retention. by the end of the summer, the department of defense said it will be unable to pay the tricare bill. it will be in a position of having to deny service to military members families and retirees. there are bipartisan solutions to both a continuing resolution problem and the sequester threat. we cannot afford to look the other way and pretended there cant huge looming problem. a year-long cr and sequestration will undermine the national defense. and the danger of the international situation is highlighted again yesterday when north korea had a very proproblem -- provocative nuclear test. we cannot allow these actions, these sequestration and

year-long cr to occur in the middle of the kind of a world. it will create a huge and unconsble problem for our men and women in uniform and their families. it's uncum -- for congress to find solution together. senator inhofe. >> thank you. senator inhofe and i have talked about how to work through the morning's schedule. at 11:00, he said it is currently scheduled to have his perhaps fourth maybe even five votes. we're going have very short question period. after our opening statements, and after your opening statements, our panel speaks, and if possible if we could finish by a few minutes after 11:00. we would adjourn for perhaps an hour, come back and perhaps 12:00 or so for about another

hour. i hope it doesn't happen. it may. we have a large committee and everybody is interested to the solution to the sequestration and the year-long continuing resolution threat that looms before us. so that's the best we're going to be able to do this morning. it's the senate -- it's full glur i are. -- glory. >> there are sixteen days remaining between day and march 1st. sixteen days to define the strength for coming decades. they announced last week that he indefinitely delayed the deployment of the truman carrier strike in the middle east. they too carrier force presence our commander in the region is urgently requested over a long period of time admiral, i'm going run through quick, admiral, vice chairman of the joint chief recently made a statement. i want to make sure it gets in the record, quote, i know of no

other time in history when we have come potentially down this far this fast in the defense budget. there could be for the first time in my career instances where we may be asked to respond to a crisis and we will have to say that we cannot do it. the secretary of defense and the hearing took place the other day on benghazi made it clear we don't have the assets necessary to carry out some of the things to adequately protect and defend offer security to our people. it's something that is not acceptable. this is what the government is supposed to be doing. the department of defense has absorbed almost $600 million of defense. with the sequestration and the cr problems there we are looking up to over this period of ten years a trillion dollars cut in a can't and it can't take place. mr. chairman, this hearing is critical to allow the joint chiefs to provide their frank

and honest assessment about the impact to the services. the loss of capabilities or readiness in the mismatch between the resources and strategy we're going have to work together to ensure that they american people understand how serious this is. that's a reason for the hearing today. last week lead by senator ayotte, senators mccain, graham, and i introduced a bill to mitigate the impact of sequestration through the end of the fiscal year and provide the department with the for examplability to desperately needs to operate under a continuing resolution. it's not a perfect solution. it is better than doing nothing. there is a growing concern that the president would -- the negotiate with congress on a comprise to sequestration until after it takes place in march 1st. and each member of congress here is from the pain effected through the constituent. the real pain will be felt by the men and women serving our country who will see the

resources they need to defend the nation arbitrarily. so anyway. that's what the hearing is about. i'll have questions, and one of them is going to be specifically, i hope you will be covering this. this is the request, not hold back the show how tragic it is. show what increase risk, which is increased loss of lives is going to result from this. that's what we expect at at hearing. thank you, mr. chairman. >> thank you, senator inhofe. secretary carter? >> thank you, mr. chairman. senator inhofe, all of the members of the committee. i'm going to be brief. i think what you'd like to get to and we'd like to get to the specific of the impact of the two budget circumstances that we face. first of all, sequestration and the second the possibility of the continued resolution going on for the entire year.

i thank you for this hearing, i mean that from the bottom of my heart. we welcome an opportunity to describe these impacts. secretary panetta and i have been using the word devastating for sixteen months now. and i testified last august to the consequences of sequestration if it was to occur. now it's at the door. you, who know us, who understand us, and know national security inside and out by virtue of your service on this committee are critical because i'm hoping when we describe what the consequences of these things are for national defense as we see and give you the information that you need that you can in communicate to your colleagues and the congress, than we can

move in the distribution of the comprehensive solution to both of the problems that you referenced. to senator inhofe, absolutely we will provide that information. we're still, and we will be continue to for some months working through the man gearial consequences of this situation. and as we do, we'll provide to this committee as complete of information as we have organized in any way you want. in today's -- i'll start in that regard. the problem comes in two-tiers. the first is that sequestration, which is scheduled to kick in just two weeks' time requires us to subtract from our budget for the remain of fiscal year 2013, $46 billion. as the chairman indicated, to do

in a way, the worse way namely to take equal shares or proportionate shares from each and every part of the budget, which is not what you do, if you're trying to be sensible from a manager point of view. secondedly, the continuing resolution we're operating under now going in to five to six months creates a different kind of problem for us. it has enough money overall, as you indicated, chairman, it doesn't have the enough operation and maintenance money. you put those two things together and in this year, there is a drastic shortfall in the funding we need to do training and training in turn impacts readiness. readiness is our capacity to fight in other places in afghanistan. we are protecting funding for afghanistan, and as you know under sequestration, the

president has decided to exempt military personnel from sequestration. and we have made some other limitations and in my distribution to the department there are other limitations we will protect the wounded warriors programs in addition the war will protect urgent operational need, and protect to the extent we can capability critical to the defense strategy. the reality is we can't protect much of value to the country. in the near term, which you have this year in the next few months is a true crisis in military readiness. if the -- if the company sequester are continued for the next ten years, as is the plan in the budget control act, we're going have to change our national defense strategy this those cuts are too large, too

sustained for us to implement the strategy that we crafted under the president's guidance just one year ago. i understand, mr. chairman, and i have long understood the department of self-defense must contribute to the resolution of the nation's fiscal situation. and that is why we have accommodated $487 billion in cuts last year. and before that, under secretary gates, made several hundred billion dollars of additional cuts in defense spending largely by removing unneeded or underperforming programs. we are also making, as you referenced, admiral having said and historic adjustment associated with the winding down of a decade dominate bit war in

iraq and afghanistan. we're making that adjustment as well. i also understand that the taxpayer deserves careful use of every dollar we get. that's why we have strich and continue to strive to get better buying power fur the deference dollar. reform the accusation system. but both the strategic approach deficit deduction and sufficient use of defense dollars will be undermined by sequestration. and what is particularly tragic is that sequestration is not a result of an economic recession for an emergency. it's not because discretionary spending cuts are the answer to our nation's fiscal challenge. you can do the math. it's not in reaction to a more peaceful world. in reference to the north korea nuclear test this morning. it's not due to a breakthrough

in military technology or a new strategic insight. it's not because of the path of revenue growth and entitlement spending have been explored and exhausted. it's not because sequestration was ever a plan that was intended to be implemented. all of this is purely the collateral damage of political gridlock. for our troops, for the force, the consequences are very real and personal. i'll give you a few examples. we intend, the president intends to -- personnel sequestration from -- but the troops will feel the effect of the this very directly in other ways. for example, he referenced the cancellation of a carrier deployment. we had to do that because we had to we recognizes we were going out of operation and maintenance

funds in the navy later in the year, and we made the decision to not deploy the carrier but instead keep it here in the united states so that we would have the capacity to deploy it later if we needed it. if we deploy it now we would not have the capacity to have a carrier deployed there in the future. we had to make that decision. all of the sailors on the aircraft carrier were ready to go. the families were ready to go. they made plans for where they were going live, for family care, for schools all of those things that go with sending a loved one on a deployment. all of that needed to change within a few days. army units that are coming down, i visit them around country, coming back from afghanistan are used to being at the highest state of readiness. being trained and ready, what motivates them or should motivate them is mission. by the end of the year, and i think the general will detail

this, they won't be training in a way their profession requires them to. so it will have a big effect on the uniform people. for much aligned civilian. a lot of people think that dod civilians are people who live in the washington suburbs who get up in the morning and come in and go to work in the office building here. they are not. they are mostly people at depos and shipyards that are fixing our equipment. 44% of them are veterans. 86% of them don't even live in the washington area. and later in the year, just two weeks' time we have to substitute a process of furloughing them which we will do consistent with the law and our requirements to you. the net of it is many will be furloughed for as many as 22

days for april first and the end of a year. the fifth of the paycheck gone. so that's a real human impact. i have said i can't be furloughed under the law because i'm a presidential appointee. but i'm going to give back a fifth of my salary in the last seven month of the year if other people in the department are getting sequestration. there's an imminent impact here. the last impact i would like to call to your attention is that on our defense industry. you know, we depend on our deafen -- depend on the defense industry because second to the magnificent people we have in uniform is what makes our military great. and the effect of sequestration are going to be very significant on the defense industry. we see it already. we depend upon them to be able

to retract and retrain science and technology talent. we need them to be financial successful. but many of our industry partners are beginning now to cur, internal investment, main contain a liquid position. the effect of this uncertainty are beginning to show up in term of investor confidence in our industry. their ability to attract and retain workers and the -- the requirement to stretch programs reduce birate all of that introduces the inefficiency in our procurement system. so for the force, military civilian, and industry, the

consequences are very direct, very devastating. i close by with an appeal that i'd asked you to convey to your colleagues in congress. we need deal very quickly and broadly with our deficit problems in a balanced way that the president can support and congress can support. we need to detrigger sequestration, we need to pass appropriations bills for all of our federal agencies, for that matter. indian there's probably not enough -- i understand there's probably not enough time to accomplish all of these far reaching actions before sequestration is triggered on marge 1st. i would urge at least that congress

greater risk of coerce and bring faith with men and women in uniform. we will have and will be part of the economic recovery. we're committed through the nation's treasuries as we work to build and afarredble -- affordable rival force for 020. we need budget certainty. we need the antithesis of sequestration. a steady, predictable fund. we need the time to implement reductions and a responsible matter over a manageable time line. we need the flexibility to transfer to the highest priority. readiness loses when the major portion of the budget untouchable. everything needs to be on the table. personally i believe we should resist kicking this problem further down the road. failing to act is a choice of

its one that will require a progressive contraction of security commitment around the world and a less proactive approach to are protecting our interest. when i testify before the committee last year, i said fa we fail to step up properly on the budget, we will reduce our option and in so doing increase our risk. our military power will be less credible because it will be less sustainable. now we are only a few days away from making that a reality. we can go better. our nation and service-members and their families expect us to do better. more importantly, a turbulent world that relies on american leadership demands that we do better. thank you. >> thank you very much, general dempsey. secretary haim do -- hale? general? >> thank you, mr. chairman. ranking member, other distinguished members, nearly eighteen agoing you charged me with leading our army and

providing me with the best military advice. over the course of my 36-year year we commanded at every level including division, corp. and theater command in combat. i know, what it takes to prepare the nation's sons and cares for war i know what it takes to grow leaders in the army. i know, what is required to send soldier to combat. and i've seen firsthand the consequences when they are sent unprepared. i began my career in a hallow army. i don't want to end my career in a hallow army. today the global environment is the most uncertain i have seen in the 36 years of service. it's unpredictable and dynamic. we simply don't know when we have to deploy soldiers to fight again. but history tells us that we will. we owe it to them, to ensure

they have the proper resources to be ready when needed. the fiscal outlook which the u.s. army faces in fiscal year '13 is dire and to my knowledge unprecedented. in addition to the $180 billion. the combination of the continuing resolution a shortfall -- excuse me, the shortfall in oversays contingency operation funds for afghanistan and the sequester and fiscal year 2013 has resulted in a 17 to $18 billion shortfall to the army's operation and maintenance accounts. as well as an additional $6 billion to other programs. all of this will come in remaining seven months of this year. the fiscal year 2013 fiscal

situation -- impact on all forces not serving in afghanistan or forward in korea. impacts which will have a significant impact to fiscal year 2014 and beyond. just a few of the acts we will be forced to take, are for example, we will curtail training for 80% of ground forces. this will impact our unit's basic warfighting skills and shortfall across critical specialty including aviation, intelligence, engineering, and even our ability to recruit soldiers in to our army. we have directed an immediate army hard wiring freeze. whether he terminate and estimated 3100 and term employees. we will furlough up to 25100,000 for up to 11 dais. we will cancel third and fourth

depo maintenance which will be sold in an terminated estimated 5,000 employees and significant delay in equipment readiness for six divisions and estimated 3.36 billion to the impact communities surrounding our depos. for fiscal year 2014 and beyond, sequestration will result in the loss of at least an additional 100,000 personnel, soldiers from the act active army. the army national guard, and the u.s. army reserve. combined with the previous cuts, this will result in a total reduction of at least 189,000. they are impact every army base and initlation in the army. sequestration will result delays to every one of ten major modernization perhaps. the inability to reset the equipment after tbel of years of

war -- unit and individual training. these cuts will be felt across the entire country. since 2008, the total army budget will have been reduced by 37%. if sequestration is enacted it will be greater than 45%. in my opinion, sequestration is not the interest interest of our national security. it will place an unreasonable burden on the soldier and sieve begans. we will not be able to execute the depth of defense strategic guidance as we developed last year. i understand the seriousness of our country's fiscal situation. we have and will don't do our part but the significance of these budget reductions will directly impact our ability to sustain readiness today and in to the future. we simply cannot take the readiness of our force for granted. if we do not have the resources to train and equip the force, our soldiers, our young men and

women, are the ones who will pay the price. potentially with their lives. it is our responsibility department of defense in congress ensure we never send soldier to harm's way that are untrained, equipped and -- to include war. we must come up with the better solution. thank you so much for allowing me to testify in front of you today. >> thank you so much, general. now admiral ferguson. >> chairman levin, senator inhofe and member of the employee. thank you for the opportunity testify on the important issue. simply stated, the combined effect of a year-long continuing resolution and sequestration will reduce our navy's overseas presence and adversely impact the material readiness and efficiency of our force thus

limiting the president's option in the time of crisis of equal concern we will damage the industrial base we depend upon to build and maintain our ships and aircraft. under these circumstances, we assess your navy will be limited in the toobility provide the exaibility and capacity called for in the current defense strategy. the navy will be unable to execute the naval force requirement. the impact of the continuing resolution is already being felt. as we reduce the operations and maintenance spending by $4.6 billion over the remain of the fiscal year. because we are operated under a continuing resolution, we also do not have congressional authority to initiate new programs or adjust funding for ongoing programs. over $5 billion in planned fy2013 investments are effected. we will be compelled to delay the start of john f kennedy.

the completion of america lha6 as well as cancel the destroyer and hundreds of weapons. without congressional authority, the carrier lincoln must remained moored. we will not be able to complete the current overhaul of the uss though door roosevelt. these effects will be compound bid the devastation of sequestration. should it execute the present form on march 1st. on that day they will face additional reduction of $4 billion to the operation and painted innocence account. the immediate impact will be to our fleet operations and deep po maintenance. we anticipate reducing flight operations for our deployed forces. canceling deployments, deferring more maintenance on ships and aircraft, suspending most not

deployed operations such as training and certifications along with others cost-cutting measures. we will immediately erode the readiness of the force. over the long-term, the discretionary budget cap under sequestration will fundamentally change our navy. we will will be compelled to reduce the force structure, the end strength and investment as we lower funding level in the altered landscape of our industrial base. like many americans, our sailors, civilians with and families are experienced increased anxiety as a result of fiscal uncertainty such as the truman strike group. ..

we look forward to working with the congress to resolve this fiscal uncertainty and we must ensure our navy remains ready and capable to protect the nation's security and prosperity. i appreciate the opportunity to testify and i look forward to your questions. >> thank you very much out model. general? >> chairman, ranking member inhofe, committee members, thank you for the opportunity to testify before this committee on the potential impact of sequestration. this topic as of one of high importance with implications not only to our fiscal health but

also to the nation's necessary leadership in the global community speaking as a member of the joint chiefs of staff the critical measure of the effectiveness of our armed forces is in its readiness. sequestration by its magnitude, its timing and its methodology will have a devastating impact on readiness both short-term and long-term combined with the effect of the existing continuing resolution, sequestration creates unacceptable risk, risks to our strategy, risk to the forces, risk to the people, and lastly risk to the nation. regarding strategy, maintaining a pre-international economic system and a just international order are linchpins to that strategic guidance. the effect of disruption to the global order are readily observed in a roller-coaster energy prices, fluctuating

global markets, sovereign behavior and economic uncertainty. failing to provide leadership in the collective security of the global order, it would have significant economic consequences for the american people. the collapse in half leadership would create a way in which old threats would be unaddressed and new security challenges would find room to grow. there should be no misunderstanding the combined effect of the continuing resolution and the sequestration will have a deleterious effect on the stability of the global order the perceptions of the enemies and our allies. sequestration shouldn't be viewed as a budget issue. our collective actions in the next months will be scrutinized on a global stage, and even the perception of a disruption of the nation's ability to protect its global interest could well have strategic consequences.

regarding the rest of the forces, the linked ring resources and readiness is immediate and visible. the scale and abrupt implementation of sequestration will have a devastating impact on readiness. sequestration will leave ships imports come aircraft grounded for want of necessary maintenance and flying hours. units only partially trained and reset after 12 years of continuous combat and modernization programs canceled. because of our special role as america's crisis response force, we place a high a rate on readiness. i've done everything in my authorities to date to preserve the tenants of the marine corps. i will continue to do so. i will under continuing resolution kept the units ready but only by stripping away the foundations of the long-term readiness of the total force. while the short term adaptations

are possible, the enduring effects of some of these decisions put us at an unsustainable tipping point. by the end of this year, more than 50% of my combat units will be below minimal acceptable levels of readiness for the deployment to combat. in a sense, we are eating the corn to feed the current demand, leading less for the long-term capabilities of the force. this pattern inevitably leads to a hollow force and its impacts are already being felt under the continued resolution. the most troubling and immediate risks are those that the sequestration imposes on our people. sequestration doesn't hurt things it hurts people. the qualitative edge that the american service member takes to the battlefield is the fundamental law advantage that differentiates the forces from our enemies. this qualitative, that image will be severely eroded by the impact of sequestration leaving

marines and other service members with the inadequate training, equipment and reduced survivability. while the military pay allowances have been exempted in this round of sequester, the quality-of-life for the all volunteer force and their families will inevitably suffer as we reduce family programs and installation maintenance to read our civilian marines will likewise be impacted. the 95% of the civilian work force that is employed outside of the compromise of the capitol region are the guards at the gate and the budget experts to pay the bills come acquisition professionals, therapists who treat the wounded with the teachers that and structure our children. the economic impact of these families and the local communities are put at risk by either short term furlough or long term termination.

protecting ability to keep faith with our wounded four years as a top priority in my marine corps. but even this, the most sacred of responsibilities will increasingly be put at risk. in closing, allow me to articulate one last set of risks, the risks to the nation. in the final analysis, sequestration asks the most from those are born the greatest sacrifice it insulates the careful planning of the services to manage a predictable resources declined, replacing it instead with a dramatic resource and cliff that guarantees inefficiency, waste and its accommodation. the effect of sequestration over the long term will threaten the foundations of the all volunteer force. putting the nation's security on a factor that is ruinous and dramatically shapes perception of the government as well as an employer and as a customer producing confidence to allow the institutions.

these are all of risks that demand immediate attention and action by scale timing and inflexibility and implementation, sequestration greatly aggravates the national risk profile all in the time of strategic rebalancing and change. i urge the committee to consider the full range of risks created by this legislation and ask for your assistance in mitigating it to the extent possible. thank you p.a. i look forward to answering your questions. >> thank you. general welch? >> thank you remember and members of the committee it's always an honor to appear before you. in line with what you've already heard, sequestration threatens the capability from america's air force. with alarming and immediate affect some people, readiness and infrastructure and eventually on modernization. sequestration represents a potential 12.4 million reduction for the air force in fiscal year

14 affecting every account and program. if it occurs that will significantly undermined of readiness and responsiveness today. it will significantly impact the work force in the coming months and its impact on modernization will affect the air force future capability. i know your staff have the specific examples from the services but to highlight a few sequestration will result in an involuntary 22 furlough as the secretary mentioned that will affect 180,000 civilian airline. that deprives the air force of over 31.5 million man hours of productivity and specialized expertise. will result in a loss of over to hundred thousand flying hours. while we will protect flying operations in afghanistan and other contingency areas, will clear determines that the flight training is, roughly two-thirds of the active-duty combat will curtail the training beginning in march and below the acceptable readiness levels by mid may and most will be non-mission capable by july.

sequestration will cut the remaining systems sustainment funds which means we need to postpone approximately 150 aircraft to 85 engines from the induction creating a backlog that could take years to recover. the air force global vigilance region and power make it one of america's premier advantages. the strategic agility and responsiveness requires a high state of readiness, sacrificing that readiness jeopardize is the strategic advantages of air power and from the air force perspective the sequestration will have an immediate effect on the ability to respond to multiple concurrent operations around the globe, something we've been asked to do with the sister services. longer term sequestration cuts to air force modernization will impact every one of our investment programs. these program disruptions will overtime cost more taxpayer dollars directed by the contract and efficiencies and the delegated to the bodies for the fighters in the field. the air force is long overdue

for the reconstitution following the decades of the war to read our inventory includes aircraft as old as i am in the forces are small as it's ever been since becoming a separate service. now we find ourselves stock in the trade space between the readiness and modernization and we need your help to get out. i would urge the congress to do all that is necessary to avert the sequestration and pass the measure for the current fiscal year and i look forward to your questions. >> thank you congenital. now general grass. >> chairman, ranking member, members of the committee it is an honor and privilege to be here today. the greatest threat to the national guard today is the continued uncertainty over the budget. i have provided all 54 with a summary of near-term measures to assist them in mitigating budget risks and threats to the readiness. however without relief, our ability to respond to domestic

and other contingencies will decline. in personnel we are implementing a civilian hiring freeze not with civilian employees we are planning to defer substantially and maintenance requirements for the aircraft and vehicles and facilities, reviewing every bit of over here across the force. we are curtailing conference attendance and travel and training that is not mission essential and produce readiness. the full sequestration and the yearlong continuing resolution will directly impact their readiness of the units and will have an impact on the full range of the national guard activities pitting it in the area of personnel, the government, civilian and military technician hiring freeze compounded by a possible 22 day furlough will limit the ability to maintain our national guard forces in the area of maintenance backlogs coupled with a loss of dollars

with equipment, availability and readiness and the area of facilities, sustainment restoration and modernization kutz will degrade in already raging infrastructure, the continuing resolution prohibits any new starts on the military construction further threatening armory and facility modernization plans. finally come in the area of training, the near term lack of operations and maintenance funds will cut the plan and vehicle miles an operations and maintenance costs and reduced readiness. if not addressed we will be forced to part. in a matter of months our readiness as an operational force for the nation's defense and as an immediate homeland response capability available to the governor's rhode. thank you for the opportunity to appear before you today, i look forward to your questions.

>> thank you congenital. we are going to start with a three minute first round and see whether or not that may actually get us where we need to go. i am going to yield two senator kaine. >> to my colleagues and the military ship i appreciate your courtesy. yesterday unrelated to this hearing i visited one of the premier medical facilities in the united states at the belvoir community hospital to visit with wounded warriors, their families and also the medical professionals who treat them. i have a roundtable session with wounded warriors and by said what would you like to either tell me or ask me and i suspect i would do a lot of talking about medical care for active-duty and veteran's. they wanted to talk about the budget uncertainty and they asked how it would affect the medical care they are receiving right now and the care of their comrades are receiving. they wanted to talk about budget uncertainty and tricare

benefits. your testimony goes into the deficits by figure and. a guard man whose full-time civilian job as a dod civilian job wanted to talk to me about what furlough men and others that were facing eminent medical retirement wanted to talk a little bit about the work force they might be coming back into to the potential effect on the economy of drastic cuts that would make it harder for them to get traction back into the civilian life. this was a hearing i expected to be talking about medicine but what i heard and ended up talking about is the effective budget uncertainty that follows the testimony of secretary panetta and general dempsey last week and i wanted to just ask a couple of questions focusing on some issues the announcement i know one of the priorities you're focusing on is trying to make decisions that are in fact

reversible should congress do our business and get this right. some of the decisions that you already announced how can we persist down the path before the decisions start to have an irreversible effect on the readiness and shipbuilding capacity? >> senator, beginning on february 15th we will begin the notification to the shipyards about deferrals of maintenance availability speeding it up to the point where and under the continuing resolution that we sustain on the resolution, those maintenance actions will be deferred. if we do not get to the authorities in the bill to say start work on the new construction carrier to complete the overhaul or start the overall they are tied up and delayed because we do not have authority to so those are with the irreversible action. on the sequestration issue and with a true man, we have to look at what happens to the navy of the sequestration. we effectively stop training at

certifications of our air wings and we shut them down on march march 1st. after 90 days they lose their certification and out takes six to nine months to retrain at a higher cost. and in our system was more prudent for us to delay truman to be able to deploy this summer and later and early next year to provide continuous coverage to the middle east rather than have the carriers now and fall off completely in fiscal year 14. the impacts under sequestration the longer we go to a greater impact on their readiness for the forces and the longer recovery time and greater expense. >> thank you very much. >> i enjoyed visiting with you yesterday and of all of the states i think you are hit just about as hard as anyone. there is a document that i know has not been circulated to everyone.

the air force alone shows what you losing your state and then you throw the navy in there and you are out of business. i would like to ask all of the other services that did not provide us with this particular, with this information at this format what it does is it shows every state help each is affected by each one. could you try to get that for me? i assume that is yes. next, real quickly you heard what i said about the admiral, do you agree with the statement that he made, does anyone disagree on this demand? okay. secretary carter, and this and the administration is planning towards the end of the release of the fiscal 14 budget. indorse of metal which takes place today from the sequestration demint yes or no is fine. >> nope. >> okay. when you do this budget you heard senator mccain and me

complain and all of this is thrown into the defense budget such as paying done nine times as much per gallon for the navy for the fourth 50,000 gallons and all that. would you not now before the record there isn't time now for the record send me something as to what your intentions are on putting things in the budget that do not really provide for our defense? we do have a department of energy. would you do that just for the record? >> absolutely. >> okay general, you and i have talked about this when we were over there about the problems with that we are facing with the hollow ring of their readiness in terms of just pilot training, number of hours. does this dramatically increase your problem what i'm trying to get to and we might have to get this for the record, readiness equals riss. have you put into any kind of a quantitative amount of what this could cause in terms of lives

for risk, yes or no is fine. >> yes, sir. >> would you make sure that we get that for the record? general odierno, you'll both talked about readiness and i appreciate that. again, readiness, risk and lives. would you do the same in your service or have you done this already? >> yes, sir. >> i appreciate that. last, on the -- general dempsey and ferguson as i mentioned in my opening statement with secretary panetta announced the delay in deployment of the truman carrier strike group will you be as specific as you can as to what the consequences will be in the lack of the presence of what it means for the ongoing

centcom operations, would you do that for us? >> yes, senator, i will. >> thank you very much. >> thank you very much, senator inhofe. senator reid? >> secretary, i just want to know clarify part of your testimony if we are able to avoid sequestration there are still significant issues in the act going forward; is that correct? >> right, sequestration, the item by item cut only applies to fiscal year 13. >> but the budget control act does a lot more than cut the fy 13 budget. it cuts the defense budget by a large amount roughly $50 billion every year for the next ten years. that's the part that turns their readiness crisis and to a change of strategy. it's a lot of cuts on top of what we have already done. >> so the immediate challenge is the sequestration and obviously

the continued resolutions, but a longer term and the strategic context we also have to reevaluate in our strategy. >> we would have to go back and do our national defense strategy if we had those cuts. >> let me ask another question. you have contractual obligations particularly when it comes to procurement acquisitions etc.. are you in the position that you have to await those contracts and pay penalties or is that something i ron ackley perhaps that you are going to continue to build equipment with aircraft etc. while at the same time, eroding their readiness of the force. >> the sequestration and the cuts only apply to the u.n. obligated funds. if we are entered into a

contract the contract is still good unless we choose to break it because everything else is gone. what it will very much be affected is the contract that we intend to enter so for example of a multi-year contracts, which we have intentions to enter because they are more efficient and to cost the manufacturer to produce things and more economically efficient way that is good for the taxpayer, those kind of things we are not going to be able to do and as the admiral pointed out, a lot of our ship actions are constrained account by account and the continuing resolution. he can't do anything to start the new ship he's only allowed to build the same he did last year. >> what me ask a related question, too that assuming the resolution somewhere dhaka road,

you are going to have to probably spend more money restarting the activities, recalling the personnel, making up for training by doubling up the forces. is that another consequence? the irony could be the savings quite rapidly when we go back to the business. >> this costs money because it wastes money starting, stopping, going up, going down, stretching out programs is inherently inefficient, so all of our managers who try so hard to use the taxpayers' dollar the best way to get things to just work with their industry partners to get a good deal for the government all of that stuff goes into the wastebasket in the circumstances. it is a shame. 63 for the testimony. >> senator mccain. >> thank you mr. term and and all of the witnesses for being here on the service to the

country. it's kind of what you say kind of an orwellian experienced. we are looking at these draconian cuts already some of the manifestations of the requirements of taken place. meanwhile lit is a day after the north korea tests and other nuclear weapons. iraq is unraveling. the irony is just rejected the vice president's proposal last weekend for the one-on-one talks concerning the nuclear weapons, libya is obvious, egypt and the state of unrest and now to nisha we are in a more unsettled period since the end of the cold war than i've ever agreed. have you ever believed -- would you agree with that assessment? >> absolutely. >> the signal that we are sending as don't wear this aircraft carrier is not coming.

this is really a disconnected the likes of which i've never seen before. i want to talk about the sequestration because the senator and i travel around the country worrying about the effects of the sequestration. we looked a whole lot of places where the men and women of the military -- how can we possibly do this, cause this uncertainty in the lives of the men and women better serving the latest being the cancellation of the deployment of the aircraft carrier? meanwhile, president of the united states when i said what happened? what happened? during the campaign, what happened? we were worried long time that was going to happen. to treat the men and women in the military who we all speak with such advocacy and passion on their behalf to be subjected to this kind of day-to-day kind of uncertainty but we owe them a

certain amount of uncertainty as to how they are meant to be treated and with their assignments will be and what they will be. >> absolutely. >> ben wouldn't you say the act requires 60 days and some cases 90 days. i think if we placed the federal government in a state of very significant possibility of going a lot of money to a lot of the military. i don't expect you to respond to this that is the lead. but it seems to me that now

times to call the leaders of the united states to the white house and say if you accepted the word of every one of our military leaders as the effect of sequestration if you accept the fact that the world is becoming more and more dangerous, that this is the worst time and we should sit down and come to an agreement to beef. for the benefit of the men and women who are serving this nation and i would be glad to hear any response you might have and i know it might be difficult for you to respond to one of my assertions. >> first of all, thank you you and senator gramm and i remember when you took that trip and i was very grateful to you because i felt like we have been voices crying in the wilderness for 16 months. as i said, this committee is an

exception because each and every one of you knows the department of defense, knows the national security and can be really aware of what we face. there was a time i thought the sequestration was unlikely either. i used to say that i was hopeful and optimistic but then i said i was just hopeful and now i'm not hopeful because we are only two weeks away, so we now have for some time not only been planning for it, but taking action and that is what you can hear described is even though that hasn't kicked in, in order to soften to the extent that is possible in the last few months of the year the effect of this, we are starting to take action now. that's what you see in the aircraft carrier and other things putative the sequestered

goes away on march 1st or shortly thereafter all of these actions would have been unnecessary and inefficient as was pointed out earlier. but we feel like we have to take them now because we cannot rule out the possibility that we are going to do this. >> and i believe our witnesses believe this could have a long-term effect on retention. >> yes. >> thank you mr. chairman. >> thank you very much, senator mccain. senator mccaskill. >> thank you mr. chairman. one of the things this place is good about is when the moment comes we have to compromise yelling about how we got to this place in the first place. and i want to gently point out for the record that both of the ranking republican on the senate armed services committee and the chairman of the house armed services committee voted for the budget control act. ..

>> me up for the compromise and for some revenue. and i think that we've got money right now that we are paying out to farmers that we all acknowledge is a huge waste of money. billions of dollars.

it isn't really going to farmers. whether they are making a lot of money or not making a lot of money, it's a great example of the place that we can all agree that we need to do it in the next two weeks, cutback, and we need to make sure that that money goes towards defense, where we know we cannot afford what you all are looking at over the next 10 years. having said that, i would like someone to tell me if we gave you the ability, because you know know there are a lot of folks that say this year's cuts, 46 million -- 46 billion, excuse me, it ought to be manageable. you know, if you have the authority to cut it where you want to cut it,, instead of the way that we are handcuffing you under the sequester, we're with that $46 billion come from if you had the ability, which i think senator inhofe is advocating. i certainly agree with him in that regard. that at a minimum, we ought to give you a the ability to cut

where to do the least amount of harm. >> if i may, you are right, obviously, but the mechanism of sequester that makes us cut everything in proportion is done from any kind of managerial point of view. i have to say at this point in the fiscal year, it does not matter that much. we have to go everywhere to get that $46 billion at this point. anywhere you can get the money, we must go and get the money. remember in many places, we cannot access it. we cannot lay people off. weekend furlough them. but we cannot furlough them for more than 22 days. we can do so for up to 22 days. the president has rightly exempted military personnel.

a certain amount -- a large amount of funding has been obligated and all we have left is the obligated reserve, as the general explained, this is tiny. he has no room to go. he is less constrained by the mechanism of sequester. right now we have to go everywhere. so it doesn't help that much. although i appreciate any on fettering that we can get. it doesn't help all that much at this point in the year. >> well, if there are any specific that you can give us about whether or not it would help to at least give you that discretion, if there are any specific you can provide us, that would be great. my time is up. very rarely do we have all of you here on time. while you are all here, i have mentioned this to a couple of

you. if you have not yet seen the documentary, the invisible war, i certainly hope that every single one of you see it before the next chance i have to visit with you. if you have specific recommendations after seeing that movie, on how we can all look ourselves in the mirror and feel better about the victims of sexual assault within the military, i would love it to hear the specific ideas. i am determined to make a difference in that regard over the next year. if you haven't seen the movie, it is nominated for an oscar and i certainly hope that you all see it. thank you. >> let me clarify that i did not vote for the budget control. >> at the time it was voted upon, the ranking republican, senator mccain and representatives buck mckeon voted for it. they were the leading armed services people at a time. but it was not senator inhofe. it was the ranking republican on the time we took the vote.

>> thank you, mr. chairman. i want to thank all of our military leaders for being here today. let me just start to put this in a bigger picture here. on a scale from one to 10, one being the least dangerous to our country and 10 being the most dangerous, how dangerous is sequestration in terms of the safety of this country? >> well, i will take a shot at that, senator. from where i sit today, it sure feels like a tank -- some think tanks may want to negotiate it down, but it's very serious. >> i am asking you for your professional judgment. is there any disagreement on this panel? >> we are out of place right now where we are facing dangerous times around the world. would you all agree with that? >> not a time to take a peace

dividend? >> absolutely. if i could, the issue of the mechanism is one thing. the magnitude of this thing -- even if we got all of the authority in the universe to deal with this, this would be the steepest and biggest reduction in total obligated authorities for the defense department in history at a time when i will personally attest to the fact that it is more dangerous than it has ever been. >> i thank you. you know, it was mentioned by senator inhofe along with others on the panel, along with others to provide sequestration for the end of this fiscal year, there are many of us who are trying to work towards solutions and as senator mccain mentioned, we did travel over the country over the last 16 months, having heard from all of you about the concerns about what this would do for men and women in uniform. i would like to ask mark

ferguson about a particular impact, that is on the virginia class submarine and are submarine fleet. what he believed would be the impact on our? number one on the attack submarine fleet, and also in regards to the virginia submarine fleet. >> you will see us take action to enforce repairs in the naval shipyard. you will see us make every effort to preserve our undersea dominance. we have issued contracts in fiscal year 13 for the submarines and those will be unaffected with procurement. there are longer-term consequences. sequestration has an impact on our training. in a few years, if we do not get authority to build that, we will lose production of 1100 nuclear operators per year, for example. by the end of this year you will

see what the hiring freeze, we will lose about 350 workers a week. 1400 workers a month. we will be down 3000 and are shipyard. if we furlough, we will furlough the workers and our shipyards, which will affect the work completion of submarines and ships going through an overhaul in those public shipyards. it will really impact in a cascading way, the readiness going forward. >> i'm sure my colleagues, senator shaheen, senator king, what they all share my concerns about the impact and importance of our shipyards. and of course, the important work done. i appreciate the insight you have provided. again, another impact, showing us why this is important that our men and women in uniform and our national security aren't impacted by sequestration. i have some additional follow-up questions. i am hopeful that we will either have a second round, or i will

submit to all of you with additional questions for the record. including secretary carter. i would like to understand whether we will have to pay damages because of the omb guidance that was issued. i will follow-up with you on that. >> thank you very much. senator ayotte. senator youcan go next. senator udall. >> yes, it would harm our military communities and would damage our military readiness. as is the case, always, our soldiers and sailors and airmen, armor reams and our coast guard are the bill payers if we fail to meet the goals. in the summer of 2011, we try to avoid defaulting on her good

credit rating. it is on our shoulders to put the national interest ahead of the petty partisan sniping that has been occurring in this town with regards to the sequester. i really would like to say that frankly we allow this kind of harm to be done to our country, it will not make a bit of difference who wins the majority in 2014. let's solve this problem. if we cannot reach compromise, let's work to mitigate the effects. general ray odierno, i would like to turn to the army's training budget. i understand that sequestration, as it takes hold, training above the battalion level will essentially stopped, except for we have units preparing for afghanistan. there is a ripple effect that might result in increased stress for deployed troops. we believe on increasing this and we are in greek faith with

our men and women in uniform. can you speak to that? >> yes, senator, we are currently funding the next group of units that would go into afghanistan. it would be done in the later part of 2013. what that means is the initial replacements are funded, those that are coming in the later part of the year are not. it would take that much longer to be prepared. i choose not to send people there that will not be ready. that is a cascading impact that we have. this real problem that we have in the 2013 budget, in terms of operations and maintenance funds. >> thank you for that clarification. another reason that we have to get this right here in the congress. turning to you, we probably host this in colorado springs.

our operations are up to eight hours per day, it is impacting national missile warning defends and situational awareness and the intelligence community. that would indicate that space command would not be able to fill the basic mission requirements in sequestration goes into effect. is that an accurate assessment? how would this be affected by space surveillance operations? with that, our friends in north korea are at it again. they just had another test and you might speak specifically about that situation as well. you thank you, senator. the space command under this operating budget undercuts a

sequestration, it gives them a little bit more freedom. what they have done is removed, when you talk about going 24/7 -- what they would have been able to do is do that in a space to provide capacity in the system. we still have the capacity for missile warning. that threat to the nation would be detected. but the redundancy in a capability, what has now impacted the background, it is the operating funds to power radar for 24 hours a day when erica. the secondary capabilities of those major radars. that is actually what is happening. >> thank you for the clarification. i just want to again talk about bipartisanship in leading the way on finding a compromise to

strengthen our entitlement programs and some targeted spending cuts. we can show them the way for a. >> thank you senator udall. senator fisher? >> we are going to need you to use another microphone or switch seats. >> okay. >> thank you, mr. chairman. thank you ranking member in half. i would like to begin by thanking all of you and the people of this country, i would also like to recognize the men and women that you represent by being here today. thank you so much. i would like to visit with you some about our nuclear modernization and readiness. doctor carter, as you know, the president has committed to

modernizing our nuclear deterrent. the cost estimates that were provided -- i believe it was last year by the department. they were about $56 million in order to sustain and modernize that over five years and 126 million over 10 years. is that still a good estimate. do you believe that it is in an affordable investment that americans should be making in our deterrent capabilities? >> well, we do need to have a safe and secure and reliable nuclear deterrent in my view, as far into the future as i can see. that does require that we have the sciences and engineering base. the facilities in the life extension programs and the other things that we do to keep the nuclear arsenal going.

if the budget cuts that begin with sequestration extend over 10 years are actually visited upon us as 10 years, i can't imagine that we won't have to also talk about the nuclear part of our force structure to accommodate those savings. you know, that is also in regards to the department of energy. they are going to get hit with budget cuts as well. the only thing that i would say is the nuclear deterrent is pretty important. what is the last thing you that you would want to do serious damage to. i would imagine that the department of energy and the leadership there, and certainly the department of defense would try to protect our nuclear capabilities to the maximum extent possible. general welch was just describing that. it is not critical, but he is

doing a little bit less than he used to do. i think you will see that in the nuclear programs. >> we are looking at the severe cuts. if i'm hearing you correctly, you would say that the nuclear deterrent would be a national priority? >> i think it is a national priority. that doesn't mean that it will escape entirely the cuts of this magnitude. i would not say that. but it is something that we would value pretty highly. look at what the north koreans are doing. you really have to have a safe and secure reliable nuclear deterrent. >> thank you, i will have a follow-up in round two. >> thank you, senator fisher. >> senator shaheen? >> thank you, mr. chairman. thank you all. >> i misspoke, senator hagan. >> oh, i thought you're you were going to let me get in a.

>> i apologize to you. senator hagan. >> thank you, mr. chairman. i appreciate all your service to our country. thank you for your time today. the devastating impact of sequestration, which we have all heard and talked about, i really do appreciate the candor that you have shared with us. it plays an important role. i chaired one of the subcommittees and i am very concerned about the possible impacts of the sequestration. and a full year on our special operations forces. north carolina is the home to the special operations command and the marine corps. as well as thousands of special operations and their families.

admiral mcraven has noted repeatedly that there is a greater demand for special op forces today than at any point in our history. as we prepared to draw down special operations forces, we will likely remain. additionally as al qaeda remains a threat to our nation, special operators will remain engaged abroad. i understand the combined impact of these issues. it could cut approximately 23% in the special operations and maintenance accounts. and 9%, essentially returning the command of fiscal year 2007 spending levels. or 2.4 billion below budget request for fiscal year 13. doctor carter and general dempsey, as these cuts go forward, how will the impact the readiness of our special operations forward?

>> get hit especially hard come in the same reasons that ray odierno gave for the army getting hit hard. but they have a lot of overseeing the special accounts. that gets affected and the sequester. we have to protect. the part of it that is working in afghanistan right now. i have to say that our strategy is not to shrink our special operations forces. it is to grow. what we said last year, we were going to take $487 billion in cuts. and that we could do that. that we had a new strategy. that strategy, our plan is, it still is, to grow our special operations forces. all of that is obviously in question now because of

sequestration. but his sequestration is averted, we get back on course, special operations forces will grow from 65,000 up to 72,000, if i renumber correctly. i was just down at fort bragg a couple of weeks ago in discussing now. it is a priority. >> it just seems incongruous to me that it seems that we can count on that, yet we are looking at a 24% cut. >> there is plenty of incongruity to go around. on the topic of sequestration. i would only add to it with the debt the deputy secretary said. in the first round of these cuts, 487 billion-dollar budget control act, we did advance it to the special operations. but if sequestration occurred in the magnitude that we have discussed, everyone will be

affected. we have to have a joint force of conventional and unconventional capabilities. >> yes, special operations forces to rely heavily, as you were saying, on the general purposes counterparts for the significant enabling support, including the intelligence surveillance and reconnaissance and logistics. general ray odierno and general amos, i am running out of time. as a representative of these military services, how is sequestration -- how would that impact your ability for your services to provide these critical enabling capabilities to our special operations forces? >> senator hagan, again, as i said, this reduction in intelligence capability, training, all of these will have an impact on providing much of the enabling support we provide the special operations forces. we are going to lose 37,000

flying hours in fiscal year 2013. i will definitely take a while to recover. as we have to go through and revalidate and support all of our forces to include special operations forces, they will be affected by the reductions that we face in the army. >> senator hagan, .5 years ago, the number of marines spend about at 2500. we did a review two years ago. due to the requirements and needs in the real world, we are not there. we are sitting at about 2600 today. sequestration continues, it persists, especially the next 10 years. it's unlikely that the force will be up to the extra thousand.

>> senator, continue to support the navy special warfare command and provide the enablers to them. on a platform of peace, for the chips that they operate from, the other units, you will see decreased presence and a more difficult time during the preparation for deployment because of its. >> thank you, senator hagan. here is where we are out. the votes that were originally scheduled for 11 are now scheduled for 1130, which means that we can safely go to about 1140, which means that we ought to be able to completely finish and hope that we have a couple of second round, if necessary. the goal being to complete this hearing by 1140. it is now five after 11:00 a.m. >> okay, we need to make sure that our staff knows.

>> i would ask our staff at that suggestion to notify our members but there may be a few minutes for a few second round. if they are interested, they should let us know. the meeting of our committee and the hagel nomination of the scheduled at 230 will begin at 2:45 p.m. because we have two votes at 2:15 p.m. two votes at 2:15 p.m. this afternoon. after consulting with senator inhofe, we are going to begin our meeting this afternoon at 2:45 p.m. instead of 2:30 p.m. i've asked everybody to vote early so that we can begin promptly at 2:45 p.m. this afternoon. now, i'm going to call on senator graham, then i will go to senator shaheen. senator graham? >> thank you, gentlemen, thank you for coming. thank you for having this

hearing. i can't think of a better topic to be talking about. can you tell us about this is? >> senator, i have a degree in english from duke university, the answer is yes. i don't know what it's going to take. maybe it gets everyone's attention, from a navy perspective, if sequestration is implemented, will he have less naval bases? >> well, senator, that falls under the base closure realignment process. >> how many ships will they have? >> if sequestration is enacted over the nine-year period, we anticipate the fleet shrinking by approximately 50 ships and at least two carrier air groups and carrier strike groups. >> in english, how many is that? >> 220 to 230. >> all right. the air force. are we going to have less

airplanes? >> what happens to the f-35? >> it depends on what is going forward. short-term is one of two airplanes this year -- [talking over each other] >> what if sequestration goes into effect fully? >> it would be hard to modernize, right? >> it would be impossible to modernize. >> would that make it more difficult to go into a situation like an attack on iran to prevent their nuclear programs in the future? >> yes, sir. it would be impacted. >> from the army point of view, what we eventually have less army bases? >> we will definitely have less brigade combat teams. about 40% reduction of sequestration. >> okay, 40% reduction. >> and we will have to look at closing bases as we do this. >> okay. okay, has anybody thought about resigning in protest?

>> i don't know if you're trying to send a message. [laughter] >> i just want to make this real to people. >> none of us walk away or run away from crisis and that is not our nature. but i will tell you personally that if ever the force is so degraded and so on ready and then were asked to use it, it would be immoral use of force must it is well-trained, well led, well-equipped. >> are we on the path to creating that? >> we are on that path. so please understand not. we are on the path of acquiring a military in the future to protect the circumstance where they know that they don't have the ability, given what we are doing, to the readiness of the force. general dempsey, i can't say it any better. do all of you agree with that

general statement? would you please say yes or no? >> yes. >> yes. >> yes, sir. >> thank you all for your answers. .. >> it's bad enough that the first year part of it is bad enough. senator shaheen. >> thank you, mr. chairman. thank you, all, for being here

and your candor in terms of your response to what has clearly been irresponsible on the part of congress. i voted for the budget control act as did the majority of my colleagues in the senate and majority in the house because i thought we were going to be responsible about how we then responded to coming up with a long term solution to address this country's debt and deficits, and the fact that we have not, i think, means that each and every one of us in congress should take a second look at what our jobs are in this body. the fact is we can come up with a long term solution that avoid impact of sequestering, avoids the devastating toll that you all talk about this morning on our military and on our defense, but in order to do that, we've all got to put aside some of our

sacred cows and be flexible. we have to look at the entire budget. we have to look at spending. we have to look at revenues. we have to look at our mandatory programs. i'll pledge i'll do everything i can to be flexible about that and look at all the options that we have to get a solution because this is not just, as you point out, about our military readiness and about this country's national security. it's also about the future of the economy of this country, and anybody who looked at those economic numbers from the fourth quarter has to understand that if we continue on the path we're on, we are going to put the economic growth of this country and everything that means in terms of unemployment and impacts to defense and all the other sectors of our economy. we're going to put that back at risk so i can understand your frustrations. i share it, and i don't blame you one bit.

i do have a scwe. you talked about the impact of the men and women who are serving our security, but i want you, if you would, to talk about more about the impact on this country's industrial base because i know we heard from the small businesses in new hampshire. there's been one firm quoted as saying that 20,000 small businesses in its pipeline would be affected if these cuts are not addressed, and i wonder if you could elaborate on the potential reversibility of sequestering with respect to the defense industrial base and its small businesses. secretary carter. >> thank you for the question. this is a very serious impact. i talked about the larger

companies are telling me that they are, as i said, maintaining more liquidity, not making internal investments in defense, but they have a capital structure to allow them to survive. remember that 60-70 cents of every dollar we contract ends up in a subcontractor, and many of these are small businesses that don't have the capital structure to be able to withstand blows and be turned on and off and so forth, and so i am concerned, and our industry partners are concerned, but some of them just aren't going to make it, and then you don't have a supplier for a critical component, and so both the magnitude and abruptness of the impacts, and, also, just the uncertainty that looms over these little companies. small businesses are important to us because they are at the source of a lot of innovation,

and they bring new ideas, new people into the defense field which we need, and so many of our most dynamic new ideas, new systems and so forth origin nate in small businesses. we are concerned about the health of the so-called lower tiers of the industrial bases as we make this adjustment. >> and, senator, if i might add, another concern for the navy is the people involved in repairing the ships, the very highly skilled craftsman and tradesesman, takes years to develop a welder, for example, that we lose those skills when the work goes away, and they have to find employment or they are fur lowed or could leave service. we have many sole source suppliers that if we cut off the development and the construction of the systems, they don't have any work for them since they are a single source for critical components. >> so that could have a

significant impact on jobs and the economy that's dependent -- >> right, jobs and the ability to reconstitute the base and if in a crisis, the ability to ramp up in the future. >> i share the concerns we're seeing that already as the naval shipyards, the potential impact that this could have so thank you, all, very much. >> thank you senator shaheen. >> thank you, mr. chairman. talk about jobs in the work force for a minute. just to be sure i understand what you're saying that if the shipyard people get furloughed, your view is that they decide this is not my long term career path? >> i think that's the potential outcome, senator. >> general welsh, i asked the other day about the f-18 line in st. louis. that's the big line. we have little defense

contractors in missouri. i did a tour of the businesses last year. as i recall, one was out in the country, and the office at one time was a dairy barn. everything's run by computer. you know, very sophisticated, very purposeful, but, of course, if they don't have that contract, i'm sure they're not conditioned in a way that allowed them to just wait until the next -- that business would go away, but what about like the big lines, general welsh? i've always been told that if that ever goes away, that's why some of our foreign military sales are so important to keep the line open. what are your concerns if you all have to say we're not going to be able to follow through with our plan for the number of planes that we've ordered? >> some of the major defense contractors have the ability to absorb work force into the public side of the house. >> uh-huh. >> boeing's an example, with a

large public aircraft production capacity. where we are facing a more immediate problem with sequestering, especially the remainder of this year is in the work force. if we stop the 150 airplanes and 85 engines not going in for the remainder of this fiscal year, we're not just furlough the work force there in the maintenance facilities, but the workload will stop, and many of the small business contracts that provide parts and people to come in and just specialize work as part of that maintenance will really start to go downhill. >> this would be a furlough not because you're furloughing people because of sequestering, but furloughing people because there was not work to do? >> yes, sir, it'll will both. >> talk about the other part of the furlough. general, we visitedded the other day of both your uniform personnel because of the way you function, you sneakily, you have

civilians wearing uniform, but on your civilian personnel, what are you thinking you'd have to do in terms of just telling them not to show up for work for a certain number of days for the next six months? >> yes, sir. if full sequesteration kicks in, and we have to plan on one day a week maximum for the rest of the fiscal year starting probably in april. we have not implemented that. we are looking at that. what it means, especially for the national guard, is the bulk of our maintenance is completed each day by our civilian technicians, our military, the ones that wear a uniform to work each day, and as we begin to draw those down, there's a readiness in the armories druse the nation. there was a study the other day looking at a 10% reduction of the rolling stock in the aviation here within the next

six months, and that's on top of already depo shut down that's going to cause us problems. >> all right. i may have more questions in writing on furloughs. secretary carter, a last question. i'm out of time. i appreciated your sense even if you're given flexibility now, the time is so short and what money's left, that might not do what you need to do have done. when asked to submit your budget, were you asked for an alternative for the sequesteration number next year? >> no. we were asked to prepare the 14 budget according to the fiscal guidance we were given late last year. >> all right, thank you. >> thank you, senator blunt. senator bliewmen thal yielding to senator nelson for a question. >> mr. secretary, how do you think the u.s. should respond to this dangerous and unprecedented action by north korea?

>> well, you know, there's nothing more provocative than what the north koreans did. i don't know if they did to to coincide with the state of the union. they had several other holidays this week they could have taken advantage of. they tend to like to do this on holidays, but in all seriousness, it is a very dangerous, and we will take action condemn and get the rest of the international community to condemn this test by north korea. i'm particularly looking to china, of course, to join in that condemnation, and they are a pivotal -- they have ativitial role in influencing the future here for north korea. that's an extremely dangerous situation for us, and the chie news have significant influence over it. we need to use it.

>> thank you. >> thank you, mr. chairman, and thank each and all of you for your service to the country and your extraordinary performance under very, very difficult conditions. not only fiscal conditions, but, obviously, the nation remains at war, and you are caring for the men and women in uniform has impressed me beyond words. your dedication to them whether it's health care or family, we often say here that our people are our most important asset, and you have lived that concept in the way you have led by example, and i am very, very grateful to you. on that score, i want to ask you, secretary carter, in terms of people, you outline in your testimony the effects on tricare, that it may mean cuts

of two to three billion dollars, and that our health system or military men and women may not pay their bills. what do you see, very briefly, what you see the effects of our potential sequester on health care for our men and women in uniform. >> yes, i'll say something, and, perhaps, secretary hale can add to that. you're right. under this scenario that we fear so much, by the time we get to the end of the year, we're out of money, and it's hard to cut back health care the way you cut back depo maintenance or training because you can't just tell people they can't be sick or can't see a doctor. you can do a little of that with elected procedures and so forth, but the reality is that by the end of the year, we're, by our

estimates, a few billion dollars short, and that will mean either trying to kick bills into the next year, and we have to cut back on the care we provide. >> just briefly, we are actively looking for a way around what i view is a crisis, and there may be our best way by far to detrigger this, and you heard it repeatedly, but i want to add my voice to this. we need to not do this. >> my understanding is that the navy is continuing to, with its program of two sub submarines ar including 2014, admiral; is that correct? >> the 2014 we don't have an appropriation bills, and that issue is unresolved for the multiyear for that submarine. the two boats in 13 are under contract and proceeding. it's questionable based on the

outcome of congressional action of the budget request a appropriate authorities. >> i'm concerned as the colleagues said about the effect on the defense industrial base, our work force, our skilled working men and women, strike fighters, helicopters as they do in connecticut or all around the united states and retaining that work force if we are faced with sequester so i thank you for, all of you, for your service, and i hope we can surmount that problem, thank you. >> mr. chairman, just on that point, we've talked about furloughs, and it's just worth noting that we need to find $46 billion under sequesteration between now and the end of the year. furloughing everybody, all of our 800,000 employees for the maximum allowable end of the law gets $5 billion.

even if we do that, we have 41 to go. that $4 # 1 billion shows up in contracted services. that's where the money will come from and effect all those people who work for us that has worked for national defense, but they are not employees of the department of defense, and there are millions of such people, and they build our systems, provide some of the expertise we can't keep in house, and that $41 billion, much of that will go to cutting their work for us. >> if i could just add to that? >> yes, general. >> in the army, we have to reduce purchase orders to over 33,000 small -- 3,000 small companies. 1100 of them are at moderate to high risk of bankruptcy if we have to execute this this year. you're not even talking about

the impacts of the small companies that exist around all of our large installations that are dependent upon the support of the installations as we continue to reduce the dollars that are spent in every one of our installations, and then in our own industrial base, the depots, we said we're going to cut 5,000, but we believe if sequesteration is in effect, it's well over 10,000 if we end up having to move out of our depos out in the out years, and so the impact on our civilian team that we've built between our depos and our civilian assistance that we have from contractors will be significant. it'll be, really, from an army's perspective hit the small companies which i think is devastating for us as we move forward. >> that's very important, and i thank you. mr. chairman? >> thank you. before i call on senator donnelly, there's a number of questions for the record you've been referred to.

there's additional ones, i'm sure, and we'd ask the witnesses, because of the real shortness of time before that sequesteration is executed, that you respond to those questions within five days. thank you. senator donly. >> thank you, mr. chairman, and i thank all of you for your service to our country. general grass, obviously, in indiana, we have a large national guard presence, and you touched upon it briefly. i was wondering if you could detail in terms of the national guard the impact sequesteration will have as we move forward. >> senator donnelly, the major impact in the near term of sequesteration will be the reduction in our maintenance and readiness declines drastically requiring us to park vehicles. as mentioned, we're so closely tied in the army side with contracted in the depo

maintenance, and the equipment returning from overseas, there's already a backlog. in addition to that, then, if we furlough or have a hiring freeze, we'll go ahead and we'll reduce the amount of maintainers at the level in hometown america which further degrades our ability through annual services, nothing else. with that, that time to respond to the disaster in your home states begins to increase. we had 2500 guardsman from four states this past weekend that responded. we'll continue to do the smaller ones. i'm concerned about the more regional long disasters, the catastrophic and complex catastrophes. >> thank you very much. secretary, this is for you or general dempsey. is there a number you can live with in terms of reductions? you know 487 # is too high, what

is a number that you can live with? >> well, we have said we could live with 487, and we worked very hard last year to accommodate an adjustment that large, and as i said, that cut was on top of the cuts that secretary gates imposed, which were another several hundred billion dollars so we understand that we need to play a role in deficit reduction. we understand that the country can't afford to give us the amount of money they have been giving us over the last ten or 11 years. what we're saying here today is that a -- we are now -- we were able to do that, but we're now on the edge in many of our capability areas, and the suddenness, the scale, and the arbitrariness of sequesteration

is what causes all of these effects you heard about today. >> i would just add and the magnitude. the magnitude of another half trillion dollars over ten years on top of the 47 and on top of the gates era efficiencies will put the current strategy at risk. now, not at risk; it will make it infeasible. the question back to you will be what strategy will you, as congress of the united states, be willing to live with, which will be a degraded capability from what we provide today, and we will owe you that discussion, but any additional cuts will change the strategy. >> okay. i just want to ask real quick, in terms of suicide prevention programs, we lost, as i mentioned last week, four men and women to suicide last year than we lost in afghanistan.

i was wondering the effects of sequesteration on those programs and mental health programs. >> sequesteration has impacts on everything. >> right. >> i mean, we have invested a lot of money and effort and time in trying to build resiliency and trying to get after the issues we have with suicide and many other issues. we have counselors that we increased significantly in every one of our installations that help our families and our soldiers to work through coping mechanisms and problems that they have, but that will be affected. we will not be able to afford the number of counselors that we have today. that's just -- that's just simple. just, we cannot do it. that's one of the high priorities. we'll try to sustain it at the highest level possible as we go forward, but it will have to take a reduction, and these are serious, as you know. although the effort we put into it, we have not yet put a dent into the suicide problem, and so this is of deep concern to all of us as we move forward.

it impacts other critical family programs that have helped us over the many years as our families have sacrificed so much over the last 10-12 years. those will have to be reduced as well, and so we're looking at this very carefully to find where the critical ones are, where the ones that are important, but not as critical, but in every case, we have to reduce the size of all of these programs. >> thank you, all, for your service. >> thank you very much, senator donnelly. senator king. >> thank you, mr. chairman. thank you, gentlemen. this hearing must feel by sard -- bizarre to you guys. it's one of the most strange hearings i've been in where the portion of the united states government is talking about essentially going out of business because of decisions made in somewhere else in the government. senator mccain talked about it, and it's alice in

wounderland. it's a strange situation. thank you for using the word "dumb," so you gave me license to use it. it is dumb. it's an arbitrary date. march 1st has nothing to do with what's going on in the economy or the credit of the united states or anything else. it's a self-imposed deadline, and the impacts will be drastic. in maine, 7,000 jobs is the calculation. george may onuniversity did a study of what the impacts are state by state, and i commend my compleegs. they estimate 7,000 jobs, and 4,000 in the defense sector, and naval shipyards. it's a disaster. it's a self-imposed disaster that we don't have to do. it's also hitting the wrong targets. your budget as a percentage of gdp is relatively stable and, in fact, has been declining. nondefense discretionary spending as a percentage of gdp,

and the growth in the budget over time and the deficit problem relates to health care, and the sequester has nothing to do with that whatsoever, and we have to have that discussion. it's terrible timing because it's in a time of fragile economy. i don't know if it can push us back into recession, but it won't help with the thousands of layoffs and furloughs around the country. it's going to kill the the economy of the institution that we make decisions on a regular basis, and i believe as you testified today, it increases long term costs. in the navy, for example, getting rid of procurements, the ships, which we ultimately need, are going to cost more, and deferred maintenance is not savings. it has to be done eventually. that's exactly what's going to happen here. i would, again, associate my

comments with that of senator mccain. we can resolve that, and that's the president of the united states. he has to precipitate a solution if i were him, and believe me, there's no chance that's ever going to happen, but if i were him, i'd have the helicopter running on the lawn of the capitol this evening taking the leadership of the congress and this committee to camp david and say, you have three or four days, guys, nobody leaves, men and women, until we get this thing solved, and i hope he takes the initiative because right now, we are slouching towards a cay tas trough fee for the country in terms of this economy, in terms of the military readiness, and i thank you for what you've done today, and hopefully the message you've given us will have some impact throughout the congress and at the other end of the pennsylvania avenue because we can solve this. it's ridiculous to be at this stage at this time given the

seriousness of the dangerous. thank you very much. >> thank you very much, senator king. here's the order of battle. we have senator gillibrand and mansion on our said -- side that i know about. i suggested senator mansion go vote on the first vote and come back so he can have his turn. it's now senator gillibrand on our side. >> thank you, mr. chairman. >> stick to three minutes, everybody, and we may pull this off. >> of course, i join all my colleagues in thanking our distinguished panel. i think it's abundantly clear that we have to avoid sequesteration because the harm to our military as well as on the civilian side and nonmilitary spending will be quite devastating. secretary carter, i was very struck by your saying very

clearly that this is a self-inflicted situation and brought about by political gridlock, and so it is going to take us sitting here along with the president to get out of this gridlock. i know there's potential threats faced in the world today including the asia pacific theater and actions taken by north korea that are very troubling, and i know the administration is correct and talking about rebalancing with an emphasis to the asia pacific theater, and secretary panetta said last week a sequesteration cuts naval operations in the pacific by a third. general, i'd like to ask you the impacts about the army's ability to carry out missions in the area of responsibility if sequestering cuts are put in place? >> thank you, ma'am. first, as i talked about 80% of

the force having to stop training this year, that includes our forces in hawaii. that includes our forces at louis who are in pay com. they will be degraded capabilities that they would have to respond to anything that goes on within pacific command. additionally, the army is responsible for providing a significant amount of communications support, intelligence support, and logistical support to the pacom theater. that's affected in 2013 and beyond. we tried defense our capability in korea to ensure they are at the highest readiness level. we'll continue to do that, but cuts in family programs, soldier programs, and cuts in civilians impacts korea as well, so for us, there's a significant impact on our ability to operate in the pacific for the next several years. >> for general dempsey, i'm glad

that you are going to protect wounded warrior programs because that is one was more, i would say, important programs to enable our people coming back from iraq and afghanistan to be able to transition back into civilian life, but i think there was mention about other programs such as councilling, family-related programs. how would those kind of programs that support our service members and our families be negatively impacted by sequesteration? >> yeah, thanks, senator, and i should mention, by the way, in addition to the effectiveness of the readiness of the army, we're in the process of moving significant marine forces into the pacific, and general amos can peek so that. think of it this way, base operations. that is to say the support services, whether it's -- whether it's any of the things you mentioned or, you know,

teachers in the clinics or teachers in the schools, medical professionals and clinics, about 30% of base operations will be degraded. >> thank you. >> senator lee is next. i'd suggest that we may miss the first vote. these are three minute votes, i mean, three minute questions, so, please, senator lee, stick to that. >> great, thank you very much, mr. chairman, and i will be brief as i can possibly be here. on december 2012, senator chuck hagel, the no , ma'am tee to be the secretary of defense sat for an interview with financial times, and when asked about how it's going, secretary pa panetts comments would be disastrous to national defense, senator hagel

replied as follows, "the defense department in many ways is bloated. the defense department got everything it wanted the last ten years and more. we've taken priorities, dollars, programs, taken policies out of the state department out of a number of other departments and put them over in defense. the abuse and waste and the fraud is astoppedding. i think the pentagon needs to be paired down. we need the pentagon to look at their own priorities." we are pressed for time so i would, if i could, have the joint chiefs go down the line, quickly, if you can answer with yes or no, whether you agree with the general characterization that the senator made. that'd be great. [laughter] >> let me try it. it's a good question. it's a fair question. i don't -- i can't speak for senator hagel, but my

interpretation of that is that it is along the lines of something that secretary gates used to say which was that we had accumulated over the decade post-9/11 when our budget was just kept going up over year, and i said this in lo gist ticks. when the budget goes up year in and year out, it's fair to say that when you had a management problem, all of our managers, they -- it was easy to reach for more money to solve your managing problem, whether it's a technical program or problem or something like that. it was noticeable as secretary in logistics that in some places that having had accumulated over the decades, and that's why secretary gates started his

niche -- initiative that i was a part of to reform the performance, and in parallel, we have absorbed 487 billion dollars in budget cut in a way that i think where i think we all said we could still accomplish the mission of the nation, and that speaks to the fact that we could do what the country needed with less. we made that accommodation. what we say today is that we can't do that strategy if there's further cuts. we have accommodated a substantial budget adjustment relative to a few years ago. we tried to do it in a strategic way, but what we say today is we can't take another major cut to sustain that strategy. >> okay, thank you. my time expired, and in

deference to my friend from new york, i'll defer. i will say it does appear to be somewhat inconsistent with senator hagel's statement because it was made just recently, just in december. thank you. >> thank you, mr. chairman ranking member, thank you for your testimony. it's incredibly disstressing to hear the statements that you've made today. as a senator from new york, i'm troubled about the emerging threats as new york city is a top tear row target. we have two missions for wmd under the national guard, cutting those programs, obviously, puts us at grave risk. we have a lot of national guard contingencies and operations throughout the state which is essential for recovery efforts. we saw what an amazing job they did in hurricane sandy so i'm very concerned that with these cuts, we expose ourselves to vulnerabilities. cyber threats is the greatest threat. we do a lot of work for them in the labs, and i'm worried about

our training. obviously, it's one of the premier trading operations we have for the army, and we have to keep the resources available. i'd like you to briefly talk about if you can quantify, how are the risks now elevated because of the cuts? >> well, senator, i'll answer briefly and see if one of the chiefs, in terms of their service,ment to respond. you asked the right question. how is risk elevated? so what we provide a deterrent against enemies and assurance of the allies, and then where we can't do as much deterrence or assurance as we think we need, we talk about risk. we'll be less forward, less forward, less forces to provide that assurance meaning risk goes up, and we could find ourselves, as i describe it, as vulnerable

to coercion, but let me see if any of the chiefs want to comment. >> senator, concern, and i applaud the great work of new york throughout sandy and the pages weekend. my concern about the national guard is as we continue to draw down on the ability to train at regional hubs, also in the combat training centers, reduce the proficiency of the leaders, and, also, of our operators, and many times when we respond to a situation like hurricane sandy, those pilots flying those helicopters are in extreme conditions reducing our ability to fly. >> senator jill brand, senator lee asked you answer the question for the record so i have that. sorry for the interruption, senator gillibrand.

>> the second question is looking at emerging threats worldwide, al-qaeda has ma tas sized, and they needed that to operate worldwide, presence in somalia, mali, all over the world. i know the president's intending to announce decisions with drawing down troops. it's rumored to be released shortly, pulling troops about 34,000 out of afghanistan. do you imagine that having a lighter footprint long term to shift how we spend money and in what way? >> i'll comment on that and ask the chairman or anyone else. it is part of our strategy -- this is the presequester -- to maintain what we call, exactly as you said, light footprint

presence in many parts of the world where terrorist groups could seek a safe haven. that is exactly part of our strategy. you do see that going on, and it's part of the special operations force structure decisions that we were discussing earlier with senator hagueen, namely, our decision if sequester doesn't go through, of course, to maintain and slightly increase the number of special operation forces so that they can maintain a wider footprint as things in afghanistan. >> senator, the question you asked is what this group at the joint table does, they are balancing global speedometer for ways to do things, sometimes directly ourselves, sometimes through partners in a region, and what you hear today is our ability to do that is going to

be called into doubt given the effects of sequesteration. >> gentlemen, we'll call a short recess in the hearing until the chairman returns. thank you. >> okay, we'll come back to order, and senator mansion, we've been here all morning. we'll put his questions in the record. he's kindly concepted to do that. my questions will be made part of the record. i want to thank our panel for their very powerful testimony this morning. we -- it is incumbent upon those of us that are elected to do the country's business that we avoid sequesteration, that we avoid the -- the yearlong cr as well. these are mindless, irrational

activities. they are not intended to become operative. they are intended to force us, kind of an action forces mechanism to determine what needs to be done, and, hopefully, they can still perform that role, but as much right now, that threat remains. it's incumbent upon the congress and the president to remove the threat, i'll say both threats because they are both real threats to the well being of the country, both in terms of our security, but also in terms of so many other important programs that the federal government helps to fund, so, again, we'll appreciate answers within five days of the questions because of the time constraints that we have. we're grateful to you for your service and for those with whom you serve for their service and their families, and we will stand adjourned.

[inaudible conversations] [inaudible conversations] >> i think because of that, you have to take everything into consideration, but i will allow that decision to be made by those there doing this every day. >> offered army scholarships who are corporate lo now high school seniors looking at becoming army officers. should they consider something else for next fall?

>> well, i hope not. we have to continue to get the best leaders and i think it's important that we continue to recruit the best, and in order for us to move forward, we're going to need the best kids possible out of high school seniors and best recruits we have, and that's really important and something we continue. [inaudible conversations] >> i don't know what to tell them. >> we'll continue to need them. >> okay. >> that's what i tell my own son. >> okay. >> comments about reduced readiness, first round of troops with soldiers would be training that the second -- >> yes, what i mean by that is because of the significant reduction training available in 13, first group we funded and we'll train. second group are falling behind. it's going to take them longer

to get ready so that could delay the deployment in 14, and would probably be, you know, a great part. >> personnel side, i think the training programs will run for this in a lot of ways. do you think that's a substantial impact on the career flow? is there a large pool of soldiers not eligible for the promageses they thought because they didn't get the training? >> we have to wait and see the long term impact on that. what i will say is we have to cancel some of the schools. in 13, we will -- everybody, and so that's going to cause issues. there's delays, qualifications, promotions in the short term. now, we're trying to mitigate that as much as possible because i do not want to keep them from being able the to get the

promotions they so well deserve. [inaudible conversations] >> what do you think are going to be the effects on the communities who thrive off military bases in the economy? >> yeah, i think significantly. i mean, as i go around, we have billions of dollars of impact on surrounding communities. as we cut forces, as we reduce programs, that impacts all the small businesses that surround all of our afghanistans, and -- >> can you see this being ever closed? >> well, i think if we have to execute full sequesteration, and the fact that we have to take out significant structure in the guard, we'll have to look at a break because we'll have to see if -- >> how do you pay for that? tends to cost money. >> well, it's problematic, but i think we have large costs on

infrastructure cost so any decision we made there was taken advantage of the infrastructure. >> last year, when y'all talked about maybe let's do that, congress screams. >> yes. >> how do you feel about that? >> well, if they sample the size of the cults they have now, it becomes efficient, you know, and especially for the -- >> general, secretary carter said he needs to be optimistic and hopeful, and that he was just hopeful and none of the above. where do you stand? >> i am disappointed so far in what's happening. i think this is a really important issue. i think for a lot of reasons people just have to the paid enough attention to it. the problem is it's not something that gets us tomorrow or a year from now. it could be three years from now. how do we get it? well, this is how we got there because we're taking steps. i'm concerned that we have not

taken action. i'm concerned there's no discussion going on, but i think that will change. thanks. >> thank you.

>> hello, welcome to the news maker committees event today. it's the national leading organization for journalists. for more information, go to www.press.org. today is state of the union day. here at the press club, it's also budget day, but as a cameraman said to me earlier just a few moments ago, every day in america is budget day. today, house budget committee's ranking member, chris van hollen and dr. tom price, republican of

georgia, will discuss the latest on sequesteration, the fiscal cliff, and the budget. this is a rare bipartisan leaders joint discussion on critical issues that divide the congress and the nation. this is an important conversation regardless of the timing, but, today, it happens to be a stage setter for the state of the union. they discuss the approaches to avoid the next potential fiscal cliff. sequesteration, automatic cuts in defense programs mandated by congress if no deal is struck could occur march 1st, and the fiscal cliff, when the government runs out of money could be in three months unless the u.s. treasury department takes extraordinary measures. the two discuss how congress and the white house can avoid recurring crisis by additional program cuts while not removing benefits by people who need them. they are also expected to address the roles and timing of additional revenues and tax

reform versus program cults incoming public concerns about social security and medicare. both will likely discuss president obama's request to congress to reach agreement that relays sequester and announcement that previous proposals are on the table. the senate budget bill, could be voted as early as thursday, in process is another issue at hand. dr. price, an orthopedic surgeon, the vice chair of the budget committee of the congress, was elected to represent georgia's 6th district in 2004 and resides in roswell, georgia near atlanta. before coming to congress, he was medical director of the orthopedic clinic at gradey me memorial hospital in atlanta teaching resident doctors in training. he chaired the committee, appointed vice chair of the budget committee by paul ryan, known as a fierce opponent of government waste and devoted to

limit government with a strong commitment to policies that create private sector jobs. we are grateful to the patience when he was going to come to the club in hurricane sandy. we are glad that you were able to come today. congressman van holen was lerpted to the house of representatives in 2002 to rent maryland's 8th district and happy to have him back from a couple years ago. his district contains month come ri county and prince george ease suburbs of washington, d.c. and ranking minority member of the house budget committee, the leading democrat. he also shortly became a leaders of the party after being elected, a prior chairman of the democratic congressional campaign committee, was the ranking member and democratic leaders of the budget committee in 2011. he's no longer a rising star in the party. i think that's what we said a couple years ago the the club. he is a star, and he's one of the most informed democratic spokesman on tv. welcome back. so we are privileged to have two

stars from opposing parties in the congress at today's news maker on one of the most important subjects of our day. are we ready? [laughter] a few ground rules before we get started. questions from credentialed media and club members. there's a microphone that if rebecca, raise your hand, will provide you. identify yourself and your organization before asking your brief question, no speeches, please. i also want to thank national press cliewb news maker committee chair, club staff, and the engineering staff, and our organizing team of rebecca, richardman, jamie, and i want to introduce my wife dr. path burg researches targets for curing cairns. raise your hand, pat. both of our outstanding members will speak for 10-15 minutes and we'll take questions. event will last one hour. we will lead with dr. price as

representative of the house majority. dr. price? >> thank you, bob. >> thank you, bob, suture. good morning to all. agreed to be with you and great to be with my colleague and friend, chris, as we discuss remarkably important issues of the day on a very exciting day. the state of the union is always an exciting day as the new administration, this is the time, the reelection of the administration comes in and outlines the plan for the future. i want to thank the national press club for this opportunity on what is really, truly, weighty, weighty issues as we tabling about budget, fiscal policies and the like, it's it's tough to talk about the numbers and make sense. we'll take a stab at it, and then i look forward to chris' comments and your questions. i was struck at 16-18 months ago when admiral mike mullen, then

chairman of the joints chiefs of staff was asked a question, and the question was "what is the greatest threat to the national security of the united states?" the highest ranking military officer in the country, what's the greatest threat to the national security of the united states? you know his response was the debt. the debt. that's chilling information from the highest ranking military officer in the country so what i thought i'd do with my time, few minutes here, is spend time talking about the magnitude of the problem we have, what we see as the source and cause of the problem and have positive solutions moving forward and flush those out during the q&a period. now, certain level of debt, all of you know, all of us likely have a level of debt whether it's mortgage or automobile loan or credit card or student loans, certain level of debt is not necessarily bad; however, when debt becomes so large that it is all consuming, and i would

suggest that we're close to that, it becomes destructive. level of debt right now for the country, 16 bent -- $16.5 trillion, too many 0's. 100% plus of the gross domestic product. the estimated debt in 2023, 26 billion. debt changes behavior, if you think about it. personally, your behavior is changed. nation's behavior is changed by debt as well. there's less opportunity, less growth, less flexibility, more dependence, you know that you're more dependent on the individual who holds your debt. nations are more dependent on the the entity that holds their debt, dare i say, less free. greater debt makes it less likely that we'll be able to hand our kids and our grand kids a nation of greater promise and greater opportunity. the first generation, not to do so in this great country;

therefore, it's a huge issue of responsibility. some are familiar with the index of economic freedom, the 2013 index. it's a joint activity done by the "wall street journal" and the heritage foundation, and what they do is categorize, prioritize, or list nations based upon level of economic freedom on a variety of parameters, on a variety of yardsticks. the united states, for six straight years, six straight years has decreased in its level of economic freedom. in fact, for the five most recent five years, we're in a category not of free nations, but of mostly free nations, 10th in the world in those lines. when you have 5 certain level of debt, we can look to other nations and see what they've done. some responded responsibly, others not so. we have seen that example in western europe recently with a huge amount of debt at the national level. what happens when you don't

address it in positive ways, and that's played out in nations that you well know. other nations responded appropriately. canada, 15-20 years ago, recognized they were on a path of destruction from a debt standpoint, and what they did was institute policies that turned things around, made their national government smaller, decreasing taxes for businesses, individuals, and the employment flourished, and the economy turned around. what's the source an cause of our current debt problem? our current budgetary problems? as bob mentioned, i'm a physician, orthopedic surgeon, spent 20 years caring for parents in the northern atlanta area. i knew if i didn't make the right diagnosis, that the patient only got better by dumb luck; right? if we don't make the right diagnosis on what truly is the problem that we have, we will only get better as a nation by dumb luck. if you look at the debt equation, most people put two categories on that debt equation. it's spending and revenue.

where's the revenue side? where are we on the revenue side? the amount of money coming into the federal government. this is a news flash, news flash, ready? the revenue in this country in 2012 has returned to 2008 levels. in fact, it's above the ten-year average in revenue coming into the federal government. revenue has returned to the ten-year average, rolling average, in this nation. what's happened to the deficit? the annual deficit? 2008 deficit was $458 billion. too much money, yes, but deficit in 2013, $1.3 # trillion. what's the problem? ladies and gentlemen, i suggest to you that we have a spending debt crisis, not a revenue debt crisis. you got to make the right diagnosis. to put it in a little greater context. we spend $3.6 trillion as a nation as a whole each year,

$3.6 trillion, about $2.5 trillion of that is medicare, medicaid, social security, and interest on the debt, those four things. the entire federal government, the rest of the entire federal government, everything, everything, post office, roads, transportation, justice, education, energy, defense, everything else is about a trillion dollars. you all just heard what the deficit was last year, $1.3 trillion, meaning that you could do away with the entire federal government with the exception of medicare, medicaid, social security, and we wouldn't even balance the budget. that's the magnitude of the challenge that we have. it's incumbent upon us to come up with solutions, positive solutions. what are we trying to do on the house republican side? our goals, as we step back and look and focus on what the goals ought to be are to increase economic freedom, provide

greater opportunity for individuals, to balance the budget within a ten-year period of time so that we can create that economic vitality in the country and create jobs and pass off that wonderful great land of opportunity for the kids and grandchildren so that their dreams, realized and not stifled. along the lines, we've laid out a three to four month strategy, three to four month path that started a couple weeks ago when we passed the no budget, no pay act, that was poo-pooed here in the down by many folks, only supported by 85% of the american people. it's important to recognize that the people recognize that the senate ought to do a budget. it's been nearly four years since the senate has passed a budget. did -- if you don't pass a budget, you don't know what the priority and top line of spending it. this bill said, look, senate, you got to do a budget. that's important as well because house republicans, the past two years, passed a budget that got us on that path to balance, but

we're comparing the very specific solutions that we have with a speech or a blank piece of paper. that's a tough debate. that's a tough debate. we believe it's important, in fact, imperative, and, in fact, the american people do believe it's important for the american senate to pass a budget. we forced the senate to pass a budget, and, surprise, surprise, they said, oh, by the way, we're going food a -- to do a budget this year. last week, there was a bill called require a plan act, i was the primary sponsor on that legislation, common sense stuff that the american people scratched their head and wonder why it's not done. it's simple saying to the president when you bring your budget to congress, and, by the way, missed the statutory deadline monday for the fourth time in five years. when you bring the budget to congress, let us know one thing, when's it balance? when's it come into balance? when does the revenue coming into the federal government match the spending going out? that's important because for the

past four years, this president put forward a budget that through the 75-year projections of the budget never, never gets to balance. remember the nations that don't recognize the calamity and disastrous consequences of this debt in the path they have gone down. next up will be the sequester as bob mentioned. they go in effect march 1st. these are reductions that were proposed by the process proposed by the white house, proposed by the obama administration, that were a part of the august 11 budget control act. they were supposed to go in effect january 1st, we kicked that down the road until march 1st. the level of spending reductions are spornt. we on the house republican side don't believe that across the board spending cuts are a wise way to control spending in the town, but if it's the only way to make it happen, that's the way it has to happen. we believe that spending reduction is the way to go. in fact, there's two pieces of

legislation passed last congress that identify the appropriate priority, targeting, as you know, enacted, enacted thursday, and we look forward to that to have the negotiation to find commonground between it us. following that is the continuing resolution, funding of the government that runsous -- runs out march 27. we believe it ought to be at the sequester level, the $974 # level to continue to get us on the path to balance. following that, april 15th, budgets on both sides, house passes a budget, we request get to a budget that proposes appropriate priorization and saving and strengthening and securing programs within the federal government, but that will allow us to get to balance within a ten-year period of time. vital to get the fiscal house in order and create economic vitality for folks. senate passes a budget by april 15th, important as well, to

compare the two. then we move into the debt limit, the debt ceiling deadline of may 19th, the time, ladies and gentlemen, where we -- if we can work together, if we can work together as a -- the representatives of the people of this great country come together and find the solutions that will get us on the pro-growth path because you can't balance the budget solely on raising taxes. you can't blansz the budget sewly on spending reductions. you've got to get the economy rolling again, and for us, that means appropriate tax reform. it means savings, strengthening medicare, medicaid, social security, programs currently on the path for bankruptcy. means adopting a scene energy program for the country so with are independent so we stop sending money overseas over and over and over, and it means recognizing we're a red tape regulation nation now destroying the ability for small businesses to create jobs.

pro-growth policies get us out of the dull drums we're in now. the challenge as the fourth of state. i don't ask you to driveway with us on any of these, but i challenge you to make certain that as you look at these proposals, that you treat all proposals with the equal amount of review, evaluation, skepticism, study, whatever it is, just give an equal amount of candor to each of those proposals, and then finally, i invite the colleagues and the president to participate in the progress in a dynamic way so that we can respondent to the urgent needs of the american people and get this economy rolling again so that jobs will be created and dreams will be able to be realized. thank you so much. >> all right. >> well, thank you very much, bob, and thanks for the national press club for having us today.

it is great to be here with my friend and colleague, tom price, and let me begin on a appointment of agreement. i join tom in urging all members of the press to very carefully scrutinize the proposals and numbers, and make an independent determination as to what actually makes sense from the perspective of math and policy, and don't simply report he said, she said. we would encourage everybody to try and look at the proposals in great detail to see whether they make economic sense. now, none of us have, of course, seen the president's state of the union address. it's a very tightly held secret here in washington, d.c., but i believe that the president will conclude that the state of the union is growing stronger by the day, but that you could be made much stronger if we set aside

political ideology and focus on sound economic strategy, and we had a good start. after inheriting an economy that was in total free fall, just about four years ago, losing 700,000 jobs every month, we have turned the corner. we are coming back, and net, net private sector job growth over the period since the president was sworn in for the first term has been about 2 million jobs, and we've seen net -- we've seen positive growth over the 35-month period, so that is good, but i think the president would say it's not good enough. the focus has to be on expanding

economic growth and boosting job creation, but our goal is not an economy that expands only for the folks at the very top. our goal is not an economy that only works for people who have already made it big. our goal has to be an economy that works for the middle class and for the entire country. it's not enough to say folks at the top will continue to move ahead while everyone else is left standing still or falling behind. it's not enough to say that the yachts will rise, but all the other boats will run aground. so when we look at the economic policies, including our strategy for reducing the deficit, that has to be our north star. is it good for economic growth? is it strengthen the middle class? does it make sure that we have rising incomes for everybody in the country, a rising standard of living for everybody, and

that includes making sure we make good on our commitments to health and retirement security for our seniors, and so that has to be the measure. now, in order to have a dynamic opportunity in the economy, we have to adopt and expand on proven strategies. we do need to invest in our future. we need to invest in national priorities to make sure that we can maintain our competitive edge, and, in fact, sharpen that competitive edge so that means we have to invest in education. if we really want a society that's upwardly mobile, we have to ensure people have the tools to do it meaning beginning with very early education, k-12, college, and making sure people have access to vocational training. it means investing in basic science and research, a strategy that the united states successfully pursued for a very long time, and with great results.

remember, it was federal public dollars that helped seed the internet. there is terrific research going on in the country at the national institutes of health and many other places that help provide our leading edge when it comes to the biosciences. we have to maintain and expand on that. we need to invest in our infrastructure. we just saw the report card from the american society of civil engineers giving us a big fat "d," a grade we would be embarrassed if our kids brought home on their report card so we have to invest in roads and bridges and invest in broadband to expand the information super highway. the united states is falling behind many of the competitors in that area, and we cant allow -- cannot allow that to happen so i mention all of those things because it would be incredibly short sided to shortchange those important investments at in particular time. it is also true that we have to

act now, put in place, a plan to reduce our rising long term deficits and debt that unless we act, will go unchecked. there's no disagreement with that, but our deficit reduction plan should not just pick a number out of a hat, an arbitrary political number. it has to be in the context of an economic strategy. again, the goal here is expanding the economy, growing jobs, and strengthen the middle class, and how we handle the deficit has to be addressed in that conflict. if we look at the european partners, they said reducing the deficit by itself 1 the number one priority. they adopted austerity measures. the u.k. is now in its second recession. a lot of the republican colleagues just urge you to go back and look at transscripts from three or four years ago, it

about cutting, that if they adopted austerity measures, it'd help the economy. good thing we didn't listen to the advice. if we had, we wouldn't have seen the numbers that we just talked about. addressing the middle class, let's apply the principles to some of the challenges we have right now. the sequester, allowing the sequester to kick in on march 1st with $85 billion in arbitrary across the board cuts between march 1st and september 30th is dumb economics. it is bad for job growth. in fact, if you look at the most recent congressional budget office assessment and outlook,

it indicates they believe the sequester would cost us 750,000 jobs this year. 750,000 jobs. we should not allow that to happen. now, if you look back in the congressional record of last september, republican leader eric cantor made an important observation, and i quote "unemployment would soar," setting back the progress the economy made and cited a study costing 200,000 jobs in virginia alone. that was the republican leader. now, i want everyone to focus on that statement because it is a clear admission from the republican colleagues that cuts in government spending do cost jobs, that how you deal with the deficit has an impact on jobs,

and if you do it and do it too deeply, it hurts the economy and hurts jobs, something we don't hear about from our colleagues, but i think it was an important admission from the republican leader last september. that's why we, on the democratic side, propose the deep immediate across the board cuts with a combination of targeted cuts and revenue from reducing tax loopholes that take place over a period of time. spread cuts over a longer period of time, do it in a targeted way, and you should include what we call tax expenditures. expenditures through the tax code, just the flip side of spending appropriations when you provide a tax break to a special interest, it increases the deficit. it reduces the revenue. it gives somebody a special

break at other's expense. we said let's deal with a balanced approach to reducing the sequester, and, in fact, house democrats have now three times offered an amendment to do exactly that. we would replace the sequester for the coming year with a mix of cuts to direct payments, big agriculture subsidies, closing tax breaks for big oil companies, and applying the buffet rule that says people over $2 million, who make over $2 # million a year will pay a 30% effective tax rate. that stays in between $1 million and $2 million a year income. that's a proposal. we have not even had a chance to have a volt -- vote on that in the house. the people's house, we believe we should have a vote. i think it would pass because it would force the question to many of the house republican colleagues,ing, including many n the armed services committee.

do they care more about protecting special interest tax breaks or about protecting investments in our national security and protecting the economy? at least, let's have a vote, up or down, on that proposal to replace sequester. it meets the president's request that we have a balanced plan to replace the sequester. we should apply that same strategy to reducing our long term deficit. we should take a balanced approach. that's the model, that's the frame work that every bipartisan commission that's looked at the challenge recommended, whether it's simpson-bowles, but also additional revenue. now, i hashed my friend, tom k say, it's vital we balance the budget by 2022. vital. that's interesting because the

budget that's been proposed by our republican colleagues in the house and voted on by republican congressman in the senate didn't meet that target. that didn't balance until 2040, and those who follow the issues closely, the office didn't say it balanced in terms of doing a policy analysis. they took the assumptions forwarded to them by the chairman of the budget committee, paul ryan, and said do the math, and those assumptions included that all discretionary spending would be under 3% of gdp, meaning eliminating the entire federal government other than the pentagon. all of the sudden, the last, you know, couple months, hitting this arbitrary political target is vital. what is vital, as i said, is having a deficit strategy that's consistent with sound economic growth and making sure that we strengthen the middle class, and that means, the first step we

absolutely have to make sure our deficits, as the economy improves, as we grow, that our deficits are not growing faster than gdp, and that we stabilize the debt as a percentage of gdp. because if you don't, as the economy improves, that higher government borrowing squeeze us out private investment and puts pressure on interest rates. we have to disoopt that strategy and adopt it now, have it kick in over a period of time. we just got very good news that the rate of per capita increase in health care costs is actually at the lowest level of 50 years. we need to continue to adopt strategies to keep that cost increase low, and we have to look yond the -- beyond the next ten years as more baby boomers retire continuing upward pressure. we, clearly, have to keep working on those issues, but let me just sum up where we are in terms of our deficit reduction

target. over the last little over two years, we have now reduced the deficit by over $2 #.5 trillion. that includes $1.5 trillion in cuts from the budget control act and previous continuing resolutions and other appropriations bills. this latest fiscal -- the agreement on the fiscal cliff to avoid the fiscal cliff and prevent middle income taxes from going up ensuring higher income individuals contribute more, that will result in about $600 billion in revenue coming in over the next ten years. taken together with the intrersz savings, you get $2.5 trillion in deficit reduction. now, we should replace the sequester, again, with a mix of targeted cuts and revenue, 1.2 trillion dollars is the ten-year

cost of the sequester, and we should find a way to replace that and continue to work on additional efforts. now, our republican colleagues, it's interesting, they've said no more revenue. if i recall during the last campaign, the republican presidential candidate, mitt romney, and the vice presidential candidate, paul ryan, talked a whole lot about how our tax code was filled with tax loopholes and tax breaks that disproportionally benefited wealthy people, and, in fact, the whole tax plan was begin to eliminate some of the loopholes. they wanted to use a dollar to dollar to reduce the rates, but they talked about loopholes. guess what, they are out there right now as we speak. in fact, speaker boehner, when he was having the most recent round of discussions with the president proposed that we raise

$800 billion from closing tax loopholes. you all wrote about it. it's out there, $800 billion. none of the revenue from closing that -- those loopholes you talked about has been achieved as part of any of these agreements so speaker boehner's proposal, although we have not seen the details, it's still out there, and, by the way, his proposal at $800 billion was more revenue than was included in the fiscal cliff agreement, had a little over 600 billion in revenue so it's curious to here our republican colleagues to say no more revenue. the reason they say it is because the grover norquist pledge that 98% of the house members on republican side have signed, says you cannot close one tax loophole for the purpose of deficit reduction. now, if the priority was really deficit reduction, you'd be willing to close some big oil and gas loopholes to reduce

those deficits. i hear republican colleagues talk about those deficits and the impact on future generations, and all of that is true, but appointly, that's never important enough -- apparently, that's never important enough to shut down tax loopholes for carried interests, for homing fund -- hedge fund managers, that kind of thing. can't close one loophole because the overall priority here is really not deficit reduction on the republican side, it is as grover, himself, said, reducing government to the size you can drown it in a bat tub. that's why you take an arbitrary political base to hit a particular target, and when you do that, you'll drown our investments in education for our kids. you'll drown investments in research and development. you drown investments needed to make our country grow, and you will drown the social safety net of medicare, medicaid, and social security.

that is the goal of the grover norquist set out, tan that's what you do with a date opposed to economic reality and the desire to grow an economy in the way that strengthens the middle class, so i will just close by saying that we have litigated a lot of the issues. it was in the last presidential campaign, and mitt romney and paul ryan talked about how people of this country based a clear choice, different paths. they laid out their path, the president laid out his path. on these questions, on these big questions of how do we deal with the economy, how do we ensure we strengthen middle class, how do we deal with deficit reduction in a balanced way? the people voted. every public survey from then until now shows the american people still support the president's strategy of reducing

the deficit in a sound way consistent with sound economics, not with political ideology, so if we can focus on economic plan, and that comes first as what i laid out, as our north star, then, together, we can move this country forward, but if we have threats of artificial shut down, it's difficult to change. i hope tonight after the president's state of the union address, we will be able to come together, the president will call upon everybody to work together to get the job done and expand job growth and opportunities for everybody in our great country. thank you. >> great, congressmen van hollen and dr. price. great presentations.

both of you wanted to go second. we'll allow dr. price to have a three minute response before we go to the questions. is that okay with both of you? >> as long as i get a minute and a half after that? >> that's what we'll do. [laughter] >> if we have the clock on it, then i think i get a whole lot more than three minutes, but we don't have the filibuster rule in the house, but chris just resembled it nicely as he presented his comments. let me make a couple observations. first, i don't think you heard me once talk about the motive of my friends and colleagues on the other side. we have got, in this town, to get to talking about specific policy solutions.

take motive off the table. if we're going to impugn each other's character and motive with every discussion about policy, how destructive is that? this is a nation that's the greatest nation in the history of the world, has met every challenge that we faced, and we've done it together. if we continue down this devicive path, then woe be to those of us responsible in bringing about appropriate solutions. the sequester proposed by the president, we agree across the board cuts are not wise. i mentioned that. my friend is very concerned about the job destruction of the sequester. i don't know what it is, but i know it may be in that neighborhood. may i remind you and remind him that was essentially the level of job destruction from the tax increases during fiscal cliff.

young had a nice study that demonstrated $7 -- 700,000 jobs destroyed because of the fiscal cliff. the amendment referred to proposed to in the house, and i wish we had a vote on it as well, but it gets $15 billion a year, 85 billion sequester level, and then, finally, if all of these things were working so well, step back, take a look. the american people in their gut know it's not moving in the right direction, and, in fact, policy adopted so far are creating more poverty. they are creating more dependence simpson-bowles. they -- dependency, creating unemployment, responsible for lost wages and jobs. i talked to a fellow who runs a car dealership this past weekend who is reducing 68 full-time pros -- employees to 28 hours a week because of the regulations in

the health care bill, not hiring a single more individual for full-time employment. these are -- he's not doing it because he doesn't need the workers. he is doing it because of regulations and rules coming out of washington. we're decreasing the quality of health care with the current policies of this country, this administration, we are increasing the energy costs, drive by your local gas station, and korsts continue to rise so -- costs continue to rise. let's get together and work positively to solve challenges that we have. put egos, put motives, everything else on the side. address the challenges that we have got. it will be then that our kids and grand kids stand up and give us a round of applause for addressing the remarkable challenges. >> chris? >> i'll be very brief, and a proposal that we put forward in the house, house democrats, does exactly that. it meets the challenge. it would replace sequester in full, more than 85 billion in savings through the combination

of cuts and revenue from closing loopholes. it is designed to replace those $85 billion cuts that would take place over the next five months and damage the economy with a deficit reduction plan over a longer period of time. that's the whole idea. you get the equivalent devra davis -- deficit reduction so you don't create disruption. with respect to the job costs of the asking higher income individuals to pay more, two points, number one, the congressional budget numbers in their seasonal sis show the job loss to allow sequester go into effect is much higher over a comparable time period, much higher, than asking higher income individuals to pay more, and by asking higher income individuals to pay more in reducing long term deficit, you help the growth as we've

discussed, by helping reduce the long term deficits. finally, look, i was quoting grover, and i didn't make any of the colleagues sign the grover pledge. that was a voluntary act on their part. they signed a pledge, and that pledge says that you cannot close down one tax loophole for the purpose of reducing the deficit. i want to say that again. if you decide that carried interest is a unnecessary tax break to hedge fund managers, which i think it is, you can't eliminate that tax break and use the money for reducing the deficit under the grover pledge, and it was grover who said that the goal, that his goal, by strangling revenue was to drown government, get it down to the size where you can drown government in a bathtub, and when you make arbitrary pledges like