let's say, 80% the funds they would have needed to do the construction at the pace that was intended. does that mean they go at that pace and they fire 20% of their work force and maybe drive up the unit cost of the ship because of the inefficiency they've introduced, or is there some other mechanism? >> i don't know if there are any contract officers here. i hope there aren't because what will probably happen is the government will say termination at convenience of the government. that's in ever contract clause. they'll say, remember, we told you, subject to appropriations. we don't have it. then the contractor, let's say general dynamics, will say, you know, we have a contract here that says if you do this to us halfway through this, you owe us $1.2 billion in damages. at some point you have to say, how much are we going to save over here by cutting this, and how much are we going to pay in damages because of the contract? we're trying to do some of that now. it's extremely complicated, but

the fact of the matter is to find $500 billion in defense spending beyond where we are, you're going to have to cut more than 500. there's no doubt about that because you are going to pay substantial penalties for weapons systems that are halfway through or two-thirds of the way through. plus, the unit cost is really kind of silly. >> ron, if you could please sum up anything that's on your mind about the shut down question or anything else. >> i agree with steve that the government's not going to shut down. if i didn't agree with you, i would not say so out loud. but i would add a different reason to it. i, too, went through two government shut downs that republicanse republicans perpetrated. the other thing they say, and this comes straight out of the republican philosophy, is no one cares. they're not even going to notice. so i would say within about eight nanoseconds of the shut down, "the washington post"

featured stories about these government employees that worked so hard all year long, and now they're not going to get their checks. they can't buy presents for their kids at christmas. they had stories about families who drove all the way across the country with their dog and everything and couldn't get into a national park. that's what's going to happen. you're right. boehner remembers that, and so do other members. they're not going to let that happen. they'll do everything they can to keep it from happening. but it might be a good thing. i've thought about this several times during this conversation. we need an outraged public. we've got to do something about our situation. this is only like a footnote to who's coming if we don't address our problem. polls show the americans say they understand we have to do something about deficit. the final thing i would say is sequester is a horrible idea. you called it stupid at least three different ways. i completely agree, but it's better than nothing. >> fascinating. >> i don't want my wrap-up

thoughts to be about export control. can i say one thing? >> yes. >> not that they're not wonderful. you know, i am constantly in these conversations reminded of that great quote that people see change only in necessary, and necessity only in crisis. i would feel bad if i walked out of this room without saying we are clearly the most innovative country in the world still, and if we're not seeing this as an opportunity as this debt crisis is an opportunity, as this deleveraging crisis is an opportunity to think about how we, as a nation, are thinking about these bigger picture items and how do we cancel ship programs, we're missing a real opportunity. we have to refocus on growing this pie. that's the solution. that's the solution. >> okay. go ahead. >> i just got to add one thing to that. i agree. philosophically, you're right. in order to see those opportunities and make them work, you need leadership. and that's the main ingredient we lack right now.

we do not have great leaders, either in administration or the hill. >> so we'll take about a ten minute break and reconvene. please join me in thanking the panel. [ applause ] as you just heard, the panel is taking a ten minute break. during this time, we'll show you remarks of senator kelly to the group from earlier today. she's the ranking group of the readiness subcommittee. when they reconvene, we'll return to our live coverage here on c-span 3. [ applause ] >> let me just thank you so much. michak michel, deeply appreciate being here in front of the brookings

institute. i appreciate all of you who have come to participate in this. really thrilled to see the two panels that are following me on this because it's a great array of national security experts, department of defense officials, and members of our defense industrial base that i'm sure will give you even greater insight than i'll provide today. but what i'd like to do is provide the context of where we are with respect to this issue of sequestration. because our country is facing a grave threat to our national security, and the grave threat was created by congress in the debt ceiling deal that we did last summer. i am one who voted against that deal because, frankly, i didn't like the way this wasbeginning where it put our national security. also, i would have liked to have seen us do what we should do in

terms of the fiscal state of the country and put together a strong, responsible fiscal plan for our country that takes into account the big picture, which obviously is not just defense spending, not just non-defense discretionary spending, but also 60% plus of our budget that includes mandatory spending. until we do that, we're not going to get our fiscal house in order in the way we need to to get our country on the right track. today, we're here to talk about this threat to our national security. i want to put it in perspective because i'm not someone -- i serve on the senate arms services committee. also, i'm the ranking republican on the readiness subcommittee. i'm not someone who says we shouldn't cut anything from our department of defense. but we have to put into perspective where we are with our department of defense right now because in addition to this issue of sequestration, the president's proposed 2013 budget

that has come forward is already being taken up by the senate armed services committee and the house committee as well in terms of the authorizing committees. that will be a cut of $487 billion of spending reductions over the next ten years. there are some pretty tough choices in those initial spending reductions. but our defense leaders and secretary panetta have testified before the senate armed services committee about the choices made in those reductions, and they're difficult but doable. what we're here talking about today is an additional 500 to $600 billion in across-the-board fashion that will come in january of 2013 because of the super committee's failure to come up with savings. and it hits both defense and non-defense. my focus today will be on the defense end.

but that additional $500 billion gets close to $600 billion when you include interest. it's done in across-the-board fashion. essentially, everything gets cut. there's no strategic thinking to the way it would be implemented, and therefore we do everything insufficiently. if you listen to what our military leaders say about it, starting with secretary panetta, he has said we would be shooting ourselves in the head to allow sequestration to go forward in january. he's described it as devastating, catastrophic. it would inflict severe damage to our national security for generations. and to understand why our military leaders are so concerned about this, again, i said i'm the ranking republican on the readiness subcommittee, and i've been particularly focused on making sure that we maintain the readiness of our forces to prevail in the

conflicts that we're involved in today. we still remain in a conflict in afghanistan. and to deter tomorrow's conflicts. when that deterrence fails to defeat our enemies decisively, that's why our national security exists. and we now have one of the most competent and battle-hardened military forces in the history of our country. i know many in this room have met our men and women who are serving right now. the training that they have, the courage they've shown is phenomenal. they are the very, very best. and we cannot, at this time in this moment in the history of our country, gut our first-class forces or break faith with our troops. if you hear what our chairman of the joint chiefs of staff has said recently, it's pretty shocking. chairman dempsey has said that if sequestration goes forward, that our advantages over

potential adversaries will diminish. it'll diminish deterrents and increase the likelihood of conflict. and none of us wants to see that happen. and if you look at other times in the history of our country where we have reduced defense spending, let's go back to the early '90s. at that point, we had ended a conflict. we had thought that we were going to take a peace dividend at that point. of course, we eventually had 9/11. at that point, there was a feeling in the country that we could scale back on defense spending. and here's where we are today. we're not in the same position at all. we are in a position where, according to secretary panetta, just last month he said that the threats to our country have not receded. our troops remain engaged in the conflict in afghanistan. we continue to confront a real

terrorist threat emanating from somalia, yemen, pakistan, and north africa. and as secretary panetta has said, we continue to see the proliferation of weapons of mass destruction, threats from iran and north korea, and turmoil in the middle east. we also see what is happening, the rising power of china and the investment they're making in their military in the asia-pacific region and the conflict we have right now in syria. the course of where we are right now in our national security, this is not a time for us to make decisions that will undermine our ability to confront these challenges that we face right now. and let me talk briefly what this means and what we know so far will be the impact of sequestration on our various

forces. with respect to the army, i told you that the national $487 billion in reductions -- that's going to result in approximately a 72,000 reduction in our army. now, everyone who's looked at this would agree with getting out of iraq and a gradual decline in the level of forces in afghanistan that we were going to do some downsizing of our ground forces. so the initial reduction of 72,000 to our army is happening. but with sequestration, general has testified that we would be facing an additional 100,000 reduction in our army if we allowed sequestration to go forward. with 50% of that reduction coming from the garden reserve. and i think this is an issue that governors aren't aware of fully yet.

although, elected officials at all levels in this country are becoming aware of it. in fact, the council of mayors recently issued a resolution on the effects of sequestration, urging congress to come to an agreement on it. think about it. 100,000, 50,000 from the garden reserve, and the function that our garden reserve play. we couldn't have fought in iraq or afghanistan without the guard or reserve, and they also play a very important homeland function for our security as well as responding to natural disasters for our governors. let's talk about the marine corps. under the initial reductions that are likely to happen, the marine corps is going to be reduced at this point by 20,000. . if sequestration goes forward,

they will face an additional 18,000 in reduction in our marine corps. here's the thing that keeps me up at night. the assistant come candidate for the marine corps came before the readiness subcommittee. i asked him about the impacts of sequestration. he said this. sequestration would repder the marines incapable of conducting a single major contingency operation. think about it. our marine corps. that, to me, is a shocking statement and one that cries out for us -- >> we'll go back now to our live coverage of the brookings institution discussion on national defense spending. >> -- a little frustrated by a strange thing that's happening in defense politics today. now, rather than focusing on the very compromise of both -- and i'll say the word -- tax, rather

than revenue and entitlement reform that the congress super committee was intended for, the discourse out there in defense discussions seems to be a cross between two strategies. one is a deliberate strategy to maximize the level of panic over what it might mean for the u.s. military and national security. i think i can't resist but throwing across the idea that having more than 150,000 marines, but that they would still somehow not be able to carry out a single contingency or the idea that the navy would be the size it was in 1915 but equal amount of effectiveness as it was in 1915. i would much prefer to have the class of marine today than one of the submarines back then. even two, three of the submarines back then. while we have that going on on one side, we also have a second

strategy, to deliberately not plan or prepare for the very nightmare contingency we're laying out there. if this was the movie spinal tap, the volume would be set to 11 while pentagon planners are being told to wear ear muffs. unfortunately, operation hysteric hysteric hysterical ostrich, as i jokingly calls it, is a way to approach national security planning. this panel is very much intended to get our way past that, to bring together a group of some of the nation's top experts and really dig deep into what the potential implication, the sequestration might mean, specifically for the industry and for national security as well as talk about alternatives and solutions, to treat it seriously rather than just turning the volume up to 11 and hoping something good happens out of that. so the panel today features dr.

rebecca grant. she worked for the rand corporation. she's presently the director of the general billy mitchell institute for air power studies, which is an air force association non-profit dedicated to studying all forms of air power. as well, she's president of iris independent research. then we'll hear from mackenzie egland. she served in the office of secretary of defense and joint staff. then she served as a research fellow over national security at the heritage foundation as well as a staff member on the 2010 defense review independent panel. she's currently a fellow in the maryland wear center for security at the american enterprise institute. finally, we're welcoming back to brookings tom davis, who is notably a former brookings

federal executive fellow. behind that, a graduate of the u.s. military academy, has a masters in international security economics from harvard. he was a program analyst for the army, military assistant to the secretary of the army. he also commanded in the third gulf war as well as an assistant professor at west point. so a set of really great experts to dig into an important issue. >> thank you, peter. it's great to be here today and to be on the panel with mackenzie and tom. we're going to have a lot to talk about with the defense sequestration possibilities. i want to review two things very quickly, which you probably all know. one is, i think, that we probably all share an assumption that it's time for the defense budget to come down.

as you know, we have been spending at historical highs. you've probably all seen the chart that looks at the top line. what always strikes me is that our spending in recent years has been higher than it was during the korean war. if you're like me, you pinch yourself and say, how did we get into this situation? but the fact about sequestration itself is really a frightening one. you talked about spinal tap, peter, but i was trying to think of a movie that would give us a sense of what this was like. the only one that came to mind was the old james dean movie, "rebel without a cause." the losing driver catches the sleeve of his jacket on the car and it's fatal. there's simply no way to bail out of this. in fact, what we've seen is d.o.d. starting to try to bail out by throwing some programs over the side, by making some cuts. the hard thing about sequestration is that we have come off a period of three

rounds of budget-driven cuts. again, we may all agree that cuts are in order. the problem here is that we don't see these tied to a national strategy, to strategic decisions about how we will direct these cuts. so sequestration is tough, then, and it's tough in its mechanics. as the first panel mentioned, sequestration means quite simply a cut, probably about 10%, to each account. that means that if it's spending $51 million in basic rnd, take out 10%. it's such a difficult way to go about cutting the defense budget that it's simply, i think most of us would agree, a non-starter in terms of sound, fiscal management. so i want to talk about two ways that we might see this unfold and tell you why we really need

to avoid sequestration and get to the place we need to go, which is a strategy-driven, hard set of choices about our future defense budget. when we think about the worst case of sequestration, the image for me that comes to mind is a fire base in afghanistan that's not able to get at c-17 drop of water, blood, ammunition, whatever of those troops have asked for. there are other parts of the budget that are likely to suffer. the one i want to talk about here is the rnd accounts. research, development, test, and evaluation. you all know what those accounts are about. they are comprise about $70 billion. so even if we have a stay of execution on program line sequestration, one possibility

is for congress to go back to d.o.d. and say, all right, we're not going to make you cut 10% out of every one of these thousands and thousands of programs. we'll give you a bogey of about $50 billion for purposes of discussion and let you find a way to go at it. well, when you've got $70 billion in rnd, maybe that's a tempting target. let's talk first about the basic part of that, the science and technology piece. 6-1 and 6-2 money. these are perhaps the little billions of dollars. they comprise some of the most essential money for innovation. they include basic research carried out at universities and applied research that attempts to take new developments? nano technology or cyber and convert them into something with a useful military application. these little cuts can be quite important. if we have a case where we see them simply go away, we pay the price as a lost technology

opportunity. but there's another problem, and that's in the remaining 50 or so billion left in the rnd accounts. this is money that goes into what the military likes to call demonstration and development. 6.4, 6.5, 6.4, 6.7. the army has work on its air defense system. the navy has big accounts. the air force, which has about $25 billion of that, covers some classified programs in that category. i think those are usually a lot of space programs. and also things like high energy laser and gps control. then defense y, there's another $17 billion in that part of the budget. it includes things we really like. things like cyber. things like homeland security crossover initiatives and also ballistic missile defense

initiatives. in short, these are not the kind of things we can afford to blindly slash, either through program level sequestration or through attempting to direct a big $50 billion bogey in one year into the rnd accounts. here's the reason we shouldn't do it. take something like the f-35 program. that's a program that along with many other major systems still has some rnd money, although it's also largely a production program. and what we learn about other programs going forward, for example, to use another air force one, long-range strike, is pretty compelling about the costs of doing insufficient rnd. a rand study completed in 2011 found that insufficient rnd was a major cost driver in four major programs. those included f-35, the navy's now cancelled destroyer, the satellite and the army apache

helicopter. take money out of rnd in the wrong place, and you'll essentially bank on more cost to that program when and if you restart it again. we could talk more about onm and some of the other things. i think sequestration could also mean a tempting desire to take a lot of money out of that operations and maintenance account to essentially bench portions of the military, stand down the aircraft, bring the ships back to port and do things like that. i think what we can see as soon as we look at concrete examples is that we agree the defense budget needs to come down. we need to look at what goes on after iraq and afghanistan. but slashing through the rnd accounts is not the way to do it. time to get to a strategy discussion and make those hard choices. >> okay. thanks. mackenzie. >> thank you, peter and michel, for having me on the panel. thanks to rebecca and tom for letting me sit up here. i'm going to take a different angle. rebecca is a good friend.

we've published together and agree on a lot of things. not everyone in the room agrees the budget has to come down. we're cutting defense. the military is owning up to it. they're patriotic. the chiefs are standing up to it saying we're doing it for debt reduction. actually, that's not the case. the president's budge that's sitting on the hill right now proposes a generous net increase for every other federal agency and $1.5 trillion in new taxes. so d.o.d. is the only federal agency taking any sort of spending cuts. as you know, the debt's not coming down. but i agree with her broad points. i was just at a meeting with a senior air force official. it came up in one of the questions earlier. the discussion was about the component cuts. it just serves as a great anecdote and example of how -- of what a knife's edge the u.s.

military is operating under. high budgets aside. most of those budgets go to people. let's just talk about -- michel had me here talking about that other times. that's not what i want to talk about. this delta of 1500 people in the active air force and the reserve component air force and could they have done that any other way and sliced that any other way? it's driven by force structure reduction. so a-10s, for example. you're familiar with the debate and family feud that's spilled out into the public. literally, it can't be done any other way because they're on a knife's edge. the subject panel here is solutions. one of the favorite solutions i hear around town is nothing new, but it's any deal to fix sequestration is going to have more defense cuts, which kind of baffles the mind since we're already talking about the 487

and how difficult that has been to absorb. so sequestration is going to get bought down, but it's not going away. that's unfortunate because i think that should be the discussion. you know, ultimately in the end, even if congress backs into sequestration, the pentagon will get flexibility. it will never come down to the program level because of the eloquent destruction that's been described up here on the stage today. so i've been thinking a lot about what are the solutions. let's get aside from how awful it is. i think there's consensus it's pretty ridiculous and it was a silly bill that passed and it was an awful choice put into place for many members of congress. that is the sequester. so the solutions. i was at bloomberg news conference last week. i heard a lot of members of congress talking about sequestration, like senator mccain, senator levin, norm

dicks, congressman welch, a bunch of others. i thought i might hear something new. i wasn't surprised i didn't hear much new. a couple things. washington loves to dust off the old plan that died before there was the new plan and recycle ideas when we have to come up with a new solution. i just figure i'd tell you what was going on before so you know where everyone is going to go. all the things we're going to turn back to when we have to have this conversation in the lame duck. may or may not be the right solution, but we're not going to r resurrect big, bold, new ideas. i've met with senator warner's staff. a lot of them want that grand bargain. they're not talking about it publicly, but there is the will there. it's not all gloom and doom. nonetheless, what are the old plans that died before we had the bca and are going to get resurrected?