if we don't have those things the strongest military in the world can't protect us, so this is a very interesting debate. i look forward to comments from the members of this committee and from the secretary and the general. we have a lot of difficult work to do but i think we're off to a good start and i look forward to working with everybody on the committee and at the pentagon to get the job done for the american people. >> we're fortunate to have with us today, our secretary of defense, honorable leon e. panetta from the u.s. department of defense. general martin e. dempsey, united states army, chairman, joint chiefs of staff. the honorable robert, if i heal, tunds secretary of defense, and controller of the department. thank you for being here. mr. secretary, the time is yours. >> thank you very much, members of this committee, always nice

to be able to return to the house i'll ask that my statement be made part of the record. >> no objection, so ordered. >> i appreciate the opportunity to appear before you to discuss the president's budget request for fiscal year 2013 for the department of defense. these brave men and women, and they are, for anybody that's gone to the battlefield and talked to those in uniform, they are without question, the next greatest generation of individuals. along with the department easy vilian professionals who support them, they've done everything that's been asked of them and more during more than a decade of war and, again, i thank you for the support you provided to them. if fy 13 budget request for the department of defense was, indeed, a product of a very intensive strategy review, that was conducted by the senior military and civilian leaders of

the department, all of the service chiefs, all of the combatant commanders and all participated in the effort and we had advice and guide yabs from the national security team and the president as well, the total request represents a $614 billion investment in national defense. it includes $525.4 billion requested for the department's base budget and $88.5 billion in spending and support of our troops in combat. the reasons for this review are clear. first, the united states is at a strategic turning point after a decade of war and a substantial growth in defense budgets. but second, with the nation confronting very large debts and a very large deficits, the congress passed the budget control act of 2011. imposing by law, on us, by law, a reduction in the defense budget of $487 billion over the next decade. we, at the department, decided to step up to the plate to abide by the law and to use this crisis as an opportunity to try to establish a new strategy for the force of the future. and that strategy has guided us

in making the budget choices that are contained in the president's budget.int. it would probably have required us to make a strategic shift under any circumstances. the u.s. military's mission in iraq has ended but we still have a tough fight on our hands in afghanistan but 2011 marked signif violence and transitioning to afghan-led responsibility for

security and we are on track to complete that transition by the end of 2014. the nato ministers, i sef, and we're biding by our libyan commitments. last year the fall of gadhafi. and successful counterterrorism efforts have significantly weakened al qaeda and decimated its leadership. but despite what we've been able to achieve unlike past drawdowns where threats have receded, the united states still faces a complex

we're still a nation at war in afghanistan. we still face threats to our homeland from terrorism. there's a dangerous proliferation of lethal weapons and materials. the behavior of iran and north korea continue to threaten global stability. there is a continuing turmoil and unrest in the middle east from syria to egypt, to yemen and elsewhere. rising powers in asia are testing international rules and international relationships. and there are growing concerns about cyberintrusions and cyberattacks. to meet these threats, protect our nation and our people, and at the same time, meet our responsibility to fiscal discipline. this is not an easy task. it's a tough challenge. to build the force we need for the future, what we decided to

do is to develop a new strategic guidance that consists of the following five key elements. number one, the military will be smaller and it will be leaner. but it s should be flexible, ready to deploy quickly and technologically advanced. second, we have to rebalance our global posture and presence to emphasize asia pacific and the middle east. these are the areas of greatest concern in the future. third, for the rest of the world, we need to build innovative partnerships and strengthen key alliances and key partnerships from europe to latin america to africa. fourth, we'll ensure that we have the capability to quickly confront and defeat aggression from any adversary any time anywhere. and fifth, this can't just be about cuts. it has to be about investments. what do we protect and prioritize in terms of

investments, in technology and new capabilities? as well as our capacity to grow, adapt and mobilize as needed? while sharing this strategy and shaping this strategy, we didn't want to make this mistakes of the past. every time we've gone through the drawdowns there have been serious mistakes that have been made. our goal is to maintain the strongest military in the world. to not hollow out the force, that's extremely force. to not hollow out the force which means to maintain a lors force structure and cut training and equipment and all the other things that are essential, to make that a first-rate force. thirdly, to take a balanced approach to budget cuts. put everything on the table and

look at every area in the defense department budget. and lastly, to not break faith with the troops and their families. people that have been deployed time and time again to the battlefield. throughout the review, we also made sure that this was an inclusive process. general dempsey, as chairman and i work closely with the leadership of the services, and consulted regularly with members of congress, as well as the president and members of the administration, as a result of these efforts strongly unified behind the recommendations that we are presenting today, consistent with the budget control act, this budget reflects a $259 billion savings in the first five years. we project meeting our $487 billion number over ten years but in the budget we present to you it's the five-year cycle and that includes $259 billion in savings. it's a balanced and complete package. as i said, it follows the key elements we laid out in our strategy. the savings come from three areas. first, deficiencies. second, force structure and procurement reforms and adjustments. and finally, compensation.

compensations that's an area that's grown by 90% and we felt that we had to achieve some cost controls in the future there as well. let me just quickly go through each of those areas. if we tighten up the force and i think we have a responsibility to tighten up the operations of the department, by reducing access overhead and eliminating waste and improving business practices across the department. as you know, the fy '12 budget proposed about $150 billion in efficiencies in five years and we're in the process of implementing those changes but we felt we could do for so we identified another $65 billion additional savings over the next five years through measures such as streamlining support functions and consolidating i.t. enterprise services. rephrasing military construction projects. consolidating inventories and reducing service support contractors. as we reduce force structure we also have a responsibility to try to provide the most cost-efficient support for the force. that's the reason the president

will request the congress to authorize the base realignment and closure process for 2013 and 2015. as somebody that's gone through brac and i went through it in my district and know what it means and the impact that it can have with it is a controversial process. it impacts our members and it impacts on their constituenies and i understand that. and yet, it's the on the effective way to try to achieve te needed infrastructure savings that we have to achieve in the long run. >> lastly, to provide better financial information, we're also increasing our emphasis on audit readiness and accelerating key timelines. in october of 2011, i directed the department to accelerate the efforts to aachieve fully audible financial statements originally under a mandate we were supposed to do that by 2017. i asked it to be done by 2014. efficiencies alone are not

enough to achieve the required savings. and that's obviously, why we had to make significant adjustments to forgs structure and procurement investments. but we did it in line as, again, with the strategies that we put in place. and let me quickly walk through those. we knew that coming out of the war as the military would be smaller. our approach to accommodating these reductions was to use this as an opportunity as tough as it is, to fashion an agile and flexible military that we'll need in the future. we've got to have an adaptable and battle-tested army that's there for decisive action and capable of defeating an adversary on land. and at the same time be innovative. we need a navy that maintains

forward presence and is able to penetrate enemy defenses. a marine corps that's a middleweight with a re-invigorated am am fib use kanlts and the national garden reserve that continue to be ready and prepared for operations when needed. to ensure an agile force. we made conscious choice to maintain more force structure than we could afford -- we decided not to maintain more for structure that we can afford to properly train and equip. that was the point i made about not doing something that hollows out the force. we're implements the reductions consistent with the strategic guidance of a total savings of about $50 billion over the next five years and the biggest pieces are resuesing the active army. we're at $562,000 and we'll go down to $490,000 by 2017 and it will be gradual ain't will still be higher than pre 9/11. same thing is true for the marine corps. from 202,000 to 82,000 marines. we'll reduce and streamline, airlift fleet basically going

after aging c-5 a, c-130 but will still maintain a fleet of 275 strategic airlifters and 218 krechlt-130s. the navy will protect a fleet of 285 ships and protect our highest priority and most flexible ships. but we will be retiring seven lower-priority navy cruisers that frankly, need to be upgraded with ballistic defense capability and that hadn't happened and it could require significant repairs in order to do that. second, the strategic guidance made clear we have to protect our capabilities and project our power to asia pacific and the middle east and to this end we maintain the current bomber fleet and the aircraft carrier fleet. 11 ships and ten air wings. we maintain the big deck

amphibious fleet and army and marine corps forces structure in the pacific after the drawdown from iraq and the drawdown in afghanistan. we're going to maintain entertain strong presence not only in the pacific but in the middle east as well. this budget also makes elected new investments to ensure is that we develop new capabilities. $300 million to fund the next generation air force bomber. $1.8 billion to develop the new air force tanker. $18.2 billion for the procurement of ten new warships. third, this straej makes clear that even though asia pacific and the middle east are the areas of greatest concern and priority, the united states will work to strengthen our key alliances, build partnerships and develop innovative ways like rotational deployments to sustain u.s. presence elsewhere in the world. with regard to nato, we'll be investing almost $200 million in the nato alliance ground surveillance system and $9.7 billion to develop and deploy missile defense capabilities that protect the u.s. homeland and strengthen regional missile defenses. fourthly, the united states must

have the capability to fight more than one conflict at a time. this is essential. we are in the 21st century. 21st century combat is a lot different and we need to have the capabilities to deal with threats in the 21st century. that means we need to invest in space, in cyberspace. in long-range precision strike and the continued growth of special operations forces. to ensure that we can still conto front and defeat multiple adversaries even with the force structure reductions that we outlined. even with some of the adjustments to force structure this budget sustains a military

that we believe is the strongest and will remain the strongest in the world. we'll have an army of more than 1 million active and reserve soldiers. 18 divisions, 65 brigade combat teams. 21 combat aviation brigades. a navy battle force of 285 ships. that will remain the most powerful and flexible naval force on earth. a marine corps with 10 artillery battalions and 20 tactical air squadrons and an air force that will continue to ensure air dominance with 54 combat coded fighter skraud squadrons in the current bomber fleet. lastly, we have to invest. if we're going to leap ahead of our adversaries technologically, we've got to be able to have some key investments in new technologies. we provide 11.9 billion for science and technology research. 2.1 billion for basic research. 10.4 billion to maintain growth

of special operation forces. 3.8 billion for unmanned air systems. 3.4 billion for cyberactivities. let me also mention a key element that we absolutely have to maintain which is a strong, capable and ready national guard and reserve. to that end we'll retain -- we've asked the army to mid-level officers and ncos so that the structure and perience leaders will be there. if we have to mobilize and another important element is to adapt and mobilize a strong and flexible industrial base.

we've got to have an industrial he fure. this budget recognizes that stry is our partner in the defense acquisition enterprise. and to the most fundamental element of our strategy and decision-make pr people. far more than any weapon technology the greatest strength of the united states is our military, the men and women in uniform. one of the guiding principals was to keep faith with them and their families so we're protecting family assistance programs and basic benefits. we're sustaining important investments in the budget to try to assist our troops with their needs and the needs of their families. yet, in order to build the forms needed to defend the country constraints, the growth in cost in military pay and benefits hase on a sustainable course. as i said, this is an area of the budget that's grown by 90%.

we've got to implement some efforts to try to control those costs in the future. the budget contains a road map to address the costs of military pay and health care and retirement in ways that we believe are fair, transparent and consistent with our fundamental commitment to our people. let me conclude by saying this. members of the committee, as i said, this has not been an easy task. putting together this kind of balanced package has been a difficult to undertaking for everyone. but at the same time, we viewed it as a very important opportunity to try to shape the force we need for the future. i believe that automatic of us, the surface chiefs and combat and commanders have developed a complete package here, aligned to achieve our strategic aims and at the same time, meet our responsibilities to fiscal discipline. as you look at the individual parts of the plan and i urge you to do that, look at every element of the plan we submitted, i encourage you to bear in mind is strategic

tradeoffs that are inherent in any particular budget decision. this is a zero-sum game. as far as i know, there's no free money around. the need to balance competing strategic objectives has to take place in a resourced constrained environment. we need your support and partnership. we look forward to that. i understand these are will tough issues. i understand these are tough issues and i also understand that this is the begin, the end of thi but this is what congressman dated. voted for the budget control act. we're mandated under law to meet half a trillion dollars in savings over the next ten years.

we have taken that responsibility seriously. the strongest military in the world. this will be a test for all of us, whether reducing the deficit is about talk or about action. and let me finally be very clear. when you take a half a trillion dollars out of the defense we think there are risks. we're dealing with a smaller force. we'll have to depend on speedy mobilization. we'll have to depend on new care of troops coming home to make sure they have jobs. and have the support they need. there is very little margin for error in this budget. everything possible to make certain that we avoid sequestration. that would subject the department to roughly another $500 billion a that would take place through a meat ax approach and we're

convinced, would hollow out the force and inflict serious damage to the national defense. so the leadership of the department, both military and civilian, is united behind the strategy that we presented and the budget that we're presented. but we look closely to working with you. and the months ahead, to do what the american people expect of their leaders. to follow the law, to ly responsible but, also, to develop a forcing that defend this country. a force that supports our men and women in uniform and a force that is and always will be, the strongest military in the world. thank you mr. chairman. >> thank you very much. general dempsey? >> chairman, congressman smith, distinguished members of the committee, that's correct you for the opportunity to discuss the president's defense proposed i'll begin by saying this budget represents a responsible investment in our nation's security. at its core itsds an investment in our people, the sons and daughters of america who serve this nation in uniform. allow me to open with a few words about them and what they have accomplished. the last ten years of war have been among the most challenging in our history. through it all the joint force has persevered and it has prevailed. our families have stood with us. deployment after deployment after deployment. and so have you. we fulfilled our solemn vow to protect and defend america, her

citizens and her interests. as i sit with you today, our service men and women remain globally engaged. they are deterring aggression, developing partner, delivering aid and defeating our enemies and they stand strong, swift and ready in every domain every day. i had what privilege to be with a few of them traveling to average and ejaipt earlier last week. i witnessed extraordinary courage and skill in the young soldiers just off patrol of the hindu kush. and the men and women, managing the development of the afghan national security forces. the brave and vigilant security detachment in cairo and the superb junior airmen that flew us to the right place at the right time. they exemplify a professional military with a remarkable and reliable record of performance. in just the past year, we further crippled al qaeda.

we helped to protect the libya people from near-certain slaughter and affirming nato's important role beyond the borders of europe. we brought to a close more than 20 years of military operations in and over iraq. and like we did in iraq, we're steadily transitioning responsibility for security on to afghan's shoulders and we helped ja pab recover from a perfect storm of tragedy and destruction. and, of course, these were the most visual accomplishments. behind the scenes and beneath the surface we defended against cyberthreats. we sustained our national's nuclear deterrent position sure and worked with allies and partners to build capacity and to prevent conflict across the globe. we continue to provide this nation with a wide range of optiontion toer dealing with the security challenges that confront us. and in an increasingly competitive dangerous and uncertain security environment, we must remain alert, responsive, adaptive and dominant. this budget helps us to do that. it's informed by a real strategy that makes real choices and maintains our military's decisive edge and maintains our global leadership. moreover it ensures we keep

strength with the true source of people. with this in mind i want to add a few chents to those of the secretary. first, this budget should be considered holistically. it's a joints budget rather than individual service budgets formed pap rocky parochially. changes that aren't informed by that context. the context of jointness. risk upending the balance that i just described and potentially compromising the force. second, this budget represents a wait point, not an end point. in development of the joint force we need for 2020 and beyond. it puts us on a path to restores versatility at an affordable cost. specialized capabilities that

were once on the margins become more central. even while we retain and must retain our conventional overmatch, it builds a global and networked joint force that's ably led and always ready. and third, this budget does honor our commitments made to our military family and keeps faith with them. there are no freezes or reductions in pay. there's no lessening in the quality of health care ereceived by our active duty service members and medically retired wounded warriors. that said we can't ignore the increasing costs of pay and benefits. to manage costs we need pragmatic reform. all of this can be done in a way that preserves our ability to recruit and retain the best of america's talented youth. finally, all strategies and the budgets that support them carry risk. this is no different.

in my judgment, the risk in this strategy and budget lies not in what we can do and but in how much we can do and how often we can do it. this budget helps us buy down this risk. by investing in our people and in the joint capabilities they most need. to close, thank you. thank you for keeping our military strong. thank you for taking care of our military family. for supporting those who serve, who have served and importantly, who will serve. i know you share my pride in them and i look forward to your questions. >> thank you very much. thank you for your testimony. thank you for your service. thank you for doing a great job in a very difficult situation. you've mentioned the deficit reduction act. and mr. smith mentioned it. and, again, many of us voted for it. some didn't. the deficit reduction act called for serious reductions in our spending. i understand the results of the last election and the people

said -- you got to go to washington to get our financial spending in order. everything needs to be on the table, defense, included. and i don't think anybody would argue with a budget as large as we have in the defense department, that we can't find savings. and this is a huge, huge cut. defense accounts for 20% of our overall budget. and the tranche we voted on, 50% of the savings come out of the defense. so i would say we've given and given a lot out of defense. and then the sequestration, i mean, when we voted for the deficit reduction we were told the super committee, that the sequestration was so bad that it would force the super committee to do its work to find other savings in the entitlement programs which is where the real problem is anyway. because if we eliminated all defense spending. if we eliminated all education spending. if we eliminated all transportation spending. if we eliminated the total discretionary budget, we would still be running a deficit of over half a trillion dollars. so all o all of this agony of going through all of these cuts which are very significant, don't

really address the real de it is not the defense department that is putting us into a very