captions copyright national cable satellite corp. 2008 i personally dent mistake iran's rhetoric for a lack of reason. think issue for us is we have to decide what global pressure, including the use of force, if and when necessary, can turn that regime away from its nuclear ambitions, it's nuclear weapons ambitions, so thanks for letting me clear that up. >> as i understand your testimony, you wouldn't take force as an option off the table? >> absolutely not. >> and one of the things i'm concerned about, when you think about with the description as the way it came across in the interview with cnn, as describing iran as a rational actor, is this issue that if they acquire a nuclear weapon, it's not just about their using it, but also the possibility they're a great state sponsor of terrorism, they could provide that nuclear weapon, to let

others use it on their behalf. is that not a real risk with iran? >> that is a real risk. as is the risk of nuclear proliferation among others who feeling threatened, would seek to acquire their own nuclear weapons. >> and i think when we hear those types of possibilities, we've heard today that that is a real risk. if iran acquires a nuclear weapon, that most of us thichg think that can't be a rational act from our perspective in terms of looking at it and the world and the number of innocent hives that could be lost if a terrorist group provides a nuclear weapon. you would agree with me, i understand maybe by their calculations it's rational, but by ours, it would not be. >> i think that's exactly the point. as we seek to influence their behavior, we have to understand their way of thinking. that was the only point i was making. >> i appreciate your testifying about that today. and i would ask secretary panetta, just as a follow-up to

the question that senator johnson asked -- really is this. the bigger question, in the president's budget, you are recommending increases to our active-duty and veterans in terms of health care costs, but it doesn't seem the president is proposing any increases as i can see it, effectively none to the civilian work force, i think that's a hard ask our military when they're already making so many sacrifices when we aren't making sacrifices on the civilian side, too. do you think that's fair and do you think that really we should also -- including myself. i think all of us should be sacrificing and i worry that we're asking them to go first. understanding that i know that health care costs are a big issue. >> senator, you know, again, if i was an omb director, i think i, i would give you an answer that dealt with the entire budget that the president presented. but as defense secretary, i had

to deal with what i was responsible for, that's why we approached it based on where we thought the savings could be achieved. >> i just worry about your ability to go to our military and to ask them to do this. to make the sacrifice when civilian employees of the federal workforce, including members of congress, because we get the same health plan, aren't making a similar sacrifice. and you as the leader of the department of defense, i worry about what message we're sending to our military with that. so that's where i worry, and i worry about you as a leader having to go and sell that. >> i understand, but you know, one of the great things about our men and women in uniform is they go where they're told to go. and they do what they're supposed to do. and they salute and do the job. and that's, that's what they're doing here. >> we have a responsibility for them. >> senator, senator, senator white house? >> thank you, chairman.

mr. secretary, welcome, we are gearing up towards a, another background maybe two, i gather, the last background as i understand it only addressed american bases, you've just said that the question in the upcoming background is what should infrastructure should we reduce in this country. is there a way to and should we include in the next background, both domestic and overseas bases, particularly given the extent to which so much what is done can now be done from a remote location because of our electronic capabilities? we fly aircraft from remote locations, far away from theaters of operation, for instance. >> senator, we have the authority that we need to close bases abroad. we've closed about 140 bases in

europe. we're looking at another 40 to 50 bases that will be closed. so we do we do have the authority to look at the infrastructure abroad. and try to reduce that when it comes to this country, the only way we can do it obviously is with the approval of the congress and that's why the b.r.a.c. process was developed. there's a political difference between your km domestic base. but never the less, when you're looking at our posture as a military, and trying to figure out where the most effective basing is, isn't it a bit artificial to have the brcc process only look at american bases and not overseas bases? shouldn't be it included into an effect global brcc? >> i think congress certainly you know, if it proceeds with a

brcc process, has every right to ask the administration in this deportment to present our rationale with regards to what we're doing with regards to infrastructure abroad and how it fits into the larger picture. >> let me jump to cybersecurity. there's $3.4 billion for cyber command, which i think is necessary. i think we're a little behind the curve and we're in a race and the threat vector is developing at a far greater rate than our defense capability is growing against it. could you speak a little bit about military supply chain security against planted cyberthreats? we have supply chain security for textiles, thanks god for rhode island industries. and yet, we have aircraft flying around that have components that

are built overseas. do you need more resources now that the cyberthreat has become more great? to make sure that our supply chain security is protected, our supply chain is protected against cyberintrusion? >> i, it has been pointed out, we are seeing increasing attacks, cyberattacks, not only in the public sector, but the private sector as well. and i think this country has a responsibility to develop the defenses that have to be there in order to insure that, that this country is not vulnerable to those kinds much attacks. the money that we dedicate in our budget tries to improve our technologies, our capabilities within the defense department, within nsa. but i would suggest that part of that consideration has to be, what do we need to do to make sure that the equipment, the technology that we're getting

all of that has adequate protections against cyberattack. >> let me make a request for the record, if i may, since my time is starting to run out. two requests for the record. one is that if you could break out for me what in your budget is related to supply chain security? to the extent that you can make that specific to cyber attacks, specifically from the chinese, if you can go that far, i'd like to get that. >> i'll do that. >> and the second thing i'd like to do is have a discussion with whoever in the department of defense is focusing on health care reform for the department of defense. you are a very big buyer, i think you said $50 billion of health care, a lot of it gets delivered overseas. but a lot of it gets delivered here. that'sed kind of money that can make a difference in how people behave and there's a significant reform movement that is taking place and i just want to be connected with whoever is

engaged in that for the department of defense. >> i will have our undersecretary responsible for the health care area get in touch with you and go through the issues that we're dealing with there to try to -- >> i appreciate it, thank you, mr. secretary, thank you, gentlemen, four your service. >> i'm going to start with undersecretary hale. i don't know if he's gotten too many questions today, but first to thank him on working with us on insuring that cfos around government have the understanding they deserve and conversations with me in that regard and insuring that the legislation is confirmed individuals in their various departments and agencies, including d.o.d. auditing, as we begin this downsizing, it seems to me the most critical thing so to make sure we're doing it right. whether it's the first $487 billion. or whether we have to go to something beyond that. i'm concerned we don't have the

kind of sound auditing we'd like to in the department. can you give us the status of that and what you're doing to accelerate the auditing of d.o.d. considering the huge sacrifices that d.o.d. is being asked it make. >> we have a plan we set up a couple of years ago to move towards auditable statements in a cost-effective manner. focusing first on the information the department most uses to manage. particularly budgetary information and the accounts and locations of our assets. at secretary panetta's direction, we have accelerated the budget portion of that, because it's key. with all of the statements being audit-ready by 2017 as the law requires. we have set aside a fair amount of resources, we have a governance process as i mentioned. we have a plan and we have some near-term successes. the marine corps is going through an audit process for its

budget. statement they're close in terms of getting an opinion and a variety of other appropriations, which is our funds distribution process, got a clean opinion last year. we're trying to do near-term things that show progress. to ourselves and to the congress. we're not there yet, but we're committed to it. i think secretary panetta's support is a golden opportunity for us and i want to leverage it in every way i can to move forward in this important area. >> just know we're watching and appreciate your efforts in having a former o.m.b. director as head helps to get some attention on it. and one omb director made good, congratulations, leon, for continuing to exceed expectations of omb directors. quickly on this whole issue of the sequester. you said and i was here earlier listening to your testimony, that it creates risks and that's the $487 billion.

you also said those are acceptable risks and explained why. this must mean this are additional risks with step two and additional $535 billion. how would you entail those risks as we move forward with the sequester as planned? >> they would be devastating. because the cuts would be made as you know, according to that formula, across the board. so it 0 would it would come out of structure and readiness. it would come out of, i assume compensation would be on the table as well. and it would come out of every area of the defense budget. and the danger is when you do it that way, you automatically hollow out the force. because what you're doing is, you're weakening every area of the defense budget by some kind of blind formula.

and it mean even though we'll have a smaller force structure as a result of the cuts, they'll be ill-equipped, ill-trained and ill-prepared. >> secretary, when do you need to start making the changes? january 1st next year is when the sequester goes into effect. when would you have to start making changes at d.o.d.? >> i'm waiting for omb guidance, but i would assume sometime in the summer. >> so you're looking for something from congress prior to the summer. >> that's correct. >> we're now into the spring. and we would need to act very quickly. you talked about health care quickly. let me talk to you about a statistic. 17.4 billion is what you spent on health care in 2000, and you're spending 50 billion today. >> that's right. >> it's the biggest krins in your budgets, as i understand it. do you think you're doing enough on health care in the first stage?

and what more can be can be done? >> it's the first step. it's the first step. we thought that probably the first step would be to try to increase these tri-care fees and then continue to kind of look at health care delivery in the future. >> may i add to that in. >> yes, sir. >> we are doing a number of things in the health care area. it's not just the tri-care fees, trying to improve the quality and again i think the our undersecretary of personnel and readiness could address this better. we have looked at provider cots. we sought and received authority to use federal pricing schedules for pharmaceuticals, which is significantly reduce our costs, to use medicare payment rates for outpayment payments, which also significantly reduced our costs. we really did a number of those things before. we looked at the tri-care fees last year and this proposal we made this year. we're looking across the board at health care and trying to hold down costs while maintaining the quality of care, which is critical.

>> could i just say one thing on sequester, please, mr. chairman? it's already beginning to have an effect on our defense industrial base. although we can wait until the summer. there are some, there are some corporations in our defense industrial base, who with the spector of sequestration hanging over them, are already making some decisions about their workforce. so this is a, this is an immediate problem for them. that will become a problem for us, eventually. >> i know my time is up, we've got to be sure we're dealing with the health care costs, because that takes away from readiness and operations and i know the chairman has talked about putting a budget together, we'd have to do something pretty quickly it sounds like to avoid eroding further the industrial base and making cuts that are devastating and detrimental. >> secretary panetta, i spent a lot of time last year on the

joint select committee on deficit reduction, working with democrats and republicans to tackle some of the issues that you're talking about today. all of us went into that committee, knowing that sequestration would be a terrible outcome. we understood that across the board cuts to these programs as well as middle class families and what most americans depend on would be bad policy. senator reed and speaker boehner agreed to. they would supposed to be painful to push us towards a compromise. i was really disappointed despite the fact that we put a law on our side that we put painful cuts out, we couldn't get to an agreement because we couldn't come to that shared sacrifice moment. i'm still willing to make the compromises needed to get to that. i hope everyone on both sides are, because i think we're all really concerned about where that's going to go. i didn't want to if he cuss on that, on my time. i wanted to ask you a question

on an issue that's become important and recently come to light. at madigan army medical center in my home state of washington. a number of soldiers have their behavioral health diagnosis changed from ptsd, to other behavioral health disorders, that didn't come with the same level of benefits. however, following, as you may know, an independent review, at walter reed, a number of those diagnoses were change back to ptsd. that's really troubling. what's even more trouble to me and to many service members and their family members in my home state and a lot of people i've been talking to, issed allegation that the decision to strip those soldiers of a ptsd diagnosis, came from a unit at madigan that seems to have been taking the cost of a ptsd diagnosis, into account, when they were making their decision. now, there's an investigation going on into this. really to me one of the things

is clear is that oversight within the army and the department level allowed this break from standard diagnosis process, to go unchecked. so i'm really concerned about how the services handle nonptsd behavioral health conditions, like adjustment disorder. where service members are administratively separated instead of going through the physical disability process. and i wanted to ask you, given that an adjustment disorder is kpensible by v.a. and d.o.d. is required to use the v.a.'s rating schedule, what is the reason for d.o.d. treating adjustment disorder differently? >> well, i was very concerned when i got the report about what happened at madigan. and i think it reflects the fact that frankly, we have not learned how to effectively deal with that and we have to. we need, we need to make sure that, that we have the

psychiatrists, the psychologists and the medical, the medical people who can make these evaluations. because these are real problems. i've, i've met with men and women who have suffered this problem. just met with a couple last night. and they had to go through hell in order to be able to get the diagnosis that was required here. so we are investigating what took place. but i've directed our personnel undersecretary to look at this issue and to correct it. because it's unacceptable to ha have, not have the process in place. >> i'm deeply concerned, when someone comes home from war and they have to go through a diagnosis like this, it's hard enough after you've been told to man up during your time of service, to then face the fact

that you have ptsd and then to have that reversed. and changed back and then total there's nothing wrong with you. is just devastating. to these men and women and their families. so this is something i'm going to be following very closely, i want your personal attention on it. and i think the issue that was raised at madigan really needs to have a more, shows us we need to have a more clear, consistent guideline for clinical practices, for diagnosing and treating ptsd. >> i agree with that absolutely. you're absolutely right. >> i never want to hear anybody in any service say, we're not going to give you a diagnosis of ptsd because we have a budget problem. >> that's for sure. >> okay. thank you very much. senator thune? >> thank you, mr. chairman, mr. secretary thank you for being with us, mr. hale and i want to recognize colonel toliver, who commanded one of the finest air force bases, in rapid city,

south dakota. i think you've touked on this once already. i want to put a fine point on it. you recommended in your budget that congress enact two more back grounds. and it seems like that a lot of that excess capacity among domestic bases could be filled by closing overseas bases, particularly in europe and bringing troops home from bases that back to bases in the continental u.s. and particularly given the fact that it seems that we've had a military presence in europe for a long time, obviously, but it seems to make abundant good sense to get some of these folks home. if you could just kind of elaborate on why you haven't recommended closing overseas bases in this budget, especially in parts of the world where it's perhaps no longer necessary to have that kind of a military footprint? >> well, we have, we have made recommendations with regards to reducing infrastructure abroad. it's one, it's an area where we have the authority to be able to make those reductions and as i pointed out, we've closed about

140 bases abroad. we're going to close additional bases, particularly as a result of reducing the number of brigades in europe from four down to two. but at the same time, i do have to tell you, that operations particularly notice middle east have acquired some of the key bases in europe to be important launching points for, for our air force and for travel and for supplies to that area. so there is a need, a, to try to maintain those basic areas. and in addition to that, obviously our nato requirements and our partnership require that we engage in exercises and in a rotational presence there to work with nato. so that we can build up that partnership to make it capable of dealing with its responsibilities as well. but having said that, we are in the process of looking at

additional reductions abroad. when it comes to the united states, and the kind of infrastructure reductions that have to takelaankly, there's noo do it than through the bracc process. >> mr. secretary, the president has said he would veto any attempt by congress to prevent the effects of sequestration on military spending. he want to share some things with you said in munich this month that you and the president quote are not paying attention to sequester. sequester is crazy. you also said that you strongly urge congress to be able to come forward and try to detrigger that amount, because frankly it's not the amount, it's the way it would be done. the formula is built on the sequester, it could cut across the board and as i said, it would certainly virtually devastate our national defense. end quote. so essentially i'm trying to figure out, that's conflicting messages coming out. you're urging congress to do away with the sequester at the same time the president said he's threatened to veto legislation to do away with it.

how do you reconcile or square those -- >> senator, i think what the president stated was that if there was just an egger to detrigger the defense part of the sequester, that he would oppose that. he thinks that the sequester across the board on defense and nondefense is severe enough, that both areas ought to be addressed in trying to detrigger sequester. >> there's a question, too, about whether or not if there were a sequester in the defense, how it would be applied. and section 302 of the budget control act speaks of sequestration of budget enforcement in terms of accounts. it does not dictate that sequester cuts must be applied in equal percentages to each program, project and activity as you claimed in a letter of november 14th, to senators mccain and graham on the effects of sequestration. for example, you could choose to apply the amount to be sequestered from the navy

procurement account entirely to one activity with that account. so how would you approach this issue in terms of the flexibility -- you're suggesting that this would be applied in a very -- >> across the board way. >> let me ask our comptroller. >> we're trying to work to understand. this is an arcane law, it goes back to 1985 budget impoundment and control act. our lawyers believe it would be at the low level of detail in that letter. i think we need to work with the omb lawyers to see exactly what would be the case. but make no mistake, i don't think anybody questions that at the account level. that would be have to be equal in percentage terms. and i think that fits the meat axe description pretty well. if you have to do it every account by the same percent. this is a bad idea. it's bad policy. and i really hope that the congress will take the steps to

detrigger it. >> it seems my time is expired. i'm getting the gavel. so thank you, mr. chairman, thank you all. >> we're trying to adhere closely to the five, because we promised the secretary to get him out of here by noon. >> thank you. let me get right to it. i want to talk, mr. secretary, first, about the guard and the reserve. you and i have talked about this in the past. in my view, their unique expertise and their ability to adapt rapidly to mission requirements. it's one of the reasons we ought to be especially careful in this time of making tough choices with respect to what happens with the guard and reserve. this year, you're all going to get four separate studies that going to provide in-depth analysis of the cost comparison of the reserve and those on active duty. what the studies are going to find, we've had a chance to hear

about them. strong evidence about how much less expensive the guard is compared to the active duty. so the question, mr. secretary, for you this morning. is wouldn't it make more sense to wait until you have an accurate model to compare costs before you go forward with disproportionate cuts to the air guard. it just seems to me, while all the choices you have in front of you are tough ones, there isn't an easy one there. wouldn't it make more sense to hold off until you get those four studies before there would be disproportionate cuts made to the air guard? >> senator, first of all, i strongly agree that we have to depend on a strong reserve and a strong national guard to assist us. particularly when it comes to mobilization. and as we reduce the force,

frankly we're going to need to have that back-up. and that's why frankly when it comes to numbers in the national guard, and in the reserve, we pretty much maintain the force that we have now. and will continue to maintain it, the one area there were reductions was in the air guard reserve and it was done pursuant to the recommendations of the air force chief. and the basis for that was in the past, we have reduced air lift in the active force, but we did not touch the reserve force. and he felt in order it achieve the savings that we had to achieve under this budget control act, that there were areas in the reserve where he could achieve some savings by reducing some of the airlift capability that was not multimission and that's why the decision was made to reduce those areas. at the same time i have to tell we met with the governors

yesterday, they have some of the same concerns you have. i told them i would work with them to determine whether we would try to do this in a way that can achieve the same savings, but that provide some ability to relieve some of the impact that some of in would have. >> thank you on that point, mr. secretary. if you will stay open on that and we can continue to have some discussion on that, i think as we look at those four separate studies, what you've done on this is to try to make it a data-driven debate. that's what's really swung us, if we can continue that discussion, i would appreciate it. one other area i want to get to and that is energy, you all at the department of defense are s of energy in our country. and sometimes just takes your breath away when you think through the implications on recent tour when we were in afghanistan, we heard about the fact that it cost in some