castles, shop in seoul's exciting shopping districts or, the best one, to go to walt disney resort. is that something that is proper for the department of defense to own? >> let him answer the question. >> that's not appropriated funds, first of all, which means that it's not part of the defense budget. but more importantly, look. a lot of the facilities are provided for men and women who go into battle and who have been deployed overseas. and, you know what? i think the very least we owe them is the ability to be able to enjoy whatever time they take off from going to war. >> this also applies to over a million civilians that have never seen war. and it also for folks that do not live in these particular areas, they can't jump on a plane, mr. secretary. but all i want to raise is the point that if you aren't audit capable and you are here asking for more money and not ready for a sequester, my constituents are

very concerned about the improper use of tax funds. i appreciate the answers to the questions and yield back my time. >> i'd like to add briefly to that. the fact we aren't audit ready means we can't go through a series of requirements imposed by auditors. we need to do that. and i've made it a major area of emphasis. but our systems are designed to know where we spend the money, and we have passed audits that indicate we are taking the direction that congress gives us, passing it now appropriately to our commands. so i can tell you where we're spending the money. i can't go through all the detailed things that's required by an audit. we need to do it but i don't want to leave you with the impression we're sitting over there spending the money wherever we want. if even 1% of them are off we have 3,000 auditors watching us. we would know and you would know. so we do know where we're spending the money. >> if i might follow up. >> sorry, time. >> he was able to answer afterwards. >> i let him answer your question after the time expired.

we have a vote hanging at five and about five other members. mr. langford. >> gentlemen, thank you. general dempsey, thanks for our years of service and for being here. you've been in front of quite a few committees and have done this. i'm sure it's your favorite part of every single week. >> it is. >> i'm sure. >> secretary panetta yooufr, yo been on both sides of this. must be interesting to answer testimony looking at yourself looking back at you. i appreciate your decades of service as well. you stated a fact that many of vus stated in other areas as well. you can't just education, for instance. years and years of just throw more money at it and that will fix the problem. because there are issues. but continuing to throw money at it doesn't necessarily give you better outcomes. it takes some reforms of the systems and structures. i hear you are both saying the same thing with defense. there need to be some things that occur and that may not necessarily mean throwing more money at it.

it may mean reforming systems and structures. so when i ask you about a couple of those. where are we as far as the total number of uniform when you mentioned force reduction. what are we talking about between all brnchs and force reduction? >> we're talking about 120,000 that will be reduced over these next five years, between now and 2017. >> are those all uniformed or some civilian? >> what i gave you was all uniform. >> where are we on civilian reductions. we had about 700,000 civilians there, not including contractors. >> we've had reductions in the civilian core as well. >> fairly modest at the moment. about 15,000 over the five-year period. >> okay. >> something we do need to look at again in terms of the balance. >> that's a question then, obviously, you are dealing with a significant -- why? you have 120,000 uniform and 15,000 civilian reductions. can i ask as far as what you are thinking is the type of civilian reductions there or why the

disparity between the two? >> i think our hope is on civilian reductions that we tie that to efficiencies. getting rid of overhead, the contract operations that we don't need. so the reductions on the civilian side are pursuant to a list of efficiencez thies we've to put in place. >> so the 15,000 is a floor rather than a ceiling? >> exactly. >> are there key areas you are already looking at that you can say, this is -- you mentioned a couple of them in broad terms. more specifically, whether we're dealing with, for instance if we close down a line of aircraft. obviously, there are civilians that handle that area. is that the kind of thing you're talking about or more service -- >> i was talking more internal in terms of the operations within the defense department because where there are duplicative operations, where there are operations or areas that are performing roles that,

frankly, we can reduce the number of people at, that's the kind of thing i'm talking about. but in addition to that, as pointed out by the comptroller, we've got about, you know, a large number of contract employees. and those contracts that we can reduce will reduce, obviously, the contract employees. >> because that's the second part of my question. how do you not just reduce civilian employees but contractors so you are really just moving it over to another area. >> we have to make sure that doesn't happen. >> go ahead. >> may i briefly? from 12 to 13, the reduction in civilians is roughly proportional to military. we need to look at the -- frankly, we ran out of time. there's only so much you can do and -- >> i know that feeling extremely well. >> bear with us. that is pending possibly in another proposal? >> well, not in this budget but we'll look at -- because the 13 number is pretty reasonable. beyond '13 and we go through a five-year planning process each year. we need to look again.

it may be the right number in the odd years but i'm not so sure. >> the second part of this question as well, obviously you put together a lot in this time period. you talked a lot about procurement reform. some lines going away. but also a lot of innovation that needs to occur that's a heavy technology. so i get a feeling there's this push and pull between procurement. we've got to be lighter, more agile, more mobile. technologically savvy. more equipment to help us. that's more r&d. more procurement. we have some aircraft in the air force that i'm 44 years old or much older than i am that we're still using. so we need some in there. how are you balancing that out between those two? >> yeah, i mentioned one thing we're looking at. multirole, shorter procurement time lines. when i was the chief of staff of the army, we had -- i got briefed on programs where the requirements were established in 2003. we're not going to deliver until 2014. >> right. and the technology is behind by

the time -- >> making it a certainty that we're going to deliver something that is either late to need or that doesn't spiral in new technology. and as you entirely in new technology, the retire automate the requirement goes up and the next ting you know you're off to the races on costs. so acquisition reform has to include a much closer merger of requirements and material solutions with senior leader involvement and shorter horizons. but i'll tell you we haven't gotten industry on board with that. we haven't gotten the congress of the united states on board. but that is the answer. >> thank you. i yield back. >> mr. young. >> thank you, gentlemen for being here today. thank you for your service to our country. first, i want to commend the secretary and the understand secretary for your ambitious efforts on the audit readiness initiative. i'm happy to serve on the audit readiness panel here within congress and the extent we can assist you in your efforts there. we'll continue to lend a critical eye as you -- your

efforts play out. but we want to help however we can. very important. i'm concerned that some of these proposed cuts to our defense budget may not be strategy based. and i'm open. i'm open to all manner of cuts. identifying efficiencies, changing how we do business, with respect to health care for our service members and veterans. looking into retirement. all manner of different things. but it has to be strategy based. i know you would agree with that. it seems to me there's essentially two different processes that you have to go through here. first you have to clarify the strategy. based on current threats and you've indicated, i think you characterized the process as adapting the existing qdr to current circumstances. so you are looking for cost efficiencies within the dod budget and shifting our posture to the asia-pacific region. is that a fair characterization?

>> correct. >> okay. and then the second process as i see it is translating that strategy into specific spending requests. requesting appropriations based on that redefined, reclarified strategy. now i think more work could be done in communicating part one, which is why we're -- why we are pivoting to the asia pacific region. why we intended to invest more resources into the middle east. but i don't want to be too critical of the administration in that part one of a two-part process. but it's the second part, translating strategy into requested appropriations where i have very little idea how the department of defense and the administration more generally came up with each of these spending requests. in an absence of that sort of clarity, i think many of us are inclined to fall back on back of the envelope sort of shorthand

things like what percentage of gdp are we spending on military? and when you think about it, that strikes me as a superficial way to determine how much we ought to be spending on our military. would you agree with that statement? that's not a strategy based assessment? a percentage of gdp? >> no. >> okay. >> what about reference to the level of military spending of other countries? is that also superficial? >> it is. >> okay. so in following our oversight role here, i also sit on the armed services committee. but i think all member of congress, we would benefit from a window into your analysis there. how you translated your strategy into spending requests. i suspect that this is a sensitive methodology, one that you don't want to maybe articulate in an open hearing. is that correct? >> well, no, not necessarily.

frankly, we went through that process with each of the service chiefs. and, frankly, we can sit down with you. we have actually a report that lists based on each of the strategies what decisions in the budget were made pursuant to those strategies. and we can walk through that with you. we're happy to do that. >> i think i would benefit immeasurably of should we hold those meetings, could we open it up to my colleagues as well, and do you believe that some of these meetings would be better done in a secure setting as opposed to out in the open. >> there will be some things in particular, cyber and certain technologies that overcome anti-access that we probably have to do closed. most of it as the secretary said would be available in open setting. >> well, i appreciate your commitment to holding each of these meetings for each of the respective services. and i will play a role in

helping to assemble some of my colleagues. thank you very much. i yield back. >> thank you. mr. stutzman. >> thank you mr. chairman and mr. panetta and general dempsey. secretary panetta, i really respect you. and i think you are the right person for the job at the right time with all of the experience you have. i want to talk to you about the role of the national guard and some of the decisions that you made. you said in your opening statement that we rely on a strong reserve, a national guard, and i agree with you, completely. as we draw down, potentially in the middle east, we're going to rely a little bit more on the guard and reserve united. that will increase. and i think that -- i was made aware of a letter that the national governors association sent to you about 49 different governors. i don't know if you are aware of the letter or not, but they

definitely are concerned about this same approach with the cuts to the guard. could you talk a little bit about that? in their letter they mentioned that the air guard provides 35% of the u.s. air force's capability for the budget. they also mention in the letter that we must oppose the proposal that the air national guard absorbed 59% of the total aircraft budget reductions and approximately six times the per capita personnel reductions. could you talk a little bit about that approach? >> sure. the main thing that we did want to maintain a strong guard and a strong reserve. and the fact is that we are going to be maintaining the guard at basically the same current levels. we're going to maintain the reserve at the same levels. with regards to the air guard, which is an area that the air force focused on, in the past

they have made cuts with regards to the active duty force itself in terms of planes. they did not focus on the reserves and the guard operation. they decided to look at those particularly with regards to planes like the a-10s and again, looked at what, you know, are these planes multimission. can they perform the kind of role we need with the new agility that we have as part of our strategy. and their determination was that these are basically single mission aircraft and that those are the ones that we need to gradually reduce. we'll still retain a large number of them but they wanted to reduce some of those. that's what's impacting right now with regards to the concerns i think that we're in the governor's letter. having said that, what i have asked the secretary of the air force to do as well as the air force chief is to do everything possible to try to mitigate the

impact of those reductions with regards to some of those planes to see what we can do. i mean, there are areas we're going to increase. we're going to do more unmanned. we're going to do more isr. are there ways to try to mitigate some of this by virtue of some of the things we are going to need under the new strategy? >> i represent ft. wayne which we have the air guard based there in ft. wayne. md we have the a-10s there. i think that what i have seen in numbers proposed is the air guard can store and maintain these particular aircraft for about 28 cents on the dollar. my feeling is we could utilize the guard even more than what we currently do, maintaining aircraft, the value we have and the experience that they -- the pilots provide. and i think that's something that's really important and should be kept in consideration. final question is, in this kind of goes into the proposal and

the air force reductions. but one of the key elements of your defense strategy is an increased focus on the asia pacific region. most analysts looking at that region, a dominance for air and naval components. but the modernization budget limits growth in the navy and shrinks the air force. why doesn't it match the defense strategy? >> well, we think it does. and for that reason, frankly, we're maintaining 11 carriers and not cutting back on our carriers because that's a major element of force projection. we're maintaining the bomber fleet. we're going to be investing in the new bomber for the future. we're investing in, obviously, the joint strike fighter to try to develop that kind of fifth generation capability. with regards to the navy itself, we're going to be continuing investments in the ships that will provide the kind of agility that will give us the capability

to move quickly the flat deck ships that we have. we're going to be maintaining a navy of 285 ships. that's what we have now. that's what we'll have in 2017. our goal in the next five years is to continue to develop the navy to a 300-ship navy. so everything about our strategy very frankly stresses both our naval and air force elements in order to project force, both in the middle east, as well as in the pacific. >> thank you. >> mr. garrett? >> and secretary and panel, i appreciate you being here. i think i may be winding things up for you. it was several hours ago, i think, that -- i think mr. daggett raised the question with what was going on in afghanistan right now and with regard to the tragic loss of a couple of our soldiers over there. and, obviously, the issue that -- well, a number of multiple issues out there. but a tragedy that we lose our soldiers over there. i'm curious from the media

accounts. i know this country has apologized to that country for what has occurred. but have you personally or the administration heard from the afghani government to apologize to us and the families of those soldiers who have lost their life? >> yes. >> from afghanistan? >> yes, minister wardak, who is the defense minister, called me over the weekend and apologized for what happened. >> i appreciate that because that is something that we have not heard in the press. secondly, to a point that mr. rakita raised with regard to the audits, i served on this committee now for nine years. and i may be here longer than everyone here except for chairman ryan. and regardless who is sitting over there, democrat or republican, we have heard the same thing that we're going to get to this. it's important and it's going to happen sooner rather than later.

at the beginning of the testimony i thought i heard you say you hoped to have this done by around 2014 but then following the questioning it sounded like 2017 for this. which is the year you are anticipating that it's up and running and -- >> i mean, it's complicated process. but in order -- what we need to do -- let me ask hal te to talk about this because he's deal with the auditing. >> the key statement which is of greatest concern to me and should be to you. all of the statements by 2017 which is the provision in the law. wide have to agree. we've overpromised and underdelivered. >> what is the hardest part of this. if this was private industry and the ceo was sitting there and saying, we just really don't know where all the money is going to as far as to a certified audit, that's ceo, present company accepted, would be out. and i'm not saying that here, but what is the hardest point? i've heard that it was over the

years that was t was to identifying what your assets really are around the country. >> the hardest point has been sustained management attention to this. we've never had a ceo that atte to this. we've never had a ceo that paid attention in the same way that secretary panetta has. there are technical factors as well, but i think i'll spare you them unless you want to hear them. >> well, maybe if you could send them to us in a short paper on it, that would be appreciative. we've never gotten that in the past. >> congressman, i share your concern as a former member of this committee and former budget sharer or director, when i found out this was the case, it's unacceptable. one of the very first things in my notes, hours ago, efficiencies, about $150 billion here and adding on to that, 60 billion. that sounds great, what i'm

wondering is can you really dom that? >> i've asked the same question. >> from the department of my perspective. say in this department here -- >> yeah, we can. >> how do you do that without a department wide audit and respectively the entire? >> my question was we were supposed to do 150 billion in efficiency savings and i asked this guy next to me what are we doing to achieve those savings and they laid out each of the areas where we're making progress and we can share those. >> our systems are designed, where we spend money and what we proepuate. they do that well. they're not designed to share the information that -- they need to be, but they're not. so that's what we can't do. we do know where we're spending the money. with the appropriate funds, i can track. swrus a couple of things. you said that he raised here,

sounds like abuse of the system. raising about people making too much money and what have you around these cases. might take away from that and i don't know what the underlying facts are. doesn't sound like an abuse. sounds more like an abuse by someone from the d.o.d., from the procurement side of the equation that that would occur. >> last question, 15 seconds. the chairman would allow. >> department has developed a proposal in 2008 and your own defense business produced several proposals that last summer. question on this is why are we looking on another reform commission when we have proposals out there and i'll close with that. >> you mean on retirement? >> yes. >> i for one suggested that committee which was people with civilian businessmen, should be reopened and include the

participation of military and noncommission officers. look, i'm not getting ready to sign up for a retirement plan that treats uniformed political tear and who put their lives at risk, what we've got is a a civilian sector proposal. >> point taken. couple of points in closing. i just want to reemphasize what i was trying to do at the beginning, which is put this in perspective, i've heard you mention that the number of you got that was given to you was because of the law that congress passed. firewall in the dca is there for 2012 and 13 and not after. so this is a number you were given by omb, not by congress. put that in perspective, the savings from the bca is $917 billion. the budget we passed in this committee and off the floor in

the house last year say $1.6 trillion, a lot of discretionary spending net. we took last year's obama line, gates line, $78 billion, and agreed with that number and still saved $1.6 trillion. now, i clearly understand what we have. we also saved far more than that in mandatory spending because as you mentioned, that's two-thirds of the budget. the point i would simply say is i heard your mention you were given a chore of coming up with $50 billion in deficit reduction. you've done a wonderful job. what you are given as a job to do, you have done your job exceptionally well. i really mean that. i just think you were given a job to do heavy lifting for other parts of the budget that did not have this kind of responsibility placed upon them.

other cabinet secretaries, other parts of the government. the budget the president sent us as a net deficit reduction of $400 billion. you're carrying the weight of a $400 billion deficit reduction out of your department and the rest of the government for the next ten years. a reduction of $400 billion. it's a budget that has a net spending increase of 1$1.5 trilli trillion. so, it's about priorities. it's about what is the priority of the federal government or has the responsibility to the federal government and are we applying the kind of discipline that you have exercised in the rest of government and we would simply argue that your administration is not. you are. but the administration's not, and as a result, this is why we still make the case that this is not a strategy and with that, i

don't want to -- i want to allow my colleague. >> thank you, mr. chairman. i appreciate that. mr. secretary -- thank you all for your testimony. i just -- a few words to chairman. i think as the secretary's indicated, we offer bipartisan way. we must find a bipartisan way to undo the sequester, but with a what i hope will be a balanced approach to deficit reduction. the secretary was loud and clear on that. with respect to the president's budget, what the president did was to take the bca, discretionary enacted on a partisan bases by this congress and extended essentially the

firewall levels moving forward. in place for two years, but if you extend and project those forward, you save within the defense budget what amounts to be essentially proposed in this budget. i want to reiterate the fact that when it came to the se quest, there was a discussion about whether or not we would reach that deficit target in part by closing a lot of tax loopholes. gelling rid of some tax subsidies and asking focus at the high-end of the income scale to pay and help reduce our deficit on a balanced plan and the response was no. we prefer to put these defense spending as part of the sequestered. the chairman said at least at one point, if he were forced to

choose, he would close the tax loopholes. but as we go forward, let's look for the kind of bipartisan balanced framework that other commissions have taken to this task. with that -- >> which is we agree we should just do our jobs. we know savings should be taken from this budget. if the question gets into the -- we just want to do our jobs. we just want to do our jobs and with that, i want to thank you for indulging us for all this time.

focusing on the president's 2013 budget request while congress is on break. tomorrow, the budget plan and next week on monday, the house and human services budget explained by kathleen sebelius and tuesday, u.s. funds going to the united nations here on cspan 3.