounts. but how in our to protect the interests around the world. as you mention right now china is building two aircraft carriers with them the ability to project power. china continues to develop anti-satellite missiles and cyberwarfare capability. iran is on the precipice of

obtaining a nuclear weapon. north korea is increasingly unstable and confrontational. north africa is experiencing a rise in terrorism. there's strength in many parts of central and south america ragnar backyards. the middle east remains unprotect will. it they continues to rise economically and militarily analyst design. sequestration reductions would lead the smallest crowd for since 1940 and a fleet of 230 shipped the smallest level since 1915. in the smallest tactical fighter force in the history of the united states air force. mr. secretary, can you elaborate on your thoughts on the devastating impacts of sequestration takes place? >> well, you know, i've been saying this and i think you understand. you take a meat ax approach to

the defense budget, where you basically cut $500 billion across the defense budget. which are basically doing is weakening every area of the defense budget. you are going to impact on force structure, you and part-time compensation, impact on our ability to develop weaponry we do need for the future. i mean, the reduction in sequestration. we are virtually going to have to step reduction in most of the key weapons that we have in production as a result of that kind of impact. the bottom line is that sequestration would be totally irresponsible. it would devastate our national defense, weak in this country and i would tell the rest of the world that the united states is going to be not only a weak

power, but unable to respond to this prestigious pointed out. >> thank you for that direct answer. general dempsey last week he talked about the current environment being the most dangerous time that you can remember in your 38 year career. can you please expand on that and what that means in the context of sequestration? >> it is a bit of a strategy paradox because the great powers are not any longer standing up against each other, but there are plenty of near peer competitor is an even more important, there are a wide variety of nonstate areas, super empowered individuals, terrorist groups who have a monopoly of nationstates. so when i said it is the most dangerous period in my military career of 38 years, i really meant it. i wake up every morning waiting

for this cyberattack for the terrorist attack or the nuclear proliferation, waiting for proliferation of technologies that makes it an increasingly competitive security environment across the globe had the effect of sequestration will be that we have to redo our strategy, the strategy that we just adapted from the two d. our strategy to this emerging defense strategy as we describe it. as the secretary said, in their personal military budget would impose unacceptable risk to our national security. >> thank you. >> thank youcoming to secretary general dempsey and your entire team. i guess i can say this is a room where we always look at du, mr. secretary, but we do appreciate your service. in san antonio, military city is

because in texas as i'm sure in a number of other cities across america there has been concern or at least great interest in your comments about base realignment and closure. san antonio as you know actually gained that was a dramatic game with the closure of brooks air force base in the last round, the city into the leadership of mayor castro astarte reached out to san antonio to find about 139 additional acres there's a need for expansion at lackland. we see the 24th air force cybercommand there as a place for cyberwarfare alternatives can be provided to those facilities we have here in the washington area. i think the proposal that senator hutchinson and senator tester has put forward to include overseas pieces in any of that review, but at least needs to be a mechanism that any

future brac to consider even though there's treaties and others to consider that we just ask you to consider that as we go forward. and of course all of us have thousands of veterans and our areas and people that are military retirees. you have a number of proposals you consider that would impact military retirees. can reassure those who are retired now are nearing retirement, that they can feel their retirement on fixed income is secure? >> with regards to your last question, yes. our goal with regard to looking at retirement, we've made clear, the president made clear that any changes that people ought to be grandfathered in who are serving in the military, who have served or are about to

retire that they will get full retirement benefits as promised to them. our goal is to look to the future and see what reforms we can make with regards to those that will join the armed forces in the future. with regards to your overseas bases question and i understand exactly what the thrust of the legislation is about. we do have the authority to close bases overseas obviously pursuant to the treaties would have to do a pursuant to the treaties in the diplomatic relationships we may have. but nevertheless we have over the last two years cut almost 100 races overseas. during the process process of taking down two of the four brigades in europe and that will involve some additional infrastructure reductions as well. so i'm trying to do this on the basis of substance. what is that we need to have?

what is that we need to maintain? and that is the basis on which we approach it. >> to even more controversial issues. one of them, i believe you are doing everything you can to seek a nonmilitary approach to iran. i would just encourage you continue to do that. it is difficult to see for all actions have to be on the table, how military intervention there can do anything that make our families less secure. secondly in afghanistan, i know that your remarks have caused some extended public discussion and will continue to do so about our future in afghanistan. i view colonel danny davis. i read this article in the arm service. am sure they were not well received in some quarters, but as a hero who spoke out about

the troubles we have turned policies in afghanistan, would have been there the past week and in a very secure area where brave americans were killed by people in afghan uniforms i know is troubling to all of us. i think your comments that we were prepared to move forward in 2014, unlike some of my colleagues at like to see them work more quickly rather than more slowly. and it curves look at our policy to find a way to ensure policy having achieved many of our goals without its broad of a footprint as we have today. and i thank you mr. secretary. >> i appreciate that. with regards to afghanistan, we really have i think turned a corner in 2011 with regards to afghanistan. we were able to weaken the tablet ban. we were able to reduce the level

of violence they are. the afghan army for the first time really engaged and performed well and took over the key security responsibilities in key areas. we are in a process of transitioning areas now to afghan control and security. we just completed a second tranche which will represent over 50% of the population of afghanistan now under afghan control and security than we are going to continue that process. the remaining tranches will take place, the final in 2013 and our goal at that time is to obviously move towards having the askins tape delayed on combat operations with our support. we will still be in combat mode and support, but will try to be able to move the responsibility over to the afghans. but maintain our transition to the end of 2014.

nato is unified on that path. it represents but we agreed to enlist then and i think it's the right path with the events they might see over the last week. i have to tell you the afghan army performed well. they controlled the demonstrations level of violence is able to go down and they performed very well, which gives us additional confidence that these guys can do the job that we've asked them to do. >> thank you, mr. kohl. >> mr. chairman, i would like to take the opportunity to make sure you to my sons on the issues are not in agreement with your position i'd be happy to come and speak with you about it. to understand the complexity here, there seems to be sometimes and start whacking away choices. i would love to have the opportunity to talk to your >> i look forward to visiting with you. >> mr. kohl. >> thank you, mr. chairman. on the opportunity to hear you in the subcommittee and user shall do so is compelling in the

testimony and appreciated. terms of my friend who also had the benefit of that process a really good questions on sequester. i want to ask your timing question and a probability question. in your view, you've been around this place. number one, how likely do you think it is sequester will really happen? because i'm actually very afraid about it. everybody seems to just sort of -- well that will never happen. of course we all thought the super committee would work and that wasn't supposed to happen. so these things out of hand is dangerous. from your planning standpoint, how much time do you need to prepare for that? hacking congress has the idea of what he talked to the election we will address whether there's going to be sequestered. what does that do to you and off obviously are uniformed subordinates in terms of planning? >> with regards to sequester, i

sure hope it does not happen. i think it's a sad it would be a terrible reflection on the congress and the leadership of this country if the leadership of both parties were not able to come together and dietrich are the mechanism. and you know, i do remain confident. i really do after 40 years in this town by having been through a lot of battles, legislative battles and challenges that i still have a deep fundamental belief that in the end, despite the politics, despite the back-and-forth that often takes place in this congress that when it comes to national security and when it comes to issues like this that ultimately the right decisions are made. so i remain hopeful that you'll do the right thing with regard

to sequester. with regards to planning, i mean, we are not planning on her. as general dempsey pointed out, but had to throw the strategy he just presented to you out the window if we had to do that with sequestered. at some point i suspect omb probably in the summer will have to request that we take a look at it and try to determine what steps would be taken. but i just think that it would be very difficult to plan frankly because it does have this kind of a crazy formula that would be applied in which we would have very little flexibility to try to do what we could to enjoy the impact of sequestered. >> sir, could i add? other were not planning? the defense industrial base test was business plans are planning for it and at some point the

specter of sequestration will have its own effect. whether it ever goes into existence or not. >> that's a great point. let me ask you, mr. secretary as well. you mention it is going to take in all of the above strategy to do with the budget deficit of this size. to your knowledge has the president imposed in the entitlement reforms? >> i believe is part of the request in the budget that they would include recommendations with regard to entitlements. i know in obviously negotiations held on the budget deal is that those who forward. i honestly believe you've got to confront that. discretionary spending is one third of the budget. you cannot ignore two thirds of the budget going through the ceiling right now. that has to be part of any deal. when we face this and as i said almost every summit i was a part of hard to put entitlements on

the table, discretionary and revenues and that is what led to the agreement that both republican and democratic residents put forward. that is where you have to go. these are record deficits are dealing with. i never in my lifetime, especially after balanced-budget expected we would have a trillion three devastates. that is just -- that has to be dealt with and i can only be dealt with the tough choices i pointed pointed out. >> last question. we don't have a lot of time. he went through and described what this process is to, just in terms of conditions to reach the desired outcome. if you have a second panel would you mind laying that out? what in your opinion as i went to achieve that goal? >> are you talking about --

>> i'm actually out of time. but thanks for your service. i appreciate what you're doing. >> mr. blumenauer. >> thank you, mr. chairman. mr. secretary. a thatcher's statement was excellent. i love the outline you prevented and you have the right person at the right place at the right time. there's nobody in history that is at the range of experiences you've had legislatively in the executive branch and the various departments. you know this stuff. and i think it is important that you emphasize will still have enough powerful military in the world if this takes place and actually that went beyond that because of the outstanding capability that we have. and i think you implied, but i think we in congress need to have more sympathy with the notion of how we deal with the notion of risk. we're not going going to reduce risk to zero. but i think we have attempted to

do here is provided in a more balanced approach to a wider variety of risk. much less likely we will fight to land wars. there's no one in the world who can engage as an evil after even after the cheney somehow, someday get an aircraft carrier or two. we need to be innate if you've done a great job of helping us think through what we need to deal with but the risks of the future. the terrorists, cyberterrorism, special ops challenges being a straight now, both in uniform and cia and whatnot. and i am of the opinion that our military can do this. they can take the parameters to get them with your leadership. this is something that can be done. i have been stunned at the capacity of what they've done in the past. congress has screwed it up. congress has raised, but dacia

models. congress has refused to talk about entitlements. we haven't raised strikers since 1990. it's less sustainable than anything we can't do that with medicare. we have required the military to buy equipment that it didn't necessarily want. in some cases didn't need. the political engineering of the tasks that you, your predecessors and the men and women in uniform have had to cope with boggles my mind and it's amazing it's as good as we have today. congress could not close the base we had to come up with this jerryrigged system so we could actually deal with military closures and i'm hopeful we don't fail in terms of going to undercutting you cannot make it harder for difficult task to. one of the things i hope we do

an attack that this table before is to deal with some of these things we agree on because the reason, if we could give you an ironclad timetable of 12 or 15 years, there's a lot you could do. but we forced you to do things the civilian contract is in not giving them money to have oversight. and i am hopeful that we'll be equal to the challenge in congress. i am not worried about the president. i'm not worried about the men and women in uniform. i'm not worried about your capacity. i am worried about congress. i would like to zero in on one area he has specific expertise in. one of the things i've been trying to work with icann to congress is to deal with help in the after his health and congresses stalling down. we haven't given you the resource is. we've had other priorities and cut the ground out from underneath you. you have given sam for a task. he's been in congress 18 years and are still cleaning up and

that has real applications in terms of military readiness. if we did a better job of helping the military cleanup after itself, there would be applications you could use to keep our men and women save overseas and families safer on his military facilities. i've got the largest generation of superfund sites. i've got one important, oregon that is the result of three naval efforts in three wars and decommissioning ships and we are going to bankrupt companies in portland because the department of defense is not participating in cleaning up after itself. and i wonder if -- and it came ashore, but i wonder if we can engage you in something where there is a better partnership with numerous unnamed $1.7 million a minute to help users all across the country. maybe wendy's are to close bases

if we didn't stick them with the toxic mess is unexploded ordnance and then leave the community and turn our back on them. >> i'd be more than happy to engage in the process having been through it. and frankly, the only way to ultimately achieve savings when you do backgrounds is to be able to have the cleanup to do it expeditious ways that communities can raise the property cannot be stuck holding property that can be reused. there are a lot of things we can do to improve the process. i'd be more than willing to engage again. >> chairman if i could, whenever there is a dangling participle here, i want to make sure it don't just let it hang. congress then use that -- you said you're confident we can do what we need to do at this budget level and even beyond. i am not signing me up yet. >> point taken for the record.

dr. price. >> thank you, mr. chairman. i do think the secretary general is both for joining us today that mr. secretary, i couldn't be more stark by your comment about the entire budget and the need for complete reform, look at the whole budget, not just the third of the pie on the discretionary side. i think so often in this town we sweep things under the rug and it's been swept under the rocks that lay addressing the real physical challenges and that as saucers as spinoffs into the economy and challenges they are if we don't stop spending money that we don't have. general dempsey, i want to visit it, that you made recently regarding the nation of iran and the statements and i think i have the quote correct here that stunned me and many of my constituents. and that is your quote.

we are at the opinion that iran is a rational actor, unquote. to stand by that statement and maybe want to expend all of more quick >> yes, i do say because the alternative is, as unimaginable. the alternative is we attribute to them that their actions are so irrational that they have no basis for planning. you know, not to sound too academic about it, it did thucydides in the fifth century b.c. the cited and reaction to fear, honor and interests. i think all nations act in response to one of those three things, even iran. the key is to understand how they act and not trivialize their actions by a true reading to them some irrationality. i think that is very dangerous for us to do. it doesn't mean i agree with what they decide to do, but i have some thought process you

>> if you can help me understand the irrationality of an assassination attempt on the saudi ambassador. >> i'm not here to justify iran. >> to comment on the irrationality of it. >> at understand irrationality, but i'm not done. >> i am suggesting they take actions. they are calculating -- what i'm suggesting is a need to be equally and even more calculated. >> you live nationally on their part? to seek nuclear weapons? absolutely not on my terms. >> over the last two years, the amounts requested by this administration for missile defense for arguably our strongest ally in the world, israel went from 121 million how a love into one of six and 12 299 and 13.

what justification, given what we see out of the nation of iran can you kids either general or secretary for the decrease in the brac? >> , with regards to israel, we have significantly increased the amount of funds to provide to israel. in more than doubles what was the level of the prior administration 320 million. we provided significant funding for israel's area penciling ballistic missile defense programs. we have secured funding for iron dome system, which is a great defense system for them again short range rocket. whatever decisions we have made with regard to israel and their assistants bubble has been made in conjunction with them. >> i understand sometimes they can. sometimes they haven't.

i guess i was expressing grave concern on the part of folks who watch this and i know you do it came interest in great concern, that the public state ends that have been made regarding what we believe israel should or should not do are harmful to the ability of planning to occur for her, i suspect diplomacy to occur is that in fact some of the comments that you have made, many believe have empowered iran to a greater degree. so just ask you if you believe that iran gets a nuclear weapon that they can be deterred diplomatically? >> well, we have all said, everyone in uniform. there's no group in america more determined to provide iran from the turn in nuclear weapons and

the joint chiefs of staff. i assure you that. >> mr. secretary. >> we are committed not just to contain, but to prevent iran from getting a nuclear weapon. that is a fundamental commitment that the president and the administration has made. we have made very clear to iran that they are not too close straight of formulas. we think that the international community is unified and trying to isolate iran and trained to make clear to them that they have to talk their process of trying to move towards a nuclear development, but they have to stop the kind of spread of terrorism they are engaged in. if they want to resolve these issues, join in a diplomatic effort. join the international community to resolve these issues. but make no mistake about it.

we are maintaining all actions on the table to make very clear to iran that they are not to do what we just said. >> thank you, mr. chairman. ms. castor. >> thank you, mr. chairman. secretary panetta and general dempsey, thank you are in much being here and all of your years of service. over the past decade, the threats to america's national security have evolved from the conventional threat -- the restaurant stayed out various to unconventional nonstate areas, terrorist networks, terrorist organizations in america and the department of defense have rightfully adopted and grown a terrific special operations force, we invest in that. the budgets grown their rightfully. the best it can pull it the value that they take out of osama bin laden.

thank you very much. when the sharpshooters were able to take out the pirate and save lives and doing so. and just last month the rescue and amalia at eight workers. so i rank the new strategy that should emphasize in the budget right to land that continually peschel operations. the former so calm commander, admiral eric olson always emphasize quality over quantity. but after years in iraq and afghanistan, where special operators around the globe have been assigned to the central command area of response ability, it is obvious the special operations in other parts of the world has been

endow an admiral in the come in the current calm commander is asking for greater agility, flexibility and building forces around the globe, that too is a neat deep. you didn't get into in detail in your testimony. would you go into greater detail on the importance in the strategic shift to special operations around the globe? and also another problem with sequestration as i am interested in your interpretation of across-the-board cut. he said if that happens you would have to throw out your strategy. but how are you interpreting that right now that the worst-case scenario happens that we know it's got to continue to invest in special operations. do you interpret across-the-board cuts means we will not be allowed to make those strategic investments where we need to be making? >> i'll take the easy one to pass it to my bus.

>> special operating forces are what i would describe as one of three capabilities but over the last 10 years we have earned the most about. in fact it is one of the things that are strategy. with dennis on the lessons of the last 10 years of or how we can better integrated testing conventional capabilities with the merging capabilities in the element chenard isr, phenomenally better in terms as eiland, or motion video, high-definition, all the things that have happened on your iphone have happened to us. the second one of course is special operating forces. we will grow them by 3000 in this budget. eventually over the fate of $588 will allow us to get back to not only the high-end direct action activities come at the partner capacity across the globe with new and emerging partners.

and a last-minute savior. that's the third of the three capabilities to have to account for now. 10 years ago we would not have had a conversation about cyber. we better have a conversation about cybertoday. mr. secretary. >> the proud methods that by taking an across-the-board city is going to impact in every area of the defense budget, but will impact on our investment company investments we are making will be undercut will find ourselves in at a house in the kind of weaponry, the kind of tech knowledge you that we need that kind of equipment and training and support system we need, all of that will be undercut by virtue of sequestered. you're not only hitting the main element of the defense system. our force structure and the support systems they are come you hit the investment portion so important to the future. >> and how do you view -- there is a lot of talk about giving

special operations greater flexibility, even outside of the combatant commanders. what is your view of how that will? >> first and foremost i'm a big supporter special operations. in my last year we had a great relationship and work very close they. padma cravens is working out ways to see how we can expand their vote because we are talking about trying to get them into more of a rotational presence in places around the world. ..