of cyber. mr. secretary, you've said publicly, and even at our briefings, that you viewed cyber as potential digital pearl harbor. and general dempsey, you in again at meetings, briefings and our cyberexercise talked about the great sense of urgency. could you talk about what you mean when you say a digital pearl harbor. do you feel that as you indicate on page six in your testimony, sir, do you have the right money. and do you also have the authorities that you need to do to protect the nation. you have here in addition to the appropriations chair of senator inouye and ranking cochran which as the chair of the intelligence committee. you have one of the co-authors of lieberman/collins. so we want to make sure we don't have a digital pearl harbor. so could you elaborate on what

you meant. do you have what you need? and what should we have a greater sense of urgency in getting some things done. and what would you say they be. general dempsey, eade like your comments as well. >> senator, i appreciate the question. i think there has to be a greater sense of urgency with regards to the cyberpotential. not only now but in the future. i think this is, obviously, a rapidly developing area. the reality is that we are the target of literally hundreds of thousands of attacks every day. it's not only aimed at government. it's aimed at the private sector. there are a lot of capabilities that are being developed in this area. i'm very concerned that the potential in cyber to be able to cripple our power grid, to be able to cripple our government systems, to be able to cripple our financial systems would

virtually paralyze this country and as far as i'm concerned, that represents the potential for another pearl harbor. as far as the kind of attack that we could be the target of using cyber. for that reason, it's very important that we do everything we can, obviously, to defend against that potential. i feel very good about our capabilities in terms of defending our systems with the help of nsa and their great technological capabilities. i do think that authorities and the ability to try to not only -- it's not only the defense sector but the civilian sector that we have to improve this. and that's the area where we have to deal with the additional authorities. the lieberman collins bill is one that addresses that, and we support the congress enacting that in order to facilitate that capability. >> i would just add, senator,

that we've seen the world go from distributed denial of services, just hackers, overwhelming a website, to incredible intellectual property, theft and technology theft to now destructive cyber. it's in the open press. and that has all happened in a matter of a few years. and that this particular domain, this cyberdomain is changing rapidly. and so to your question about sense of urgency, i can't overstate my personal sense of urgency about that. secondly, i'd like to pile on to the secretary in support of the pending legislation that encourages information sharing and takes a good, necessary but only first step. and then thirdly, i'll tell you on the issue of authorities, we -- the president does have the authorities he needs. what we need to develop are some rules of engagement if you will because these things occur at network speed. this is not something where we

can afford to, you know, convene a study after someone has knocked out the east coast power grid. so we're working on that. >> so i know my time sup, but what you say is that you feel there's enough money in the dod approach to meet the protection. what gives you heartburn and concern is the protection of dotcom and as you develop rules of engagement, we've got the congress now has to do -- really have a sense of urgency at developing

>> thank you very much. mr. chairman, i know my time is up. i have other questions related to military medicine. if i could one final note, mr. secretary, i wouldn't be the senator from maryland if i didn't raise the ship the comfort. today is the beginning of our sail. tall ships coming into baltimore harbor. as ancient ships come in, we're saying good-bye to the hospital ship "the comfort." i take no comfort in that. could you take a look at it and see if i could keep the "comfort" or if maryland could keep the "comfort." thank you. >> thank you very much, mr. chairman. and mr. secretary, mr. germ dempsey. you recall your time in the house of representatives. i was one of your local acolytes. you set the stage in our budget deliberations for us to reach a balanced budget which i'm very proud of that achievement, and i know it wasn't easy. i asked the appropriations committee staff to compare

spending when our budget was in balance to where it is today in three categories. using constant dollars. and here's what they came up with. going back to 2001 in domestic discretionary spending there has been zero increase in spending. when it comes to entitlement spending, there has been 30% increase in spending since we were in balance. with the budget we are proposing, the base budget, not the oco, but the base budget we're proposing for the department of defense it will be a 73% increase over what we were spending when we were in balance. and constant dollars. i might also say to you, though i think the sequestration clearly hits hard, maybe too hard and too fast, at the end of the day under sequestration, defense would end up with the same percentage of the gnp that it had when the budget was in balance. so my question to you is one to take a step back, perhaps from your role and go back to your

history with the budget. what is a fair number for us when it comes to the defense of this country and security. i know we need every dollar it takes to be safe. but if we are going to cut back in health care and education to provide more money on the military side, isn't that going to have an impact on the men and women who volunteer to serve in our military and whether they are qualified to serve? >> first and foremost, you know, with regards to the defense budget, i do believe we have to play a role. and the fact is that we're going to be cutting $500 billion from the defense budget over the next ten years. >> under sequest -- in addition to -- >> and then if you add sequestration to that, you are looking at another chunk, $500 billion on top of that. so it does have to play a role. at the same time we have a responsibility, obviously, to

protect the strongest military in the world and to help defend this country. on the larger issue, senator, you know this as well as i do. and i think every member of this committee knows it. you are dealing with a very serious deficit issue and debt issue. and you can't keep going back to the same well to try to resolve those issues. you can't keep going back to domestic spending. you can't keep going back to the discretionary side of the budget in order to solve a multitrillion-dollar program that faces this country. i mean, if you are serious about taking this on, it's what we had to do, frankly, beginning in the reagan administration. that's what we did in the bush administration. it's what we did in the clinton administration. if you are serious about taking this on, you have to put everything on the table. you have to look at mandatory spending. you have to look at revenues. you also have to look at how you

cap domestic discretionary. but you're not going to solve this problem with the domestic discretionary budget. you just aren't. >> when we brought -- in the simpson/bowles commission when we brought them in to see where we might save money, the most startling testimony came when we asked about private contractors that work forward the department of defense. the basic question is how many there are? and the answer is we don't know. we really don't know. estimate somewhere maybe governmentwide, some 7 million. there are 2 million federal -- civil service employees to give you some context here. and when you look at the dollar amounts being spent in the department of defense for contractors, as opposed to the civilian workforce at the department of defense and those in uniform, it's substantially higher. for many of us, this outsourcing just became a passion. and people stop asking the most basic question. is this serving the nation well? is it saving us money?

i notice that you are insourcing more. you are bring something jobs back into the department of defense. in your earlier testimony you said you need to reduce the service support contractors. so it seems to me that there has been documented waste when it comes to these service contracts. when it comes to the contracts for big ticket items, i will tell you the cost overruns on the f-35 equal 12 solyndras. i haven't heard too many press conferences on those. but it's an indication to me that there is money to be saved there and i know that you would take that personally and want to do it. how much is built in your cost service and cuts when it comes to this potential overspending on contractors and cost overruns on projects? >> obviously, on the efficiency front, this is an area of principal focus. we did 112 -- or $125 million

last year? >> on service contracts? >> on efficiencies. >> $150 billion last year with regards to those efficiencies. we are adding another $60 billion on top of that. a lot of that is aimed at trying to reduce the contractors and to try to gain greater efficiencies there. look. i'd be the last one to say that we can't find those savings in the defense department budget. we can't. and that's what we did. but the goal is not simply to whack away at it without tieing it to a strategy about what kind of defense system do we need for the future in order to protect the country. as long as we can tie it to this strategy, as long as we can make sense out of how we achieve these savings, then we can achieve, as i said, the $500 billion in savings that we've been asked to do by the congress. and we can achieve and be more

efficient in the future. but don't think that defense alone is going to solve the bigger problem that you are facing in this congress and in the country. >> thank you very much, mr. chairman. mr. secretary. welcome back. i have two kind of disparate issues i wanted to cover with you. last november we had a short conversation about what i was hoping to be perhaps the next step in breaking down the discrimination against people with disabilities in our country. and that was allowing people with disabilities to serve in our armed forces. we had a unique case of a young man who had gone through rotc in california. had done extremely well on all of his tests, all of his scores but was denied entry into the military because he was deaf. and i said perhaps having a

pilot program of bringing people in to the military who could add to the defense of this country, who would be exemplary employees but they may not be able to be the chairman of the joint chiefs of staff. they may not be a pilot in the air force or other things. they can do a lot of other things. and so since that time, i must tell you that we've had some problems with the department of defense and moving ahead on this. you even requested, mr. secretary, a briefing on this from people down below, but nothing is happening. i can tell you that my staff has tried to work on this since the first of this year. numerous phone calls, meetings have been canceled. we could never get any response on this about setting up such a pilot program until a couple of days ago when they found out i was going to ask you about this and we now have a meeting set up

next week, which is fine. i understand all that. i'm just saying that i know you are going to look at that. i just think this is one place where, again, we've got to break down some of these barriers. there's a lot of people with disabilities that want to serve their country, can serve in the air force, army, navy, marines. they may not be able to do exactly everything that people can, do but they can do within their abilities. they provide a lot of support. i just ask you once again to really take a look at this and set up a pilot program. and if you can't do it, mr. secretary, if you can't do this, if something is prohibiting you from doing that, let me know and we'll try a legislative approach on that. >> i appreciate your leadership on this issue. you've been -- you've led on this issue for a long time during your career here on the hill. and i really respect it. more importantly, i agree with you. and for that reason, you know, i

think we can try to set up a pilot program. i mean, look, right now when we have wounded warriors. and let me tell you. wounded warriors come out of there with new legs, new arms and sometimes they are back at duty. and they are doing the job. and they are doing it well. >> exactly. >> so if we can do it for wounded warriors, i think we can reach out and do it for others as well. >> some of these young people that are coming through schools right now and stuff who have a lot of abilities and want to serve. that was one. the second one had to do with another issue that i briefly raised with you in afghanistan. the department of defense has been involved in a program of spurring small businesses in afghanistan. obviously, get people off of the drug business and stuff. and one of that was in the carpet industry.

the afghan law -- there's an afghan labor law. u.s. law. ilo convention 182 about child labor. about using child labor in this thing. we asked that you work with the department of labor, our department of labor on this to incorporate, to use an ngo in terms of monitoring this and setting up an inspection system. an independent third party inspection and verification system to make sure that no u.s. taxpayers dollars are used to support businesses that employ children in the worst forms of child labor. now we've had some progress in that, but as we tend now as we'll turn this over to them, we're not setting up a mandatory verification system. we were kind of doing a pretty good job. now that we're handing it over in our agreement, we're not

making an agreement to make sure they adhere to the independent third party verification system there. i know it's a small thing. you have a lot on your plate, mr. secretary. talking about all of our budgets and things like that. to me, this is just, again, one of those areas where we can do a lot of good while also supporting an industry in afghanistan and again, i would ask you to look at those contracts that we have to safeguard that verification and that third party verification system in afghanistan. >> i know we're aware of your concerns in this area. let me ask bob hill to comment on that. >> senator harkin, i think you are referring in part to some contracts through the task force revisits and stability operations. and they did do some delays trying to make sure that there were appropriate safeguards on child labor. it's a difficult area to work on. a country that has different rules and standards. >> no, there's an afghan law.

>> say again? >> there's a law in afghanistan. we just want them to adhere to their own law. >> i hear you. they are aware of the concerns. and i think they have made some steps in the right direction but i'll promise you we'll go back and make sure that we're doing all we can. >> if you could, just give me a point person to work with in your office down there because my staff, and i know this pretty well. we know it needs to be done in terms of that verification. >> that's the big sticking point. thank you. thank you, mr. chairman. >> thank you very much. senator collins. >> thank you, mr. chairman. first, let me thank my colleague from maryland for bringing up the very important issue of cybersecurity. she along with senator feinstein, senator lieberman, senator rockefeller and i have been working very hard and agree that it's absolutely critical that we set standards for critical infrastructure and that that has such important

consequences. and i very much appreciate the endorsement of our efforts that i heard this morning. i also appreciate, mr. secretary, your urging us to act sooner rather than later to avert what would be the disasterous consequences if sequestration were allowed to go into effect. i think it would be a huge mistake for us to wait until the lame-duck that's too late, and we do need to tackle that issue now. we really do. and i think it would help if you provide us with even more detail, and i know the armed services committee has asked for that. let me turn to another issue that refers to our priorities. as i review the department of defense's budget, i am very concerned that the ship building

account is significantly undervalued. ship building represents a mere 2.2% of the budget requested by the department of defense. 16 ships were eliminated or delayed outside the five-year budget window, and just to put this in perspective, our country currently spins s as much on interest payments on the national debt every month than we do for shipbuilding in the entire year. further, the executive branch alone spends more than the entire shipbuilding budget, $15 billion a year on federal agency, travel and conferences. i know the administration's

trying to address travel and conferen conferences, and that says something about priorities and the commanders have testified repeatedly about the increasing importance of the maritime domain and their areas of responsibility. i recently returned from a conference in southeast asia, and i know secretary panetta, you were there as well in which i heard about china's aggressiveness in the south china sea and its maritime claims and its harassment of vessels from the philippines, for example. . the importance of our navy and the ability to project power particularly with the pivot with the asia pacific region cannot be overstated. so i'm concerned that the budget

projects only 285 ships by fiscal year 17 when every study i've seen whether it's inside the department and independent reviews have said that we need and a minimum between 300 and 315 ships and the fact is the ability that quantity still counts and that you're going to try to project power, so i would ask you to address my concern and how the department settled on 285 ships when virtually every study calls for 300 to 313. >> i appreciate the concerns

you've indicated. when i asked the navy to do and the navy chief to do is to make very certain that we have the ships we need in order to project the tower we have to project in the pacific, the middle east and elsewhere and be able to do that effectively and their recommendation was that based on the number of ships that are in line to come on, the ones that we are already producing and to do this and do this in a way that meets our needs that the 285-ship approach is a good baseline and we're ultimately going move to 300 ships by 2020 and we're maintaining 11 carriers and we'll maintain a number of the

anphibs and we'll maintain our destroyer with regard to the fleet and we'll maintain a strong submarine force as well and i'm convinced based on the navy chief's recommendations that we can do this. obviously meeting our fiscal needs here, but we can do this in a way that protects a strong navy for the future. i'm willing to keep going back and looking at those numbers to make sure that we're in the right place because i share the same concern. if we're going to have a strong presence in the pacific, if i'm going to have a strong presence in the middle east i've got to have a navy that's able to project that, and right now, i think everybody i've talked to in our shop and in the joint chiefs says we've got the force to be able to happen. >> i feel obligated to comment on this because i mentioned in my opening statement that the budget we submit side a joint budget. it's not the individual service

budgets that are bundled together. we were faced with $487 billion and so every service paid a bit of that bill. i will tell you the navy paid least of all because we prioritized exactly the issue you talked about, but quality count in the air and it counts on the land. >> thank you, mr. chairman. >> thank you very much. welcome, mr. secretary. it's good to see you. i've known you for a very long time. i was sitting here thinking, your first appearance before the intelligence committee when you became director of cia you were somewhat tentative, somewhat reserved and today i saw you at full volume, totally in control, so it's been quite an evolution. let me begin by thanking you for

the help you gave us on our intelligence codel to afghanistan. it was very much appreciated. i was wondering if i might be able to talk with you on the glock subject and you had a meeting with admiral allen and the four of us had time and he was most impressive and we learned a great deal and one of the things that came up was the incident in november and it became rather clear to me that there were mistakes made on both sides and general allen, much to his credit has taken at least -- i think it's six or seven steps to remedy some of the problems. here enter the glocks. you raised the question of the glocks. it is my information that pakistan wants most of all, some

civilian announcement that mistakes were made on our side, and i think mistakes were made on their side as well as i've looked into this and that the glock problem could be solved. as a matter of fact, was there a meeting on the 11th, a day or so ago unless it was cancelled and so they're prepared to rather dramatically lower the cost, but the apology is all-important. as we have, and if we can develop a positive develop with pakistan and both you and i and others know what the road have been and that there might be an opportunity to make a change in that direction to go with the new head of isi as well as some

other things. so my question of you, and my lack of understanding is why there can't be some form of statement that, in essence, says, if it's believed i happen to believe it that mistakes were made on both sides and of course, the united states apologizes for any mistakes that we made and we have taken steps to correct that and see that it will never happen again. >> your chairmanship of the intelligence commitet and dealings that we've had to have with pakistan and you're right. it's a complicated relationship, and it's also a necessary relationship by very muirtue of security and needs in that area.

this is an issue, and this is an issue that's still under negotiation and there are discussions that continue with regards to how we'll resolve this and the issue you discussed is one of those areas. i think general allen, the united states has made clear that the mistakes were made on our side and also made on the pakistani side and that we expressed the condolences for the mistakes we made and we made that clear and we certainly have continued to make clear the mistakes that were made. i think the problem is that at this point they're asking -- they're asking not only for that and there are other elements to the negotiation that are also involved that have to be resolved. so it isn't