efficient. but we're already taking in about 20% of our gdp in federal taxes, not to speak about state local taxes. it is tough. but at the end of the day, i'll have to say i think it is a -- my democratic colleague here, good, thank you. going to challenge me on this. i'll just say we can't increase taxes. >> what a warmup, bill. >> so, joe, here, just came back from vacation so hewe can't blame him for being late, i threw this on him at the last minute and he agreed to participate. joe i consider my utility man because he is the person you go to when you have a question on the budget and almost definitely has your answer. the only way i paid him for all these favors over the years is with free kupz ofcups of coffee at our office, which i assume he has a mediocre supply of coffee at his

office as well. joe served in a number of different positions as bill has, ranging from committees and the house to the office of management and budget in the administration, and has served as chief economist, staff director and variety of those positions and served with bill on the bipartisan policy center's debt reduction task force which came out in 20 10, which came out with a plan to reduce the debt which is inherited some of the proposals and policies that bill has been talking about up here with tax reform, entitlement reform. so joe you're jumping in the middle here, but we were talking -- >> the question was -- >> in terms of priorities in the federal budget and the growth in the entitlement programs and interest payments and how that's crowding out some of the other pieces. and so what do you think of the federal budget in terms of how it addresses our priorities as a country and where you see it moving forward? >> well, i assume that bill probably used this word already three times, the budget is not

sustainable. >> i didn't. that's first time. >> geez. >> i was getting ready to use that term, though. >> okay there you go. well, i beat you to it. the budget as it stands now is not sustainable. so is it meeting our needs? i think by definition, no. we have to make changes so that we are not, cue the slay piece piling up debt to the extent going forward that people like you are not going to be able to pay enough taxes to service that debt and also to do the things that the country needs to do. so that having been said, you look at what the budget does, and you come to the conclusion that there have got to be some changes. now, among those changes we will need to pay more taxes. there is no doubt about that. >> and right before you walked

in, joe, bill made the point that we could do it all with taxes. i don't think knowing as his republican credentials that he's recommending that and knowing what he supported under -- but -- >> yeah i -- bill probably also got into this too, and i apologize for being late. that's mostly down to me i should have been watching e-mails instead of playing with my granddaughter. among the problems that we have on the spending side of the budget is an unsustainably rapid growth of health care costs. i know that there are folks who are saying you know hoe sana singing hoe sana and saying that we solved that problem. i don't believe we have. and i believe in a few years, you know, two, three four years down the road we'll see that what we have seen is a little blip in the growth curve and it is -- even with the most optimistic forecasts now it is still health care costs are

still growing unsustainably. we have to do several things because of the growth of old folks like me, the growth of the number of old folks like me relative to the population even if we reduce the rate of growth of health care services per person, the number of persons is growing rapidly enough that health care costs will continue to rise. so we pay more in taxes, we face the reality of a growing population of people dependent upon health care, particularly through health care services particularly delivered through medicare. and that means that we will need to make adjustments in the other direction elsewhere on the spending side of the budget. so, you know, my usual one sentence answer is we're going to have to take every dollar that isn't nailed down and some

that are if we're going to get out of this nest. and why don't i stop there and we can -- >> sure. a component that both of you touched on is -- we have a room full of millennials here, very relevant issue given the programs are so -- >> i'm a millennial too just a different millennium. >> that so many of these dollars that we're talking about do go towards the generation that you are in, and that all of us will eventually hopefully be in but not towards the -- us in our earlier years. what do you think of that discrepancy and how that can be adjusted? >> you look at -- i'm sorry, you were asking me? >> either yeah. whoever wants to jump in first. >> go ahead, joe. and then i'll -- >> i would say the following. we have a lot of problems in terms of the performance of our economy, people talk about the

problem of growing inequality. that is a reality, which it seems to me is most painful when you look at the fact that standards of living are not growing as rapidly as we would like. in the very near term, we have -- we have recently had and looking forward for at least a little while job opportunities have simply not been as available as we would like. eventually i believe we will get past that but incomes have not been growing very rapidly. if our society is going to continue to have growing standards of living to which, you know, we all aspire we are going to have to make sure that as many of our population as possible are going to have skills that are necessary to advance in the workforce. that raises issues, all the way

from preschool education where we are, even relative to some competitors around the world sadly deficient, just in terms of access. all the way through the quality of education going through secondary school and into college where interestingly enough the u.s. population overall continues to be doing relatively well with respect to post secondary attainment, with respect to -- in comparison with other countries, but that's because of people like me older people, who have degrees where as our younger people -- the rate at which we are conferring degrees on our younger population is falling behind other countries around the world. so we need to do a better job in post secondary education and that includes serving first

generation, second generation americans, there are still a lot of kids out there and please don't be offended if i call you kids, i still call my 40-year-old grandchildren kids, we have kids out there who have not had anyone in their families get a post secondary degree or attend at all, which raises a lot of issues with respect to the support they need to get into school to have a path to paying for it and then to get themselves through. we have people in their 20s who started but didn't finish or didn't start but clearly are capable of attaining degrees. and we need to find ways to help them to complete degrees while they support their families, while they have multiple obligations in time, which makes it very hard for them to attend

school. those challenges are going to cost money. we have complaints from some quarters that our elementary and secondary schools are extremely inefficient. and we could save money that could help us to pay the bills to do a better job there. to some extent that's true. but you can't make that argument with respect to preschool. we don't even have the classrooms, we don't have the teachers, we have to start that from the ground up. and that is not cheap. >> bill, joe mentioned in college education and something we have been working on a little bit at the bipartisan policy center as we have a commission on retirement security and personal savings that is co-chaired by former senator kent conrad and joe lockhart who is an official in the bush administration. they have been discussing personal savings and the first step of that often is student debt because many students exit college with a lot of debt some

don't even finish and then have the debt carried over and it is sort of inhibiting their ability to save and pursue their career and so talking about some of the challenges that joe talked about, but also the savings issues and student loans what are your thoughts? >> at the risk of having the millennials out here throw things at me let me -- >> i hope you're accurate. >> let me be -- not disagree with joe entirely, but let me just -- i know you're all college students let me just say not everybody needs to go to college. some of the skills out there i asked purdue, lane grant college where i did my undergraduate work, mitch daniels the president of purdue university now who used to be omb director here governor of indiana had a major study that they conducted with the national academy of

sciences i believe. and skilled worker ss, plumbers, pipe fitters making more than his college graduates long-term. all i'm suggesting and here is getting into student loans is that while i agree that those who want to go to college should go to college, need to go to college, there -- we shouldn't by creating certain incentives through a student loan program that makes it -- creates that debt on you out there, we shouldn't be incentivizing the creation of additional debt, which means that we shouldn't have -- should have other opportunities besides a four-year graduate degree and i'm not taking anything away from what you do and what you're being good students that you

are, but just recognize they're out there, there are other people that do not need to go to college and what we should be focusing on from a long-term perspective is developing those skills skilled development is critical. i want to come back to one issue, though, broader, back to the tax issue, shai mentioned at the outset that another component of the federal budget that is fast growing and will continue to -- will grow fast depending upon something that is right now being controlled and almost by global economics and that is interest rates that(aai the fastest growing component of the federal budget will be if interest rates normalize back at 5% will be just paying the interest on the public debt. our public debt right now is close to about $17 trillion -- total gross debt $17 trillion.

and one thing that that debt means to me it is a tax, it is a tax on future generations. it is not a -- it is, again, here, you're getting screwed doubly. your social security benefits are not going to be there, and more importantly you're going to have to pay for that debt that we're accumulating today. either pay the taxes today and now in fairness, i would say you can't get yourself out of this without increasing taxes today as well as -- or else the taxes -- you get the taxes in the future on paying that debt. and more importantly, and the one that really concerns me about the debt is that we're at something like about 74% of gdp on debt held by the public. and that historically has rounded up closer to 40% of gdp. current projections, even though the deficit the annual deficit is coming down, debt held by the

public continues to grow in the near future. and that's with some optimistic assumptions about economic growth. and the real problem the real problem, joe heard me say this, shai heard me say this before, we have an old senator that tends to get himself in hot water a lot particularly with aarp aarp, senator simpson from wyoming likes to say that we have a treaty with taiwan and that treaty with taiwan says that should china attack taiwan we would have to go to war with china to protect our treaty with taiwan. and today we have to borrow from china to go to war with china. little bit embellished, but the truth of the matter is, of that debt, held by the public, not

inirgovernmentin inner governmental debt, of that debt held by the public today, about 56% of it is not owned by americans. thank you very much. we're still a good place to invest. but we lost some of our sovereignty. we had debt held by the public after world war ii our generation, but we owed it to ourselves. war bonds. that's not the case today. it is a global economy. and so not only is your social security at risk not only is your taxes at risk, your sovereignty -- control of your sovereignty of the country we love is somewhat at risk because of the -- >> i want to add one thing to what bill said which i agree completely, including the point that not everybody needs to go to college. we need to do a better job of having those people prepare to go from high school out into the world, not doing a good job of that. >> i agree. >> i wanted to add one thing

that bill remembers congressman john brad from south carolina for whom i worked for four years, wonderful gentleman, no longer in the congress, wish he were, he used to say if you want to erode public respect for government, the easiest way to do it is to build up a substantial public debt. because one of the complaints you hear from people is i pay all this money in taxes and i don't get anything back for it. and you get the national defense, you get your highways, you get food inspection you get lots of things that people don't think about. but to the extent that people are paying taxes, for the purpose of paying interest on the debt they're exactly right. they aren't getting anything back for that. i always used to say that the one thing you get for the taxes you pay to pay interest on the debt is you prevent the acme

collection company from backing the truck up to the white house and repossessing the furniture. that's all you get. you don't get any highways. you don't any food inspection. you don't get any national -- >> mm-hmm. >> you also lose i mean we could go on for a long time. you lose a lot of flexibility with respect to making policy in the future. it would be nice if we didn't have to go to china to borrow money to go to war with china. one little point embellishing on that a little bit, the -- the share of our debt right now, which is held by foreigners by your number, 56%, go back 15 years and it was sufficiently lower than that. over the last 15 years of the money that we borrowed, $2 out of $3 was from foreigners. >> that's a good point. that's a good point. >> so we touched on a lot of different budgetary issues. i want to ask about one or two that are moving forward

potentially in this congress today. trying to tie this back into the political reality and one of the issues that has been on the table over the last couple of years, might be again in this congress, is tax reform, specifically corporate tax reform. and just in the last couple of days, an issue that has gotten a decent amount of attention in the washington bubble is something called dynamic scoring. and it's something that is -- it is a complicated concept, but joe and bill being the budget experts they are, i thought it would be interesting if you could give a quick explanation, maybe joe of that means and the issues there and bill if you want to weigh in on what you think about that issue. >> i went to a luncheon in 2004 where dan crippen was speaking on the subject of dynamics -- the washington economist group. >> dan crippen former director of the -- >> former director of the congressional budget office.

he was asked they score bills. so although there is also the joint committee on taxation which scores tax bills this topic comes up mostly with respect to that. and dan, for reasons known only to him as i was reaching for the water pitcher to refill my glass decided i raised my hand to ask a question. he called on me. and this is 2004. the question i asked him was if the congressional budget office had used dynamic scoring for the tax cuts in 2001 how much lower would the deficit be today? which is the best economist joke. people were rolling on the floor floor. >> we should fwakback up and tell the audience more about the subject, which is probably why they're not -- >> all right. the notion behind dynamic

scoring is there are things that government can do that would be beneficial to economic growth and therefore would increase revenue. these policies, even though they would cost money up front would therefore have the effect of increaseing revenues later and possibly paying for themselves or more. there have been allegations, hopes, claims dating back to 1981, really in a formal sense that changes in policies, particularly tax cuts would so increase economic activity that you would make more money back than the tax cut costs you first instance. there are certain folks in washington who historically tend to be skeptical of these claims. i've been one of those people.

we could get very fancy about it, but let me give outphysicfizz you the physics. we enacted tax cuts that came to 23%, reducing tax rates. so right off the top you take the amount of money that you earned, you reduced the rate on that that income by 23% across the board. and the allegation was at the time that we would get so much of an increase in income because people would be incented to work more to invest more. taxable income would go up enough to get the money back. here is the simple math is, you want to think of this in two pieces, tax rates have gone down by 23%. you need incomes to increase by 23% just to break even. if you think this thing is going to pay for itself, you need even

more of an increase. basic fundamental point how many people in this economy are paid for 40 hours a week and cannot work longer than that unless their employer asks them to. >> good point. >> there are so many institutional constraints. there are so many people who are not particularly interested in working more than they do. they have children to take care of. they have other things. there are many people who have control over their hours, who, if you offered them a much lower tax rate might very well decide hey, i'm going to work less and still make as much money. i once testified before a congressional committee, worked out the math, and said okay, you have a doctor who plays golf three days a week and operates four days a week. you cut his taxes by 25%. his tax rate is by 25%. worked it out so it worked --

i'm not doing math on the fly here. he's got two choices. one of them is he could operate on three days a week play golf four days a week and still make as much money as he is already making. is he going to choose to work more? or is he going to choose play golf more? and there are a lot of -- there say lot of evidence that suggests that looking at the population as a whole more people choose to work less rather than more, on average it balances out. cut tax rates by 23%, you lose 23% of your revenue. >> so even i guess, sort of -- the question that is on the table today is as joe explained, i think there say pretty good consensus in the economic community that the tax cuts don't pay for themselves. you won't make back as much as you are by cutting the tax rates. there is a question as to whether there is some marginal effect on economic growth and on people working more in the labor force and so what dave camp, the chairman of the ways and means

committee put together a tax reform proposal last year he had it scored by the joint committee on taxation and found a margin, but somewhere between 50 and $700 billion, which is not an insubstantial amount of money, that the -- would accrue because of that tax cut and lowering the tax rates due to a growth in the economy and people earning higher incomes. and so on that issue of whether cbo and the joint committee on taxation should be accounting for the macro economic impacts in their scores is what has become contentious, because if those are allowed to be counted and find there is a benefit to the economy, that means you could potentially cut taxes more than you would otherwise be able to. and so, bill, do you want to -- with your experience talk a little bit -- >> this is -- this is rather sensitive because i've been apparently misquoted on the floor of the house yesterday

about a comment i made. and, remember, i'm a republican. some people might question that. but -- and i -- i'm with joe on this a little bit. let's back up for just a second. what are we talking about here? when congress passes reports legislation, the -- they need to know what the impact is going to be on the things we talked about here earlier. level of spending, level of revenues, how that fits into a projection going forward on the level of debt and deficits going forward. so historically, the congressional budget office where i began my career in this town, was charged with under the law, you make cost estimates of the legislation. what does cbo do? they make an estimate that is thought of as conventional score

ing ing, you change a tax rate that lowers the tax rate, you're taxing less than the revenues come down. you cut the reimbursement rate and the costs of medicare go down. the question has been raised particularly on the tax site i'll get to it on the other side, that well let's lower -- if we lower tax rates out there marginal tax rate ss, that will stimulate economic growth. let's be clear republicans and democrats, all of us, we want economic growth. part of this debate has been precipitated by a weak economy by the potential growth in our economy. there has been an intentive. why can't we get more growth in

the economy and for members coming in to congress, on the republican side, and yesterday and the rules they adopted they had -- in the house they adopted a rule that says for score keeping purposes of major legislation, that being tax legislation, or spending legislation, cbo you can't do it the way you've done it in the past. you got to take into consideration the things that joe mentioned, which are the dynamic effects upon incomes, and in terms of investment, and all of that will create additional growth. and as shai said, economists disagree on this. i don't know how many of you are studying economics or majoring in economics, but i'll tell you right now there is a lot of disagreement, even in the economic profession as to what does a change in marginal tax rate do? as joe outlined, a perfect

example, of where may not be the case and you're restricted mostly, controlled by it. long story short, this is extremely controversial. it is going to get more controversial as we go into this year. i believe that there are incent incentives to be created for growth on the tax side. i do not believe just lowering marginal tax rates without dealing with a lot of other issues in the tax code, credits deductions, exclusions, should have to be addressed also or else it is not the growth -- it is not going to offset the lost revenues from simply reducing. i'm not opposed to looking at alternative dynamic scoring and getting various estimates. my best example two things and i'll shut up shai, two things, this gives you -- because

economics is the dismal science of uncertainty, there is no one single point estimate for accurateact accuracy accuracy. let's be fair. joe is a good economist. he would be the first one to admit there is uncertainty in every economic forecast even macro economic forecasts. the problem is that congress doesn't fund in ranges. when i was a very young, early out of graduate school economist at the congressional budget office, i had responsibility for the federal food nutrition service programs, which included at that time called it the food stamp program. and i had developed this wonderful model i thought was great about projecting food stamp participation and i had my standard there with the

estimates and my t squares and r squares and all that good stuff and statistics. i came up with an estimate for participation. and it was a range. and i got called over to a chairman's office, chairman showing my age talmage to explain to my estimates. i said here they are, it is a range. and in between here and here. he looked down at me and said, son, we don't appropriate in ranges. we appropriate a number. the difficulty with this whole process is congress has to have a number. and the adding dynamic scoring creates greater uncertainty. at the end of the day, we shouldn't be slaves to economic models. they are the elected officials. they should take in all of the information they can get and

they should mackke a decision but they should not be bound by a particular estimate that has such uncertainty involved in it. >> i fear i led us astray on a technical point, but it is something that many in washington and congress feel is important issue and that will impact how policy is made over the next couple of years. but one other policy question and then we'll get to some from the audience that we haven't spoken about yet, but was touched on, is tax expenditures. and those are all these provisions in the tax code that some call spending through the tax code because they work basically the same as spending programs. but there is over a trillion dollars in those every year that on priorities that range from charitable contributions to retirement incentives to nascar provisions that -- for building racetracks or so what do you think is necessary to look at those with a finer toothed comb and decide which ones should be in there and how that can help us increase revenue to improve

our deficit position moving forward? >> okay. real quick joe. then i'll -- can i make one observation? >> sure. >> that is the things you've identified are i'll call tax expenditures, home mortgage deduction is an example or whether a deduction for contribution to your health insurance, or whether it is for charitable giving or for energy electric cars, why are those expenditures in the tax code? they're in there because somebody thought if we put them in there that will help economic growth. the same argument, and one -- and one point that we shouldn't forget is this isn't just on the tax side. the area i get very concerned about is that, listen, we already talked about it education, investment, instruction, infrastructure science technology, don't those things contribute to economic growth also? why should we only be looking at

dynamic scoring only on the tax side if we're not looking and that worries me because then that incentivizes my friends open the -- joe and his party so say, well, good we'll spend more money on everything and it will pay for itself. >> right. so everybody can have their cake and eat it too where everybody pays for itself and spend more and tax less and everybody is happy. >> and we have growth. >> right. >> we have supply side tax cutters and we have supply side spenders. and many of the supply side spenders think that if dynamic scoring could be put to their use, they would be very happy. shai asked the $64 trillion question that is over ten years. >> ten years. >> and that is program review. there is a problem with the review of tax expenditures. bill asked the rhetorical question and answered it why are the provisions in the tax

coat? the reason why the provisions exist is because the people put them forward and think they would advance economic growth. the reason why they're in the tax code very often, they think they're not going to be reviewed. and once you get them in there and they're part of permanent law, hey, we're home free and we can go and do that year after year. if you put them in an appropriations bill, they would have to be reappropriated every year. why is a program an entitlement program rather than an appropriations program and that's the same thing. entitlement programs tend to go into permanent law and appropriations have to be reappropriated every year. why are we not doing program review and we're not reviewing tax expenditures? we're also not reviewing entitlement programs. i'll give you one interpretation of why this is true and bill may

agree or disagree or may have another reason why aren't we doing program review? members are too busy on the telephone trying to raise funds for their next election campaign, guys are elected to the house of representatives and the first thing you hear is you should be doing a minimum of x hours on the telephone, not in your office, because that's illegal, you go across the street where there is a building owned by the political party and we have the little booths where you can go and you can pick up a telephone and you can call people and raise money for your next campaign and you start that in january of the odd numbered year because if you collect enough money ahead of time, you might deter potential challengers and that's the best of all possible situations because then you can take that money and you can give it to your colleagues who are subject to challenges from the other party, and that makes them indebted to you so when you want

to run for a leadership position, they're grateful to you, so they'll vote for you. >> there was a panel on monday with commissioner on political reform at the bipartisan policy center that probably touched on some of the campaign and political issues. why don't we -- while we're fin finishing up this conversation, invite student who want to ask questions up to the microphones. one quick question for both of you while they're getting set up is i think when i was in college before i came to washington i thought that what went on here was sort of 80% based on substantive policy and about 20% based on the politics of the situation. and since i've been here five or six years i've come to realize i think it is about the reverse that about 80% is made on the politics, and if we're lucky 20% actually gets made on the substance of the policy. and given that what do you think are the odds that we see some action this year on some of these important issues that

everyone agrees needs to be done, whether tax reform or controlling health care costs but the political reality just is difficult. >> i'm going to be an optimist for a change. congress will pass a budget. it will be a difficult budget. congress and they haven't done a budget for the last five years, and so that budget will start the process of at least starting to engage the discussion on a number of these critical issues. now, will that lead to agreement particularly with the president? on legislation? maybe not in some areas. but in some areas, minor areas, i think there is hope that something -- some things can be done. i think that the idea that a few years ago that there be a grand

bargain that will do the big tax increases and the big entitlement reductions and i think the grand bargain idea is off the table, but i think marginal improvement in policy and legislation at least until we get to about early -- later this year, later next year get to presidential politics, so the opportunity for moving forward on a few of these issues i think does exist for this year. >> joe? >> rather than prognosticating, let me just make one point and that is a lot of the big issues that we have been talking about and that bill just mentioned are of a nature where you are talking about the potential onset of a very big problem. in many of these instances, by the time you recognize that the problem is upon you it's too late. and you are incurring an

enormous amount of damage. i hear very often people saying in effect if we're going to avoid a crisis in this country, we need to have a crisis to provoke action. well there is a circumstance later to that which goes beyond the obvious. and particularly with respect to the accumulation of debt, which bill talked about a few moments ago, somewhere out there you start getting into the quick sand and once you set foot there, the costs for the american people become very considerable, your options are much reduced. what i would urge all of you to do as you go out looking at your role as citizens is to talk to your elected officials to the extent you can, express your view that it is important in the spirit of the bipartisan policy center and with this reality of

the consequences of inaction on some of these serious problems it is really important that we put our heads down and get our work done on a bipartisan basis. you need 60 votes to get anything done under almost all meaningful circumstances. if we wait until some party has 60 votes in the senate and controls the house of representatives and controls the white house we may very well already in the quick sand. >> great. we have a lot of eager students waiting to ask questions. we'll have you state your name and school and then ask your question and we'll try to get quick answers so we can get through as many as possible. let's start on the left. >> john graves, harvard university extension school. i really want to jump on the constant campaigning issue but i'll go a different way here. you mentioned the budget is not sustainable. you also mentioned that the entitlement program being the

top of the list, as we move forward, that we cannot pull from that and we should look elsewhere at major impacts we can make. i'm a realist. i get that we probably need to audit defense spending. some of the major dents we could probably make are there. but do you foresee that on an ongoing basis entitlements will always be here and we have to prioritize down the list to make sure that entitlements are always there? will that change in 2033 when the fund are exhausted? how do we move forward and will the entitlement always be on top of the list? >> sounds like that's for me. well first of all the controlling point that i tried to make earlier we need to grab every dollar that isn't nailed down and many that are. we in the interest of being able to do the things that we need to do as a nation, we need to work

on improving the delivery of health care in a fashion such that the cost per individual of delivering health care in our country, not just for the elderly through medicare, but really everybody is -- that the rate of growth of cost is reduced while we maintain quality. that is part of the overall picture. the problem with health care thus far, and i have my own ideas about what we ought to do for health care and you can look at www.ced.org and read about it the problem with the cost of health care is in significant part that technology enables us to do a lot of marvelous thing but the technology is expensive. and so part of what is going forward is how do we improve outcomes in our health care system including doing things

that are just coming online that turn out to be very costly but can do very wonderful things for people. that's going to be very difficult, but we need to -- we need to work on every front and improving the efficiency of the delivery of health care is probably tops at the list of what we need to do. >> and just touching on your broader question, i think one answer i've heard a lot from people have done this for a number of years is that the entitlement programs go directly into people's pockets, especially something like social security and so it is much harder to reduce those on the priority list than it is for things like paving the roads and doing the scientific research that leads to discoveries 20 or 30 years down the line. so i think that's one of the dynamics that probably won't change anytime soon. but is inherent in the way the budget is made up. >> hello, gentlemen. my question to you is regarding the national debt. you discussed the national debt

as if it is a burden and it is a burden to us and it will be for generations to come, i believe. but can't it also be used as a national security tool? because a country such as china, as you use in your example, would not want to go to war with us because of our economy and how that could drastically hurt their interests financially in us. what are your thoughts on that? >> i agree with you that that is the flip side of it that supposedly that the globalization of the economy out there makes us all more interdependent. but it also creates greater risk and uncertainty, still out there, and i think it creates the possibility of increasing financial crises out there as we're seeing already in europe, with the euro now, we're seeing with the global oil prices coming down, everybody says, the fact that this is wonderful, i like the fact too i filled up last night at $2.15 in northern

virginia, but i tell you, i don't like big variabilities. and i'm not totally convinced that all -- that with big debt and without us having control over that debt that it may be true that china will be not interested in creating any problems with us because we're interdependent. but we don't control their government. and that's the risk i see. but i think your point is well taken. >> thank you very much. >> adding to that just one point. if you want to write a movie screenplay or a novel, the way you develop your plot is that some other country decides that it is going to use their holding of our public debt to try to crash our economy. the reality you mentioned that if they crash our economy they destroy the value of the debt that they hold is the argument against that.

the real problem is not the movie screenplay. the real problem is you're in the movie theater, and somebody starts smelling smoke. in financial markets, it's like the smoke in the movie theater. you do not want to be the last person trying to get out the door. and so when people perceive, if people -- if and when people perceive that u.s. paper, particularly u.s. government paper is not a smart thing to own, that's when things come down in a very, very big way very quickly. that's the problem i worry about, not china trying to take down the u.s. economy. >> okay left. >> amy coleman from the harvard university extension school -- >> i'm sorry i picked on harvard earlier. >> a number of political analysts and i'm thinking particularly of shawn k. and andrew basavich talk about

american -- and that public opinion needs to shift towards the reality of what is possible in budget reform. do you have any insights into the sort of roadblocks political or otherwise, in getting the public to acknowledge the limits of spending cuts and the necessity for additional tax revenue to get the budget under control and how we can get more candidates to run with the realities worked in their campaigns? >> just to add to that i think there is some additional basic public polling results that show that the average american has no idea what, you know, you all answered very well earlier, which is the major pieces of the budget there is the common refrain of you ask people how much they think we are spending on foreign aid they'll say 5% 10% of the budget. and then you ask them how much they think we should be spending and they'll say, 3% of the budget and then tell them we're spending less than 1% of the budget on it and they're often quite shocked. how do you think we can improve that public education aspect and

translate that into the policy action that she's talking about? >> i have a quick response and that is that building upon what joe already mentioned earlier and that is the number one is to make it such that we have campaign finance reform, they're not spending all their time raising money. why do i say that? because this last midterm election i was struck by the lack of discussion about the budget. and the federal deficit came down, that was good news. but you never saw in any of these campaigns out there a discussion about the things we're discussing here today. you didn't hear a discussion about debt. you didn't hear a discussion about deficit. you didn't hear about that. why is it? because quite frankly i always remember some congressman tell meg one ing me one time at a town hall meeting, you got to cut government spending, i don't want you to -- i want you to get this deficit under control but keep your dirty hands off my medicare benefits or as an example. because to them that's their benefit. i paid into social security. that's my benefit. what are you talking about

cutting or reducing social security benefits? i think we have a -- members of congress have a responsibility in terms of when they're running for office to try to use this as an opportunity to educate, but let's be honest. it is not a popular thing to go out and campaign for an office and say, you know, we have to look at medicare benefits or social security benefits because that, as shai said, that's in my pocket right now or raise taxes. it is a challenge. >> i used to work for congressman lee hamilton, who some people know from his role in this september 11th commission, but he was a very broad ranging guy and i was with him one time he was talking to a group of his constituents. and they were getting on him and this was the late 1980s, the budget was not the issue really that it is today though people were very worried about it. and somebody said, you know, why doesn't the congress do something about this problem?

and he was trying to express himself and finally he found a point he wanted to make he said reducing the federal budget deficit is the second highest priority of every of every member of congress. the point being that after they take care of their highest priority you don't have a snowball's chance in haitis of doing anything about the budget deficit. one person comes from a location in the coastal community who needs the bridge by the federal government. the other wants to protect medicare. there are 535 first priorities and they're all different. every one of the members of congress can give you his program but we don't need 535 programs, we need one that the majority will agree with and that's the problem we've got.

>> devon ryeman. both of you spoke before about the push for secondary education, and you both did mention that there needs to be more done with helping just entering the work force so my question is, why isn't there a government push on attending technical schools and receiving a technical education, and what would you both do to fix that? >> a push for what? >> a push for more of attending technical schools and technical education. >> listen, i think i give credit to the president for emphasizing two-year colleges technical colleges. he's tried to move in that. i partly say that because my wife teaches at a junior college out here in virginia. but at the same time i think the bottom line is -- here we go again -- where is the funding coming for that? it's coming out of that thing we call cap nondefense

discretionary budget. there's very little for changing investment. i don't think there's a sense that we shouldn't be. it's the resources, once the first priorities are met, aren't there, unless you're willing to raise taxes or change those other two-thirds of the 50% that medicare, medicaid that reduces and then there would be an opportunity. the bottom line is the resources are restricted. also i think there's a sense here that this shouldn't only be a federal responsibility. there should be both state and private and local responsibility in getting the private sector involved in it which i realize is another whole discussion. >> hi i have a question. among the solutions that have been discussed to balance the debt and the budget is the

balanced budget amendment. do you see this as a possible solution in the future as either practical or sustainable? >> great question. that was on my list to ask. joe? >> very briefly, i am not a big fan of a balanced budget amendment. the typical formulation that you come up with of the balanced budget amendment is okay. if you're not going to balance the budget you need two-thirds vote or both houses of congress, something like that. having observed two-thirds vote of the congress and what it takes to get the last votes and having seen directly or indirectly members of congress saying, okay, you want my vote here's what i want, by the time you get done bargaining with all these guys, in effect you say, okay, if we're not going to have a balanced budget this year let's have a party. i got my price, he's got his price. if you're not going to be able

to comply with that, go ahead and really do it. as an economist there are times when the economy is doing well and a budget surplus is appropriate. there are times when the economy is not doing well and the budget will be in deficit no matter what you do. go back to 2008 2009, 2010 we didn't have a prayer of balancing the budget in those years. you need a two-thirds vote to get away with a budget deficit, you're going to have a party. or you write into the constitution of the united states that it's okay not to have a balanced budget if the gross domestic product has declined for two-quarters and is lower. i can't imagine writing a definition of the gross domestic product in the constitution of the united states. i cannot think of a better way

to desecrate the primary document of the founding of our republic than to get into nonsense like that. economics jargon does not belong in the constitution. put me down as leaning no on the balanced budget amendment. i was on the floor of the house when a balanced budget amendment was being considered and a member of the house had the floor. i was sitting next to leon panetta who was the chair of the budget committee at that time and was managing the time against the balanced budget amendment. this member of the house said and so i ask the chairman of the budget committee, if we're not going to have a balanced budget amendment to the constitution, how are we going to solve our budget problems? and leon said, just do it. i wrote a letter to nike and i said you guys have got to do something for my boss and i never got a response.

i was very disappointed. but that was the right answer just do it. >> with concerns to the military and military spending, a large portion of congress's budget does go towards military spending, and even with current cutbacks to military spending do you think that more cutbacks should be done towards the military in order to help reform the budget? >> very good question. let me drill down a little bit here because this will be coming up as an issue this spring with a review that the pensions and retirement security for the military commission comes out. what we're finding out and leon panetta, the former chairman and others and outgoing defense secretary, mr. hagel also recognizes, the same problems we have in the overall federal budget are the same problems in the military. the fastest growing components of the defense budget are not

the tanks and weaponry. it is paying the benefits, the healthcare benefits the pension benefits, the benefits compensation to go with having a voluntary service out there. and so i believe that if you're going to talk about defense, controlling defense, you have to go back in and -- here we go. same issues. wait a minute, i signed up in a voluntary military because i wanted those benefits and now you're talking those benefits away from me. the same issue that's endemic to the overall federal budget is the same problem that's causing the defense budget to grow. as that grows then, our real fighting capabilities get strained and that's what worries me. so i do think there's room for improvement in the defense budget but it's in the areas which means us getting right back into the pockets of those people who have served. >> coming back to the just do it slogan, there's been a sequester or what we in washington call a

sequester which are basically automatic cuts or squeezing the amount that you can spend on certain categories and defense is one of the pieces that's had those cuts and caps on it. i think that was put in place because congress couldn't come spending reductions that were necessary. if you look at both the defense and domestic discretionary accounts, those are the ones done on an annual basis and include infrastructure and education, both the defense part and the domestic part as a percentage of the economy are at all-time lows. i think a lot of people in one party or the other don't want to acknowledge that, for whenever one they care less about. the cutbacks have already been made either voluntary or involuntary. it's really the other pieces of the budget that we've been talking about the entitlement and interest payments that haven't been addressed and the interest payments are the result of the tax side and the spending

side. bill do you want to add anything? >> for the mill len yals -- don't throw anything at me. i was the one drafted in the vietnam period. there are days when i'm wondering whether or not we ought not to bring back the draft. i'm sorry. go ahead. >> i'm sure that's a popular sentiment in this room. >> you guys mentioned that entitlement seems to be one of the biggest problems with the budget today yet we can't touch them due to the political ramifications. what does congress have to do to address some of these special interest groups like aarp and groups like that in order to bring about entitlement reform? >> i didn't suggest that they -- first of all, i'm not talking about cutting. this word you cut gets thrown around a lot. i'm simply talking about slowing the rate of growth. i also was saying at the outset for those who are in retirement or near retirement even paul ryan's budget of last year that

was making changes did not affect people that were within ten years of retirement. what i'm talking about, i'm talking about you guys, i'm talking about changing the formula now, raising the age of full retirement now. i'm sorry if you're 20 -- you got 50 more years in my book before you can retire if you're 20. i think we should raise it to 70. those are things that do not affect current recipients but will affect, admittedly you in the future. you're not getting the benefit now. it's easier for me to calculate a benefit for you in the future that you don't know what it would have been had we not made the change i guess is what i'm trying to say. it's politically less risky. i do think we have to make changes and they can be made and they're phased in over time. so yeah i'm not saying we

shouldn't make changes, and i'm not saying you can't make changes. >> things like raising the retirement age on social security, you could call that a cut, but society is living longer and certainly there are distribution issues there and generational issues but it's hard to keep letting people retire at the same age for decades upon decades when people spend more time in retirement. >> just to add, social security is actually the easy program to deal with. healthcare is both growing much more rapidly and it's a lot more complicated. in terms of social security, we can make small changes that take effect and grow over a longer period of time, that by the time you get to the years when this issue is likely to be critical will have made a significant contribution. i would just add, with respect to folks who are now in the

retirement ages or close we could have those who are affluent pitch in a little bit and help as well. that, i think would be entirely appropriate. i'm more concerned about my grandchildren than i am about myself at this point. i'm willing to throw some money in the kitty. >> hello. i'm from harvard extension. i was wondering, i'm in environmental studies major and given that we only have one planet and a finite amount of resources, meaning that both human and economic growth is not infinite how do you think this should change our current growth-based market in the future? well, we have seen enormous improvements in technology historically. when i was your age, son every

other day in los angeles i have been there very seldom but i remember seeing the photographs. you would have such smog that you could not see any distance whatsoever from the top of a building. we've cleaned that up. part of the reason why folks are ringing their hands, we have a fixed amount for gas lien, there's not as much money going into the kitty for doing the highway repairs that we need. now, we need to go a lot further. we will probably have to make some difficult choices, but we've got to look across all the

tools that we have at our disposal. one of which is raising people's consciousness and getting them to conserve to the extent that they can do so. second is making the devices that we have more efficient and a lot of the consumption that we do is in buildings. that means to some extent going back and retrofitting, to some extent it means being a lot more conscious with what we build and there's a lot of that going on. also with respect to vehicles where we've achieved a great deal going forward. but one of the things that we could do that would improve our outcomes with respect to the environment, would give us a lot more headroom -- >> watch this event at c-span.org. we leave it now to take you live to the pentagon for a briefing by air force secretary deborah lee james and chief of staff mark welsh.

joining us today is deborah james and chief of staff general welsh. they will open with a few remarks and then go through where we've been, where we are today and where we plan to go in 2015. business rules, please if you don't mind we have about 60 minutes total. again, the secretary will open with remarks. following that there will be on the record q and a. if you would please identify who you are, who you're affiliated with as you ask your questions. then at the end of this if there are any unanswered questions, followups please get with air force press desk or any of us in the blue uniform that are still out here. so again like i said we have about an hour so with that, ma'am, the floor is yours. >> thank you general. hello, everyone. happy new year and thank you very much for joining general

welsh and me for about an hour this afternoon. since becoming the secretary of the air force about 13 months ago, our air force has dealt with many issues that are enormously critical to our national security. first, the united states air force remains fully engaged in combat operations against isil forces in iraq and syria. to date we have provided more than 60% of the 16,000-plus soaredies that have been flown. we also continue at the same time our enduring efforts to provide air and space superiority, intelligence, surveillance and recon assistancesense, our nuclear forces and command and control. these of course are five core missions and we deliver them through the air, space and cyber space domains. we have never waivered even with this operation ongoing in the middle east with our sizable and long-standing commitments in

europe and throughout the pacific, and we certainly won't be wavering in the future. we have been navigating in our air force through some very challenging issues that are facing us as an institution, including short falls in our nuclear enterprise tackling sexual assault and the very tough decisions involving the downsizing. in order to increase our perspective, the chief and i have made a commitment to routinely get outside the beltway and ensure that we are getting some first hand feedback and first hand look at the missions that are being performed by our airmen and the issues affecting our airmen and their families. the chief and i have been on the road a good bit. we're staying connected with our sister services, with congress industry, our allies and international partners. we meet with them routinely to hear their needs and their concerns and so that they can hear ours as well. so the bottom line, if i step

back and what's my key takeaway from all of this is everyone wants more air force and indeed we have never been busier around the world. demand for our services is way, way up but we are meeting those demands today with the smallest air force in our history. when you couple that smaller force against the backdrop of aus tier budgets and with the huge demand we have a total force that is under significant strain. by total force i mean our active duty, our national guard our reserve, our civilians and their families. indeed, general welsh and i saw this strain firsthand as we conducted our travels. fortunately, we have very dedicated and professional people who have been getting the job done despite all of these pressures. however it is taking a toll. let me talk about the fy-15 budget as well as a bit of an

outlook for '16 and beyond and general welsh and i would be happy to take your questions. for those of you that were with us when we did our last update in july, you'll remember that we made a call you might say, we issued a call to congress and that basically was that obviously we understand it is the constitutional prerogative of the congress to rearrange our funding priorities, but please do not decriment our readiness accounts. readiness is too important and we have to get our levels back up. as you know, we cannot accomplish our duties without congressional support and in that spirit i want to step back and thank the congress particularly the defense committees for supporting our air force readiness and our modernization going forward. in fact the congress proep rated the overwhelming majority

of the budget requests for fy-15. indeed, we ended up with a higher top line than our original request which i think is recognition of just how necessary and valuable our air force is in the world today. with that said of course we did not agree on everything. congress restricted our tough choices regarding the retiring or the reducing of aging force structure, but they did give us the funding that we needed to sustain the operations and to operate near current force structure levels for this year of fy-15. most importantly they did not pay for these add-backs for our readiness accounts. for this we are very grateful. our travels also showed us that when it comes to the downsizing that we have been undergoing, enough is enough. indeed, that is the number one source of strain for our airmen. it has been the downsizing. so general welsh and i agree

that we have now downsized as much as we can in support of trying to balance our resources and capabilities, but we simply cannot do more. indeed we've already announced that there shall be no involuntary boards in 2015. we're actively now working toward an fy-15 goal of maintaining end strength around 350,000 for our active duty personnel, and that is where we intend to remain. if anything, we perhaps need to look about going up in terms of some of our numbers and that goes for the guard and reserve as well. turning to the future the air force will still face many challenges as we continue to restore readiness and take care of our airmen with an ongoing focus on ending sexual assault. the sexual assault response coordinators with whom i meet regularly on all of my base visits, they tell me that we are making progress in this fight.

the information of course contained in the secretary of defense's recent report bears this out, but it's not good enough. we have to keep on it and the chief and i are committed to doing that. this past monday i kicked off our sexual assault prevention summit where we have brought together over 150 airmen from different ranks and backgrounds to have discussions and workshops and particularly to focus on the issue of prevention. this is just but one of the many ongoing efforts which is designed to demonstrate that we will give this persistent focus, persistent leadership and persistent action going forward. now, turning to fy-16 we are going to be asking the congress of course to eliminate see sequestration and allow us to get rid of excess base infrastructure and we will once again ask for the authority to divest some of our older aircraft in order to free up

money to plow back into people, readiness and modernization. keeping in mind as we've said many, many times, if sequestration does return, it will have serious and devastating affects on some parts of our air force. we will of course ask congress to resource our manpower requirements to meet mission, structure and readiness needs to support the commanders. general welsh has coordinated very, very closely with our commanders as we assembled the budget and we are committed to meeting their needs. after the budget is submitted we certainly will have a lot more to say about what our key investments are and these will be investments in the nuclear enterprise and cyber space, our national guard and reserve forces. i do however have a few announcements today to share with you with regard to isr.

last june i visited kreech air force base and saw our remotely piloted aircraft isr mission first hand. the chief has been there many, many times. the airmen who perform this essential mission do a phenomenal job. but talks with the rpa pilots and the sensor operators and their leaders certainly told me suggested to me, that this is a force that is under significant stress, significant stress from what is an unrelenting pace of operations. now, these pilots, just to give you a little color on this fly six days in a row. they are working 13, 14-hour days on average. to give you a contrast, an average pilot in one of our manned air force aircraft flies between 200 and 300 hours per year. again, these are averages. but in the rpa world, the pilots

log four times that much ranging from 900 to 1100 flight hours per year. again, this is very stressful operations because mistakes can cost lives. finally, i learned that many of our experienced operators are nearing the end of their active duty service commitment, which means they will have a choice in the not too distant future to either stay with us or leave the air force. now, to start working on these problems and to remedy some of these issues i want to share with you some of the steps general welsh and i are talking now to address it. our plan is designed to immediately relieve some of the strain while still meeting the commander requirements, and then we of course recognize we'll have more work to do for the somewhat longer term to address the people side of this very important but nonetheless high demand weapon system. here are the near term steps. we will maximize the use of the national guard and reserve and

indeed we will be redirecting some resources in order to provide the money to bring additional personnel on active duty. number two we will seek recently qualified active duty rpa pilot volunteers to deploy for six months to some of these distressed rpa units. so these are folks who have been rpa pilots but they've gone back into their original air frames perhaps. we will seek volunteers in that category to come back into the rpa world. number three we will delay the return of some of the rpa pilots who are on loan to the rpa world from other air frames. those are three items we are acting on now and we believe that that will provide some near term relief to the ops tempo and boost the quality of life for this force. we're also looking at pay.

we think we need to get it changed and we're working to do so. what we can do right now is i will be utilizing my authority to compensate and incentivize career rpa-only pilots whose service obligations are expiring. in fact, i just signed the memo earlier today. as our experienced operators reach the end of their initial active duty service commitment, we will increase the monthly incentive pay from $650 a month to $1500 for those rpa pilots while we also explore more permanent incentive plans which will be a little bit more down the road. our commanders expect and demand the unique isr capabilities that only the air force can provide. airmen have delivered

time-critical data. they've prosecuted targets and supported our combat ent commanders without fail but this pace has been unrelenting so it's critical that we address these problems now. we'll have more to say about this plan as we finalize the details in the next few months. let me wrap by saying this is the greatest air force anywhere in the world and primarily because of our airmen. the american people expect our air force will be able to fly fight, and win against any adversary and commanders obviously demand and expect the same. so it's important that we continue to afford our nation the air force capability it needs well into the future by appropriately investing in our people and in our platforms. so again, thank you so much for joining us today. now we will take your questions. jennifer? >> secretary james and general welsh, do you have regrets about attempting to retire the a-10?

the decision came before the current war with isis. do you regret that at this point? >> no i do not. >> why? >> first of all, the current war against isis, the operation against isis, there are a number of strike platforms of course that are engaged in it. a-10 is one of it but there's also f-16s, f-15s and so forth. they're each contributing, i believe the statistic is 11% coming from the a-10 community? >> yes, ma'am. >> so my point is the a-10 is a great contributor but so are the other aircraft. even had the plan to retire the a-10s over five years which we submitted last year even if that had been agreed to we would have still had a-10s in our inventory so it makes sense to use them and we obviously will always use them. >> why do you think it's such an

emotional issue for people on the hill? >> it's emotional inside the air force, too. i would be disappointed if the people who flew the a-10 and trained with the a-10 weren't emotional about this. they love their airplane. they should love their airplane. i would expect that. for the air force it's not an emotional issue. it's a sequestration-driven issue. we don't have the money this year or this coming year to fund all the things we currently have. the good news is last year, although we weren't allowed to move forward with the plan we recommended, we were funded to continue operating the a-10. if we can use it appropriately, we should absolutely use it. it's been intended to be around until 2019 and our intent would be to use that great platform and the great people who employ it anywhere we could. it's not about not liking or not wanting the a-10. it's been some very tough decisions we have to make for

the threat ten years from now. >> barbara? >> general welsh,wníñ you've spoken here a lot about drones, rpas. the combat lessons that are being learned from the use of drones, whether it's the fight against isis or air strikes in yemen, operationally in combat, people seem to think air strikes are the thing that solves the problem out there. what are the limitations that you're seeing in terms of lessoned learned in combat from the use of drones and air strikes more broadly in terms of limitations of what they can and can't do on achieving military combat objectives? >> not speaking to specific operations but in general terms, we're predominantly the great great majority of the time used for isr not for strike activity. we have the capability to conduct strikes from some of our rpa platforms, so we've taken

advantage of that but that's not the primary use that we use them for in most military operations. the limitations of using an rpa to conduct a strike are similar of using an aircraft to conduct a strike. you have to identify a target, clearly try and decon flikt friend from foe, minimize civilian collateral damage the same problems you have in a manned aircraft. some of the limitations in using rpas, you're trying to develop situational awareness through a very narrow view as opposed to having a pilot looking and using the human brain sensor to assist you in that effort. ideally you would have both tools available to you. having people on the ground assist because it helps you point at the most -- highest priority targets. it helps you decon flikt friend from foe easier if there are people on the ground with friendly forces. all those factors apply everywhere we're using rpas today as they would anyplace else we would use them in

conflict. >> do you think there's too much emphasis at the moment on the air part of the equation that everyone thinks from the air you can defeat isis and al qaeda in yemen when defeat may not be what is possible from the air? >> i don't think speaking specifically to isis the dod approach is not to defeat isis from the air. the intent is to inhibit isis to slow isis down to give a ground force time to be trained because a ground force will be required. you don't dictate instates from the air. you can't control territory, influence people. you can't maintain lines of control after you've established them. that will take a ground force. in this case, a coalition ground force that's being trained now to try and make that effort and we'll support it from the air. >> amy butler. two-part question on the strike.

first, with regard to the ioc, last year there was some discussion about when the air force's ioc could actually happen in part because of the maintainer issue coming from the a-10. can you give us your current thinking on when it is likely to be able to declare ioc and if you're looking at maybe changing the perimeters or how you're going to achieve that. then secondly bigger picture with the joint strike fighter whenever you do ioc, whether it's 2016 or '17 or whatever these jets are dribbling into the service. they're not going in at the rates you wanted. so this thing will not become wholly influential until years after you expected. there's a lot of talk among the technology people that stealth at that level will be at a risk of compromise because of the proliferation of high frequency radars and integrated defenses. so i'm wondering if you're looking at how to address that

issue. obviously it's not an issue for today but probably five, ten years down the road. >> first of all, i believe that 35 ioc will be as scheduled between august and december of 2016. i've seen nothing that changes my opinion of that. i'll tell you this, i oc is an important term because it's initial operation capability. it means we will have the ability to employ a number of aircraft to conduct activity should we desire to do so. foc is when this airplane should be fully capable of doing the things that we put in our requirement set for it to do. so our development of capabilities that aren't available at ioc has been part of the plan the whole time. it's been the plan of every airplane we've ever bought as far as i know at least recently. you get the airplane you have initial capability. you continue to develop the capability through new software upgrades adjustments you find during initial operational tests. by the time you declare it fully

operational capable, that means it now meets the requirements set that you defined. that's the ultimate goal and where we're focused. i'm fairly comfortable the 35 stands today. none of the things that are coming out from the j po are real surprises. this program has tracked rate much along the milestones set in 2011. i won't talk about before that but since then it's pretty consistently along the price curves and all the milestones since then and we must continue to do that. the big challenge for us is operationalizing maintenance for the airplane and that's what we're focused on right now. i feel pretty good about that. remember for me the focus is capability at ioc fully capable at foc. stealth is an interesting discussion because people tend to identify a piece of it and think someone will compromise

that piece and therefore stealth is no longer valuable. stealth is a combination of things. it's also speed, low observability, different ways of collecting data, transmitting and protecting transitions. it's a way of breaking kill trains. while we may have a new radar developed that allows an acquisition radar to see an airplane, that doesn't mean it can pass the track off to a radar that will then guide a weapon that will be able to destroy an airplane. as long as we break a kill chain, you're successful at using stealth. i don't see anything that indicates that is not going to be true ten years from now. >> just to make sure to clarify general bokton said the maintainer issue could be a show stopper. >> i'm talking about the development of the aircraft. the maintainer issue is not an f-35 program issue. it's an air force program.

>> but it is critical for ioc declaration. >> and we will look at -- you have to have enough to operate your initial detachment of airplanes but we will have enough for that. we have enough people to prioritize this to the point that we will be able to get to ioc. by the way we get some help from the congress on this as well that allow us to get there. aaron? >> i was wondering if you can speak just to clarify, you said you will attempt again in the next budget to retire some aircraft. is that the same groups of aircraft that you talked about in the last budget trying to retire? secondly, can you talk maybe generally about how the operation on isis has impacted the budget request certain areas you need to plus up or take away from? >> i would answer that question by saying we are constantly

monitoring what is going on in the world. we're constantly making adjustments as a result. so i think it's safe to say that the budget submission when you see it in totality will reflect some of those changes. in terms of the retiring of the older aircraft and will the plan be identical to what it was, i doubt it will be identical, but there will be some similarities. yes? >> we're very interested in the new pay for rpa pilots. i just wanted to clarify is this for all pilots or just those nearing the end of their active service commitments? >> as you know right now, jeff rpa pilots get the same flight pay that a pilot on any other airplane gets. the difference in the two communities is that right now pilots of manned aircraft when they reach the end of their initial commitment, they're offered the aviator pay which tries to keep them in the service for a period of time after that up to $25,000 per year. that's not available to rpa pilots. as an interim measure, the

secretary got approval for plussing up that monthly $650 flight pay for rpa pilots to $1500 a month. the next step is to pursue aviation continuation pay similar to what our manned aircraft pilots get for the rpa force. >> i just wanted to make sure, it's for all rpa pilots? >> this is for rpa pilots who are currently operating mq and mq 9. but the proposal for aviation continuation pay is going to be broader. we'll look at where it should apply across the community. >> this month? >> i'm not sure what the actual -- >> let us get back to you right after this on that. we'll double-check that. >> we can give you that answer. >> one way to tackle the shortage of rpa pilots which i don't think has been explored is allowing noncommissioned officers to fly them such as the army allows. is that something the air force is interested in looking at? >> actually we're looking at

two things related to what you just said. one, yes, we should look at the enlisted force as a potential approach to move rpa pilots. there are pluses and minuses to the affects of that. we're looking at those now and i'll come to the boss with recommendations in the relative relativelyrelative relatively near future. the second step is to look at other services that may be divesting themselves of aviation assets and see if there's interest in moving into the rpa business. >> secretary james, you said you have delayed the return of rpa pilots on loan elsewhere. i wasn't quite sure what you meant by that. >> pilots who have been trained and who specialize in another air frame may spend some portion of their career in the rpa field. some portion. but then the idea is to go back to the original air frame. so we would delay that going back for some of those pilots. >> how long?

>> right now, jeff, specifics to give you context. we have about 38 people who are on alpha tours from other airplanes and scheduled to go back this summer. of those 38 people we are talking to each one of them and asking them about staying. that's where we are right now. we know there are five of them who have already been matched for other jobs. they'll leave. the other 33 we're going to ask them if they would consider staying in light of having these other things that are going to try and help the schedule problem that they're facing. our crew tells us they're excited about the work they're just worn out. this has been going on since 2007. as the rekwiert increasing and the solutions to it keep lagging the requirement change. we have got to get ahead of this. the biggest problem is training. we can only train about 180 people a year and we need 300 a year. we're losing about 240 from the community each year. training 180 and losing 240 is

not a winning proposition for us. the reason is because we're only 63% manned in our training unit for rpas because we can't release the people from the operational units who are flying the operational support to go be training instructors. even the people in the training units who are there about half of them daily are flying operational support missions. so we have got to get ahead of this training curve or the enterprise is going to have a major issue. that's what we are trying to get done right now. >> julian? >> thank you. julian barnes "wall street journal." has the pressure and the strain on the rpa pilots led to decline in the number of caps that you can put out there at any one time or a slowdown on any hope for growth that you have had? has there been an operational effect obviously on these individual pilots a lot of extra hours, but have you had to

reduce what you can provide commanders in terms of -- >> no, we have not. we've met the operational demand signal, but we're doing it by putting people in position where they're not having to debate whether they want to continue doing this. >> just to follow up quickly do you think these initial steps that secretary james, you've outlined here, is this just a first step or are you going to need something more from congress, do you think, in order to build up the number of pilots you need? >> these are first steps. within the next few months we'll have a more robust plan so to speak, but these are the immediate actions with more to follow. yes, second row? >> sandra. i wanted to ask you about the deputy secretary of defense bob works, initiative to invest in

invasion invasion innovation innovation. i was wondering if you can talk specifically what the air force expects to get from this. it sounds like it would be more centralized than the usual approach. so anything specific that you can say that you would want the department of6" that will tie very closely into

this effort and we think we have a number of ideas that we will feed into this department of defense effort. it may assist us in moving faster in some of these areas or give the department ideas for how they can move forward in some of these other areas. >> can you talk about the ideas? >> some of the standard ones are hyper sonic technology, how would you use it, how quickly can it be developed. a great example of a place where we can maybe save 25% of field costs. if we can prove that we need to get that fuel on as many airplanes as we can, as we can afford. that's a game changer in cost with the number of hours that we fly airplanes around the world. directed energy and how you apply it i think there are great applications in the i.t. world, quantum computing springs to mind although i don't understand it completely, the possibilities of how it can be employed are kind of stunning. there are things in individual human capital development in terms of education, training

how do you interest people how do you teach people as we go forward over the next 20 or 30 years. the possibilities here are just endless. >> when you say directed energy do you mean like the navy's laser gun, something comfortable to that? >> there are lots of applications you can use for the air force. we should piggyback on successful services like the navy, we should be exploring laser communications. there are a number of ways that we should be moving forward in a lot of these areas. this is exciting to us. this is a great opportunity in my mind. >> yes, sir, second row. >> hi. secretary james, why should a new entrant with eeov certification believe the air force is performing in good faith with its stunning six-month delay in certification for eelb? >> i think we were all disappointed that space ex was not certified by the end of

december. we had high hopes. however, they have come a very long way. 80% of the criteria were met. 20% are still to go. this is real engineering work that needs to be demonstrated. this is not a paperwork shuffle. i hope space ex knows that we're operating in good faith. general grieves, the certifying official personally put a great deal of time and attention on this resources, people and money, to try to make sure that we were doing everything that we needed to do to get this over the finish line. as far as i'm concerned, this is not a question of if they will be certified it's a question of when. as you pointed out, it's still some months away, but i am certain that it will be there. the last point i will make is that this certification process is written down. it is contained in a proprietary

document called a crda. it was signed by both parties, by the air force and space ex. this lays out in detail what needs to happen. it's important that all parties re-read that document and understand what needs to happen and i'm sure that that final 20% will be done and we will get there. it's in our national security interest to make sure that they get there. >> will you publicly release the crda? >> it is proprietary? >> what about a limited redemocraticry release? >> i guess we could consider that. let us look into that. >> i want to get your reaction to elon musk's statements to bloomberg business week in a recent interview. he said the people fighting the certification are really in the bureaucracy of the pentagon and

the procurement officers who then go and lockheed the prime contractors which actually happened. it's easy to understand from a game series standpoint. essentially we're asking them to award a contract to a company where they're probably not going to get a job against a company where their friends are. so they've got to go against their friends and their future retirement program. this is a difficult thing to expect. kind of a slap at the integrity of your acquisitions program an observer would say. what's your reaction to that? >> i think those are rather unfortunate comments. i don't know who he means. i don't know who he's referring to. but the people that i know are working very, very hard on this certification process. so i think those are unfortunate remarks and i don't agree with them. the last point i'd like to make, if i might tony, is that after all is said and done, i am going

to set up an independent review. that review is going to be led by the former chief of staff larry welch who you may recall very recently did an excellent job doing an independent review of our nuclear enterprise. so he has agreed that he will take this one on. we're finalizing the details of what the work plan will look like and so forth because i'm one who thinks that any process which we've now been operating under this process for about a year and a half with space ex, what have we learned from it are there ways that we can streamline, speed it up do things a little bit but still of course protecting what we call mission assurance. mission assurance means we want these satellites to be launched without failures without crashes and burns which by the way we had some spectacular failures in the late '90s and out of that the process and procedure and what we now call the certification process was

born. so we don't want to sacrifice that but there could be lessoned learned. i want to be sure we have those implemented. >> these are unfortunate remarks but he did say them in a fairly deliberate manner. are you going to communicate your displeasure directly? and might this ripple effect through the air force certification process who might want to say the hell with him? >> i will not ripple through the acquisition air force professionals. i feel confident of that. i only wish that mr. musk would have said some of this to me directly when i called him to tell him that space ex had not quite made it, we were still working it, and so forth. i only wish he had said this to me directly. yes? >> air force times. going back to renewing the push to retire some of the older aircraft, what will be different this time around? general, you talked about the need for the air force to

explain itself to congress to justify these cuts. what will change. recently there are a lot of changes now to air force structure in europe for the future of millen hall and the f-35 basing. is there any shift on that front? >> why don't i take the first one and if you wouldn't mind taking the one on europe. in terms of what will change, there's probably not a magic bullet answer to that. there's new members of congress. we have to educate we have to continue to explain the position about why we need to not only invest in today but also invest in tomorrow. if we had a lot more money i mean a lot more money, we could do it all, but of course we're not going to have a lot more money, so we have to make choices. that's what we're paid to do. we're paid to make some tough choices in this environment. so we will explain that story to the members who we have known

for some time, as well as to the new ones. >> the infrastructure and consolidations in europe are just that. it's not giving up mission capability. there was an opportunity to save money over time in a fairly significant way by consolidating installations in the u.k. for example and getting rid of three bases and consolidating at one. also reduce is operating costs because they have the structure and everything required to continue the activity. so that was just a consolidation of capability. much more efficient over time and will pay for itself. millen hall is a base closure because the cost of updating over time with very old infrastructure that hasn't been maintained is excessive compared to the combat capability we get from the operations that go on at the base. we have other installations where that can be bedded down at much less operating cost over

time. we can save the capitalization costs of rebuilding the infrastructure. the good news is that our partners in the u.k. have done a lot of downsizing and soul searching on how they're going to operate themselves in the last ten years in the defense business and we're very supportive, although neither one of us really likes giving things like this up. millen hall has been a great installation force for a long time and remains that way today but this is all about cost savings and efficiency. >> mark shants, air force magazine. force structure different aor, the air force has been pouring a lot of mill con into what used to be expedition naer wings especially over the last year. i don't know whether it's spiked in the after math of oar. my question to you is, is this part of an ongoing effort to normalize the air force's

presence in that region, a la korea, u.k. et cetera, expanding of company tours, things like that? do you expect this to continue at other locations? what's the trend here? >> what we're trying to do mark, is support u.s. central command's desires in any way we can, in any way we can and we can afford. the long term footprint is their decision. we support it and let airmen do the jobs that we bring to their command. if they would like to establish a more permanent presence over time and are able to work out that agreement with the department of defense the state department, and the host nations, we figure out how to help them as the keepers of the installations of the facilities and provide that investment and capability for them, whether it's trying to expand family presence, so you can build stronger relationships with the

community and the nations that are hosting you. we try and meet their requirement just like we try and meet their operational requirement. that's what this is all about. >> requirement is going up, correct? >> well, we are actually drawing down the number of installations in the greater middle east i think as we've come out of afghanistan. it will be necessary to identify which will be semipermanent to permanent. the responsibility is to lead that effort and then our job is to try and support them in making those facilities capable and credible in terms of the mission and support they're supposed to provide. >> madam secretary, going back to the question about force structure reductions since the congress told you we really don't like the idea of retiring the a-10 will you graduate to that second tier of items as places where you have to go to get the money to live within sequester?

and also are you going to submit a budget that has one with and without sequester? >> i would suspect first of all that the president's budget proposal which will of course be revealed in february so i'm sorry we can't go into a lot more detail about the specifics in it, but i do suspect it will be above the sequestration level. i suspect we're going to be asking for a level which is much closer to what we think we need as opposed to what we might be forced to live under if sequestration hits. so that's kind of my best guess at the moment about that. assuming i'm right about that, we would also, of course just like we did last year, explain to congress that if we had to go to the sequestration level here would be the choices which, again, if the choices were considered tough and we certainly thought they were tough in the last year's go-around, sequestration will be much, much more severe and will do damage to a variety of areas within our air force.

so we say again that will be bad for everyone and we need to lift sequestration. >> so not specifically a second tiered budget if you will for sequestration, but a list of probable alternatives if you do have to do it? >> that's what i suspect we'll do, yes. yes? >> i have two questions. the first is a followup to amy's question earlier about f-35 maintainers, not the labor but a few months ago there was urgency and concern about not having enough maintainers to achieve ioc, and now it found like you're saying that there will be enough. what has changed since then? is it simply the provisions or is there more that's happening there? >> so what we're doing and this is a very difficult problem to figure out but what we've been doing in the last, what, month or so, two months i guess since the final decisions were issued by the congress we have been trying to work our way through it. we think we're getting close to

a solution which is anything but a perfect solution. it presumably would leverage a little bit of the flexibility we were allowed in congress a number of different factors to try to bring this together so as not to risk the ioc of the joint strike fighter, but as you point out there aren't enough of these experienced maintenance people to go around for all of our needs and that is why this is so difficult. >> if this -- if the proposals that we come forward with are not agreed to then ioc is correct. we are now to the second set of solutions beyond what we thought was the best military approach because we haven't been allowed to take that. we don't have a thousand extra maintenance people waiting for a job. they're doing other work. we have to get them into a new platform by taking them out of something else. it's the only way to develop them or hire contractors or delay ioc.

those are the three and some combination of those things that have to happen. we don't like the option of jrj p r(t&háhp &hc% so we will do everything we can to come up with other creative solutions that will be painful in different ways to try not to do that. >> when will those solutions start to be implemented and is this something that is already happening? >> this is something that we've been working with folks on the hill for a while to come up with the solution to get things done and within the department and i think as the budget rolls out and we get into the discussions and the timelines of supporting the ioc it will become pretty clear. >> on the rocket engine development program congress provided an extra $220 million. how do you expect the air force will use that to speed up current processes or what is i guess, the status of that? >> so we are trying to work through those details right now. we don't have it fully flushed out, but we're appreciative of

the money that will kick-start the effort so as we said, get off of the reliance of the russian engine but we don't have the details plushed out yet. yes? [ inaudible question ] >> the department announced the discussion to cut 10 predator and reaper combat air patrols and i was curious if the defense against centcom and the fight against the islamic state have forced them to reconsider that decision? how does that exacerbate the manning challenges that you're talking about? >> as far as i know, the numbers get confusing sometimes, but the number of caps is on the upward trend, not on the downward trend. >> the answer is yes. we had to reconsider the decision because of the new activity that was not projected at that time and it's exacerbated the problem. that's why we have got to do something right now to stabilize this workload issue. we thought we wereáj drawing down

and had a plan in place to man this enterprise if we had actually drawn down we'd be fine right now. >> is that the plan? >> there's been a lot of discussion 45, 55 and we've been on a plan for 55. >> it's increasing. >> down to a number that you can share? >> no ma'am. i'm not real confident where it's going to but it is increasing. >> these numbers do get confusing. yes, in the back please. >> on that same issue how much money is there to train these 180 or so rpa pilots and how much money will it take to spend the 300 or so that you would need? >> that's a great question. i don't know the specific answer, but i'll get it for you. i don't know what the cost is per student. i would have to get that for you. >> how much do these measures, you just announced these initial measures cost or is there a cost to them. >> the only cost to the initial -- there is a very small cost in terms of the aviation bonus intended to keep a number of people in the career field.

there aren't that many of them who are coming to the end of their tenure and that's not a very big number at all. there is a cost associated with expanding support from the garden reserve used to fire rpas today to expand their manpower so they can bring more people full time to be able to support more cap activity. that comes out of an mpa pot that we have in our budget already, but there will be a cost associated witv'>s it and if we continue it over time we would have to include it as part of an appropriation request. in the future it would be part of the appropriation. that would be the big cost right now. the funding up to 300 people in the training pipeline is in our budget. we had planned for being there right now so we had programmed for that. i just don't know what the amount is, but i can get that for you. >> we are at the five-minute mark. >> if i can follow on the solutions, the rpa mission is

much broader with maintainers with the intelligence analyst that review this. what potential solutions are you looking at to ease the stress on that force and when you talk about potential, the damage that can be further sequestration cuts. at what number range personnelwise are we talking about that you could see operation alreadiness being affected in a severe way. if you're talking about 350 and you're talking about lower 320 or something like that. >> of raw strength? >> to the risks that we've been working the rpa retention issues for the entire force for a while now. there have been a number of initiatives and we can give you a list of things that have been done over time. the crisis right now is with the pilot force because of the way they're their tours of service are organized and we're reaching a point where some of them can go and it is the most stressed part because it is the lowest manned percentage wise part of the rpa fleet and that's why that's the focus, but as far as

future discussions, it's about the entire enterprise and it has been for the last eight years. so i will tell you, we're,d(3x considering everybody in this and the specific items near-term are to keep the pilot force engaged. they have the longest and most expensive training pipeline in that community but there are many other people as you well know who are engaged in this enterprise. the other thing that you mentioned is the number, it's actually 315 not 350 so 315,000, and as the secretary mentioned to you we believe we're there. we can't go any lower. we are getting to small to succeed as opposed to too big to fail and so we're at a point now where we are undermanned in many career fields because we've taken people out of them to put in other areas to shore up those areas. rpas is a great example. we've green from 21 caps in 2008 to going to 55-plus now and those people have come out of other things like maintenance, security forces and other areas

where we changed the ratio so we can build the rpa fleet on the fly and now we have to get our maintenance up above 84% because it's affecting readiness and capability, we have to get our intelligence business which underpins all of this rpa activity up to full manning in every different category. so that's why we think, even if we move hardware out of the air force and move it into the reserve, component, the software and the people have got to stay and let's bring in new people to operate the hardware and let's re-man the air force squadron. we can cut things out of staffs all we want, but if we break squadrons we're out of business. >> i'm sorry. >> that's okay, katherine. >> two more questions. >> two more. >> how much -- how many more people do you need to get the nuclear facility security fully manned? what are some of the things that you're going to be doing next year to continue the process? i know you said nuclear security

and nuclear capability was one of your key investments and what will you be doing to keep that moving forward and about what is the percent of the budget that you will be using to invest in nuclear? >> so in terms of the manning we have redirected about 1100 people to plus up the nuclear forces. furthermore, there are eight what we consider critical specialties and we'll make sure that those are 100% manned. so as you heard the chief say earlier as we were talking about the broader air force and why we were so passionate about not going any lower in terms of overall numbers, one of the things that certainly i've discovered is still a relatively new secretary is that we are undermanned in lots of

this point, but this will be an area of additional investment next year as well as over the five-year plan which, of course that will all be public in february. yes, sir? >> david from bloomberg. i just wonder if you can give us any update on the bomber program. is the competition still on track and any update for the timeline on the award for that and can you speak to the urgency of it and some sense of how urgent it is and if it is urgent, why is it better to spend all of this time and money designing a new aircraft instead of buying more b-2s?

>> the competition. there's really nothing new. it's on track. best projection i would give you is some time in the late spring, early summer, and no real changes to the program so we're steady as she goes from things that we've explained before. do you want to talk about the operational and the meme and so forth? >> first of all, it will be -- compared to the b-52 it is pretty young and compared to most aircraft being able to operate in the environment 15 to 20 years from now, it's old. the timeline for the mid-20s, beginning delivery of the bomber allows us to start retiring the b-52 fleet over about a 15-year period so that by the time we get to 2040 we will still have b-2s in the inventory but the same limited number we have now and hopefully by the mid 2040s we'll have roughly 80 to 100 is the target number for long-range bomber and we've stuck with