a kinnealey person in that will go up at 4:00 in the morning excited about this program. [laughter] this is what i most enjoy seeing in the department in the comptroller's office. sova it is great fun to have them here to my knowledge the first time we ever brought three opponents together for a programming. this was a management innovation by secretary mcnamara.

a is and it still is the foundation people to are not worth keeping the building don't understand the importance of the significance of this process. it has a strategic coherence why then defense department is coherent to wrap up the year with a of 98% success rate with the very deep process to put ourselves through largely efficient but it does bring together the past of 70 years of technology. you have to plan on a plane that will be around for the next 40 years. the department has the largest day care center in

the world. how you bring that together? that is what the is gentleman to professionally. especially since nobody in the government is doing anything these days. [laughter] so i am delighted to have them here. so this will be refreshing. [applause] >> thank you dr. to our distinguished guest and

maybe the first time we have the braintrust a symbol that a public event. i want to start we will blow in order -- go in order but the assistant secretary of defense summiteers' give that strategic framework? >> for i am happy fy17 leadoff and frankly and make the case that we have. that revenue go through the process when it secretary carter, it was pretty clear

he had a sense of a new security environment to figure our how you change and adapt that budgeting process? he gave us a clearer direction on the strategic imperative with the supreme court budget to deter. he also was very clear that i hope you read that transcript and we need to build to drive looking at the ed near-term and long-term issues but as everyone knows russia and china and north korea and

counterterrorism globally. but you cannot choose which is more important the he thought a great power conflict is something we haven't done as much work and clearly wanted a focus on that. but did anyone time the people shall expect they can deal with those five challenges to us from what we put up on the hill. but we need to say we can do more than one thing. he consciously did not want to prioritize. so we have a quick overview.

first the budget that you will see clearly reinforces is the direction to make the military full spectrum so after 14 years of focusing on the very important role of force is in harm's way in conflict i will argue this continues a trend to understand to look at new ways of doing things with the security environment that we have. but to get those innovative ways how you deal with the rest we will not fight these the same way.

we have to be innovative that the new approaches. and third you will hearer balance. one is the mix of capability and generally the direction was when in doubt that was not universally applied it was different for each service based on how they are done but that is a general focus. second with preparing of the future threats the key is we cannot prevail if we don't start thinking and planning about it now. so talk about this a joint

force talks about to prevail against our competitors into be seen to dominate as the aggressor would a jews to initiate both were fighting posture is not at the expense event of a global presence to ensure the allies can understand to bring the force is into the region and elsewhere. the most credible way to know how you win and how to get there. the other piece looking at what we do today and there

is much in the budget for but there is a gradual shift in relative terms to deal with the future risks. as i look at those multiple regions there are five things to do with any one of them or multiple conflicts but we really prioritized becky posture pieces where we had the ability to make those modifications with research and development but

the one thing i know is a big focus is that offset strategy and that the chair reinforces to figure out how to offset the key capabilities of our potential adversaries in with the problems that we face into we come up with new technologies to achieve those of vintages and not allow us to have access? we also have a lot about allies in a posture and working with the in dropper ability so the largest death is going on in in europe but i will quickly tried to get to each of those five

challenges with russia of that budget took stock with european security environmental and what russia is underdoing -- doing with that integrity so that was a huge focus for us. we obviously have to work with our allies with the strength of the nato alliance in we've will continue to do that. but to the european reinsurance initiative started last year and bumped up over 300% and 3.4 billion to do 789 million last year.

so this looks like me but then also to account for the rapid deployment to keep some airforce units there also rotation deployments and exercises to increase in dropper ability and long-term power projections but with both russia and to go up against the more maritime. but also try to move forward. china we continue which in

we need to look at where we have advantages such as engaging targets to emphasize the accursi capabilities. >> we have continued but the

access with our partner and the other pieces of survivability in the pacific. >> other places we have looked at to make investment with the targeted that our useful. but in general we feel pretty good about these environments. . .

>> i appreciate you organizing this event and certainly the doctor's kind introduction. it is daunted to do an unprecedented talk because i think every talk ever has been done over the years. it is great to be with two good friends and have a chance to represents. this is a little bit of an odd stop for me because my friends in the audience will reap call i started working in the organization that bob now leads

and policy. my first job in the obama administration was controller of the air force. i had the budgeting and execution peace, and i've had the strategy peace. now i'm in charge of the programming. programming is probably the piece that is least familiar to folks who are not immersed in art department of defense. that is really about connecting the broad goals of our strategy and of our operational planning with the capabilities, the capacity and the readiness that is required to carry everything out. it is about delivering comprehensive deterrence for the nation so we can secure piece for the american people in the world. in essence what that means, i have to argue with both of these gentlemen regularly.

i have to argue with mike when he is being too detailed. in all seriousness it's a process that connects down from brought it objectives to the specific dollars and cents. it is a process we have been using for over 50 years through various changes, the process with we have been working inside the department to revamp and improve. part of what we're trying to do is tighten that linkage all the way through to budget. that's partly why you see the three of us spending more time together then perhaps has been the case. what are the details that make up that tying of resources to strategy? tying resources to the nation and what we need. as bob

indicated we needed to start with critical objectives. one of the things that we had that was powerful in the budget cycle, the program budget cycle those concluded was clear and early guidance from the secretary of defense. as to the strategic priorities. he gave us that guidance early enough that we could charter some very specific and focused analytic efforts to get at the critical question that turns into the details of the budget. so we are able to charter six reviews last year. the strategic portfolio reviews were designed to reach across the different structures in the department. not limited to one service, not limited to one domain, not limited to one weapon system or one appropriation mine item. it was designed to reach across. i will talk about one of those today to give you a flavor of

how informed the budgetary decision-making that was led. i'm grateful to the work of my team and they co- lead six strategic reviews across the state department. they were analytical crown jewels in court to us aligning resources to the most critical challenges. the 1i would like to talk about a little in detail today is the power projection. the reason we we had that is building on power projected in the previous two cycles as well as because we know the department has to feel the right capabilities and sufficient quality in order to provide that comprehensive deterrent for adversaries and potential adversaries around the world. potential adversaries need to

understand and be very cognizant of the capability of the united states if we need to defend american interests. whether or not those capabilities are up to snuff and make that potential adversary think twice is really a part of a global deterrence. three major thematic findings in the power projection of the portfolio review that got to the heart of how we would invest in our capability dollars the cycle. first, they played a great emphasis on the ability of the united states to deliver -- range. there's a lot of talk in washington a military communities about what it means, parts of that are very real. one way the united states can counter that is with long range

capability. the second critical theme is about disaggregating complex system, ask dreamily expensive and valuable systems in order to carry out military tasks. there you will see as we turn the program in the budget more speculative investment. the third principle is to leverage areas of sanctuary. if others are seeking to keep you out so that you cannot defend allies or, it is important to to be able to pack from domains or means where you will enjoy relative sanctuary. bob mentioned the work and taking the department on a strategy. what this power projection and strategic portfolio review was not designed to prove or demonstrate the strategy you can clearly trace some of the same line of some of the same

thinking really tying into how we constructed that portfolio and the findings that came out of it. let me go through a few of the specifics. michael talk about how things were substantiated in the budget in more detail. one of the things the programming process brought to the table and we may forward in the longer term look of the future, mike and his team is understandably heavily focused on the budget year on the execution year. whatever request occur in front of congress which is a lot of different things to keep your mind on. my team is really heavily focused on a balance across a five-year and sometimes longer horizon giving us a planning horizon far enough out that you can start to see new technology come in. to emphasize both the sanctuary

piece in the delivering effects of range will highlight it specific to untrained domain again which is what the budget does. it's an area of externally managed for the united states, where where we enjoy sanctuary, where we have technological advantages built up over decades that give us extraordinary capability. so you see across the future years of defense about $40 billion of additional investment. that is an increase of about $2.5 billion, that money goes of course to build a more state-of-the-art, goes to the initial stages of modernizing deterrence. it also takes a very specific additional steps that i want to highlight. one extremely important one is the investment in the virginia

payload module. that is an extended cab version of your standard virginia tax levy. it is an extra in her high leverage on. the run-of-the-mill virginia offers you 12 vertical longitude, the virginia payload module offers you 20. the capabilities to support a whole host of weapon systems. that's a big deal. for a comparatively small investment each one of those is going to be enormously more capable. we are recognizing any csn investing additional upgrade in the combat system, investing in other technology for submarines. it includes torpedoes for art submarines.

we are also looking toward on-demand capability and the virginia payload module will also give submarines more capability. also shifting from the undersea's they will be playing out several other domains. in the air domain we see a focus on things like the arsenal plane which the secretary talked about. in the surface domain you see an important investment and expand the capability for the tomahawk missile which is one of the numerous missile which is extremely effective. what the secretary has announced with this budget is that we will be upgrading and modifying the tomahawk as it goes through its remanufacture and also give it a shift attack capability.

we could deliver a very serious impact if needed. he also had the secretary talk about taking one of our premier surface-to-air missiles which was used for air defense and converting it to give it an anti-ship capability. so you so you have an extremely high c and high-energy missile that we are modifying for additional capability and then we have a low level, low-flying tomahawk missile, a dual threat for anti- ship. again, taking systems that we have an leveraging them to strange strategic calculations. the second and final major point to make today is falling onto the point bob made about posture and presence. we are constantly balancing our

capability of fighting with their presence around the world. what we have seen as the force have come smaller and as we have dealt with a substantial shift as numbers have come down in the middle east and around the world, we have an opportunity to reassess in relative terms how much of the poor should be out and about and how much of the four should be training and preparing to provide a stronger deterrence to a potential large fight. we are incrementally adjusting that. one of the critical pieces and that category in this budget and program, we made a determination that we would reduce the inventory goal of that program from 52 ships 240.

we would also move down to a single vendor. that is a ship that we had purchased to play certain war fighting roles but most predominantly to provide prep. we assign that plea to replace the mayan countermeasures that we have, to patrol coastal boats that we have and the already now retired . largely a force that was to be around the world. because of how how that program was designed it was providing incrementally more presence than the historically weak as we were maintaining a higher temple with those ships. as it turns out a fleet of 40 of those is going to be fully capable of providing more vessels than the legacy fleet it replaced. important to note the 40 ship

fleet is fully adequate to perform the war fighting missions that we need that fleet to perform. you'll see some discussion and commentary about where's the requirement on that. and maybe had for some years 52 ships total required which embodies both her presence requirement and the war fighting requirement. the posture versus present dialogue on the source of the present within that were fighting. again it is a matter of balance. we needed to to make those adjustments to free up the resources to get the naval aviation enterprise and to invest in munition programs we talked about.

i have talked in broad terms about how we translate strategy into program and it turns into budget. i have hopefully given you a few useful specifics. i look forward to talking through the q&a about any other pieces there, in particular, in particular how the department use the secretary construct of looking concretely on challenges in order to focus. with that i will turn it over to mike to put lipstick on this beautiful budget that we have. >> thank you. i should note, i realize we didn't really introduce doctor jamie. and mike was under secretary of defense. >> thank you.

i thank you for introducing us, it is good to be here with jamie and bob. it is unusual only that we are here in public because we meet and work together all of the time. we see each other just about every day. i'm also happy to be here at an institution so well-known for this discussion. that is something that is very welcome. i'm going to recap a little bit about what i put on paper. a few points that have been made already. the primary thing that secretary uses radar homework to do rate the budget this is being responsive to the five challenges he saw, again as bob said there was a mixture of

priority and not priority in these five challenges. the prioritization it is the competitors, the great challenges first, that was clear, that the priority but it's not acceptable to do only three or four to these, we we are responsible for doing them all. one of the things that is striking to me, any secretary of defense lives in the here and now and a lot of time responding to what is going on today in the current challenges. but the secretary has us thinking all to the future. if you look at what were trying to accomplish in the budget it spans the domains and if you think about the five challenges in terms of geography you're talking about eastern europe, middle east, south china seas, a a good bit of the world's geography. we're talking about both from the here and now in the fight

against terrorism too well into the future of how we are postured against other competitors. i i think we have to talk about this in detail but we recognize a considerable part of our effort has to go and does go in our process that jamie leads. it goes beyond the domains where we know we have to win on air and sea and on land. but also with cyberspace, every part of the world and from now to the future the secretary is asking us and demanding us to be excellent across the many ranges of domains. if you many militaries would attempt to do what we attempt to do. so the five challenges i really the big lens through which we viewed many challenges in the budget. we also talked about this

morning that going beyond presence which is a big bob put it well it is not one or the other, posture presents it as posture on top of presence. what can we bring, how, how quickly can you get there, how fast, how lethal, how much can you bring, as well as being there being present working with alleys on it daily basis. we are not in an either or mode, but the relative emphasis is what the secretary was trying to get into this budget and what we try to capture. another thing i think is important in innovation that you hear a lot, there are really for parts which i'm listing on the slide to talk about for a second. everybody's mind leads to technology when you think of innovation and that is part of it, and that strategy and phrases becoming well-known is largely technological and there is an aspect of it especially

reaching out with the secretary was doing last week to nontraditional silicon valley that people do not directly do business with the as you would think of. innovation in the secretary's mind and in the agenda goes well beyond just new technology, as portent as that is. i think proven so far to be misunderstood the codes are talent level is so high already so there are some that ask what we need to do anything new because we are already is working well with what we have today. the secretary feels that as you look at what it takes to attract and retain someone today, and what it will take to attract someone in the future that we cannot rest, we have to think about how people don't

necessarily want to in 20 or 30 years ago when they first joined. interesting aspect of this, just last year a great degree of cooperation between an independent commission and the congress and the department resulted in a military retirement reform that has not happened and 30 years. it's in line with what the secretary's thinking what it takes to shape the future. it is geared towards a more affordable benefit like the rest of the economy already has moved to the last 30 years. something that allows people to walk away with more than what they have now. it's more of an aspect of when you hear the secretary about force of the future it means how can someone commit to this department, how can he serve your country a short time or a

career if we can only get part of your time to come in and come out, portable benefits are part of that that attracts people in the rest of the world. we have also talked about in recent days some of the dodd monetary compensation benefits, child care hours, maternity and paternity leave expansion, things that recognize that what attract and retain the person is not just always a paycheck. in terms of our budget, these benefits are changes are not large forces of the future, but they are important. i think they're well played and we spent a lot of time on these senior-level debating them. trying to think about what will keep us on the leading edge well into the future. back to the innovation side, have a new technology is important of course but if you have new tools and think the

same old way, you are obviously not getting the most value out of them. how we think and this is particularly bob's area on our planning, reinvigorating wargaming priorities, new technology in new ways to use what you are ready have or new ways to use the tools your hoping to acquire. finally, how her own business process works is something secretary looks of the private sector and realizes that even successful at attracting new talent to the department, they came here bound business process that made no sense to them that were slow, cumbersome, we might lose them again. we need to be agile and how we operate and how we operate as well as new technology and the best people. all of these are connected in our mind, innovation is not just about new technology as important as that is. another point to make, we talked about some of the proposals that got most attention like the european assurance, as natural

and normal it is to focus on anything in the budget, the thing that is really grown by the most%, i would just like to remind people that the european reassurance is not a total of our efforts to counter russia. it sits on top of the presence we have had for decades and other things that are important. new category, new label, it's natural to highlight areas of particular emphasis and those are important, there is a reason why they are the most single are most talked about part of the budget is the european reassurance initiative but it it is not the sum total. it's also true true and there's a good example, with a few exceptions most things in the budget are not to counter russia or north korea, most of our systems are capable -- that is how we look

at it. it's hard to come back to budget later and say what is your budget, how much goes to counter russia, that's not not really how we do it. it is important to look at that. i want to talk about the budget and its size if you will rather than the shape. many people may have heard by now the secretary described himself as being grateful or supportive of the budget deal from last fall. i want to take a second to talk about that. first of all we had been stuck for three years prior to this deal under $500 billion in our base budget.

we were able to get through this budget deal with about 25,000,000,000 dollars per year in 16 and 17. above the level we bennett. that it's real resources, here now to give us additional capability and get give us additional capability and get us closer to where we need to be. look into the future there'll need to be more budget deals, more discussions in the future, the to your budget deal expires after this year and leaves it open again as to where we are going. were were starting from a better place by having the steel than being stuck where we were before. there's resources here now and it's also a jumping point for the future. on the chart you can see the blue bar on the bottom are the base budget and we have jumped up above the red line, about 20 or $25 billion in 2016. not quite as high in 2017 but still an important increase. it's very typical a budget deals

where there is a leveling off on the first year to the second tier. finally, the secretary and the point he has made a couple of times and the reason he was calling early and often for compromises that compromises how we govern this country and it represents progress to us to know what our top line is. we did not get this deal, as everybody knows until november. we found out our fy 16 top line one month already in and it was late in our process and it was very far along by november when we got these final guidelines. still that left us about six weeks to do a focused effort on how to make the best choices to get the top line down still represent the secretary's priorities. doing so gives us some certain stabilities which is important for troops. until you know for sure where the budget is going people will

wonder, are there going to be involuntary separations and things like that. what is my future, what does that mean for me and my family? are we? are we going to be of the standard also gives us certainty the industry partners need, not the -- at least some certainty and better than the alternative of a shutdown which we have experienced in recent years. it's important for troops, partners, and those inside the department to know what resources we have to work with them for partners around the world. that's what the secretary means when he says he support the steel. he does not mean that that we got everything we wanted, clearly we did not. we had to take resources down about 16 and 17 and we can talk about in the q&a. about what choices we made. we recognize that was always a possible outcome when you're seeking a compromise that you may not get everything that

you wanted. finally, i like to go to my last chart. one thing i want to say that is important part of this process and looking at her budget is the unstated assumption that we made the choice as we describe the late part of last year with the belief that our top line was down. if you look at the chart and you can see the blue, purple, green, that is our profile that we have for the fy 15 budget, fy 16, and now fy 17 budget. those were accommodating particular reduction in the budget deal particular reduction in the budget deal from last fall. we have been remarkably more consistent than any other team i know. here's the resources that we need and there's a good reason for that. what bob had described remained

fairly constant goal for us across the last two years. the things we things we need to accomplish them with has remained conscious in our plans. not to say the army has not been reducing but the rate at which they are reducing has been pretty constant. that is not moved around a lot. therefore the so-called means, the resources have also been constant, stable i should say that we have for several years now been very clear about the level of resources we need to accomplish our task in our missions. we have stuck with that. we did not get all that we wanted in this budget deal but we have made a big jump up, from where we have stuck from three years which is the flat reddish line. we do not get all the way up to the 35 billion-dollar increase but we made about two thirds of

the jump. that positions us well for future years. we need to make another jump in 18, we see the biggest risk in this budget not so much as the choices that we made to meet the short-term budget reduction but we're surly happy to discuss and defend those. i know we will be asked about them in the hearings throughout the year. the greater risk to us is the 100,000,000,000 dollars between any of those three lines, the blue, purple, the blue, purple, green, and the red which represents the four years remaining on the budget. that is about 25,000,000,000 dollars per year in resources. we year in resources. we need to make another leap up next year, to get up to that level again that we have been advocating. i think that gives you a good

indication of where we need. let me wrap up on the way can talk about individual programs and choices that we made. i know there has been a lot of discussion. >> thank you all, great, starting us off. we'll go to questions to the audience in just a minute. i think we have microphones in the room to bring around. i will kick it off with questions for each of you. bob may be with this one, one of the things talked about recently is the idea of improving the department strategic -- that would be the ability to address strategy rapidly within fireman changes. so before the inca dry we had russia rolling into ukraine, ice

is is expanding its territory, the world was changing, and the department of defense has to change to keep up with it. from your perspective, what is the department doing to improve its strategic agility and what else needs to be done? >> i will answer that from two different perspectives. one one is that we obviously need strategic agility. while there is a qdr every few years and the dsr has been legislative i do not think anybody should think that is the only time we take a look and do the things we do during a qdr. what what is the strategic environment, how best to make sure to pursue our interest, protect our our interests, protects our friends, and allies within that environment. you make that decision the new every year and when you see massive changes.

to a large extent -- in the where are we making changes in the budget in terms of relative emphasis. that is an important piece. something that we have struggled with. how do you do a better job with assessing with how you're doing and where you're going. on the other hand, changing strategic guidance every six months or year, that's not good for the department either. you have to have some level of consistency so people understand they are not going back and forth between multiple things. and finding that balance is the key but there are lots of things as mike noted that are consistent within the budget that we have been doing for a long time, while you make changes on the margin, all say one thing about being more agile as a focus that this deputy secretary has pushed and we see across the environment which is

working, how can you discover new things about how to operate, where where to operate, how to use things in an environment we are pushing innovation a lot of that is -- there is money specifically tied to incentivizing wargaming within the department. starting in the 16 budget and beyond. combining all of those and having a sense of understanding that some things are consistent, we have things that we will always have to do to project power into areas, understanding what is consistent while understanding that you cannot be so happy with the work you have done that you do not ever look to challenge that. >> jamie, question for you. i know goes back, you are an air force controller and prior to this administration effort to achieve greater efficiency and how those dollars have spent some have been successful, some have it apart because congress

does not always agree with what the department wants to do. my question to you, looking forward what legislative or policy obstacle or holding the department back from achieving greater efficiency and use of resources? >> it's not a popular answer but it's an important piece of it. it has been aspirational goal for several years now were now more than ten years since our last round, the study the department has done 20 or 25%, sometimes more surplus infrastructure and most of our mission areas. depending on what part of the force and what capability you're talking about. it is substantial. the big thing that plays there is not so much the cost of maintaining stability or owning

more real estate, it is the people that come with that. when i work for the air force, walking around and he took eight or 900 am i to open new base before he had any operational folks there. 800 or 900 air men air men just to have that base. you can understand as you shrink down the operational forces the capital gets more more expensive because it's more advanced. we are operating with a lot of overhead to maintain it. base closure is an important piece, it's critical to note that the department is not happy with what happened in the 2005 crackdown, but we think of

future background would have a much different financial ramification. even though it is now paying off financially it was a much smaller scale closure and large scale realignment than the previous which yielded larger financial savings. we would model that more in the earlier model. this is a difficult political topic, we understand that. understand that. the department is going to remain consistent and we just need to move forward on this to enable costs take out, to drive our combat capability. there is more that we can do there, i think the department needs to look at agility and identifying and divesting programs that are not delivering. as as we look to an

era where we have a great power competition going on, it is important that we are willing to take enough risk in the things we develop and acquire to maintain that for the long run. doing that recess it takes approach folio approach which you do not expect. we need to be a do exotic work that may only have a small chance of turning into a military capability. if you don't to several of those you are going to be elected incremental. we need that but we need a portfolio with some higher risk effort. the department has to be good at divesting those when it is clear they are not paying off. that is what we are working internal and with congress to build an understanding.

it is difficult to have a portfolio with various high risk technology if you know you're going to be punished for any failure, even if it was a conscious choice to take risk. as the secretary looks to model this it cannot assume that every investment you make is going to pay off. if that is what your assumption is you are not being ambitious enough. mike may have something he wants to have as well, i don't know. >> certainly it is one of the more challenging months. we have had challenging discussions as well on areas of healthcare over the years. i was in your first point about agility as well that we do have operational agility that

requires financial community to respond. our organization has always worked with services and with combat commanders to respond, we're here to talk about re- budgeting and execution on the planet, we don't normally talk about it that much. we do have to respond to the here and now contingency. we do have and i do appreciate the recent amount of flexibility in our operating account and how military operations are done through the commander-in-chief. they are not negotiated with the legislative branch. we do have some inherent flexibility that we use but we also need to move money around to address challenges in ways that are avenues that are more enduring. i believe the most rheumatic example in recent use is the ebola response which was a logistic and financial issue.

having the ability to do that is important to do that as well, it is a different kind of agility. in operational agility instead of strategic. >> i also put out a call for questions on twitter and i got some good ones. mike, in many years we see the military pay raise proposed by the administration is a across-the-board pay raise. it will got all the ranks at once. one of the challenges with that is over time if you have across-the-board pay raises it widens the gap in pay between higher ranks and lower ranks, the higher ranks grow at a faster amount because they are starting from a higher base. from time to time the department has targeted pay raises and part

of the pay scale based on recruiting and retention needs. this is something the department has looked at this year, to think it is time to look at that again? >> i think this year the focus has been, the mental focus has been on some of the nonmonetary things i'd this griped. -- described. there's a variety of aspects for that probably also that the fundamental change in the retirement system is something that we need to work through, i was just out at indianapolis, i think that we have been looking if nontraditional is the best

way to describe it but in terms of childcare, maternity and paternity leave aspect, we, we just had a change in retirement as well. every year there is a discussion on healthcare and some ways to make it better, and both the value and efficiency of the healthcare system. i think pay raise in self is an important thing that people think about first. the virtue of it is also it is most easily changed but we have been seeing that. i do not think the case has been made that i have been a merit aware of but it is something we could do fairly easily if the administration decided that administer changes needed to be mated. there are some pockets where you have the opposite take but a widening compression as well. >> i want to open up from questions to the audience.

please wait for a microphone to come to you. >> good morning. i'm an independent consultant and i don't think anybody envies it the job that you have trying to put together a budget with so many floating variables and changes. i do most of my business round the world so i take note at geopolitics where it affects that business agreements and dealings with different and ministries and presents. it is interesting where we have a lot of problems we do have a lack of presence. as you try to look at the navy budget it is interesting that all the service chiefs have common denominator as the lack of needed additional carrier, even to the fact that the chief of staff to the air force notes that it affects the number of air force. as you look forward and i realize in the out years you

cannot really don't know if you can raise your base budget lines and so forth as you mentioned earlier. is there a sense that maybe we need to add another carrier and there's a domino effect associated with that. the #to be flat, don't notice, on the the navy on it but from other services. >> the department is on a path right now to again have 11 carriers operational. as you know we were in a short-term gap where the delay with the main carrier has left us with only ten functional. that is coming up naturally already. i'm not sure if you're arguing to go further beyond that which is a pretty big undertaking given the nature of the carrier investment. it would be a major decade

endeavored to get to that point. i don't think it's under serious consideration. the navy is working hard and has been for a few years not identified the right way to optimize the deployment and employment of the fleet and order to produce maximum carrier presence. we make conscious choices a few years back in the face of the geopolitical situation to search the carrier force out and to provide enhanced presence for about a year understanding the consequence would be we were deferring which meant we would have more carriers and dock then we would otherwise have for short period of time. we are now just about ready to come out of that. you are probably seen a little bit of the regret associated with that decision. it was very much a conscious decision made by the secretary of defense.

>> thank you. i'm with national defense make same. i have a cyber question. i think it's 35 billion worth of investments in cyber, can you give us a breakdown of what that money would be going towards then mr. moore, what are the keep programs or capabilities you're trying to put forward in that budget and what are the top policy issues that your wrestling with when it comes to using cyber weapons and armed conflicts or in scenarios that perhaps don't rise to the level of a dod response? >> okay think were still struggling for metric in the

cyber area that are commensurate with some of the ways we talk about other programs that have been around longer. our category of these is a top priority and then we look at offense, we look at cyber in the whole larger area where i cio does a great job leading us, i think the last few years we did a great job looking at cyber in the context of other issues. one of the things on my plate a lot is the response to the opm hack as it was called which affected mostly dod people. we have both our own needs and efforts but also they need to respond to the challenge that comes at us from the outside. the cyber budget i think jamie could talk about choices that we

made, there are some that are on classified that we that we could talk about. many are not. >> i'd emphasize looking at cyber that we are continuing to grow the overall capacity and capability in u.s. cyber and the various components. they are understandably focused first on the priority of securing the network. we know the way the u.s. operates in peacetime including the way we would operate in case of a major war is deeply dependent on the flow of information. we know that is a contested environment. we have seen it contested where we've had major companies and debilitating acts and we know it is contested along governments and intelligence agencies. based on that, we have a very

clear priority of defending the network first. we are growing teams that are dedicated to active defense into testing herself. we are building a series of scorecards and metrics that will hold individual some organization to account. if cyber security is a large discipline process in a department like the department of defense, where finding ways that commanders at all levels are cognizant of how choices what they are making can affect cyber security. we are also looking at the global environment and asking hard questions about what does it mean to maintain deterrence in a world where cyber can be weapon eyes? those are the trickiest questions and have the heaviest policy overtones. we might use that to talk with our distinguished collie care.

>> is much as we have done in cyber think it is fair to say that there is still more as we think about integrating this domain into the way that we think about conflict. obviously first is the discretion of our own network. then the planning perspective that would go through, we have to ask different questions and figure out how we can use this as an effective tool both from a deterrence and perspective. part of this is going to be do we have to look at cyber, do we have to have cyber reactions to cyber actions. or can we integrate cyber into how we think about things. it's very sensitive and tightly controlled as it should be given the repercussions that could come back not just on the defense but also on the society at large. working through these these issues is important from a theoretical perspective but that

has to be coupled with what you can akin to to understand how you want to look at it in theory. >> tony, back there in the back. >> tony with bloomberg news. how does your vision of a we have to be able to do it all square with the looming as the next in administration has to start playing for 2021. howdy square those two? how much money roughly will the next ministration have to pony up or have to fight starting in 2021 just to in 2021 just to pay for the nuclear modernization upgrade, the bf 35 ramp up, be 21, how do you square your two goals that we have to do it all yet we have to navigate? >> great question. just one clarification for the

group, this future years defense plan is the first one in which the real bulk of that nuclear bow wave is in the planning dry. fy 21 represents the target procurement date of the first replacement submarine. so we are looking at a substantial ramp-up, i don't know if we still have slides here, if we, if you look closely at mike's final slide will call the spaghetti chart, you will see last year the future defense plan though short up there for the cycle, 2017 budget shows a pickup in the defense top line in fy 21. that was the product of a very serious and deliberate

discussion between leadership of the department of defense and the senior staff at the white house up to the president about upcoming nuclear modernization. specifically substantial build in that year with regard to both the ohio replacement and funding for the first shift procurement. also the icm replacement and those grew less year-over-year. we had a very serious dialogue about that and in response the president gave the department fiscal planning targets that were greater than those that were projected the previous cycle. it doesn't represent the whole that you're talking about, that that bow wave it grows particularly in 2020 and the late 2020s where the ohio

replacement some brain is in replacement. right now we are building one and we have a two-year gap, we're incrementally funding the submarine over three years. so if we go to one a year that will be very substantial increase. it is on the border of 12-$18 billion per year above where we were over this last decade which was a period of low investment. investment for the department is cyclical. the nuclear weapons established in the united states was fielded post-world war ii, modernized under eisenhower and modernized and updated under reagan. while the program crest based on those cyclical modernizations, were on another area of growth. each modernization and history has been alive in the period of

top lives in the future years defense plan. what it lays out is really the start of a ramping back up. obviously obviously that will be a decision the new administration will have to make it maybe even the administration after depending on how future elections come before we get to fy 21 or 22. >> i will just add that in your question you stated how do you square and the you in english unlike friendship is the same as one person or many. there is a dod specific aspect of trade within the defense budget but at the larger national question of how much are we going to pay for defense in that era. it cannot be limited to just us which is why we started the conversation with the white house and it involves

the mark in people as well. are we willing to make that investment. we saw the same discussion at the particular focus on the nuclear tribe in last year's budget. our. i requested that. we weren't able to get it all. that same discussion will be had with more important and more at stake when you get to this point. >> let me add one more quick point, which is we conducted an nuclear strategic portfolio review as well. what we what we did with that among other things as we looked very carefully at what was the department's option to pay for nuclear modernization so within the strategic forces and it was very quickly became apparent that unless the department was willing to divest the submarine which we are not, there is no way to pay for that

modernization within the budget because the bow wave you're talking about because it is an ebon flow thing it was a double of what we need to spend a nuclear. >> ..

>> >> i don't think it is all that not clear. but 2.0 at the first hearing of the secretary by any member of congress.

but it's it isn't that much of of a dispute there is a budget deal and that is how the administration viewed this number. >> hello. i want to turn the of discussion to the unfunded pierides as these have readily been leaked out to capitol hill the secretary had a chance to provide input does he still want to reserve the prerogative to modify what the service is sent to congress and to with that value and continuing this to sidestep the

oversight the budget process ? staying one dash. >> it is that it's bad point it for us to give up so soon before it has time to review this but they do have some value in the process with that additional pressure might be but the problem in this instance so just to take that at random to henry already had this well thought out discussion absence of unusual change of

the budget is less hopeful this time than usual. >> every individual discussion but if you cannot balance it against the entire portfolio in understand where you are accepting risk event that is not have as useful and that is respected member of months doing looking at allocating risk in the best way the us secretary thinks to change that decision really does change fell whole calculation and balance. >> we'll understand that they will respond to that question. >> with the chairman of the joint chiefs recommendations associated with those to the

chairman. >> by preface the congressional role as part of the oversight just for the record. but the uncertainty of the last five years you have had to wrestle with you have to think of vegetarian facility so you were here in november you said sacrificing structure to accommodate budget cuts takes too long to reverse so you didn't want to do that so what about the high end of current readiness? that doesn't have much shelf life but that is expensive stuff.

is there any attempt of that current readiness to givens the uncertainty the flexibility?

>> file take a quick status that but first what strikes me is that is it correct as a response to the budget signal is up problematic undertaking. but on the readiness side the primary difference but with those contingency operations letter aren't going so we have the different problem given that time and effort in manpower.

if we lifted this program this budget most of the leadership felt that the recovery rate and then choose to take any more risk than that. >> 2.senator very important in the background since by their nature to be out and back to get time with their families. but the army in today's

world is a the combat zone of day-to-day activity is now increasingly go forward then go home to take a breather. both of those are about managing the force and said to be reluctant to read to be driving them to that ad ban flow and that is the reality and that is different than what we were looking at 25 years ago. as an individual service member you can progress to a

career if you are an army infantry if your unit is in a readiness date if you were in that unit you will not have experience at that point in your career freakish you will have progressed a lot. said to be conscious of the fact is with that sequestration the acting undersecretary of the air force, which had a red flag operation because you were

out of money and the men dead women that were scheduled to have that didn't it may not it will miss that. so we have to be extraordinarily cautious and vice president extremely high priority to do deeper cuts of those programs and you try to shift that back and to recognize our deterrent and where that rest. >> ready for what? the fact given that shift dealing with great power to

have baffle spectrum for current -- focus that they were ready for those missions but arguably not with adversaries still in the process to get ready but the secretary told us another one you don't see that money taken out. >> unfortunately we are out of time. we have to get them out by a than 30 her you can stay for the next panel discussion. [applause]

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this. >> while we are again being settled we have a new survey it you would find that on the feed. is specifically looking at that potential for people who come to these events with a strong inside and opinions and one week from today.

so i think we are ready. kent to my right is the executive vice president for a new american security international security council and next on space is day visiting fellow at the american enterprise institute. also a deputy staff director from the armed services committee and in the middle is the director of the defense industrial group

also working in the pentagon and on the hill and also staff to ash carter bin next in line senior adviser previously working in the office of management and budget handed say retired marine. if we are glad to do have a nonresident and since then president of united healthcare of defense issues. and we barely fit on the stage but we do have some insight to share this

morning but to go down the road just give five minutes of opening remarks. >> prior to this session question on how to budget so we will focus on that. i think the issue and i think the department has done the best job and then the offset strategy's but

then that was the basic challenge and then let it that current operating environment. in the first was of nuclear weapons. and then those quantitative advantages and then to reestablish so both of those first two strategy's of those unique and qualitative responses. but get to the third asset strategy is pretty much all

of these adversaries to death they choose to do so and that is a profound shift in that operating environment and that is important it is somewhat more challenging to be investing in ways to reestablish about finding ways to compete on a quantitative battlefield as well. so part of that having that what was called to be highly precise as well as insurer every vehicle of our armed

challenge so that third offset strategy of my mind as well as the new way to generate those operating in higher rents there are too operational paradigms' the problem of the first 1,000 nautical miles. so then have every project military power? an important part is the last 100 yards and there the question is how do we ensure the infantry units to destroy the enemy?

silicon that investment portfolio so it is fairly positive. but on that question of the first thousand nautical miles ahead new carrier based to promise to help extend that rain. investments with an unmanned underwater vehicles with the assets of perpetual risk

sleazy a lot of investment -- so you will see a lot of investments with that diversion of that capability they are huge investments that get to that of quantitative not just the qualitative problem. but pushing emissions down and with that capability of that date data of that squad level so that offset strategy is real to encourage them to be more