hello. this is brian. >> caller: the guy that called from pennsylvania a few minutes ago, he referenced what was going on in ferguson and tried to parallel that with salt lake city, or utah. the media makes those decisions. that's not a decision that individual news outlets make. i mean, it's a big deal in ferguson. this guy was killed by ed -- by the police department. so just to comment on that, i think it's one. i think it makes no sense. but i think to draw parallel between the two is not, is not adequate. thanks. >> host: from michigan, here is john, independent line. >> caller: good morning. how are you tax.

>> host: fine, thank you to go ahead. >> caller: i was calling with reference to the situation in ferguson, missouri. i heard people calling and criticizing al sharpton and jesse jackson for showing up. but the parents of michael brown requested that they come to ferguson. and i think the fact the requested should suffice in a. the other comment i have is that i think it's a big deal or good idea that the attorney general chose to visit ferguson because these have been long-standing issues in ferguson, it is my understanding. but it's all over the country. there are too many black young males getting shot and killed by the police. >> host: let me ask you, what do you think jesse jackson and al sharpton, what do they add to the situation and by being there? con that they are there i guess to console the family, which at this point in time everybody needs to console the family. in my opinion, this young man was shot and murdered by the

police. i thought it was too much deadly force use. that's my comment. thank you. >> host: winter haven, florida, you are up next, democrat's line. >> caller: yes, they do, i just wanted to call in an echo what's happening in ferguson and the fact that reverend al sharpton, just like joe madison, if they do not be too we city there will be no light shed on what's happening to our young black men getting shot down in the streets. so we would not have known anything about the trayvon martin incident, the incident with venetian mcbride. things were not be brought to the forefront with a man with a chokehold in new york. we would know nothing of this. light would not be shed on this and i should bring people who bring life. to all of us who argue against the people coming out to help, that's exactly what we need. otherwise it would be swept under the rug. >> host: so the attorney general being there is a plus,

is it a positive? >> caller: he absolutely is a plus being there, even if they brought the president or whoever they want to bring there. we need light shed on these incidences that are categorically happening and are bringing a destruction to our black men in this country. >> host: what about president obama, should he visit the area? >> caller: if he so chooses to. like i said, it sheds light. people were being hanged and you never knew a thing about it. but now that light is being shine on it, people know about it in the media. people come out and rally against it and voice their opinion. other people seem to get upset about it. but when other people's kids get killed, you want cash but if it's your child you would want someone to know about it. by god, we are to be bringing and shedding light on this. >> host: >> looking at some of her primetime programming coming up. its booktv to the focus

tonight this book fairs and festival including visits to the annapolis book festival in maryland and the "chicago tribune" printer's row lit fest. >> even the ipcc does not subscribe to the belief that extreme weather events are tied to global warming whether its human cost or not. they say there is no evidence of an increase in extreme weather events related to the warming that has occurred. and yet bill mckibben and al gore, the whole bunch, perpetuate the idea that every extreme weather event is because of us. this is why we will never be able to predict the future of the climate, other than about

three days out as john coleman who's coming up soon will probably tell you he knows. it's because of clouds. water, most important greenhouse gas is the only one that occurs in both liquid and gacy is faces in the atmosphere. the liquid phase of water and the gaseous phase behaves in incompletely different ways with regard to solar energy. clouds can reflect the son back, they can hold the heat income depending on where you are and how thick they are and what computer model can predict the pattern of clouds in the world? it's impossible. that is why we will never be able to predict the future of climate combat clouds are the wild card and many people believe that as the earth warms and more water evaporates off the sea, it would be cloudier and wetter, and that will reflect more sunlight back, in other words, it would be a negative feedback against the

effect of co2. that's just as plausible hypothesis as the fry in hell hypothesis that we keep getting from the alarmists. >> a quick preview of tonight's special look at the issue of climate change. join us at eight eastern on c-span2 see the entire program. >> here are some of the highlights for this weekend.

>> find our television schedule one week in advance at c-span.org and let us know what you think about the programs you are watching. call us at (202) 626-3400 or e-mail us at comments@c-span.org. join c-span conversation, like us on facebook, follow us on twitter. >> earlier this year the senate armed service committee held a hearing on changes to military retirement benefits. witnesses included joint chiefs of staff vice chair admiral james when it held, acting deputy defense secretary christine fox and other retired osha offices. this portion is just under three hours.

>> [inaudible conversations] >> good morning, everybody. the committee meets this morning to review the reduction in cost-of-living adjustments for working age military retirees that was enacted as part of the bipartisan budget act of 2013. we welcome today the acting deputy secretary of defense ms. christine fox and vice chairman of the joint chiefs of staff admiral sandy winnefeld, and i will introduce the second panel of outside witnesses after we hear from secretary fox and

admiral winnefeld. the bipartisan budget act adopted in december included a provision that reduced the c.o.l.a. for working age military retirees by 1% until the retiree reaches the age of 62, at which time retired pay is adjusted to the level it would have been had the c.o.l.a. not been reduced. in a "usa today" column defending the legislation, congressman ryan explained the provision as follows, here's what the new law will do. we make no changes for those currently at or above age 62. this reform affects only younger military retirees. right now any person who has served 20 years can retire regardless of age. that means a serviceman who

enlists at 18 becomes eligible for retirement at 38. the late 30s and early 40s are prime working years and most of these younger retirees go on to second careers. now, the consolidated appropriations act adopted a few weeks ago amended the bipartisan budget act to exempt disability retirees and their survivors from the c.o.l.a. reduction. i believe that the c.o.l.a. reduction is wrong because it targets a single group, military retirees, to help address the budget problems of the federal government as a whole. ..

proposals to repeal the change including proposals with different offsets and some with no offsets. these include proposals from senator shaheen, mcconnell, sanders, prior, hagan and others. the differences among these proposals highlight the challenges and opportunities in the end of ring t bring to repes legislation before it takes effect in 2016, but i believe we

must find a way to appeal it and i predict that we well. will. i trust that our first panel will also address the broader context in which this provision repealed will become centered in coding the stress based on the department of defense budget by the combination of congressionally mandated budget reductions, approaching a trillion dollars over the next decade. and also combined with the dramatic growth in the cost of military pay and benefits. the military services have responded to severe budget pressure by reducing the force structure and industry, deferring the repair of equipment, delaying or canceling modernization programs and allowing training levels to seriously declined. the department of defense has

told us that it will be unable to meet legislatively mandated levels unless it also begins to curtail growth in the cost of military pay and benefits. army chief of staff odierno told us that n-november the average cost of the soldiers pay and benefits is doubled since 2001 and if it is left unchecked it will double again by 2025. the service chiefs have testified that this rate of growth was not sustainable even before the cuts mandated by law and that a failure t to probe cb the growth would result in drastic reductions to military force structure, readiness and modernization. so we look forward to the testimony of our witnesses on the impact that the reduction in c.o.l.a. per page would have on the current force and on the

retirees, its impact on recruiting and retention and how these changes state into the overall concert of the defense picture. senator inhofe? >> everything you said was in my statement, too so i will just forgo that. ththe fiscal year in 2013 established a commission to undertake the review of the military compensation and retirement system and proposed forms to congress by early 2015. when the commission was created, the congress made a promise in the wall to the retirees and those currently serving that they be grandfathered for the changes to the benefits that they were promised when they volunteered service to the country. i've often said that it would make a decision and it's predicated on what they are told at this time would be the

situation to change that if it becomes a moral issue. that promise was again made by the presidential principles submitted to guide the submission. section 404 weeks peace promises and we agree there needs to be a series in the military pay compensation, however, the piecemeal approach taken in the budget act is the wrong way to do that and i would add that this is on top of other cuts they are not classified as such that it changes to the detriment of the retirees so i think we are on board together trying to come up with a solution to the problem. thank you mr. chairman. >> thank you very much senator inhofe.

>> secretary fox? >> thank you mr. chairman. distinguished members of the committee, i appreciate the opportunity to appear before you and to discuss the state of military compensation and retirement benefits. on behalf of secretary hagel and the men and women in uniform we serve, i would like to begin by offering my appreciation for the support of the committee and once again and acting the national defense authorization act. your dedication to passing means the department has the authority it needs to accomplish the incredible array of missions we undertake around the world each and every day as well as those that support our number one asset, our people. allow me to discuss within the larger frame of the department's fiscal situation.

we are grateful to the support and acting the fy 2014 appropriations act and for the bipartisan budget act of 2013 which provides us with much-needed certainty over the budget for the fiscal year 2014 and 2015 and partially addresses some of the significant budgetary challenges imposed by the provisions of the budget control act of 2011. in response to the sequestration last summer the secretary directed at the department to be prepared to operate with significantly fewer resources than those previously requested. the resulting strategic choices and management review showed that savings from increased efficiencies reduced overhead and reduced military and civilian pay and benefits would not come close to funding the gap created by the budget control act. nonetheless, every dollar saved in these areas could remedy for the shortfalls to the military

readiness, capacity and capability caused by sequestration. that is in part by last summer secretary hagel announced another reform most notably a 20% cut in the department's major headquarters, staff directorate and support agencies. while the bipartisan budget act partially mitigate the worst of the readiness problems in fy 2014 and to a lesser extent in fy 2015 beyond those two years it remains the law of the land. if sequestration is allowed to persist, our analyst us shows it will lead to a force that is too small for inadequately equipped and insufficiently trained to defend the nation's interest. that is why the department continues to call for a change in the law even as we plan responsibly for a future that could include a return to sequestration. it's within this context that i joined the rest of the

leadership in stating that we cannot afford to sustain the rate of growth in military compensation with experience over the last decade. one third of the defense budget consumed by military compensation cannot be exempt as an area of defense saving. we must find ways to slow the rate of growth. we are where we are today with respect to personnel costs because of good intentions from the desire to make up from previous steps between military and private sector compensation to the need of recruiting and retaining a top-notch force to an expression of the nation's gratitude for the sacrifices of our military members and their families. as a result, inflation-adjusted pay and benefit costs are 40% higher than 2001 even though the active force today is only slightly larger. the central character was to load has grown from less than $20 billion in 2001 to nearly

$50 billion in 2013. payments for housing costs have also increased faster than inflation. this rate of growth occurred in the era in which the department's top line was also growing to meet the needs of the nation involved in multiple conflicts. given today's fiscal realities, barring unforeseen events we are unlikely to see the defense budget rise substantially for some time. so if this department is going to maintain a future force that is properly sized, modern and ready we cannot maintain the last rate of the compensation growth. the admiral and i brought together a simple handle. iis on your table in your packages just below the written testimony. what we hear unmistakably from our people is that they feel that the quality of life and able to buy the pay and benefits

package listed on this chart is relatively high but conversely what we increasingly hear them say it is lacking is particularly following sequestration isn't their level of pay that air quality of service. our men and women are the first to say that they are well compensated by the department doesn't have the money to maintain their equipment or supply them with the latest technology or send them to get the training they need and then they are being done a disservice. when they are sent into harms way this can quickly translate into a breach of trust. here i am referring to our collective come a sacred obligation to provide our troops is the finest training and the government possible so that they can deploy to combat to accomplish their mission and return to the family safely. against the backdrop of the department has been a significant amount of work to explore how we slow the rate of growth responsibly, fairly and effectively lead we have

provided to congress several proposals in recent years some of which have been accepted and most notably just this year the congress accepted a 1% basic payraise even though the employment cost index called for an increase of 1.8%. we are currently reviewing all military pay and benefits and may offer further proposals. a few words now on the c.o.l.a. minus one provision included as part of the dba. to my knowledge no dod officials were consulted on the details of the bda including the provision. the department fully supported the changes made to the provision to exempt military disability retirement and survivors. moving forward we support a comprehensive review of this provision including its effect on retirees not currently exempt. if the congress decides to retain the cpi minus one approach, we strongly recommend that it be modified to include

grandfathering. because of the compact nature of military retirement benefits, i would urge that the congress not to make any changes in this area until the military compensation and retirement modernization commission presents its final report in february, 2015. there are many ways we might change the retirement including far more fundamental reforms. because the cpi provision does not go into effect until december 2015, there is ample time for such a careful read you including waiting for the commission to provide a template. i will conclude by reiterating the pay and benefits are an area we must be particularly thoughtful, cognizant of the commitments made in our ability to recruit and maintain the force needed for tomorrow. yet it has become increasingly clear that slowing the rate of growth of compensation cannot be excluded from critical efforts to sustain a force that is

balanced, equipped with the latest technology and ready to meet challenges seen and unforeseen. not to do so in the name of serving our people if for any other reason would ultimately risk a future in which our men and women could be sent into harms way with less than what they need to publish their mission. secretary and the rest of the department leadership won't let this happen on their watch. he and i appreciate the support of this committee and look forward to working with you to achieve the balance that we all seek and our men and women deserve. >> thank you very much secretary fox. admiral when i? >> members of the service committee thincommittee thank ye opportunity to testify on the cpi provision and all military compensation in general and i would like to start with the latter if i may. i would likely make clear that our men and women in uniform and their incredible families

deserve the best possible support that we can provide including competitive pay and other forms of compensation. this is especially true when they've experienced over a decade of wartime diplomats and stress, coming on top of all of the normal descriptions of military life, including the sacrifices made by the wonderful trousers and their families. however, we must also recognize good stewardship over the resources that the american taxpayers and the trust of the department of defense to protect the united states this means investing prudently to maintain the highest quality all volunteer force while simultaneously getting the best value for the capability, capacity and readiness that we need to win decisively in the combat. i try not to forget that the american people have been very supportive over a decade of the war to those of us who wear the uniform. they've provided ample funding for the combat operations. they treat us in person for differently from our vietnam

predecessors. many businesses have offered generous discounts and other special benefits to the men and women in uniform. the congress have provided substantial increases over the last decade of compensation and they have more than closed previously existing apps with the rest of the nation's workforce. we in the u-uniform are very grateful for all of this. it means a lot. however, demanding at this point that our compensation not only remains that it's currently higher relative level but that it continues to rise faster than that of the average american is simply not sustainable at a time our entire budget is under great pressure. this growth has been substantial and rightly so. by the 1990s the military compensation had fallen tree deeply unsatisfactory level relative to the rest of the working population in america. the quality of our all volunteer force suffered as a result. to address this with the help of

the congress, we substantially increased compensation growth trajectory in the late '90s and the post-9/11 period. these increases worked. in 2001, the u.s. median annual household income was $42,000. that he pleaded to the direct pay of an average e. seven in the u.s. military. today the median annual household income is $52,000 roughly equal to what an average makes. it surpasses the u.s. median annual household income to pay grades earlier or about 810 years earlier than his or her career would have in 2001. none of this includes indirect compensation or the special pay and bonuses we used to shape our force. we are very generous changes to the g.i. bill. to provide additional context in 2002, the quadrennial review of military compensation or q. r.

m. c. concluded to attract and maintain the best that america has to offer and because of the rigor of military service, military pay should equal around the 70th percentile of civilians with comparable education and experience. but in 200 2000 the midgrade and listed personnel only place in the 50th percentile. by 2009 the higher compensation trajectory enables to more than close this gap. in 2012, thus the age reported an average enlisted compensation claims between the 85th and the 90th percentile. understandably so during the decade of the war. while these percentile numbers are not a goal, they are an indicator. they simply can and should gradually placed compensation on a more sustainable trajectory. congress and the department had already made initial adjustments but more are probably needed. the department with the support of the joint chiefs and our senior enlisted leaders is now

considering proposals that would meet that intent. contrary to what some are reporting, none of these proposals would reduce the take home pay of anyone in uniform. we believe we should make this adjustment once. we will still be able to recruit and maintain the best of our nation and to our all volunteer force, and indeed we are hearing from our people that they are are much more concerned about quality-of-life cuts continued ability to continue serving in a modern first thing about maintaining the trajectory that closed previous gaps. we realize we will probably not get this exactly right and we seldom do. there may be special cases and issues that require collective action. they have the most accurate information possible. some will say the savings can

and should be found elsewhere through efficiencies. we agree we are working hard to do just that and we can use additional support in that area. yet even with our most ambitious efficiency efforts, we would still need to address the growth rate of compensation. in the end, we believe the most important way that we keep faith with the fantastic young men and women who volunteer to defend our nation is to only send them into combat with the best possible training and equipment that we can provide. controlling compensation growth and a tough budget environment will help us do just that. regarding the cpi minus one provision we are very pleased that the bipartisan budget act prevent a government shutdown and gave us at least a couple of years of long needed predictability in our budget. however, the inclusion of the cpi minus one provision has clearly led to considerable understandable anxiety among those who are currently retired or are planning for retirement.

i want to make it clear that your man and i and the service chiefs and senior enlisted leaders support grandfathering any changes to our retirement structure. the chair man has testified several times on this point and the recurring cpi provision does not fit within that principle. we believe changes to the retirement plan if appropriate should only be made after the commission takes a holistic look at the many variables involved in such a plan. accounting for changes and the cost of living is only one of those variables. and it is far too soon to reach a conclusion on whether it should be part of a grandfathered plan. however and whenever the specific provision is addressed it shouldn't permanently remove the cost-of-living adjustmen cos as a potential variable. in other words we don't have to rush into this we just have to make sure that we get it right.

however as the secretary said, we are grateful the appropriations bill to exempt military disability retirement and survivors of members who die on active duty. we thank the congress for this correction. it's an important signal to those in our force who have sacrificed the most. thank you again for the opportunity to speak today and for your continued strong support for the magnificent men and women who serve and who have served. i look forward to hearing your views and questions. thank you sir. >> thank you very much admiral. >> he would have made reference to the fact as did senator in half and myself that we have a military compensation and retirement modernization commission that is at work and the report is due at the end of this year, early next year.

i would ask both of you this. you made reference to the possibility or the need for some kind of an acceptable adjustments to the benefits given in the growth you talked about them being made realistically that means that there's got to be some kind of a criteria which is to utilize and draw the line between acceptable adjustments to the existing benefits and changes that would cross the line and undermine commitments that we have made. one of those criteria is what the grandfathering. is there any other criteria besides that one, which either one of you would suggest that we consider as we find a way to reveal this provision? were the commission considers

that they look at the broader picture? do either of you have suggestions on a? >> we both have thoughts on this because we have been thinking very hard about it. i do the leave that the changes to the compensation fall into two buckets. there are changes to pay and co-pays and things of existing benefits programs and then there's retirement. so there are kind of things the department has proposed in the past looking at adjustments to things like pay raises. you're going to get paid this year. the raise is something we should talk about. certainly we believe that those need to be looked at in the very clear eyed way to make sure that we can recruit and train the best people that we need for the all volunteer force. there are standards for that but frankly we monitor that very closely every year and as

admiral winnefeld said we certainly come back to any kind of trends in the negative direction. the retirement, however, is a program that the commission is looking at and considering fundamental reform. those are important for the ways we think about shaving the force and how long people stay in on the force, for example. and that has to be thought of in a very different way and that is why we really do want a commission to help us think through and look at all of the considerations how that would affect the shape of the force in the future. i didn't know or understand what promises were being made to me that i did feel like i was going to get 30 days of leave and i was going to be able to have my own personal healthcare covered and that i was going to be able

to tire at 20 years and i think that's the expectation. the retired members don't send the change in what they believe they were promised and i don't believe i got many promises when i came in. i do think that when we look at the commission looks at potential future changes to the retirement system, they have to look at all of the variables and those include investing time, you know is the 20 years or something else, wha what your we retired based pays and the multiplier would be if there is such a thing to be included on any bonuses that would take care of that and matching and also cost of living. but in the end, i think there are three goals of such a system has to meet. otheother goalother goals we hae program to help us shake our

force with the right profile and we have to get the best value for the american taxpayer and i think that as long as we can meet those goals in the commission and grandfather would we do i think that we will be in good shape. i hope that helps. spinnaker do you expect that there is going to be any change in the benefits in the 2015 budget request? >> are you talking about retirement benefits? we are waiting for and working with the commission to think through the retirement. >> you agree with that? >> disrespect to the secretary said a moment ago any adjustments we might make an existing compensation, those are changes in the existing structure. we think the commission is going to look at the entire structure and that makes a longer deliver the buck.

when we find a way to repeal this some of us are going to want to find an outfit -- offset and some of the bills filed don't require an offset. do either of you since i think you've indicated that you would support repealing this provision do either of you have suggestions on offset inside of the defense budget? >> it's about $6 billion as you said in the mandatory spending inside of the defense budget there's only two places to go to the mandatory try care for life or changes to retirement and we've already said any changes we believe should be grandfathered. we have proposed changes to the

fees that would contribute if not cover a 6 billion-dollar bill. so that is inside the defense budget. and in our budget there are savings that we would accrue outside from the mandatory savings that yo you refer to abe 500 million a year. we understand in the planning that these types of changes take time so if you grandfathered those savings would accrue over time and that's true for all of the deficiencies we understand that it takes time and that is one of the big challenges would give us and we may go back in 16 that sudden drop is a challenge for us because it does take ti time. >> i just want to make sure the distinction is clear to the members there is a 6 billion-dollar mandatory and in spite of the dod there was

about 500 million a year and we are already going to have to contend with the nonmandatory ways which will involve the readiness, capability capacity choices that we will not be able to make because of that what we are prepared to deal with that and we understand it's a factor among all of the other factors we have to deal with when crafting a budget. >> thank you senator inhofe. >> secretary fox di is a former drifter in the program evaluation and you've landed the strategic choices and management review. in that effort you spend many hourspent manyhours examining ty personnel compensation benefit structure including retirement pay and benefits in the current row as the interim deputy secretary of defense you will have been heavily involved in the department of this year. i have a chart you can see over

there on the side and it shows. i talked to you about this chart in my office and i think that you have to review this. >> we have a quorum now. can we keep you here for one minute? we want to get nominations nomie and forgive the interruption but senator inhofe has encouraged me to interrupt anybody to get the nominations voted on including himself. >> thank you very much. sorry to do that. we have a quorum so i would ask the committee -- >> so much for speaking out. >> i shouldn't have singled you out. this is a unique opportunity for me since the koran is now present i ask the committee to consider the nominations in the list of 1,096 pending military nominations. first i ask the committee to consider the nominations of matalin to be the principal

deputy administrator of the nuclear security. brad carson to be undersecretary of the army, william to be the assistant secretary to the air force for acquisition. acquisition. is there a motion? and is there a second? and all favor, say aye, the ayes have it. now we will consider the 96 pending military nominations. all of these nominations have been before the committee and the required length of time. is there a motion to report than? second? and favors a aye, opposed, nay. the ayes have it. i'm sorry to have done that to you. >> i will be right back. now that we have moved over a thousand nominations while i was here i'm glad i was able. >> sorry to have done that to you. we will not take that back from your time. >> mr. chairman and i just want to point this out to you to get the big picture. you are both familiar with this. this is the area of savings prior year to the budget that was passed.

it cuts down in the area of the balance which is the readiness for the first two years. but just to get an idea that would be what i would call the orange is the readiness area. the modernization prior to the budget is the green. you see that's not very much. the force structure is a big thing but not in the first year, it's in the last. and i think that when we talk about the savings from the various changes in compensation that your looking at the blue line and you're really only looking at about half of the blue line because it is entitled efficiencies of which changes and compensation would be a part. so it would be about 50%. now, secretary, do you agree on that analysis of that chart? >> yes, sir you have briefed my light extremely well.

we do not consider the retirement changes because of the commission and the complexity as i said before. so, that's compensation there is about half as you said correctly are just changes to pay in fees and things of existing programs. >> i understand that and i appreciate it. the reason i want to bring it up is this meeting today is about compensation, and there is this misunderstanding of where that fits into the overall picture. most people think that it would be about the size of perhaps the green and blue together. and i think people need to understand it is a big deal. it's a lot of money. but for the rest of it my concern has always been in the readiness area. secretary fox we've already seen this could have a devastating effect on the long-term

financial impact of those that are currently serving. and i think that we need to be sure that we are all on the same page on this because they can't squeeze hithe cutsqueezes milits between the tricare v. increased that applied at the c.o.l.a. rate and the compounding decrease adjustments to the retired pay. as a result the pay will not keep up with inflation. i want to bring this up because it is over and above those issues that we have already had an play right now. do you both agree that yes it is as bad as they are they are even worse because the fact they already have taken with most of them would consider to be cuts in the tricare medical services. >> i want to make sure i have your question. is it the c.o.l.a. minus one provision of grandfather

compounds on the changes -- >> that's correct over and above those changes. >> certainly we believe that we should grandfather any changes to retirement and we also believe that for the retirement we need to look logistically. it might be right for the future and it might not. so, absolutely the c.o.l.a. minus one is important. the tricare increase that we talked about in 2012 was an increase of $60 a year as our chart shows the 500. it's up to 548 a year. that compares for the civil servants $820 a month. so yes, there is an increase in my view anyway $60 a year as indexed is not as significant as the c.o.l.a. minus one provision that we are talking about. >> is over and above.

>> when i was serving in the army many yeararmy many years ay before you were even born, we were talking to people that were going to be reenlisted and making career decisions, and it was always based on what was their promise to them at this time. a general dempsey said the other day and i'm quoting now if anybody thinks i want to be a chairman goes down in history for having carved up the pay and compensation and health care, i assure you i do not. i do not want to be that the chairman. the problem is there is going to be a chair and that has to do it so in my view we should get on with it but we should do it all at once. what he is referring to is the military compensation retirement commission which will be coming out next year. i think you already answered the question, secretary fox. would you agree also that the

military commission should be allowed to finish its report and then do everything all at once rather than to do it piecemeal quick >> we think on the retirement sided with the a big mistake to make the piecemeal changes, which is why the c.o.l.a. minus one with a bit of a surprising to disruption. wdisruption. we think that on the generic compensation we have all of the information that we need to make on the regula a regular compenst definitely on the retirement peace we should wait. >> senator inhofe, senator manchin? >> i want to thank both of the witnesses for the committee today and we are here to discuss a very important issue as you've been talking about the critical impact on the service members and for those who will join in the future. after more than a decade of the war or our service members have made tremendous sacrifices to

say that we should honor the promises made to the men and women of the service and i refuse to believe we cannot find a responsible and thoughtful solution in these fiscal challenges and so i really want to thank the chairman for holding the hearing today. there is a couple of things i want to ask both of you. this is for both. why was governor of west virginia the first thing that came to me as we had to raise taxes. and i said don't you think that we can run a place -- but me see if we can do a little better job before we raise taxes and we were able to alert the taxes and have more efficiencies and be more prudent in what we did and basically the values are based around the priorities and vice versa. the u.s. marine corps became the first service to complete the unqualified favorable opinion that first the gold standard, countless claims of mismanagement i think only you know that. that. the current goal is for the clean audit depending on the

2017. yet, we are discussing the cuts to soldiers, pay and benefits today. it doesn't seem prudent to say the first thing you have to do is cut the soldiers pay and benefits when you don't know if you can run the place better. if it is the best option for the cost savings what are the courses of actions that you would recommend? because we hear just the unbelievable waste and fraud. i don't want to say that we could be more efficient that would be a crazy statement and of course we need to be more efficient and the other thing i want to share with you is that from my time as the senator said as the director of cost assessment and program evaluation, i spent four years starting with secretary gates in the defense department and we

found savings and we found efficiencies and the secretary is running his acquisition review and has done better buying power started by doctor carver the secretary of defense. so, the department has been seized with efficiencies. we found $100,000,000,000.1 and then another 60 and another 30. as the senators chart shows, those efficiencies while important, and we must continue them are not adequate to pay the bills of the sequestration. that said, we have to do them. slowing the growth of compensation is another piece of this. we are not cutting compensation. we just need to slow the growth. it can't continue to grow about 40% inflation so we think that is another piece of it but fundamentally come at these budget levels everything is on the table. first and foremost efficiency.

>> i would also reinforce that we are not planning -- no proposals we make are going to cut anybody's pay and that is an important thing to get out and i would also share in the belief e there's an awful lot for the department can do to become efficient. it would be responsible to say or believe anything else. we are working hard on that and cutting our staff sizes considerably and working hard on acquisition efficiencies. and i think that many senators here would point out examples of where we have a long way to go on that although we are making progress we saved $4 billion on the expendable launch vehicle which i think is a tribute to the management of that program. but no question we need to become more efficient that even with our most ambitious efficiency targets we still have more of this gap that we have to fill.

the frontline defense for the state has always been and every state will go the same. with that being said, i'm concerned with the recent force of the army wants to the apache helicopters. kind of a 40,000 troops. i look at what we are doing with contractors, private contractors and the department of defense and it's been a problem for me to think that we are going to be maintaining our contractors size while we are cutting the men and women in uniform. and also, the guard extends with declining budget you can use the guard more effectively and efficiently.

it's a fantastic institution that this country is used for many hundreds of years and we will give you a different number. but, as we cycle now going into the reserves and the guard will that be a way to? you have all of his experience and expertise. >> we are in the process of the budget of the deliberations that we are doing right now looking at the balance between the act and the reserve component. and i would guess that there would be a difference in the proportionality that i wouldn't want to get into any details in there about how one would come down as opposed to the other. but, no doubt about the guard of the other thing you mentioned was contractors. and again, we completely share your belief. we have to make sure that we have our contractors -- >> we had a heck of a fight on our hands just getting it from 700,000 to 9,000 we thought maybe it should have often paid more than the vice president to 33 that everyone has pushed back on that. >> the largest proportion of staff reductions that we are taking on the staff and i

suspect elsewhere out of the 20% reduction that we have offered to do the largest proportion of the contractors because they are costly. >> most of them are military. >> the guard to me is the most effective way for us to go in this country to have expertise and keep the expertise ready at all times. and for some reason i don't see the pentagon and bracing that even though we had a i located that the joint chiefs position. i hope that we are getting close to that. with that, thank you. >> do you believe that the

actions that were taken in the context of a budget agreement was not the way the pentagon would like to see this issue addressed is that correct? and that the best way to do this is overall addressing of the issue through the commission that the committee had recommended the lawrittenin thee president? cynic that would be our preference. >> and would you agree that one of the principles we should probably adhere to and address this issue would be to make sure we do not act in a way that affects existing service members and retirees? in other word words would be prospective in nature and we could address the issue effectively if we do a prospective rather than creating the impression to the men and women who are serving and those who have already served that we

are reneging on our promises to them. >> that is the position and has been. >> so it will be definitely you believe a recognition from this commission that whatever changes need to be made will be prospective in the nature rather than affect the existing benefits and retiring paramete parameters. it's written in the establishment of the position that they would be grandfather grandfathered. on the expertise of military personnel issues would you agree? you don't have to answer, secretary fox. you don't have to answer, secretary fox. i will say that. i think you already answered this question but for the

benefit of the wreck are dead and to reduce 1% of the military cost of living was not conceived within the department of defense; is that right clicks to your knowledge were you ever consulted on this decision quick >> not to my knowledge. q-quebestimac do you technologys made by the budget committee without ever consulting the department of defense as to the impact of the readiness morale keeping our promise, etc.? >> to the best of my knowledge we were not consulted. >> i want to thank you especially for anticipating this issue because it is an issue of the rising personnel costs. we can come up with a recommendation that would take into consideration the views of the military and civilian leadership in the pentagon and

hopefully arrive at a consensus radar next panel of witnesses today will be very adamant and understandably so about their concern about the effect of this action taken by the budget committee on the morale and readiness and the ability of us to keep our promise to the men and women who have served and are serving. so thank you mr. chairman for actually anticipating the fact that this issue has to be addressed and i hope that we will be able to convince all of the american people that have the need to select as we do based on the most highly qualified people that we can find. thank you mr. chairman. >> thank you so much senator mccain. excuse me. >> senator donnelly?

as we look at the challenge in light of our belief that peace e should be grandfathered and we look at the 6 billion-dollar amount that we are looking at are there things that you can sit with other folks at the pentagon with the joint chiefs and such and say are there areas where they could try to type $500 million? putting it in your best judgment as opposed to imposing something from the top down here in regards to our retirees? >> with a piece of this but is already inside of the dod budget where we pay into the cool front that is a 500-dollar bill. when the legislation was passed via counts were basically credited that $500 million we started to plan prudently to use

it. we are going to have to backtrack on that if this proposal is repealed but we are prepared to make those difficult decisions. if we are asked to account for the money that is outside of the budget of the $6 billion that was in the mandatory spending, that is a far more difficult problem for us and as the secretary mentioned there were only two pots of money in the mandatory side that we can address and one of them is retirement that one of them we should be in father did the other is to try care for life peace which is a difficult question as well. >> secretary, would you like to -- stack the admirals at exactly our position. we are prepared to find a 500 million a year because we do believe grandfathering is the right thing for the people. it is another one of the reductions that the department would seek to make that has backloaded savings. we are prepared to address the challenges.

>> we have a commission coming up next year and we don't want us dead in front of them or any of the decisions that are going to be made. what are some of the areas we can take a close look at and made a difference while still staying to the perspective service members this is a great place to be an opportunit in opo have in your life? >> that is a great question and it gets back to the variables that are inherent for the retirement plan. and i think one that has been discussed the most is the interest of time. the piece that you have to wait until 20 years to receive any retirement benefits. actually helps us a great deal right now and in the profiling of the force we want to have a young force that is going to stay to a certain point and then frankly we need a number of them to move on so that we can bring fresh faces in so it would be very difficult to design a

system that would give the best thing before that but it's not impossible and that is one of the things the commission certainly ought to consider. >> secretary fox? i would like to share some advice that i got from the secretary when i was trying to look at some of these issues. he warned me and i will share what he said. he said the defense department is like a dinosaur. little brain and very eyeing motor skills. if we start fiddling with these retirement benefits we have a chance of messing it up. that's why it's so important the commission do this thoughtful work looking at all of the analysis because of the admirals have said it's very important that we understand the changes and investing and what that does to the shaping of the force. the needs of the force are changing as we look into the future technology changes come expertise changes and we see some of our people with important expertise to stay longer and we need others to

move through faster and to bring in new ideas t create how do we get that right clicks it is a very difficult challenge and we are working with the commission and we look forward to continuing to do so. >> as we look at the commission and you have the challenge of saying we want that mix to also change at the end where some decide other choices is it pretty much an art? you have to dig deep to find out how do we set this up so at six or seven years we don't lose people we want for 20 or whatever and the skills that we want on the flipside of that fact mabutmay choose to move ony have that choice. is it going to be a major consideration when you look at how to get the mix right for the future? >> i think it is.

we have pretty good models and the like under the current system for the retention behavior. we understand that fairly well. there's always unknown variables out there and there are the number of the variables is dizzying. national employment, the propensity to serve on the part of the population whether we are at war or not. believe it or not even family income and health care debate the fast a person graduating needs to get into a job. a number of recruiters. the number of the amount of pay and benefits, the program and the likes of it is a big soup of variables in their end of the commission is going to have to consider that very, very carefully. and when you open up the sort of release but the glue that could allow people to retire earlier. those models are going to be upset and we will have to determine how to modify them so

we can understand them and i think that is part of the challenge for the commission as to understand whether we have a model that can accurately predict behavior so we can profile the force correctly. >> thank you mr. chairman. >> important hearing and i appreciate you calling it and mr. chairman and i appreciate you starting out at the outset saying that this cpi minus one is wrong and needs to be fixed. as a matter of fact not a single voice has been raised in support oof what the that congress enacd what was signed into law. i appreciate this and i also want us to appreciate the seriousness of the hit to the military retirees that are affected. and it hasn't been mentioned yet

today and if any witness wants to challenge beyond this, now is the time to do it but for the typical enlisted military person who retires below the age of 62 this is going to be in a lifetime hit somewhere between 70 to $80,000 or more lifetime to that military members. currently if i'm wrong but that has been substantiated over and over and depends on exactly when the end listed person retires and exactly what the ranking was at the time. it's over $100,000. out of their pockets, lifetime. so this is a serious matter where cpi minus one sometimes can appear to diminish the profound effect of that.

i understand the problems that are facing and the daunting task that you have to make the numbers come out. that's why we established the commission with certain parameters. as i understand, secretary, sorry this was enacted. you're glad it's been corrected with regards to the disabled military retirees. >> why was it a good idea to fix it? wasn't going to go into effect of the 2015 for the disabled retirees was at the idea to go ahead and fix it for them? ..

it seems to me it doesn't make any sense, if we're all in agreement on this, to wait, unless you want to hold out the possibility that we may stick with this. now, if you want to send that signal then waiting for a commission report or waiting 13 months might be a good idea. but if we're all agreed this is

wrong, shouldn't have been done, we can pay for it elsewhere, it seems to me that it makes no more sense to postpone this for 13 months than it did for the other clear case. it kind of reminds me of sequestration. mr. chairman, we had witnessed after witness appeared before this committee and other committees. were not going have sequestration in the united states of america. we have witnesses from agencies held committee after committee. we are not even making plans for sequestration because it is so unthinkable, it is so heinous, that we know this is not going to happen. the president of the united states said in a debate, not going to be any sequestration. we hoped that was true, but it wasn't true. sequestration did happen. and take me to say we know this should be fixed, we know it's

wrong, we know it was the wrong approach, we regret it, but let's wait, to me it holds out the potential that it'll be like sequestration and go into effect despite everyone's protestations to the contrary. you know, we said is not going to be sequestration and their sequestration. we were told in this he repeatedly if you like your health plan you get to keep it, period. it turned out that that wasn't the case. we told military members, you do your side of the bargain, you side -- sign up for worldwide duty, you places of in an assignment to regions where your in harm's way, and we're going to keep our promise to you. and last month we broke that promise. now we are being told let's just wait 13 months before we fix

that. i really, i can go along with it. i would say to my colleagues, this is about a promise that everybody says we need to keep, and it's also about the process. my friend from arizona said this came out of the budget committee. this didn't come out of the budget committee. it came from behind closed doors and was authored by two individuals and presented to us as a package, take it or leave it. if we would start following the process in this congress, if the budget conference had been allowed to vote on it, to debate it, to hear amendments, we might have adopted senator i else offsets. we could've come up with these savings elsewhere. -- senator ayotte. if we would have had an amendment process like the rules called for in the budget bill, we would've had opportunities on a bipartisan basis to pay for

this elsewhere, to have these savings elsewhere, to keep our promises to the people who fulfilled their promise to the security of the united states of america. if we had had this in the omnibus bill. we need to get back to following the rules around this congress. if this has seen the light of day, the elected representatives of the american people, the 100 senators, the 435 members of congress, would never have stood for this broken promise. i think this ought to be a lesson to us. let's keep promises, there's a reason we've got rules around here. it's not to wait and it's not to get around them, because generally it ends up with bad policy. i think you. i want to work with you but i have to say we need to go ahead and act. everyone acknowledges this was wrong and if it was wrong we need to go ahead and send a signal that we're going to make it right. >> thank you, senator wicker. senator kaine.

>> thank you, mr. chairman. i want to mitigate a little different down than my friend the senator from mississippi on this one. i agree completely that this is the provision that needs to be changed and i think we'll change it. i agree that we should change it immediately because it seems like a thrust of your testimony is why not return to the status quo pending the 2015 report, and we need to change this just to return to the status quo so that we don't send a wrong signal. and whether it's what they pay for or not, i think we should return to the status quo. but i do want to take on the bigger picture issue of, instead of kicking ourselves around because we made a mistake, we haven't done a budget in four years. we haven't done a budget in four years. and a divided congress hasn't done a budget conference since 1986. so we did a budget in the senate budget did not include this

provision. there are at least four members of this committee who are on the senate budget committee. this was not in the senate budget. it did come up during the course of the budget conference in the negotiations between the two chairs. i do want to trash the chairs for coming up with a budget deal that we had to vote on, because no budget has been hurting our military and hurting our veterans. sequestered, which is what we did when there was no budget deal, has been hurting the military and hurting veterans. continuing resolutions instead of appropriations bills has been hurting the military and hurting veterans. so we did in december what legislative bodies do all the time, which is there was a budget deal that was a compromise, that had things in it that i loved, that had things in it that i hated, and that didn't have things in it that i wished were any.

that's what doing a budget deal is. this is an example of something that, we didn't put in the senate budget to because we didn't like it. we like the grandfather notion, i think all of us embrace. but the vote that we cast on this, i know it's good to put this whole vote as we were breaking a promise. no. we were trying to do a budget for the united states of america in a congress that hadn't done a budget for four years, and doing it with the knowledge that there were some pieces that we didn't like and felt like we could fix. so i think that there's a tendency of your to keep each other around or for one house to get the other house around or for the executive to kick the legislative around or the legislator kicked the executive around. around. talking each of the dentist no way out of challenges that we have. i think the budget year that we reached in december, i'll just ask you. are you glad that we have a two-year budget? is that a good thing for the

military? >> the department has been very clear, we needed the stability and we appreciate the stability. >> and are you glad they were able to get an omnibus appropriations bill for the full year instead of gimmicks like engineering resolution? >> yes, sir, of course. and appropriation gives us a lot of opportunities to do we need to do without the c.r., which just ties our hands as you will appreciate. >> a standard feature of this budget deal, the best part about the deal is there was a deal, and a standard feature of a budget compromise is that there some pieces that i don't like and i hope to fix. i wish ui extension have been part of this budget deal. it wasn't. trying to figure out a way to fix that. but the fact that there are pieces of the deal that we don't like i don't think should obscure the issue that when we together passed a budget deal and and i'll do this, we did something really good for veterans. we did something good for the military. i live in a state that i'm trust

the most direct military connection in terms of the number of veterans per capita, active duty military, reserve, dod civilian, dod contractor, military installations. we are the most connected state to the military i believe of any in the country. even though there are aspects of the deal that we don't like and want to fix, the fact of the deal is something that i think house, senate, democrats, republicans, inside, outside capitol hill, should be glad that we have finally shown we can get it. not the we can make improvements, and this is one thing that i share with anyone around the table that we ought to fix this, and i'm actually very confident we will. for purposes of those who are watching this who worked in on the earlier discussion about the composition of the panel, i think it's important and i'd like to ask you guys to describe who is that's around the table coming up with the recommendations that you intend to make back to congress in february 2015, because i think it's important to know your are all viewpoints, enlisted and

officer and active and veteran, are all viewpoints sort of being represented? i'm not talking about the names but i'm talking about is it a good collection of stakeholders who are making these recommendations will look at these issues from a variety of different angles? >> senator, just for clarity, are you asking about the processes which use inside the defense department, not the composition of the commission, is that correct? >> i would like to know within the dod and in the composition of the commission. this is more to explain for those who are watching this. >> for the commission, i don't have the actual composition of the commission and rice or with me but i do recall having looked at it and that it was a good representative the commission, panel, that love a good opportunity to look fairly and thoroughly at retirement in particular. we have confidence in this panel.

we've had good cooperation with them and they're working hard, and they think they're going to come up with some pretty good information force. inside dod, with a number of meetings of the joint chiefs with the senior enlisted advisers in the room, and we've talked about this for months on specifically the compensation pieces. we are still working through it. we haven't made a budget decision yet, but there's been a thorough vetting with our senior officer and enlisted leadership of the proposals that we might present. >> and then on top of that, the senior officer, enlisted, has brought to the joint chiefs, has come to the department leadership right up to the secretary, spent a lot of time with them, with the military, the civilian, our personal experts, our comptroller, our analysts, all in it together going through these proposed options for change, how we might think about it. that's the process we've done pretty much every year that

we've proposing changes to the congress for our compensation. >> thank you, mr. chair. >> thank you, senator kaine. senator ayotte. >> thank you, mr. chairman. thanks so much for this hearing. it's a very, very important topic. let me just ask you, admiral winnefeld. i think it's been clear, and secretary fox, not one dod official was consulted on this cost-of-living increase cut, where the? >> to my knowledge, there were no dod officials consulted. we heard about in the in game, as other people did. >> just to be clear, the way this went down is that many of us sitting around this table action also serve on the budget committee, and as a member of the budget committee and a member of the armed services committee we weren't consulted about this cut to the cost of living increase. as far as i know, the chairman of the armed services committee was not consulted on this cost-of-living increase cut.

and, in fact, the cut actually violated the principles in our own law that we passed that said that if yo there are going to be any changes to retirement that they would be grandfathered, isn't that right? >> that's correct. >> wonderful that we can reach a two-year budget agreement. but, you know, what was astounded to me is wants this became public that people from both sides of the aisle said this is wrong. before we even voted on it, people from both sides of the aisle had ideas on how to fix it, but we couldn't get it fixed then before we think this view. that would've been the right thing to do. and now the right thing to do is to fix it now, not to leave this hanging over our event in women's heads in terms of the unfair cuts here. i hope that we can agree to fix this now, not to delay it.

but this is a lesson. did not consult our men and women in uniform is outrageous. to not include people who serve on the armed services committee to make cuts to military retirees, only in washington. i think that we should commit ourselves around this table to find a fix for this. we can pay for it. many people, including myself, have ideas on how to do it, not taking further from the military budget, so that we don't have a further impact on sequestration and the service to our men and women in uniform, making sure they have the equipment that they need. let me just ask you, admiral. sergeant first class -- the chip and use an example of you enlist at 18, you put 20 years in, you retire at 38. well, someone who's done that in the last 20 years, how likely is it that that individual has done

multiple tours in iraq and afghanistan? >> certainly depends on the branch of service, but no question that if you're a soldier or marine were some and any other services who serves on the ground, you've probably done more than one tour. >> when you do a tour in iraq or afghanistan, do you have a chance to put roots down in a place, so that when you do retire that you already have reached there, that you can establish a career? is that so easy? >> i'd say regardless of whether you're serving in afghanistan or iraq all around the world -- >> or anywhere. >> one of the facets of her life in the military is that we accept that we don't have the opportunity necessarily to set some roots down. as the something of officer, i don't even know what routes are. but there are a number of people who come into the service from states all around the country who might have residual risk there. you're right, for 20 years you're moving around. >> isn't that different from the average individual in terms of

the ability to establish a career even post 20 years in the military? >> it's even more than that. it affects the spouses employment. many of them faced severe disruption as they move from place to place. we've gotten some help from the congress on that frankly, but it's hard or spouse to move from one place to another and jump right into the same job. >> so often for coming so often for come in a unique a two income household. when your spouse as many around all the time, he or she can't have a situation where they can establish their career also. so yo you losing income there as well, aren't you? >> its income, and i think there's a frustration and an anxiety level up next time we move am i going to build to find a job. >> so let's be clear. a military retirement is very different in terms of the sacrifices that are made than your average civilian retirement, do you agree? >> yes. >> in terms of the sacrifices

made by your family, in terms of the opportunities that you lose to earn income, in terms of the opportunities that you lose to put roots down because of the sacrifices you have made for our nation, is that right? >> i absolutely agree and that's why we tend to not try to make direct comparisons between civilian and military retireme retirement. >> in fact when you retire from the military you can be recalled, can't you? as far as i know, in a civilian retirement generally you are mandatorily recalled act to your job, or you? >> its unusual but in the event of a crisis, a national emergency, absolutely you can be recalled. >> in fact we've been informed since 9/1 nine 9/11 about 3400 retirees were actually recalled back to active duty service. does that sound about right? >> i don't have the numbers but it wouldn't be a bit surprised if they were accurate. there are some who come in voluntarily but others are recalled. >> so that's another huge difference. i think it is connect with what

happened in this budget agreement. i want to ask you about an issue that was brought to our attention that involves general officer retirement pay, both you, admiral, and secretary fox. as we look, i saw a report that said that in 2007 legislation provided incentives for senior officers to continue serving by extending the basic pay table from a cap of 26 years to provide increase in longevity to play out for four years of service. according to one press report in "usa today," using 2011 numbers, this could result in a 4-star officer retiring with 30 years of experience receiving $84,000 more in retirement and previously about. i understand why these changes were made, because we were in a wartime and i assume the purpose was to encourage combat experienced one and two star admirals and generals to

continue serving during the war. however, now we're in a situation where the congress had made cuts, and i want to say these cuts, by the way, are a penalty. it's a 1% and increase -- 1% decrease in your cost of living increase. it's a penalty. we haven't even looked at issues like do we need to continue the increases to the generals and admirals that they've received now that we are winding down in iraq and afghanistan. could you comment on that? think about the impact on a sergeant first class losing $80,000. that is a huge impact. >> senator, we think the commission should look at all elements of retirement, all bakeries, all of the many variables i listed earlier. so we look forward to what the commission has to say on that and other issues. >> and also looking as well,

obviously admirals, generals, and seeing what is there in terms of the compensation as well, because it seems to me that the people that took the biggest hit under this, the officers take a big hit under this as well and i don't diminish that. but your average enlisted person, from what they take as a hit, basically as i understand it their average retirement is about $25,000 a year, and was moving around and everything like that, they have to try to find another job just to feed their family. do you agree with that? >> i do. we are looking at all of the proposals we are considering under the budget submission that we will make this year. flag and general officer pay is one of them. >> well, i appreciate it. i just hope that we can fix this wrong and right it now, and not white, sumter fox. i don't think we should wait. thank you. >> thank you, senator ayotte. senator reed.

>> well, thank you, mr. chairman. i think there's two clear issues emerging with broad consensus. one is we have to correct this issue. and my sense is that has to be done very quickly, immediately, for many reasons. line is the issue of what signal we are sending to the forces in the field. i understand, and the chairman may correct me or respond, that we could move such a bill through this committee without a pay for, because we're not responsible for the pay for. is that i could? >> that is accurate. i think that the one bill which has been referred to the committee, where doublechecking this, is the bill of senator hagan and senator pryor i believe that does not have it paid for. if there's a pay for, and offset, in other words, then that i believe will be referred to a different committee. but this committee i believe

will have the ability to act probably on the bill and hope that we will not wait for the commission because there is a clear consensus we should clear the air on this issue. >> thank you, mr. chairman. i appreciate fackler petition. again, i do sense that this is a consensus across the whole spectrum of the committee. that does still leave open the question of the role of this commission, which is absolutely critical. we can anticipate -- i'll ask you, admiral winnefeld, and in secretary fox -- we can anticipate next year when the commission report that there will be proposals to us, and we can deliver it upon them thoughtfully and publicly, that will deal with the spectrum of pensions, compensation, benefits, et cetera. and that's necessary because you're reaching a situation

where maintaining the operational readiness of the existing force is being squeezed, for want of a better term, because of the obligations of these costs that are building up and have been building up because of congressional action. and you comment on that, admiral? >> the commission will certainly offer its recommendation to the congress and certainly to this committee on how both pay and compensation and retirement should be structured. so we believe that we should wait until -- i'm not necessarily saying we should wait until we repeal this because that's a different question. but we do need to look at what they come up with, the various variables on retirement. on the compensation is, it's possible that the commission could come up with some structure recommendations to compensation. any recommendations we would make for the fy '15 budget would

not be structural. it would be fine tuning the existing system to recruit and retain the best while getting the best value for the taxpayers. >> before i ask the secretary, the presumption i think within the commission is not only will the recommendations allow us to deliver it and make awful decisions based upon input from everywhere, but also in basic fairness that they would be sort of implemented on a basis so that people will not be prejudiced. they will be grandfathered provisions, because without that you people who served with distinction and with great courage, who through their expectations could radically change. is that the presumption? >> i would have to double check but i'm almost certain that the law itself, the legislation that established the commission directs them to not consider anything other than something that's grandfathered. and we support that. >> secretary fox, your common? >> yes, sir.

admiral winnefeld is correct. i actually bought a section within. the law specifies that any changes be grandfathered. that was as guidance to the commission. we do want to see the commission's results and that they would be brought forward and debated and we look forward to the. this point about timing. i hear the consensus. we agree, c.o.l.a. minus one in the provision is not grandfathered and that's not what we seek. we want any change to retirement, whatever it ends up being, his grandfather. the only point is that it doesn't happen until december 2015. we believe that two things must happen. it needs to change before it simply meant and we need to give space to this commission to allow it to be effective. if that space is repeal and into something, so be it. if that space is wait and see what the commission has to say and then do it one time, a one time change, so be it. but those are the parameters of our consideration. >> so your point is that at

present, because the effective date is not december 2015, there is no one who was 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 us. it would have to be grandfathered to protect people, which this 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. the commission will now report out in february 2015. >> but it doesn't preclude us and it should preclude us from taking the action to correct it and then wait for the commission's collaborations. just one of the point. what is driving this, not entirely, but is they need not

only to keep our promises to the retired community, which should be considered invulnerable in my view, but also everyone's commitment to people on active service that they have the best training, the best equipment, that their families have the best opportunities while they serve. that's one of the fundamental tensions we are trying to do with. is that accurate, admiral? >> yes, sir, it is. and i would add if i could, the only real interest that i have in deliberating -- delivery doing this is simply to make sure that if it is repealed, its repeal in a way that doesn't take it off the table in some form of accounting for cost of living, whatever it is, so that it is not taken off the table permanently for the commission. the commission ought to be will look at all the variables. if its repeal in a manner that doesn't mess with that, if you

will, that time is completely up to congress, obviously. >> thank you, mr. chairman. >> thank you very much, senator reid. 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 conclusion on the strategic choices and management review, secretary hagel 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 coming budget request. but can you tell you what the status is of general dempsey's review on the compensation part? ..

>> that we will consider submittins part of the president's budget request. and we're not ready to talk about those because they're not final, but we're not going to make the 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'd like to follow up on it, if i could, for a minute. is the department, including outside groups, in its are review of the compensation, have you reached out to veterans'

groups? >> we are, we're still in the process of deliberating over these things, and we're not ready to show whatever proposals might be submitted. but we do look forward to consulting with the veterans' groups, because it's important that they understand them. we'd like to have their support. t we know that will be difficult anytime you're talking about slowing a growth rate of compensation. we're not taking anybody's pay away. and we understand that. that's what veterans groups are for. we love them, they do a very important service for our people. but i think in due course we will definitely consult with them. >> so am i understanding you correctly in that you're coming up with proposals inside to department and then you're 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 to the,

certainly listened to the veterans' support organizations. they're very vocal, understandably, and we appreciate that. we understand what they're telling us. and i think that at various levels there have been discussions with members of the veterans' groups, round tables and things, but we have not presented any specific proposals to them because we can't get out in front of the secretary or president in submitting a budget. >> i go back to this then. you're presenting your proposals to these groups. you're not asking them to present proposals to you with ideas for changes? >> no, we have not brought them in and asked for their proposals on how to change compensation. we're certainly open to that. we listen to what they say, 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 glide slope of compensation, but i would be interested in that if they did.

>> may i just add that secretary hagel does meet with the veterans, and so certainly there is a dialogue. as admiral winnefeld has said, we have not concluded anything about specifics of our compensation proposals. but he meets with them and listens, and they have a general dialogue about far-ranging issues. and i have not been privy to them, but if you would like, i would be happy to take for the record some report back on the kinds of topics that they discuss. >> that would be helpful not just with veterans' groups, but any stakeholders that are out there that could offer 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 has been a lot of back and forth with the commission sharing data, sharing analysis and so forth. so there's been those kind of discussion. again, not specific proposals because they're not done, but there's been a lot of

engagement. >> thank you, dr. fox. i appreciate that. secretary hagel has also stated that the department would begin implementing the package in the fy-2015 budget. is that still the plan, and are you going to include any of those changes in the budget? >> so we are still looking at our budget deliberations, but we do, we are seriously considering proposing additional changes to compensation -- not retirement, again, let me be clear, retirement is the commission, and we need all the help because it's so hard, but some modest proposals on other parts of compensation following on to the very large effort that the joint staff and admiral winnefeld has been leading over the past 6-9 months. >> okay. i would appreciate it, and i know that other members of this committee would too if we could get that information. and i would think the earlier we could get that information, the better so that we can make

decisions that, hopefully, will be helpful to the department as well. if you could tell me, have you, have either of you seen any impact that these recent cola changes have had with regards 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 -- in a potential recruit's deliberation as to whether he or she is going to enlist in the military. but it does, of course, impact our retention. in particular it doesn't really, we find, affect the retech for our first and second termers, but it very much affects the retention for our third and career termers. so we haven't seen any behavior

changes yet, but we do know that they're very nervous about this. they don't like it, and, you know, if you are 17, 18 years in the military and you're thinking of retiring at 20, now if a cola minus one provision is memorialized, you may consider having to stay longer in order to accrue more of the benefit so that your retirement would not be impacted as much. i think that's the calculus that they're doing. i don't think anybody's going to quit the military because of it, but they are nervous about it, and they're, again, doing the calculation on how long they need to wait until they retire. >> you had mentioned earlier that it may not have that big of an effect on recruitment, but i can certainly see it would with retention, so i would imagine that the sooner we can provide 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 just throw in here is one of the retention concerns we are starting to feel

is the concern 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 they expected when they joined? >> okay. thank you so much. thank you, mr. chair. >> thank you, senator fischer. senator hagan. >> thank you, mr. chairman. 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. and 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, sequestrationing will drastically reduce -- sequestration will drastically reduce future military readiness and jeopardize the national security of our country. we're still at war in

afghanistan, it is essential that our service members are fully paid, fully equipped and receive 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, the cola that we've been talking about, for our service members. we've made a strong commitment to our brave men and women, many of whom 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 for all of us and our country. while it's true that our country faces difficult fiscal challenges, we cannot balance the budget on the backs of those who are answered the call of duty. and i know that there's 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 and develop their mid-grade officers and noncommissioned officers from within. as service members reach their 8-10 year service mark, many are making that critical decision, are they going to stay in the military, 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 that the recent -- excuse me -- cola cuts will cause our mid-grade officers and nco tos to leave the service prematurely, and how do you believe they view these recent cola cuts as well as the broader debate about military compensation reform? and if both of you would take a minute.

>> no, i think that retirement is part of the calculus of anybody when they're considering a retension decision. reenlistment decisions. the younger ones tend to think more in terms of pay. the mid-grade ones tend to think of a bonus, if they can get one to stay in, and the more senior ones think in terms of what's coming down the line in retirement. so i don't have anything, a metric that indicates a change in behavior because of the cola one provision because it's simply too soon. we do surveys, we can look at the numbers and the like. but, again, we do believe 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 cola minus one, i would have to retire at x, 22, 23 in order to have the same benefit accrue over the course of my retired life. and so they are, they're 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 say "senior," how many years are you talking about there? >> we classify our senior folks as, i think, anywhere from 13, 14 years on. and, but it's most acute probably for those who are, i'd say, 1fv

. >> and that's the challenge. >> what are the percentage of the bonuses? to 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. >> you know, it's interesting, the welding profession is one that is in high demand all over the country. and i'm sure nuclear welders even more so. i feel strongly that the recent cola cuts need to be repealed, as i said earlier. but one of the elements that concerns me most is that current

retirees and service members 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 would be 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's said that in several different testimonies, i'm saying it now. all of the joint chiefs are unanimous, and the senior enlisted leaders, we all believe that 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 grandfathering, and i've spoken with secretary hagel. he also supports grandfathering. so i think there's unanimous consent between the military leadership and the civilian leadership of the department. and grandfathering has to be a

part of anything we do going forward that changes retirement. >> and when will the commission's report be, will come forward? >> that's february of 2015. >> thank you. thank you, mr. chairman. >> thank you very much, senator hagan. senator graham. >> thank you, mr. chairman. thank you for having this hearing and all of the things you've done over the years to keep us focused in congress about what's the right thing to do for our military. i really appreciate your leadership. >> thank you. >> seems to me, as senator reed said, we've all reached a consensus that we would like to undue what we all consider to be an unfairness here. as far as timing, i think the sooner the better, and i would just make this observation: senator wicker kind of expressed the idea that nobody thought we would engage in sequestration, but here we are. so 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 the add any more, just be one thing off their

plate. that's why i would advocate doing can it now. and i'd also like to associate myself with senator cain. you know, it's good to have a budget. you make mistakes in the budget process, but quite frankly, i'm very pleased with my colleagues. we raised this earlier on, with senator wicker, ayotte and myself, the way that congress has responded in looking at this with an open mind trying to fix it in a bipartisan way. i think this is a good thing for the body. everybody makes mistakes, but, you know, you really judge people by their willingness to right wrongs, and it seems like we're on a good glide path to find $6 billion to set aside what we've done with the cola minus 1%. but the idea of reforming compensation, count me in. i think the time has come prospectively to look at the sustainability. now, there's a difference, admirable, between what you're saying about the overall cost to personnel within the military budget and what some of our veterans' organizations are saying. what percentage of dod's

budget is personnel related? >> the military compensationing by itself is about a third, and overall compensation to include civilians is about half of the budget. but i would, i'd hasten to add that we -- the more i've dug into this -- >> right. >> -- and the more years as a body have dug into it, the less sophisticated that metric sounds because there are so many variables that go into it; how many people do we have, what is the cost of health care, do you include oco or not? it's just a squishy number, and you wouldn't want to pin here's the goal, it should be 32.5%, because if that changed, it would disrupt things. we really want to find out what it takes to recruit and retain the best and pay them fairly. >> the one thing i would suggest is get with some of your veterans' groups that have a different view of what the personnel costs are. i remember chairman dempsey talked about 54 or 50% of the current budget is absorbed in personnel cast, and when you

look in the outyears at the growth of tricare, where are we headed in terms of personnel costs within the budget over a 15-20 year period? >> right. i think when chairman was referring to the 50%, he was including civilian -- >> right. >> indirect benefits that are provided as well as direct pay. >> yeah. >> frankly, it's probably going to stay table. there was some initial -- stable. there was some initial -- >> even if you don't, 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 reform it's going to go down a little bit. but, again, the more sophisticated, we believe, way to 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? that's an isolated look. it's not a what's the right

share of the budget. you can imagine if you picked a budget share and the budget went down -- >> right. >> -- does that mean we'd reduce pay? we wouldn't want to do that. >> no, i understand what you're saying. ec tear fox -- 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're 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 unsustained, we'd just take it out of the people. we'd have fewer and fewer people -- >> well, you'd have fewer and fewer people with less equipment to fight with. >> yes, sir. it would be -- >> the goal is to have a well paid, well trained military that

can win the war, right? >> and come home safely, yes, sir. >> come home safely and have a fair fight. we want overwhelming force on the battlefield so the war ends as quickly as possible with the least amount of casualties, and that means we have to have equipment and the training. is that right, admirable? >> you're absolutely right, senator. we want to win 100-0. >> 100-0. we don't want to go to war because those who go to war have to believe they will lose, and those dumb enough to go to war will lose, it's just that simple. but you've got to keep the people around to make sure you can win the war. now gdp on defense. 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 have very good command of those numbers, sir. i don't have them memorized, i be i think -- but i think it has changed over time, as you well

know. >> okay. does a 5% sound about right? okay. where will we be at the end of sequestration even with the relief we have provided in terms of gdp spent on defense? >> senator, i think you know the answer to that question. [laughter] >> yeah, but i'm not in the pentagon. i need somebody in the pentagon to tell me this. >> i'll have to take that for the record to get you -- >> well, 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 up in the future, you may not be able to retire at 38. we're going to tell the retired community we're not going to, you know, dump on you. we're going to do this prospectively, but somebody has to have the vision of where we'll be as a nation at ten years from now in terms of budgeting, and that takes me back to sequestration. it's my belief that we're going to be dramatically under 3% of gdp if we keep this glide path

intact, and in 15 seconds what are our allies doing in nato? are the people we fight with spending more or less in the next ten years on defense? >> in seven seconds, less. >> okay. so our allies are spending less. if we leaf sequestration intact, we could be well below what we spend in retirement fees. do you consider -- what's the likelihood the 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 its collapses of its own internal contradictions, and that's going to take some time, absolutely. >> likely not to occur within ten years? >> we would love for it to occur within ten years, but i don't think we can count on that. >> so let's plan for the worst, right? >> yeah. >> thank you. >> thank you, senator graham. senate 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 cola cuts in retiree pensions that were a flaw in the budge agreement. i would disagree -- budget agreement. i would disagree with him only on his reference to glide path 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's been very helpful to reach aring that path which i think -- 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 flaw 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've 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 cut without any provision for grandfathering, but the cut itself, in my view, is offensive. but i want to deal with the broader issue that has been referenced here to this morning as well which is how we attract, recruit, retain not only new best and brightest of their generation, but also the 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 agree, they are as important as any weapons systems, any platform that we have. and i know that you've outlined well the impact that retirement and other benefits may have, but maybe you could give me a broader assessment, give the committee a broader assessment, admiral winnefeld if you could begin, and then i'd be interested in secretary folk 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 back. i think we need to do it now, right away. >> very good question, senator. i'd address recruiting and retention separately. on recruiting, we take surveys of people who decide to raise their right hand and put on the cloth of their nation. and, you know, why did you do this? why did you come in? and it's interesting that the

number one reason we are hearing back right now is pride, self-esteem, honor. the number two reason is better my life. the number three reason is duty and obligation. the number four through eight reasons are travel, future education, experience, and they want to be challenged. next comes pay, more discipline in their life, adventure and helping others. so that gives you -- that actually makes me feel pretty good that our young men and women -- >> it's very encouraging -- >> coming into the service for the right reason. in terms of retech, particularly for those mid grade officers and nco tos you're talking about, there really are two fundamental variables, quality of life and quality of service. so, 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 slope of compensation, we're going to tune it very carefully. we have to be