date is not until december 2015, there is no one who is actually being denied the full benefits that were promised, et cetera. the other point i think you make is that it is entirely possible that the commission could propose some retirement arrangement, maybe not this one identically, but some arrangement. however, that would have to be debated by the it would have to be grandfathered to protect people, which is provision is an. so that would provide a much better approach to dealing with the issue of retirement. is that they're? >> yes, sir. that's exactly our position. and the commission our report out in february of 2015 spent but it doesn't preclude us and it shouldn't preclude us from taking immediate action to protect it and waiting for the deliberations. just one of the point, what is driving this, not entirely, but

is the need not only to keep our promises to the retired community, should be considered, invulnerable in my view, but also everyone's commitment to people in active service that they have the best training, best equipment, that the families have the best opportunities while they serve. and that's one of the fundamental tensions were trying to deal with. is that accurate, admiral? >> yes, sir, it is. i would add if i could, the only real interest that i have in deliberately doing this is silly to make sure that if it's repealed, it's repealed in the way that doesn't take it off the table in some form of accounting or gaza living, whatever it is. that it's not taken off the table permanently for the commission to the commission to be able to look at all the variables. if it's repealed in a manner that doesn't mess with that, if you will, timing is completely

up to the congress, obviously. >> thank you, mr. chairman. >> senator fischer. >> thank you, mr. chairman. and thank you both for being here today. you've presented us with a lot of interesting information. in discussing the conclusions on the strategic choices and management review, secretary hagel has said that chairman dempsey would lead an effort to find $50 billion in savings through changes to compensation. now, today you said that retirement changes won't be part of the budget request. but can you tell me what the status is, of general dempsey's review on the compensation part? >> we were challenged as a sort of a stretch goal to try to find -- i don't think it was 50.

i thought it was less than that, something like 40, but a decent sized number for compensation savings. in other areas of the department by the way were equally challenge in other ways to find savings. we worked very hard to do that. we actually came up with a set of proposals that would be required to make that mark. we found them too severe. and so we have been working on a set of less severe proposals that we will consider someone as part of the president's budget request, and were not ready to talk about those, but when i going to make 40 or 50 or whatever it was, but it was a very good exercise for us in a stretch goal in trying to see where we could find savings. >> thank you. senator kaine raised an issue earlier and i would like to follow up on it if i could 40 minute. is the department, including outside groups, in its review of the compensation, have you

reached out to veterans groups of? >> we are still in the process of deliberating over these things and we are not ready to show whatever proposals might be submitted. but we do look forward to consulting with veterans groups, because it's important they understand them. we would like to have the support. we know that would be difficult at any time you are talking about slowing the growth rate of compensation, we're not taking any place they would. we understand it. that's what veterans groups are for. we love them. i do a very important service for our people. i think, ma in due course we will definitely consult with them. >> my understand -- am i understanding you correctly that you're coming up with proposals inside the department and then you are presenting it to stakeholders groups looking for input, or are you including the stakeholders, veterans groups, for example, in providing you with suggestions and input?

>> we've listened, certainly listened to the veterans support organizations. a. are very vocal, understandable come and we appreciate it. we understand what they're telling us. i think at various levels there have been discussions with members of the veterans groups, roundtable and things but we have not presented any specific proposals to them because we can't get out in front of the second are on the president in 70 a budget. >> i go back to this them. you are presenting your proposals to these groups. you are not asking them to present proposals to you with ideas or changes the? >> we have not brought them in and asked for their proposals on how to change compensation. we are certainly open to that. we listen to what they see. we read what they write, and we take that into account as we deliberate over these things. i don't know whether they would come in with a proposal at all to change the kaleidoscope of

compensation but i would be interested in as if they did. >> may i just add that secretary hagel does meet with veterans, and so certainly there's a dialogue, as transport has said, we have not concluded anything about, specifics of our compensation proposal but he meets with him and listened and they have a general dialogue about our range of issues. and i've not been privy to them but if you'd like i would be happy to get for the record some report back on the kinds of topics that they discussed. >> that would be helpful. not just with veterans groups biting the stakeholders that are out there that could offer a maybe valuable information as the department moves forward in looking at compensation. i would think you would want to seek that. >> may i also add on the commission, there's been a lot of back and forth with the commission sharing data, sharing and analysis and so forth. so there's been those kinds of discussions. again, not our specific proposals because they are not done but there's been a lot of

engagement spent i appreciate that. secretary hagel has also stated that the department would begin implementing the package in the fy '20 15 budget. is that still the plan? are you going to include any of the changes in the budget? >> so, we are still looking at our budget deliberations but we are strictly considering proposing additional changes to compensation, not retirement. again, let me be clear, we need all the help because it's so hard. but some modest proposal and other parts of compensation, following on to the very large efforts the joint staff and admiral winnefeld has been leading over the past six to nine months. >> i would appreciate it and i know that other members of this committee would com, too, if we could get that information. i would think the earlier we could get that information the

better so that we can make decisions that will hopefully be helpful to the department as well. if you could tell me, have either of you seen any impact that these recent c.o.l.a. changes have had with regard to recruiting and retention? has there been any impact to date on that? >> i think it's a little soon for us to directly measure impact. generally, we find that retirement benefits play a less than 1% accounting and potential recruits to liberation as to whether he or she is going to enlist in the u.s. military. but it does of course impact our retention. in particular, it doesn't really -- we find an affect retention for the first and second termers, but it very much affects the retention for our third and career termers. so we haven't had to do with

seeing any behavioral change but we do know they're very nervous about this. they don't like it. and if you are 17 or 18 years in the military and thinking of retiring at 20, now if the c.o.l.a. minus one is memorialized you may have to consider staying longer in the military in order to accrue more of the benefit so that your retirement would not be impacted as much. site think that's the calculus that they're doing better than anybody is going to quit the military because of it but they are nervous about and their aching to the cancellation on how long they need to wait until they retire. >> you mentioned that earlier that it may not have that big of effect on recruitment, but i can survey see that it would with retention. so i would imagine that the sooner that we can divide certainty to the members of our military, the better. would you agree with that? >> certainly. i think this is an issue -- one thing i would throw in your is one of the retention concerns we are starting to feel is the

concerned about the quality of service. will they have the training? will they have the equipment? will they have the opportunity to serve in a way that is as rewarding as expected when the joint? >> take you so much. thank you, mr. chairman. >> senator hagan. >> thank you, mr. chairman. and admiral winnefeld and secretary fox, thank you for your service and for the jobs that you do. i supported the recent budget after i heard from top military leadership in north carolina's military community about the urgent need to halt sequestration of our defense budget. we've had a number of hearings in this committee about the negative effects of sequestration. and i think we all agree that if allowed to continue, sequestration will drastically reduce future military readiness and actually jeopardize the national ticket of our country. we are still at war in

afghanistan. it is essential that our service members are fully paid, fully equipped and received the support and training that they need. however, i have strongly opposed the provision that was included in the murray-ryan agreement that cut the cost of living adjustment that we been talking about for our servicemembers. we have made a strong commitment to our brave men and women, many of whomcome in my state, have deployed multiple times to combat overseas. and it is my true belief that we've got to keep our promise to our servicemen and women after they have sacrificed so much were all of us in our country. while it's true that our country faces difficult fiscal challenges, we cannot balance the budget on the backs of those who have answered the call of duty. i know that there's a strong, broad, bipartisan support to repeal this provision. senator pryor and i both have a bill that will do just that, and looking forward to bringing that

up, onto the senate floor. my question is that, unlike the private sector where most companies can easily recruit mid-level employees, the armed forces have no alternative but to build, develop and they treat officers and noncommissioned officers from within. as service members meet at eight to 10 your service mark, many are making that critical condition, are they going to stay in the military and make it a career or not? my question is, most of these officers and noncommissioned officers are battle hardened leaders with multiple deployments to iraq and afghanistan. do you believe the recent c.o.l.a. cuts will cause our midgrade officers and ncos to leave the sort of -- to leave the service prematurely? how deeply they view these recent c.o.l.a. cuts as will the broader debate about no to

compensation reform? if both of you would take a minute. >> i think retirement is part of the calculus of anybody when they're considering a retention decision, reenlistment the decision. the younger ones tend to think more in terms of pay. and midgrade ones tend to think of a bonus, if they can get one to stay in. the more senior once tend to think of what's coming down the line in retirement. so i don't have a metric that we can measure right now that indicates a change in behavior because of the thank you, mr. chairman -- of the c.o.l.a. one provision could we have heard anecdotally that people who are approaching retirement are doing the sort of calculation that says, well, if i retired at 20 i was going to get this. under c.o.l.a. minus one i would have to retire at ask, 22, 23, in order to have the same benefit accrue over the course of my retired life. so they are definitely thinking about this. there's a lot of information

banging around out there, and so it is a factor for sure, especially for the more senior members of the force. >> when you si senior, how many years? >> we classify our senior folks as anywhere from 13, 14 years on. but is most acute probably for those who i was a 16 use and beyond who are thinking about this. >> secretary fox? >> yes. so i think that admiral winnefeld articulated nicely all of the factors at play. so i'm getting there, it's going to take me longer if it's c.o.l.a. minus one, maybe i should stay longer to get at that level. that's exactly the kind of thing we need to help with the commission and the studies that they're looking at. force shaping tools, maybe that's okay. we need expertise to stay longer. in other cases we don't, and we can't have it. we need to incentivize people to say maybe there was a it's not worth it and they want to leave in the 10 years instead.

all of those factors affect the expertise we have in the force to do the things were asked to do. sometimes you can compensate with bonuses. sometimes with special day. of course, that takes away from savings. so it's a big stew of calculation and complexity that we need to sort through and that's the challenge. >> what of the percentage of the bonuses and salary? >> that varies dramatically. i can tell you as somebody who's a nuclear welder in the united states navy probably gets a pretty substantial bonus compared to somebody who might be in a lesser skilled position in the navy or in another service. so it really varies dramatically. >> it's interesting, the welding profession is one that is in high demand all over the country. and i'm sure nuclear welder's even more so. i feel strongly that the recent c.o.l.a. cuts need to be repealed as i said earlier, but

one of the elements that concerns me most is that current retirees and servicemembers were not grandfathered. if, after careful consideration, there are future changes to the military compensation and retirement, how important is it to exempt those that have or are currently serving, and what we the impact of certainly failing to do so? >> we've been very clear that we believe that any changes to the structure of the retirement plan should be grandfathered. chairman dempsey said that in several different testimony. i'm saying it now. all of the joint chiefs are unanimous in the senior enlisted leaders, we obligate any changes to the retirement system should be grandfathered. >> and when secretary panetta was with us and was involved in standing up the commission, he was very clear on grandfathered in, and i spoken with secretary hagel. he also supports grandfathering. i think there's a unanimous consent between the military leadership and discipline

leadership of the department to grandfathering has to be part of anything we do that change is retirement. >> when will the commission's report come forward? >> february of 2015. >> thank you. thank you, mr. chairman. >> thank you very much, senator graham. >> thank you, mr. chairman. they give for having this hearing and all of the things you've done over the years to keep us focused in congress about what is the right thing to do for our military. i really appreciate your leadership. seems to me central we've said we've all reached a consensus that we would like to undo what we all considered to be unfairness here. as far as timing i think the sooner the better. i would just make this observation. senator wicker kind of express the idea that nobody thought we would engage in sequestration, but here we are. i just think the sooner we can go back to the status quo, the better. there's enough anxiety among our military service personnel now. we don't need to add anything

more. that's what i would advocate doing it now. i would also like to associate myself with senator kaine. it's good to have a budget. he made mistakes in the budget process but quite frankly i'm very pleased with my colleague. we raised this early on with senator wicker and send ayotte and myself. the way the congress has responded to looking at this with an open mind trying to fix it in a bipartisan way. i think this is a good thing. everybody makes mistakes but you really judge people by their willingness to right wrongs it seems like we're on a good glidepath defined $69, hopefully, to set aside for what we've done with the c.o.l.a. minus one%. but the idea of reforming compensation, count me in, i just think the time has come prospectively to look at the sustainability. there's a difference, ago, between what you're saying about the overall cost of personal within the military budget and with some of our veterans organizations thing.

what percentage of dod's budget is personnel related? >> the military compensation by itself is about one-third. and overall compensation disciplines is about half of the budget. but i would hasten to add that the more i dug into this and the more ideas the body delivering this has dug into, it's the less sophisticated that metric sound. because there so many payable by go into the how many people do we have? what is the cost of health care? it's a squishy number and you would want -- here's the goal commission the 32.5%. if that change it would disrupt it. we want to find out what it takes to recruit and retain the best. >> wending i was just is to get with some of your veterans groups that have a different view of what the personnel costs are. remember, chairman dempsey talked about 54, 50% of the current budget is in personnel

costs if we look at the out years, the growth of dr tricare, where are we headed in terms of personal cost with inside the budget over a 15 or 20 year period? >> i think when chairman dempsey was referring to the 50% he was including civilian. you also have to ask, indirect benefits as well as directly. frankly, it's probably going to stay stable your there was some initial information and information is all over the -- >> even if you don't do reforms it will stay stable? >> if we do reforms, the percentage would probably stay stable. >> without reform? >> without reform. without reform it might go up a little bit. with the formidable go down a little bit but the more sophisticated we believe we can look at it is what is the best way to recruit and retain the best america has to offer. take the best possible care we can of them and get the best value for the american taxpayer. as an isolated look.

it's not a what is the right sure of the budget. you can imagine if you take a budget share and the budget went down, does that mean we reduce pay? we would want to do that. >> i understand what you're saying. secretary fox, i guess the point i'm trying to make is, if about half the budget is going to be personnel costs, direct or indirect, the other half will be spent on readiness, modernization, being able to actually go to the fight. the reason we are looking at reforming compensation is because over time, we think it's unsustainable. am i right or wrong? >> yes, sir, you're correct. these statistics, this budget share includes the number of people we have and the amount they are compensated. so if compensation costs were allowed to grow and sustain, we were just take it out of the people. we would have fewer and fewer people -- >> fewer and fewer people with less equipment to fight. the goal is to have a well-paid,

well-trained military that can win the war, right? >> and come home safely. >> , '07 and not have a verified. we're not looking for a verified in the future, right? we want overwhelming force on the battlefields of the war ends as quick as possible with the least amount of casualties. and that means with heavy equipment and training them is training, is that right, admiral? >> your abs of the right. we want to win 100 to nothing spent we would all want to go to war because those who go to war have to believe they will lose. those dumb enough to go to war will lose. it's that simple. you have to keep the people bred to make sure you can win the war. historically in a time of peace, what's been the historical average, say since world war i, gdp spent on defense? >> sir, i don't remember. i'll have to take that for the record. >> i know you very good command of those numbers. i don't have to memorize but i think it has changed over time, as you will note -- as you well

know. >> where will we be at the end of sequestration, even with the relief we've provided with gdp on defense? >> i think you know the answer to that question, sir, and speed but i need someone in the pentagon to tell me this. >> i'll have to take that for the record. >> the reason i want you to find out, because we need to make an intelligent decision about sustainability of benefits prospectively. telling people if you sign it in the future you may not be able to retire at 38 and have to wait a few years. we're going to tell the retired community would not going to dump on you. we're going to do this prospectively but somebody has to have a vision of where will we be as a nation 10 years now in terms of budgeting. that takes me back to sequestration. it's my belief that we are going to be dramatically under 3% of gdp if we keep this glidepath

intact, in 15 seconds, what our allies doing in nato? by the people we fight with spending more less in the next 10 years on defense? >> in seconds seconds left spent our allies are spending less. we could be well below what we spend in time -- which the likelihood a war on terror will be over in the next decade, admiral? >> we think that we're going to have to continue to suppress, contain, defeat al qaeda until it collapses of its own internal contradictions, and that's going to take some time. >> likely not to occur within 10 you? >> we would love for it to occur within 10 years but i don't think we can count on that. >> so let's plan on the worst, right? thank you. >> senator blumenthal. >> thank you, mr. chairman. and thank you both for being here today. thank you both for your extraordinary service to our

nation. i would agree with my good friend, senator graham, in his assessment that we are on a path to repeal the very unfortunate and unwise c.o.l.a. cuts in retiree pensions that were a flaw in the budget agreement. i would disagree with him only on his reference to glidepath, which implies an ease and unimpeded track that is rarely found in the congress. and i think it will take some doing to have that path achieved. but i think that the debate and the discussion here this morning and your testimony has been very helpful to reaching that path, which i think we have an obligation to do. i voted for the budget agreement, like so many of my colleagues. i did so with the understanding that that law would be corrected and that it would be corrected before the next ndaa, as soon as

possible, right away, for all the reasons that you outlined so well, the effect on the morale and really the dedication of our armed services. and the brave men and women who serve us. they deserve better than this kind of got without any provision for grandfather and. but the cut itself, in my view, is offensive. but i want to deal with the broader issue that has been referenced here this morning as well, which is how we attract, recruit, retain, not only new, best and brightest of their generation, and also a mid-level officer and noncommissioned leadership that is battle hardened and perhaps battle

weary, but one of our greatest assets in this country. because at the end of the day, and i would hope that you would agree, they are as important as any weapons system, any platform that we have. and i know that you've outlined well the impact that retirement and other benefits they have, but maybe you could give me a broader assessment, give the committee a broader assessment, admiral, if you could begin and then i would be interested, secretary fox as well. what are the incentives we need to offer? how do we change if we need to change? because we need to do it before 2015. and this commission reports -- i think we need to do it now, right away. >> very good question, senator. i addressed recruiting and retention simply. on recruiting, we take surveys of people have decided to raise the right hand and put on the cloth of the nation. why did you do this? why did you coming? it's interesting that the number

one reason that we're hearing back right now is pride, self-esteem, honor. the number two reason is to better my life. the number three reason is duty and obligation. the number four through eight reasons our travel, future education, experience, and they want to be challenged. next comes to a. more disciplined in their life, adventure, and helping others. so that gives -- that makes me feel pretty good at our young men and women are coming into the service for the right reasons. >> that's very encouraging. >> in terms of retention, particularly for those midgrade officers and ncos you're talking about, there are two variables i think that are fundamentally, it all kind of sub variables with the two most important our quality of life and quality of service. and retirement of course is something that the senior folks look forward to. but in terms of quality of life, as we adjust the glide scope of compensation we will tune it very carefully. we have to be watchful of that

and are some other things that go into what quality of life really means. how often do you move and can your spouse good job, that sort of thing. in terms of quality of service, we are hearing more and more from our people that, they are sort of surprised but all of this. what really matters to them more than keeping this high rate of growth is they want to fight in a modern and ready force. they want to go to work everyday and they want to have parts in the bandwidth they can repair the thing that they are entrusted with. and want to be up to drive it or flight or sailor. and they want to feel confident that they are on a winning team. that matters, it's an intangible but it makes a tremendous difference for our people. we have to look after that as well as the quality of life. >> senator, i would just add i think admiral winnefeld laid out usually. these intangibles i think are important as we look at any changes to retirement, for example, going forward.

.. duty on a ship and have other people there. they're not trying to do three or four jobs. all the things i think are eroding the morale of our force right now. >> and another way of putting it might be the sense that the country appreciates what they're doing as well. they're not only on the winning team, the best team, the gold medal team, but the country

appreciates the work they're doing. >> you can't even begin to understand how important it is to our young soldiers, sailor, airmen, coast guardsmen, they walk through airports and train station. ordinary americans thank them for their service. it's huge. >> you know, one other question in the limited time i have left, i know that you do survey -- that you try to apply some scientific method to assess the incentive and so forth that you just described. and of course, we have our personal experiences, senator cain has a son who is serving. i have two. we know friends and so north. i wonder how well you think those survey -- the scientific effort are doing in measuring the kind of incentives and so forth that are

at play here. >> it's a good question. you always have to take any kind of survey or data with a grain of salt. and if you're not listening to the drum beat that you're hearing from people ante-dotely what they're saying to you, what your senior leaders who are terribly important in the process are saying to you, then you don't get it. we have to temper anything we hear in the survey. i don't have a crisp answer on for you whether there's a dichotomy there. i think in general it's what we're hearing. they're both reflecting the same thing. >> and i do think we're very aware surveys can lag. i think that's why our service chief and secretary spends so much time out talk together force. to the men and women in uniform. >> thank you. >> thank you for your excellent testimony this morning. thank you, mr. chairman. >> thank you. senator vitter. >> thank you, mr. chairman. thank you, both, for your service.

certainly i want to express strong support for fixing this problem absolutely as soon as possible as well. i voted against the budget deal in december. this issue is the single biggest reason why. we need get it fixed. and i want to express strong support for fixing it in a way that doesn't increase the deficit in any way. that would be doing through two steps what the huge majority of us vowed absolutely not to do. and so that would be a failure as well. so i'm hopeful we'll get this done. i have one question for both of you. this provision essentially creeded folks in uniform differently and worse than federal civilian employees. all other federal civilian employees. it sort of penalized them, receipt to actively, on the issue, while the changes made for all other federal employees

was prospectively only. do you think there's any justification for that different treatment? >> i think it was surprising. i don't think that the vast majority of our force actually, you know, thought that through. they weren't aware, i think. it was really the one piece itself that registered with them. but it is definitely a difference. >> sir, i think, again, that's why we support grandfathering and believe that you have to look forward. maybe there's a change, whatever change it is it's for new people coming in. >> great, i'm glad most of them realize it. but my description, unfortunately, is accurate. that's the fact of it. i want to underscore i think it's fundamentally wrong and inappropriate. thank you. >> thank you, senator vitter. s. >> thank you, mr. chairman. and in light of the fact we have

a second pan panel, i think i'll submit my question for the record. i have one observation in light of senator cain's comments. i thought the first budget of a divided congress in 28 years was miraculous. i think today we are established the provision confirms that because we can't find parenthood. it was an immaculate conception, i think. this provees. -- provision. immaculate misconception might be a better term. i appreciate your testimony. i'll have some questions for the other panel. i associate myself with everyone else here. i don't think we should wait until the commission. i think we should fix this. it's not a huge item. it should be fixed, and i think our veterans and people that are receiving pensions for some odd reason may not fully trust us to resolve this in 2015. i think we should take care of it as soon as we can. thank you, mr. chairman.

>> thank you very much. that will complete the questions for our first panel. we will now call up our second panel. thank you so much, both of you, for your testimony. [inaudible conversations] we now welcome our second panel for witnesses -- outside witnesses so called re-- the chairman of the board of the military officers' association of america. reteared -- retired army general. and chief executive officer the association of the united states army. retired air force master sergeant richard dough delay

any. retired enlisted association. chief executive office defense analysis. he served as undersecretary of defense for personnel and readiness under president bush from 2001 to 2009. now we've also want to note in our audience we have with us a number of veterans particularly i'm informed we would welcome veterans from all of our veterans, but that would obviously include a special group of veterans of our wars in iraq and afghanistan. we also have statements for the record from the following individuals and groups. they will be entered in to the record the fleet reserve association, the iraq and afghanistan veteran's of america, the american leaguen,

the veteran of foreign war, the national military family association, and lieutenant cornel michael parker, u.s.a. retired who is a wounded war advocate. we are now going to start with general. this is a reunion of sort. we want to tell you we're delighted to see you all here, and we -- of course, very much treasure the relationship which have been established between this committee and all of you. and treasure the service which you have performed for our country. we thank you. >> chairman levin, senator inhofe. members of the armed services committee. thank you for the opportunity to appear before you today. i've also submitted a statement for the record, but it's an honor to me to speak today to you on behalf of those who serve and have served and their

families. on behalf of the 380,000 member of the military -- officer's association of america, i have the honor and privilege of serving as the chairman for the rest of this year. we thank the senate armed services committee for holding this hearing on military retirement program. the purpose of our retirement program is to offset the extraordinary demand and sacrifices inherit in a service career. retirement benefits are powerful incentive, as we have heard today, for those who served 20 or 30 years in uniform despite the sacrifices that they and their families have to endure over the period. the critical element to sustaining a high quality career military force lies lies with establishing a strong reciprocal commitment between the servicemember and the government and the people they serve.

if that reciprocity is not fulfilled, and we break faith with those that serve, retention and readiness will inevitably suffer. the cole will cut to servicemembers, retirement pay, and the bipartisan bucket act is a breach of that resip call commitment. the recently passed -- chapter 61 retiree and survivors from the cole will cut we believe the partial deal break the sacred trust with the rest of the retiree community and their families. we believe it should be repealed now. the financial impact has been called and various quarters as small, but, for example, and we've heard it today, a noncommission officer in the grade of e. 7 retiring this year with 20 years of service see cumulative loss of $83,000 by the time he

or she reaches the age of 62. more than three years of his original retirement pay of $23 ,000 a year annually. the ongoing rhetoric about spiraling out of control personnel cost has emboldened some to propose drastic changes to military benefits and compensation in the name of fiscal responsibility without fully understanding the unintended consequences of their action. suggested cost cutting proposals are gaining traction because critics continue to cite personnel cost growth since 2000 as a motive to gut pay and benefits. when you think about that, we need to think about it in a context of people, soldier, sailor, airmen, marines who are serving in harm's way every day rather than look at it in a budget context. we believe it's important to put

the 2000 in context. since 2002, yes. but using the 2000 baseline without historical context is grossly misleading. first, it implies that 2000 was an appropriate benchmark for estimating what reasonable personnel and health care spending should be. we don't believe that is correct. at that time, years of budget cutback depress the the military pay, cut retirement value by 25% for post 1986 entrants. and booted other beneficiaries out of the military health care system. retention was on the ropes, if we recall, and at the urging of the joint chiefs of staff, congress fixed the problem to prevent a readiness crisis. congress worked diligently over the next decade to restore military pay comparability,

repeal retirement cuts, and restore promise health care coverage for older retirees. in other words, the cost growth was essential to keep the previous cutbacks from breaking the career force. now many express shock at these fixes actually cost money. they forgot that congress deems that these changes were less costly than continued erosion of our defense capability. more over, military compensation studies erroneously concluded that the cost trend of the last decade will continue indefinitelily. we not believe that's correct. now that comparability has been restored, there won't be any further need for extra pay plusups above private sector pay growth. which is in the law. similarly, congress won't have to approve another tricare for

life program or repeal reducts, which we had to do in order to maintain the readiness asession and retention of the current force. those were one-time fixes that won't be repeated, hopefully, and won't need to be repeated. yet, we continue to focus on recent growth reject and adopted a new budget cutting phrase which is slow the growth. we believe the matt doesn't add up. military personnel cost which have been derived from the omb data, which include military personnel and defense health program continue to consume the same amount of pentagon budget for the past 30 years. about one-third. that's hardly spiraling out of control. even so we're asking for deeper cuts. leveraging our people program versus readiness is simply a

false choice of what this nation should be able to afford for its defense. the key to a ready force is and has been sustaining a top-notch servicemember for mid year or not commission officers -- mid level noncommission officer and officers for another ten years. without existing military career incentive over the past ten years, of this protracted warfare, the all-volunteer force would have been placed at serious risk. so in conclusion, we believe that the cole will cut needs to be pull -- fully repealed now and not wait. secondly, we believe any changes to today's retirement program needs to be grandfathered to existing retirees in the current force. and three, any further changes recommended by the commission must be fully vetted through this committee to determine what

impact it will have on our world class, all-volunteer force. our obligation is clear that's protecting national security. as it always has been, the most key element to our national security are the men and women who serve and the family members who serve also. thank you, again, for the opportunity to appear before the committee. i look forward to your question. thank you very much. >> thank you, general. general sullivan. >> mr. chairman, senator inhofe, distinguished panel members. thank you for the opportunity to speak with you today. it's -- as the president of the association of the united states army and former chief of staff of the united states army. the association of the united states army represents hundreds of thousands of members of the active army national guard, army

reserve, the retired -- community, civilians, and the army families. 121 chapters worldwide. our members are well aware of the fact that much of the good done for soldiers over the last few years would have been impossible without the commitment of this committee and we are indebted to each and every one of you, and your predecessors. your tireless and selfless personal staff's, professional staff, we appreciate their efforts. we understand the fiscal times -- these are very challenging times for our nation. certain things need to be done. before i continue, i want to acknowledge the bipartisan bill.

i've never been sure what was called. let's say the murray-ryan bill. whatever it was, the chips in to sequestration have been very important for all of the services. i just want to add my the voice to the thanks for everybody who made that bipartisan bill and the budget and the return to somewhat more normal order, which is taking place here. i remain hopeful that these chips in to the walls that surround money known as sequestration will lend permanently. in many ways, it's been stated by countless people this morning. the budget deal was good news. unfortunately included in it it was a broken promise. and the broken promise has been talked about repeatedly. inspite of the fact that the

president, the chairman of this committee, several secretary of defense, and the chief of the military services and the senior civilians in the pentagon, you heard it here this morning in the first panel, it stated repeatedly that any changes to the military compensation in benefits package would be grandfathered for the currently serving force and current retirees would be grandfathered. yet it was changed. this one line in the budget act created doubt in the mind of the very people who not need doubt created in their mind about the commitment of the american people for their well being and -- whatever the wars may be. and frankly we now have them worried about things never worried in my 36 years of active

service. i cannot imagine this point in our history need to cause them to be worried about their well being. the congressionally military compensation and requirement modernization committee that was tasked reviewing potential changes to the military retirement service was directed to follow guidelines set by in committee, and the president, that included grandfathering the currently serving -- and current retiree. in my viewing with the commission should be allowed to do its job and i recommend strongly that this provision, which gets in to the retired pay of those between retirement age and age 62 be taken off the table now and not passed to the commission. based on some hope that someone

else sometime down the road is going to change it. i don't think it worked in the past but it would work now. the longer it continues, the more uncertainty will be created in the minds of the people. and i think this will be a pay now, pay later. i don't think we understand the full impact of what we're doing here. as the economy rights itself, the blow to the in defer -- earned deferred compensation boast will be an enormous disincentive for qualify -- personnel to remain on active duty. recruitment will also suffer because any decision to serve could be influenced by how the current force is treated. today's soldiers are tomorrow's retirees, and they are watching and they will speak. and the current retirees who are -- many of whom are combat veterans

themselves will influence in some way recruits or potential recruits. in the case of the army, the army is a family business, and you will find a very high percentage of those serving on active duty today were influenced by either parents, grandparent, aunts, or uncle. the cut and pay benefit must be balanced against the long-term viability of the all-volunteer force. recent history which has been pointed out from the '80s and '90s shows that presip use pay cuts and benefit cuts have unintended detrimental consequences. the prime example is the ill-fated reduct retirement adjustment. actually, and just a few years we faced a recruiting challenge, which congress wisely reinstated the old system.

the current c.o.l.a. cut provision will some say will tame the wildly out of line military pension will hit hardest on the enlisted force. in most cases, i would point out that these people staff sergeant e6 or sergeant first class e7 are not fully employed in lucrative retirement positions in today's economy. for now -- the main source of north carolina and after decades of service, which i hasten to add, could have been involved repeated -- repeated tourism duty in conflict areas. this puts them in a bad position employment wise, so forth, and so on which i won't go in to today. the fact of the matter is, the compensation package in place today recognizes compensation,

which is by over 20 years of arduous service. by the way, this compensation was designed to encourage a career of service in the all-volunteer force. based on personal qualifications. this force is performed magnificently over the last several decades, and certainly the last 12 to 13 years in active combat. by the way, without the support of their families the thing would have fallen like a deck of cards. and i think we need pay particular attention to their families and role in all of this, and the children who have seen their mothers and fathers come and go to serve this country. they need to be taken care of going forward. in in addition to patriotism, what is kept professional soldier in the army and professional sailors or airmen or whatever the case may be, in their service has been the

assurance that the benefits which they understood they received would be forthcoming. i will tell you i never worried about retirement. it was just there. somehow we have created doubt in their minds. the last people in the world you want worried about that kind of stuff. those out there climbing in to helicopters and airplanes and ships and jumping out of airplanes in the middle of the night is whether they are or their families are going to be taken of. i am troubled when i hear we are paying the troops too much. and this is the reason we have to cut back on training, readiness, modernization of the force. at the end of the day, the force is people. it is people. we're talking about high quality men and women dedicated to their nation. they are not the problem.

the message they hear, though, they are contributing to their own unreadiness by their mere presence. we must change this narrative. america can afford the defense it needs. it is simply a question of priorities. shifting the burden of the nation's fiscal problem under the back of the troops is unnecessary, in my opinion, wrong. the instability caused by this cut will reverberate for years unless it's taken off the table. we're going feel it pay now; pay later. understand clearly the concept of shared responsibility, but the federal government and all americans must remain true to the promises made to the military personnel. we understand that military programs are not above repeal. i understand all of that. but always remember the nation must be there for them, those who answer the nation's call.

there's only a handful less than 1% of the american people. this committee, this committee right here, safe guards the welfare of america's military personnel on behalf of the nation. i want each of you to know that we appreciate what this committee does. and we also appreciate the fact that as stated earlier, i think general said it, you are the ones who will look at what the commission comes up with to ensure that it meets your goals of protecting the all-volunteer force. i urge you to find a bipartisan solution that will remove the under 62 military retiree c.o.l.a. provision and do it now. i my recommendation is you take the issue off the table and san diego -- send a signal out there to the force now so people sitting around a stove in the middle of

afghanistan in the middle of the night will not be talking about this issue. this is not the kind of issue they need to be worried about. this system was really created in the '40s. it probably deserves to be looked at. there's no doubt about it. but they don't need to worry about it. and their well being at this point, i think it has a hugely destabilizing effect on the force, and i urge you to take it off the stable now. i'll do whatever i can. i'm sure these other people will , too, to testify to that effect. thank you very much. >> thank you so much, general. now we've got the sergeant delaney. >> members of the committee, good morning. i'm a national president of the retired enlisted association.

it's the largest association that was created exclusively for enlisted personnel. from all branches and components of the u.s. armed forces. i appreciate the opportunity today to address your concerning the issue of military compensation. specifically the cola reduction for military careerist. i'm greatly concerned about the recent action this congress has taken. quote, when you freeze salary i ares, eliminate bonuses, and change their health care benefits, it's folly to think it's not going have an impact on the work force. end quote. that's a quote from bradford, president and ceo of the congressional management foundation not two weeks ago in "politico." he was not talking about military retirees, of course, he was speaking about the congressional staff and the effect that eliminating traditional health care is going have members of congressional staff leaving and pursuing other opportunities. according to the recent survey, 90% -- 90% of staffers said they are concerned about the benefits

changes under the new health care law. in that same survey, when asked if they look for another job in the next 12 months, four in ten, 40% of chiefs of staff and state and district directors said yes. quoting him again, quote, if these predictions come to pass, it would likely be the largest brain drain talent the congress has ever seen. end quote. what makes anyone think that reducing benefits for military careerists will not have the same effect on their decisions about whether to remain in the service? congressional staffers are dedicated, conscious, hard working professionals who care about this nation and the institution they serve. the same is true of military careerists. ..

and responsibilities as members of congress. to get ahold the institutional memory. as well as the expertise that is indispensable to the functioning of congress. the same is true of military personnel. the largest single segment of retired personnel who make up 29% of all military retirees. the top grades of the senior commission officers make up 47% of all of the retired personnel and if you added the five and e6 you will reach the embrey ty cherry is made up.

the e7 received a payment of about $23,000 a year. the fact is there is no way to retire and have the same standard of living that existed while on active duty without getting another full-time job. that works out to about $83,000 equate to a loss of four years' retirement pay. the cola cut would be greeted the living standard of the military retirees affected. without cola, inflation would eat away nearly half of the retired paid value for the free ty three retiree. is congress going to punish the military career? why under this law with a single out for the military cuts? why were they not to grandfathered in as the federal employees work? what have they done to earn this slap in the face? according to the former command sergeant major of the army communications electronics

command, it is the noncommissioned officers who are the ones keeping that in the changing technology. using their leadership capabilities to bring that technology to the soldier field. he also continues it is true the ngos are the backbone of the army. they teach you either how to do it right or how to do it wrong. for over a decade we have heard of the men and women in elective officials as the best trained, best led force in the nation. who do you think trained and led the those servicemen and women? it was the very people suffering because of the congress. i confess i am beginning to think that much of the praise from some of the members of congress was self-serving and nothing more than lip service. when i ask the members who believed it was nothing than a small adjustment and therefore refused to receive them, please stop talking about how great you think the armed forces are. to the members that agree that

cola steps should be cut off by asking to put aside the ideological differences and find a way to pay for cola. i many ideas have been put forth by members and the path now is to agree on one. the department of defense is the only federal department that is not able to be honored. we are here to at a minimum suspended the kutz of personal benefits until the dot can audit the books and see what's spending its money. the men and women that served on the armed forces voluntarily agreed to show the sacrifices they were asked to endure. is it too much to ask of the citizens and government to repay that debt? i pray that it's not. the nation that forgets its defenders will be forgotten. please, members of congress don't forget the nation's defenders. >> thank you master sergeant. we have very much hurt your testimony.

next is dr. david. >> senator inhofe, members of the committee is a pleasure to appear before you. to reflect the research by the department of defense i do have a statement that i hope might be made a part of the record. you're written invitation asked the right focus on the recent evolution of the military compensation, but how do we get to where we are? i would argue three important forces that have agreed to the compensation system that is the subject of the discussion this morning. first, of course, the history of the military pay and benefits that experience -- explains the part that is offered as opposed

in cash. second desired by the country to recognize the reward of those that have served in the military and explains a substantial growth in a series of benefits over the last 15 years or so to the advent of the tricare and expansion of the g.i. bill to make some of the benefits transferable and the substantial relaxation of the century old ban on the concurrent reseat of the federal annuities'. is the third force of course has been emphasized this morning is the need to ensure that we have a high-quality all volunteer force. that was the source emphasized over the targeted pay raises that the congress enacted at the end of the 25th beginning of the 21st century. it's also the source of the expanded authority to pay what the department used to ensure that the all volunteer success during the conflict.

they reduce the conflicts of importance. the issue going forward as we all know is the question of change. i agree wholeheartedly we ought to use the commission process to take a holistic view of the changes such as the ones being discussed this morning. i do argue that the prior question in that change ought to be as some of the once emphasized what forced as the country want in the future? what shape of experience, what level of quality, but differences of skilled backgrounds are required to secure the national security. you could have different compensation that could be argued one would be more efficient than the present one. that is to say to sustain the force at less total cost than the tax payer and i do think two

of the important issues in that regard is whether there is so much of the compensation to be deferred, particularly because of the fairness perspective on the benefits most military personnel will never actually collect those payments. and also, whether the compensation should be offered in time. as those changes are contemplated, i do think the question emphasized it is critical to keep in mind the circumstances of the military different from the circumstance of most american families involved and cannot change the reality and the burden of deployment, but we have to be sensitive to the fact that it affects the military and state of military over time. and above all, the various testimonies have stressed i do think it is critical to pay attention to the transition of the mechanism to read and to the question of the expectations of those who have served the path of those that are serving now,

with the changes that are proposed are consistent or whether put it differently from those of are affected by them can accept the changes that we wish to make. i look forward to your questions. >> thank you so much, doctor. we are going to have to have a short first round of questions here if we are going to be able to get to all four senators. but let me ask about the commission which is going to be reporting on the connection of the service groups and of the veterans' groups to that commission. i think it is the intent of everybody that has spoken, the senators that have spoken in terms of this cpi +1 is our intention and believe that it should be immediately repealed

and as soon as possible in the legislative body. i don't think from anyone i've heard from here today at least that there is any intention to wait until the compensation and retirement modernization commission reports about what a clear the air on that or remove that item at this time. but my question then turns to the commission as to whether or not your organizations feel that you will be contacted, that your advice would be solicited, whether for instance you looked at the members of the commission and feel that it is a representative group. so why don't we start with you, general. >> mr. chairman, first, the military has had one meeting with the commission.

we think it is relatively represented as the force determined by this committee. whether or not we will be asked to go back again and discuss with them some of their final recommendations, i can't answer that. i don't -- we have not yet then informed of any such opportunity. >> if you feel the disco's for any of the organizations represented here today, but the others that are out there feel that their advice is not being sought and they do not have an opportunity to express their views, we would welcome the hearing on that because the commission should be selecting the views of those organizations that represent our troops and represent our retirees and veteran's. so let me now ask you as well,

general sullivan. >> senator, we have already been before the commission wants at the national level. i believe some of my people out on the field have been doing some field interventions, and some of our members have participated in those. so i think that the views are well represented with them. and i'm comfortable with the representation on the board. >> our organization has spoken twice to the commission, and we are comfortable with the way that it is operating and we are hopeful about an outcome. obviously it is not sure what the outcome will be. we will have to wait and see, but we are happy with the commission. >> thank you.

we are facing a budget crunch although it has been kind of deferred for a year and a half or so. nonetheless, the law requires that the sequestered approach would be back in full blast starting in 2016 unless we had. we have acted the best we could in terms of 2015, but we are going to face the same kind of horrific problem through 2021, starting in 2016 unless we take the steps to avoid it. and that means that we will have in place -- if we don't act, roughly a trillion dollars in cuts to the defense budget that were enacted as part of the budget control act to years ago. half of those have already been implemented and the other we would face basically.

so i'm wondering if you have any thoughts not just about that subject. i think we could infer what your thoughts would be about trying to avoid the sequestration on that approach. but if these budget caps that are currently mandated by congress continue, do you have any thoughts on any approach to how do we deal with the balance between the pay and benefits as well as the need to train and equip and so forth? do any of you have any thoughts on that? >> let me start with you on this one and that we will go to the others if they have a comment. >> yes, sir. the key question in that regard is the mix of personnel that you believe are best suited to the nation's security needs. balance among the active duty personnel, federal civilians and

contractors personnel. there may be more mileage long term in getting the balance right than the other changes that might be discussed in terms of the compensation, not to put the commission's work aside. it's very important and significant looking at operating costs for military personnel and also the reserves are considered, too. but the question on the demand side so to speak was a mix of personnel that was suited to the security needs. could you make the use of the civilians that is true today? i think there is a number of evidence to suggest that is the case. and reserve military would truly be a military functions of the department. >> do any of you want to add a comment to that before we turn it over to the senator? >> i think that is a profound question, for which i'm not sure that we have a profound answer.

but it depends on how much risk you want to take. but until somebody comes up with a defense strategy and national security strategy, i don't think that you can wade out that equations. then you have to ask yourself what prediction can we make about the distant future. and right now i think we are out there. because in my view, it's always been hard to predict the future but we are making -- we are taking risks without understanding the future. i will just leave it at that. >> let me turn to senator inhofe. i will turn to the others because the time limits. >> i'm going to ask one question because i want to offset some of

the accusations year from people in service organizations. my feeling is that those of you come any of the service organizations would fall down on the side that if you had to choose between an adequately strong national defense and the maintenance of the current military retirement levels, which would you choose if you had the two? that's an easy question. >> i will always vote on the side of the strong national defense. >> the other two of you would agree with that i assume? >> we all took an oath to defend and protect the united states of america. >> that's good. >> that's what we feel. >> the reason i say that, and if you hit the nail on the head, general, you said america can afford the defense it needs. it's a matter of priorities. that is my whole position in a nut shell. that is something that -- a lot

of people don't believe that. there are people serving right now who think that we -- that really don't believe in the strong national defense that all of us agree with. let me make sure that everyone understands the 15 members who asked questions and made statements in this hearing on the first panel, you have one. you came here because you want the 1% corrected. we all agree. it is a moral issue because in the years that i was in the army, people would talk about reenlisting commitments were made to them and you cannot come along later and change them. we want a comprehensive reform to get into all of these things. but first, we want to make sure that we correct it. and you said that we want to correct it now. so do all of us want to correct it now.

from the military were participating in one of the service is. we'll understand and we agree with you. that's it. thank you, senator inhofe. who will be next? >> not much choice. >> thank you all for your testimony. i believe we will fix this and fix it promptly. i want to ask a question about the next issue down the road, which is as we start to think about what we might hear back from the commission in early 2015, from the conversations with you know, primarily in the people in the military, i have a youngster in college. the way they talk of the compensation benefits is that they have the feeling that some are promised. almost contracted.

a retirement after you serve a full career that is in the promises of. some are sort of reasonable expectations defined in the military and i agree there is going to be va system that will be functional, and i have a reasonable expectation without knowing what the budgetary top point is. there is going to be a functioning system. and some were sort of less than a promise or even a particular expectation. there may be a help or a desire. so, for example, what will the premium level be for the retirement health policy or health insurance policy that i would pay if i get to that? most are not thinking about those issues and they are not really contacted for a particular premium level. so obviously the commission is going to come back with recommendations about all these kind of things that are sort of in the promised so on that might be perspective, things that are sort of in the reasonable expectations and things that

frankly newcomers don't think about that much. and i would be curious the only question i have is talk about how we ought to be thinking about these issues as in preparation for getting that report. first i think what the commission proposes i think we have to review every aspect and full and open review and abetting it secondarily, the general said we have to look at it in the context of what we want the force to be in the future. and we do want an all volunteer force. but, you have focused on an issue that is critical in the survey that we do with military families and that is health care. the military families and service members believe that military health care is a promise. they don't see that as optional, and certainly, you believe that

it is not as important when you get older and looking at it from the family aspect. so, in that context, i think that we have to be very careful because it is a slippery slope we've already cut the military health care. we have already increased the co-payments and increased the pharmacies. so we have already done things that are distracting, if you will, from what the service members and their families proceed to be a benefit if you will. >> general, can i follow on that because that gets to my question. if there is a believe that health care is promised, and i believe that it is, it is a promise and those that are coming in believe. is there also an expectation that if that extends to a particular premium that is an annual one that wouldn't change

over the course of retirement -- >> i don't think we have ever gotten to that point. i do think that the reasonableness is a variable that must be considered, and that variable must be considered in the context of the requirement and with that individual is going to get as a retirement. think about the context that you have heard today. the sergeant first class who is getting a retirement at $23,000 a year and out of the family of three or four he is at the poverty level to start with. so, to require him to pay an exorbitant health care fi i think that it is very problematic. >> other comments on the question? >> thanks for the question, senator. if you take that last business about the medical, the younger person who comes into the

service today, the concept of retirement might be different than the concept that we have which was developed in the forties after all like expectancy now is 77i think. okay so there is a model for retirement and there is a model for medical. whatever the model is come and my view should be if there are increases it should be stated right up front. those increases will be within the us cola, the world-famous cola. if the cpi is such that whatever increase in pay might be within sight that as opposed to this wildly fluctuating medical inflation. very quickly you could take a

g-7 off the table if you go to the medical inflation. so there has to be a model and a concept when they bring the system for word. and as the general said, we didn't worry about that, because it was free tire if 50% of 20 plus then after 20 years, then it was capped at 30. medical we just went and got an aspirin, whatever, couple of tylenol. >> that is making us all hungry for lunch and i want to thank you for your leadership on this important issue. here is what worries me.

the only group that really takes a hit right now are men and women in uniform. so what worries me is we grandfathered the federal employees meaning only the new hires would they get impacted by it, but the men and women in uniform have taken the bull let for us, they got the cost right now to the cost of living increases. if it is because only less than 1% of the population defends the rest of us is because the federal and please and the other groups around here just have stronger lobbyists and voices? we are going to protect our people. what always worries me about this is that it was a huge disconnect from washington in terms of those that have sacrificed the most that they

would be the one group targeted in all of this and i just want to get your thoughts on all of this as leaders of our military organization because as i think that the big picture, what is the lesson that we need to learn from this that really worries me as i think about the big picture of the message that we are sending to our men and women in uniform when we have been at war. iraq, afghanistan. it's been a tough time for them. >> the problem that we face is that a lot of people think the military is an easy target. we will take some money from them and it's all over five for ten years period. rather than say let's adjust this if we are going to do it let's grandfather shall his it would take me over the halfway point and when i retire.

now they're looking at ways to change all that. there is a bunch of target's on our back. the talking about closing those. we have to pay for part b now have to pay for tricare for life, too? increasing the co-payments on the medical cost. it raises the pay and there's a lot of things it seems we are an easy target and that is what really bothers me. >> general sullivan, what kind of message we send with this and what we need to learn from this? >> as i said in my remarks, we are causing our people in uniform to think about the issue come to think about an issue

which they don't understand, and by the way i don't want to prescribe any motives to any one on what ever happens. >> but did we forget -- i'm worried what are our priorities? >> i think that's it. you have to decide. what we spend it on our security or on other things? and i think that is a decision that has to be made. right now i'm sure it appears to some of the troops that all of this is being placed on their back for the last 25 years beginning in panama right through to this day when we are fighting in afghanistan. by the way, now we've changed the formula. i don't get.

>> i think he made a great point. first of all, i think that we have to understand that the servicemen and women and families are getting a message, and the messages being sent every day. you can read it every day, any number of periodicals starting with the commissary, tricare and they see that there is a devolution if you will of support. the other issue is the servicemen and their families, their contract is with the united states of america. and they count on the congress to take care of them. they don't have a union. they depend on us to take care of them. they are billing to do extraordinary things for this nation and to each other and put themselves in harm's way to be without a family at not have equity in the house, change their times and do all of those

things and count on the congress of the united states in america to take care of them and they are getting a serious message now. i can tell you from the amount of e-mails that we get from family members on all of this, they are very concerned about all of this. >> i would like to clear the air. i don't think they are asking more than they deserve. i don't get that feeling at all. they want to know that people like you -- and you are, by the way come to your credit paying attention to what's going on in. >> sent you all for being here and i would also add that, you know, when people call things

and $80,000 cut to resurgent first-class whose average retirement is 23,000 like "the washington post" did or miniscule. we are sending the wrong message. thank you. >> thank you. senator came to become -- king? >> cast your mind back if he would to when you signed up. when do the people that synnott signed is their something that says if you sign here you will get health care or you will get a certain level of retirement benefits? i'm just asking you what are they saying the government has

committed to them? >> the oath of office that is to support the constitution in the united states and do what ever you are told to do. and the fact is it is a nuance business of all of those things that are told that hour not in a contract, retirement pure for example, commissary, all of those things that are never put on a piece of paper because they are serving to serve the country i remember signing my oath of office and that was it. >> my memory is not better than his, but over time i learned.

they require 2.5% a year. i took my oath. >> even if it was a piece of paper, what were the expectations? >> the contract was that i would have a retired payment. it would be 50% of what my last pay slips said and i would have medical care that would pick me up off the battlefield and even myself or my remains and bring them home. >> i think it is from the hearing this morning on the first panel but everyone this morning, they didn't agree with the piece that was in the budget deal and they want to fix it. member for come as we go

forward, they want to work off of the principal of the grandfathering of what is in full law. i think that is what this committee is. now, dr. chu, i would like to follow-up on those points. there's been a lot of talk about grandfathering. if everything is grandfathered and nothing changes except prospectively, what does that mean in terms of budgetary effect? because we operate on the ten year budget window. but as -- in my simple-minded way it's everything is grandfathered that means there will be no savings for 20 years. by the way, i think there should be something at the time of enlistment that says this is what the expectations are. this is what the benefits will be. so, there is clarity on that. but dr. chu, how we grandfather and at the same time do anything in regard to the personnel cost?

>> i should begin by reminding all of us that grandfather does not necessarily mean preserve the change. so the retirement change made by congress grandfathered everyone including the cadets at the military academies that did not preclude the congress from reversing the course when it came, when the first savings actually were going to take effect and would have a slightly smaller annuity coming up to that point. so i think it's an issue of expectations and issue of buying and so to speak on the affected parties that is crucial to the successful transition and the regime. to your immediate question, how do we say when everything is grandfathered, i would point out that it discusses mostly one-sided. so any reduction on the benefit

is not generally awarded only to those that are going to serve prospectively, and that's the naturally the way the benefits have been awarded to everyone, regardless of the period of service. so one issue is when you take more thought might be given to and what kind of affect at which to achieve. >> from the purely technical perspective, tricare for life changes, and the annuity changes would show up in the dod budget as a savings if there were reductions so to say. so those were both funded by the set-asides. >> even though the savings -- >> you would get a dod budget. the treasury would not see the cost, the treasury would have a

small receipt from the dod for the payments, but the larger outlay. so, yes, from the technical perspective you see the budget savings for those things that are subject to pre-funding which is in the military just the tricare for life program and the annuity payment for the longevity of the service. >> gentlemen, thank you very much for this important testimony. and as i said, i think it's safe to say you can see from the hearing today that this committee is very firmly committed to fixing this problem. >> think you. >> thank you very much, senator gramm. >> thank you. i think that we are firmly committed to fixing this problem and without those e mails i'm not sure we would be as committed as we are. so i want your membership and want you to know it matters and

that you go visit people. the congress is very friendly to the military. sometimes we make decisions that upon a second look maybe were not that smart. the fact that we are responding appropriately i think is a good thing. but do not underestimate our urging helps. now is there a social contract even though it's not in writing if your kids, sons and daughters will not have to be drafted because others would have to come forward and do the job done voluntarily isn't that the deal? and i don't know what that's worth to somebody out there knowing your son or daughter doesn't have to be drafted. think about it in terms of the budget. well would you pay if you have to avoid your family from being

drafted. when we talk about the retirement your master sergeant, is that right what was your retirement? >> 21,000 a year. >> 21,000 after 20 years of service and multiple deployments whatever risks come your way, that is a good retirement but by no means an exorbitant retirement given the value to the country. would you be willing to pay somebody $21,000 or contribute? i think most americans would say yes. who is advocating for the defense budget? you are out there talking about

the troops and their quality-of-life and what we should be doing in terms of tricare in the future how we should be sensitive to any changes we make to the benefit package. who is representing the equipment, who is representing the number of people. if not congress, who? >> the association advocating for that, we are advocating permission accomplishment and that is a very finely tend relationship between young men and women who are developed as leaders and trained to fight and their equipment at the doctrine.

>> when you look at their readiness to the country it's not only the people it is a modernization of equipment and also the training. the reason we are not talking about that today is because the subject of the panel. >> if you believe as i do that at the end of the sequestration period we are going to have a greatly reduced military capability at a time that we might need it the most is it unreasonable for a member of congress to say over the next decade that the gdp that we spend on defense should be at least consistent with the peacetime spending, is that an unreasonable position? >> i think it is also not unreasonable to ask all of the people who are suggesting otherwise.

could you please tell me what you think that you are getting or a defense establishment at the end of this journey? >> what kind of capability. >> gutkind capability are we going to have been 15 years if we just have this mindless approach to the budgeting? >> my time is about to expire. i guess what i'm trying to suggest is that historically we have been spending around 5% of gdp and more and more, there's an organization out there to start advocating for a tenure number consistent with the threats we face. so i know that you are here to ask about the cola changes, and the need to be changed but i'm asking you to see even bigger.

if you keep invoking sequestration and look where the average has been and see how far away would you be willing to help us in that industry? >> thank you to all of you for your testimony and service. >> we are fixing this absolutely as soon as possible and in a responsible way, which certainly includes finding a third real and not taken. i want to use my time briefly to highlight another smaller issue but important issue that can be fixed at the same time, and at the urging of me and others in some of the bills to fix this

issue. and that is a problem created when they changed their scoring rules with regards to the clinics and how they were scored in and worked into the budgets. not to get into the weeds that out of the blue, the cbo change those rules and it made it far more expensive to get the community-based clinics built because it scored much more up front. they would respond to this and put solutions up unfortunately many of us up on capitol hill have been in the house passed a bill that what appropriately deal with this scoring issue so the clinics are built. 27 glen mix immediately slow

down an impact nationwide including two in louisiana that should have done already built but for a separate by the va. the house bill passed 346-1 and it's very fiscally responsible. it deals with the issue and at the urging of me and others of this provision, it is already included up in some of the bills dealing with this cola issue including the sanders bill. so i would just urge you all to put that near the middle of your radar and i would urge my colleagues to get this pretty simple should be noncontroversial fix done so we move forward as we have been planning to on the community-based clinics i believe it can and should be done. >> if any of you have a response to that i would love to hear but

i just wanted to put that on the record. >> thank you all for your service and the vets for their service whether they are here within earshot or somewhere else and we will now stand adjourned. >> thank you mr. chairman

the winter olympics and sochi kickoff week from today and the center for international studies this morning a former national security adviser and the bush administration's book about the security threats in sochi. here is a look. >> ha fro >> i had the advantage of being inm the government and having a role at the white house at least for the returning games and in the beijing olympics tong uordinate the u.s. security ane

the response to threats.nd i think it is fair to say not from an alarmist standpoint but pomply from an objectivealarmisd standpoint, certainly everything we have heard and everything we know, that these are the mostha dangerous olympic games since 9/11 and given the environment a and all of the opportunities, al the various groups laid out.me. let me lay out how the house the might view this and why i suggest it is the most contextex since 9/11 with a view the terrorist threat as serious and that is defined by the intent of the groups that could threaten the games, the capability of those groups and the opportunity. and let me go through that just simply and quickly because

that's often how the intelligence community and the policy community in the u.s. government thinks about categorizing threats and certainly in this context makes it very clear why the u.s. is concerned with the threats. first they bring to the could disrupt. it is obvious and comes from the senior most leadership of the various groups. significantly and importantly in the july 2013 statement is not just a call for a tax on the games and a massive disruption, but also the listing of the moratorium on attacks on civilian targets, which is the call to arms and opening of the target of around the sochi olympics and not just the venues but the transportation and other venues that are potentially vulnerable and the site of soft

targets. in terms of a little these, we have seen over the last decade the availability of the groups to hit not just in the caucuses that in the russian heartland in great devastation. in the description certainly in the report its that you have these groups that have practiced the capabilities and have mastered a variety of the factors that is to say that these are groups that don't just specialize in one type of attack these are groups that can plan a variety of ways to attack the secured and unsecured sites. and you have seen this with singular suicide bombers and bus

bombs and the use of militants in targeted assaults and you have seen it in the ability of the course of the last decade to attack all sorts of issues that are vulnerable, transportation hubs and you have seen a tax on the airlines and on schools, security sites, police stations, hospitals. and so these are groups that again not only the intent, but the demonstrating capability to attack from a variety of factors and are practiced in many ways.

earlier this month the united states and other [inaudible conversations] >> i was a little worried when i heard them say all of you go after this next question. i was like is he being held hostage, do we need to get him? so i'm introducing somebody that really needs no introduction which is chairman goodlatte. i want to thank the governors i

have found a few and for a couple dollars i can tell you where they are. we also want to again thank tama because he makes this happen and thanks to german goodlatte who has basically been with this group since the beginning, the education program that we do all year long are in large part due to the support we get from him and his staff as well as a specific intent, so why do want to thank him for that but i do have a bit of a bone to pick with you. in the hearing this afternoon we are trying to make the rock stars and the tech geeks can be friends. we want your notes at the end of the program. so, without further ado, chairman goodlatte. [applause] >> my apologies. that is a very good point. we encourage the technical folks to come and participate in this hearing and i know that many will because it is the subject of great interest to all of you

and, we are also colliding with a bust of the union address tonight and a whole host of other things. so, you can stream it right here while you are participating in this great for on as well or you can stream over there. either way, we don't want you to miss either one, and our apologies for having them both occur on the same day. i am very excited about this opportunity, and if i can pull up his biography we would all be better off still.

>> drew is an american internet entrepreneur who is better known for being the founder and ceo of drop box and online storage service. according to forbes magazine, he has done very well for himself. [laughter] i will let him share that with you. [laughter] >> drew housten was born in beaverton oregon and he attended the regional high school. he later graduated with a degree in computer science from the massachusetts institute of technology where he was a member of the fraternity. it was there that he met arash who would go on to become the co-founder and ceo of dropbox with him. he was named one of the promising players aged 30 and under bye business week, and

dropbox has been touted as the most successful investment today. he's often named among the top 30 come under 30 entrepreneurs by inc.com, and dropbox has been called one of the top 20 best startups in silicon valley. in june of 2013, mit and the annual commencement ceremony is remarks he gave this advice. he said you were the average of five people you spent the most time with pity is think about that for a moment. who would be in your circle of five? i have some good news. mit is one of the best places in the world to start building that circle. if i hadn't come here, i wouldn't have met adam and i wouldn't have met my amazing cofounder and there would be no dropbox. one thing that i have learned is surrounding yourself with inspiring people is now just as important as being talented or working hard. can you imagine if michael

jordan hadn't been in the nba, if his circle of five had been a bunch of guys in italy? your circle pushes you to be better and that is what we want to hear more about. so please, welcome drew houston. [applause] >> i will apologize sense of those of you down and we can't see us quite as well. but have a seat and welcome. >> thank you. it's good to be here. >> thanks for that good word of advice that i saw when i looked you up, and i really appreciate that the five people clustered around you can really influence your future. do you want to elaborate on that? >> welcome i was lucky as i said again. it started out at mit, and then add a drop -- dropbox and i was fortunate to have so many great

people join the company. and have been fortunate to learn from a variety of entrepreneurs. all of these people have certainly made me a lot better at what i do. >> tell us about the drop box. >> dropbox is basically a free service. basically what you do is it is an application you can put on your computer or your phone and it lets you have all of your stuff with you wherever you are. if you e-mail yourself things or carry a flash drive for think i should back up my computer you never have to do any of those things. it is easy to use. we just crossed 200 million users and things are going like crazy. >> where do you think you are headed from here? >> we are growing really quickly. last year was 200,000 now we are over 500,000. if things stay on pace we will keep going for the future and

that's kind of how things work. >> what are the biggest challenges that face? is it scaling up or are there other things? >> mainly what i spend the most time on is improving. so there is a kind of war for talent in the area, and i'm sure all around. and just all of the challenges in the company. and we open up a bunch of new offices last year and all these things are going on all at the same time, and some of the things that are on my mind are things the subjects will cover today. ..