addition to the security cuts made as part of the budget control act, we took very deep cuts over the next ten years in non-defense discretionary spending. those items are also on the chopping block as part of is he sequestration and i would note in skiening the sequester the offer was made to the republican colleagues to say instead of having these particular defense cuts as part of sequester we can get rid of a lot of special interest tax loopholes. they chose to put the defense cuts on the table before cutting tax loopholes and special interest tax breaks. that's just a matter of historical record. that's a decision they had to make. let me -- i would also point out that as part of the administration's budget request, over $300 billion in savings and mandatory health which is about equivalent in aggregate to the amount recommended by simpson bohls in that category as well

as some non-health mandatory spending cuts, and of course the president's budget includes about 1.6 trillion dollars in revenue raised as part of a balanced approach, closing those tax loopholes and asking folks at the highest income levels, the top 2%, to go back to the same top marginal rates they were paying during the clinton administration, a period when the economy was booming. mr. secretary, i want to ask you about one of the proposals that's been put forward by the chairman of the armed services committee to deal with sequester and what he proposed in a piece of legislation that i have right here is across the board cuts in civilian personnel, both defense department and outside the defense department. i think it is worth noting that 36%, 36% of executive branch

civilian employees are at the defense department. almost 1 in 4 civilian employees in the federal government work at the defense department. that's 764,000 out of 2.1 million federal employees. that proposal would result in the department of defense cutting over 80,000 civilian workers over the budget period. now, as part of your budget, you emphasized and strengthen the defense acquisition and workforce, and in order to save taxpayer money to make sure that we're not wasting money, to make sure we have such capacity and capability. in fact, you say that this workforce determines the quality of dod's acquisition outcome, and an area of the budget which we all agree is in need of improvement. mr. secretary, and i would point out gao, is highlighted this as an important area as well, and

pointed out that in many cases we actually now hire contractors to oversee the contractors as part of the acquisition process because we don't have enough inhouse expertise, a practice that raises conflict of interest issues which gao also point out could waste taxpayer money. i want to know if we were to mandate a 10% cut in the dod civilian workforce, when what impact would that have with respect to strengthening the acquisition process and saving taxpayer's money without harming the defense of this country? >> yeah. let me respond by first saying that congressman mckee on was trying to make a good faith effort to do something to avoid sequester and i commend him for that but i told him personally the approach of going after the civil service side of it, particularly when it came to

defense where we have almost 700,000 civilians who work in the defense department alongside the military men and women in uniform, that it could impact on our ability to implement our mission, particularly with regards to the area that you just described. look, i was director of the cia. the cia is made up of civilian workforce, and these are people who every day put their lives on the line in order to protect this country. it isn't to say that obviously savings can't be achieved here, but i think to just put it all on the backs of the civil servants in this country, i think, would be not a wise step. >> thank you, mr. secretary. let me ask you a question with respect to your audit workforce and despite efforts at the defense department over the years, the defense department remains the federal agency that has not now passed a clean

audit. the department of homeland security finally cleared that hurdle. there is clearly room here for improving efficiency and in fact as part of your budget you recommend increasing the audit workforce in order to save taxpayer money and not allow those dollars to be wasted. in fact, you recommend a 10% increase in the audit workforce so that we can get a handle on these things. i am going to assume that a 10% cut in that workforce when you asked for a 10% increase would make it more difficult for you to save taxpayer dollars in a wise way through auditing. >> obviously. >> thank you. now, i want to get to this issue of contractors. sometimes people in congress when they talk about we're going to reduce the civilian workforce, they think it is going to save the taxpayer

dollars. you go back and say we reduce the size of the civilian workforce when in fact in many instances those same tasks and responsibilities have to be, are, contracted out and in fact mr. secretary if you can talk about that because one of your goals has been in part to reduce the number of contractors, i would point ought that the project on government oversight has a study that found that contractors get paid 1.8 times more than the government pays a federal employees for performing comparable services. so anybody who thinks that just cutting federal civilian employees and contracting out that work saves taxpayer money is plain wrong. so if you could talk about that choice and that challenge. >> well, one of our efforts and efficiencies is to try to reduce the number of contractors we

have there. i think it was secretary gates who basically said he didn't know how many contractors were at the defense department, and because you're looking at just numbers of contractors plus all of the subs plus the others that are related to that, so it is a huge number. there is no reason why we shouldn't know how many contractors we have and, frankly, there has been responsibilities that have been contracted out that i think should be performed within the civil service side of the defense department, so we are looking at that whole area as part of the efficiencies, the 60 billion, that we hope to achieve in savings that represents a good part of that. >> thank you. my last question deals with looking at our national security challenge in a comprehensive way. your predecessor, secretary gates, often pointed out that we need to deploy the full scope of resources focusing, yes, on the military and also on our diplomatic capabilities, development assistance capabilities, and i just like to

read a quote from him that he gave at a speech at the nixon center. he said, and i quote, i never miss an opportunity to call for more funding for and emphasis on did i diplomacy and development. whatever we do should re enforce the state department's lead role in crafting and conducting u.s. foreign policy, to include foreign assistance on which building security capacity is a key part. proper coordinator and concurrence proceduring will ensure that urgent military capacity building requirements do not under mine american's foreign policy initiatives and admiral mullen stated in a letter to the majority leader in 2010, the diplomatic and development capabilities of the united states have a direct bearing on our ability to shape threats and reduce the need for military action. general dempsey has made similar statements in the past. i want to ask you because last year's budget, republican

budget, cut 280 -- around 2$240 billion from did i diplomacy and development assistance which your predecessor and admiral mullen and others said are important to our overall national security. if you can comment on whether you share the views of secretary gates on this issue. >> look, i think we all understand that a strong national security can't be just dependent on our military power and military weaponry and our military men and women. a strong national security is dependent on having a strong diplomatic arm, a strong development arm, a strong intelligence arm, and a strong capability to try to have a strong economy in the world. all of this is related to our national security, and i think if any one of these areas suffers cuts above and we understand yo others, it is going to damage our security

just by virtue of the kind of broad approach we need to have to maintain the leadership position we have in the world. >> thank you. >> thank you for your service. i believe you're carmel monterey area has to be one of the most boufl places on the planet, so i know you're enduring a big sacrifice being here. i thank you very much. >> it does make my sanity subject to question. >> and, general, thank you for 38 years of service. the next few years may be your most critical time. secretary panetta, you you be publicly stated that sequestration is unacceptable. a degree with you and i am concerned about the devastating impact of sequestration, the method and the amounts have on our ability to protect our vital national interests around the world. as you mentioned, right now china is building two aircraft carriers, with them the ability to project power.

china continues to develop antisatellite missiles and cyber warfare capability. iran is on the precipice of a nuclear weapon. north kafka experiencing a rise in terrorism. the arab awakening in the middle east remains unpredictable. russia continues to rise both economically and militarily. the list goes on. according to reports, sequestration reductions would lead to the smallest ground force since 1940, that was suspensioned, a fleet of fewer than 230 ships, the smallest level since 1915 and the smallest tactical fighter force in the history of the united states air force. mr. secretary, can you elaborate on your thoughts on the devastating impacts if sequestration takes place?

>> well, you know, i have been saying this and i think you understand, you take a meat axe approach to the defense budget where you basically cut $500 billion across the defense budget basically doing is weakening every area of the defense budget. you're going to impact on four structure, whatever you're going to impact on compensation. you're employing to impact on our ability to develop the kind of weaponry that we do need for the future. i mean, how can you -- the reduction in sequestration, we're going to virtually going to have to stop production on most of the key weapons that we have in production as a result of that kind of impact. bottom line is that sequestration would be totally irresponsible. it would devastate our national defense. it would weaken this country.

it would tell the rest of the world that the united states is going to be not only a weak power but unable to respond to the threats that you just point out. >> thank you, mr. secretary, for that direct answer. general dempsey, last week during a hearing you talked about the current environment being the most dangerous time that you can remember in your 38 year career. can you please expand on that and what you -- what that means in the context of sequestration? >> ken, it is a bit of a strategy paradox, isn't it, because the great powers are not any longer really standing against each other but there are plenty of let's call them near competitors and even more important there are a wide variety of non-state act ors, super empowered individuals, terrorist groups, who have acquired capabilities that hereto for were the monopoly of

nation states. when i said it is the most dangerous period in my military career, 38 years, i really meant it. i wake up every morning waiting for that cyber attack or waiting for that terrorist attack or waiting for that nuclear proliferation, waiting for the proliferation of technologies that makes it an increasingly competitive security environment across the globe. the effect of sequestration will be that we'll have to go back and redo our strategy, the strategy that we just adapted from the qdr strategy to this emerging defense strategy as we described it. we would have to redo that. as the secretary said, it would in my personal military judgment impose unacceptable risks to our national security. >> thank you. >> thank you. >> i guess i can say this is a room where we always look up to you, mr. secretary.

we do appreciate your service. in san antonio military city as we call it in texas, as i am sure in a number of other cities across america, there has been concern or at least great interest in your comments about a base realignment and closure. san antonio as you know actually gained though it was a traumatic gain with the closure of brooks air force base there in the last round, the city under the leadership of mayor castro reached out with san antonio to find an additional 139 acres if there is a need for expansion at lak land. we see the 24th air force cyber command there as a place where cyber warfare alternatives can be provided to those facilities that we have here in the washington area. i think the proposal that senator hutchinson and senator

tester put forward to include overseas bases in any of that review that there at least needs to be a mechanism in any future brac to consider where our overseas commitments are even though there are treaties and other things to consider and we just ask you to consider that as you go forward. then of course all of us have thousands of veterans in our areas and people out of our military retirees, you have a number of proposals that you're considering that would impact those military retirees. can we assure those who are retired now or who are nearing retirement that they can feel that their retirement on fixed income is secure? >> with with regards to your last question yes. we made clear and the president made clear that any changes that

people ought to be grant fathered in who are serving in the military, who have served or about to retire, that they will get full retirement benefits as promised to them. our goal is to try to look to the future and see what reforms we can make with regards to those that will join the armed forces in the future. with regards to your overseas bases question, and i understand exactly what the thrust of the legislation is about. we do have the authority to close bases overseas obviously pursuant to the treaties. we would have to do it pursuant to the treaties and the diplomatic relationships we may have. nevertheless we have over the last few years cut almost 100 bases overseas. we are in the process of taking down two of the four brigades in europe, and that will involve

some additional infrastructure reductions as well. so i am trying to do this on the basis of substance. what is it we need to have? what is it we need to maintain and that's the basis on which we're approaching it in the defense department. >> two even more controversial issues. one of them i believe you're doing everything you can to seek a non-military approach to iran and i encourage you to continue to do that. it is difficult to see while all options have to be on the table how military intervention can do anything but make our families less secure. secondly n afghanistan, i know your remarks have caused some extended public discussion and will continue to do so about our future in afghanistan. i view colonel danny davis. i read his article in the armed

forces journal and aware of his other comments. i am sure they were not well received in some quarters but as a hero that spoke out approximate the troubles we have in our policies in afghanistan, what happened in the past weekend in a very secure area where brave americans were killed by people in afghan uniforms, i know it is troubling to all of us. i think your comments that we were prepared to move forward in 2014 unlike some of my colleagues, i would like to see you move quickly rather than slowly and encourage looking at our policy there to find a way to ensure our security having achieved many of our goals, assure our security without as broad a footprint as we have today. i thank you, mr. secretary. >> i appreciate that. with regards to afghanistan, we really have i think turned a

corner in 2011 with regards to afghanistan. we were able to weaken the taliban. we were able to reduce the level of violence there. the afghan army for the first time really engaged and performed well and took over the key security responsibilities and key areas. we are in a process of transitioning areas now to afghan control and security. we just completed a second tranche which will represent over 50% of the population of afghanistan now being under afghan control, and security, and we're going to continue that process. the remaining tranches will take place, final tranche will take place in 2013 and our goal at that time, then, is to obviously move towards having the afghans take the lead on combat operations with our support. we'll still be in combat mode and and we're going to try to be

able to move that responsibility over to the afghans, but maintain our transition through the end of 2014. nato is union foid on that path. i think it is the right path. even with the events i might say over the last weekend i have to tell you that the afghan army performed well. they controled the demonstrations, the level of violence was able to go down and they performed very well which gives us additional conference these guys can do the job we asked them to do. >> thank you. mr. cole. >> mr. chairman, i am not going to answer the congressman but i would like to take the opportunity to make sure you know that my silence on the issues of iran and afghanistan are not agreement with your position and i would be happy to come and speak with you about it to understand the complexity here, there seems to be sometimes some stark black and white choices. they're not. i would love to have the opportunity to talk. >> i look forward to visiting with you. mr. cole. >> thank you very much, mr. chairman.

thanks both of you. had the opportunity to hear you and defense appropriations subcommittee and as usual it is always compelling and really thoughtful testimony. i appreciate it. in terms of my friend mr. cal gerz, some really good questions on sequester and i want to ask a timing question and a probability question. in your view and you have been around this place, how likely do you think it is sequester will really happen? because i am actually very afraid about it. everybody seems to just sort of, well, that will never happen. we all thought the super committee would work and that wasn't supposed to happen. we're here. dismissing these out of hand is designing rus. from your planning standpoint how much time do you need to prepare for that? i think congress has the idea we'll wait until after the election and address whether or not there will be a sequester

and what does it do to you and your uniformed sub board gnats in terms of planning. >> i sure as hell hope it does not happen. i think as i said it would be a terrible reflection, i think, on the congress and the leadership of this country if the leadership of both parties were not able to come together and detrigger that mechanism. i do remain confident i really do after 40 years in the town having been through a lot of legislative battles and challenges that i still have a deep fundamental belief that in the end despite the politics, the back and forth that often takes place in this congress, that when it comes to our national security and when it comes to issues like this, that

ultimately the right decisions are made. i remain hopeful you will do the right thing with regards to sequester. with regards to planning, i mean, we are not planning on sequester. as general dempsey point out, i would have to throw the strategy i just presented out the window if we had to do that with sequester. at some point i suspect omb probably in the summer will have to request that we take a look at it and try to determine, you know, what steps would be taken, but i just think that it would be very difficult to plan because it does have this kind of crazy formula that would be applied in which we would have very little flexibility to try to do what we could to avoid the impact of sequester. >> sir, could i add. >> although we're not planning,

congressman, the defense industrial base which has to have value proposition and business plans are planning for it and at some point the specter of is he questions trags will have its own effect whether it goes into existence or not. >> that's a great point. let me ask as well, you mentioned it would take an all of the above strategy to deal with a budget deficit of this size. to your knowledge has the president imposed any entitlement reforms? >> i believe that as part of the request in the budget that they would include some recommendations with regards to entitlements and i know during the obviously the negotiations that were held on the budget deal that some of those were put forward. i honestly believe that you got to confront that. look, discretionary spending is one third of the budget. you can't ignore the two-thirds of the budget blowing through the ceiling right now. that has to be part of their

deal, and when we face this and as i said, almost every summit that i was a part of, we had to put entitlements on the table. we put discretionary on the table and revenues on the table and that's what led to the agreements that both republican and democratic presidents put forward. i think that's where you have to go. these are record deficits you're dealing with. i never in my lifetime and especially after getting a balanced budget expected we would have a trillion three kef sits. that's that has to be dealt with and it can only be dealt with through the tough choices i just point out. >> last question. we don't have a lot of time. you weren't through and you described what those processes took to the defense appropriations subcommittee just in terms of the conditions that had to prevail to reach the desired outcome. if you have a second would you mind lying that out again, in your opinion somebody that has been through these to achieve

that kind of goal? >> i am sorry, in terms of what? >> i am actually out of time. >> okay. >> i was trying to push it in. >> thanks, but thanks for your service. >> thank you. >> appreciate what you're doing. >> thank you, mr. chairman. mr. secretary, i thought your statement was excellent. i loved the outline that you prevented and you are the right person at the right place at the right time. there is nobody in history that has had the range of experiences you have had legislatively, in the executive branch, the various departments. you know this stuff. i think it important that you emphasize we will still have the most powerful military in the world if this takes place and actually if it went beyond that because of the outstanding capability that we have. i think you imply and i think we in congress need to have more sympathy with the notion of how

we deal with the notion of risk. we're not going to reduce risk to zero. i think what you have attempted to do here is to provide a more balanced approach to a wider variety of risk. it is much less likely that we're going to fight two land wars. there is nobody in the world that can engage us with the naval efforts, even after the chinese somehow, some day, get an aircraft carrier or two. this is -- we need to be and i think you have done a great job of helping us think through what we need to deal with the risks of the future, the terrorists, cyberterrorism, a symmetrical attacks, special ops challenges face the right now in uniform and cia and whatnot. i am of the opinion that our military can do this. they can take the parameters that we give them with your leadership, general, and this is something that can be done. i have been stunned at the

capacity of what they have done in the past. congress has screwed it up. congress has raised compensation levels, congress has refused to -- talk about entitlements. we haven't raised try care since 1990. it is less sustainable than anything we talked about with medicare. we required the military to buy equipment that it didn't necessarily want and in some cases didn't need. the political engineering of the tasks that you, your predecessors, and the men and women in uniform have had to cope with bobbles my mind, and it is amazing that it is as good as we have today. congress could not close a base. we had to come up with this jerry rigged system so we could actually deal with military closures. i am hopeful we don't fail in terms of going all