the same protections extended to the consumer finance regulator, that is under the fdi act. >> yes. by and large, the entire premise of the supervisory priority of the cfpb is grounded in parallel treatment of the institutions. if you're going to be in the consumer finance business, it shouldn't matter if you're a broker or investment bank, you all should follow the same set of rules. ..

first regulator responsible for protecting the american consumer. this is in their recent enforcement action against capital loan. the first by this efp. the hearing held earlier today was entitled by of republicans who is in your wallet that impact on families, communities and small businesses. there was the title. it seems to me that hearing titled mirror ironically the catch phrase of couple one omnipresent commercial i want to ask in addition to credit card companies, credit bureaus also heavily affect the financial

lives of americans coming and the bureau just announced its intention to supervise credit bureaus to which larger participant party. can you elaborate on the what this would mean for credit bureaus and also what it would mean for consumers? >> certainly. actually, we were just talking about one of the key features of the sea of beebee supervisory authority that it has the opportunity to extend not just big banks but non-depositories as well because long depositories after all are quite important features in the landscape of the united states. and i would argue certainly perhaps none more importantly than the credit bureaus and the information off of it. the fact the matter is the latter sort of consumer information that is captured within the credit reporting companies has great benefits for the democratization of credit acrossthe united states. it is a quite remarkable thing. on the other hand, it is

certainly possible that inaccuracies or an equities with respect to that data can have the consequences of trapping consumers into situations that end up not being especially fair to them or the system more broadly. those are issues among others the we hope to be able to put light on through continued activity including confidential supervision of credit reporting companies. as you point out, this week we finalize our rule with respect to the larger participant in the credit reporting agency industry. there are something like 30 firms that would be subject to that rule making and therefore subject to the supervisory authority together the firm's constitute better than 90% of the revenues in that business. and we will proceed with an alacrity as soon as that becomes -- >> another question. can you explain the bureau's

auditing practices? who conducts the audit and how often are they to happen and what has been found to date through the auditing process these? >> so come audit or supervisory exams are dhaka court activity within the supervisory process, and that is true for this efp and the regulators and has been true for quite some time. the key thing to remember with respect to exams brought the is the purpose of the process is to ensure compliance with the law it isn't meant to speak up on people we try to be clear and transparent about what the expectations are and what our exam teams are so that institutions are best to insure their own compliance and the day of compliance management systems they can count on and to ensure that our relationship can be a productive one to make sure the financial laws are protected in

the way the congress has intended. >> another criticism that we have heard is that the bureau is going to create additional regulatory burdens for our smaller institutions and businesses. yet dodd-frank requires that the bureau convene panels bearing the rulemaking process to assess the effect of the proposals on small businesses which are of great concern to me dated can you report on how the process has worked so far? >> it has been quite a productive early venture into the convenient small business review panels. the synthesis we here with respect to potential rulemakings and to date folding the feed back into the proposed rules that we actually promulgate. if the purpose was to make sure we are hearing the diversity perspective with respect to small enterprises and make sure we are attentive to them even before we propose a rule i would call it an unmitigated success.

>> time has run out and i yield back. >> i recognize mr. duffy for five minutes. >> thank you mr. chairman. a quick question and to clarify you had indicated the rules that you make have an impact on the 105 largest banks and you are going to enforce them that it's fair to say also the rules that yo promulgate will also be enforced on smaller institutions as well is that correct? >> or rulemaking authority as distinct from the supervisory authority is meant to cover the entire landscape of the firms which is why we have been so attentive as we were talking of a moment ago to make sure that we are using for example the small business review process to ensure that the rules ask crafted can ease compliance where necessary especially with respect to smaller firms. smaller firms be they depositories jarmon depositories are by their nature less able to easily shoulder significant

compliance costs tend to be more fixed than variable which means to the extent it firm is smaller on the compliance board and would be more biting and constraining and so the basic to make sure we are attentive as applied to the various regulatory requirements. >> which is one of my concerns. i keep getting that feedback from our small banks and credit unions about the compliance costs with the new rules coming out. within this efp, those are dillinger of disclosure issues as well as other disclosure forms. are you all communicating so when qr m comes out we are not going to have different ways of compliance issues for the small banking institutions? are you all talking together so it's going to be very fluid and we and are not going to have one rule come out but would then be modified when the disclosure

comes? this is going to be very smooth process? >> dodd-frank contemplates a number of reforms to the market. quite appropriate given how many facets proved to be quite not up to the task of pricing rest. we are proceeding in ways to make sure your concern is under arrest. number one is structural in some ways the statute itself leaves out means by which to make sure somehow definitions don't get on coordinated, for example the qualified residential mortgage definition which is an important relevant to the coleman under dodd-frank that definition cannot be broader than the qualified mortgage definition so there is a structural means by which these fit together. the second is process. so there's greater advantage. it isn't easy on the team, but it's great advantage to actually developing all of these areas simultaneously so that we are thinking about those interactions instead of thinking

about them as an integrated whole. >> the practice internally if you are all communicating this chongging to make it as simple and easy as possible. >> absolutely. a compliance burden is fundamentally deadweight in the economy to make things as easy as possible and still achieve the consumer protection appropriately in the statute. >> you heard the argument today and we have read articles that the new rules may reduce the power of consumers that they work for them the chair will this up earlier but it is an example of habitat for humanity and example they may have issues of making loans not as wealthy individuals because of the risk making the ability to pay. we saw with the card act we want to make sure people have the ability to pay and we all agree that is a sound banking principle, but the impact is if

you are a spells that stays at home you may not get a credit card. have you contemplated all of these of should issues? i know that we are trying to make the process work better and protect consumers, but in the and there is the unintended consequences. i cannot imagine that you intend to have habitat for humanity not be able to engage in a loan and build a home for a low-income family across america. i don't imagine that is your intent but that is the reality of the rules coming out how do you plan on and addressing that? >> our rulemaking process doesn't lack deliberation and certainly doesn't lack for transparency getting feedback from the public and so for example in case of have it for humanity or lots of other institutions that are concerned with providing credit to the underserved segments of the population we absolutely have referred to the garrard the feedback and are in the process to make sure we think about how

it is that these things fit together. we take feedback for what it is intended to ensure a better more nuanced rule that works not just for now but for the long term and the entire marketplace. >> i yield back. my time is up. >> thank you, madame chair. in the last few years since the credit crisis, there are great many members who remember that they warned us repeatedly that we were on the road to ruling in the subprime mortgages lending and that's not really my recollection. i introduced with mel watt legislation in 2004 to provide consumer protections in the subprime mortgages lending and i recall it was a fairly lonely fight and the argument against was you mean well, this is well intended but you're going to construct credit and make it unavailable to people who would otherwise now for the first time

can get credit by whom they couldn't otherwise we will not be allowed to refinance. and i acknowledge the importance of making credit available. the regarded member of the federal reserve board argued fun on yousaf for sub prime lending as democratization of credit but by the last decade come he was arguing the term had become obviously abusive. so there is something that began as a practice that ceases to be. but i thought that everybody that agreed a lot of the loans made, a lot of the mortgages in particular in the last decade or not such a good idea and now we hear the same arguments for consumer protection that is going to construct credit.

do you think all of the loans made in the last decade should have been made? and some consumer protections against had prevented them from being made it would have been such a bad thing? >> thank you for the question. there is no question that the credit business is a cyclical one. it is to banish somehow that cycle from the economy. that said not just in retrospect but at the time there were mortgage loans being made at the height of the bubble in 2005 from 2006 got first half of 2007 that were simply impossible for me credit perspective. they were being made without, for example a lambertson query into the bar were's ability to repay the loans. basic reforms, common sense provisions within dodd-frank would have prevented them from being made at the time. there is no question about that.

>> what we hear the idea of these consumer protections will prevent people from making consumer choices looking at the kind of consumer choice is that those mortgages represented and particularly at the height of the ball because by that time the mortgage as whatever holes on innovation they may have been in the 1990's, the predatory mortgages had completely shove of those out of the market. it was entirely a predatory market that made those loans subprimal were almost entirely predatory. do you think we should be worried about consumers not having a choice no one in their right mind would make? >> let me give an example just from our supervisory enforcement auction announced yesterday. the characterization that for example without on credit card products may make sense for some

borrowers but it doesn't make sense to make that inquiry until you are confident that the sales practice associated with those products in fact abide by law. no one can be expected to make the right choice for himself a rehearsal for their families unless they actually are confronted with a financial services landscape that operates in a fair and non-disruptive way. and i think that is the central challenge for the bureau, and it is the central thrust to the consumer demand as understand them in dodd-frank. >> i yield back. >> mr. cunego? >> this efp on its website has a consumer complaint database >> of the democracy of the complaints but we do take steps to confirm for the commercial relationship and that the identified a company?

so given that the cftc doesn't verify these complaints but boasts that it collects thousands of them's and collect in assuming the complete data base from a legal rational point of view or not influenced enforcement of regulatory actions by this efp. i think i lost the last part of it. you are asking whether or not consumer complaints will not influence enforcement? >> no, no pity if you have a consumer complete database, but it says that it does not verify the veracity of those complaints and i to assume you don't use them at all for any of your enforcement action? >> the consumer complete data base that is published we certainly make sure that we have the come plans that means you remove duplicates we make sure that the customer that is making a complaint is in fact a

customer of the institution they are complaining about. with the disclaimer means is that we put those counts and classifications on the complaints and without publishing the point of view as to whether one of the consumer is right in the complaint. however, for the subset of the complaints that we received both on the randomized and focused way we do conduct an investigation on a subset of those and the outcome of those investigations may or may not influence. estimate yet they are on e-verified. islamic the ones that within force the agenda would be the ones would come up to the estimate put the database says they are unverified and you will not verify the accuracy of the complaints. so what are they there for? >> are you asking the congressman -- >> do you use to verify compliance to start enforcement action or do you have them there

as a collection? >> there's internal stuff that we do with respect to the companies that we receive to investigate and to the extent those investigations result in a finding of a potential violation of law then of course we would take appropriate steps thereafter. >> it's not true that they are verified. they are verified. yugo and verify them, is that correct? >> we will investigate a subset of the conference. >> it is a misstatement to say that you will not verify the accuracy of these complaints, yes or no? you verify the accuracy of the complaints of all of the complaints that are cataloged on a website? >> therefore what is to keep your organization from putting together a campaign against a single financial institution by having hundreds of individuals centcom plans to this efp about an institution, and more importantly, who is going to verify the accuracy of the

complaints if such an event were to occur? >> we are careful to make sure that this is why it is that we ensure that there is a commercial relationship between the come plant and an institution. you wouldn't want to some hope in the system to someone submitting thousands of complaints with respect to the firm he or she happens not to like so there are anti-fraud and the motion though is that the numbers of complaints are somehow irrelevant to the consideration of bill would be relevant for consumers. i certainly don't see things the way. >> my time has started running out but let me ask you this. are there any penalties for individuals or groups of individuals that submit those complaints in this efp? >> we have not as far as i know with respect to so-called bogus complaints we have discovered. islamic moving on, one of the

things that troubles me about thus efp is your agency's ability to ban product or a least make them so attractive that nobody will use them. the paper released in may economist of the chicago fed debunked to the theory that will win, or why he consumers were the primary target of the lenders accused of pushing complex mortgages. the chicago fed study showed that those that took out interest only word - amortization loans by and large had much higher income and higher scores than any borrower. yet this efp be excluded these types of mortgages from the proposed qualified mortgage rule. so, my question is a sophisticated a bar with a high income and high credit score wants to use a complex mortgage to buy a home or invest in the second property, why should this

efp war any other federal agencies bobbit? >> ,, i think just to be clear what it is it is possible to provide the cameras and lower interest only compliance with the ability to repay the rule. but as contemplated by the statute it is possible. i think what you are referring to is the qualified mortgage definition within the statute and unambiguously doesn't provide for the deferred amortization products to this because this efp be conducted in a kind of a study to determine the typical consumer that i see my time is up. >> thank you very much. >> mr. space for five minutes. >> thank you. mr. dante, in my district of georgia, a significant percentage of homes are valued at less than $100,000. and with the qualified

mortgages, 3% caps many of my constituents especially low-income and first-time home buyers wouldn't have the access to credit escrow for taxes the compensation would have to be included in the calculation. as a result of the cyc was sponsored h.r. 4323 which is the consumer act to ensure that these fees would be excluded regardless of whether they are using a lender with affiliated business is there not? said, it seems to me that any expansion of charges to be included in the finance charges were caused vast numbers of mortgages to fail to meet the standards required of of a qualified mortgage. obviously this efp towns all originations charges as a part of the points and fees a huge

part of the mortgage loan market in georgia and elsewhere wouldn't meet the requirements to be a qualified mortgage and lenders wouldn't make the loans. moreover, there could be and especially in negative impact on consumers ability to choose the mortgage and title companies if affiliated fees are included. so, with this information, and as i've articulated it, are you not concerned that expanding the range of charges that must be included in the finance charge will make it nearly impossible for adverse consumers to obtain a qualified mortgage? >> thank you, congressman, for raising the question. it is one that we have been trying to be mindful of and it's a good example of the benefit of working on a number of the reforms of the same time to make sure that the approach is

appropriately integrated and doesn't create problems in one set of the reforms even as we are trying to solve problems with your example, we are trying to make sure that the finance is sort of used that it doesn't inadvertently somehow create dramatically different sweeping and was waiting out of loans under for example the hopa standards are qualified mortgage standard. we have, with those questions which is how is it that one should account for the conceivably unintended consequences of vastly increasing the universe of the loan in the project. >> succumbing to don't see any difficulty at all with this situation the? >> i think you are right to point out the issue which is if we were somehow blind to it and just proceeded with a new definition of finance charge without being attentive to the impact on hopa and qualified

mortgage, i would agree that there would be a bad outcome but due to the issue and others the team is very much focused. as the lead of the legislation is a useful way of making sure that the expansion of charges to be included in the finance charge will not cause vast numbers of mortgages to fail to meet the standard required of the qualified mortgage. >> off. >> the gentleman yields back. the chair is going to recognize for the purpose of making and reduction of a guest and then i will go to mr. pearce. >> thank you madam chair and it is an honor to have a couple members from the european parliament join us here today, and we have with us the chair of the economic and monetary affairs committee who is sitting over here, and mr. peter skinner

both from the u.k.. he also serves on the economic monetary affairs committee, and had a chance to meet sharon for the first time a while ago but she is the first from britain and the chair to chair the committee and i believe to do that as well it's been chair since 2009, and then mr. skinner has been in the parliament since 94 and has been on the committee for 16 years. so the committee has the responsibility to economic and monetary policy for the e.u. for the policies, the movement of capital and regulation financial services such as banks, insurance, pension funds, asset management, financial systems. so, they are here meeting with them and a member of the regulators and also continuing to build those relationships peter and i had a chance to meet in copenhagen a few weeks ago as

part of the transatlantic legislative dialogue, and we are looking forward to continuing to build those relationships as we know we are in a one world markets space for financial markets after a pleased that you were able to join us here today. thank you, madame share. [applause] thank you and welcome to the guests. we could have orchestrated a little more fireworks but we are doing business as usual. mr. pierce for five minutes. >> thinks that armchair and mr. dante for your service. i guess as i'm looking at your account, and your reporting of the cftc is solely accountable for protecting the consumers of the financial products and services, i wonder, and you go into some of the failures, homeowners that couldn't understand or couldn't afford

devotee to repay is a repeating a theme. so, i wonder if you -- if this efp has taken a close look at what led to those home owners not being able to repay, what caused that process that began to push the loans out of people. have you all done that? >> we work with the backdrop that has come before a delivery agencies and the researchers. thank you for raising. >> i think it's important to come back to what is we got here in the first place to the estimate i'm just asking have you studied that? >> it's relevant to the disconnected you have any authority over fannie and freddie? yes or no? >> yes or no? >> the gse don't of consumer relationships in general.

>> but they actually according to -- i don't care if you've read the book by gretchen arnesen and joshua on the reckless endangerment but on page five, the ex plan fannie mae led the way on the underwriting standards and the shift was quickly followed by private lenders. and then later in the , it became the playbook for the financial executives and that whole process under james johnson the spent about $100 million in ten years lobbying the congress to make certain small changes in the rules that would allow him to push those said to have members of this committee back in 2005 that were asked are you of raised the lending programs that james johnson was pushing through fannie and that this institution was encouraging. are you concerned that these easy lending programs are going to wind up luring people into the homes they could add

alternately afford? it came on us the middle of the night it was orchestrated by the drive that began to change the financial compensation standards and fannie mae and freddie mac to one of the loan values and $100 million toward himself and his nine years as the head of fannie and freddie. so i wonder as you are concerned about the consumer if you are worried about who is protecting us from policy and from these people who will lie influence to redirect. if you don't do that and if you have questions behind the scenes, then i would feel there is no one actually out here who is really concerned about the consumer. this began with the banks. it began with one guy that began to buy influence on capitol hill

and within the administration that began in 1994 with president clinton biting into the idea that somehow the money he says more americans should own the home that is a theme that continued through this term and president bush's term during the period they began to restructure the policies to push the loans for people who couldn't afford them and when i hear that you are just going along and not kicking back at the system that encouraged, it gives me pause and sadness that this is a little bit of a game of that we are using the crisis to come down and we are going to lean on the banks all the way up the main street without getting at the problem.

the problem originated in these halls and i think you'll know that but have the courage to say if loudly we are looking at a piece of the problem. you are not letting us get to where the real problem is. the problem was there. was there in the halls of congress and in the financial services committee and it was there with james johnson when he was buying influence here and you are not saying that. i haven't heard that once and it makes me sad. you are the sheriff in town and you are looking the other way. i yield back. >> mr. green for five minutes. >> thank you madam chair. i thank the witness for allowing me to be a part of this subcommittee. i am very much concerned about our military families, and as you know, members of the

military or sometimes required to relocate, and upon relocating , they have mortgages that have to be dealt with. sometimes they have to have short sales, they have to have refinances, and these things are sometimes difficult to negotiate the servicers because with the service is perceived as a limited amount of authority. the people that service in our military do so without question. they go where they are told to go. families go with them. i would like to compliment the first lady and the president for joining forces which helps them educate the jobs, job training. can you explain this efp is doing in concert with fdic and some other agencies to make sure

that they can get the assistance that they need when they have to transfer and relocate in some other area because they are forced to do so as a result of serving our country. estimates before for your concern with respect to the issues surrounding service members and their interaction and finance system of the united states. this is a specific nstance of a broader theme and the bureau and its work today when we have been trying to shine a light on issues that are especially important to our service members. as you point out, service members not infrequently are asked to change stations with the so-called permanent change station workers. among the tree home owners when they receive the orders are not -- they say no thank you i would rather stay right here. and that becomes a problem to the extent the homeowner like so many across the country in fact

is under water so there isn't very much flexibility to be able to refinance or sell the house. so, we worked with the provincial regulators to make sure the services were put on notice that in fact there are legal obligations with respect to the treatment of the military borrowers under a number of different statutes and we are quite attentive to it over time. it is an area where that which congress has already done if combined with shining a bright light on the issues i hope is that we can affect real change. this is petraeus that runs the office or service member affairs has been doing exactly that not just in the mortgage but across a number of important markets where frankly the men and women who put on the uniform to serve in the country at some level we should be attentive to the fact there have been financial servant gave to circumstances the different than the populations and the institutions follow the law with respect to

them. >> thank you. i trust that you will promote a rule to help them make this transition and maintain their credit worthiness and in general not get caught in the home they can't do anything with because the current market conditions. i wrote that he will give it your best to it i have a minute and 16 seconds left. have you been asked any question that you would like to respond to and you need a moment to answer some statements that may have been made that you didn't get a chance to respond to? if so you have a minute to do so. >> congressman, hopefully on have been responsive to the questions that have been raised to be given the frequency with which quite legitimate concerns about the impact of the financial reform on small community banks has been raised

it is useful to point out the fact that over the last decade community banks have been pushed further and further towards the periphery of the finance and the united states and there are some reasons for that at least in part because we headed regulatory system. that did not create an even playing field. if in general you have the gil troy system that makes it as a practical record easier to be in on depository or easy to be very big compared to very small and you shouldn't be surprised when community banks and up with the short end of the stick if we do our jobs right we should be able to help that cannot make it worse. >> thank you. i yield back. >> mr. luetkemeyer for five minutes. >> thank you madam chair. mr. dante it's always interesting to have you before the committee. the discussions this afternoon. can you tell me what spurs the rule making of this efp the different areas they get into?

>> let me answer that in the long-term policy agenda and in the near term not quite in that order. the near-term policy agenda as applied to rulemaking is set up by the statute. we have a not inconsiderable rulemaking agenda within the mortgage business that is mandatory and carries with a timetable that is -- senate what they call a timeout right there. what is the reason to read to you have any idea what the reason is for the rule making a request that has been made of you? >> yes, the statute is relatively clear in most cases. >> why is the statute the way it is? why the statute wants you to make a rule. >> welcome i know that the deliberations in the the date with respect is the statute where land he and spirited and of course but discretion has chosen a number of different rulemaking mandates and we have embraced them and we are moving

forward with the sweet. >> in the course of the rulemaking yearlykos benefit analysis of each roll? bac we do. it comes in a couple different flavors. one is a in houses of the cost and the benefits and burdens associated with the rule and there is also an element that relates with particularity in the institutions in the financial-services market. >> with regards to the rules have you been accustomed in that analysis? >> yes, as a part of the proposal, part of the reason why the document is 1100 pages long is that the new rules associated in the integration are 60 pages of the 1100 pages of what some of the required elements of the room again and put in the cost benefit analysis that we published. >> thank you. part of the mission is going to

respa is to create a disclosure form and something more friendly, yet we wound up with a three page long estimate at the beginning of the five pages long estimate at the end. do you think that is really an improvement? >> i do. both improvements we've been careful to reach out to a number of different -- >> excuse me a second. have you ever done a survey to see how many consumers actually read those documents? >> we conducted what is called qualitative user testing before the proposal was even issued. >> qualitative usability -- >> it goes by a few different terms other agencies when the private sector to develop the broad contours of a piece of collateral or disclosure -- >> did you ever do it? >> absolutely. stack what was your finding on the form? >> if you are referring to the

general difficulties the consumers have -- beckham asking if you did a survey on the respa forms to see if anybody reads them. as the mcginn general but which we have proposed is something that is easier, it would appear based on the testing today. estimate what page, and it's been to be easier to read, is that right? >> the mandate by the congress by closing documents of the final lending disclosure. >> deutsch of the percentages of people that actually read the respa documents? >> it is -- you would be hard pressed to find a the borrowers to sit at the closing table. schenectady you have a figure, please? 2%? >> i was wouldn't hazard to guess. we will be doing quantitative testing after the proposal, and pogo. >> in the proposal rule we don't have to leave, what percentage of people read this stuff so is there any use for it?

>> it's the single largest financial transaction. >> but if they don't read it what good is it? >> welcome congressman, at some level if you are useful to know how the dollars and the transaction -- >> very quickly i have one more quick question for you. falling on mr. canseco's question on the complaints it was very concerning that you indicate you didn't to verify all the complaints, did not go through to try to figure know if they were the legitimate complaint and didn't follow this there was something to be followed up on. why? >> this is i feel like it wasn't adequately clear to read to the extent that there are complaints that are at the consumer dispute resolution that we have an investigations team within our consumer response unit will follow up on those comments. >> but you just verified what it was in the adjournment complaint. you didn't tell them they followed on each individual complete to see if there was something there.

>> when i refer to is the conference that we've received. with respect to that which we published on the web site and we are quite transparent than on personally identifiable information as a seated with complaints that we have received with the various data fields. it is something that won't continue to populate over time. for example -- >> the basic question was you get to the complaints come in to verify that it is a legitimate complaint do you fall a lot? one individual come you talk about -- you keep talking about a subset of the group of people that are being a reduced but if there is one individual case you are not falling on that from the discretion of the answer is that you're giving. is that correct? >> with a random sample of complaints -- stat if you are getting a random sample you are not taking care of every single one of them. >> complaints resolved to the

satisfaction of a consumer we will not follow the investigation of every one of those complaints, no. >> mr. manzullo. >> thank you. according to fico and other sources, small amounts of medical debt that have been reported to the credit bureaus can dramatically lower a consumer's credit scored and keep a credit for the customer from accessing credit and bolstering our economy is the review of medical that reported by the credit bureaus in the radar screen to be as committed is trying to understand the interplay and data, david accuracy, its resilience and the scores and the use ability of scores thereafter with in this sort of medium term research agenda and the near term supervisory agenda we know it impacts the credit score. >> the reason i ask that

question as i practiced law for several years involved in three or 400 bankruptcies. one of the things that we saw towards the end of my career, and what we see today are people filing bankruptcy because of the medical bills and these are not large screen tvs. these are bills that were incurred because a person had no insurance or otherwise and that would be the case that has no impact. it has nothing to do with the person's ability to pay the bills that would come from day-to-day and in small amounts of money even money for bills even if the bills are paid off but impact of a person's credit

score. that's where i want to go. do you think that you would be open to looking to the fact so that perhaps there may be a regulation that says if the medical debt is under such and such amount and it's been resolved but it no longer should be a part of a person's permanent record. >> i understand the issue that you are raising and i do think that we should take steps to inquire into it with a this something that has been raised in other contexts that we have conducted and it is analogous to other issues for example the delinquency rates for the home lenders who otherwise identical homeowners one of who happens to be under water because he lives in a part of the country where there's been a lot of depreciation. delinquencies are high here where people are more under water does that necessarily mean that you are more or less likely to take your although finance? it is an analyst -- >> just laying out that issue --

>> we welcome your thoughts. >> the second question i have is on respa to read my practice all i closed probably 2,000 real-estate closings from small shopping centers and farms residences, industrial properties, etc. and most of those were homes. i think it was in 73 or 75. what we are seeing now is going from relatively small folder of documents to documents that can reach six, seven, 8 inches high and my experience is the fact that it's impossible for a person to read through all of that information, and in the

effort in good faith attempt came up with a one-and-a-half page statement. are you familiar with that give me your thoughts on this. the president tested the amount of paper that appears in the closed. and it obviously many of the documents had a closing our state law driven and not federal but i absolutely agree that there has been over -- over the period of decades i assume right mind and the moment that almost reflected reaction there is a problem at a member of this closure come and at some point i think that point is relatively early on there are diminishing

returns. and i mentioned one of your colleagues in a different subcommittee here a couple weeks ago my wife happens to be here today we bought our house a year ago she does financial fraud at the port of justice and consider what i do for a living we didn't read the document at the closing table. at some level to the things are predicated on an unrealistic assumption of behavior that's why we are trying to get the most critical of destruction to become information so they have a chance to look at the most critical things ahead of time. i certainly don't think that throwing up our hands is the right answer but we want to make things better and not worse. >> thank you. i believe that concludes our questioning. i would like to ask for unanimous consent to insert into the record the statements from the financial-services roundtable. hearing no objection, so ordered. the chair notes some members may have additional questions for this panel which they may wish to submit in writing.

without objection the hearing record will remain open for 30 days for members to submit written questions to the witness and to please those responses in the record. without further discussion the hearing is adjourned. >> let me show you a little some of the stories in the newspaper this morning about the economy. first of all, the debate over

the fiscal cliff which people say are going to be enjoyed is in sequestration takes place in the fall. this is the "washington post" this morning the party's trade blame on apparel spending arguments aimed at november. five and a half months before the deadline for the potential disaster broken to heated debates this week over age and over a fiscal meltdown that could lead to nearly $600 million worth of tax hikes and automatic federal spending cuts next year. the stars include hours of the speeches in the senate and house vote on related legislation on wednesday. most unusual was the relatively long lead time since this congress has shown repeatedly its eagerness to avoid serious debate except as a last resort. and here's more from thewash "washington post" "new york times" this morning the economyd remains soft and housing data on home sales and factory production release on thursday and weakening the u.s. economy. commit americans bought fewer homes in june from may.ay. many factors and the federal philia regioadelphia region

dontracted for its third month and a number of americansonths d seeking unemployment benefits rose last week. as the parties compete over how to effectively create jobs we would like to ask you what ismot the most effective way to create jobs in this country?begin wi what's began with a phone call from devotee a democrat in philadelphia. good morning. you are on the air. >> yes, good morning. i noticed yesterday with a blocked the outsourcing to stope the outsourcing of jobs. that's not going to help. we need those manufacturers to come back into the united state so that people can work and get good jobs and good benefits. everyte talk about how the president isn'thi doing anything to read everything he tries to do to get this economy moving it the block. it's not because i'm a democrat and i'm saying it. what's i'm just watching what's going on down there on the hill. 500 s

they voted 500 times to block the health care act, yet no one wants to put on the floor to gek these jobs back into the d country. our >> thanks, debbie. from the facebook community alsc debating the topic this morning, they're needs to be standards set for private employers.o ma i see first hand to many employers misuse and abuse workers that is the dominoomino effect of the turnover and mark. post this on facebook the american economy thrives on the balance of private sector individualism and government. any of those three and the ne is a suffers another rises fiscal ignorance. next is a call from a stock aiorgia you are on the air.you' >> yes.er: it's very simple. we need to cut the corporate ta rate. when corporations are strangled by the government and the epa regulations they are going tos, jump ship and that means leave america and go where they can affordic to operate.

the stockholders obviously invest their money in the invest corporate structure. they cannot make money for thost stockholders what good is it? less government means more jobs. more jobs means more people are better employed. that are buying goods and services and that is what will keep america running and keep the corporations in this country than to create jobs.ever estimate the government has never created a job spec that goes back to ronald reagan's strategy at work. cal >> our first caller deprived the inability of the senate to passt legislation about theof outsourcing of jobs.ould gue i would guess you would disagre. with her. estimate the outsourcing of jobs is basically because they arehi jumping ship. they can't operate in this country under all theses and regulations and government taxes

and all the control and now we want to add even more to the pot and expect everything to runise smoothly and raise taxes on top of that. the design america would have left of her is being destroyed, and it must be stopped. >> next up is philadelphia. joe is an independent. go ahead, please.ing. >> good morning, susan. thanks for taking my call. i want to reflect on the lealious caller who came before me.most post world war ii we were the we the greation on earth. they told us the russians andthe chinese were going to annihilato us as a society. all t we have all these jobs over world war ii and all thesef makg politicians got hold of making bet lives better and run all of our jobs overseas and everywhere else where they don't have to

put up with all of the who tri harassment. one who tries to pursue a dream ce the is subject once they try to pursue that dream. it's disgusting. and what the climate is doing ti we will of my grand kids are going to grow up in is totallyto unacceptable. if they have these ivy league educations and have so muchng te damage you don't have to be a genius to figure out what they th have done to us. kie but the kids don't stand a th chance in this country. got to and we have to stop thesent government regulators because ey they are doing everything they can to stifle the american and hope w good morning to all and enjoy your day. i hope we get this on track to meet next is tamim bentonsport vana what a democrat. good morning. >> good morning. i don't even know where to start the job problem isn't about competing with overseas.porate

ot's all about corporateve g profits. all you've got to do is look at the charts. look at the data.ata. you can see that the exhibit of payhe skyrocketed. skyrocked. it's up or down. t get the facts that the illionaires' on the right wing want to push the machine every people to turn around. at the same time they want to frk their money overseas in the tareign investments for taxnts shelters and then they say thatt we can't compete. competiti what's more about comonpetition. it's all about their profits and that is all but it boils down to presidy would get behind the president and supported on an actual jobs bill we could get jobs in this country.ps of >> thanks. several clips of video we want to show the measure is w e twahe senate majority leader harry reid yesterday talking about the legislation that failed on the outsourcing of jobs. >> in the past decade it is remarkable and in a very negative sense how many jobs

have been shipped overseas. about two and a half million. call centers, manufacturing jobs, but it's fairly easy to see why republicans are blocking the bill to stop outsourcing. there obviously defending the presidential nominee, who of course made a fortune by shipping jobs overseas. so it's no wonder that republicans are even afraid to debate the shedding jobs overseas. the republicans are afraid to defend their support for outsourcing as mitt romney is to release his tax returns. and senator mcconnell suggested tt sayss debate is an important issue. i think that says it all. side >> here's the reaction from the ashing other side in the "the. ningington times" this mor in the story headline gop sees mr. foundage of legislation.-- this is the bring home jobs act

which shifts the tax breaks for companies that shift jobs overseas and cut taxes for businesses to bring jobs back to the u.s.. democrats held a common sense measure that would boost domestic job creation and close tax quote loopholes that encourage outsourcing. but republican leaders post on the measure on the ground that it effectively would impose the necessary tax increase on many companies. senator orrin hatch of utah the top republican on the senate finance committee said that, quote, while on the surface the proposal may sound unreasonable, it was misleading and would lead to an extraordinary deviation from current tax policies. there has always been a tax deduction for business is ordinary and necessary expenses and expenses associated with moving has always been regarded as deductible business expenses. mr. hatch said thursday as the substantive tax policy goes, this proposal is a joke. the bill buy mostly on partisan grounds 66 to 42 falling short of the 60 necessary to end the filibuster. growth oklahoma is up next and

public this is jerry a republican. we are talking about effectiveyo job creation. you are on. .. the government and agencies, local government, big governments, and federal governments start purchasing from u.s. manufacturers themselves. the last figure i see is the federal government's purchases was only in the 65% raping where they were purchasing locally. and the argument would be it's too expensive. we can buy cheaper overseas. that's what everybody else says and even what the consumer says. get the monkey off the businessmen's back. get the government and its regulations and that includes the unions and get them off their backs so they can and be profitable. and let's have the democrats one sensible thing. businesses are profit centers. they are no social institutions. the poor never gave anybody a

job. and it is up to businesses to survive and those moneys which they survive with go into returns for governments, i mean for shock holders which goes to teacher's unions, firemen's unions, retirement for everything. so there has to be a realization by unions and the government as they have got to work with business and not look upon business as some sort of a cash cow. thank you. host: charles on twitter offers this. first, everyone needs to pay down their personal debts, not that attractive but true. next is a caller named mary from yorktown, virginia, who is an independent. hi, mary. caller: good morning. this day president has the

ability -- this president has the ability to open seven plus million jobs and illegal workers still have to this day but he refuses to do that. to stop blaming romney and other people for the outsourcing. and also, when this president took office, the democrat has full control of the house and senate. they had the majority vote. they did not do anything about the tax breaks for the rich. the oil subsidy asks the oil spending. they had full capability to stop all that. they didn't do it and they're blaming on the republicans. i'm sick of it. hold them accountable. tell obama open the seven million jobs that the illegals have and get us back to work. now he's talking about giving work permit to all these illegals here? this is exactly what we don't need. and he's sitting here telling y'all to blame -- and he's

talking about outsourcing? it's like the pot calling the kettle black. hold him responsible for his actions. throw him out in november because he is not helping us. host: this is an article -- from the other side of the congress and capitol hill on the other side of the aisle, let's listen to house speaker john boehner yesterday talking about the republicans in job creation. >> the house has passed legislation with common sense reforms. we've done our job. but our president has not lifted a finger to work with the congress on jobs or to resolve these big issues. he doesn't even have time to >> we will break away from this recorder program, take a look at

the national press club just getting underway. our discussion with cleveland clinic's president and ceo, dr. delos cosgrove. live coverage now on c-span2. >> comprised of the cleveland clinic, eight committee hospitals, 18 famine and ambulatory surgery centers, a hospital in florida, a center for brain, health and the fatah, a wells and executive health center in toronto, and the hospital currently under construction in abu dhabi. his leadership has emphasized patient care and patient experience. including the reorganization of clinical service into patient-centered organ indices based institutes. he has launched a major wellness initiatives for patients, employees, and communities. under his leadership, the cleveland clinic has consistently been named among america's 99 most ethical companies by the institute.

dr. cosgrove is a graduate of the university of virginia school of medicine and complete clinical training at massachusetts general hospital, boston's general children hospital, and brook general hospital in london. he was a surgeon in the u.s. air force and served in vietnam as the chief of u.s. air force casualty, staging flight. he was awarded the bronze star and the republic of vietnam commendation medal. he joined the cleveland clinic in 1975, and was named chairman of the department of thoracic and cardiovascular surgery in 1989. under his leadership, the clinic's heart program was ranked number one in america by world report for 10 years in a row. he has performed more than 22000 operations, and earned an international reputation for expertise in all areas of cardiac surgery, especially valve repair. he is 30 patents for developing medical and clinical products used during surgical environments. his visionary thinking, medical

and business expertise and dedication has earned him numerous awards and honors. he is a member of both the cleveland medical hall of fame and the cleveland business hall of fame. he taught inside business, power 100 listings for northeast ohio, and is highly ranked among modern health care is 100 most powerful physician executives. among dr. cosgrove's many attributes he is known for his ability to provide high quality care, while holding costs down. he is also known for his concern that health care reform might stifle medical innovation. we look forward to hearing his views on these and other issues affected by this supreme court rulings on the formal health care act. ladies and gentlemen, please join me in welcoming to the national press club, dr. cosgrove. [applause] >> well, thank you very much. that's the nicest introduction

i've had today. [laughter] well, i'd like to share with you some of the experience and some of the things that are going on around the cleveland clinic and how it reacts to the affordable care act. first of all let me tell you a little bit about our organization. we are very innovative innovation -- organization paper 91 years old, a not-for-profit, have a tripartite mission of research, education and clinical care. we are physician led, and all of us are salary, and deployed by the institution. there are no financial incentives to do more or to do less, which is an important aspect of where we are. we all have one year contracts, and there's no 10 year. in the queue we have an annual professional review, which is part of making the quality of our organization. now, it's interesting to look at health care to see exactly where we came from, and how we are organized.

the design we currently have dates back to 1950, and much of it relates to the hill burton act which encourage communities across the united states to develop hospitals and be responsible for the care of that community. since that time, health care has improved. longevity has extended. and with that we've seen diseases change as well as therapies change. and it's now in working with chronic diseases, six of the seven major causes of death in the united states are chronic diseases. so it's no longer possible to have all the technology in one hospital, and no hospital can be all things to all people. so what is the crisis that we're currently dealing with that we've heard so much about in the united states? and want to be affordable care act and how did it try to address these things? there were three main things that we try to address. the first is access. you have heard about the how the

affordable care act put another 32000, 32 million people who currently did not have insurance currently have insurance, and this is a major step forward. the other problems that were a round quality, quality was variable across the country. and, finally, cost, which was escalating. right now with $16 trillion obligation that the united states has, 50% of that is related to medicare. the health care bill will do little to affect that obligation. in fact, we probably will see increasing costs. so how are we as an organization and how is health care as an organization beginning to deal with these issues as we go forward? let's take them one at a time and we'll talk a little bit about how we as an organization begin to deal with these. first of all, access. insurance doesn't necessarily mean that you get to see your

physician. one of the individual in the audience came to me and said that here in washington it was now difficult to see physician. and there's a number of steps you go through to try to get to see physician. so we begin to try to address each one of these. the first thing that we did is we put in place nurse on call pixel at 2:00 in the morning when your child has a temperature of 103, you get on the telephone and get some good advice from a nurse, or send a suggestion about what like to go to get that sort of therapy. last year we saw 20,000 phone calls. this is a free service of the clinical service. the secondary that we did is when you call up a target to on the telephone. so we put together a call center. the call center now has an average of 40 seconds to answer the phone and only a 3% drop to rate on your phone calls.

and when you call, to make an appointment, each time you are asked we like to come today, last year we saw 1 million safe appointments. the ability to see those appointments, we were able to make 95% of those appointments of able on a same-day basis. then there's the emergency room. everybody would complain about the weights there are any emergency room. we change our methods a year ago at how we see people in the emergency room, and now the average weight is under 30 minutes from door to seeing a doctor. all of our emergency rooms across our entire health care system. so we try to begin to address actually the day-to-day needs of access to the second issue is quality. and i would point to you that quality is really not one thing. it is three things in health care. first of all, it's a clinical experience.

is a physical experience, and it's an emotional experience. the clinical experience we begun to address with electronic medical record. electronic medical record now begins to make your data available to you across the entire organization. you can move from outpatient facility few making in the hospital to the main campus, with your electronic medical record going with you all the time. and so anytime you see a doctor, that information is available at that point. the other thing we thought was incredibly important is because transparency. and transparency comes in a lot of forms. starting some 30 years ago we began to look at outcomes and begin to try to understand how you understood what outcomes were. and each time we looked at those, we always found that there was an issue we could do better than. and so starting eight years ago we said we would like each one of our institutes to put

together at outcomes book and make it publicly available. these outcomes books are published and they're available on our website. and that's part of transparency around our quality, and additionally we think that transparency is about what is going on in your care should be available to you at any point. so we opened the medical charts, and you can see your chart anytime that you want in the hospital by simply asking for it. further, you should be able to know about your medical history and your medical record when you're not in the hospital. so we have electronic medical records so they can be available to you over the internet. we have almost 500,000 people who now have access to that. interestingly, we now know that people who use this take better care of themselves, that guide

picks -- diabetics take better care. we encourage people to actively participate in their care along the way. further, we have begun to understand competition within the hospitals. and we looked specifically and been very transparent not only about the entire organizations, but the individual departments and individual physicians outcomes. and we post those publicly for the physicians. interestingly, i would tell you there's no more competitive group of people and doctors. and doctors do not like to see themselves on the bottom of the list. and if you want to improve the quality of a physician, all you have to do is rank them and make it public, and it's amazing how fast things move a. so we've had a lot of good experience that way. the physical part of come into the hospital is also part of everybody's experience. so we have begun to look at

everything, as force the physical experience in the hospital is concerned. from the architecture, from the light coming into the ring. we increased class across to bring more natural lighting. we have begun to bring art into the hospital. the speakers to longer spend all their time paging people. they played in the public spaces classical music as you coming. which adds nothing to the cost but greatly enhance the atmosphere of the facility. and we bring in art therapy, music therapy, and even amazingly we have dogs walking around our hospital. i laughingly said there's nothing better than elect from the lab him and the pediatrics -- [laughter] so we like to have the physical experience be a positive one as well because it helps with healing. the third and perhaps the most important aspect is the emotional aspect of being in the hospital. we were very concerned about

this because anybody of the 43,000 people who work in the cleveland clinic can next -- ruin the expense of a patient in the hospital. i had one of those expenses one time when a relative called me to the room, a relative of my wife's comment to him and said, very upset family, and i wanted to know why the results of the the heart surgery had gone great. they were upset because underneath the bed there were dust bunnies. that ruined their entire experience. is that we brought all of our 43,000 people together and took them off-line for three hours. we sat around roundtables like you would have here, with doctors, nurses, environmental service people, people who drove buses, people who worked in the loading docks and we talked about the train didn't experience. in -- talked about the cleveland clinic express. has been a major factor of how these people are engaged.

and we no longer address them as staff and doctor to everyone at the cleveland clinic is addressed as a caregiver. and that has changed the atmosphere. and with that when you find ourselves in the top 90% of in the country as far as age gap scores and patient satisfaction is considered an important factor of our peoples expense when they go to the hospital. finally talk about cost. one of the important things we have to realize about cost is we have perverse incentives. one of the major things about reducing costs is employing physicians. all of the physicians at the cleveland clinic are employed. myself included. and i get a straight salary so did not make any difference whether i did three hard operations a day or four. i got it exactly the same amount. so there was no incentive to do more.

our system really encourages people to do more. essentially penetrate it is known as eat what you kill. a little strange. [laughter] but nonetheless, the incentives are wrong. and so as we need to begin to move to an incentive that is not, does not in sync you to do more but, in fact, instance you to take care of patients. and be paid for that. now, the involvement of the doctors has been proven that the salary doctors have a proven that reduces costs. the dartmouth atlas looked at top organizations around the country, and the two they came up with the lowest medicare costs were mayo clinic and the cleveland clinic, both of which employed physicians. the other thing that physicians do is, employed physicians, is it brings in around two involvement in the organization. we involve our physicians in

everything. we're physician led, we involvement in our purchasing decisions and/or utilization -- decisions. all of which helps bring about lower costs. the other aspect to bring about lower cost is integration of health care systems. we are completely integrated across our organization. and so that has allowed us to do a couple of very important things. first of all, we have reduce duplication of services. we have rationalized services. we have rationalized and gone around and consolidated pediatrics, trauma, rehabilitation, heart surgery, obstetrics, and gone to places which do a bigger volume. and as a result of doing bigger volume, they do more. and as result of that they get better quality and more efficient. and that certainly has been proven to be the case in multiple studies across the country.

we also recognize now that health care is changing. where it is done is changing. the hospital is becoming less and less the epicenter of care delivery. care delivery is going to inpatient, to outpatient, home care. and we now can see that hip replacements and knee replacements are done with 24 hour stays, and the people going home the same day as they've had those procedures. it's simply the advance of care. it is also the advance and change in the type of diseases we're dealing with. more chronic diseases, let's take you diseases, and acute diseases and surgical diseases are now more taking care of as outpatients and as in patients. now, the other perverse incentives is around all of us. there's no incentive for us to take care of ourselves. we smoke come up we, we don't

exercise, and we go to get health care and expect to get great care. let me just give you a couple of examples. first of all, you have to realize that 40% of the premature deaths in the united states are secondary to three things. smoking, eating, and lack of exercise. let's take smoking for example. the incidence of smoking in the united states is 20%. the scary part is it is rising. it is associate with a majority of cases of cancer in the united states. so we began a very aggressive approach. we started out by having no smoking allowed not just an ability for anyone on our campuses, our parking garages, and anywhere on property of the cleveland clinic your daily we -- then we decided that we'd make a bold step and stopped

hiring smokers. we test people, by the way, it is illegal. [laughter] what is more things i've done. -- one of the smart things i've done. the liberal this program at a smoky cessation into the community. and help drive smoking cessation laws in public places in the state of ohio. in cuyahoga county were relocated, the incidence this book has gone from 28% to 15% in five years. so you can make a difference, and perhaps we have saved more lives by doing that than one would in a cardiac surgical career. the epidemic of obesity is terrifying. right now one-third of the united states is overweight. 130 is obese. obesity is leading the epidemic

of diabetes. right now, 10% of the cost of health care in the united states is secondary to obesity. and the projections are in the next 10 years that that will go to 20%. so we will not control the cost of health care in the united states unless we control the pandemic of obesity. so again we figure that we need to begin to address this. so we started out, we took the trans-fats out of all the food reserve in hospital, we have made four changes in the cafeterias of the food that we serve. we took the candy bars out of vending machines, sugar drinks out of the vending machines and then we turned to exercise. we give our employees greek curves, free wait watchers, for yoga, free access to our gyms, and over the last two years we have lost 330,000 pounds.

[laughter] it's a start. socom these i think represent an effort that you can also take out into the country, and we need to begin to address these. let me just for a moment tell you a story. and i think you'll understand the reason for this story. too can have years ago, a 25 year-old opera singer was flown into the cleveland clinic in the dead of the night, from here, as she was in stage lung disease and had she not had a lung transplant she clearly would have died. she received a lung transplant, double lung transplant, was extremely sick, kept in a

medically induced coma for four weeks, eventually recovered, left the hospital, came back to sing opera. three months later for the team that looked after her. that summer she married the man who stood by her through this entire event. and then she began to get short of breath again. she came back to the cleveland clinic after extensive medical therapy, and could not be sustained or improve on tt therapy. she was placed on an artificial lung for three weeks, waiting for a second set of lungs. she received those second set of lungs, and is now living in washington, and singing opera again.

i'd like to have you meet charity who is with us today. [applause] >> charity i think is, she's here with her grandmother. her grandmother is tom's wife. tom was the congressman and last time she was here, he spoke before this group. he was a congressman from california for 27 years. would you stand up? [applause] i introduce this to you because i think this is an example of american medicine at its very best. and we need to address the three issues that i talk about, access, quality, and cost.

if we're going to build continue to drive this sort of quality medicine in the united states, and provide quality care so people like charity can return and sing opera for us, and can contribute to our society. thank you very much for the privilege of talking to you today in sharing some of our experiences. [applause] >> thank you. how has the cleveland clinic managed to reduce costs without sacrificing the outstanding care for which the clinic has long been known for? >> i think one of the main things we've done is we have involved the physicians in our decision-making, and the physicians understand about the things that they can do. for example, they came together around pacemakers, hits, need

replacements, purchasing. and we reduce our purchasing by about $125 million in the last two years. >> what can be done about the decreasing number of doctors and he'll take care of our growing population? >> the number of doctors out of is not decreasing. the problem is that we've never produce enough physicians in the united states to look after the demands. we've been a net importer of physicians forever. we're going up a shortage of about 90,000 doctors across the united states, and we're simply going to have a shortage of nurses, bordering around 1 million nurses. and so we're going to find other people to be the caregivers. physicians assistants are becoming increasingly used. that allows everybody to practice at the top of their licensure. and technicians are coming in to replace much of the work that

nurses have previously done. no need to have nursing degree in or to take or recorded temperature. >> do pharmaceutical companies reward physicians who prescribe their medicines? if so, how? >> well, i think all of us have seen many stories about pharmaceutical companies and device companies encouraging physicians to do that. i think that is being less and less an issue in health care world. to use the a lot of entertainment that went that way. that is almost completely gone, the best of my knowledge. >> is the cleveland clinic more or less likely to hire employees as result of the affordable care act? [laughter] >> i don't think we know yet how the affordable care act is going to affect us. we haven't seen yet the implications in terms of the number of patients that we're

going to see, or and figure out how we will take care of them. clearly, any health care organization, the major cost, is people. it's about 60% of the cost of running a clinic right now. and obvious he would like to do that in the most efficient way that we can, and will have to wait to see what the demands require. >> tens of thousands of patients die each of from infections contracted in hospitals and doctors offices. how can we reduce that? >> yeah, that's a great question, and you know, that is one of those things has been brought to the attention. we have seen probably a 50% reduction in the incidence of central line infections across the country, simply by bundling and using standard procedures. and i think that we are increasingly looking at the same thing that pilots look at, checklists, -- bringing

checklist to medicine. interestingly now, part of the other major issue in kosice end of life, and we think that there's a lot we can do to both make that and more civil and kind experience. and at the same time, let people pass in a less cost -- costly way. and so we're looking at a checklist, and the cleveland clinic are now doing a research project trying to develop the end of a checklist that will remind people about where you are in the process, have you talked to them about it. and i might just say parenthetically here if you don't mind, i think this is an important topic. and i would encourage yo all to think about this yourself, and

in a many of you had this experience. both physicians and family and patients are stressed at the end of life. the worst thing that can happen is not to have a discussion about the difficulty that this represents for both people. i found in my surgical career that if i would enter into the discussion with them and say, i will do everything possible to keep your loved one alive if i think they can return to a useful member of society, at the end of that time if i think that we've come to the point where don't think it's going to happen, i will come to you and will have a discussion about this. and i will not make life go on just endlessly for keeping your loved one alive. i've always been greeted by thank you so much, doctor, i'm really pleased, i look forward to those discussions and i'm greatly relieved that you have that discussion with me. it takes -- and if you into into

those and have that discussion with your physicians, it will be good for the patient, it will be good for you, and it will be good for the doctor. >> are their growing risks from antibiotic bacteria, and how serious the strengths, and what needs to be done in prescribing antibiotic development process? >> i am clearly over my head here. clearly, antibiotics therapy is something that increasingly people are concerned about getting resistant strains. we've seen this in tuberculosis and staph infections. that we have selected out by our use of and vioxx. i think it's important that antibiotics be used judiciously and that he pharmaceutical companies being encouraged and supported as they develop an increasing antibiotics to take care of those currently

resistant strains. >> how can health insurance companies reduce their costs so they can devote more of their income to provide needed health services to their clientele? >> i'm going to plead total ignorance on the. i'm not in the insurance business. >> prostate cancer is often in news is is with differing medical opinions as to watch waiting for something to get treatment. what is your take on this? >> it's interesting. now we're beginning to understand the differences there are and prostate cancer, and that has been done out of the study that is the almost 10 years old, done at the cleveland clinic looking at the genetics of the prostate cancer. we realized that some are very aggressive, and some are not aggressive at all. and i differentiated between those we can begin to decide what is the most appropriate type of therapy. >> when omega-3 fatty acids were

discovered to improve heart and blood vessel ailment, some pharmaceutical companies were very concerned that this would reduce sales of the heart and blood vessel drug. has this happened, and how do these fatty fish acids help improve heart health? >> i am sure that you're aware that we have seen about a 30% decrease in the incidence of cardiac death in the united states in the last 25 years. and i think this has been the result of several things. it's not just coronary stent and coronary bypass surgery. it's about the fact that there's better awareness of taking care of yourself, more increasing use of fish oil, et cetera, and better diet and exercise. and i don't know that any of these drugs have been substantially decreased in their use. >> what do you think of stuff such as mayor bloomberg propose to tap -- or other items being

sold? >> well first of all i think you have to salute mayor bloomberg for many of his pro-active stances, and encouraging wellness across new york city. he was one of the first people to begin to take trans fats out of the food. he raised our awareness on many issues. whether this is the solution to the obesity problem, the size of your drinks to the size of your cop, i -- remains to be seen to i'm not particularly optimistic about it. >> you said you know longer hire smokers. do you hire folks at the clinic that are obese? [laughter] the americans with disabilities act protects -- [laughter] protects people from discriminating from people or obese and under advisement we do not discriminate against people who are obese. >> if a patient who received

care at the cleveland clinic later sees a doctor who was not actively with the clinic, under your system of record access with a doctor have access to those records? >> yes. would like to provide access to the records without being involved in the electronic medical record, it's not possible to send electronic medical record, but we didn't get electronic medical record to patients and patients can take it to his referring doctor. so if you get treated at the cleveland clinic and you get sick in los angeles, you have access to your records and you can take it with you. >> how serious initiatives noncompliance by patient comparing to take the full dosage of prescribed medication? >> noncompliance is a big issue. and where try to figure out how we can begin to address this year we realized that just making a phone call and sing did you take your pill today doesn't do it. we actively involved right now in a discussion with time

warner. cable, who can bring in people's television sets a way to communicate back and forth between the doctor. so you can actually say the patient of which hold up your bottle of pills and did you take one of those today. and i think that this is the next step beyond the phone call which started out as a routine office visit and cause a phone call reminder and then that group of ways to do this and skype sort of fashion. and i think this is the next ad hocly for the future begin to drive compliance. >> a news report yesterday indicated that there have been 18,000 cases of whooping cough in the u.s. this year, and original vaccine is not sufficient to what should be done to prevent or reduce further outbreaks of? >> you know, i think the concern about whooping cough is a major concern, mainly driven by the fact that scare about autism. that mothers and fathers are not

getting their children immunized because of the fear of autism. i think that has been pretty much just proven. i don't think there's much question about that now, but this whooping cough epidemic would not have been had we had continuation of the immunization but i think that's the reason for it. >> copd is the third largest killer of americans, second leading cause of disability in the u.s. what is the importance of research into lung disease and does the clinic plan to increase such research? >> i think -- my father died of copd, and he was a smoker. and i don't think i've ever seen someone with chronic obstructive pulmonary disease who frankly was not a smoker. and the biggest thing we can do is begin to drive smoking out of the general public. this is a huge public concern, and we're not going to get that

improved into we take care of the major cause, which is really smoking. >> how can health care institutions better work together to share or codevelop more effective and organic processes, technology or clinical capabilities? >> start to feel like a dr. oz. [laughter] collaboration, and i think, let me take this to a little higher level if i could. we are starting to see now a tremendous change in hospitals across the country. the hospitals are coming together in systems, systems are collaborating. we're starting to see systems talk to systems, and as we begin to head, just one little fact. 60% of hospitals not in the united states are part of a system. and as we have systems come together, we start to get more

standardization of care, more efficiency, and more collaboration going on there. >> speaking of dr. oz, being a popular tv figure come what more can the media to educate and motivate the public about better health care practices secrets i think is a tremendous need for medical education, and this goes television, print, everything. and is going to be a big process to educate people about what the current health care act entails. i think very, very few people recognize exactly what's in that bill and what the implications are, both for personal care and for the health of the nation. so that's going to be a big educational process for you all. that i don't think you can do too much to emphasize the importance of people taking care of themselves in terms of smoking or obesity and such. frankly, my major concern is the

public generally has not come to grips with the pandemic of obesity. and just to put that into some sort of perspective for you, if you look at the disability, the total disability of employees at the cleveland clinic, and you take out people who have cancer, 90% of those on permanent disability are morbidly obese. that's a big problem. >> a number of states have indicated they are underway to expand medicaid as part of its affordable health care act. what will this do to the health care system like the cleveland clinic? >> well, if we don't have medicaid patients covered, we are going to have more patients who are not, are not paid patient but currently we're the largest medicaid provided in the state of ohio. and this is going to have just

more patients without any reimbursement for us. and that will cost the rest of us who buy insurance to have their premiums go up. >> how did your hospital in abu dhabi come about, and are you planning other hospitals in more countries? >> it's an interesting sort of history. 9/11 happened, we're all pretty on about 35 patients a month, particularly from the middle east. and at that point it went to five in about two weeks. and so my predecessors cpo said why do we try to meet them halfway and we will establish something in london. and we tried to buy a hospital in london. we try to lease a hospital in london. we looked at green fields, and in the meantime people begin to realize that perhaps the cleveland clinic was willing to go offshore. we had inquiries of one side or another from 70 countries.

and we looked at many of these, and by far the most attractive was abu dhabi. and i think it's important point out to you that our arrangement in abu dhabi is not such that instead of spending money in northeast ohio, we are investing it in abu dhabi. that's not the case. in abu dhabi, they're building, the government is building the hospital but they are paying ourselves and they are paying us a management and consulting fee. now, and so essentially we're using our intellectual capital better to drive your petrodollars back to northeast ohio. now, in the bigger scheme of things, if you look at what the world wants from the united states right now, they are not particularly interest in our steel or our refrigerator, in many cases our cars, but they do one or entertainment, our innovation. they do in our graduate

education, and they do want our health care. and our facility is the first facility from the united states that has taken the challenge of going entirely overseas and staffing the hospital, bringing the design to the hospital, brings the protocol to the hospital and take responsibility for doing it. it's a great opportunity to begin to help design a health care delivery system for a country. >> given the success of the cleveland clinic anything replicated in other countries, why aren't there more hospitals like yours here in the united states? >> the cleveland clinic was started as a system that was looked at as very innovative and radical at the time that it was founded, with employed physicians. in fact, your looked as medical bolsheviks at the time it was started. and then that has not been the tradition. it is very difficult to change

from the system that is currently exist most places to what we are, and because most physicians are very entrepreneurial. now, what's happening right now across the united states is changing that enormously. right now 60% of the doctors in the united states are employed. and 75% of the medical graduates now are going to be employed instead of being self-employed. sso you are saying hospitals coe together, hospitals employing physicians, essentially that is looking increasingly like the cleveland clinic over a period of time. and i think that you're beginning to see that change happening. it will not happen fast, but it is important i think for the long-term of portability that it does happen. >> you talked about your stepping on salary. how serious are the other side

of concerns that physicians cannot afford to practice or don't find a compelling? has that been a problem that you've had in your profession? >> i think it's worthwhile talking a little bit about how we pay and how we set salaries. we look at what the average number of academic medical centers across the united states and we to pay for a department in the average in the 90th percentile of that. that means pediatricians don't get paid the same as neurosurgeons do. but we pay according to specialty. the expertise at the individual has a specialty and what a national standard for that specialty is. >> to what extent do medical malpractice lawsuits and premiums were and premiums will places like the cleveland clinic? is the situation getting better or worse? >> tort reform is something that was clearly not part of the

affordable care act, and i think it's an important thing that we're going to have to eventually deal with kick in ohio that we have had toward reform, and it has decreased our costs of malpractice very significantly. we think that there is estimate that about 4% of the health care cost of the united states are attributable to malpractice and people trying to avoid it. >> what are the costs and benefits of medical tourism were americans go to other nations for major procedures that are very costly in the u.s.? >> it's interesting that there's been a great deal made out of people leaving the united states to give care outside the united states. and the data essential except medical tourism principally to places like india and singapore. and it always get the data about the numbers that go there.

the vast, vast majority of those are from southeast asia and the middle east. and not from the united states. so it is a trickle of people who leave the united states for health care outside. i think it is almost negligible economic influence on health care costs in the united states. >> did the people who utilize your 2424 hour call service have to have insurance? >> no. >> aren't there other factors been smoking and obesity that cause ill health like chemical, air and water quality, and what are you doing about these? [laughter] >> you guys are mean. there is no question that there are multiple other things that affect health care, but those are, those are the three really big ones. the thing that concerns me, quite frankly, is the epidemic

of autism. autism, frankly, was something that was not seen when most of us were kids. and now it's one in 88 diapers. the applications for that both for society and for the economics are stunning. at the other end of life, the other thing that concerns us is alzheimer's disease. if you get to be 80 years old, the chance of having alzheimer's is 25%. the economics of that, and it's now risen into the top, one of the top seven causes of death in the united states. the implications of the two things at the beginning and end of life are stunning. and until we begin to identify whether it's an environmental factor over just other factors, begin to deal with those is going to put a huge burden on

the cost of health care, both in the united states and around the world. >> what recommendations do you have to give schools to change their lunch menus and vending machines away from junk food to healthier offerings? >> we are very fortunate at the cleveland clinic to have mike roizen was achieve wellness officer at the cleveland clinic, and he is reached out in schools of cleveland and we began to actively help them to improve the quality of their lunch meals that they serve. and this has been a big effort that has gone on a long time. the other corollary of that is the epidemic of childhood obesity, which is directly related to school grades, and we have done a great deal of research on that particular topic, as well. so the food issue in the schools is a cute. we're trying to deal with it locally. i think this is going to be

something that has to be taken up on a national issue probably right here in washington. there are three some agencies by the way here in washington that regulate food in one way or another at this point. >> how was it affordable care act affect the medical innovation? >> i'm a little concerned about the beginning to look at the efficacy of a drug or a device when it's in practice, decide what will pay for it or not it or not. let me keep you an example. eq develop a heart valve can be take you about 10 years of work with animals and through the regular process to get that approved by the fda to be sold. if you're going to tell whether one heart valve isn't better than the part of it will take you another 10 years to be able to understand that. i don't think there are very

many venture capitalists who are willing to invest in a 20 year project. so i'm concerned, frankly, that beginning to fund things on that basis will begin to drive a lot of the innovation out of health care in the united states. and you have to realize that health care and products that are developed here are sold all over the world in major exports of the cleveland clinic whether the pharmaceuticals or devices, or other things used in health care. and that may well slow because right now we know quite clearly that the rate of tort process is a lot faster outside the united states dan is inside the united states. i think we also have to remember sort of on a bigger scale that you can't do anything new without risk. and ask society become so risk averse, we are not going to see innovation that has driven health care to the point which

has doubled the life expectancy in the united states in the last 100 years. >> republicans in congress have talked about the need to repeal and replace obama's health care law. are there any aspects of the law you would repeal, and what would you replace them with? >> let me defer just a little bit on that. [laughter] i think more importantly we have to say that the law does a couple things very well and something that doesn't do quite so well. first of all, we know that it's not going to control costs. so we're going to have to do that. and is probably going to be led by the private sector. and one of the things about controlling costs is there's not a lot in the law about providing incentives to take care of themselves. and i would like to see more incentive for people to do that. and interestingly, just recently

we helped senator biden and senator portman introduce a bill in the united states senate that would set up criterion for people under medicare to begin to have financial incentives for meeting various milestones. keeping their weight under control, blood pressure, et cetera. and we found that very small incentives, financial incentives drive significant behavior. by that i mean we found, for example, we have 3000 diabetics, only 15% of those were seeing a doctor regularly. and we were shocked when we found that. so what we did is we put a series of incentives in place, now 50% people with chronic disease are in chronic disease management, with the wellness that i talk to you about before, with a financial incentives. we have now seen our cost curve

flatten so we are no longer seeing inflation and the cost curve looking after our patien patience. >> which other health care facilities to you considered to be innovative? have any other clinics had ideas you found it impressive? >> innovation can happen anyplace. and we see it coming across sorts of places. i don't think that you can look at health care and expected to come from one organization. i think they're great things happening on multiple locations. i think the important thing is to go and try to find those and incorporate them boldly into your organization. a number of years ago, i told everyone of the employees of, dr. bliss of the cleveland clinic that i asked him to take one trip year, just go and learn something new someplace but i didn't care where in the world they went. and so i thought we're turning loose a couple thousand spies to go find some really good things. and so i think there are lots of places come and we have to look

for new ideas wherever we can find them. >> what is the impact of providing more home-based medical care for elders? >> the thing that is driving home care is the fact that the diseases change. people are now have chronic diseases that are not going to be looked at in the hospital come and better be looked after at home. implications are that first of all we have to build a system to do that, and secondly, it's going to reduce the cost of looking after patients and they'll be better cared for at home. ended up at anybody would rather be in the hospital and be at home, and that's the direction we're trying to move. >> we're almost out of time for before asking the last question with a couple of housekeeping matters to take care. first of all i'd like to remind you all of our upcoming speakers. on july 24, judy woodruff and gwen ifill will discuss the

complex issues in play and the rest of the november 6 general election. on august 20, general james amos, debt of the u.s. marine corps will discuss the role of marines as america's crisis response force. and on september 6, kathleen turner, iconic film and stage star will discuss reproductive rights in the state of women's health. and on october 2 secretary arne duncan u.s. department of education will be here. i would like to present our guests with traditional national press club mug. to be is of course a low-calorie healthy beverages last night and the last question, traditionally hospital but has been regarded as being pretty terrible, bland and uninspired to do you sample patients food and any advice or other hospital? [laughter] ice sample patients food every day at lunch. and thank you very much for the opportunity to be here.

[applause] >> thank you for coming today. i do also like to thank the national press club staff, including his journalism institute and broadcast and for organizing today's event. finally, here's reminder that you can find more information about the national press club on a website. also if you like to get a transcript of today's program, please checkout our website. again, it is www.press.org. thank you. we are adjourned. [applause] [inaudible conversations] ..

bush and clinton and bush and obama have done more to confirm box's production of the rich getting richer and everyone else slowing behind than 75 years of the soviet union perhaps. the senate armed services

committee heard from senior military nominees for air force chief of staff come u.s. southern command and national guard bureau chief. members asked the nominee is a range of questions focusing on the impact of budget cuts through the department of defense, sexual assault crimes in the military, drug trafficking and shifting focus to the asia-pacific region. senator carl levin, democrat from michigan, shared this two and a half hour confirmation hearing. >> good morning everybody. this morning of the committee welcomes three distinguished military nominees, general marks welsh come united states air force who is nominated to be chief of staff of the air force. lieutenant general john kelly, united states marine corps

nominated to be the commander of u.s. southern command commander lt. general frank grass, army national guard, who is nominated to be the chief of the national guard bureau. we've thank you all for your decades of service to the nation and for your willingness to continue to serve in these positions with such a great responsibility. i'd also like to welcome mant to thank your family members, some of whom are here this morning. the long hours and the hard work that are put in by our senior military officers require a commitment and sacrifice, not only from our nominees, but from their families. our nation is indented not just to you for your service, but to your families. and it is to regard as the tradition of this committee to invite each of you during your opening remarks to introduce the family members or others who are here with you this morning.

general welsh as the perspectives chief of staff of the air force, who will face the difficult tasks of recruiting and retaining a quality force and maintaining current readiness to conduct the ongoing war on terrorism. while at the same time, transforming the air force's force structure to deal with threats of the future in the face of difficult cost and scheduling problems they year force major acquisition programs. many of the ongoing challenges facing the department of the air force center on acquisition programs. and as chief of staff, general welsh will be leading the air force and define requirements for the acquisition community to fill. some programs have been proceeding reasonably well, such as the tanker replacement program. timoney acquisition programs are mired down in problems, which unless resolved will make it

difficult if not impossible to afford the air force that we need. perhaps greater concern is the fiscal year 2013 plan for realigning force structure for the air force for the cuts proposed fall disproportionately upon the international guard. historically, the air force has been credited for having a very good relationship with its reserve components. and that is essential because it relies more heavily on the reserve forces than the other military departments. with the presentation of the air force fiscal year 2013 proposals, through making force structure reductions, however, the air force appears to have decided against relying as much on the air national guard to provide tactical fighters and airlift capabilities. the firestorm which erupted from the proposal resulted in congress stepping in. this committee has proposed the

creation of a national commitment on the structure of the air force to advise congress on appropriate criteria that should be used for the force structure when planning the air force of the future. general kelly the southcom area of responsibility includes the caribbean from central and south america. the primary threat to the united states emanating from southcom's area of responsibility is the destabilizing impact of transnational organized crime. these violent criminal organizations are a real threat to national and international security and southcom is the hub for the department of defense activities to counter this threat and a critical entity to which federal law enforcement agencies are supported. last summer the president released the national strategy to combat transnational organized crime. general kelly, you will be one

of the key and planters and the department of defense of the president's strategy and the committee looks forward to hearing your views on this threat in southcom's ongoing role in the implementation of this strategy. over the last two decades kosoff,'s most significant operations have been supporting the colombian unified campaign against the revolutionary armed forces of colombia or farc and other transnational criminal organizations. southcom's trained and a good activities and columbia have seen success as the colombian government is backing control of the vast majority of its territory and general kelly, you will be responsible for maintaining this important military to military relationship. the success of southcom support operations in colombia however has an apartment that illegal narcotics trafficking and in the

association of a destabilizing impact have shifted into central america and general kelly the support of southcom to those nations in central america and put in honduras, el salvador and guatemala will be the key focus sutphen southcom. southcom will undoubtedly be called upon to assist the nation's in the aor responding to natural disasters. none of us have forgotten the devastating impact of the earthquakes in haiti and chile or the hurricanes that have struck central america. southcom's ability to deploy naval and deviation assets to assist the recovery in the immediate aftermath of these natural disasters is a critical capability. and this committee is strongly supported these efforts over the years and will continue to do so. general grass, this is the first time this committee is called a nomination hearing for the chief of the national guard bureau.

we are doing so now because of last year's legislation making the chief the national guard bureau a member of the joint chiefs of staff with the specific responsibility of addressing matters involving long federalized national guard forces in support of homeland defense and civil goal to beat possible support missions. the chief of the national guard bureau is also a principal what advisor to the secretary of the fed. for the chairman of the joint chiefs of staff on matters involving long federalized national guard forces and on other matters as determined by a secretary of defense and also as the principal advisor to the secretary of the army and chief of staff of the army to the air force and the chief of staff of the air force on matters relating to the national guard from the army national guard of the united states and the air national guard of the united

states. general grass is serving as the deputy commander of u.s. northern command the combatant commander responsible for homeland defense and civil support missions to other federal agencies and states and responding to natural man-made disasters. in carrying out these missions, northern command relies on a well coordinated and collaborative relationship with the national guard bureau and state national guard forces. general grass is also the vice commander of the united states element of the north american aerospace defense command and with canada to protect the aerospace in the maritime approach to north america and during your improvement -- excuse to come in your tenure at northern command there's been notable in improvements the general authorities and cooperation between the defense department, the state's, the national guard bureau and the

reserves on the civil support missions. and as a result, the nation is in a better position to respond to emergencies. so we welcome you all. you are extremely well qualified to the positions that you've been nominated to before turning to your for your opening statement on will call on senator mccain. >> thank you mr. chairman. i would join in welcoming the nominees and appreciation to them for their years of service as well as the family members who join them today. if confirmed the environment and would face would be as you know uncertain and potentially volatile. while we are winding down combat operations in afghanistan, we are also facing the most insidious range of threats to the country and a long time. we are, however, also entering a period of declining defense budgets and lower mobilization levels for the foreseeable future. what this will mean for the active and reserve components

mix particularly within the air force and power in this context the national guard will maintain desired readiness are open questions. so general welsh and general grass coming your vision for the air force and the national guard will be vital. general welsh i look forward to hearing how you plan to cultivate with the prevalence within with the pentagon's acquisition chief called acquisition malpractice and what the deputy secretary defense agreed before this committee was a culture of corruption, personal accountability in the acquisition process starting with setting realistic and realizable requirements and continually addressing affordability across the system lifecycles. the general grassley the air force plan under its fiscal year 2013 budget request is to cut almost 10,000 personnel and retire or realign the various challenges in congress including

on this committee. i believe the guard and reserve must accept and manage some level of the reductions such as the active forces drawn down deutsch the planned budget cuts and deep cuts that may occur as the result of sequestration. i look forward to your contributions to the decisions regarding inevitable military force structure reductions. general kelly, the storage of transnational criminal organizations continues to wreck havoc throughout the southern command area of responsibility. despite billions of dollars in investments, we have yet to make any meaningful system allin pact on the flow of narcotics and other illicit materials through the region and ultimately into the u.s.. as you and i discussed yesterday, the best measure of how we are doing and restricting the flow of drugs into this country is the price amounts of cocaine in the street in any

major city in america. that price has not gone up. despite the billions of dollars of effort that we have devoted to it, and in my view we will pursue this more in the questioning we are going to have to have a national conversation about drugs and the demand for illegal drugs in this country. in the meantime, i think you've got to start thinking outside the box as to how we can come up with innovative ways to restrict or at least dramatically reduce the flow of drugs across the southern border which is killing our young americans, young and old. to all of our nominees i would like your military opinion about the impact of sequestration. the department of defense has already been directed to cut budgets over ten years by all the takeover fight for a $50 billion. and subject to another $500 billion if the congress and the white house don't agree

before january on a plan to avoid automatic budget cuts known as sequestration. members of this committee and putting myself have been urging the department to provide us with an assessment of how harmful these cuts could be to our military readiness particularly of military personnel accounts are not exempted from sequestration but the president has inexplicably maintained that he would veto any legislation that would repeal these cuts. just a few days ago the air force chief of staff general schwartz observed the impending defense cuts could invalidate contracts, pushed the cost of weapons systems higher and if not handled wisely could turn the military into a hollow force. specifically, she said that these reductions are not on the right way, that is a possibility maybe even a probability. general welsh and general dress if you are confirmed such remember of the joint chiefs of staff, i would expect you number one, to bring them on the joint chiefs deliberations come in

your best military judgment on whether and how the air force and the national guard respectfully, respectively must prepare today for the draconian cuts required under the sequestration and number two, to provide the committee with a benefit of that judgment if you disagree with my expectation, i would like to hear at this hearing. negotiating the department through this on surgeon period will require sound and seasoned leadership with this in mind i look forward to your testimony today. thank you, mr. chairman. >> thank you very much, senator mccain. let me call first on general welsh. by becoming you can leave them on. i don't think you turn them on and off. stomachs before mr. chairman.

ranking member mccain, members of the committee, my wife is with us this morning. she is sitting to my right in the blue suits in the front row. with her is her sister, her friend, wife of air force lt. general stephen mueller and then mr. steve massey of a family friend who is a very proud virginia native and a great patriot. betty and i have been married for 34 years and i've always found our relationship fascinating because she needs me for absolutely nothing. and i need her for everything. she is the most beautiful, talented intelligent woman i have ever known and she has raised our great children mark, john, matt and liz while i wander the world. sheave rocks and if you are confirming her this morning we would like to take about five minutes by an confident you will be more delivered with me. mr. chairman, thank you so much for allowing her to be here. it is a tremendous honor and a humbling experience to be nominated by the commander-in-chief to serve as the chief of staff by the united states air force and i would

like to thank the president and secretary leon panetta and adamle for their confidence. i'd also like to thank general schwartz for his leadership of the air force for the past four years. i believe that history shows times are always challenging and these times are certainly no different. but everyone that congratulate me on this nomination immediately mentions the significant challenges we face and despite the difficult fiscal environment, i'm very excited about the opportunity to work with you to find a way to reduce our deficit and to keep our air force trained, equipped and ready to defend our nation, its citizens and its interests. i will let me by an even more excited about the opportunity to lead the men and women that served in the finest air force and marvel at how they will overcome these challenges. today and every day those chairmen of people than cargo to every corner of the world. the conduct the i guess our obligations for every commander. the conduct life-saving medical eve activations for the wounded

warriors and bring the fallen comrades come to the nation's families that love them. they cleared the ied and to supply with convoys they deliver space-based communications, navigation and missile defense warnings. a fight oulder to shoulder with army navy and marine corps comrades on the battlefield and patrolled the sky above them. the lives are on the line. if confirmed i fully accept the response of the to stand beside secretary donnelly and lead all the airline 690,000 strong. active guard reserve and civilian air men who serve the nation as part of an unbeatable joint team. 23 special leaders of the team are sitting next to me today. national guard soldiers and airmen of tygart sharing the nomination of general frank grass and john kelly is simply a great officer and a leader who sacrificed more for this nation than most of us can even comprehend. it is truly an honor to be here with them. mr. chairman to allow a brief personal reflection as i close.

i was born into a military family. i was blessed with the example of to grandfathers that served in the united states army in world war i. my father was an army air corps and the united states air force officer for 34 years. she served in the three wars. he was the greatest patriot and best year force officer i have ever known. and if he were alive mr. truman would have received a letter from him. but a proud father and a proud american. thanking you for allowing his son the privilege of attending this hearing. because this is a privilege. thank you mr. chairman and members of the committee, i look forward to your questions. >> thank you general it's a very moving statement. general kelly, you our next. >> chairman levin, mccain, distinguished members of the committee i am honored to appear before you today as the nomination to command the united states southern command. it's a privilege to join the other officers on this panel. general mark welsh welsh both of

whom i respect and have had the pleasure of working with the past. i'm joined by my wife who for 35 years has been my partner from everything i've done in the service to this nation. i wouldn't be here today without her. she has done so much and has given so much over the years not just to the kelly's but every military family she could touch and i want to introduce her to you today and with all due respect she's the woman in the front row. [laughter] i also want to mention briefly a few other of my family members that couldn't be here today. my precious daughter kathleen who spends every waking hour caring for when the warriors and families of walter reed. my two daughters in law, heather and andrea was crazy enough to marry marines and a time of war. the women of amazing substance. and finally, our two sons john and robert both marines, but combat veterans and multiple

combat tours in the fight, both men of amazing character and bravery. i wish the five of them could be with us here today. i'd like to thank secretary panetta and president obama for the honor of being nominated. i've been honored to work alongside secretary leon panetta and i sincerely appreciate the trust and confidence she and the president has shown in considering me for this command. i'd like to think the committee for the support provided the soldiers, sailors, airmen, marines and their families who serve the nation every day here at home and overseas. i personally have seen the difference your support mixed day in and day out for these heroes. mr. chairman, the past three years general but frazier has which the united states southern command great distinction. his leadership and vision will leave a tremendous legacy is confirmed i hope to build upon. he pointed out what american and caribbean is a regional characterized by an array of more traditional securities alleges and emerging opportunities.

no doubt, there are any number of threats to the security will the least of which are illicit trafficking particularly in drugs and precursors in the growing sophistication of the transnational organized crime syndicates. cyber and energy security, natural disasters, humanitarian crises and malignant collection for both inside and outside of the region are challenges. each of these however also presents an opportunity allowing us to engage and cooperate with countries in the region. if confirmed i look forward to working with the men and women of u.s. southern command as well as the dozens of civilian interagency partners that continue the important mission of ensuring the defense of the united states by building strong cable partners who share in the responsibility of safeguarding the hemisphere. once again, i'm honored, humbled to have been nominated for this position and grateful for the opportunity to appear before you

today. >> thank you so much congenital for your statement. >> chairman 11, ranking member mccain, distinguished members of the committee, it is an honor and privilege to be here today. i am honored president obama and secretary leon panetta nominated me to be the 27th chief of the national guard bureau. i am also honored to testify with general welsh and general kelly. two great americans whose sacrifice and service stands nearly eight decades. i would like to take this opportunity to introduce my wife patricia who stood by my side throughout my career. my service in the national guard wouldn't have been possible without her tremendous support as she raised our five children amanda, joe delauro, patrick. over the past 12 years our family has grown. we've had an addition of a wonderful daughter-in-law, to

wonderful songs in all and eight beautiful grandchildren. mr. chairman, over the past four years, general craig mckinley has led the guard bureau for a historical transformations. the national guard achievements could not have occurred without a tremendous leadership of previous chiefs of the national guard, directors of the army and air national guard, the general, the senior enlisted and most importantly, the sacrifice and commitment of the citizen soldiers, airmen and their families. today i sit before you with confidence that you're national guard is more ready and capable and a rapidly deployable than ever before in the nation's history. and also, ready to respond to disasters in the states, territories and the district of columbia. the past decade has also demonstrated that the national guard is an operational force and a critical partner with the

army and the air force in all missions, all contingencies and on the north american continent. today our nation faces the challenge in threat environment one that is asymmetric and more dangerous than any other in history. these threats come in many forms. the citizen soldiers and airmen of the national guard or skilled combat veterans and they will continue to provide value-added solutions to the national security. if confirmed, i will work to ensure the capabilities gained since 9/11 are not lost and the investment not squandered. i will partner with the congress, with the army and the air force and seek counsel from the generals so the national guard is always ready and is always there. to the men and women and families of the army and the air national guard, and i am humbled to be nominated as the chief if confirmed, you can know that i

will be your strongest advocate. i want to thank this committee for your support of the national guard most valuable assets. our soldiers, airmen and their families. chairman levin, ranking member mccain and members of the senate armed services committee, i think each of you for the opportunity to appear before you today. if confirmed, i am committed to working with this committee to ensure the national guard forces remain a vital part of the best military and the world and i look forward to your questions. >> thank you. i wish every american could hear your opening statements today. they are powerful moving statements. we have some standard questions that we ask our nominees, and i would ask each of you to respond. in order to exercise our responsibilities, these are the questions that we ask. have you here to applicable laws and regulations governing the

conflict of interest? >> i have. >> do you agree when asked to give your views even those under different from the administration in power? >> i do. >> have you assumed duties or undertaken actions that appear to present the outcome of the confirmation process? >> i have not. >> will you ensure that your stuff complies with deadlines established for requested communications including questions for the record in hearings? >> i will. as the mackall e cory in protivin witnesses and brief responses to congressional requests? >> i will. >> will those witnesses be protected from reprisals from testimony or briefings? >> they will. >> do you agree to provide documents including copies of electronic forms of communications made timely manner when requested? bayh dewey constituting the committee or to consult with the committee regarding the basis for any good faith delay or denial in providing such

documents? >> alladi do we estimate let's try seven minutes for the first round today. general welsh, we've talked in my office about the budget of the air force for 2013 and the budget cuts proportionately deeper in the air national guard as compared to personnel reductions proposed for the actor force for the air force reserve. can you give your view of that budget request? >> is mr. chairman, thank you in the budget request clearly when it presented to the helen became obvious that we have gotten into the position where we have a proposal that is simply not executable. i was not a part of the discussions in the coordination will lead to that. i did hear their force briefing to the senior leadership about

where there was a decision made on the actual ratio of the force structure to be included, but i have no idea of the process to turn it into individual organizations units and equipment. having said that, i think what matters the most today is how we move forward from here because we are in a place we cannot stay. however we move forward it has to be together. i believe that there needs to be a more inclusive coordination process on the budget clearly we learned that this year. it has to include things like title xxxii requirements of the front end of the discussion that has to include better coordination and information sharing not just with the air national guard and air force reserve, what with the national guard bureau and clearly the link between the national guard bureau and the council of governors has to be energized and a more meaningful projective to become productive way of i would offer if confirmed by will work very closely with general grass and with our great air national guard commander reserve director to help adjust the

process so that we never end up here again. >> thank you for that. general welsh, let me ask you about a policy question which we asked in our pre-hearing questions and it relates to the european basis and you indicated in your answer that we should consider reductions in consolidation opportunities in europe and the planning must begin with a careful assessment of the missions in europe but that you are willing to take a look at possible reductions and consolidations. i just wonder if you know going in of any possiblities are you just want to go in there with them open mind. >> no, mr. sherman we've been working on this for about a year we've been discussing with the staff the options the might be available. some members of the department

of defense we have options with them as well. i think the most important place that i believe we came with an initial the agreement on is the idea that there are signed during missions that the united states needs to have the united states air force accomplish in the european and african continents. and i think that an during mission is easy to identify and i included that in my answers to the questions if we can agree on that the debate can center on the other requirement the nation may or may not have in the future. and i think that is a policy question. i think it involves both the executive and the legislation bridge of the government. our party actually is fairly simple once the questions are answered it is to tell you exactly what is required and where it is best situated to base the forces to do those types of things that america needs the options to accomplish. >> we are very much interested in the missions and also interested in the possibility of consultations. we've got to make some savings

and that's got to continue to be one possible location so keep us informed on that if you would. >> this but we had a number of seual assaults in 2013. all of the service is in the department of defense at that time beefed up their sexual assault prevention and response programs apparently though they have not yet had the desire because the 12 military training instructors for example at the air force basic military training and joint base in san antonio in texas had been accused now of sexual misconduct ranging from on professional relationships to more than 30 e-mail record becomes. there are several pending court-martials which obviously we would not ask you to comment on specifically. the commander has been relieved

but can you get your assessment on the air force and sexual assault prevention response program at this time? >> yes, mr. chairman, i can. i think you put your finger on the statement that what we have been doing is not working. it's not for lack of effort in the department of defense, the secretary of the chairman our service chief and the air force and the other service chiefs have been very vocal about this crime about ways to approach preventing it and about care for victims etc.. we have done a lot of things to try to help over the last ten years or so. we have institutionalized training at every level from the excessive officer enlisted to the commander training and air force. we do annual refresher training. we have completed the bystander intervention for the uniformed air force to read over the last six months or so. we have new special prosecutors. we have additional osi

investigators. we have days in every unit to sit down and discuss at. everyone is trying to do the right thing and figure out some way of stopping this. but the fact is we have and in fact we haven't even reversed the trend. now all those things are good things to do. but it's not enough. we have worked on dictum care, reporting. the one thing none of us figured out how to do is stop the perpetrator before the crime. and so, mr. chairman, i think there is a lot more work to be done. the simple fact is the goal for the sexual assault in the united states air force, and i am sure my comrades here would agree on all the services is not a declining trend. it's a zero. we don't accept that there can be more than zero aircraft accents were zero suicides and this crime of the goal is zero. if you're commander come if you are not a supervisor if you're

if you are a commander and supervisor and you are not directly and aggressively involved in speaking out about this issue in your unit the new or not a part of the solution you are a part of the problem and we have to get that institutionalized and air force. the of the we need to do i believe this to get a series of things to attack the perpetrator side of the equation. maybe it is on the entry in the service. i don't believe there is a tool that will allow us to help in that regard to identify the predators. we need to do better a small group in the united states air force to better know the people that we work closely by and we've instituted a program to do that over the last several months i don't know the return on that investment is going to be but their investment is very, very small. it's about an hour a month to sit and care more about the people you work with from day to day because i believe that the better you know them are now you the better you will take care of them. i think there are serious things we need to do, mr. chairman, to address this problem.

what i know is we cannot rest on our morals. we have done a lot of work and we have made no difference. >> we thank you for that. it's a very thoughtful answer to an extremely important question. senator mccain. >> thank you para congenital welsh and general grass, as you know, the secretary of defense has made it very clear that the effect sequestration in his words would be catastrophic damaging to the national security. a few days ago general schwartz observed that the sequestration could invalidate contracts, push the cost of weapons systems higher and if not handled wisely could turn the military into a hollow force. do you agree congenital welsh congenital grass with of those assessments of the impact of sequestration? >> senator mccain i agree the effect would be catastrophic. as an operational commander sitting in my current job of

course doing due diligence of operational activity in the field that would be affected instantly by sequestration cuts. we tried to look at what would be the impact and even up the operational level, the impact is almost immediate just from the perspective. if you assume a 14% budget cut across the board which is what i am assuming as i looked on the road everything is affected. our ability to provide the units as affected, malaysia keep airplanes flying and support counterterrorism activity either centcom or africom is affected. our ability to train aircrews is affected and eventually of course every modernization program is affected in a major way especially some of the key ones we are going to rely on so much over the next ten to 20 years as a jew to populate the new capabilities that we need and the trade space will become readiness and modernization. that is affordable treat space

to be operating. >> senator mccain on every with secretary panetta as well as german dempsey the sequestration would be devastating to the department of defense. general kelly as we discussed previously, one of the major domestic challenges we face is the flow of illegal drugs into the country the majority of which comes from south of the border. we know that it's resulted in 50,000 mexican citizens being held in the past few years the breakdown in law and order and corruption and it is extended throughout our hemisphere. it's destabilized some of the smaller countries in central america. one of the city's i believe in honduras is now the murder capital of the world. is that correct? >> that is correct, senator. >> and all of this can be traced to the flow of illegal drugs

into our country. i guess my first question is do you think that it is a fact that given the cost of an ounce of cocaine in every major city in america is not any higher than it was years ago as an indication that we are not succeeding in restricting or reducing the flow of drugs into this country? >> i agree that might be the best. >> and so, what is your proposal as to how we can -- we know that in colombia it was a success. but overall, it is not impacted the use of drugs in this country and it's probably all of your and my area of responsibility but doesn't this have a lot to do with the law glamorization of the use of drugs, the acceptance in certain levels of our society that it's kind of the in thing to do we see that in the media

quite often and movies and television. have you got an idea as to what we need to do to try to prevent this and by the way before you mention that, wouldn't you agree that the majority of the drugs still flow across the arizonan mexico border? >> senator, the second point, absolutely. most of the drugs coming to america from the south originate or come out of the production facility or the production field in colombia more so today are increasingly out of places like bolivia, some with peru as well in fact peru has overtaken bolivia. correction come overtaken colombia is the number one source of production of cocaine. cocaine about a thousand metric tons of it a year starts its journey north to the united states. most out of venezuela by various

means. submersibles and aviation. most of that makes its way -- semidey myett really the anecdote of the submarine that you talked yesterday. >> the cost of the submarine. $2 million. >> building the submarine's up in the smaller rivers and venezuela primarily. it costs about $2 million. all of it is off-the-shelf technology. it takes about a year to build about $2 million to build and when it gets to honduras and off loads to the smaller vessels which is the normal way through, they need about two and 50 million-dollar profit and then they just turn around and do it again and again and again. so the profits are astronomical but complete the comment most of it makes its way to know what ramallah, hundred us is then shipped through mexico and across the texas and arizona border particularly in the arizona border because of the nature of the terrain. as for is the glamorization, the

problem in my estimation is if you ask anyone in south america and central america they will tell you the same thing the problem is in the united states made its the demand problem. it's astronomically think this country if my numbers are correct it costs america almost $200 billion a year. that is primarily lost productivity but obviously the law enforcement we have program and what not to wonder billion dollars. i think we've put something in the neighborhood about 26 billion in terms of domestic and international law enforcement to try to keep it from coming here is huge amounts. a thousand tons or so that started its journey appeared only five or six times gets through. that 546-ton is spread across america every community and every city and it costs us

dearly. the human capital loan is outrageous so i think the demand is where the problem starts and that is where the solution is. >> and there is a serious problem of corruption and the small center american countries. estimates pointed out many times honduras, guatemala, el salvador, they've had to start the transition using their military which no one likes and certainly they don't want the the transition in the military which was corrupt and more effective to deal with the drug because the amount of corruption and frankly in the statehouses and capitals. >> my time is expired. this is an issue that really picks up great importance from the national security standpoint, and i hope in the future we will be able to pursue this issue with the numbers that the general just pointed out not only drugs that the cost to the american people and taxpayers is

beyond calculation. we look for to working with you. thank you mr. chairman. >> thank you, senator mccain and coincidentally, the permanent subcommittee on investigations which had a hearing a couple days ago now looking at the money laundering that goes on between mexico and the united states how that money gets laundered after the money is put in place here in the united states smuggle to mexico into a bank in mexico which is an affiliate of its hsbc through the correspondent attacks in those affiliate's the global bank and i will take more time to do it other than to recommend the folks like senator mccain who fought so hard in this area to try to stop to take a look at the way this billions of dollars

in the cash is laundered each year. senator lieberman? >> thanks mr. chairman and to the three of you for your service for the opening statements which i agree with the chairman or compelling with your service and opening statements and your testimony reminds us or me why the u.s. military remains perhaps the only great institution on our society that continues to enjoy the respect, the almost role respect of the american people and deserve that and i thank you for that. general, in your answers to the committee's advanced policy when you're estimates and priorities i was quite compressed and interested that your first priority was kai and i quote, continuing to strengthen the nuclear enterprise. and i wanted to ask first a few questions about that. i assume from that that you

believe that the continued strength of america's nuclear weapons capability is a central part of our fulfilling our responsibility to protect our national security >> senator, i personally do believe that. more importantly, from my perspective, it is clearly the policy decision of the nation that we want to maintain this capability and the united states air force has been tasked with maintaining two-thirds from the perspective. there's been a lot of work done in the air force over the last four years as everybody on the committee knows to try to reverse the trend of seeming inattention and actual inattention in some cases to that missionary. many people start with our secretary have had this as a clear priority and stressed it repeatedly. we have made a lot of progress. but we can't relax and pat yourself on the back and think we are there because we are not.

this is an everyday focus area for us and has to be. >> give us a little more detail on the areas of the seeming on attention have been for some people worry it has been. >> senator, i think the biggest thing -- let me start on the practical perspective because that is where i am sitting now. in europe we have a tactical mission and we have a security problem but we deal with. we found even though there were not major problems in the past and in europe in that particular mission set there were a number of things that had just over time become less than ideal if i can say it that way there was no clear her replacement plan. the mission discussions that have gotten routine focus on a particular mission said that isn't what we were doing from day to day with ever operational crew it had become secondary to the war fight going on in the least. understandable from the human perspective but fighting the

actions the chief and secretary of taken to refocus on this problem to reorganize internally to stand up airforce strike command and organizations like the nuclear warfare center that focus on the details required to keep discipline in all parts of this enterprise have been very, very helpful. >> some groups of citizens, respected citizens in putting some retired military have called in the recent times to set the goal of the elimination of the nuclear weapons than as a part of that have suggested that the united states unilaterally could and should reduce the number of warheads that we have. i want to ask you if you what to give your response to those ideas. >> my personal opinion is the concept for the reciprocity is very important in the business. i don't think we should unilaterally never believed to lower the numbers.

>> thank you. one other question, general is about the half 35 joint strike fighter you identify as your top modernization priority. however, as we talk about the impact from a devastating impact of sequestration i think we also have to acknowledge that the budget control act is already put. it's not devastating it is very damaging in the restraints on the military spending. the budget proposal, almost 200 more f35 from the five-year defense plan. i want to ask are you satisfied with the progress made by the f35 primm over the past year and do you support the current program of record for 1700f45 over the long term? >> senator, i will admit freely up front i haven't been involved in day-to-day over the last year with the progress of the

program. i will tell you what i believe based on my assessment as it stands today. i'm excited about the program because i believe the nation needs it as an operational commander i know the threat will help us deal with. just looking at a potential scenario and syria you can see the application of the system very clearly as a part of a joint team not just an air force effort and enable other joint activities on the battlefield. our international partners, six of the seven principal partners in europe are very excited about the capability and relying on us to deliver as is our air force. we are commanded to this. i am concerned about the program not just because the budget control act but because the problems we've had to this day. our manufacturing process, assembly line is not up to speed and running to the level we hope to would be at this point in time which means we haven't been able to build and deliver the jets on schedule or accurately

predicted cost. i think that cost is a major concern. if we can clearly identify how much this will cost to buy and fly after we acquired it then we really have no idea how many we can afford or how many we should expect to receive any realistic look to the future. so i think putting pressure on the company, on the acquisition process internal to the department is mandatory. we have to stay focused every day and if confirmed, the would-be a daily yvette for me. i will tell you, sir, i also believe that there are good things happening. the aircraft has been delivered almost 1900 hours on the air force of reforming very well in the test programs. the pilots are making comments like dependable from a great performance. so, there are good trend is occurring. we just started the local area activity operations to fly in the area to prepare for our upcoming program we hope to start in by the end of the year,

and i would just go back to the idea that if we continue this progress that we seem to be moving down to words, they're starting to meet the expected windows now we have to continue this corps. >> thank you very much. with thank you, senator lieberman. senator inhofe. >> thank you mr. chairman let me we repeat what has already been said i look forward to serving with all of you. general welsh, if i don't run out of time i think we are going to talk about the aging fleet and let me tell you how much i appreciate all three of you spending time personally with me in my office and the rest i think that is more productive than these hearings, but i may have some -- on to ask you to answer that question for the record. on the avionics modernization permit is one that has just been

very popular by all segments right now. we have had three of the four committees supporting this in their early markups, and it's one that the general said the air force provides military capabilities equal to or greater than the alternative programs and with less cost than those programs. now, i know that in the president's budget they have terminated this program not necessarily terminated the talk about the c-130 program. it's my understanding and i have gone into this and looked at it that there are a lot of things that were not made in the devaluation. for example, the program does require to have a navigated on board. if we were to find that c-130 program can be acquired actually cheaper than the c-130 program

would you support that? >> thank you come as a matter. i will tell you i was not involved in the discussions related to the program or the adjustments to it, so i can't speak for the secretary or the chief on the decisions they made. my general understanding of it is it was a part of it in the budget control act discussions were they made some tough choices. >> what i was getting at is in the event that it turns out that the program is less expensive i would ask you could even do that for the record if you want to just let me know if your feelings are and also for the record because it wouldn't be time to get, again, according general schwartz it says notwithstanding the aoa jay starts capability on the block. i would like to have you for the record give us your opinion on the evaluation of that program if you would do that. stat yes, sir, i will submit the chairman in his opening remarks

to general kelly talked-about the train and equip program, and i would add to that what i would call ccif train and equip program. that is a big thing in the area you are going and as a matter of fact i think in costa rica, the defense minister is a product of the program and he's been talking about this. at the same time, i'm happy to say that we have taken a different look at this than we used to. we used to consider doing a favor in these countries. they are doing a favor to us. we know that china is involved in the area and so is iran. i would like to have you give your opinion of that program and what the plans are in the areas.

>> i think any program -- >> and train and equip. >> i think any program that broadens and deepens the relationship with nations milton l. context in that part of the world or any part of the world is -- you get a lot of bang for the buck and to the degree that i understand, the issues certainly to expand the programs throughout the region. >> i agree wholeheartedly with that. once these are developed it will end and they are always there. now, you are going to have a program in your area and you had a chance to spend some time and look and evaluate the opportunity we have that that resource which i might say is the best bargain that we have $84,000 a year and half the time they don't even collect. >> i certainly not traveled

there recently and can't confirm one of the first things i will get intimately involved in this confirmed. >> okay. that's good. general grassley, you talked to my office about the state partnership programs coming and we know that there has been ag a yo problem with that in fact i've read that and i agree that the changes need to be made. do you have any -- have you thought through first of all your evaluation of the program coming and how you are going to overcome some of the problems that are there that were called to our attention by the gao? >> senator, while i served the work of the program very closely with the european command both in the u.s. air force and the u.s. army and tremendous value from that program and i think as we talked one of the things that has come out of that is the additional force from the nato countries and where we have partnered the national guardsmen army and air to fill out the shortfalls in other countries

especially in the balkans and some of the other countries that wanted to deploy by providing that additional skills that we have partnered and provide additional forces. for a very small amount of money it's been a tremendous program and the map 64 countries today. we had one partnership in the northern command that we've worked with and that is what rhode island and the bahamas, and the partnerships and relationships we built and many of our captains and majors will grow up to be colonels and generals and the national guard, and their partners will do the same so that relationship we celebrated the 20 of anniversary will endure so it is definitely money well spent. senator, one thing i think we have to look at very closely and is confirmed i will do is to take a look at how that money is being spent and make sure that every penny that we put into that the taxpayers' dollars are spent for the result.

>> well, my time is expired but for the record i would like to have each one of you write an evaluation or answer the question because i have been deeply disturbed as has other members of the committee on the use of the military for other agendas such as the hidden agenda and we have our jolly green fleet on its way up there now. but do you think that has spending $424 a gallon as the navy did for 20,000 gallons is the best interest for the nation's defense and in the air force $59 a gallon for 11,000 gallons all of this could have been done for $3 a gallon i might add and also the $27 a gallon for the 450,000. is this something that should be done in the military or would it be better done in the department of energy has understand that is the years of this to be doing.

thank you mr. chairman. .. general, good luck. i think you are going to do a great job. the only thing i anticipate is

you will always have a slide boston accent but that's okay. [laughter] general, well again thank you for your service. i want to mention a program that is emerging and get your viewpoint. that is the association program between regular air force units and air national guard units. and this is great potential in terms of the four structure issues you're going to face. we have the 143rd which is the best c-130 j squadron and they are scheduled to be part of this, but it might be appropriate particularly in the context of the budget to keep moving forward this association. it seems to be cost-effective and also it will cool the talent

of the air force in a way that might be unique to the air force, because of the difference between someone with 5000 hours in the air national guard in 5000.-- hours in the regular air force. can you tell me your views on this association? >> senator i grew to end the air force as an institution agrees with you. i've been in numerous discussions in my current job during the business of the pentagon with either the secretary or chief of the staff of the air force who is made the same comment. we have to look at the association for the solution to a number things moving forward. it developing young aviators and different weapons systems at a more rapid pace than we can do in an active squadron. it's a way of augmenting capability for forward deployments and there a lot of pluses to the senator and every time we have either a unit stand up or unit restructuring or force structure change that part of the consideration not to be the association.

>> let me open up for broader topic and that is, you have a situation at lakeland air force base which is real disappointing and that is being very mild. i know you are trouble by it, very much so. we would like to think this is an aberration but are you looking closely into the culture of the air force in terms of -- because of all the services it seems to be the one that is much more specialized early on clear young ballistic personnel, young officers go into various sophisticated specialties flying jet aircraft etc., and that the ability to sort of -- and the organizational supports for the basic command issues and troop leaving issues. sometimes they are not there

because if you are a meteorologist you are not really going to command as a young lieutenant, 30 or 40 people, you will be working with other experts. do you think about that in a systematic way about whether there is some issues that you have to address? >> senator i believe we have tried to it as i said before, our projection just for this year is roughly 600 reported assaults so what we have been doing is not working. we have to work -- look differently at the problem in my view. this certainly isn't a matter of everyone not trying hard. the incident at lack and clearly, from just the little i understand and what everyone is read in the newspaper is horrible. it's completely unacceptable for any institution, not just for the united states air force. i do believe the air force has a unique problem with this crime but we do have a different environment than the other services and they think each of us needs to look at that environment and how it is

impacted and whether it presents an air paternity for something to get that perpetrator part of this as opposed to the other technique we have worked hard at inmate process. we will never make enough progress that we are at least moving in a province -- positive there. i think you're right every environment needs to be looked at and i believe in this specific the specific case you mentioned. general rice is missing about the problem has aggressively done exactly that. he directed an investigation into the specific problem and brought in an outside commander directed investigation to look at the larger cultural problem with that particular training organization which spans all the specialties before they go to specialty training so senator i agree with you. we have to try anything we can. >> i think you put your finger on the issue of predator because that is absolutely contradicting to the essential aspect. the soldiers, airmen, sailors which itself was service and

complete dedication to your subordinates, not exploitation of your subordinates so that is the lesson so thank you very much. general grass, congratulations. i'm glad you mentioned that rhode island has a relationship with the bahamas. we were trying to figure out yesterday which one of his predecessors figured out it was necessary to mention the forces in the middle of winter each year and we couldn't figure it out. but thank you for that. your responsibility as the joint chiefs of staff are addressing matters involving non-federalize national guard forces in support of homeland forces of these are really the state elements of the national guard that have not been federalize. as you approach this task and you're sort of the

groundbreaker. do you see this as essentially a two-way street, where you will be talking to the tags about what they have to do with state resources to enhance their nonfederal activities rather than just simply reporting back to the joint chiefs and saying you know, they need more help for a need for this or they need that? >> senator, first of all because of the chairman and joint chiefs position i see of course as a principle adviser to the secretary as well as the chairman, have to have a very close working relationship, as also with the chief of staff of the air force in chief of staff of the secretary of the army. what i bring to the adjutant general is an understanding of what is happening within the federal government and inside the department of defense. from the state perspective i need to be able to understand what needs the states have to be able to respond, fires, floods,

tornadoes and be able to come together with our partners within dod and find a balance. one of the things, just met with council governors on sunday and we talked a little bit about this. we will be pushing and working very closely with the states to understand their requirements of the homeland and especially working with fema. >> i think that is entirely appropriate. it's just that, given what we are all talking about, the budget limitations of the federal government, that is you identify the gaps particularly nonfederal functions of the national guard, there seems to be also at least the opportunity to talk about how the states might with their own resources begin to fill those and i suspect you are going to at least do that. >> senator in our current assignment at u.s. northern

command, we sat set on a path about two years ago to establish a chemical and biological capability across the nation. part of that path that we were directed by the department of defense to put together was more regionally based. we have learned a lot from that and it is informing now regional plans and state plans which had a level we have never dealt with before. >> i think you are going to play a critical role and you are sort of the pioneer. so, good luck and thank you. >> thank you senator. senator wicker. >> thank you mr. chairman and gentleman thank you or your service. thank you for your excellent testimony already. thank you to your families. we appreciate their service too. gen welsh congratulations on being nominated as our next chief of staff. you have experienced as a commander both europe and the

pacific -- dod has announced a new strategic guidance and counsel aided -- encapsulated as pivot to the pacific. what you think this will mean for the air force? >> senator i believe what it means to us is there is an new strategic focus on the pacific meaning that our air force planning or capabilities to respond to combating commander needs to be focused on the pacific first, without forgetting the activity in the middle east which remains a focused area as well. i think it means that we have to start looking at things like development of combat capabilities to include weapons, to include tactics where we operate and to a greater degree the coordination of maybe with united states navy then we have in the past because of the battle space we would anticipate in the pacific.

it has been clearly and navy battle space for a long time with a very strong air force presence in korea. we have to add the same capabilities to support activities throughout the region of the pacific command and i believe we have already started down the road of me cannot integration and training possible and practical with the force structure we currently have. we have to continue to modernize it. >> thank you. changes in movement of air force personnel? >> senator i do not know right now. i've not i have not been involved in actual discussions on the pacific and i know the pacific air forces doing the same thing we have been doing in europe but with the focus of ensuring we do not lose combat capability in the pacific. we have been looking from the other prospective trying to maintain a partnership while looking at opportunities for consolidation wherever poplis -- possible. if confirmed i will be very involved in those discussions and will look forward to discussing those options. >> thank you.

let me be specific about one recent development in pacific command. i understand that pacific command has recently requested that the global hawk currently in theater not be removed for retirement. now you know the latest, a few months ago, secretary carter told this congress and the world how essential this program is and the decision was made at some point to reverse that. notwithstanding your answer, your written answer supplied, the current requirement for how the isr is being satisfied. with the 27 u2 aircraft and the advanced multi-intelligence sensors. doesn't the pacific commands

request imply that argued to fleet is not entirely sufficient to meet all the combatant commander requests of isr support from the united states military? >> meeting the requirement with a 27 u2's was based on the approved requirement for high-altitude combat air patrols which was three. the air force budget position wasn't the u2 fleet to meet that requirement. the chief of staff of the air force within the last week had decided we will not remove the global hawk at this time from the pacific, europe or the middle east and so we have had a chance to take a look at the mitigation strategy for replacing that loss combat capability as soon as we start to build a airframe. >> who made the decision? >> i believe it was the chief of staff and that is where i heard the direction come from. >> i hope you will continue to work with the committee to give us as much detailed information as you can about that. let me move to a general

question. i told the air force -- i'm told the request is 54 aircraft in this years budget and to look at the situation historic week, the last time this small number was requested was before the birth of the air force, before the army air force and army air corps, before the army air service. is that correct and also the air force has retired or requested to retire almost 600 aircraft in the last four years. should this committee be concerned about these facts and do i have them correct? >> senator you are close. i cannot specifically state the exact number but you are very much in the ballpark with those numbers. i think we should all be concerned about that. i think it's a fact of life as

we look to reverse for structure and cost savings. we will have to modernize the force in some way which means we have to reduce some of our force capacity in order to provide the money to do that. i think the big issue for the air force says that as we move forward for example, if i'm confirmed i believe what are my principles is to tell the air force in a way that is not in air force blue. we support combatant commanders and the nation insecurity. i think over time the united states air force is happening over the next few years and then we may have a balance. it's incumbent upon us to make that clear if that is the way we feel. if confirmed i will make a principle responsibility of mine. >> thank you for that answer. one final, one final area.

we have 10, c-130 j. aircraft in my home state of mississippi. the air force budget proposes to move these from keesler and that case. case letter with the left out of the mission. now we have spent considerable taxpayer dollars on infrastructure with keesler. i don't know how involved you have been so far with this, but i want you to tell me what you know about it and if you can't get back to me on the record what business case analysis has been done to support the recommendation to transfer c-130's from keesler to another air force facility, and what do

you say to the significant infrastructure replacing keesler to support these c-130's including state-of-the-art simulators etc., and what does that say about the stewardship of our taxpayer dollars? >> senator i can tell you nothing about the discussions that resulted for the loss of the c-130. i was not part of the discussion and i just don't know. i would be glad to take it for the record though. and get back to after consulting with the air step. >> i look forward to that and thank you very much and i look forward to working with all three of you. >> thank you senator weaker. senator nelson. >> thank you mr. chairman and let me have my congratulations and appreciation to all of you for serving so well in our military into and to your families. thank you very much.

general walsh currently progress is being made towards constructing a new command and control for u.s. digit command military construction requested an authorized and appropriated by this congress for the fiscal year 2012. the mission of u.s. stratcom is at the forefront of our national security and command and control of our new clear enterprise which you have identified is your number one priority. u.s. stratcom plays an important role as america complies with the new s.t.a.r.t. treaty among other things. it is imperative our nuclear command and control have all of the support resources it can carry out its mission. the entire project has been authorized but because of the nature of this project, the defense department will have to impress phaser face or implement of funding and the congress will have to implement until the

command control center is complete. this would require more than one or two years. we have already talked about the constrained budgets facing a sequestration. hard choices need to be made within the department of defense and i'd know this has been and will continue to be a hard choice. but i also believe that projects for this mission for cyber, missile defense, nuclear command and control, these threats will not likely dissipate. can you speak to why a new stratcom headquarter continues to be a priority for the air force as well as part of a joint command effort that is imperative for our national security? >> thank you, senator. as you know the air force has been supportive of the development of this project. if confirmed i will continue to do so. i do think the command-and-control capabilities

will provide -- the secretary of secretary of defense and the president and the nation is absolutely critical and it's a national security particularly because the new clear missions they oversee but also in other ways. the command-and-control space operations and cyberactivity in the way forward in that arena would require the united states cybercommand. i think all of those things drive this requirement and i believe i am fully on board with this one. >> i appreciate that very much and then know my colleagues are still here. you can't fight cyberwarfare with -- you have to have this kind of structure that is more than a building by the warfighting machine with the high-technology that will be included within it. high technology that others would like to track for their own use in other countries and of course the terrorist, the

cyberterrorists who would love to be able to do it. that is why it is more than just simply a building. would you agree with that? >> senator i would agree with that. >> thank you. lieutenant general grass, in the years following the cold war are national guard became as we spoke yesterday, woefully underresourced, was treated as sort of a secondary force, supplemental, not an operation of reserve. in the buildup during the war, obviously we found out how woefully underresourced it was and we made giant strides towards correcting those -- that under resourcing and now that we are in a position where we are winding down, certain functions because of the winding down of iraq and ultimately afghanistan, we do face with resourcing the

critical point of whether or not the guard, the reserve as well but the guard in particular, will have the kinds of resources necessary to remain the kind of operational reserve that it has become rather than mothballed into a supplemental force. can you give us some assurance that you will do everything sitting at the table to make certain that the guard does have the necessary resources to remain cable of the role that it has now achieved and is operating in? >> senator, because of our dual mission both homeland as well as being prepared to support the army and air force around the world, we do want to continue to maintain that edge and it is a lot of investment has gone into the army national guard and the air national guard in the last 10 years and we don't want to lose that. part of that will be working with the services to find the

right balance both from the homeland perspective as well as the overseas mission. part of that will be getting back back into innovative training opportunities and some of that may be supporting combatant command as we did 20 years ago or 15 years ago before the war started, so i'm committed senator if confirmed i assure you i will make this a top priority to maintain the airy and army budget. >> is critical in both homeland security, functions in terms of natural disasters and is a former governor having called up the guard on more than one occasion and having it respond admirably under the leg adjutant general stanley hague. i'm one who knows how important that unction is. i was also distressed with a call the call up of the guard in the first afghanistan but then in iraq to find that many of our

transportation units from nebraska faced inadequate resources. parents were buying walkie-talkies from various stores and sending them over to their sons and daughters to use because they lacked the capacity to communicate in caravans and trucking caravans. so it's something that's simple that simple but something that essential that we need to just simply continue to know that it can be under resource for national security any more than it can be underresourced for homeland security including a national disaster so i would very much be aware of your commitment to that and appreciate your stating it to us all here today. and general kelly, i know that you go forward in this new responsibility with southcom.

we are going to be facing not simply drug situations but violent extremist organizations and the growing engagement in the region. we have always got concerns about the iranian revolutionary guard corps and its efforts to expand their influence not only in the middle east, containment that has not been possible but they have also found their way into your area of responsibility and and a note general fraser has detailed the regional activities that hezbollah and can you speak to your views on the increased presence of iran and hezbollah with southcom and whether you believe you will face -- what you will face and in the resources you will need to fight these asic extremist? >> again senator, it would appear to me that iran is on the margin of many parts of the

world, caribbean, latin america. over just the last few years they have expanded the number of embassies they have in that region of the world. they have quadrupled i think the number of cultural centers that represent the islamic, islamist point of view and certainly the iranian point of view. i think you know that they have become very close. the president of iran is become very close with the president of venezuela. what we see right now is their desire to broaden and deepen their relationships with several other countries in the region. unfortunately, it's been our experience around the world that where iran goes so goes the quds force and so goes terrorism. we obviously have to be very careful watching that and i note general fraser has this on the front of his screen.

>> we face right now with the president of iran and president chavez two peas in a pod. we have to avoid having it become three peas in a pod with their expansion activities in south america or any central american region as well so good luck, appreciated appreciate it very much in thank you all and best of luck to all of you. thank you. >> thank you senator nelson. >> thank you mr. chairman. obviously it's a pleasure meeting all of you in my office and discussing the issue so i'm not going to repeat those concerns and certainly general kelly is good to have a massachusetts native and good to see you and your wife here. your sacrifice and service in service to our country is very well-known and appreciated back home in our state, as you both know. and obviously general grass being on the joint chiefs now is

something we all worked collectively on this committee to make sure happen so we could find that good balance to make sure that is properly represented especially as the yeoman's work they do not only with the homeland but obviously when they are mobilized. a question to you general grass. the state partnership program is something i have not only participated in as a soldier by going to paraguay and serving their but there are many other senators who have relationships with your state and a state partnership program. is that something you plan on continuing to support? >> senator brown i'm a strong supporter as i mentioned earlier, working with the european command back in the mid-2000. 21 countries in the european command and seven at the time with africom that we worked closely with and saw the value every day. saw the relationships that were built over the last 20 years especially in what used to be

eastern europe during the cold war. i am a very strong supporter and i think if you look at what we spend on on the program as a nation, the benefit was tremendous so i definitely plan to support it. ..

>> sexual assault is something that's very important in the military. it's something that is a problem i know in the guard we i think it made some real strides recently to address. what are your plans to deal with sexual assault in our guard in particular? >> senator, it's instrument important to me not just as leader but as a father that we treat every service member with respect. and we have unique issue in the guard because of this version, small town america, 2700 armories across the nation, and some of our servicemembers who have problems may not be able to be reached early. and provide the right treatment and the right council. i know you done some great work already in that area, and my goal, if confirmed to go in and take a service look at this within the guard and determine what resources we need. and if we're adequate addressing the problem. >> as you know there's been a

real effort obviously with general mckinley, and this really drop everything the last couple of months to come up with a plan. i think that's a good plan and i would look forward to making sure that you have access to the plan and get you blessing and support on a. also i have heard there is potential about cutting drill pay for most of the guard and reserves, the way to help reform the pay structure. i would just ask you to look long and hard at that because a lot of the time spent in the armories as you referenced around our country, for the flag, as you know has always done without getting that pay, is something i think will be a deterrent for our guard and reserve to serve. i just want you to be aware of that, something i'm aware of and i would ask you to take a look at. and general welsh, touching base obvious with cybersecurity was referenced earlier. i think and i think you and

others believe that we are not going in the battle now but there's more coming. that being said, the air force base does a better than nowhere else in the country. we have the brainpower, the technology and advancements with mit and others, with lincoln labs want to participate and upgrade. i would only ask you are aware that we spoke about, i would only state publicly i would ask that you give that base proper consideration and looking to expand that effort. because i think you'll get a good value for your delicate you are going to get the best brains and i think in the country out of mit, harvard, d.c., worcester polytech, i could go on and on to address that very real concern. but to shift gears for a minute and a kind of build up what senator lieberman said about the f-35, when you think will actually have one? >> senator, the plan right now from the air force is for the commander air combat command by the end of this calendar year to come for with a set of criteria. approved to the chief and the

secretary, and courtney within the department of defense that will outline the event driven criteria for ioc. associate with it should be a general timeline. i doubt if we will come forward with a specific date because it will have to be event driven at some point but you should expect to see something by the end of this calendar year. >> what is the current air force fighter shortfall, do you know that? >> sir, are we talk about pilots or aircraft? >> aircraft, i'm sorry. >> when people talk about the current shortfall their addressing shortfall versus the actual operational plans for the different combatant commands but a lot of this is based on timelines, airplanes time at over the next five to 10 years, and that's what the discussion is focused on. the '13 budget was an attempt in one way to try to ensure that when you clearly when capability would face out into the capability would be a couple to prevent dropping below the required level. >> let me interrupt and say, in

layman's terms for those folks in the audience and those listing, are we okay in terms of our pilot and fighter aircraft as of right now, with all the conflicts we have and any anticipate conflicts that we may have? do we have enough fighters and fighter aircraft to do the job of? >> i think we have the right numbers today. we do have a concern about fighter pilot production and absorption into the fighter community. it has to do with numbers of cockpits available to train new pilots in, we are working every aggressively. by the way this is something the total force is a clear part of the solution and has been included in the planning since day one. >> i look forward to being honored to vote for all of you. i know we're in good hands. thank you. >> thank you, senator brown. senator begich. >> thank you very much unkind road solutions -- thank you very much and congratulations. thank you all very much.

fir geral l d a great conversation i think yesterday, a lot of conversation about alaska some of the concerns of the. i just wonder if you could describe for the record, as we continue to move to asia-pacific kind of posturing and what that means and how you see alaska's role in that instance, assets that we have there but also if i can add a little bit additional, the arctic and how that plays. so maybe give me your thoughts as you know. i met with some air carriers this morning about their freight traffic, and they talk about anchorage as an important piece, fairbanks obviously, but how important it is for the business. but from a military perspective as we again move to the asia-pacific posturing, give me your thoughts on the alaska assets and the value, or what needs to be done or not, or what your thoughts are there, and the

arctic if you could add that to the discussion. >> thank you, senator. in so many ways geography still matters in a major way. >> you can't move land. >> no, sir. you know as well as i do that when our air forces are forward deployed they can service component commanders for the airport of the combatant commanders. admiral locklear is very clear that alaska and air force forces stationed along with the army forces stationed there are critical to his posture of the pacific there. there's a reason we have our newest fighter based in alaska. there's a reason we have anchor aaron it's stations in alaska, a tremendous unit. there's a reason we have to airlift rescue forces, command-and-control aircraft, geography matters. so from that perspective clearly alaska is a very valuable platform. the other thing that matters in a big way to meet is a chief of service if unconfirmed is

training airspace. it is treasure to us. especially as we go to new generations of aircraft that need more space to operate in, and tactics involved largest redwood aircraft and different types of scenarios. the range complex in alaska, as you know is phenomenal. red flag alaska gives us the opportunity to do anything which is very important to me as a capability provide any future if unconfirmed, and that's to bring partners together. i had a meeting about a week and half ago with a polish chief. pages return from their first trip and want to come tell me how much they enjoyed it and how valuable it was as training for them. and also ask my support and other newer member nations from nato to consider doing the same thing. and as you know, there's several to we have invited as an air force. and so, lots of things a positive about the state of alaska. on the arctic issue, i'm not an arctic expert. the one thing i do know just from the nato look at the arctic

in europe and the air commander job there is that one of the problems we had is where to turn for arctic warfare? where do you test equipment for our burden in that environment? alaska clear to begin provides us a great opportunity to do that. >> thank you very much. and for those folks from poland and others, we have some great f-16s in fairbanks. i will just be that therefore no. >> i've heard that. >> let me ask if i can for you and general grass, you kind of mentioned it, we tooling. you know, this is the busiest the northwest, it's incredible as you said an important aspect because of where it's located and the valley and the quantity of fuel. i know there's been a desire in the past by the air force to recognize you to make this, make the wing and association which is an important piece which means manpower and so forth. can't be the one of you or both if you respond to that? obviously when you move to the level it means different

personal level, but because of its activity and potential new aircraft opinion on what happened and what those are located in the future, it just seems like the opportunity to consider that or at least review that any future seems to be worthwhile, maybe even one of you could give me a comment on that if you could. >> senator, as commander for u.s. north american airspace, working closely with canada, i know the value of those tankers. when we are setting in whether it's a small aircraft coming through or aircraft recently across canada that went out of to mutations, those tankers are some of the first ones that go up oath to support u.s. fighters as was the canadian fighters. so i know that value very much. i know there's a balance there, and i've worked very closely with the air force, if confirmed to take a look at that and really worked closely with the

director of the air national guard to understand it better. >> would both be be willing to commit to at least review and revisiting the issue the association for the 168th as you just kind of mentioned, or are you going to look at that again to make sure as you look at your five and 10 year plan, is there a need to revisit that? >> senator, i'd be happy to look at the. i was not involved in the previous discussion. i have no idea what the reason was for not doing that. i would be happy to look into that and get back to give. >> very good. >> i would be happy as well. >> i just thing as a look at the new asia-pacific, things like that, needs to be resembled based on the larger picture. general welsh, yesterday we talked and i appreciate the candid discussion we had yesterday. as you know what a little struggle everything some other senators did into transparency that is necessary for community engagement, and understanding of wind realignments or situations

change in the military operations. and as you know with the air force we had a little concern, as you know about in alaska, and maybe you could just give me your thoughts of this relationship between air force, congress and the communities as we move to this new age of redeployment, we ssignment, realignment. and also our budgetary constraint and how you see your role in creating that kind of transparency if necessary. >> i believe that he pressures that are on us especially from a budget perspective now demand core sharing of information earlier in the process. between all of the organizations and the bodies you just mentioned. i think there are factors that each one of those groups bring in with a different perspective. i don't think the air force has the entire perspective, considered early enough in the

process. part of my emphasis would be to make sure we do have we're very, very closely connected to not just the national guard, air national guard but the guard bureau, confirmed that they're clearly closing the distance between them and the council of governors and the tags, and they don't think we can move forward any practical way without members of the united states congress being, understand the intent of the actions we proposed. >> thank you for much. my time has expired. i do have a question i will be for the record for you, general grass, in regards to sherpas and the cars and for the record, general kelly, congratulation to i did have a question for you but if you're doug fraser i would harass you because he was in alaska a little while but i hope all three of you can even though you're from southern command, come to a alaska. it's a great opportunity see some incredible troops we just brought back almost 9000 from afghanistan a few months ago from our striker and others, and they did an exceptional job and we're very proud of them.

so thank you for your willingness to serve and willingness to take this next position. thank you. >> senator portman. >> thank you, mr. chairman, and thanks to each of you for your distinguished service. and your comments this point but i agree with the chairman from your opening statements were moving and partly because of the incredible service that you and your family have provided. we appreciate that and also you have brought a lot of experience at a critical time. challenge is not diminished, but the budget pressures have increased. we have talked a lot about that this morning. i appreciate general welsh, you can buy yesterday for the discussion on some of the air force challenges that we face on the budget side. i would like to see public and what to do yesterday which is is that i think frankly the fy 2013 budget presentation by the air force did not have the kind of analysis, frankly did not have the kind of relationship with the congress that would've been helpful, particularly with regard to the air guard issues.

and i appreciated your comments yesterday, and i'd like to give your chance today to talk a little about how you would like to see the air force budget process moving forward, particularly with regard to the guardsman and the title iii to requirements and working with congress. >> thank you, senator. i think what is gotten us to this point clearly didn't work well. , i think they all have the best interest in the nation at heart. i think it's because we didn't understand how to make this process successful, and we can't repeat that again. i believe there are things therefore should consider earlier in the planning process. i think we try to do that. obvious we didn't have the details to the level of satisfaction of the other people who have to be part of this plan in the long run for a to be executed. and so i think things like title iii to requirement should enter the front end of discussions. i think the ability practically

execute a plan is something that can best be discussed with members of congress come members of the department events and members of the air force and the national guard bureau, specifically the air guard and air force reserve. i think we'll have a critical investment in this process working properly. and that they will have an interest in making it work properly. and so if confirmed that's michael, how do we get to there from where we are today. >> we talked about acquisition earlier, the chairman and send mccain spent a lot of time on this but there's a report recently through acquisition study that indicates the air force transport heading in the wrong direction despite all the good efforts that have been made according to the report. total cost of over one, major defense acquisition programs actually increased from 52 to 58 billion from the 2009-2010 years, but it is used to which they have data. in light of what's happened with

the joint strike fighter i know we discussed it earlier, huge cost overruns, also some major time issues, not just for our military but for our partners. what's happening with the support aircraft, i guess what i was asked today is if you could just give the committee a sense of how you would tackle this issue, what would your priorities become how would you go about it? i'm not suggesting it's entirely and air force issue. but it does happen and a lot of these projects do, lands on the air force major defense acquisition side so you will be very knowledgeable. >> thank you, senator. i know that you are very well aware of the top of level, the work ethic of the men and women of wright patterson air force base for example, imagine any of these programs, or supporting programs. this is certainly not a lack of effort that is causing a problem. we have very talented people in the acquisition workforce but i believe there are three key

things that we have to track, things that if confirmed would be my focus areas going forward and acquisition. number one, we have to be very disciplined in the way we establish and then controlled requirements, especially the major acquisition programs but we do have a history of requirements. i believe that one of the roles of the service chief is to be visibly involved and the requirements process for a major weapons system. and if confirmed i will be. i believe the second and went to focus on is disciplined, and that's disciplined with a capital d. execution of these programs. and if you stress that cost is the key performance parameter, then anything that affects cost has to get visibility up to and beyond the program manager level. as opposed to trade been made with good intent that in the mushroom into much larger cost. and then finally i do believe cost has to be a key performer. it just has to be that way. we do not have the luxury.

we haven't in the past and we certainly don't going forward have the luxury of all funny programs to expand to 30, 35% over cost of schedule. unacceptable spent we talked initially about the budget rushes and this is an area where there could be vast improvement and i appreciate your personal commitment to that, and leadership but i think the metrics are right. i would also say competition and transparency, and we talked about that in terms of the joint strike fighter. there is a great opportunity actually with you coming in with fresh perspective to be able to help on the. on science and technology, you know i feel about this. it's too easy to see signs and technology become the bill payer. we are eating our seed corn when we do that and appreciate your comments yesterday. i think ultimately our qualitative events this talked about a lot is going, because of these significant progress we seen over the decade with science and technology, which we're enjoying now from advance

this would make 10 years ago, and as you know, you mentioned wright patterson air force base, we are very proud of the research lab, cutting edge work that is done there. love having assets that if we think that's incredible resource for the military, not just the air force but the military at large. in your opinion could you characterize the health of the labs and what your priorities would be for the research and technology efforts of the air force? >> thank you. i was just at wright patterson last month and talked to a number of the folks in the labs about programs they are working. they are terrifyingly smart. they are very committed to this activity, and i was astonished at the capability, quite frankly. i may believe that one of my responsibilities as a chief of staff if i end up in that role is to shape the future of the united states air force. to the greatest extent i possibly can to in cooperation with all the agencies and organizations that support us. one of the ways you do that is

by investing in the future, and i think that's what science and technology investment is. i think we have to continue to invest in that region. you mentioned the air force institute of technology. that's investment and the people side of her technology and technology. it's an opportune for air force to send young officers to program based on their area work and air force. they are competitive soldiers and their trained specifically to improve capability for our nation in that area. i think they are both essential parts of the plan going forward, and i would be a very big supporter. >> again come we are appreciative of your willingness to step forward and take on this role. look forward to confirmation. my time is coming to an end quickly. general kelly, i just have one quick observation to make. first of all, thank you for your service and your family service and sacrifice, and you're taking on anarcho the important task. i have to make a comic based on your interaction with senator mccain earlier on the substance abuse, the drug issue,

i couldn't agree more. and i've worked a lot on the demand reduction site including with the chairman's brother, congressman sander levin, and i do think that's what we're going to get the most progress. had had the opportunity yet to sit down with one of your predecessors, something, which i'm confident of, greg mcafee was so calm -- socom commander. he became as you probably pay tribute of her on the demand side reduction. and i wonder if you've had a chance to visit with him? >> have not yet and haven't thought of that but that is a great idea, senator. >> well, he's an army guy, not a marine. >> that's all right. >> but notwithstanding that, i think you guys will have a lot to scheppach and again he has a wealth of experience on sort of the domestic side of this. i wish you the best of luck. this deteriorating situation in

central america is heartbreaking. we're heading in the right direction in many respects, this is devastating to us. countries and the community, those families. and so best of luck to all three of you gentlemen. thank you, mr. chairman. >> thank you, senator portman. thank you for emphasis. senator mccain as well. you, too, general kelly, i think it's an important element to get into this discussion. stay in discussion. senor ayotte? >> thank you, mr. chairman. i want to thank all of you who are here today for your service. you have incredible records of service to our country. and, of course, to your family for all of their sacrifice and service. first of all i wanted to ask general kelly. yesterday i had the chance to do a panel on the issues of

sequestration. and this panel discussion was not only focus on the overall impact of our national security, which in all of you have described as catastrophic, and we know that our secretary of defense has described it in the most direct terms as shooting ourselves in the head. but what has really struck with, general kelly, is a sergeant major can't testify. he is now retired from the marine corps. and he was really concerned about is breaking faith with our marines. so i would ask you this, not, to really, can you tell us, if we don't address the sequestration, pretty quickly around here what are we doing to the morale of our troops? and i guess i would start with you, general kelly, and then also general welsh and, of course, general grass, to comment as well. because we talk a lot about the

weapons systems and everything else, but we're talking about our men and women in uniform who have shown such great courage and have made so much sacrifice to this country. can you give us some insight on that morality should? >> absolute. first of all i would never disagree with sergeant major kent, or any other marine sergeant majors. i agree with sergeant major kent. i believe it would be breaking faith. i think one of the things that the leadership and the department of defense, in fact the leadership to washington happens to understand that there's a great deal of churn in the minds of, particularly the families, the spouses of what's going on in the military. and if you listen to them, you get out and about as i do as secretary defense, the thing that they are confused about are concerned about is the uncertainty. we have from their perspective budget cuts. we have forced reduction. we still have a war going on, and i don't think anyone in the room would disagree it's a very,

very dangerous world. and who knows what comes next. and if you put all of that uncertainty into a blender, so to speak, and mix it up, that's where all the forces in my estimation, again, we saw in my own career in the '70s and again in the '90s, where the uncertainty causes people to say time to go, i don't know if i'm going to job next week or next month. i believe the nation has made a commitment, particularly now that we have an all-volunteer force, to the servicemen and women that serve him and their families. we've made a commitment to take care of them, not just because we're at war but perhaps it reinforces the commitment. they give enough. it's a tough row to hoe as a military family, spouse him and we await to them to certainly not include them in on the

consideration as we look at sequestration. >> and to general. >> -- thank you, general. >> the men and women have been deploying in support contingency operations along with their fellow service men for the last 22 years now. to the middle east. what they're looking for right now in many cases is stability. and stability doesn't mean nothing changes. it means a plan that we can execute. they are very good at the. they just want to know where we are going. so they can start to get to work on it. >> senator, get a chance to go down to fort carson and -- departing or returning home. we are looking eyes of the young families, the children and the spouses their, and the husband is on his fifth, sixth, seventh deployment, and they wonder what is up for the future. should i stay in this career

field? should i move to another career field? and we had a. and i think there's another part of this, which is maintaining those warriors who want to be leaders. and i think sequestration will put just to the limit where we will list some of our best and brightest. >> let me follow up with you, general grass. general odierno has testified before the staff committee that what sequestration would mean for our army is an additional 100,000 reduction in forces for our army on top of the already roughly 72000 reductions that we are already making. and what he told us was that 50% of those would have to come from the guard and reserve. what does it mean to cut 50,000 from our guard and reserve in terms of not only our national security water homeland security? >> senator, i haven't had chance to study those figures, but as you know, every day there's five

to 7000 guardsmen on state active duty, and 25,000 deployed overseas. and if we lose capability we will totally take a series look at whether we continue to do the job is to support our communities. >> those jobs also include the important function to our governors, respond to national disasters as well state that, don't they? >> yes, they do. >> absolutely. this is an issue that has to be addressed right away. and it's my hope that on a bipartisan basis we will put aside the election year politics and get this resolved on behalf of all the men and women who serve underneath all of you. so admirably and courageously. in addition i like to follow up on another line of questioning, particularly addressed to generageneral welsh. one of the issues i have concerns about come here we are talking about sequestration, but in order for us to make good decisions about responsibly spending the taxpayer dollars,

that come to the department of defense, this odd issue has been very, very important. -- occupation has been very, very important i'd appreciate what secretary panetta has said about trying to make sure that we need a statement of budgetary resources by 2014. in fact, it's now incorporated in the defense authorization. i have asked for, push for. i know others on the skimming have been very focused on this issue. i understand that the air force has had some of the greatest difficulties. general welsh, will the air force leave it -- meet the deadline, and how important would you make this issue as the chief of staff of the air force? >> my honest answer is i don't know. the biggest limiting factor we have right now, systems for shared data. the systems we have on the books that will help do this kind of audit readiness work don't deliver until after 2014. and so it's causing this to be

done manually which is not the ideal way to do it. i can tell you this, there's a lot of effort going on in the united states air force all the way down to the squatter love right now. i've met with my wing commanders, for example, in europe three times over the last four months on this topic. so we are working as hard as we can. i don't know if the corporation can get there by then because of the problems we are uncovering in sharing data in the right way. clearly this will have to be a focus area if i am confirmed. it is now for the air force. i can assure you of that, and we will do everything we can to make that deadline. i just don't know the answer. >> i appreciate your testimony and your candidness, general welsh, and i obviously hope that you will make this a top priority because we have to be able to look the american people in the eye and tell them that their taxpayer dollars are spent wisely, and again as a look at something like sequestration, that every dollar we need to be

able to account for. so i really appreciate your looking at this issue and one that i know is of great importance in making sure that we're watching a taxpayer dollars. my time is up but on a final note, today russia and china veto the u.n. security council resolution that would have imposed new sanctions on the assad regime in syria. it is outrageous. i make this point because general kelly, you said we still live in a very dangerous world. and we know china is continue to invest its military, certainly our relationship with russia has changed, but we need to make sure that we have a strong military, otherwise other countries around the world will feel that they can just run all over us. so again, another reason to address sequestration, and i appreciate the leadership of all of you. thank you. senator blumenthal. >> thank you, mr. chairman. thank you all for your service,

and particularly your family, for your service which i know, it has been integral and essential to the work you've done for our nation, and thank you and them for your service and sacrifice, in particular, general kelly, thank you for your family. i would like to ask you, if i may, sir, about the mc-12, which is important, not only to south, aor, but also to our national guard, connecticut air national guard is expected to see 92 olympics it is really a question as well. for you, general grass. what is your assessment of the mc-12's future role in drug interdiction mention in southcom's aor. you think it has a role? how effective will it be? and would have a role in the air national guard?

>> i can speak certainly two platforms like the 12. i think the senator knows, the southcom command is an economy force committed to national strategy that's been developed, it's been this way for great many years. the kind of things that go on in south american southcom are things that are unique probably to this theater. anything and everything that can be provided to the southcom, the southcom, that can help us get our arms around tracking illicit drugs as well as helping the various countries down, most of them are very friendly to the united states, most of whom want to partner with the united states hear anything we can do to help them, provide them intelligence, and insights into the networks that they deal with, the criminals and get

networks would help them in measurably. we don't want to fight, we don't want to fight their war for them on the ground. what they do we lack is a way to get into the network that no one else but the united states military can do. >> thank you. general grass? >> senator, all the intelligence, surveillance and reconnaissance aircraft today are very heavily committed, no doubt, and i think the asymmetric warfare that we're going to face both on today but in the future will demand more. and i'm committed, senator, if confirmed to continue to work with the air force, and general welsh to take a look at both the sourcing and also the stationing of those forces in the air national guard. >> i appreciate that. i believe very strongly that the mc-12 house the kind of role that you describe, general kelly, and appreciate, general

grass, your commitment to keeping strong and even strengthening the role of the air national guard. because in connecticut as you well know, in the two wars that we thought it has been a very profoundly significant force, i think, for our military readiness and for our effectiveness in those theaters. so i thank you for that commitment. i would like to raise with you an issue that i think we have discussed a little bit, perhaps not arisen today, but i think is very, very important to all of our veterans, especially to our national guard, the issue of making sure that they have employment when they come home. as you know, unemployment rates among the recently returned veterans, particularly our younger veterans, our particularly higher than the

general population, which i think is absolutely unacceptab unacceptable. and intolerable. we always been better. we must do better for them. and i'm particularly troubled by the potential and the allegations that i received it i think they are incredible, about possible discrimination against them, that may occur in the job market place because they may be deployed, because they are committed to being available when the guard and the nation needs them. and our reservists as well. so i don't know what the any comments as you sit here now about that issue. i know it can send you but i would welcome any comments if you do have. >> senator, i think as we head forward and to look at the use of the guard and reserve, the employer support of the guard and reserve programs is an outstanding program. and if confirmed when the commitments i will make is to

take a look at what our the base root of the problem, both from an employer perspective as well as an employee perspective. then i will get with the adjutant general advocate best practices across the nation to look at some of the statistics to what programs that work best and build a plan to move forward. >> and i can't speak for my colleagues here today, more generally, but i think you'll find a very, very high degree of support for any program that provide job opportunities, training, counseling, education, and as far as health care is related, job opportunities, i think they'll be a lot of important work. because as we've also discussed i think our guard and reserves will be playing an increasingly important role as citizen soldiers, and have throughout our history, proudly, and thank you for your commitment on that

score. general welsh, you mentioned the possibility on the issue of sexual assaults, or perhaps better screening and assessment at the front end of people going into our military. i wonder if you could perhaps expand on that font? >> i'd be happy to. i wish i knew enough about the available tools to expand on any meaningful way. i just believe that that's the piece of this we have not successfully taken on yet. if we can stop the crime, everything else becomes easier. that should be the goal. i know there is work in social sciences to look at screening tools for different kinds of behavior. i don't know personally if there is a tool that allows you to identify someone with predator tendencies, but we certain should be looking into the. i hope somebody is but i just don't know that they are. i think we need to look at other

things in that pre-crime face, if you well, things like the possibility of raising punishments for low-level offenses within this category of crime under the ucmj. anything that can be seen as either a screening force, a deterrent force or the ability to respond rapidly and as publicly as possible from the commission of a crime may help identify or suppress those people who can commit this crime. i do, however, whether a certain number of predators ever, not just in the military, but we have been. and if we can somehow target that group at the front in, so the most horrible could be eliminated before they occur. we all feel, senator, these are like our children, that we are being given the privilege to command. anytime this happens it's horrible. and we are not doing enough to stop it. >> i am very sympathetic with your answer, very supportive as

a longtime prosecutor before i moved to this job. and particularly on the prevention and the deterrent, and also have been very interested in the possibility for enhanced advocacy for victims. so that they feel more welcome on the part of the prosecution process, which will enhance their willingness to come forward and cooperate. and so my time is unfortunate expired but i would welcome an opportunity to pursue this issue with you. think you very much. thank you to everyone of you and your family again for your extraordinary service and sacrifices. thank you, mr. chairman. >> thank you. senator chambliss. >> thank you, mr. chairman to let me ago the sentiment of my colleagues about thanking you and your families for your great commitment and your service to our country, gentlemen. general welsh, dod and specifically the air force has a

very robust maintenance capability, and it's vital that we retain an organic capability and capacity within the air force to ensure that the response to significant military operations and national emergencies is littered the ability to conduct some of this work in house also provides negotiating by the government and kinds -- and allows dod and the taxpayer to pay competitive prices for the maintenance work. if confirmed, what is your vision for maintenance and logistics within the air force? >> thanks center. if confirmed, i would intend to pursue exactly that course. i believe that i agree with your assessment. i believe it is an organic capability we must maintain for any number of reasons for professional development of every forces that can deploy and serve in the forward areas, to cost and efficient operations in the actual execution of the work.

my personal opinion is that this is a very, very good thing our force and we should continue to focus on the. >> general kelly, you and i have come along with over the last couple of decades. we have known each other and want you to know how proud i am of you and your service to our country. thanks in particular to you. i want to talk to you for a minute about isr. the availability of isr platforms is going to continue to be a major requirement for southcom. parent commander, general pressure has also referenced the need to improve isr operations within southcom. and specifically, the need for imagery intelligence wide area coverage, century integration, moving target indicators, layered isr architecture and tools as well as biometrics. if confirmed, how do you plan to work with dod and intelligence community to prioritize and acquire these assets for your aor?

and you perceive any additional requirements or assistance with respect to isr? >> if confirmed, i will make as much noise as i possibly can within certainly the halls of the pentagon to increase the amount of isr. my current position allows me to see were almost every isr asset in the world is being utilized. for what i can take from it is that they should not be enough to isr to go around. it's concentrated in a couple parts of the world, very, very, very important work. my hopes, my hope is that as the war in afghanistan winds down, and, frankly, the air force and the great enemy and that operate, particularly the drones at a higher level isr, as well as aircraft and whatnot, they begin to recover from what issues an unbelievably demanding

day-to-day existence, fighting, maintaining isr over the battlefield. my hopes are as we come down from the war in afghanistan, as we have from iraq, that some of the isr will be made available in places like southcom. >> with respect to -- chairman levin and i both serve on the border i try to stay pretty i could with a group, and now that you're coming on board there, we look forward to working with you. and seeing you at fort benning soon, i hope. spent jenna welch, the joint stars provides the ground movement target indicator capabilities with the warfighters. you and i both discussed yesterday, and it's an extreme import and isr platform. i'm disappointed that despite the findings of the recent a way and air force long-term responsibility for carrying out

the mission, that the air force doesn't have a plan for how to carry out his mission long-term. there's essentially no money to modernize joint stars. the air force as well as carefully in my view at potential options like this during a business platform to carry out the mission. can't i just have your assurance that upon confirmation that you're going to look into this issue immediately and come back and let's visit and let me have your thoughts on this. i indicated to me you really haven't had the time to study it, but i just want to know that you're going to look at it in the near term and let's visit further on the. >> if confirmed i will absolutely not. >> another issue that is of significant importance from the standpoint of the budget, tough budget times that we're in right now is issue of multiyear procurement. multiyear programs like the c-130j, we have one on f-22 and we need to be looking at further

multiyear procurement opportunities like with the f-35. can you share with us your thoughts on the value from and particularly with respect to these major weapons systems that we're looking at? >> thank you, senator. i think learned from the logic perspective would always be the weaker if the window of the factors are editing it. is from the cost savings alone. that, of course, requires a stable investment plan that has to remain realistic despite the turmoil associated with budget. i do not know about recent decisions on whether to you or to not enter into multiyear procurement plans versus year-to-year plants. i suspect decisions that have been made in that regard are basically do to the question marks around the budget landscape in future years, in an attempt to maintain some flexibility to work in the budget in that environment. but i think clearly from my viewpoint, if you can buy

multi-year, it's the best way to go from a cost perspective. >> in a similar vein we know we're going to buy weapons systems in the near term years, putting advance the treatment money in the budget is always the best way to go and we've had an issue in the last few. with respect to advanced procurement on c-130j's. is there any question in your mind about what providing for advanced procurement funding on weapons systems that we know we're going to buy is not the right direction in which to go? >> i would agree. again, from the cost perspective only is always a good way to go. >> general grass, unfortunate my time is up. i don't want to slight you in the least, but thanks for your service. the 48th brigade in georgia has been very active on both

iraq and afghanistan. we've had a number of georgians who have paid the ultimate sacrifice, but yet our morale is extreme high and our folks remain committed, capable, well-trained, and we look forward to working with you to make sure that that level of competence with notches in the '40s but the entire guard is there. so thanks very much to all of you. >> thank you, senator chambliss. senator hagan? >> thank you, mr. chairman, and mr. chairman, my remarks will be short today. my questions will be sure because i have to preside over the senate at noon, and that's one of those areas where you just can't be late. so, i would want to thank all of you for your warm comment about your spouses, and i think we all know how an important family is an especially in your position. i just want to tackle your comments and thank all the family members and the wise for all of the service you've given our country. so thank you. general kelly, in may the dva

and honduran law enforcement conducted a failed operation against the contention of drug traffickers. this operation was conducted using state department owned helicopters that were piloted by the guatemalan military and honduran law enforcement were aboard. this complex arrangement is partly result of dod's reluctance to modify the rules of engagement for the helicopters located at -- to match the rules of engagement used to support the dva in afghanistan. this looks like a cumbersome arrangement. what are your initial thoughts on the rules of engagement that require such complex coordination, and you think this type of arrangement is necessary, and if confirmed, will you reveal the rules of engagement for the army helicopters speak with senator, certainly if confirmed i will take a look at, take a hard look at this issue. i do know that the arrangements that exist between southcom and

the military, and then other agencies of which there are 15 or 16 that southcom actually works with, dva and others, there's some pretty specific command lines, certainly dod forces are charted to attempt to pick up in the air and sea lanes the movement they don't have that responsibility, but certainly if there are better ways to do business, break down barriers to streamline, particularly if you have to have things in place, but to streamline it to get authorization to break the rules, if you will, legally. that's something that is just in everyone's interest. we started this journey in iraq, and afghanistan. there were many procedures that were in place between the services and the various intel agencies that over time made no sense and we broke those down. very, very streamlined there. i'm guessing, i think we could probably do the same thing, and

if confirmed i will take a very hard and immediate look at that. >> think you. in my last question has to do with cybersecurity. general welsh, as we look at these issues, i think we need to look at how we do cybersecurity and regard as a military capability. and we need cyber operators, not just technicians, and a culture that sees cybersecurity as a military capability. in your opinion what does the air force need to be doing to recruit, train and retain cyber in men and encourage innovation in the cybersecurity operations? what needs to be done to support a cultural shift that used side more as an operational capability than a technical skill set? and i really worry about the availability of enough of these cyber technically skilled people coming into our military. >> senator, thank you. as you know there's been -- in

the past on hiring authorities that have allowed us to bring in more and more of the right level of qualified people to do these jobs for us. so thank you for that. i agree with you this is an area we're still trying to go into our own skin on. for both the joint and the air force perspective. i think that general alexander and united states cyber command working with joe kidd and strategic command are putting together the specific requirements that the services and then tried to organize, train and equip. once we clearly identify those i think we'll find, at least in the air force, the greater good of our people are people who help establish the architecture, the infrastructure within which are cyber operates will then operate. those operators need to be recruited very carefully, trained very carefully in a different skill set than the people who establish, operate and defend the architecture. and i think that's our first task, making sure we have had organizational cross clear in

our minds can we know exactly who we need and what skill set, and the we focus on finding the right people, trained in the right way. >> and we are competing directly with industry on these issues side think it makes that much were difficult to mr. chairman, thank you very much. thank you. >> thank you, senator hagan. senator graham? >> thank you, mr. chairman. to all of you, really accord yourselves will and they want to share senator hagan's comments about the way you recognize her family. i think it speaks volumes of you are as individuals. and i know that a lot of military families suffer, and general kelly and mrs. kelly, we appreciate what you all have gone through very, very much. general kelly, would you say, how would you rate the security on our southern border right now? >> well, the fact that we have such drug problem and availability with drugs north of the border to an awful lot about what speed we are finding

tunnels. >> titles, the so-called fuel trains, things coming in across in cargo, and -- >> on a level of the very secure feel very insecure, where du, what would your general opinion -- i know you haven't had time to study it in depth, but going into your job, what is your general view of the security on the border? >> based on the availability of drugs in america, it doesn't seem like it is very secure at all. >> couldn't agree with you more. please think long and hard about what the command can do to make it more secure insight of -- t. agree this is a national security threat by -- not a law enforcement to? >> absolutely. >> do you think the same tunnels can bring terrorists to our country? >> or any other type. >> these nutrients can transport a lot other than drugs, right? >> yes spent i think it's a growth and i wanted to our

military can do to help, the law-enforcement committee. general grass, on the national guard front, what does it mean to have the national guard bureau chief as a member of the chairman of joint chiefs, to you? and how can you effectively use that position? >> senator graham, as a member of the joint chiefs, identify have to bring forward the adjutant general and the governors, thoughts, concerns on homeland mission but also need to balance that with a federal initiative deployable forces and be able to give my best military advice to the secretary of defense as well as the chairman of the joint chiefs. >> do you think you could help maybe referee this problem the air force has? >> senator, the nominee here to my right and i've are had a number of conversations. >> the reason i pushed so hard to have the chairman, the national guard represented were

so integrated no, and the state homeland security mission is very important, but the federal lead for the guard is probably the greatest since the revolution itself. and i think this whole problem with how you construct a new air force in tough budget times with the guard and reserve, that if you had been in place longer, it would have helped. so the goal is to have a guy like you they're talking to the air force or the army, maybe next time it's the army, to give them some better intel and insight on how this all plays out. so i think not only can you be a good partner, you can be a good advocate, too. so i hope you'll take that challenge. >> i totally, totally agree, and as soon as i get on board, i will make partnerships. >> general welsh, i've just been very impressed with how you've

handled yourself here and the way you articulate your fear of being the next chief of staff of the air force. general schwartz is a fine fine man and i think he's done a good job during tough times. what is your view of the air force stand in congress right now? >> i believe there is some concern, and i would tell you this fairly widespread from the opportunities i've had this week to meet with many members of this committee. it's not isolated to a particular issue or a particular region. and so i think it's something that we need to pay a lot of attention to. i think there's a trust problem that the air force must address and improve. >> and saying that is not a reflection on general schwartz or secretary donnelly, but you're in town good. so we want to help you sort of start a new chapter for lack of a better word. now, back home, the centcom flag

is forward, united arab emirates, the centcom commanders home station, is that chris? >> that's correct spent that's not going to change? >> our chief is on record saying that is temporary assignment and spent what i would like for you before we vote is some coordination between you and general mattis come if you can give me a general time period of when the flag will come home. i understand he needs to be coordinator because of afghanistan, in particular threats may be confront iran in the future but i think what the people is looking for is some kind of time treated. doesn't have to be an exact day or month, that when they can be reassured the flak is coming back. would you do with general mattis and get back to me about that? >> i would. i do not know his views on will find and get back to you spent i would appreciate if you would find out before we vote. now, trainers, the piii is been a good airplane. not -- i need a tuneup i think.

i think the efforts to get a new train -- new trainer keep moving to the right because you have budget problems. .. difficult if not impossible is that correct? id performance is very difficult?

and if you're talking about fourth or fifth generation that will allow you to be trained for those fighters is that correct? >> it makes it difficult. >> about the air guard air reserve writing you given an excellent answer and i will be the first to say the air guard and reserve including the air guard and the air force reserve just wanting to be within their means and acceptable ranges. final comment to each of you. do you agree that the congress does not get a handle on tricare and health care costs that are growing exponentially. the department defense budget but you're going to have to make some draconian choices in the future between health care and families in the retired force in the ability to train and fight? >> i do, senator. >> all of you on the record congress needs to address the

growing cost of health care entitlements and defense budget, and are you willing to stand by me and others on this committee going to our military families, and i say that something's got to get here. >> i am, sir. >> thanks a bunch. wish you all well. >> returning the flag to the other location. >> i'm not going to ask any additional questions second round are you okay? we think you and your family is and your extraordinary leaders your families are there and we can't tell you how much we admire you and we stand adjourned and will try to get these nominations acted upon

soon as humanly possible, and we look forward to your confirmations, and again, thank you we are grateful to each of you and your families.

30 years of the administration of ronald reagan and bush and clinton and bush and obama have done more to to confirm the projection of the rich getting richer and everyone else slept behind it and 75 years of the soviet union perhaps.

>> those men and women that are almost mortally injured in the war who because of the huge and dances that have been made in medical trauma treatment over the last ten years now they are being saved. an incredible number of them are being saved. almost everybody that falls in the battlefield is being saved. and i wanted to write about what life was like for these people and i started off with the question having seen some people thought were pretty gruesomely named within it be better off if they were dead? don't they wish that they were dead?

military contractors warned congress of job layoffs in advance of automatic budget cuts known as sequestration. $110 billion in defense budget cuts are scheduled at the start of 2013. the house armed services committee heard from the minus.ry contractors on wednesday. the included lockheed martin ceo robert stephens, the former o'keefe who now heads the major european contractor dacs. f >> since we began this hearing back in september of last yearse we have held seven hearings andd one briefing on sequestration. the bulk of whichave delved into the impact of sequestration on our military capabilities and national defence. today we are holding our second hearing focused on the economic impact of sequestration. this time, focus on the

implications for the defense industry base that enables and supports our war fighters. joining us today are mr. bob stephens, chairman and ceo of lockheed martin. mr. sean o'keefe, chairman and ceo of eads. david hess, and della williams, president and ceo of williams. i should note that mr. o'keefe also chairs the national defence industry association and mr. hess chairs the aerospace industries association. ms. williams is on the board of the national association of manufacturers. barring a new agreement between congress and the white house on deficit reduction, over $1 trillion in automatic cuts known as sequestration will take effect.

although the house has passed a measure that would achieve the necessary deficit reduction to avoid sequestration for a year, the senate has yet to consider legislation. the president's budget submission which saw $1.20 trillion in alternative deficit- reduction through increased tax revenue was defeated in a bipartisan and bicameral manner. this impasse has created a chaotic and uncertain budget environment for industry and defense planners. while the cuts are scheduled for implementation, companies are required to assess and plan according to the law and sequestration is the law right now. we have all heard the growing number of estimates. secretary panetta has warned seek restoration would be catastrophic to our military and result in the loss of 1.5

billion jobs -- 1.5 million jobs and a 1% increase in the unemployment rate. this would send 200,000 men and women in uniform from the front line to the unemployment line. it would result in the smallest ground force since 1940. the smallest number of ships since 1915 and the smallest airforce in its history. the national association of manufacturers warned that dramatic cuts in defense spending under the budget control act of 2011 will have a significant negative impact on u.s. jobs and economic growth. the manufacturers forecast and one by dr. stephen fuller on behalf of the aerospace industries association has estimated private-sector job losses at over 1 million. faced with the process -- prospect of being forced to lay

off four -- workers and give bad news to shareholders, industry leaders have been attempting to get more guidance from the administration. -- on how they will interpret and implement the law. to date, the guidance has been piecemeal. last fall, the pentagon stated that war funding would not be sequestered. then in may, the omb overruled and declared that while veterans' benefits would be exempt, funding for the troops on the front line with not be exempt. in june 2012, secretary panetta met with various defense industry's executives to discuss the impact of sequestration on their operations and to gauge the current state of the industry in general. in addition, press reports indicate that the director of

the office of management and budget met separately with heads of several major defense companies. unfortunately, it does not sound like industry learned much from those meetings. reports indicate omb does not plan to issue implementation guidance until at least november, less than two months before sequestration is scuttle to take effect. my fear is that the guidance will come much too late. industry faces a host of planning canada's -- planning challenges. not the least of which is the act which requires most employers to provide notification at least 60 calendar days in advance of mass layoffs and plant closings. in some states, the requirement is 90 days. that means defense companies are

currently grappling with whether to send tanks slips by november 3 to their employees. in addition, i worry that the cavernous silence from the president will lead many to exit the industry or to walk away from capital investments that are in the best interests of our troops. as i have said many times before, the men and women on the front lines have on our backs. who is going to have theirs if we allow the impending threat of sequestration to shutter the american industrial machine that enables them to fight, win and return home safely. this overdue guidance from the administration on how the -- on how they intend to interpret the

law and implement sequester mechanically is critical to employers, not to mention congress. i look forward to our panel with the director of the omb on august 1. we all believe there is strong bipartisan agreement that sequester is bad policy and should be replaced. my hope is this hearing will provide additional incentives for the administration to provide more information to employers and for all parties to resolve this impasse. i look forward to your insights today. mr. smith. >> thank you, mr. chairman. i think our witnesses for being here to discuss this important subject and give their perspective on it. there -- i agree with the chairman that sequestration is

not a good idea. it would be bad for our economy, bad for defunds -- bad for our defense. it is-across-the-board cuts in all discretionary spending -- education, transportation, infrastructure and on down the line. the part of the problem is the budget control act was not well drafted. i have heard dozens of different opinions about what it means and what exact effect it would have theory but is exempt, what is not and how it would implement it. nobody knows for sure until we actually do it. that is part of what the administration is wrestling with. i do not think there's any dispute that there is bad. i have not heard the white house disputes that. secateurs panetta has explained how awful sequestration would be. -- secretary panetta has explained how awful secret station would be. the burden of this house

committee and house is to get rid of it one way or the other, to make sure it does not happen. if it happens, it will have a profound and negative impact. this is a problem right now. we tend to look at it and say sequestrating kicks in on january 1. but all of you and thousands of other employers are making decisions right now and based on what date reasonably project will happen in the next fiscal year. those decisions are leading people to hiring less people in some cases, laying them off in a petition -- thinking things will be cut off. we also have to look at what has gotten us into this. there seems to be an opinion that while this is a terrible thing and it is incompetence that is preventing us from dealing with it, it is not.

it is more denial about the fiscal situation we are in. we are only here because of the refusal of the majority of people in the house to raise the debt ceiling. this deal was done at the all -- as the only way to raise the debt ceiling and stop the united states of america from defaulting on its obligations for the first time. it was only that blind notion that somehow not raising the debt ceiling was a solution to our fiscal problems that forced us into this awful decision. a decision which i did not support, mainly because it put all of the burden on the discretionary budget. we had a $1.20 trillion deficit. a 38% deficit that needs to be addressed. so far, we have put the burden on that on the backs of 38% of the budget which is the discretionary spending budget. we have refused to talk about revenue. the solution going forward

double help us come up with the deficit control steps necessary to avoid sequestration -- admit that we are not balancing the budget anytime soon. we would love to have a balanced budget but there is not an economist out there that will not tell you doing that in the near term would be devastating to the economy. our role is to get those deficits under control but we cannot hold hostage steps that will do that to the notion that we have to have a balanced budget right now or even in the next three, four, five, six years. second, everything has to be on the table. we are going to need more revenue. we have cut taxes across the board. if we are truly committed to providing for the men and women who serve us and for our national security, we have to be willing to raise the revenue to pay for that. that is a critical piece of it. yes, we also have to look the

other 62% of the budget. the mandatory spending and savings there as well. right now, there seems to be this desire for a balanced budget. also a desire to not raise revenue and not to cut any spending that is important. those numbers do not add up. i hope this committee can begin to be a part of the process of starting a realistic debate that can avoid the awful outcome that would come with sequestration and the awful outcome coming every day we delay making it clear that it will not do sequestration. i look forward to the testimony and the discussion. thank you. >> thank you, mr. smith. and thank you again, each of you for being here today. this is probably one of the most important hearings i can remember attending and we really appreciate your willingness to be here.

mr. stevens, if you will begin, please. >> could morning. chairman mckeon, distinguished members of the committee, i thank you for this opportunity to i expressed our industry perspective on the impact of sequestration. i will submit a prepared statement for the record and offer a brief summary. >> no objections. that goes for each of you. >> thank you read as chairman and chief executive officer of lockheed martin, i am proud to represent 120,000 hard-working men and women who are the foundation of our business. we are a global security company operating in 50 states in 75 countries. our work force includes 61,000 scientists and engineers and 26,000 military veterans.

our company consistently higher is the largest number of graduating engineers from u.s. universities compared to any other company. we receive more than 1 million resonates each year from -- resumes each year from people who want to help keep our nation safe and secure and ensure the united states lead the world. lockheed martin is the largest provider of information technology services to the federal government and we have a business presence in virtually every federal department or agency, including the social security administration,nih, the veterans administration and the federal aviation administration, to name a few. the men and women of our company play an important role in america's future and we all take that responsibility seriously. sequestration jeopardize is that future. from a national security perspective, defense secretary leon panetta has spoken in the

strongest possible terms against sequestration. he said this process will have catastrophic consequences for our nation's defense and he described it as a meat ax. it is. the cuts were developed independent of any correlation with national security strategy , technology needs or operational reality. those cuts will be detrimental. from an industry perspective, our near-term horizon is completely obscured by fog of uncertainty. with just 167 days remaining until it takes effect, we have little insight as to how sequestration will be implemented and no insight into which programs will be curtailed, which sites will be closed, which technologies will be discontinued, which contracts will be reformed in which suppliers, particularly small businesses who are vital to our supply chain, will be shut down or severely crippled. most tragically, we fear people be unable to provide the

equipment and support needed by our military forces and we are unable to reliably estimate how many employees will lose their jobs and how many families are going to be disrupted. it might be flattering to believe that our industry is so robust and durable that it could absorb the impact of sequestration without breaking stride but that is a fiction. the impact on our industry would be devastating, with a significant disruption in ongoing programs and initiatives leading to facility closures and personnel reductions that would disrupt a advanced manufacturing operations, road engineering expertise and accelerate a loss of skills and knowledge. it will undermine our aerospace and defense base which i believe is one of the crown jewels of the american economy and is vital to our country. beyond the fence, i think the broader consequences of sequestration also are not well understood. the abruptness and across-the-

board nature of the cuts will hit hard virtually all domestic discretionary accounts as well. since most of our domestic departments and agencies do not have substantial capital acquisition accounts like the department of defense, that means the cuts will come from people through significant works for los and personnel reductions double byte the constrain agencies in providing essential support and services and filling their missions. sequestrating constitutes a blunt force trauma. it is likely to tear the fabric of our industry and affect our national security and -- i do not profess to have the with them or expertise to give counsel to this committee or the congress on the precise path forward to resolve the fiscal challenges our nation is facing but i have spent a decade of my professional working life in the national security arena and i have never been as concerned for the risk of the health of our industry and government

enterprise. sequestration has been described many times to me as a doomsday device, a threat that was designed never to happen. but the effects of sequestration are being felt right now throughout our industry. every month it goes by without a solution is a month of on -- additional uncertainty, deferred investment, lost talent and increase costs. i urge you to take action to stop the sequestration process and ask that you do so soon. >> thank you, sir. >> i appreciate the opportunity to appear here today on behalf of the 90,000 members of the national defence industrial association which i served as chair. in addition to representing eads, the world's largest aerospace and defense company, i am particularly cursed by a memory of how this particular provision of public finance was

first introduced into the federal process as a mechanism to enforcing some measure. when it was enacted in the mid- 1980s, it was intended to be indiscriminate. across the board by precisely the same amounts, the logic was 25 years ago, the method was a substitute for rational judgment. and choice of priorities. because the process had failed to reach consensus on what those priorities would be. therefore exacting a precise amount was enacted. the logic was also that this method was devoid of of any priority selection.

nothing would be more affected and therefore there were no priorities. if everything is the same priority, there are no priorities. the logic was this resource management mechanism was so stupid that the threat of it would be a prompt all by itself to public leaders to avoid it at any cost. that was the logic. quaint as it sounds, 25 years ago. but it has been adopted a year ago as a mechanism now of enforcement following the debt limit extension provisions. that were then enacted to force this again. the consequences of this are serious. bob stephens has talked about efforts that would be applicable but the percentage that is to be applied while it

ranges anywhere in the single digits to low double digits may sound like that will not be much of an impact. it masks the real consequence of this. the most severe is the administrative disruption that will likely cost almost as much as what this mechanism is designed to save. by however much is sequestered, taken across the board without priority or application, to any sense of its value in which contracts are valued at exactly the same value as cutting the grass at military bases, the consequence of that may sound exacting in its precision but the effort to implement it would be much more disruptive than anything else. it will force inefficiencies as

it has in the past. that has been demonstrated and documented in terms of its extent. it is going to implement and enforce a number of contract penalties kabul terminate a variety of different programs -- there are some efforts to select with an the amounts that are identified by the program product in activity definitions. even those definitions are still in dispute an argument over how they will be applied. so that will extend this even further. the cost will certainly increase as there is a change in quantities by contract. the cost of capital for smaller second and third tier suppliers will almost certainly go up as financing expenses, just to meet the cash flow requirements as

progress payments are disrupted. once that is settled, penalties will then be applied as well. bob stephens spoke to the act provisions that will be an across-the-board destructive effort. that has already started in some cases by notification to many of you and your colleagues as well as governors in 50 states. this provision may in fact have to be implemented. so it has already begun. the impact on second and third tier suppliers of which the national defence industrial association, most of its members represent, is going to be very significant. the disruption in that particular market is going to be one that may not sound like the percentage sound like a big deal. but just take for example suppliers to my company