president's idea has merit. if we are not able to do that for a while we will we do in the meantime? the answer cannot be nothing. >> thank you. secretary jack lew, thank you for your service.

i want to talk about an area that i talk to you once before about community banks they were not the speculators that brought about the financial collapse then they're trying to figure out a way to remain relevant. during the tarp time the preferred stock of community banks or now held by treasury considerations of

treasury to make it easier to be able to recoup they're preferred stock. >> we share the view that community banks way a critical role in local economies and in creating an engine for small business growth and local economic activity. we have in the incb -- t.a.r.p. program to work with community banks. >> appreciated. i was interested in your exchange in regards to the us harmonize with the unit -- international community and the fact that we have high corporate tax rates and i i also was interested in the exchange on simplification where you are trying -- sen. wyden wants to get the code much more simplified command i agree.

i would put in the plug that you take a a look at the progressive consumption tax that i filed. taxpayers under taxpayers under 100,000 would not have to file any income tax than we would have the lowest marginal tax rate in the world. if we are going to harmonize i urge you to take a look at it because i think that it would answer some of your questions. i want i want to give your comment in regards to the administration's position on doing business tax reform. i will cochair a working group looking at the business tax issues, and we have concern as to how small business is treated. if you deal just with corporate tax rates, then those who have pass-through entities or use as corporations would be at a competitive disadvantage if that is all we do. because of the high individual rights.

i would i would ask how can you really just do corporate tax reform and be fair to small businesses in our country? >> sen. we have always talked about business tax reform, not corporate tax reform because we think it is important that we look at small businesses as well as the corporate side. we have in our proposal, for example, expansion of section 179 provision allowing for the taking of depreciation so that if you spend $1 million a year is a small business you can take a full reduction in the year you make an investment and do not have to do it over time. we have done an enormous number of simplifications to make it easier for small businesses. i think that we are designing provisions that are going to help small businesses open to ideas if they're are ideas that come

out of the conversations you and the senator have. we look forward to working with you. i.out that if you end up in a position where one of the reasons businesses choose to file as individual businesses as opposed to corporations is that it is better for them to do. becomes advantageous. >> but it changes with the current competitive situation, situation, and small businesses are already challenged today. i understand they can make that choice. i would like to get one last.and if i might on retirement and savings. once again, progressive, progressive consumption tax would help reward savings and retirement, but one of the things we have learned when we worked in the house is that the tax incentives alone are not enough for working on middle-income families and that is why the employer-sponsored plans when they put money on the table is important.

make a contribution into the employee retirement plant and we look forward to working with you on that. >> thank you, senator. >> just 1st a short statement. i know that they asked you about currency. i want to echo they're remarks. i also want to remind you and that the ambassador that their is strong support in the senate for low currency

provisions, tpa and tpp that are stronger than negotiating objectives but real real, enforceable currency standards. i do not need your comment now. i am hopeful that as we move forward we can bring you in our direction a little more. i want to walk through the country by country global minimum tax that i, you command the pres. had proposed. just a series of questions because i think that it is often difficult to process this. the global minimum tax you propose is 19 percent. >> that is correct. >> so if corporations get a credit that is 85% of the effective tax rate that they have paid for the last five years in every country where they do business. >> that is correct as well. >> that means if a corporation shifts profits to bermuda with the

corporate tax rate is zero that they would now zero 19% to our government on those profits. >> correct. >> but if the same corporation worked profits and south korea were the tax rate is slightly over 24% or india where it is higher or germany where it is in the high 20s the corporation would potentially not owe a a single dollar more in us taxes. >> that is also correct. >> this is a proposal that fundamentally shuts down tax havens, as we discussed before, and prevents the global race to the bottom. your opinion? >> that is an accurate description. there is you discussion of base erosion and profit shifting. one problem is the tax havens that have a race to the problem and the other half is broken tax rates like ours that have a ridiculously high statutory rate. we put in a proposal that does what we need to do and we we will be vigorous and the international setting to

push against the tax saving race to the bottom rates. we have an enormously better argument if we do our part. >> two what do you ascribe the opposition to your proposal in congress among some in the business committee? >> i i think they're will always be an argument for a lower rate if their is the possibility of getting a lower rate. it is not surprising that we are hearing an argument that should be lower than 19 or lower than 14. we have not heard arguments that undermine the basic integrity of the approach command i do not think we have heard arguments that suggest that their is not the basis for a bipartisan discussion to work through this. we do not think the numbers we have picked have an absolute truth to them. we could have gone higher or lower. this would fix the broken tax system. >> speaking of something that we can work out thank

you and and that we have worked out a bipartisan way for decades social security disability insurance insurance, the president's budget supports a routine accounting measure called reallocation. we had hearings last year. we have had discussions with pretty much everyone on this committee on the issue of reallocation. it does not cost taxpayers money and has been done 11 times before. walk us through what you suggest not and tell us what will happen if we refuse to do it and why we should do it. >> sen., we have a two-part proposal. we have proposals that would do things like continuing disability reviews and incentives to get back to work pilot

programs to help people get back to work from disability but i do not think they're are any experts who believe that any approaches that you could design would fix the disability shortfall in the short term. we saw a huge increase in the disability rate during the economic crisis for a variety of reasons. the only short-term solution is a reallocation of rates. i remember i remember when we had to reallocate from disability in order to get to the 1983 reforms. it is many times there have been reallocations. we need to work together on longer-term solution, but i see no alternative but to have there been a reallocation to deal with the upcoming challenge. >> if my recollection

fairly good and accurate prediction of when this would happen. >> the exact month shifts as you do updated projections but we have known it was in the zone of the next year for sometime. >> thank you. mr. chairman thank you, thank you. >> thank you, senator. >> thank you. just when things could not possibly get worse the congress distinguished itself at the end of the last congress by passing a bill that included an extension of the one production tax credit for two and a half weeks. you have just -- in that context and understanding that context in your answer to senator brown you described our tax code has broken and ridiculous. there is not any thinking person on this committee that does not agree with that characterization. you have been around for a long time and have acquired

a lot of wisdom. i i think the people of colorado, what they would like to know is more what are the conditions required to fix this tax code, to reform the tax code? what must we do to put this committee in the position to actually do the people's business and not do this insanely minor and ridiculous legislating but actually get to a place where we can fix this code? >> senator, allowing the private sector to compete in this global economy. >> i could not agree more that short-term extenders are a terrible way to do business. for a company that at the

beginning of 2014 wanted to no what there tax status would be in waiting until the last week of the year does not help you plan. it is all retroactive for decisions made when people did not no what the tax code would be so it could not possibly have the incentive effects that effect that it would have if it was permanent tax law. we propose doing in the context of stacked -- tax reform so we pick the ones that should be made permanent, make them permanent, pay for it in the context of tax reform and have a tax code that has stability and certainty to it. the answer the answer of what we have to do we learned in 1986. we must work together. we know they're we will be interests that oppose losing whatever special approval as they have but it is worth broadening the base, closing loopholes, lowering the rate having an international system annexes competitive. i am more optimistic than many because it makes profound sense and also think if we do not do it it will lead to an economy where we see more companies doing things we do not like

and that is not a good outcome. >> i would like to thank the chairman for putting us in these working groups. i remember a charter school in my district, i once asked them you could hear a pin drop in this place. how do you create these conditions? i visualize the conflict in advance and when it comes i know it we will be their and we can get through it. that is what we need to do. it won't be easy, but we can do it. >> sen., i senator, i have offered to both the chairman and the senator and we look forward to working with the bipartisan working groups to help technically and with they're ideas. >> there are a number of us that feel the same way. i want to ask you an education question. the gal found in 2,009 1.5 million students fail to take a credit or deduction

for which they were eligible and another found that one in four taxpayers failed to take the maximum education tax credit when they were eligible for multiple credits. i was pleased to see that the budget supervise the system of education tax expenditures and makes the american opportunity credit more refundable. i wonder whether you could expect this -- discuss some of the current limitations and also describe hausa publication and better targeting might actually increase overall college affordability. >> senator we share the concern that the current array of patchwork, tax benefits and grants make it difficult for her a family to take full advantage of everything available to them one of the reasons we put together this approach was to simplify it and make it so that families would understand what it is that they have available and take into account.

we have consolidated simplify taxes. improve reporting of tuition and related expenses. the reporting is more straightforward. we repeal the student loan interest adduction for new students and allow debt forgiveness to be excluded from income and have reduced the tax benefits of education savings accounts. well, we certainly are not going to do that. >> i am out of time, mr. chairman. i want to want to call your attention to a bill that senator alexander and i have that would reduce the questions on the financial aid from 108 questions to two questions. that questions. that would align with the work you are trying to do. >> thank you, senator. >> senator scott headed

over so he can come back. we would like to continue. >> a promise not to take more than 30 minutes. >> when i i can get away with that. >> smart enough not to try. >> i will say this you have done something that i am very surprised that and almost bewilders me. you have answered questions which is a remarkable experience. thank you. i have not liked your answers, but you provided true and clear direction for this committee, and committee, and i appreciate that. i want to go back to a question you heard as it relates to the inheritance tax. i started a small business and number of years ago and grew that business from zero accounts and know cash to

being where real money from our perspective. let's say $2 million. their is a million-dollar threshold. i passed that business on to my nonexistent child. a $2 million value. what would the taxes owed be? >> i'm sorry are you asking about the estate tax? >> stepped up basis. >> a million-dollar exemption and we also have a ten year payment plant. it would be taxed at the rate of the individuals income. if they were not earning a lot they would pay a low rate. >> a couple of thousand dollars likely.

>> over 15 years. >> the real challenge anytime challenge, anytime you have a nonliquid asset that you are required to sell and/or leverage in order to get the resources to pay the government you reduce the actual value of that asset which then means that for small business owners and specifically minority business owners the way you create wealth is by being in a position to take a profit. that only happens a couple of ways. and so in the area of business ownership when you're in the position to create profit you have to pass it on generation to generation. well, the proposal from the president actually impedes the ability for smaller minority business owners to transfer wealth so you create wealth. i would love to see you guys go back to the drawing board and perhaps have -- at least a little knowledge in this area.

a million-dollar threshold on a nonliquid asset is really worth about $6,000 in my experience. >> through the exemptions we tried to be sensitive to the issue. we tried to make it not be overly burdensome. if you look at the illiquid assets it is much harder to make the case. most of the money involved is in those kinds of assets. that is where substantial wealth is transferred from generation to generation. >> perhaps their is a part of the narrative that is factual. impacted by this conversation, there are hundreds and thousands of small minority business owners impacted severely. let me ask you a separate -- a separate question.

unlimited discretion to make sure that banks and financial institutions are not taking on too much risk. the president and his budget includes a knew tax or fee on banking liability supposedly designed to curb excessive risk-taking. i believe any knew tax on banks ultimately finds it way to the consumer. does the request for this new bank tax or fee suggest that the president believes the dodd frank a law a law that was passed entirely, it seems, on party lines does not have ample tools for reining in excess of risk? >> we think that it is working well and has very much reduced risk in the system.

we think the tax proposal we put forward is entirely consistent with the act and is designed to make it a bit more expensive for firms to be highly leveraged which is one of the factors that contribute to risk. i think that if you look at our overall tax puzzle by reducing the corporate tax rate it is going to have a benefit for financial institutions. if you look on balance we treat the financial institutions quite fairly. >> i would tell you the seven basis points may mitigate risk but at the same time it passes on a better burden to the consumer which makes it more difficult. it would be a positive rate however for us to get they're the 14 percent repatriation rate you must know is a nonstarter.

you you must no that that has to be announced on our side of the aisle. would be helpful to go back to the drawing board and have a conversation that has a realistic expectation. >> i would just say the structure was similar to the proposal put forward by the former republican chairman of the house ways and means committee so we view it very much for being in the realm of an issue that would have a good constructive bipartisan conversation. >> conversation, yes. progress, probably not. >> senator. >> thank you, mr. chairman. i appreciate the fact that tax reform got so much notice today because it is an opportunity for us to make progress and one where we have differences in terms of what the repatriation rate is. i do think the structure is consistent with what many of

us talked about on the side of the aisle. choose to invert and by a small company overseas and move from ohio to one of our global trading partners in this is happening all over the country. companies who are us companies cannot compete as a foreign companies are buying them. there's a study coming out soon that says more us companies are being acquired by foreign companies. finally it is just tougher to compete. i have heard this from all kinds of companies. they completed it and all the negotiations to buy a subsidiary in the german company walked in and said they would pay 19 percent

more because they can afford to this is happening. i commend you for putting into the budget iambic concerns about the budget, as you no. i don't think it takes on the challenge of our time but with this particular provision that gives us a chance a chance to try to do something that we will help american workers and therefore not just increase economic growth but create middle-class jobs we are talking about because these jobs are the very ones that are at stake right now and are who loses out if we don't lower the rate. this is not about the boardroom. it is about the workers. the one question i would have for you today this came up with a lot of the different members their has been discussion of saying why don't we just do a tax holiday in other words, tell folks that you can

bring money back to this country at a lower rate and and therefore we we will be able to fund the highway trust fund. have you looked at that issue? >> senator, we have looked at it in both the joint tax community and our estimators in the office of tax policy have determined that it costs money. >> so it would not create additional revenue. >> not through conventional scoring. as a structure, as we were discussing earlier, a one-time tax holiday is not solved the structure problem it tells companies keep your earnings overseas. it does not regularize the tax treatment in any meaningful way. by putting in place a knew structure we accomplish the goal of having our tax system work properly so the business decisions be made on economic terms, not on

tax determined terms and i think that it will create a better climate for creating jobs in the united states. while. while i don't think the one-time voluntary tax holiday works well and accomplishes the goal i i think the proposal we put in structurally does. as you and i discussed the question of where you set the rates is something people can disagree about. i i think there is a basis for bipartisan conversation which i hope you will reiterate what you have said publicly. i do think we can have some differences. we need to be sure that this works. if we end up with the rate of 19%, some would argue that we have not accomplished that because you look at comparable rates around the world. the effective rate has to be in the mid-20s mid- 20s in

order for us to be competitive. the 19 percent minimum the average rate is above the average of the oecd country. we hope you will work with us on the rate and to ensure we have the ability to help on the highway trust fund we must come to an understanding on how we will deal with the extenders. let's be sure that we are working together to find the baseline that works. if you did do the deemed repatriation you think their could be some revenue for a highway trust fund. >> i i do think that their could be revenue. to be clear as we deal with the expiring provisions we must deal with the individual provisions that expire as well. >> without objection so ordered. >> two different plants, plants, about this issue of

currency. the currency manipulation i hope that you and your work on this issue we will help us to try to put an enforceable standards on currency and i think it makes a lot of sense because it affects the way american workers can compete globally >> are you ready or would you like me to go? >> i am happy to have you go. >> if we are limited to five minutes, you go ahead. >> great. >> sec. kayfive, let me me walk through what looked like the transportation choices because i think that is an important part of this debate. to me they're are three entrants in the discussion the gas tax issue and we got a sense last year that it would be hard to build significant bipartisan support for a major hike in the gas tax. then their is the repatriation issue. i am certainly open to

looking at this the question of taxes and transportation there is clearly a nexus because we have, of course trust funds and excise taxes. their is a clear nexus there we we have also learned from the 2,004 experience that there is no repatriation rainbow out there. in fact my senses that if you make it voluntary with respect to the whole process the joint community on taxation while scoring. that is a path worth debating. the path that we know works because we have done it is the bond question getting some of this vast sum of money off the sidelines and into infrastructure.

a clear investment in bonding works. in this room close to six years ago after a decade worth of bipartisan efforts and chairman baucus talked about build america bonds and people want to no what might happen. i told people we might sell $3-$5 billion worth of them. in worth of them. in a year and a half $183 billion worth of build america bonds were sold up and down the eastern seaboard. senator casey governor rendell and others, major supporters. you can debate what kind of bond they ought to be. there are different types to me because it has actually worked and help us get more revenue because there is a bipartisan history there i think it would be helpful.

you are interested in something you call public infrastructure bonds. i have had a great interest in a variety of new approaches that we will draw more private investment in the country's infrastructure give us give us your thoughts on how the approach that you are talking about would lend itself to a bipartisan alliance to get more private funding. >> sen., as we have discussed, this is an area we finally agree on. >> violent agreement. >> violent agreement. your lead in the design of bond provisions here has been extremely important. we have worked with you. i hope we can work on a bipartisan a bipartisan basis to get either the qualified public infrastructure bonds. you can name it any number of things.

the idea is to create opportunities for private capital to be invested in infrastructure. even if we are successful in extending our surface transportation bill that will only meet a fraction of the infrastructure needs we have. this is this is not a case where we should do an either or. we need to do both and pursue public-private partnerships as a 3rd avenue. our infrastructure deficit is one of the real serious economic challenges for us to deal with in order to make sure that the future of our economy is as bright as it has been in the past. we cannot have ports that are not adequate to take the deep draft ships that we will be coming through. we cannot have airports that are subpar and behind the international competitors.

we cannot have roads that take hours longer to get from one place to another then should. it costs time and money and is a drag on economic growth we we believe obviously there are short-term benefits of job creation. long-term the entire history of our country one of the keys to success. >> in order and i know my colleagues have been patient. >> i think the ranking member. i want to apologize i was not hear earlier. we are grateful that you are hear. >> you will probably get another. >> watch the video later. we are grateful for your work.

we had the ambassador here a number of days ago. one of the parts of his testimony the back-and-forth of questions clearly indicated an issue that you and i have talked about a lot over the years is currency manipulation and that has not been addressed in the tpp negotiations. he directed questions to you which is the reason i raise it 1st and foremost. i raise it as well because of the concern i have. that concern is rooted in the economic and often devastating economic impact of currency manipulation, as you and i have discussed. but these negotiations some of our potential partners including japan cause us

concern as well. the other concern is down the road we are trying to be a part of the tpp. that is a great concern on currency manipulation. in terms of data just as it relates to japan the economic policy institute recently found that currency manipulation was the main driver of our growing deficit with japan. 896 jobs nationwide six jobs nationwide in 2013 including 40,100 jobs in pennsylvania. currency revelation as a driver.

the privacy, i privacy, i think currency manipulation is both unfair and very damaging and would be -- and it is kind of a double insult. it is not raised. we have not addressed it. >> senator, i want to agree with you that if countries pursue policies that are designed to gain unfair advantage on exchange rates for the purpose of trade advantage it is wrong. we push back. the current international strategy but even more importantly bilaterally and the epi study on japan is not entirely accurate.

there is no evidence in the last several years japan has intervened in a way that would meet the standard that you describe. the activity that report is pointing to is not government activity but the investment of funds in the private pension fund. private pension funds have makes portfolios. if you did the analysis the united states invests in other countries as much as other countries invest in the united states, and i don't believe there is any evidence of any manipulative investment. we don't just hold them accountable for their actions but their words their language even suggests they are deviating from using domestic tools for domestic purposes. we come down very hard and in all of the bilateral

engagements we see changes in language and restraint of policy. i do think that the question of looking at macroeconomic tools is an important one. if you look at our qe policies it was disruptive. without qe we would not have been able to dig ourselves out of the recession. japan has quantitative easing as well. we can't compare practices that are macroeconomic to unfair competitive practices. >> and response, i think both both of us that agree that whether their is a dispute whether you raise a dispute about one particular study we can agree that currency manipulation has been damaging to our economy. number two is i am not willing to let you pan off the hook on this. the broader question goes beyond japan.

i get the sense, and and this is one of my real frustrations it is raised, prioritized and i understand that it is raised and that it is asserted in bilateral discussions or even negotiations. but we never seem to get something tangible a result a result that would put our workers at least on a level playing field. that is the frustration. i get the the sense that the administration does not place the priority that i place on this issue. >> i actually think that we are 2nd to none in terms of pushing back on unfair practices and i know i know i have raised it not in just an occasional offhanded way but i make it essential to our relationship. i think we have been

aggressive. we are open to a discussion of how to build a bridge between trade discussion and trade legislation and the processes were dealing with currency through the current authorities and the look forward to that conversation. >> and i would as well. we are over our time. thank you. >> zero want to start out by telling you i agree with senator casey and probably would not have gotten around to asking my question. this is how i phrased the question. i will give you my opinion. i don't even want you to take time to answer it. following on our meeting a week or two ago he said like sen. casey, it was up to the sec. of secretary of treasury that was negotiating or dealing with

the subject. my question would have been specifically, is the administration doing anything of consequence to address the currency manipulation? my feeling not just watching the obama administration the previous republican and democratic administrations that everyone is afraid to tackle it and i don't know why. particularly it is frustrating we do not take on china because they are not involved in tpp but they are involved in this whole business of currency manipulation, and i think we are afraid to take them on. every time you mention something about it they say you are interfering with our internal affairs. >> senator, we have taken china on. i have taken the vice premier and the president and the finance minister on this issue.

they they have responded to our pressure, change the policy and i think -- i am not saying their is a need for ongoing vigilance and pressure but we have taken it seriously and made progress. >> i would not want to say that -- i know that the steps of been taken but you no what the chinese say they never admit that you have anything to do with the. >> they have actually admitted that they would refrain from intervening. they now they now say they will for -- they now say they will refrain. they they have never been willing to abide by the transparency requirements in response to repeated pressure. they have now said that they are going to abide by the transparency so that we can see what we are doing. i am i am in no way saying it is not a serious issue, but we are actively engaged in pushing hard.

>> the let me say thank you if you are doing more than what i perceive. i want to follow up on something you discussed. you spoke about a $1 million issue as far as the way the president's plant would work when speaking with the senator you mentioned the $1 million threshold. is this an exemption or is it a dividing line between determining what is or is not a small business? more specifically and the businesses over $1 million are they taxed on the whole gain or is it a $1 million exemption? >> it is a dividing line so it is definitional. as i now think of the question i may have to revise my response because i may have treated it as if it

were the other. >> so to clarify there we will be a $1 million exemption. >> a dividing line. >> if you are over 1 million the 1st million is taxed. >> i believe. the $1 million gets to the size of the business, not the size of the game. for a larger business the provisions would apply. for smaller business they would not. >> so you have to be under $1 million. >> you still get -- there is a $200,000 exemption. you still get the 15 years to pay any taxes due in your

only taxed on the game, not the base value. if the game were 500000 you 500,000 you would be paying on the 500,000 gain, not the value of the whole property. >> rather than take any more time i will put a statement i have in this issue -- on this issue in the record. i think it is detrimental to family farming. i think that if you want to keep the family farm in the business it we will be very destructive if you want to keep it in the family. for the community i want to thank secretary move for appearing today and i want to thank the senators who participated. questions for the record should be submitted know later than thursday february the 12th. the hearing is adjourned.

>> thank you, senator. [inaudible conversations] [inaudible conversations] [inaudible conversations] >> flags are flying at half staff over the capitol today because of the death of congressman alan nunnally, 56 years old to read the mississippi republican was diagnosed with cancer last may and had a stroke. he died today in his home.

>> well, it may have seemed like groundhog weaken the senate has three failed attempts to bring the department of homeland security spending bill to the floor were tried. tried. we are joined by lauren fox. what is the whole that? >> the fact that democrats are united against this peace of legislation which rolls back the president's executive action in 2014 and his barca action in 2012. they have continued to hold the filibuster and republicans are not quite ready to budge. they want to continue to put democrats on the record. i i think that is where the holdup is. what we are looking for is whether or not republicans are ready to start the

negotiating process and whether or not democrats will accept anything less than a clean department of homeland security funding bill which is not look like they are willing to let happen. >> ahead of next week's action the headline here are the gop options and none of them are good. briefly, good. briefly, what are some of those options and what seems most likely? >> well republicans can continue to bring this bill to the floor and make democrats vote on it. we do not expect the vote to change much. the other option the other option is that republicans could accept a clean department of homeland security bill and passed it. that would upset a lot of the republican right flank in the house and senate people have repeatedly said that they would like to make the president's executive action the centerpiece of this funding bill. one other option that has been floated sen. collins

introduced an amendment that would take out the controversial piece decrying the president's 2012 action of rolling back, but still including language that would make senate republicans hold democrats accountable. of course even those who said they did not approve of the way he did it they do not appear to look like they are willing to vote with republicans. that is an unlikely option. if they cannot get onto the bill senate republicans want house republicans to send them a new peace of legislation which puts the house speaker in a precarious situation where he has to fight off his right flank and look to pass something else. i think none of the options look good and it will

certainly be between mitch mcconnell and the house speaker to work out. >> lets quickly look at the house because they we will take up the measure passed in the senate the keystone xl pipeline bill. >> i think that it -- they want to get this on the president's desk as fast as possible. the president has said he won't sign it it but they want to have that confrontation as soon as possible. >> we are joined by lauren fox who covers capitol hill for national journal command you can read more on twitter thank you for joining us. >> you bet. thank you. >> the political landscape has changed with the 114th congress. forty-three new republicans and 53 new democrats in the house and 12 the republicans and one new democrats in the senate, also 108 women in

congress. keep track of the members of congress using congressional chronicle on c-span.org, lots of useful information including voting results and statistics about each session of congress. >> the obama administration this week unveiled his $4 trillion budget proposal for fiscal year 2016. $585 billion would go to the defense department. a a deputy secretary of defense and vice chairman of the joint chiefs of staff briefed reporters about the proposed budget. this is 25 minutes.

>> good afternoon, ladies and gentlemen. thank you for joining us. my time with you i would like to hit three key things we believe very strongly that this is a strategy driven resource informed budget that meets 21st century national security needs of our great nation. second, the surest path in our view to a resource driven strategy drive budget is to keep sequestration's in effect and fy 2016 and beyond and accordingly we we will submit a budget that is above the sequestration's. even at the present level trying to achieve a healthy

balance between capacities or size of force the capabilities of that force and the readiness of that forced to respond to challenges will remain a constant challenge. this is especially true with regard to maintaining technological superiority. our defense strategy is outlined. we won't go over it much, but i commend it to you. it calls for a joint force to defend the homeland conduct a global counterterrorism campaign and operate forward in multiple theaters to assure friends and allies. this this is a strategy that is designed to preserve us global lead and help preserve global peace in the 21st century. like it like it or not, america remains available for security responder of

choice. as we have seen this past year when the us 1st led nato and responding to russian aggression in the crimea and ukraine and then formed an international coalition to fight against isi l and finally to respond to the people at crisis in western africa. these responses these responses come on top of an already volatile security environment. the requires a lot of our joint force. force. today there are about 211,000 servicemen and women around the world trying to preserve the piece trying to fight against adversaries. we constantly try to scrutinize whether our strategy, for structure, and global allocation of forces if aligned with what we see happening in the world and if it is keeping pace with emerging threats and at the

request of levels we believe quite strongly that this budget is the best balance of ways and means that we could possibly achieve given the level of resources. we are asking for $534 billion in fy 2016. $36 billion above the fy 2016 sequestration's and about 38 billion or 7.86 percent above the enacted fy 2015 levels. altogether when you add it all up across the five-year defense plant fiscal years 20 16 through 2020 this is approximately $150 billion over sequestration's. in addition to the base budget we are asking for

$51 billion in overseas contingency operations. this budget supports our efforts to continue to draw down in afghanistan, to operate forward the persian gulf and the environs there to and assist iraqi and our partners in combating terrorism. this strategy driven resource budget is designed to support the five key priorities of the 2014 qdro strategy. we believe they are the right ones. number one continue to rebalance the asia-pacific region. we continue to do that and will continue to do so. second,. second, maintain a strong commitment to stability and security in the middle east third, sustained the global counterterrorism campaign through and with partners whenever possible. strengthen our key alliances and partnerships and finally

prioritize key modernization efforts. we also think our force planning construct which informs the number of programs remain sound. as i said we recognize the events of the past year will cause us to question the assumptions that underpin each of these priorities especially with respect to what is required to keep security in europe and the middle east. now we believe the requested fy 2016 future years defense program budget levels will allow us to execute the 2014 qdro strategy at manageable levels of risk but with elevated risks in some areas funding levels lower than the president is proposing, especially at fault sequestration levels our defense strategy would

become brittle and more prone to breaking. .. this has caused enormous strain on the men and women in uniform as well as the civilians who support them and their contractors. it also has been stressing on our equipment. we have long plan to keep two to three years of reset button what's happening because of high demand in a very volatile environment we are going to be

doing a running reset over the course the next several years and as a result we will not return to full spectrum combat readiness in the joint force until 20222023. second because o&m costs operations and maintenance, or readiness costs as well as personnel costs continue to go up faster than the rate of inflation the department needs to see one to 3% real growth per year or otherwise the balance starts to get a little bit out of kilter. now we have been at the same level for three years, essentially between fy13 and fy15 we have been at about $496 billion. and due to high demand the services have to keep their force structure and as a result and on top of that we have been digging out of the readiness problem we had in fy13 when sequestration hit. so we have been trying to attack this problem by becoming more efficient in using more disciplined uses of defense

resources but is still very hard to keep up with a loss buying power -- power that we have had and we continue to perform -- pursue these reforms aggressively especially so that we can put more money into modernization. and that's the third reason why we are having so much problem. we are facing challenges on likely have seen anything since the end of the cold war. our nuclear deterrent force is aging and will be modernized in the 2020s and 2030s. we need to keep the old equipment and systems going but it is becoming more expensive for us to do so and requiring us to do for resources and not regard. our space capabilities would support our global operations face unprecedented threats and we are forced to spend more money on space resiliency and control measures. the proliferation of guided munitions makes it more difficult for us to project power so we are having to shift money into what we call counter

anti-access area denial areas. all of this money has to come from somewhere so even at the president's budget level it's at constance rubik's cube trying to figure out what is the best mix of capabilities capacities and readiness. the white house has helped us in this regard adding about $21 billion in requirements specifically more towards modernization as compared to the pb 15 budget level. this is a deferred modernization problem and we are trying to tackle it in this budget and we need help up of sequestration caps to do so. now we look very much forward to congress in addressing this problem. we think this is the right budget and this afternoon we will answer any questions that you have and we expect to enter a lot more over the course of the next several weeks as we deliver our budget and talk to

the members of congress about it. >> thank you mr. secretary. good afternoon everyone. the first message i have is an internal message and that is assembling a defense budget is hard enough in the best of times but it's extraordinarily difficult to do in our time due to the trifecta of declining resources, constraints on our flexibility and uncertainty over future resources. so i want to start by thanking the many people both civilian and military to put in the long hours required to put this thing together. they are as dedicated and hard-working as anybody else in this department so thanks to those folks. deputy secretary work is outline the contours of this your submission. the details are on line. this budget -- no budget is perfect that we believe we have assembled the best possible combination of capability capacity and readiness investments that we need to protect the nation and our national security interests. we also believe it meets the

current and future needs of the all-volunteer force that has served us so well and that represent represent her most asymmetric advantage in this world. as such the chairman and the service chiefs and i all fully support this budget. it is what we feel we need to remain at the edge of manageable risk in our ability to execute the defense strategy that's outlined in the 2014 qdr. but we have little margin left for error or strategic surprise. i heard the term third and manageable last night a couple of times. this shouldn't surprise anyone that when it comes to national -- defending our national national security interest the chiefs don't like to hear third and manageable. we don't like to hear third down and forth down is not an option. any given strategy represents a delicate balance among the anne's ways & means risk all that live inside a security environment. that balance is inescapable. if you disturb one variable

something has to change among all the others to reset the balance. as mr.'s work outline that means that we have aligned to defense has steadily decreased over the last two years. the same time time the security environment has become more chaotic and potential adversaries ari wrote in our technical advantages. but there has been no corresponding change in the ends of the strategies that we were trying to serve. we are making progress in some of our ways through efficiencies and a few new ideas and technologies but the variable that has carried the lion's share of the strategic balance is risk. and we believe there is no room left on that end of the balance. so our best military advice is that any decrease below the pb 16 request to echo mr. work will require adjustments to our defense strategy to restore balance. doesn't mean the strategy completely breaks but we will have to make adjustments to that strategy. all you have to do is look

inside classified qdrs forest planning construct to get an idea and ultimately will mean reduced american leadership in freedom of action and that is of course an option but not one but i think most of us would prefer. i underscore and when i talk about reductions i'm not only talking about reduction of -- i mean anything below the level we are submitting. i would also reiterate while fully respectful of congress's role and not only how much money we spend but how what we spend it on unfounded changes to the submission are the same as production and would require adjustments to that strategy as well. that is what makes the strategy or this budget is strategy driven budget because we are asking for what we need above the sequester levels in order to keep risk manageable. we have to do better than manageable in the most important thing such as nuclear deterrence which this budget does.

again it represents an opportunity to arrest the decline in our investment in protecting our national security and interest -- interest under the current strategy rather than having to adjust or rewrite it. we do look forward to working with the congress to get the submission across the finish line hopefully on time next fall. in the meantime we will continue to work hard on the ways part of how we defend our country or our newest innovative initiatives and we be happy to talk about that. so thank you again and i believe that we will take a couple of questions before turning it over to the real experts who are sitting offstage. >> i wonder if you could talk a little bit about what happens if you don't get all the savings or you don't get a budget above the sequester? how does the strategy change or how does it break legs what can't you do? >> well this is something that i would hope that everybody in this audience and all of the members of congress considers

first. it's easy for us to tell you if you go to the sequestration level budget we will by this many fewer jfx joint strike fighter send this many fewer ships. but what does that mean? we are trying to get to what part of the strategy that we won't be able to do. now in the broadest sense our program is designed to allow us to do two things simultaneously to respond to crises big crises simultaneously. one for a large multi-phased joint campaign involving the navy, the air force, the army, the marine corps, combined arms operations etc. and the other one is to respond to an opportunistic aggressor and a different theater in which we try to impose cost or deny the adversary the objectives. so we believe that the pb 15 force structure that we submitted last year is probably sufficient to need and if we had

to take more cuts julian, we would have to consider moving down the number of forces that we have. and at that point you would have to ask yourselves all right, would you still be able to do those two things simultaneously? would you still be able to have the same level of presence in our forward theater's? would you still be able to respond in the timelines that we think we can respond to today? the answer to all three of those in our view is not likely. we don't have a specific -- we want to main focus on this budget because we believe this budget is what the nation needs. if congress doesn't agree then we would answer that question specifically. >> you have a lot of people doing the math and saying so what if you lose 36 billion sequestration and that takes you down to pointer $90 billion. that was roughly what you had in

2008 in 2009. why couldn't you live with $498 billion the same amount on the iraq war was running out-of-control? what would you say to that? >> well in real terms off the wartime peak we dropped 22 23% off the wartime peak but what we see happening is the challenge is too as i've outlined challenges to our space constellation, the demands of trying to keep our nuclear deterrent force going the problems that we are facing potentially projecting power in certain theaters because of the proliferation of these forces. in the past three years you are right we have had flat budgets do we have taken risks both in readiness and capabilities to maintain the capacity is the size of the force necessary to respond so we have three years of built-up demand on modernization that we haven't been able to get to. and so if anybody says you've

been at 496 billion yes that's true but we have been accumulating risk while we do so so. the president has said i'm not comfortable with those risks and that's why he's asking for an increase from 15 to 16 and he's asking for release of the sequestration caps at $150 billion over it. >> admiral winnefeld how close are the joint chiefs to just telling the white house we need to abandon the strategy because it's too uncertain whether congress in its hyperventilated partisan environment is going to relieve the pentagon from caps much less domestic spending. you keep saying it's unmanageable but what point you tell the white house we just have to rewrite this before you leave office? >> i would want to put words into the white house peace but i do believe they would agree that what the sequester we will have to regret the strategy. i wouldn't know if i'd say abandon it. a band that means starting with a clean sheet of paper. we have to make adjustments.

as i mentioned in my remarks if my remarks at the look of the forest planning construct it talks about steady-state operations in crisis operations and steady-state operations asked us to do three things, defend the homeland to do counterterrorism operations distributed counterterrorism operations and also provide a deterrent presence in many different regions. first we are not going to compromise on homeland defense. we know that and in sequester cuts we probably wouldn't have to. it was certainly affect our ability to do deterrents across the world so you may find we would have to do presence in fewer locations or lower amplitude presence in many locations. those are the kinds of decisions will have to make and that will impact her freedom of action in the world and american leadership. i don't think many people would sign up for that right now. i think we would have broad agreement across the government that had sequestered levels we will have to make adjustments to the strategy.

>> we have time for one more. >> we had to stop flying squadrons stop flying and putting ships and apple maintenance. we stop doing all of those things and we dug a readiness hole. the balance of the bipartisan budget act we were not satisfied at those levels. but we accepted them and happily because it helped us get out of the readiness hole. we said the best way to say it is that we have been surviving but not driving over the past three years because we haven't been able to get to these modernization issues that have been facing us. and when we presented this to the white house this fall they agreed with us and that's why were asking for a budget that's above. so we believe this is the right budget of the right balance. >> tony we have a pretty good way of looking at the relationship between supply and demand for forces. and on the supply-side we can capture this in a diagram of how many of particular force element

that we have and how ready they are both now and what it will look like under this budget and what it would look like under the sequester. it's not a pretty story when you compare that to the requirements we have across the globe. i'm not talking about desire mints but real requirements for presence and crisis response starting to get pretty dicey. that is why we are saying it's manageable risk but anything below that would rapidly lead to a manageable full. >> in your overseas operations i'm told we have $7.9 billion for investment reset in readiness which sounds a lot like the money on procurement and operations and maintenance in readiness. did you guys have a criteria in mind when he decided what you are going to fund from the account versus operations and maintenance procurement? >> we would be the first to say over the course of the decade or so we have had overseas contingency operations funding that too much has crept into that account on the investment side and the like.

we are determined to fix that. it's going to take time. we can't do it overnight. if we were church i do it overnight it would represent almost as big as the sequester bill. so we are going to be putting together a plan to do that. we hope to have it teased out of their starting in the 17 budget in completing it in 20 but it remains to be seen as we start to middle our way through this thing how we will get to that. we agree that we need to get occo spent on what occo was intended to do. >> to follow-up on this the white house will announce that their intent is to try to move what these enduring base costs that have crept into oakville over 13 years of war back into the base budget that we can only do it at the sequestration caps are lifted. otherwise if you took 20 to $30 billion of enduring costs and try to put it into the budget without a concomitant topline increase as the

vice-chairman said that is in essence a 20 billion to 30 billion-dollar year cut. working with the white house and we will announce you know first of all we have to find out if sequestration caps are lifted and then we will work throughout this year and the pb 17 budget submission we will unveil our plan. >> ladies and gentlemen the people who can really answer your detail questions are mike mccord or undersecretary of defense for comptroller and mark ramsey who is in the j. eight so i'd like to turn it over to them them. again thank you all for being here this afternoon and we look forward to answering your questions over the next several weeks and months as we tried to find the right balance in capabilities and capacities and readiness. >> thanks everybody. also briefing reporters at the

pentagon on monday the general who served as the air force's deputy assistant secretary for budget. he outlined proposed air force spending for fiscal year 2016. >> hello everyone. today major general air force secretary for budget will be providing the air force fiscal year 2016 budget. today's briefing will be 40 minutes long and a q&a session. please state your name and affiliation and i ask that you ask one question in and a follow-up question so everyone has an opportunity to ask a question and when we have time for one last question i will let you know.

general martin. >> thanks everybody for being here. i know it's a long afternoon so hopefully my brief will answer most of your questions. i major general jim martin air force director of budget and is my pleasure to brief you on the air force 2016 presidents budget budget. over the next 25 minutes this is what we will cover today. we will start with the air force strategic framework in the guiding principles we use to build our budget. we will recap the impacts of sequestration and operate at reduced budget level since 2012. we will look at the details of the fy2016 budget to include our request for oh funding. simply put our fy16 budget was built to support the defense strategy in the most urgent combatant commander requirements. it's a request based on necessity what we need for today's readiness and a

long-term strategic framework. the capabilities we will need in the future. it allows us to begin recovery from three years of operating a reduced funding levels. the strategic framework is contained in the three documents you see on the slide. these documents define who we are as airman, what we do and where we intend to go on the next 30 years. the strategic framework along with the secretary's top three priorities offer a foundation for the fy16 budget. along with the strategic framework we use the guiding principles listed on the chart in an effort to balance resources across our five core missions. as always our active guard and reserve team is a deliberate process and together we worked hard to find what the air force needs to be ready today and what we will need in the future to stay ahead of potential high and

threats. the end result is a budget which supports the defense strategy meets combatant commander requirements of expectations and is anchored to a 30-year plan. next slide. as you can see on this slide our air force is fully engaged in operations around the world. in fact demand for air force capabilities continues to grow. we all should be very proud of our airmen and the service they provide her nation. in 2014 we flew almost 20,000 close air support to more than 35,000 ops missions and launched 25 space missions 109,000 tanker shorties and offloaded over 172 million gallons of fuel to join coalition forces. in our medical evacuation crews airlifted over 6000 wounded warriors and civilians out of harm's way.

each of these missions include active-duty, guard and reserve airmen. it was a true total force effort. our airmen both military and civilians take great pride in their service and it's truly remarkable what they accomplish everyday. however we have a total force that is under strain. the air force is smaller we are busier than ever and our aircraft are the oldest they have ever been. since last year world conditions have changed and the demand for airpower have increased. silly me changes to our fyfy16 budget requests, changes that put our airmen in the best position to get the job done for our combatant commanders. however this can only be accomplished if sequestration is repealed and their budget request is supported. next slide. before we discuss fy16 i wanted to highlight the impacts of living with budget reduction since 2012.

you will notice on the chart in fy12 our fy16 planning men -- number was over $10 billion higher than this year's budget request and it was $20 billion above estimated bca funding levels. what has happened since fy12 is lost opportunity and reduced capability for air force and joint partners. we all remember when sequestration hit in 2013. impose large immediate cuts which required drastic action to make it until the end of the fiscal year. our readiness was severely impacted. we stood down one third of flying units for three months. pilots lost critical flying time need for full spectrum readiness. double maintenance requirements were deferred causing months of backlog which decreased aircraft availability. critical training for nearly all career fields was deferred. aren't the structure suffered as the limited funding for emergency repairs only which impacted operations across all five core missions and the total

force. and worst of all we have to furlough most of our 180,000 civilian airmen for six days. after starting up by 14 and a government shutdown in planning for a second year of sequestration we are certainly grateful for the modern short-term budget relief that congress provided for fy14 and 15. it started the process of readiness recovery. it was a great start, but it wasn't enough. under the bipartisan budget act we still have to make choices, choices that were necessary to save billions needed to live within budget limitations. for example last year we had to take near-term risks to maintain some balance between readiness today and future modernization so we attempted to divest and reduce fleet's overtime to save billions in reinvesting capabilities we need for the future. we started to draw down our military force. we deferred investments in new

technologies. modernization of urging aircraft took a backseat and party and lastly infrastructure continue to suffer. we accepted risk and facility repairs and delayed important construction projects which pushed the bow wave of unfunded projects over $12 billion. these effects are being felt across the total force. for these reasons, we believe sequestration needs to be repealed so we can start the recovery from reduced funding levels. our fy16 budget request allows that to happen. next slide. now you may remember a similar chart from last year's brief and our message is fairly consistent. this chart shows what we can do at tb levels versus what might happen if sequestration for bca funding caps remain. let me draw your attention to the blue and red lines.

the blue lines represent the air force's fy16 pv request. the red line represents the estimated bca funding levels. what's in between is potential loss capability. as you can see in the blue box that box includes pv levels. we can restore capacity to meet the less urgent needs of our combatant commanders. this includes refacing the you too's capability and e3 for command and control. we can restore five j. star aircraft, 17 f-15 c. to the national guard and 24 f-15 c. at lakenheath. at tb levels we can maintain flying or set maximum executable levels and capacity to keep us on the path to readiness recovery. we can preserve our top three modernization programs like the kc-46, f-35 and long-range strike bomber.

these provide capabilities we will need against future high-end threats. we can continue to strengthen the nuclear enterprise. we can increase investments in space cyber isr and preferred munitions. we will be able to address a portion of the 12 billion-dollar infrastructure bow waves and at tb levels we can stop the downsizing of our foursome began rightsizing to meet the strategy. bottom line the fy16 pv request can start the recovery for the air force we need and air force that supports defense strategy and provide capabilities combatant commanders need now and in the future. but even at tb levels would still have to make tough choices. we will resubmit the request to phase out the a-10 fleet by f. white -- by 2019 to focus available funding and manpower

on multirole platforms that will perform close air support and survive in a high-end threat. if sequestration or reduce bca funding levels continue in fy16 more tough choices will be required taking it impossible to meet the operational requirements of the defense strategy. as i mentioned a red box indicates what could happen at a bca funding level and what is potentially at stake. the air force could be forced to reduce isr capacity by 10 caps which is equal to the medium altitude isr capabilities supporting operations in syria and iraq. we will also divest do you too fleet which reduces high altitude isr capacity by 50%. we were tired to argue for, bloc 40 aircraft which will reduce and comment pacom intelligence collection on ground moving targets by 6000 hours per year. this comes at a time when more

isr capacity is being requested, not less. the you too fleet would lose capacity transport people and equipment to where they are needed especially in the pacific. so the bottom line in places where he had no or fewer boots on the ground and jets in the air. the majority of our tactical airlift and tanker fleet reside in the guard and reserve. under bca level funding they could absorb large flying our cuts, further diminishing combat readiness and capacity. we would be forced to reduce funding and programs that support full spectrum readiness flying hours of weapon system sustainment ranges simulators and high in training such as combat flag exercises.

we would have to reduce investments in capability we need to defeat future high-end threats. we'll reduce f-35 procurement by 14 aircraft as well as new technologies such as the adaptive engine. as i mentioned today's air force is the oldest busiest and smallest it has ever been. we had the fewest number of airmen and aircraft since their creation in 1947 and the average age of her our aircraft is almost 27 years. they simply can't afford to get smaller as her airmen who have volunteered to serve continued to go into harm's way they do need to be fully trained equipped and ready. our airmen deserve that and our nation expects it. now let's look at the details of the 16 budget. next slide. this is a breakout of our fy16 budget request. you see the bar on the left

represents our total air force budget to include active guard and reserve components. the top blog is what we were sure to as non-blue which is the portion of the air force budget that is not directly under our control is managed by other departments or agencies. the remainder of the budget is the focus for today's brief. in a bracketed area you will see the air force blue budget for fy16 is 122.2 billion or roughly 23% of dod's 2016 budget. of the 122.2 billion air force blue budget approximately 77 billion or 63% support day-to-day operations. these requirements include military and civilian pay which make up approximately 52% of day-to-day operating costs. flying hours weapon system sustainment and match come capability funding is approximately 40%. facility requirements and installation support represent

the remaining 8% of the total operating costs. the gray boxes at the bottom highlight our top procurement and largest programs. these programs total approximately $26 billion or about 60% of our investment accounts. hopefully you can see the largest portions of our budget are in people, readiness and future capability. so when forced to take large and sharp budget reductions we simply can't avoid impacts in these areas. now we will look at each appropriation starting with military personnel. next slide. the military personnel budget is 24% of our request and supports a total and a total end strength of 192,000 airmen. as i mentioned earlier continued readiness challenges and extreme ops tempo have made it clear that our fy16 end strength was too low.

as an air force, as i have said we have never been smaller but we are busier than ever. airmen have told us they don't have enough people to do the mission. we listen and that's why secretary james and general welsh have made it clear enough is enough. people remain our number one priority. so as you can see in this chart our fy16 budget request makes an upward adjustment to alleviate some stress on the force. the increase allows us to make adjustments for force structure and strengthen the nuclear enterprise. it also provides rpa and increases in the number of cyber teams. the male purse request support to 1.3% pay raise for her airmen and continues to support vital people programs. however sequestration could drive the total force and strength down another 10,000 airmen.

further reductions would leave us with a team that has an incomplete roster that is too small to meet a demanding schedule and allows little time to practice and provides no downtime. our airmen deserve better than that. now let's move onto the operation and maintenance account. next slide. the fy16 o&m budget continues the path to readiness recovery. while the bipartisan budget act helped stop the decline in readiness levels, readiness is not a short-term fix and it will take years to fully rebuild. to continue on that path to readiness recovery we have funded all the necessary readiness components. this includes flying hours and ws as to capacity and investing in ranges simulators and critical skills training such as combat flag exercises and advanced weapons schools. the increase allows us to ramp up to support 16 steady state

isr cap three supports vital space programs and establishes 39 cyber teams and strengthens the nuclear enterprise by adding funding for icbm the two and modernization programs. also helps fix our aging infrastructure by funding facility sustain the 80% and continues the commitment to her airmen by funding support services such as the sexual assault prevention and response program childcare facilities and fitness centers food services educational benefits for military and civilian members along with a 1.3% pay raise for our civilian employees. however bca levels progress toward readiness recovery will stop. bca levels will reduce weapon system sustainment by 1.2 billion potentially impacting another 2000 jobs in our debt those. we will have to reduce flying time by more than 41,000 hours.

critical training will be lost and will be forced to cut advance advanced reference schools in combat flag exercises. the sustainment funding will be cut and effort across all five core missions will be challenged to include the nuclear enterprise. let's move on to rdt and be. research development testing and evaluation is where big ideas customized technology we use everyday. these appropriation grants support the air force's mission of our worlds greatest air force powered by airmen fueled by innovation. innovation is at the core of our agenda to. gps is a great example of this. because of this we have increased funding by 2 billion are per map by 15 levels to start the recovery in this appropriation.

this year we focus on new and emerging technologies while continuing to modernization and recapitalization of our tanker fighter and bomber fleets. strengthening the nuclear enterprise remains air force is number one mission priorities. the budget supports the effort by modernizing the minuteman icbm program accelerating the long-range standoff weapon by two years and restoring funding to the b-2 defense management system direct attack capability. assured access to space is paramount in this budget begins development to provide two competitive launch providers with the objective of eliminating reliance on a foreign-made rocket engine. while maintaining readiness for the current environment we must also invest in innovation and recapitalization to defeat future threats. for example this budget request investing and adaptive engine technology that will increase

performance and revolutionized engine fuel consumption. this budget restructures the jay star recapitalization program providing critical command-and-control with enhanced isr capabilities on a modern fuel-efficient aircraft. we will continue design and development of the kc-46, f-35 long-range strike bomber in combat rescue helicopter programs. this budget will also allow us to begin recapitalization efforts for air force one. however bca levels potential actions that we may have to take would be reducing funding or cutting programs such as the adaptive engine technology global hawk block 30 center enhancements, b2 dms and minuteman command-and-control modernization. all of these programs could be at risk. next slide. our fy16 procurement budget

preserves the production ramps for a top modernization programs sustains our space. german strategy and restores our munitions levels. as you can see this as an increase from fy15 to 16. this is mainly due to increased quantities for kc-46 tankers f-35 and c-130j aircraft. we also buy 29 additional mq-9's for increased demand. additionally this budget maintains the multiyear procurement plan for the c-130j the 27 aircraft purchased in fy16. for the space mission we sustain our fish and space procurement strategy for the block bias of aea jeff satellites five and six ge 05 and six and modernization for ground units mobile grand command-and-control units. we will fund five launch services and purchase one gps

satellite. finally this budget allows us to increase funding for munitions based on forecasted demand and current ops tempo. however far budget is limited to bca levels they could potentially cut 14 f-35's ammunition inventories will not be replenished to the next necessary level. the next slide will show our procurement quantities by platform. these are planned procurement quantities for the budget. it shows both base and oh oco quantities and potential bca impacts. we will now discuss milk on. next slide. as i mentioned earlier reconstruction has been put on the back burner over the last three years due to redundant -- reduce funding levels for this request allows us to recover and

investing critical projects. projects to strengthen nuclear enterprise support munition that downs continue combatant commander support and enhance quality of life. this request funds three nuclear enterprise projects for weapons storage and to alert facilities but also a basic military training dorm and three permanent party dorms. to support the kc-46 in the f-35 that downs we request funding for several projects such as maintenance munitions and flight simulator facilities. for the air force reserve there is funding to construct high priority projects allied on the sly. for the air national guard this request includes funding to support cyber isr and rpa bedbound all critical for total force operations. finally the air force continues to fund construction for the combatant commands to support high-priority missions.

at the bca levels will continue to take risk for military construction and could be forced to cut approximately 50% of our projects. on the next slide i will provide a brief summary of our mission. fy16 oco budget funds capabilities that are in high demand and provides funding for operating locations in centcom and oar. these locations allows to conduct operations provide critical command-and-control deliver persistent isr and supporter joint partners with airlift and air were refueling capabilities. this year we are submitting and oco budget request totaling 10.7 billion. nine time .2 billion for operation and maintenance requirements. the request supports are deployed airmen after guard and reserve with proper pay and

allowances. additionally our oco investment request supports isr platforms munitions and other emergent capability requirements. next slide. this brings us to the end of our breathing and again i want to emphasize the air force is fy16 president's budget is built on strategy and the most urgent needs of our combatant commanders by the sequestration returns and 16 at halts readiness and renders us unable to execute the defense strategy. more tough choices will be required and it will force us to choose between a ready force today or a capable force tomorrow. the bottom line is we will need both for the joint force to be successful. so supported the. >> request and what it does for us keeps us on a path to full spectrum readiness and allows us to invest in future

capabilities. the first step in a down payment if you will on the air force are airmen deserve the the capabilities or join teammates and the security or nation expects. that concludes my brief. i'm happy to answer questions. >> thank you. you have said that if sequestration continues the air force would have to cut 10,000 airmen. given how congress works you may not get an appropriations until december. with these cuts have to be made for fiscal 16 our fiscal 17? >> i'm just saying based on current estimates right now that's one potential action that could happen but the chief and the secretary made it clear that we don't -- the 315,000 is really our red line. so we would look at other options but just given the numbers that the potential impact. >> have you already identified what type of airmen might have to be let go? >> in fact we are stopping the downsizing.

there were no more involuntary separation program scheduled and our budget request is important so that we can eliminate some stress on the force, that we can make sure we are adding back money for the force structure we have as well as billets that support and strengthen the nuclear enterprise. >> in order to say personnel would you consider buying fewer f-35's? >> when you get into the the bca funding level discussion what i've shown you here today is a list of potential actions we would have to take but again these actions this list of actions are required to try to save $10 billion in one year. so we would look at all the different options as we go forward and that's something we will work with osd and also congress before we make final actions. >> general james drew from inside the air force.

you've once again propose getting rid of the compass call fleet. is this a air force really backing out of the electronic warfare mission or is this something that congress just won't tolerate and will fund you for? >> we have had to make tough choices and that is we are -- why we are digesting some of this fleet. we still have budget levels to live with. if you go back to the chart that shows fy12 even at the pb level we are still $10 million below so we need to do just someplace a week reinvesting capabilities that we need for the future. >> i just had a follow on. and the same thing with getting rid of the block 40s and different things at the sequester level what analysis did you do to figure out if that was the best place to cut should you have to meet those budget

control levels? >> again the analysis was based on what we need to be ready today the capabilities that are in high demand for combatant commanders and capabilities that we will need in the future. that's really what we did in our analysis. >> amy butler with aviation week. the budget request notes if there are two launches and i think you notice well that have been set aside for competition. can you tell us which launches those are and if those might go away with sequestration at that stage and also hardee's new launches that are being put out for competition or was it always assumed that these would be competitive launches? >> we had competitive launches and fy16 there are three launches which will be competitive. in fy16 i think there are three to four. decisions on what payloads go on

those launches are still pretty decisional but when that contract is awarded than that announcement will be made. >> because you are zooming you will have a new and turned the rationale for this new entrant has been that it will decrease the cost of launch substantially through competition so how much less re-able to budget for elv or launches because you have this competition? >> we have said all along competition is a good thing. it's a good thing for air force and a good thing for a nation because it gives us a better product and it does drive down costs when competitors know they're someone competing for the same workload. last year when we awarded our elv contract we think that was one reason why we resulted in significant savings.

>> is it possible to get a number of how much expect to save because of these competitive -- >> while i don't think we can truly define what the number is that part of our acquisition strategy for just about everything we are doing is try to have more competition. again it gives us a better product potentially better capability and it's good for the air force pritzger. it's good for the nation and its good for the industrial base. >> a couple of questions. the comptroller today said his charts indicate that the air force has got the lion's share of the boost in 2016. can you give a sense of what areas the $16 billion was distributed to? who were the winners in your counts for these? >> in broad terms i would tell you air force capabilities like i said are in high demand right now. increased isr capabilities and initiatives to increase space capabilities strengthening our nuclear enterprise is something

we are putting a lot of investment in and as i said are air force capabilities are in high demand right now. >> how much of that 16 billion would be jeopardized if sequestration? certainly not all of it. >> tony you weren't here when we talk about that but if i could get them to pull that charred up. >> i can read it here. >> you know what their priorities to enhance space capabilities and strengthen the nuclear enterprise maintain readiness in him maintain some capability for the future what would it do in any bca funding scenarios try to balance all five permission sets. and to make sure that we are meeting the requirements that are government expects and our combatant commanders require. >> my understanding is that all 14 of the launches from 2018 to 2020 would be competed. is that accurate? >> that is correct.

>> aaron with defense news. can you say if there's any sort of priority in terms of the options on the table if the bca level aren't raised? you have a whole bunch of different options there. this is going to be the first to go, this is the next tier, this is the next tear? >> right now sequestration is the law so we are trying to bring a president's budget that supports the defense strategy. the sequestration is the law and to highlight what potentially could be at risk. but again before you make any final decisions we'd have to know what the actual bca funding levels for across all five core missions is to make sure we are meeting the most urgent requirements that are expected out of airports and work with osd and congressional feedback as part of that process as well. >> there's nothing that the

first to go it's not the kc-10? >> we would go back and take a look at that and try to balance risk across all nation sets. >> we have talked about the a-10 over the last year and congress has consistently blocked that. congress also hasn't necessarily raise levels and there doesn't seem to be much emphasis on bot that it's going to happen this year. is this a realistic budget request saying this is a lot and it would be nice to have but is it realistic to ask congress this? >> this is the pb requests built on strategy and we use a very different elaborate process across the total force to make sure we are meeting those capabilities that our combatant commanders need now but we also need to look ahead in the future. i call it not only being ready today but what we need to be ready 10 years from now. i think this pb requests is what we need to support the defense

strategy and it's still $10 billion less than what we were planning for just a few years ago. >> courtney from inside the air force. there has been a lot of analysis in the last few years about the air forces force mix between the components. how does this budget reflects in various mission areas and platforms the recommendations that come from that analysis? >> you are talking about the results of the study that came out? i would say in every budget process that i've been a part of tonight been here for the past four or five years it's a total force budget. we have our active guard and reserve personnel in the room when we build these budgets. everything we try to do we leverage the unique capabilities of regarding mr.. i've mentioned you before that

much of our tactical airlift and air refueling capabilities exist in the guard and reserve and we continue to look at that. i think the study recommended 42 recommendations and i think we agreed with 41. our chief has commissioned a group to try to study those and to see how quickly can a movement those recommendations and i think that study is 80% complete. we are moving out as fast as we can to leverage this unique capabilities our guard and reserve components can give to us. >> the other question i had and this may be a little bit in the weeds but there's a chart in the back of the budget overview book that said listen airframe by air from the number of aircraft in fi 15 and fy16 and reflects almost a 40 aircraft drop the c-17 area.

am i reading that right and what does that -- >> i don't have the numbers in frenemies to let me take that one or the reckoning at that too. i know we had a couple of corrections on that chart that you're referring to. >> tarak copp with the "washington examiner." when the things you mentioned during your briefing presentation was a sixth generation fighter. if you could describe details about the program particularly a line item for it. we haven't seen anything. >> here is what i will tell you about the sixth generation aircraft. the concept not a platform that's in our budget and that's a team we are trying to get back to inner s&t budget to look at that next generation or at that next capability that we need to stay ahead of our potential ever terry is. there is money scattered throughout the budget that we can certainly go back and try to get the numbers that.

>> where's that money scattered? >> it's in our rdt and e.u. budget. >> roger of air force times. lassar when the air force mentioned they started to push the retired a-10 there was a plan that came out. this is a proof would it be the same schedule same airframe for the same units? >> it's very similar to what we propose last year. >> what is different this year? is there any change because some lawmakers have come out and said they are going to plug it right away and they have vowed to stop it. is there a change in communication? what is different this year that will give it a chance? >> i don't think there's anything different from the standpoint of our proposal. it's phasing out the a-10. we don't actually phase them out until 2019 but it's explaining why saving $4.2 billion what we

can do it that savings because we really need to invest in those multirole platforms that cannot only to cast but also survive in the high-end fight. lacerated% of our course close air support mission was done by either platforms. we love the a-10 that we have a transition plan to remove the aircraft in 2019 and we think it's a good plan and we have a good plan on how to reinvest that savings into capabilities that can perform close air support. >> i thought last year was 3.5. has the number change? >> when you consider this a wing replacement and you add in that member you get to about 4.2 billion. >> over what time. matt? >> it's across fytp 19. when the a. tens are completely

divested in fy19 then that is when we would achieve the savings over time. let me go in the back here. >> amy mccullough air force magazine. there's a line in here for ee lb. is that funding for the new entrants in the -- >> you'll remember last year we broke out the ee lb funding instead of one line and we broken into two different lines that reflects that. you can find that information in our justification books if you access the qr code that we provided. >> i have got to go back here. he hasn't had an opportunity yet. >> i am brandon bradley nuclear security and deterrence monitor. you mentioned at the b.c. levels of force might have to consider whether to cut back on minute man command and control modernization and several officials have recently said how important it was to revamp command-and-control for minute

man free command-and-control centers while also a emphasizing the central role that will happen the follow-on of the minuteman iii system the gbs tease. i was wondering if you might be able to comment on the force that is required at the command-and-control centers and the possible and come back -- impact that could have on development? >> let me take that one for the record because i can get you details on, we have found in our program. we have increased our investments in the nuclear enterprise overall and so there's a lot of money that's in there for minuteman iii sustainment as well as the force improvement program the recapitalization of the minuteman iii so rather than trying to quote you a number let me get back to you on that one. okay? [inaudible conversations]

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