required us to do, are we signaling somehow that we are entering a period of american global en trtrenchment and retr from the world? as i mentioned earlier, the new strategy to sustain global leadership was quite deliberate. we are retaining full capability to confront more than one aggressor anywhere in the world even if we are engaged. in large scale operations we will be quickly to identify the objectives of an opportunistic adversary and impose acceptable costs in another theatre of the world. even as we rebalance the posture toward asia pacific and continue to place a premium on the presence in the middle east, we will uphold the nato commitments, including through new rotational deployments of additional ground nato forces

announced by secretary panetta a few weeks ago and in other areas of the world such as asia and africa, we will continue to develop a small footprint and innovative approaches to maintain the presence, an invest in our relaktionships with partner nations at relatively low cost. the use of an austere base in djibouti for the recent soft rescue of two aide workers held in somalia is how effective such presence can be. and even if we no longer size the army and the marine corps for large scale multi-year operations like those in afghanistan and iraq, we are establishing ways to retain the key expertise and the lessons learned so that subsequent generation of americans do not have to painfully relearn them as we did after vietnam. the underlying theme that runs through all of this is an

emphasis on flexibility, agility, readiness, on retaining capability across the full spectrum of missions. this is the key to sustaining our leadership in an era of complex challenges and hard fiscal choices. consider for example one of the most discussed words in the strategic guidance and i mentioned it before, rever reversibility. some have seized on this word as a sign that somehow the principles are not firmly fixed or that the decisions on key programs are subject to rapid change. in fact, reversibility means something completely different. it refers to our ability to make course corrections in response to strategic economic and technological change. for example evenb as we reduce the overall ground forces, we keep a relatively high p proportion of mid grade officers

if we need a premium to build up the forces quickly. in the context the guard and the reserve will play an extremely important role. it is your expertise, your dedication and your commitment and your readiness that will enable our military to have the built-in adaptability and resourcefulness that we have described. we expect the reserve components to continue to provide both an operational and strategic reser reserve in the future. they continue to be a source of innovative approaches to building the capacity of critical partners around the world. here, i want to take a moment to highlight the state partnership program which pairs the national guard units of a given state with a particular partner country. one of the first such partnership relationships was established back in 1993 between the illinois national guard and the polish military. since then illinois guardsmen

and polish forces have deployed together to both iraq and afghanistan, and the troops from the land of lincoln have helped the polls with such matters of a stronger nco corps along the american model. as for the reserves, we have already begun to see a further expansion of the missions and the responsibilities to help the nation meet urgent national needs. in the national defense authorization act of a fiscal year '12 for example, there are provisions allowing the service secretaries to call up, up to 60,000 reservists into active duty for as long as a year outside of times of war and emergency. this allows greater access to reserve comb poent ve component commanders and also allows the secretary of defense to activate reservists up to 120 days upon

request from a state governor for a disaster or emergency situation. before this, as many of you know, this was notab possible. it deprived us of access to the great expertise that reserves can bear in such a situation. these provisions reflect to awareness of the part of the administration on the hill and just how important the reserve can be to our security across the range of potential situations. whirl the guard and the reserve will be essential components of the future force there remains many questions about the future role. for example, how should reserve component units returning from combat be reset? how should we reset their equipment and training in light of the new strategy recognizing that we can't afford to place equal emphasis on all scenarios and mission sets? what types of skill sets and units should be considered as candidates for the operational

reserve that we would expect to be activated and deployed more frequently than normally the case. what types of units if any can be held at lower levels of readiness and utilized in tims s of large scale protracted conflict, and how can we as a department and community as a nation do a better job of ensuring that our guard and reserve members are not unfairly penalized by current or potential employers in what is already a difficult economy. the obama administration is extremely serious about expanding career opportunities for veterans and we have la launched a series of ip ishtives to help out. but there is certainly much more to be done in this arena. i'd like to conclude my remarks on a note of optimism. one of the reasons that i so strongly believe that we will indeed see a period of sustained american leadership is that when circumstances are difficult, we

as a country, as a people do find a way to come together for the broader national interest. we have seen a broader practical illustration of this in the recent "review" in that there are often beget intraservice rivals and while there are disagreements in the review process, the people involved, civilian and military alike, found the process clollegial an the strategic trumped the parochial time again. and the shared buy-in only intensified as the process went forward. this is a remarkable thing to witness and i have seen many reviews in the pentagon before and it gives me a lot of faith in the civilian and military

leadership to give sound decisions as the choices have to be head in the months and the years ahead. no doubt those choices will involve their sacrifice. for example, as part of the total force the reserve components will experience some strength reductions commiserate with the counter departments. and so we have to seek basing infrastructure to be rationalized to meet the needs of a smaller and more flexible force and to ensure that we have the resource s s to invest in readiness and modernization. critical initiatives like this will require us to look beyond the narrow interests, and the narrow interests of any particular office or department, state, region, party, or branch the armed forces. the forces. there are those who believe that we have lost the ability to do

this, and the process that generated the strategic guidance gives me hope otherwise. i think that we are better than our skeptics argue. the truth is that we must transcend the partisan and the parochial, and our national security depends on it in a time of austerity. ti. so as i step down from my current position, i feel a great sense of honor to have worked with so many outstanding men and women, military and civilian. and many of them i see in the room today and again, i thank you for your service to this country, and i wish you all of the best. god bless and i look forward to your questions. thank you. [ applause ] >> in retrospect, as you leave office next week, what looking

back on when you took office was the greatest surprise? >> you know, i think -- >> other than the -- >> well, there are many surprises, but i think that right before i came into this office i had actually written a report called "the inheritance" was really documenting how daunting the set of challenges that the new president at the time we didn't know who it was go ing to be, but how daunting the inheritance of challenges was going to be for this american president. i think that what surprised me is how much more challenging things got, and i mean, at the time we wrote that report, we documented the fiscal crisis, and the rise of the new powers and the proliferation of wmd and new domains like cyber space and space and so forth, but we didn't anticipate the arab spring. we didn't anticipate some of the other developments that have happened, and so, i think that

what's been the biggest surprise is that just when we thought we had it bad, it gotten worse. but truly, what is remarkable has been how the current civil military team has really pulled together to grapple with the changes, and to try to do it in a very integrated way that more often than not takes a whole government approach. >> could you comment for those of us who really don't have the experience in it, how is policy developed in the department of defense? and then beyond the department of defense? >> well, it is a great question. first of all, i'd say that policies developed, policies initiatives may come from within the department of defense, but if they are significant for the national security, they almost always get brought into a broader interagency discussion and process. and so, i think that it works a couple of ways. there may be a bright idea that

comes from the bottom-up perhaps from the field or perhaps from somewhere in the department, and typically in my role, i will bring that into the deputy process so that you have the p deputy national security adviser and members of the intelligence community, state department, usaid and the treasury and sometimes the department of homelandappropriate, and we exercise the options for the initiative and ultimately decision for the president to consider. and other times a top-down decision where the president sees an opportunity and wants to go in a particular direction and that process wants to be harnessed from the top down. pu the good news, ample opportunity, and there is always to be sort of, to lead from wherever you set by putting good intellectual capital well thought out ideas on the table. >> some have suggested that it is not as nimble as it might be.

>> yes. >> and that when policy is formed at the department level and beyond the department and the intraagency, it becomes broken. can you comment on that? >> i spent a lot of my time in between stints in government writing about how the intraagency process needs to be improved, because when you think about the challenges that we face, it is hard to think of one where only one instrument of national power gets you to a solution. it almost all involves the combined efforts of multiple different agencies and perspectives and resource streams. and so, it is very important that we have a process that integrates. we all love to complain about this process, but i will tell you that i think that because of the tremendous challenges that we face, and because we are in the country still at war where you have to be responsive, i

think that we have developed a process that tries to be responsive to the need. it is not always successful, but it is more successful now than i have ever seen it before. that means that i have spent a lot of my time over, you know, with my colleagues from other departments working together several hours per day to try to hammer out the intraagency solutions to the challenges that we face. >> you touched on changing roles for the reserve component. and included in those would be variable readiness for mobilization for different missions. so we are if i am interpreting this correct, we are looking for expand use of the reserve force, and we have come out of a period where the reservists, and the director petraeus had folks

raise their hand and we have people in the audience who have been mobilized three times in the last ten years and unprecedented service, but at the same time, there is discussion that you said that everything is on the table. what is the current policy thinking about the incentives for service particularly reserve service and health care and retirement benefits, et cetera? >> well, first of all, let me clarify. i think that if you look at at the height of the demand for reserve utilization, which is when we were at the peak of both iraq and afghanistan, i think that if you take that as the peak, the demabd nd is going to come down gradually, and we have completed the mission in iraq, and we are still working very hard in afghanistan, and we are making progress towards our 2014 transition goals. but you can expect that

gradually over time, and over the coming years that commitment is going to come down. so overall, i think that demand is going to be coming down, and the question is that we have organized the reserve components in the guard to be in a fully operational reserve in the last several years to support that very high demand, and as that demand comes down, the question of whether we keep that uniform level of readiness across the entire force or whether we look at different possibilities within the garden reserve where some on a volunteer basis want to deploy the offense raise their hands and volunteer to do so and have a higher tempo, if you will. others who really want to reset to more of a strategic reserve, and so forth, so that the truth is that we, and that is the -- those are questions that we need to work through with you in the

coming years to figure out what is that model that is responsive to the needs of the future and what does that look like? i think that going forward in terms of the paying compensation, we are taking a total force look at this. let me be clear, no one is planning any pay cuts. i think that the secretary, and the chairman were very clear on this. what we are looking at is a gradual slowing of the growth of inkre increase in compensation. i think that you have seen since 2011 something, 2001, sorry, something like a 40% increase in military compensation. just getting my figures right, and even though the number of personnel only increased by 8%. we absolutely want to protect funding for wounded warriors, for family programs and transitioning veterans and you will see us continuing to invest in those areas. but we have to look at areas

like conversation like health care where we have perverse incentives in place, and many of you know that even though you are a working age retiree and you have access to tricare as a reservist or guardsman or active duty retired person, you may be able to -- even if you have the able to get health care with the employer, your private sector employer, you can still stay on the tricare and not take the private sector coverage. that means that the department of defense is carrying a lot of health care costs that would be borne by private health care employers and while in principle you could make an argument for that, but in truth, the reality is that is money not spent on capabilities and equipment and training and readiness and other kinds of programs for our personnel. so we need to really look at this as a hole lis tick way, and

similarly on retirement. nobody is going the change the contract on somebody who is already serving, but we have asked congress for authority of a commission to sit down to look at this holistically to ask the question of whether we can have a better system. the majority of the military members don't stay on 20 years and many of them spend many, many years in the military and walk away with nothing in terms of retirement. is that the right model for us going forward? these are the kinds of questions and no easy answers and very politically charged difficult issues, but we owe it to ourselves and the country to sit down the wrestle with these to try to come up with a better approach. >> we in the reserves already epp joy the gray area between the retirement and 60 years old is similar being contemplated for the active component? >> we are looking forward to the establishment of this commission, and i don't have any particular proposals that have been put on the table as of yet.

>> i was chatting with the junior officers this morning remembering back on my reserve service, and the 1970s after coming back from southeast asia, and there was a period where we were running through the woods yelling bang-bang because there was no training ammunition, and the funds had been cut out of the carter year defense budgets, and it took 15 years to recover the capability of the reserve force for desert storm that evolved into the current operational reserve. what's being thought of as there's a defense drawdown to guarantee that we don't have as more missions go to the reserve and the guard. what is being contemplated to ensure that we have the resources, training and equipment to do those missions?

>> well, it is a great question. and we do not want to go back to the days that you describe. i think that is the reason that the secretary in his guidance up front emphasized ethat second injunction that we don't want to go to a hollow force and keep more forestructure than we can afford and make ready. when you look at that force, it goes to the guard and the reserve when we are relying on you all to be part of the notion of reversibility, being agile and able to adapt to unforeseen contingencies or circumstances in the future. so one thing management-wise, we are paying particular attention to how the services are resourcing readiness both active component and reserve and guard going forward. we will continue to do that. >> i heard a discussion yesterday at army senior leaders seminar here that suggested that

in some units that vehicles are not being takenb out of the motor pool because of the shrunken dollars for fuel. down on that grass roots level, will these policies and shift ensure that doesn't happen? >> well, again, i think that the h hon monitoring of that and tracking that and making sure that kind of example gets to the senior leader attention. i can tell you that the intention at the top is to ensure that we hold people accountable for keeping the force ready. i know that is certainly the secretary's intention and he and the chairman are working very hard towards that end. >> there has been a recent push

for communications efforts and when we got home nashgs w, that of the table. are there any operations for reserves? >> well, there are operations reserves the nsf and in particular, that do maintain certain linguistics and regional focus and very much play in the partner capacity-building mission and in that sort of thing. so, you know, whether what i don't know is whether socom plans to expand that over time, but given the cultural richness of this country and the linguistic richness of this country, it is a particularly good way to tap into that. in many ways. but, again, i am not sure about the particular plans of the that element will expand. >> this new strategy guidance, how will it influence the 2014

quadrennial defense process? a full qdr or a chance to make course corrections with potentially a new administration or the current administration? >> well, what the next qdr looks like will depend on a couple of things. whether or not we are in an era of sequestration, god forbid or whether congress does the job to make the necessary hard choices to avoid going down that path. if we are in a more sustainable budgetary trajectory, then obviously, the changes, the fiscal environment will be less dramatic and frankly much better for the national security. in terms of the other key factor

is who wins the election. if president obama is re-elected, typically the qdrs of the second-term presidents are less dramatic than the first term because they are adjusting off of their own baseline. if someone new comes into office typically they do a more full qdr that goes back soup to nuts to come back to make more changes based on that. so, it depends on some circumstances that we can't foresee at this point. what our job is in osc, but particularly in the joint staff is to really prepare for either case and to ensure that we have done the intellectual work to tee up the options for a future president whoever that may be. >> you have used the word irreversibility, and how does that apply for the supply base for the defense, and which has been pinched in recent year and

foresees a greater constriction of resources for support of the defense acquisition and r&d? >> for the industrial base it means a couple of things. one is an effort to protect the investment in science and technology and research and development as much as we can even under a tightening fiscal situation, and because that is the seed corner of the future, but it also means that in some particular areas, where if you lost a particular part of industrial base it would take you years and years and years to recapture it if ever. that fact has been factored into some of the program and budget decisions. so even though a particular program may have been weak or something that we thought about doing away with, if in doing away with that we completely

lose a capability or the able to have that capability in the future in a timely or responsive bas basis, we influence the decision of what to do in that case. it is a complex calculus, but we are serious about the notion of reversibility because of the experience that we have had in the beginning, but a it is very hard to predict the future in in current environment and it is too important to keep in institution's ability to be responsive to the unforeseen. >> okay. the secretary has an appointment at a white house on -- >> another deputy's committee meeting. >> 1600 pennsylvania avenue. >> yes, on the same topic. >> so the last question is an omnibus question. i have several cards that have ip qui inquired about what are position policy ought to be toward

central and south america and israel. you comment on the globe and i would throw in iran and korea as well, and spanning the globe as they used to say in the "wide world of sports" and -- >> i will see how many i can cover. >> where are we going? >> i am trying to write all of the ones that you mentioned. okay. central and south america -- very interesting. this is a region where we have very strong partners where we have common ideals and objectives in a number of countries who in an earlier era emerged as democracies sought to embrace economics and so forth, and so the military engagement is a very important part of the engagement strat jishgs egiestr of the things that we have seen is that we have a real focus on building part and capacity and take a case like colombia, where

colombia, seven or ten years ago was under siege with a virulent insurgency, and we invested not just the department of defense, but also in colombia to help them fight off the insurgency, and help them to build the capacity to help secure themselves. what has happened through the experience is that colombia is a net exporter of security in the region. they are now training our friends in mexico on flying held koerpts and they are now training militaries in central america on how to deal with counter narcotics missions and so forth, and so, you know, it is they have really given a lot of reality, and some great example, too, to this notion of building partner capacity, and the value not only for us, but for the security and stability in key regions where we may not have the forces