that number comes from the permanent subcommittee on investigations study investigation which i chaired, but is he going to continue to defend a whole bunch of other tax loopholes such as the stock option tax loophole, the carried interest loophole which allows hedge fund managers to treat as capital gains income which everybody else has to treat as ordinary income. he needs to address the questions of revenue loopholes and he also, if he wants to increase defense spending, he's got to say well, if he doesn't go for revenue, where's he going to cut. and not be allowed to get away with some answer like he will go for efficiency and cutting waste. >> do you have a response? >> i think maybe taking it just in a slightly different direction, the question was kind of a voluntary person wants to do this, the reality is that one

thing that we have been as a nation perfect at is we have never guessed when and where we will be in the next conflict. the question here that worries you is, is that conflict coming before we can get through some adjustment to the economy to start to rebuild ourselves. then i think the statements and the comments of the senator are appropriate in that if we are in fact entered into another conflict here in the near future, will we and how will we in fact sustain ourselves in that conflict. how will we find the revenues in order to actually conduct that conflict because we may not have a choice. it may not be a political decision. it may be forced upon us which is oftentimes the case. >> next question? yes. >> senator, i was hoping you could share your personal thoughts on the air force's effort to cut the operational costs of the space program and

the space test program. >> i don't really have any detailed answer on that. most of the space program is not even in our budget so i don't have a comment which would be detailed enough for you. >> i would like to jump in on that one, too. >> thank you, general. i need a lot of help. i brought staff here, too, in case the general falls short. >> the air force is moving operationally responsive space under their rapid acquisition programs. so it's not -- it's just a movement and where they are managing it. my personal opinion on that is that's the right thing to do. in other words, begin to integrate space into the rest of the activities that you are responsible for. don't hold it separate, don't make it unique, so that only the people in space or work in space know how to use it. space on the military side is but another venue in which we

conduct operations and it ought to be integrated with all of our operations so we know how to use it and what it is it's going to contribute and is that contribution worth the expense. today, space is extremely expensive. counterparts like airborne surveillance systems, other things like that, have value, too. what's the right balance. if you separate these things, you won't know how to find the balance. >> i do have one answer on the satellite program which is that the cuts to the satellite program that i think are in a different agency, nonetheless will have a negative effect on the defense department that rely on those satellites. so i am concerned about the reduction in the satellite program and the agency that controls many of those satellites which is the department of commerce. >> your perspective on our nation's future in space? >> i think, just this discussion makes the point which is as general cartwright talks about the need for us to think about

competitive advantage in the future, we've got to look at all of these different assets and then understand how that changes the mission, set of mission capabilities we need and what the mission of the future looks like. so whether it's space or air or land or undersea, it's an integrated approach that we've got to be thinking about which is why it's important to apply these judgments at the mission level and at the mission capability level, notwithstanding the fact that we budget at the program or the systems level. i think senator levin's point about sequestration cutting all programs equally like a peanut butter is absolutely the wrong approach, because it ignores mission, and what general cartwright touches on is the integration of space with air and other capabilities and that's the future, which is why we've got to apply our thinking and the trade-offs with judgment at the level of mission and necessary mission capability for tomorrow's wars, not yesterday's

threats. >> thank you. next question? >> senator, bloomberg news, what signal should the public be watching for in the next couple months to see if in fact sequestration may be avoided? can you give us any insight, tips on what we should be looking for? >> thank you for asking the question which will allow me to get the detroit entity, the tigers. the big issue is revenues, whether or not an uncompromising position which has been taken, pledges which have been signed, are going to be maintained. that's the signals. you're going to i hope get answers from candidates as to whether or not they're going to stay with the haley barbour type pledge or whether you're going to see more and more, as a few have already done, suggesting that they are not going to be bound by that pledge. their first oath is to the constitution and the security of the country, not to haley

barbour. you are a're going to hopefully people on the republican side who signed those pledges gradually recognizing that there can be no real deficit reduction and you cannot protect defense and other critically important priorities of this country from sequestration without additional revenues. you can't do it. it's been proven over and over again. that's the one tip that i would look for. maybe the candidate, the presidential candidate on the republican side will answer the question about the barbour pledge. remember, he was asked that question, by the way, in a debate when all the candidates were asked whether or not if they could trade one dollar in additional revenues for ten dollars in spending cuts, would they accept that trade. raise your hand is what the moderator asked all the candidates, including romney. i think none of them raised

their hand. that is an extreme position which no president that has been serious about deficit reduction, including ronald reagan, has taken. that's what i would look for, is that specific question. >> next question? yes? front row. >> yes. question for the senator. what realistically is your goal for what the defense cuts would look like? it's not $55 billion a year. what would you see -- >> no, i would like to see at the most, you know, this is -- i'm going to answer this question but i've got to tell you, i totally agree with what both my colleagues here have said. first, that you've got to acquire things in a very different way and second, you've got to decide what is the strategy, what are the threats that you're going to face and how do they change. when i give you a number, it's with that in mind.

my best guesses would be about $10 billion more a year tops which would be $100 billion over a ten-year period. it's a figure that kind of for totally planning purposes and when we look at how to come up with plans to avoid sequestration, the $100 billion over ten years is a number that i look at because i think defense has got to contribute, but i think we've got to be very, very careful that we don't do the draconian approach either on defense or the other important programs like education, health care and so forth. >> next question? >> senator, i'm from south korea. the united states has 20,000 troops in south korea. the united states needs to reduce spending in south korea

and secondly, [ indiscernible ] >> our spending in korea, we've got to reduce some of the planned spending for the housing, in particular. we cannot afford to be spending i believe it was a figure like $10,000 a month for family housing that was planned in order to have families -- more families come over and be with our troops in korea. we cannot afford that. we also -- so i would say that in terms of the number of troops, the first thing we ought to do is turn over responsibility for wartime control of operations to the koreans. that's long overdue. we keep saying we're going to do it and we don't do it. so if there were a war on the korean peninsula, the question as to who would be in operational control should have been decided that the koreans shu should have been in operational control years ago

but at the request of the korean government, that's been delayed a number of times. that should end and i would hope that there could be some progress in terms of north korea that would allow us to reduce our troops, the number of our troops in korea. as far as the kind of missile system the koreans have, i don't have any strong feelings on that providing they pay for it. i would hope that they would do it in a way which would not be viewed as kind of an offensive, taking an offensive position or a threatening position towards china or towards north korea. if they want to do it in a nonthreatening way, totally defensive way at their own expense, i don't have a problem. >> i think just to pile on there, on the forces and the money spent in south korea, what's important here up front

is to do what and what is it today that the south koreans need from america that is permanently based there and available all of the time, and it's not what was 20 years ago. so having a rich dialogue about that, but it's time, really, to make an adjustment on the posture. the second issue of the missile is not a technical issue. it is not a programatic issue in reality, it is one of understanding the environment in which you would introduce that and the stability change that would cause. it may not be a bad stability change. it may in fact enhance stability but understanding how all in the neighborhood view that change and that they understand it is the key issue here and it's probably generally it just takes time to make sure that the logic and the reasoning is well understood by your neighbors before you field something like that. >> in the back? >> yes. a lot of government -- >> your name and organization,

please? >> dave hanson from international affairs. a lot of government contractors may be watching this and thinking it's unrealistic that congress will agree on raising revenues and further cutting spending to balance the budget. what are the chances that congress could just vote to repeal the sequestration process and just keep borrowing money to pay for these implements to defense and keep defense spending where it should be? >> anyone? >> want to point to me? there is a chance that that could happen, particularly during a lame duck session, that we would once again kick the can down the road, modify the law that now is in place which forces some -- us to be more deficit-conscious so there's a chance that would happen. i don't think it's the right way to go. but to say that congress, there's no chance that congress would kick the can down the road

would be kind of inconsistent with a hell of a lot of evidence. not only can you kick the can down the road, but i think we have special gym shoes made just for that. >> i'll just make a point to your question. the focus of sequestration of course is january of '13, but that's a quarter of the way into the next government fiscal year. so your point about impact on industry, i think there's a growing recognition that the impact on industry is going to begin in all likelihood in october at the beginning of the fiscal year, because if there is uncertainty that continues with regard to sequestration or not and if not, then what instead, in all likelihood, one's going to see the government start to be very careful about how they're spending money because they don't know what kind of a budget they're going to be on for the year and with

sequestration hitting midyear, that changed behavior is likely to happen beginning at the beginning of the fiscal year in october. so i think industry is facing a very difficult situation here beginning in what is our calendar fourth quarter as this all plays out. so focusing just on january ignores the point that i think behavior's going to start to change in october. >> next question? yes. >> following on, to what extent do you think that will change political behavior? is that enough to spur action on the hill? >> there's some evidence that it's already spurring action at least in the senate, where lots of colleagues are exploring possibilities to reach agreement in advance to send some kind of a signal in advance in some way that we're able to act in a way

that is rational and a way that involves compromise on the part of everybody. we've got to get over the idea that some have brought to the congress recently, particularly that compromise is a dirty word but there is some evidence, at least conversation taking place in the senate. i think probably a majority of us are involved in those conversations one way or another. >> next question? yes. >> john donnelly with congressional quarterly. question for you, mr. chairman. you said you're confident sequestration won't happen but you think it will be more challenging, the when part of it. given what was just said about the fiscal year starting in october and my understanding is secondly that pink slips have to go out in i believe september in anticipation of these cuts, is it fair to conclude that the schedule that congress is on really is to do something this

summer on this or else face the kind of economic fallout that you worried about? >> i can't say that's the schedule congress is on. i think that is what at least most members i think of the senate and i can't speak for the house, recognize as the reality is that we should be finding a way to act, sending some kind of signal we're able to work together and compromise, even if it's not the whole thing, that we are able to do something prior to beginning of the fiscal year. i happen to agree with what you said about the problem really specifically beginning october 1. i think warning notices to employees have already gone out from some major employers. that kind of instability and uncertainty is what is going to drive us hopefully to finding a path if not to a full solution, to put in a different context, it's called a confidence

building measure that congress is able to at least take some steps down the path of avoiding that train wreck. >> thank you. >> what would that look like? >> it could be -- there's a lot of possibilities but one might be for instance in some of these tax extenders, to take one which should be simpler, frankly, is to find a way and pay for the extenders being extended. that involves things like r & d tax credits and a lot of other things which i think most people want to see happen and that it could hopefully involve even on some parts the tax cuts. everybody agrees we can't raise taxes on middle income folks. the disagreement is whether we should continue the lower tax bracket for upper income folks. maybe we can find a way to at least agree that this middle income, this median income group that has been so hard hit should not face a prospect of a tax

increase in january and agree at least on that part, leaving the question of whether the upper bracket tax rate would be restored to the higher rate for later on as part of a larger deal. >> thank you. next question? >> yes. senator, what is the long term risk on waiting to avoid sequestration and how quickly could private industry recover? and also, i wanted to see if you could elaborate on what 3,000 accounts would be automatically cut and if these were accounts across the board, flat out cuts or reductions in spending? >> the second answer is whatever the cut is, whether 8%, 9%, 10%, whatever it is, to reach that mandated target in law, would have to be applied to every account. there's a different word, called every line in our budget, but i don't think that word is as clear as the word account so i'm using the word account. that's a number which was given to me by my staff, 3,000, and

but it would have to be an equal amount. there can be an effort at reprogramming. there is flexibility on the wage, on the pay of our troops. the president can avoid that but then he's got to make up for it in some other way by adding then a slight increase to the percentage on every other account. in terms of the effect of continuing this uncertainty about this fiscal cliff, it's going to have an ongoing, i think, weakening effect on the economy. i'm not a business person or economist but i would guess that that weakening process would begin sometime this fall. >> are you aware of any planning in the government for sequestration in case it happens? >> i hope there's planning going on. we have a provision in the defense bill that requires the defense department to tell us what the impact is specifically

of sequestration, and that's fine, but every department, not just the defense department, every department should be informing the public, informing congress, what the effect would be of sequestration would be ofn should it happen. i'm all for require the defense department to do that. i joined in the language in the defense bill, an amendment on pending legislation to try to do that and if so, it ought to apply to every department and impact on education and on health care and on other important programs as well as defense. >> the impact on private industry? >> of sequestration? >> weight of sequestration. >> there's been so much written many by you of the paralysis that one sees on the industry side. i don't know how many hundreds of billions or trillion dollars of cash on corporate balance

sheets and the reality is that corporations aren't going to invest this capital until they can get some sense as to environment that they are investing into. this continued turmoil and uncertainty continues the paralysis. and if we're really looking for private sector investment to have major role in bringing our economy back, we need to create an environment where business can at least understand the environment in which it is expected to do business and therefore be willing to invest. all of what senator levin is talking about is just another color on this continued confusion and uncertainty, which has business standing on the sidelines waiting to see what will happen and to expect business to act before they see that certainty is foolish. it won't happen. >> general, how about the impact

on the military of the delay? >> my sense is that there's a bit of a problem here. it's responsible to plan for the future. you don't want to give away anything and so often times the worry is as you announce a plan, if i were asked to do x, y, z this is what i would do and then all of a sudden it happens and the discussion is felt to be lacking in whether that should have happened or not. somehow the departments, not just the department of defense shs ha, have to find a way to look at further cuts and do so in an environment where they feel safe that they can explore all of the options without having someone take the decision away from them before they get the opportunity. >> john from national journal. senator, the things you mentioned were both tax cuts. r & d and maybe adjustment with

bush tax cut plans, and that really doesn't give you anything for sequestration or for revenue. what would be the accompanying thing that you would be looking for on saving money side? >> the reason i mentioned them is i think the publwhat the pubs and business community needs is some clear indication that we're going to avoid a fiscal cliff and a train wreck. they need stability and confidence and that is what is lacking now because of what they've seen and what they are seeing. what i suggest is that there may be some actions which could be taken now, which would give people some confidence that we're able to work together on a bipartisan basis at least on some things that we can agree upon. we can agree, i hope, the middle income tax cuts continuing and not being lost. i think -- i mean, i don't know

of anything that doesn't agree with that. there may be a few. 90% of us agree. why not get that done? why not get done the things where we can reach a bipartisan agreement. i mentioned extenders because i think 90% of the congress would not like to see research development tax credit for instance lost. there are other things which i would hope there could be agreement on. we have a provision that goes to try to reduce the impact of these offshore tax havens. that provision is in the farm bill actually. excuse me, in the transportation bill that is now in conference. if that stays in there, that is something and i hope it will stay in there, it's my provision. i hope it will stay in there because it's the right thing to do. i should have put that first. any rate, so i wouldn't want to limit the list to this because

i'm sure there's a lot of things that can be agreed upon. why not? >> there's not necessarily what you are just talking about a sequestration plan or something like that? >> you asked me would i have a program that would avoid sequestration myself? i would. am i talking to colleagues about it? i am. okay. that's what you're asking me. >> you don't classify it as easy confidence building. >> total solution? i think if people could agree -- if there was significant bipartisan agreement on a plan to avoid sequestration, if there was a plan, in general raways i would be a confidence building measure. >> next question. >> mr. chairman, when the defense policy bill reaches the floor, that will be the first time any americans will see the senate debate it.

could you talk about why is it that the house can mark up the defense bill in public and you permitting marks in private and would you consider marking up the defense bill in an open session? >> we have many cases where we have classified information that we talk about in the defense budget. it's just too complex basically to clear the room every time we want to go in and out of a session. it's a practical solution. the votes are all made public. the outcome is made public. the debate on the floor is obviously public. there are too many instances where we either contemplate having classified or where we actually talk about things which are classified for it to be a practical way to do things. >> thank you. next question in the back. >> laura peterson, taxpayers for common sense. senator levin, do you agree with some of the comments that

general cartwright has made about the unnecessary size and expense of our nuclear arsenal? >> i do. >> next question. go ahead. >> this is a question for the senator. the budget continues to fiscal '12 in terms of freezing the budget but the house version actually called for unfreezing of budget because of deep link between u.s. and japan. is the senate willing to compromise when it goes in conference or is this something that will be a major source of conflict? >> i can't say we're not willing to compromise on anything since i have been putting in a plea for compromise on sequestration. so the answer is of course we're open to discussion and argument. this is one area where the senate and where senators webb and mccain and i particularly have felt that we are on a totally unsustainable approach relative to certain changes in

okinawa and that before -- this goes to general cartwright's point. before we make decisions on major spending because there's a lot of spending involved here, that we have our long-term strategy in place as to where we want to go and what we want to do and that is not the case with the situation in okinawa, japan, mainland of japan and guam. we do not have that report which we're waiting for. and it's a report which we believe very strongly we should get as to what the future requirement is in that area and until we get that report, our feeling is we should not be committing large sums of money to improvements in guam or to other pieces of that puzzle. >> thank you. next question. >> compromise always willing to talk. >> go ahead. >> general cartwright, to what extent do you think that emerging u.s. cyber capabilities

will offset spending in other areas and i was wondering if you think all this reporting about olympic games and other u.s. cyber operations against iran could actually enhance the u.s. deterrence posture. i know in the past you talked about the need to focus on offensive cyber capabilities versus defensive ones and also if senator levin wants to comment about that, that would be great. >> i think on the emergence of cyber capabilities, both defensive and offensive, part of what we're trying to make -- what i had at least advocated for was that like missile defense, like the conventional capabilities that this nation has in airplanes, ships, et cetera, that the balance and utility of those activities and how they are put together and integrated in a way against favors that we actually have and not ones we aspire to have or what we wish to have are