a process, budget reconciliation, to cut the mandatory spending such as s.n.a.p. and medicaid and we have had kind of discussions on voucherizing medicare and so on. do you agree that things like s.n.a.p., for example, actually increase growth of our economy? that actually, it is, you know, it's penny wise and pound foolish to, you know, food stamps are only used in counter cyclical times and if we cut food stamps, we are actually cutting revenue? >> well, i don't know in terms of whether they sort of pay for themselves in any way. i don't know if they help growth. but you're right that they are automatic stabilizers in that

when the economy goes into recession, some of these programs -- >> they are like $1.75 benefit for every $1 we spend on s.n.a.p. so to block grant this, we are automatical automatically cutting gdp. i don't have much time. mr. chairman, i just want to say -- >> you don't have any time. >> i'm talking to you now. i'm not asking any more questions. >> the gentle lady's time has expired. >> okay. >> we will now hear from the gentleman from south carolina for five minutes. >> i was asking about the process. >> i think, chairman, a couple observations and a question. one, i was struck by my colleague's conversation from new jersey on social security and raising the payroll tax. as we all know, there are unintended consequences and politics is ultimately what drives washington, d.c. as we remember, you know, social security was put in place as a social insurance program. if you lift the caps, you really move it to a social welfare

program. people like to link it between i pay in, therefore i get more over the years. if you de-link those things, it becomes a pure social welfare program which really undermines the constituency for that system itself. so from both sides of the aisle, i think there have been legitimate questions about doing so. i want to follow up on my colleague from virginia, dave bratt's thoughts on sort of the bigger picture where we are. i think he was really hitting on something in that you know, from the republican side, we blame obamacare and the obama economy for the deficits and where we are. from the democratic side, we blame tax cuts. but the reality is if you look at where we are, i do believe, i guess it was my colleague from the west that said the sky is falling hearing. sky's not falling but we are in an incredibly dangerous financial spot which is what i think my colleague from virginia

was getting at. from both sides of the aisle, we have to look earnestly at how do we make reforms because where we are headed is to a spot that i think is enormously dangerous. as he pointed out within ten years we will be in a spot where there is only enough money for interest and entitlements and nothing else. if you believe the financial markets anticipate which they always do, we will see a day of financial reckoning given the difficulty from both sides, whether it's cutting taxes or cutting programs on either side of the equation, you look at that ramp-up on mandatory spending, we are in, something's going to give. i don't think it's a sky is falling phenomenon. i think it's felt at the gut level by the american public. what folks tell me in my home district is there is a lot more lightning to the way we can't get on spending forever in our business, in our state, in our family budget, and ultimately gravity works with government, too. so you look at those numbers and

you say okay, we are in a more difficult spot. you look at global economy and gdp shares around the world relative to 1950s when we came out of world war ii, we are in a spot. you look at the buildup of debt, you look at, you know, we are in a different spot than we have been in ages past. the aging population. we have a lot of things that curtail rather than -- this is not our grandkid's time or our kid's time within our lifetime? >> well, that's right, and that's the real concern. you hit on something i probably should have stressed more. is the sooner you start to fix this, the less pain you're going to feel in fixing it. if you wait ten years or 25 years, then try to fix it, you've got to have a lot more dramatic policy changes that the american public's not going to

like. >> two related questions. one, do we not have an accounting fiction that's in place right now? if we ran our books under cruel accounting which is what every system in corporate america is required to do, wouldn't we be in incredible financial pinch right now? rather than an in illusioned form be decreasing. >> certainly would give you a different picture, different look at things. give you some idea of what you've committed yourself to when you've -- >> to be more precise, unified budget mass operating deficits currently, they'd be rising rather than shrinking, wouldn't they? >> right. >> i looked at fed numbers around the country. the atlanta fed predicts it will

have 1.2% economic growth next year, which is below your number. they're a bit more pessimistic. if you were to see that 1% decrease, we would have a complete hole blown into the, you know, the scale of the deficits that are coming our way. any thoughts on this and the possibility of lower economic growth, given what's happening around the world? >> that would be a concern. we still have significant slack. we still have employment -- employment's 2.5 million people short of what we think is potential employment. slower growth next year would create more of a problem. it would make these numbers look a lot worse. >> i will just say this in closing, mr. chairman. i think this day of financial reckoning is coming. i think it's coming within ten years. i think it has real implications in terms of the value of the dollar, future interest rates. >> the gentleman's time is expired. mr. norcross recognized for five minutes. >> thank you, mr. chairman. my apology also for getting here late.

i was at the national prayer breakfast. it's good to be here. here we are again. seen in various ways where we're going to be this year and a few years from now. less growth obviously creates more on an inversion basis and conversely growth will help us. let's talk about minimum wage. 2009 was the last time the minimum wage was increased. obviously for those who are earning that, they've had a huge loss of their purchasing powers. inversely, if we were to raise that wage over the next few years, let's say a dollar a year to $15 an hour, what would that do to your projections? >> well, we'd have to of course do a full analysis to get you a more precise number. >> but in general. >> i think in general the tricky part about something like minimum wage is when you raise minimum wage, some people get a higher wage. the problem -- the problem can be is that labor markets are like any other market and if you raise a price, demand declines. and so there's the possibility that you'll have a reduction in

employment. when we did an estimate for -- a little while ago on raising the minimum wage to i think 10%, something like that, we forecast a decline in employment as a result of the increase. so that's sort of your tradeoff because you do get higher wages but you run the risk -- >> -- states having to raise their minimum wage, they've increased their employment. so the basis for that is -- >> well, what's tricky about that, i can't speak to that specifically. what's tricky about that is lots of other things change at the same time.

there's a lot of economic literature on the effects of minimum wage. there is probably some reduction in employment when you raise minimum wage significantly. >> so at the end of the day, as we increase the revenue because those that pay the minimum wage are paying more in taxes? >> i think that sounds right but i don't recall our budget estimate on that. >> anybody who is unfortunately making minimum wage without a raise. when you talk about raising the cost of doing business -- >> right. >> which minimum wage, by your suggestion, is doing. so those who would take the profits out of a company who want to take more profits would cause the same effect if they're taking more out of the company? >> right. that's part of the debate, right, is whether a company can handle the higher wage, take it out of profits, or whether they'll look for subsidies, right. a lot of minimum wage jobs where there are a lot of subsidies. to the degree that happens,

technology is a good substitute, then you've got an unintended consequence. >> if it costs you more on the bottom end or on the top end, it's costing you more money. >> i got you. >> that's the point we're trying to make. so it's going to have that impact. point of the matter is those who are making minimum wage are guaranteed to spend every dollar here in this country. >> oh, yes, i got you. okay. i yield back the balance of my time.

>> i thank the gentleman. the gentleman from new hampshire is recognized for five minutes. >> thank you, mr. chairman. i want to thank the chair and dr. price for their confidence in me to rejoin this committee. i enjoyed my time on the committee in the first term. and see some of the similar faces and look forward to what is amounting to a continued and ongoing spirit debate about the budget philosophy and process here in washington. i just wanted to say to dr. hall, first, thank you for being here. my background is -- i was in the private sector. i ran our state's largest city, manchester, new hampshire, for four years. i come from a background of balancing budgets. i actually was able to reduce taxes, reduce borrowing. we were named one of the best

managed city, small to medium sized cities in america. i also recognize the obligations and responsibilities we have in the confines of the budget. there are a number things that concern me that you've touched upon. first of all, the growth rates. other estimates that have been discussed are a little bit lower. i think we're probably somewhere between 2 and 25. i hope it doesn't go lower. the fact the budget deficit is going to increase up to that 86% over time. that is a -- if i saw that in the private sector on the balance sheet, that would be a big concern. would you share that view? >> i think that's right, yes. >> the other concern i have

is -- you touched upon it. the labor participation rate. that has to increase in order for the consumer confidence to be affected for spending, local spending to be affected, and for our opportunity for revenue to the federal treasury, correct? >> that's correct. >> i think you said 1% increase in growth would be $300 billion over ten years. >> that's right. >> in reduced deficits. well, that's all about the labor

participation rate. and what kind of jobs and salaries people will have. >> right. >> you mentioned we have a lack of productivity but you're not exactly sure why. >> right. >> is it because of the lack of lower participation rate and then the types of jobs that is impacting the decline in unemployment rate. which is retail sector driven, rather than driven by higher wage sectors. the very people that are graduating today that would like to get a job at a minimum of $1,000 a week or more. i guess my question for you would be this. what component of the regulatory requirements that we have in this country affect those decisions to have greater output by our small-medium sized employers in the country? >> that's a tough question. because you do obviously expect that regulation -- labor market regulation can have an impact on employment. certainly companies, decision to bring on workers or invest in capital, it's not easy to undo that decision. it likely effects that. as to how much -- i don't think

the literature has been very successful in figuring out carefully the impact of regulation. it certainly depends on what kind of regulation. some is good for economic growth. some is not so good. >> some in the affordable care act is problematic. some in dodd/frank are prolow matic. if you can pull up slide ten. the projected outlays for major budget categories. so if you look at those lines. major health care programs. social security's actually going up. discretionary is going down. because we've capped through 2021 the amounts of that expenditure as it relates to gdp. those two lines that are going in the upper direction appear to be the problem in terms of increasing our debt, is that a fair statement? >> that's right, major source. >> okay. if we could get then to slide -- the next slide, projected net interest outlays. this is a concern i have as well. when you're looking at the amount of billions of -- this is in the billions, of net interest outlays, that is a source of concern. despite the fact that our discretionary spending is on the decline. as it relates to gdp. this is going in the opposite direction. so this seems to be a serious source of the problem, is that correct?

>> oh, yes, that's right, it is. >> this is something we need to fix. >> gentleman's time is expired. >> thank you, gentlemen. i want to talk about the farm bill and the farm subsidies. i remember when this discretion was happening several months back, we were having a big conversation about what the costs were going to be of some of the outlays for a couple of the programs. the agricultural risk coverage program and the loss coverage program. can you talk to the committee about what the projections of the costs are going to be back then and what the projections are now? >> i just don't have that level of detail in my head on the farm bill. i can get back to you. i'm not going to be able to remember right now. >> i have the information. >> how fortunate. >> so i can help you out. because you help us out all the time.

the projections for these programs, both the arc program and the plc program together were projected to cost $11.6 billion from 2016 to 2018. the new estimates released this week say the combined costs for those years will be almost $20 billion, which is 70% higher than the original projections. so the conversation that we need to have on this committee, mr. chairman, also needs to get into what we're doing with regard to the agricultural risk coverage program, the price loss coverage program and some of these other programs that are involved in the farm bill because we're seeing significant increases to the tune of 70%. i can only imagine what this committee would say and many members of our friends on the other side would say if there's a 70% increase in projections in certain other programs that maybe weren't going into the agricultural sector. what the opinions would be on the other side. i think we need to look very closely in this budget about

these projections and about what the costs are. how about the affordable care act? can you talk to us a little bit about what impact that's having on the long-term budget deficits in the country? >> sure. it's really hard to know what impact it's having because a lot of things have changed. we have done some elements recently on what the effect would be of its appeal. we did an estimate of the complete repeal in june and our estimate there was that it would actually reduce the add to the deficit. that's in large part from the medicare payment controls. the reconciliation bill, we did a look at just the subsidies.

proposal without the medicare payments. from there, would reduce the deficit from about $500 billion, about ten years. reductions are working sort of in the opposite directions. of course you have the impact on a number of people who have health insurance. >> so some of the reforms in there, you talk about the medicare program are bringing the deficit down by $150 billion over the course of the next ten years. you have the 20 year outlays? >> i don't offhand. >> okay. >> i don't thing we estimate. that's the whole thing. that's remopping the subsidies and then removing the controls on medicare payments. >> repeal obamacare. >> right. >> repeal, you're going to have $150 billion hole in the deficit. >> right. >> i think this is an important issue here, mr. chairman. because we talked about long-term deficits and we put the slides up on the tv screen and we talk about how this is such a terrible thing. we obviously have a lot of personal stories.

people in states of ohio who now have medicaid coverage, now have coverage, subsidies helping them out, pay for the coverage, pre-existing condition. and to go in and just this 60 or 70 votes on repealing this without any real plan to replace it. but also sending all those folks into a more dangerous insurance market because they will go back to being denied coverage because of pre-existing conditions. they go back to if they had a tragedy in their family hitting a lifetime cap of course in several months. i think it's important we put all of this into context. the issue with regard to the farm subsidies, what we can do there, investments we need to make in the prevention, healthy foods, getting them into our schools, so on, so forth. if we do what our friends on the other side wanted to do, repeal the affordable care act, blows a huge hole in the deficit. thank you, mr. chairman.

>> gentleman from arkansas recognized for five minutes. >> thank you, mr. chairman. thank you, dr. hall. i'm fascinated by the work that you all do. i studied some economics classes in graduate school in yale. it causes some mental gymnastics when you try to put all this together. i think i would frame it in an economic double negative when we talk about how a tax cut is a spending increase. but i guess it goes back to where you assume the ownership the money is. if the government owns everything, then if you cut taxes and you in theory i guess increase costs or spending for the government. if you follow that out, maybe if you raised taxes high enough,

you could totally drop spending to zero along those lines. i'm not sure i'm still trying to process that economic double negative theory. but i was also as an undergraduate trained as an engineer which basically they just teach you how to solve problems. the first part of solving the problem is to identify the problem. we've obviously identified a problem we have. that is debt. and deficit spending. and if we drill further down into that, you know, we talk about how we're on a slippery slope. and we look at the tops of spending we have that's driving the debt and we see -- you've testified two major areas. social security and government-funded health care. and we seem to be on a slippery slope with moving targets. the reason i say that, just back in march, the experts at cbo said we would have about 21 million enrollees in the aca exchanges. and the latest report you've

reduced that by 33% that says 13 million enrolled in the exchanges. so that number's moving. then we look over on the medicaid expansion side of the affordable care act and we see a projected increase of $187 billion over ten years. compared just to the cbo's estimates back in august. so we're seeing a projection that -- if that's based on increased enrollments, projection's $14.5 million over $11.5 million. why do you think the expand enrollments are increasing beyond cbo's prior expectations and the exchange enrollments are decreasing? >> it's hard to say. with the exchange enrollment to be honest, our earlier estimates were not based on data. they were based on our modeling. we're now getting data in. this is our new estimates based on our experience with the data up to this point. so it should be better at that point. but it certainly suggests that

the rate of enrollment is slower than we thought. it doesn't mean we're not going to get to the same level we ultimately forecast for that. it certainly means it's been slower than we thought. as to why, you know, i just don't know. >> could it be that the exchanges are failing and more people are just being dumped into the medicaid expansion? which still only includes, what are we up to 31, 32 states? we're not even up to all 50 states on the medicaid expansion. >> there has been a big shift towards that. and we expect -- and that's been more so than we thought would happen. >> could you give me an estimate as to the federal government's share, more accurately, the american taxpayer cost per beneficiary? >> i can't off hand. i can -- >> we're in the $6,000 per beneficiary? maybe you can get that number and -- >> i'd be happy to. >> we talked about this projected 14 million population in the aca medicaid expansion. what percentage of those would be classified as able bodied

working adults? >> i don't know. >> the expansion population is obviously different from the traditional medicaid population. >> the eligibility is for those who are 138 -- have an income of 138% of poverty or below. so it is a rather different population. >> could you try to get that number for me? >> yes, we can tell you. >> percent of able bodied working adults in the medicaid expansion. also, how many of them are contributing to their health care costs? >> yeah, that i don't know. we can add that to our list. >> probably zero percent. if you can get that number, i'd appreciate it. >> thank you, gentleman, time is

expired. >> thank you, mr. chairman. thank you, dr. hall, for being here. unlike my colleague from arkansas who is a graduate from yale and had studies there partially in economics, i did not. i agree with him this is mental gymnastics. the difficulty is we have to make decisions upon projections.

and knowing whether those projections are good projections or projections that may not happen just because what happens in the economy or some other factors is often difficult. as has already been talked about in here, the debt is continuing to grow and the economy after eight years is still lagging behind and we're in a situation of just how do we rectify all that so my children and now my grandchildren are not going to be left with all this debt. so that just sets up the premise of what i'd like to do is take a look at the side deck you gave us on the economic forecast. i want to go to page number two with the growth of real gdp. i'm curious because on this you're projecting 2.7% growth of gdp. what was the growth last year? >> growth last year was only 1.8%. >> 1.8%. and what was the projected growth? >> i thing we projected 2%. >> 2%. >> we were off. >> i think it may have been just a little more than that. just the fact of the matter is, it did not reach what was projected. there are a lot factors. let me get to that second point

of factors of how it is you make those determinations. i actually like your optimism. guarded with that optimism because we've not seen that. we've continued at least the five years i've been here, undermet every projection that's happened by the cbo on economic growth and that's sad for our economy but, again, making those decisions that we make, we have to have information that is the best we can get. i want to turn to your page number three here where you have projected contributions to the growth of real gdp. you're estimating there's going to be an increase in business investment and also an increase in residential investment. and i'm not sure how you can get to that when at least in my area, what i'm reading on the news is things are not looking that cheery. as a matter of fact, i just this morning was reading the clips. reuters. loss of momentum, projective plunges. the number of americans filing for unemployment benefits rose more than expected last week suggesting a loss in the labor

market amid a sharp economic downturn and sharp stock market sell-off. i'm concerned about that. and then on your next page there on page number five, total real compensation of employees. you're estimating that to rise. we have a lot of business around us and my district. nobody is giving the employees raises right now because everything is so stagnant. growth in business on the next page there anticipated demand. and on the residential formation. so if you can help me with how you get to those projections so i can be more confident as we make those decisions moving forward. >> i'll tell you how we got that number and what the risks are to achieving that 2.7%. first and probably the most important is that consumer spending continues to be pretty strong. it actually has been pretty strong. even this last economic estimate of gdp for the fourth quarter. consumer spending was still okay on that. so that's a necessary thing. but the reason we think business investment and residential investment are going to increase

is because they've been very low now for a number of years. and if businesses haven't been investing, they're sort of overdue to update and so that's the main reason why we see an acceleration next year. business investment and then residential investment as well. so that's our optimism there. >> let me -- i have only 45 seconds left here. what i am proud of, in our budget, we're making some assumption if you go out and look at what helps the recovery. on many of the papers i'm reading say if we could do tax reform where we can lower the taxes for both people and businesses. if we can get our free trade agreements going. entitlement forms. these are all the kinds of

things that will actually help us grow. and i recognize your projections. but until we do some of these things that really will be meaningful, i'm not sure that the projections are really going to matter because we've got to take the bull by the horns and do the kinds of things that will help the economy grow. >> gentleman from alabama is recognized for five minutes. >> thank you, mr. chairman. dr. hall, as has been pointed out several times. you projected to increase. what accounts for this increase in such a small amount of time? >> this is from our august numbers. i'm not sure what the spending part to be honest is. we had some changes in -- i'm

remembering now. we had a couple changes. one, we looked at spending on medicaid. it looked like more people were moving into medicaid as a part of the aca. so because more people are taking advantage of medicaid, we think that spending is going up. the other one is veterans compensation. in particular, the number of veterans going on to disability and the average amount of disability payments have been much higher than we thought they were going to be so we've raised our estimates on that. those are the two big things that affected spending. >> i wasn't going to touch on this, but since you brought up medicaid. your projections for the federal outlays for medicaid reflect an increase of spending for the newly eligible enrollees under the aca. >> yes.

>> is this all the $187 billion increase shown as a technical change to medicaid in table a-1? >> yes, it is. >> i want to go back to what i was working on a moment ago. how much of the increase in the deficit between this january's baseline and last january's baseline is driven by legislative changes in 2015? >> the increase -- i can tell you the increase since august. our forecast there. about half of it was because of the -- >> $750 billion? >> that's right. was about half of it. >> does that take into account interest on the amount it will have to borrow? >> yes, it does. >> okay. how much of the increase in deficit was driven by legislative changes in 2014? >> that i don't know offhand. >> okay. could you get that to us? >> sure can. >> appreciate it.

the report shows that projected spending as a share of gdp over the next ten years is about 2.9% above the 50 a year average. so even if we do make some cuts and reform entitlement programs, it would just be returning spending to a more historical average. would you agree with that? >> that's right. >> if we were to repeal obamacare revenues, how much would you need to save in order to balance the budget in ten years? >> you mean given the absence of the aca? >> not only are we cutting spending on that, we're also eliminating some of the taxes that are associated with it. >> our full estimate of eliminating the aca would be it would add $140 billion to the deficit over ten years.

so this would be all of it. this would be the subsidies and reductions in medicare payments. the reduction to medicare payments actually have been -- >> that's just on the revenue side, that doesn't take into account the spending side. >> oh, i'm sorry. yeah, i don't know the breakout. yeah, i'm sorry. i don't know the breakout right now. >> if we were to properly account for the offsetting collections as government receipts and not count them as negative spending and all the money currently spent was still spent, what would the outlook be for 2016, have any idea on that? >> i don't right now, i'm sorry. can we -- do you have a calculation? >> i don't. >> okay. >> that's why i'm asking you. >> okay, i'll get back to you. >> we'll see if our calculations come out. if we're close to that. >> okay.

>> in the time i have left. for what it's worth, everybody else has been optimistic. >> the je plan's time has expired. the gentleman from new jersey is recognized for four minutes. >> can i can he answer the question? >> someone from new jersey raised the point saying this hearing is about the sky is falling and austerity.

i'll tell you what the sky is falling for people back in nj nm, the people who lost his job and can't get a new one. the small business owner who doesn't have a business anymore. the single mother who can't buy enough food or clothing because of the economy. it's the 50 million people in poverty, their sky is falling. a dollar can only be spent one time. and if we have programs that aren't wasting money, they're not going to get it. for those people i think the sky is falling and that's what we're trying to do is to make sure that it's not made worse because of the budget. >> the gentlelady from wisconsin talked about this. what popped in my mind, anybody who works in an h and r block office or fills out turbo tax and at the end of the process the lady says, here's your

refund for x number of dollars, i'm sure the person didn't think isn't that swell. the government spending money on me by giving me $400? they're thinking i'm getting any money back. i don't think they think spending. i think they think that is their own money that they spend for the good food, clothing housing and the rest. that brings us to this point a moment ago i didn't quite get your answer to as to why did we see the unexpect uptick in discretionary spending last year. you gave, you weren't quite sure. let me help you out. the cbo's own report states, and i quote, the increase results larnlly from the bipartisan budget act of 2015. larnlly from the bipartisan budget act of 2015.

it's in your report. isn't that correct, then? >> if it's in there, it's correct. >> so that answers the question why we're seeing an uptick in spending of $32 billion, it's because of this bipartisan budget act. and if you look over history, one of the disappointing things over the last four or five years is you know cbo took a look into spending over this period of time and we were trying to get the house in order. in 2011 congress passed the bca, the budget control act, did what. capped the spending, right discretionary spending over a ten-year period, 2012 to 2021, i believe. and the idea behind it, wasn't that to say how can we save a trillion dollars over that ten-year period. that was the basic idea, correct? >> i believe so. >> here's the problem. in 2013 didn't congress suspend it for two years?

>> yes. >> and now with this current law we just suspended it again in 2015 for another couple years. so although we sad savings plans in place, each time we don't enact them we postpone them. so my question to you on this is, do you take that into consideration? i mean that we're going -- congress is continuously going to postpone the savings? and if you don't, why not, in about ten seconds. >> we basically following direction from the budget committee. on some things we assume that when they're due to end they will end. and some times we've been told to assume that they're going to continue. >> but based upon those assumptions your assumptions having wrong each time. and because of that, the forecasts have been understating what our actual deficit is. last question. >> on those issues, yes. >> the gentleman's time has hill talks about how racial tensions of the 180s per reflected in sports. >> "rocky" is a heavy underdog

in the first film. he loses in the first film, he loses in a split decision to apollo creed. no one thinks he's going to do well. he does remarkably well but he does not win. in "rocky ii" he knocks out apollo creed in the most implausible scene ever filmed. rocky wins. these were both very popular movies in 1976 and 1979, but these are much more than just sports movies. these are movies about race. these are movies about american history. >> at 10:45, brooklyn law school professor christopher beauchamp talks about the patent monopoly. the upcoming first in the new hampshire primary, we look back at the 1992 presidential campaign. and arkansas governor democrat

bill clinton's second-place finish in new hampshire and his positioning as the comeback kid. >> well, the evening is young. and we don't know yet what the final tally will be, i think we know enough to stay with some certainty that in new hampshire tonight has made bill clinton the comeback kid. >> we'll also feature both democratic and republican ads that aired in the granite state, including those of bill clinton and george h.w. bush. and at 8:00 p.m. on the presidency, university of washington history professor margaret o'marra talks about her book "pivotal tuesdays and a argues the 20th century was shaped during four elections, starting with the election of 1912. for the complete american history tv weekend schedule, go to cspan.org. >> defense secretary ashton

carter outlined his budget request in a speech this week. it included increased spending to challenge russia, and threats from the islamic state and nort korea. from the economic club of washington, this is an hour. >> very honored today to have the 25th secretary of defense as our special guest.se as ash carter has had a distinguished career in government service and in academic life. of def very briefly, he became the 25tn secretary of defense inform member of last year. prior to that, he served as deputy secretary of defense for two years and served as undersecretary of the defense for acquisitions, technology and logistics.ics.ecre he served as assistant for r se international security policy.cr for those services in the

defense department to date, he has been awardedpartm the distinguished service medal of s the department and awarded the defense intelligence medal.iand in the academic world, he's had a distinguished career, as well. graduate of yale university majoring in theoretical physics and medieval history. an unusual combination. he won a rode scholarship.he taught at oxford for a while. came back and was a research la. fellow at m.i.t. and a research associate in the brookhaven laba ultimately in 1986 he went to the kennedy school where he ultimately became the head of an the bellford center in a chairel professor at the kennedy schoole he is the author of 11 or co-author of 11 books and more than 100 scholar articles on an0 subjects like management and technology and national security so it's my pleasure to introducp the 25th secretary of defense, ash carter.defense, [ applause ]

>> thank you. thank you. thanks, david. appreciate it. good morning, everyone.david. appreciate you being here. it's a pleasure for me to be what i understand, david, to ben the first secretary of defense t to address the economic club of washington. and one of the core tasks for me and one of my core goals in thie job has been to build and to rebuild bridges between our r wonderful department and the rtt wonderful, innovative, strong american technology and industry community. so i appreciate you returning the favor by giving me the opportunity to be here as what is, of course, the largest institution with the largest int budget in america. and it's that budget i'd like to discuss with you this morning. t

a week from now, president obama will release his administration's budget for admi fiscal year 2017. about half of its discretionary portion, that is $582.7 billion to be precise, will be allocateo for the department of defense. and today, i'd like to preview with you some of the overarching themes and some of the new mak investments that we'll be makin because the fact is this budget marks a major inflection point for the department of defense. in this budget, we are taking the long view. we have to because even as we fight today's fights, we must l also be prepared for the fights that might come ten, 20 or 30 years down the road.budget. last fall's budget deal set the

size of our budget. allowing us to focus on the he shape, making choices and trade-offs to adjust to a new, strategic era and to seize opportunities for the future. si let me describe the strategic me thinking that drove our budget decisions. first of all, it's evident that america is still today the world's foremost leader, partner and underwriter of stability and security in every region across the globe. as we have been since the end of world war ii.obe. and as we fulfill this enduringf role, it's also evident that we're entering a new strategic era.entering context is important here. a few years ago following over a decade when we were focused of necessity on large-scale countea insurgency operations in iraq and afghanistan, d.o.d. began embarking on a major strategy

shift to sustain our lead in full spectrum war fighting. while basic elements of our it resulting defense strategy me remain valid it's also been wod abundantly clear to me over thet last year the world has not and stood still since sen.ussia emergents of isil and the resurgence of russia being just a couple of the examples. this is reflective of a broader strategic transition under way, not unlike those we have seen in history following the end of other major wars. today's security environment is dramatically different than theh one we have been engaged in forv the last 25 years. and it requires new ways of thinking and new ways of acting. i talked with president obama about this a great deal over th last year. and as a result, we have five in our minds evolving challenges so that have driven the focus of the defense department's ing an planning and budgeting this se

year. two of these challenges reflect a return to great power of compe competition. first is in europe where we're i taking a strong and balanced approach to deter russian aggression. we haven't had to worry about ah this for 25 years. while i wish it were otherwise e now we do.therwis second is in the asia pacific where chi that's rising and where we're continuing to retain the stability in the region we have underwritten for 70 years t and that's allowed so many h nations to rise and prosper and win. that's been our presence.ird c third challenge is north korea.. a hearty perennial. a threat to both us and to our e allies and that's why our forcen on the korean peninsula remain ,

ready every single day, today, t tomorrow, to as we call it fight tonight.ght iran is the fourth challenge because while the nuclear deal was a good deal and doesn't limit us in the defense department in any way, none of its provisions affect us or its limit us, we still have to counter iran's malign influencel against our friends and allies in the region. especially israel. and challenge number five is ouo ongoing fight to defeat ly terrorism and especially isil. most immediately in its parent o tumor in iraq and syria. and also where it's metastasized in africa and elsewhere, all th time we protect our homeland and our people.be while isil must and will be defeated now, in the longer a

perspective, we must also take into account in our budget thats as destructive power of greater and greater magnitude falls inta the hands of smaller and smaller and more abhorrent groups of people, countering terrorists will likely be a continuing parn of the future responsibilities of defense and national security s i leaders far into the future as . can see. d.o.d. must and will address ala five of those challenges as parg of its mission to defend our people and defend our country. e doing so requires some new thinking on our part, new w posture and in some regions and also new and enhanced new capabilities. for example, as we confront tie. these five challenges, we'll nol have to deal with them across al all domains, not just the usual air, land and sea but also s particularly in the areas of cyber, space and electronic

warfare where our reliance on technology has given us great strengths but also led to vulnerabilities that adversaries are eager to exploit. key to our approach is being able to deter our most advanced competitors. we must have and be seen to havn the ability to impose either unacceptable costs on an egret advanced aggressor that will either dissuade them from takinf provocative action or make them deeply regret it if they do. to be clear, the u.s. military will fight very differently in coming years. than we have in iraq and ur afghanistan or in the rest of ts the world's recent memory. we will be prepared for a high-end enemy.

that's what we call full spectrum. in our budget, our plans, our capabilities and our actions wet must demonstrate potential foesn that if they start a war we havs the capability to win.eloping because the force that can deter conflict must show that it can dominate a conflict.n in this context, russia and ths china are our most stressing ci competitors. they have developed and are r continuing to advance military g systems that seek to threaten o our advantages in specific areai and in some cases they're hese developing weapons and ways of war that seek to achieve me objectives rapidly before they e hope we can respond.lenges because of this and because of their actions to date, from d ukraine to the south china sea, d.o.d. has elevated their tions importance in our defense planning and budgeting.

while we do not desire conflict of any kind with either of these nations, and let me be clear, though they pose some similar nr defense challenges, they're wih otherwise very different nations and situations. we also cannot blind ourselves to the actions they appear to choose to pursue. let me now highlight some new ct investments we are making in this budget to address both near term challenges. i'll start with the near term challenges. back and begin there with our campaign to deliver a lasting defeat to isil. as i said a couple of weeks agoi at ft. campbell, kentucky, and s in paris a week and a half ago and as i'll reiterate when i meet with my coalition er-gui

counterparts in brussels next ee week we must and we will defeat isil. because we're accelerating the y campaign, d.o.d. is backing that up and we need to back it up in the budget with a total of $7.5 billion more in 2017, 50% more than in 2016. this will be critical as our ura updated coalition military prev campaign plan kicks in. for example, we've recently bees hitting isil with so many gps-guided smart bombs and a-1 laser-guided rockets we are starting to run low on the ones that we use against terrorists 5 the most. s so we're investing $1.8 billion in f y-'17 to buy over 45,000 more of them. we're also investing to maintain more of our fourth generation fighter and attack jets than we previously planned including a-10 which is devastating to isil from the air. re the budget defers a-10's final 0

retirement until 2022.ar replacing it with f-35 joint strike fighters on a squadron by squadron basis so we'll always have enough aircraft for today's conflicts. another near term investment in the budget is how we're reinforcing our posture in europe to support nato allies in the face of russia's aggression in pentagon parlance, this is called the european reassurance initiative and after requesting about $800 million for last year, this yee year we're more g than quadrupling it for a total of $3.4 billion in 2017. that will fund a lot of things,a more rotational u.s. forces in europe, more training and xer sidesing with our allies, more prepositioned war fighting geara and infrastructure improvementsy to support all of this. and when combined with u.s. forces already in and assigned to europe, which are also substantial, all of this together by the end of 2017 will let us rapidly form a highly capable combined arms ground force that can respond across also that theater if necessary. as you can imagine, the budget o also makes important investmentd in new technologies. i we have to do this to stay ahead of future threats in a changing world as other nations try to h catch up with the advantages we have enjoyed for decades in ares areas like stealth, cyber and space.

some of these investments are long term. i'll get to them in a moment. tm but to help maintain our advantages now, d.o.d. has an d. office we don't often talk aboud but i want to highlight today.bt it's the strategic capabilities office or sco for short. i was deputy secretary of short defense. to help us to reimagine existing d.o.d. and intelligence, community and commercial systems by giving them new roles and g game changing capabilities to confound potential enemies. the emphasis here was on rapidity of fielding.ed to m not ten and 15-year programs. getting stuff in the field quickly. we need to make long-term investments, as well.invwell. i'll get to them in a moment but the focus here was to keep up iu with the pace of the world. i picked a talented physicist, a rhodes score lar, to lead it.

sco was incredibly innovative, u and rapid development and even g the rarer virtue of keeping current capabilities viable for as long as possible. in other words, it tries to build on what we have.it's go smart. so it's good for the troops, it's good for the taxpayers, too. thinking differently in this way as is well-known in u.s. defenss history and space, country on the moon, computers in the c pockets, information at the s i fingertips. all that.th taking airplanes off of the of e decks of ships, nuclear s submarines beneath the sea, satellite networks that take pictures of the world. all those things. this kind of bold and enno investigative thinking can't be lost to history. it's happening now every day not only in sco but in other placese throughout the department of

defense like the dozens of get r laboratories and engineering centers all over the country. as we drive this work forward, the budget grows the research and development accounts for the second year in a row. investing a total of $71.4 ting an in r&d in 2017.row. a number that no other institution in the united states or the world comes close to. and to show the return we're getting on those investments i'll tell you about a few projects in the sco. r that it's been working on and that are funded in this budget.. some of them you may have heard of but my guess is some of you a have not and some of them we're talking about the first time here.ut mys first one is advanced navigation. ed taking the same kinds of micro cameras, sensors, so forth ting littered throughout our small smartphones and everything today and putting them on the small diameter bombs to augment the existing target capabilities on

the sdv.exis this will eventually be a modulr kit to work with other payloadsr enabling off targeting, small o enough to holdth in your hand ln your phone and cheap enough to own like your phone. another project uses swarming autonomous vehicles in all sorts of ways that in multiple domains. in the air, they develop microdrone that is are really dd fast, really resist tent. they can fly through heavy winds and be kicked out the back of aa fighter jet moving at mach-spoint 9 like they did in alaska last year. or they can be thrown into the air by a soldier in the middle t of the iraqi desert.og and for the water, they've developed self-driving boats to which can network together to do all kinds of missions from fleet to defense to close end surveillance. without putting sailors at risk.

each one leverages the wider world of the technology. microdrones are actually 3d printed. same and the boats built on some of the same artificial intelligence algorithms that a long time ago and in a much more primitive form were on the mars lander.ore they've also got a project on gun based missile defense. where we're taking some of the i same hyper velocity smart for t projectiles we developed for the electromagnetic gun, that's the rail gun and using it for pointe defense by firing it with f artillery we already have in our inventory.lready including the 5-inch guns on the front of every navy destroyer fn and also the hundreds of army ow self-propelled howitzers. mone in this way, instead of spending more money on more expensive m interceptors or new platforms, n we can turn past offense into os

future defense. defeating incoming missile raids at a much lower cost thane round and imposing higher costs on an attacker. in fact, we tested the first shots of the hyper velocity projectile a little over a month ago and we also found that it y significantly increases the range.sig and last project i want to highlight is one we're calling the arsenal plane which takes one of our oldest aircraft platform and turns it into a ato flying launch pad for all sorts of different conventional payloads. in practice, the arsenal plane t will function as a very large airborne magazine, network to fifth generation aircraft that act adds forward sensor and tar getting nodes, essentially combining different systems who already in our inventory to create wholly new capabilities. so these are just a few examples of what the sco has done so far. and they're working on a lot

more.e. orking now, there are many other arease where we're driving smart and is essential technology p gical innovation in the budget to sta ahead of threats in the long ded term andes keep our military in the decades ahead the best in the world, the first with the most bar none. wit one of these is undersea capabilities where we continue to dominate. and where the budget invests over $8.1 billion in 2017. and more than $40 billion over . the next 5 years to give us the most lethal undersea and anti-submarine force in the world. it buys more advanced payloads and munitions like better torpedoes and unmanned undersea vehicles.s it buys more advanced maritime l patrol aircraft. and it not only buys nine of ouo most advanced virginia class urs attack submarines over the next five years it also equips more of them with the versatile it

virginia payload module which 't triples each submarine's platform strike capacity from 12 tomahawk missiles to 40. now, budgets often require trade-offs, which all of you in your own domains are very ry familiar with.be so where trade-offs among force structure modernization and readiness posture needed to be o made, we generally pushed to favor the latter two. w this is important because our military has to have the agility and ability to win not only the wars that could happen today but also the wars that could happens in the future. to put more money in submarines, navy fighter jets and a lot of other important areas one trade-off was to buy only as ay many litoral combat ships as we really need.this is this is part of a broader effort in our budget to focus the navye on having greater lethalitygreat and capability that can deter and defeat even the most

high-end future threats. i'll be discussing this further tomorrow in san diego when i visit some of the navy surface warfare sailors. we we're also investing more in cyber.ly totally nearly $7 billion in ovr 2017 and almost $35 billion over the next 5 years. among other things, this will 5r help to further d.o.d.'s network defenses, build more training ue ranges for our cyber warriors and also develop cyber tools and infrastructure needed to provide offensive cyber options. i also want to mention space because while at times in the n past space was seen as a hat's sanctuary, new and emerging threats make it clear that's not the case anymore. last year, we added over $5 billion in new investments to make us better postured for that and in 2017 we are doing even

more.ed forand i enhancing our ability to identify, attribute and negate all threatening actions in space.space. like with so many commercial space endeavors, we want this domain to be just like the oceans and the internet. f free and safe for all.n't wa there are some in this world who don't want that to happen. who see america's dominance in these and other areas and want to take that away from us in the future so we can't operate y frm effectively around the globe so we're not waiting to invest glo until the threats are fully realized. waitiwe we're investing now so we stay ahead of them. so now, of course, pioneering and dominating technological mina frontiers is just one way that our budget seizes opportunities for the future.we're we're also innovating operationally, making our contingency plans and operationd more flexible and dynamic from europe to the asia pacific.

and we're investing to build the force of the future as i call s it.nteer force of -- the all-volunteer force of the future because as good as our technology is, it's nothing compared to our people. our people are the reason we have the finest fighting force the world has ever known.nt we and we have to ensure that the talent we recruit and retain generations from now is just ash good as the excellent people we have today. i made several announcements over the last few months to hel. to do that. we're opening all remaining combat positions to women. very simply so that we have access to 50% of our populatione for the all-volunteer force.a and every american who can meet our exacting standards, and that's important, has -- will have the equal opportunity to contribute to our mission. we're also implementing severald

new initiatives to improve and modernize our personnel call management systems to create what i call on-ramps and off-ramps that allow more people inside and outside d.o.d. to engage with and contribute to our mission. people outside defense to come in for a while, maybe not for a career but for a few years.not f and contribute to the most consequential mission that a human being can contribute to.an and our own people to get out o and learn about how the rest ofs the world works and make sure he they're up to date and up to speed. i have emphasized this both in silicon valley and our boston technology hub. valto the m and we're strengthing the famili support we provide to our military families to improve their quality of life. th the emphasis here being on tentn retention of excellent people and where we can making it possible for them to reconcile f the needs of having a family

with our needs of military service. not always possible to reconcile but we're making an effort where we can consistent with the profession of arms and our needs. w there will be more to come along this line. ta now, having told you about the budget and particularly talking to an audience like this, i need to say something also about how we're reforming the d.o.d. toths enterprise to make us more efficient.t.efore i can't come before a group liki this and ask for the amount of money that i believe we need for our defense unless i can also st satisfy you that we're spending. it in the best possible way. just like you have your shareholders, we have our taxpayers, and we owe it to them to ensure we're doing everythin we can to spend our defense dollars as wisely as responsibls as possible.at's w that's why along with our reform

budget we're keeping up our focus on, for example, acquisition reform. we're starting to see results from our better buying power ng to stsrom our initiatives. we're looking to do more and get better. we're also doing more to reduce overhead, which we expect to bl help nearly 8 -- provide us more than $8 billion over the next five years. $8 billion that we can use elsewhere for real capability e and not overhead. and we're looking at reforms to the goldwater-nichols act, the famous act of the 1980s that fau defines much of d.o.d.'s institutional organization. we e on this last point, we have been doing a thorough review for the last several months. and i expect to begin receivinge recommendations on thatk in coming weeks and making decisions. let me close by touching on the broader shift that is reflectede in this budget.

for a long time, d.o.d. tended . to focus and plan and prepare for whatever big war people thought was coming over the horizon. becomi badadthat at one point becoming so bad ae that after a while, it started to come at the expense of f cere current conflicts, long-term at the expense of the here and now, thankfully, we were able to the realize that over the last decade, correct it and turn ourt attention to the fights we were. in. we had do that. the difference is, while that kind of singular focus may have made sense when we were facing off against the soviets or sending hundreds of thousands on troops to iraq and afghanistan, it won't work for the world we live in today.n, now we have to think and do a he lot of different things about a lot of challenges at the same na time. sad to say but true. at not just isil and other terrorist groups but also competitors like russia and hina and threats like north korea and iran. we don't have the luxury of just one opponent. or the choice between current fights and future fights. we have to do both. and that's what this budget is s and designed to do. i

when this forum we're in now was founded 30 years ago, its inaugural speaker declared thats america's best days should still lie ahead. with this budget and with our es magnificent men and women of the department of defense, they will -- our best years will lie ahead.artme as those men and women of the department of defense continue to defend our country, help make a better world for our children. thank you.. [ applause ] i >> in introducing you, i neglected to say when you were in high school you were a lacrosse player, a football yea player, a cross-country runner and also basketball.did

how did you manage to do all in those sports? >> i always did a sport in each of the three seasons. i did swimming and diving in the summer. plus i always had a job at night. alwaysys worked at night.mer. fishing boat, gas station, hospital orderly. i was a busy guy.do all but i couldn't do all the sports you named at the same time. and when people got a lot bigger and taller than i did, i gave up basketball. started wrestling. when they got beefier than i did, i gave up football and i started to run cross-country. and lacrosse isble onean of th things where if you're pretty good at everything you can be pretty good at lacrosse. if you're pretty dexterous and pretty fast and you have prettyd good endurance and you're prett tough but you're not a big football player or a tall re no basketball player, something you can do -- it's a good sport..pl. >> when you are the secretary of defense, you have all the military under you. are thehe they're in pretty good shape. you have to stay in shape. what do you do to stay in shape? you look like you are in good shape. >> i try to work out whenever i can. really every day.e > to if i can.

i drive everybody crazy. i think people like it. i walk a lot. one of the nice things about -a working at the pentagon is -- it has these great big hallways. i walk around. i talk to people. ound.o a little bit of talkking management by walking around. >> you walk in somebody's offico and surprise them? >> when you get to the top, you. everybody comes to you.not mov so you can sit there all day and not move. if i worked in a smaller office building -- nobody has a building as big as the pentagon. i think i would go nuts. because i like to get out and move around. >> let's talk about the budget o for a moment. is it harder to negotiate the budget with service chiefs or omb? what's harder? >> well, i've got to say, omb bt tradition is not totally but quite deferential to professional military and d.o.d. advice. ional we get a lot of latitude i woull say compared to the civil agencies..say c within the department, we have a

very -- a process that has gonee back for a long time. you know, it really makes the best use of the uniformed and civilian leadership.p. and i was undersecretary as you mentioned for acquisition and technology and logistics. chnolo and whenever a decision was made above me, i always said, i wish somebody had asked the person o who has to carry that out. so i'm very -- i believe in involving the people who have to carry out these decisions and execute these budgets in the e decision making. miserv so i'm very inclusive in that t regard. i think we have an excellent -- professional military judgment in all of our services. and that's all reflected in thie budget. this is what these people who do this for a living and have for many decades think is the best way to spend this money. i have a lot respect for their judgment. tois y. >> the defense budget the president will propose is $582 billion more or less.se congr suppose congress says, we think you need more. what will do you?you

you'll resist that? you won't take that money? >> no. don't say that.we h look, the budget that we have reflects the bipartisan budget u deal of this year for which i am grateful.and i and i'll tell you why. and i will tell you why. we have started every fiscal year for six years, david, withs a con continuing resolution.w i won't go through -- most people in this room know how debilitating that is, how inefficient it is. litat it's dispiriting to our troops. they say, what's going on? other countries look and say, what's going on with you guys? can't you get your act together? it's very important that we not be jerky proceeding.o-year it was only two years. only a two-year budget deal..bue i would have liked something longer than that.uestion

but it was what i have hoped for and was speaking about since i became secretary of defense, , which was a coming together in washington.n. end of gridlock. what that means to your questio is, did i get everything i want? no. but i think that's the definition of people coming together and compromising is ba everybody walked away without having everything they wanted. that said, with the money we have, the shape is what matters. we have been working on the shape within the size that the bipartisan deal gave us. >> for many years we have had a dual budget for defense. we have had the regular budget vebudget and a so-called oco account where -- for the war. is the new budget agreement such that you can't get more money for oco and 582 is including that. both. >> 582 does include oco. the budget deal did take account of both. let me tell you why the theory of oco is a good one.e. i'm sorry.o it's overseas contingency operations funding, so-called wartime funding. c it is funding intended to cover

the variable costs of operationp that go up and down in the course of a year. down i the base budget funds the enduring military that will be here ten years, 20 years down the road. if you think about it, david, think about hurricanes, for example. prosaic example. thanes, a major hurricane occurs every three years.. we're asked to respond. can you can have us do that. you can give us the money every year and we will spend it. or you can give us the money when the hurricane occurs and wa will spend it. we then. that's obviously more efficient. it makes sense to have variable costs in the budget. leaked >> it has been leaked -- sometimes there are leaks from y the pentagon. you probably are familiar with that. something that has been leaked that the navy would like to havy a few more ships.thos i think you cut the number downg

to about 40. they wanted maybe more. suppose they go to capitol hill and try to get more. will you resist those? of t >> well, i'm going to argue for what we, including in the navy, think is the best balance. by the way, the size of the navy is increasing. we're going to go up to 308 ships. >> you have -- what do we have now, 280 or so? avectly r >> exactly. that's exactly right. 278 actually. we are increasing the size of the navy.278 but what's really important is to increase the lethality of each ship. emphasi so we're emphasizing that. and we're emphasizing under sea. we had to make tradeoffs. in each of the services you make tradeoffs as i said amongst tod force structure, capability, foe investment and readiness. all three of those are important. you just have -- we only have so many dollars. >> there's one ship you are building. it's a new gerald ford class bi aircraft carrier that supposedln will cost as much as $15 billion for one ship. fo how did one ship get to be so r

expensive?u goi and are you going to build more of those?ore. >> i'm sure we will build more in the future. we will not build them in the way that that was built. that's an example.hewill not in i talked about the need for discipline.rogram that is a program that was undisciplined. we're trying to wrestle that onh into shape.at othe i'm not going to try to justify the history of the ford class carrier over the last 15 years g or so. we have been trying -- i started when i was -- to get that program under control. by the way, a lot of our programs we are getting under s control now. the figures reflect that. but we have got to do more. peop it's important because not only for efficiency sake but for the confidence of our business community and our political leaders and our people. they say, look, we're giving u you, you know, this much money

for defense. we need to see that you are using it well. when we have an example of that where there's a cost overrun of that magnitude, it casts into doubt the whole enterprise. it's not okay. of course, we will buy more aircraft carriers in the future i'm supposing we will. but not that way. >> so on isil, do you expect it's likely for any possible way that you can see the u.s. government during the obama administration sending ground q troops into the syria iraq area to combat isil? >> we are. >> significant ground troops. 50,000, 100,000, anything significant??50,0 >> we're looking for a couple things about that. just to remind everybody, we have 3,700 boots on the ground in iraq today and we're looking to do more. we're looking for opportunities to do more. look o oto to get to your question, we're not looking to substitute for local forces. we're looking to enable local m. t forces. why is that? it's because we not only have tp

beat isil, we have to keep theme beaten. that is, there has to be somebody who sustains the defeat afterwards.we kn we know what it's like when you don't have that force to sustain the defeat. e and so we're -- our strategic approach is to enable capable motivated local forces. they are hard to find in that t part of the world. but they do exist.ng but do we have troops that are o helping them? yes. foppo we're actually looking for opportunities to do more. go so as we go north to mosul, we have to take raqqah.sul, that will prove there's no such thing as an islamic state based on this ideology.e. we need to take those two cities. need you'll see us doing more.e. we've asked for more. every time the chairman and i

have asked the president for more capability to do that, he has said yes. i expect that will continue. one other thing, david, which is it won't just be americans. this is crucial. it's got to be the other member. of our so-called coalition.a a lot of them are doing -- making considerable is right contributions to this. but some of them are not. and you really have to look -- this is a fight of civilization for its own survival. we need everybody -- and that's all the europeans, the gulf states, which are do -- turkey which is right there on the border. there are a lot that need to make more contributions. are we going to do more? yes. we have to win. >> in your coalition, you have 65 countries. i think in davos and other coui places you said the other r d te members of the coalition aren't doing very much. what are you doing to encourage them to do more?t are >> well, not all of them are in that category. tocourage>> we but many of them are. d so what am i doing to encourage

that? i next week i will be for much of the week in europe.fense and i've asked the defense ministers -- the first time ever interestingly since the campaign against isil began, that the defense ministers -- not the foreign ministers.nst they've met before. but the defense ministers getting together. what i'm going to is sit down and say, here is the campaign plan for -- if you think world war ii news reel picture terms, think of an arrow going north tn take mosul and another arrow coming south to take raqqah. that's kind of a good mental picture of taking care of isil w in syria and iraq. we have other places in the world, but we have -- it's necessary, not sufficient but necessary to destroy isil in 's iraq and syria.d. and what i'm going do with them is say, here are all the capabilities that are needed. boots on the ground. he airplanes in the air.. more prosaic things.

logistics. bridging. training. training for those police that are going to patrol cities like they're patrolling ramadi now ae once the cities are retaken. you i will say, okay, guys, let's match up what is needed to win with what you have and kind of d give everybody the opportunity to make an assignment for themselves. this is important.rtant.thates i the united states will lead bec this. and we're determined. real but other people have to do their part. because this really is -- civilization has to fight for itself. -- >> we've flown about 10,000 sorties over iraq and syria in this effort. but most of them have been from ave floted states.self. is anybody else actually flying and dropping bombs? >> yeah. others are flying and dropping bombs.pping >> and and we're grateful for that. otr but there are other ones that are flying transport aircraft, that are flying tankers,s,are f are flying awacs aircraft, that are flying isr reconnaissance

airplanes.connais there are people doing training, the brits, the australians, a number of people besides us aree doing training in iraq and taking action in syria. s so i don't want to suggest that we're doing it all by ourselvese now, there are some folks that are really doing amazing ves. courageous creative heroic work. but the reality is we have a coalition that is committed at the political level to defeat isil and that needs to be translated into the operational military contributions they are making. that's what i will be doing next week in europe.tributi be >> the russians say they want to defeat isil. but their guided missiles don't seem to be going to the right places. is that because their technology is not as good as ours? >> that's so true. they did. they said they were going to go in and fight isil. g that's not what they did.the ma

that would be welcome if they did it, but it's not what they are doing. in the main what they are doing. is propping up assad. so this is wrong-headed in two e ways. it's wrong-headed in the sense that it's not doing what needs to be done.hat remember, they have a threat from isil too. in the caucasus and so forth., . you've seen isil going after the russians too. so serious business for them as it is for us and the rest of the civilized world. >> when they are flying around and we are flying around, how do we coordinate? >> we have worked that out. we talk at the working level and make sure we have safety of tag flight. they are behaving professionally in that regard. what they need to do -- i don't know whether they will do ur to that -- is get on a different strategic track. that would be one where they pe help us to make the transition g in syria that has to occur to end the civil war there and get

a decent life for people there again. that means without having the whole state of syria collapse and all the state structures go away, without the person of pes bashar assad, who is a lightninl rod for civil war. but a transition where the state structures, as the russians say, survive and the moderate opposition and those state m structures combine to make a government of syria that can rue the place on some decent us principles and then help us turn against isil. a that's what they should be doing.at th but they got off on the wrong foot. tr i think they have a es self-defeating strategy.and s i don't know how long it will take them to realize that. >> speaking of the russians, on ukraine, it has been reported that we're training in the united states ukrainian soldiers and sending them back now. do you expect to have more youe conflict there? >> we actually train them in

ukraine.vious mostly. we send equipment and so forth. it's hard to say -- obviously, while we're watching the the russians' activities in the middle east, we're not taking i our eye off of ukraine. i mention that we're making e investments in europe, supporting our nato structure in europe and also supporting the ukrainians militarily and in other ways. >> you expect more conflict in t the near future? >> it's hard to say what -- whether the minsk accords are not being implemented to the letter. at the same time, the level of violence is low are than it hast been. i certainly hope it stays that way. the minsk accords is the right way to go to settle things downi there.ven don't forget, david, even if st things settle down, crimea was still annexed.>> you >> i know.

>> you have to look at this conduct by russia and the rest of the europeans do as well and say this is an unwelcome this n development in european history. as i said in the speech, it has been a quarter century since we had to be preoccupied with that. unfortunately, it looks like no. we do. i wish it were otherwise, but both ukraine and in nato, we're going to have to help countries to harden themselves against e russian influence, including thd little green men phenomenon, and also mount, as we did in decades past, staunch defense of our nato allies. >> so in afghanistan, before you leave office, obama administration is over, what do you expect that we'll still have 8,000 to 10,000 soldiers there? >> the plan is to have 9,800 through the end of the year.

that's our plan. we adjust plans.s the the president adjusted his plan. in october.get i the thing to look for in this coming up season is the growing capability of the afghan security. -- the whole deal is over a period of time that's not going to end by the end of this year, we have a plan to stay with it. the budget i described -- i supd should have said this in the budget contains full funding for the afghan security forces. remember, that's the key. they are supposed to be increasingly able to take over i their own security. so in this season coming up, you watch whether they are using ane operational mobility more than v they did in this last fighting season, whether they will have now fixed wing aircraft. we just delivered to them. rotary wing airport. all these capabilities they didn't have last season they will have this season.heseiti you hope that that -- not hope.d that's the plan is to have that strengthen their hand against taliban. full self-sufficiency is years

away. kor and everybody knows that. >> you mentioned north korea as one of your favorite subjects in your speech. did the north koreans explode a hydrogen bomb recently? >> i don't think that they were as successful as they may have a claimed. may we don't know that fully. i don't want to go any further than that. but i -- that's the story. don't forget -- i don't want you to take any consolation from do that, because nuclear weapons in the hands of north korea, particularly coupled with cou ballistic missiles, coupled with their -- how do i say this?ight odd demeanor and position right there on the dmz, that's a really serious combination. they're not in the headlines a lot. mz, but we, as i said, never take n our eye off that. >> you famously wrote an articl

with bill perry when you were not in government saying that maybe a pre-emptive strike against an icbm or other missile capabilities of the north koreans will be something the e u.s. should consider.umstan do you still have that view?nch >> that was a different circumstance then. it was a test launch missile. our policy was that we were not to tolerate it. we were trying to figure out how to not tolerate it. so that was then. now is now.rth but for now, the nuclear program of north korea is a serious concern, the ballistic missilesc are a serious concern, the sizee of their force positioned righta there on the dmz and the size of the special forces which they work on quite hard, in every way they are a serious business. n about and i just got to remind you,

we're on the korean peninsula. we will win.rea no question about it. but it is a very, very savage te and intense war.rren so it's no -- it's not something that -- not an area where you want deterrence to fail. but deterrence has to be very strong there every day. >> the chinese seem to be building islands in the south china sea. are we going to just let them do going are -- are we going to -- do you think they're going to use it for military purposes? goio send are we going to send our ships nearby? >> they are.arby? act. and we're reacting. we have to react.. by the way, it's true that they are not the only ones doing this. therefore, our formal position as a matter of what about these claims in the south china sea id

that we, the united states, s. don't adjudicate those claims. we do want is everybody to stop land reclamation and stop military.nd the one you described, namely, we will keep doing what we have done, what we have done for 70 years. we will fly and sail and operation where international law permits, period.t stop ki and we demonstrate that and thae won't stop.ntsfense second, we're making all these investments that you see in our defense budget that are specifically oriented towards the checking development of the chinese military.hinese third, they are having the effect -- i don't know when thie will dawn on them -- of causing widespread concern in the region which makes others react, ager including others react by joining up with us. so to give you a few examples. vietnam, for example.rity. very eager to work with us on

maritime security. vietnam. and then good old friends that you are very familiar with, , ri australia, the philippines, gion probably notice that japan is a rising military power in the of pacific and close longtime friend of the united states.self so all around the region peoplew are reacting. the chinese are with this kind l of stuff going to get people to react and compensate. more importantly, it's self-isolating behavior. i don't know when they will nitd realize that, whether they will realize that. it's not the american approach to have a cold war there, to carve up the region, to divide. we're not trying to stop the th

chinese from doing what they're doing.d look at what the united states itted has brought to the asia pacific region over the last 70 years. the most rapidly growing region economically in the world. it has been the peace and lives stability there that we underwrote that's allowed first japan to rise, then south korea, then taiwan, then southeast asid and now china and india. that's what we have stood for. and they have benefitted from dr that. so to disrupt the security environment where half of humanity lives and half of nk humanity's economic behavior is is not a good idea on their part.d? been certainly for our part, we intend to continue our strong role there. >> before you leave office, do n you think guantanamo will be cle closed? >> don't know. i have been completely unabasheu about this. i would like to see it closed. i think on balance it would be good for us.hat but here is the issue. there are people in that detention facility that -- there's no other way to say this -- have to be detained. there's no way that i can safely have them transferred somewherey else.stio so to answer your question can it be closed safely?n

for us to do that, we have to e. find another place to detain the people who must be detained. now, at the moment it's against the law to establish another detention facility. some in congress have considered a willingness to consider a proposal to build an alternative facility. we have such a proposal. and we'll see whether we get the support for it. this is something that i just would rather not leave to my y successor, the job of this next detention business and to the gt next president. but i don't know whether we will get it done this year. it's not something -- to do it this way, we need the help and support of congress. i hope we're getting it. i'm working on it. i think it would be a good thing for the country on balance. >> how damaging were the snowden revelations? and has it made it difficult for you>> to work with silicon vall firms? >> no question it was damaging.i it was damaging first to our security in compromising important secrets to our foreign

policy and relations around the world but critically to our arustry. and yes, it created some hich i distrust, which i'm working very hard to try to overcome. to not by preaching to people and not by -- trying to work through issues. -- but also, you know, for our companies, it has put them -- it has used as a -- essentially a guise for protectionism by some competitors to american companies. no question about it.sadvant so it has put -- edward snowden's actions put our companies at a disadvantage to the point where some countries that -- from whom it is wild to hear such a claim are saying, oh, store your data in our country, it will be safer there you oh, go, really? safer than here? you know, i'm intent upon

building bridges of trust. when i was started out in this business and was a physicist, ny everybody in the generation older than me that brought me ht up, they were all manhattan project people and so forth.forn they had a reflex that it was ap important duty to use your knowledge for good and in service of the public good. i can't expect that for he. everybody today, not as big a fraction of the young people a have the experience of closeness to the military. that's why i'm trying to reach out to people and make them sit familiar with what we're doing, give them a user friendly way to make a contribution. i do find that people out in silicon valley and our who innovative community -- i need to say this. these are people who have -- ar

where they are because they liks to do things of consequence.et they see that defending our have country and defending our world is something of consequence. so the mission does grab them. they get it. they look at isil and they look at these problems i have talked about russia and china and so on, they understand this is serious matter.ndr. to we have to defend ourselves.hal but i need to meet them halfway, listen to them and find a way in this very different age from when i started where a young person can see their way to hei contributing to the greater -- w what's better than waking up in the morning and being part of something bigger than yourself? >> you have said that women canb be in all combat parts of our military force.ce. the marines were not thrilled with that, i think.you you overruled them? how did that work?we >> the marines raised some issues which we have to addresse we are addressing in implementation that didn't make me say we're not going to it, o

but it made me say -- if you read my statement, i'm working w right now on the implementation. simply declaring things open is. not effective implementation. there are real issues here. we're working through those issues. it was important to them, for example, that i say and i did sd that the way we implemented thie was going to be important, that standards were not going to be relaxed, that there would be no quotas. this was about creating the hey opportunity. but i couldn't make it so that women would be able to satisfy o that -- those standards in the numbers that -- there's a lot that needs to be done here.ry n i thought they raised some veryy important considerations.

and we're addressing those in h implementation. but for the army and the navy and the air force and our special operations command, thee all recommended no additional restrictions.tandarex they also gave me their reasoning. i took all this together, put i- together and said what i said, which is this is the right m decision, but we have to not me implement it carefully, standards are important, don't expect quotas. we're going to do it in a p serious professional way like - i'm not saying this about me.ler i'm saying about the department of defense. i'm so proud of a place like that that is a learning, adapting organization.y. they take on things -- we took on counter insurgency. before me time. mastered it. you may not have liked the u ma circumstances.y i'm not trying to say that. but we got really good at it. o this say place that takes on a y mission and then very carefullye very deliberately, very professionally works it throughy we will do that. we will do that for this. i'm completely confident. >> you have a ph.d. in

theoretical physics.vetical p and you're a summa cum laude graduate in physics and medieval history from yale. mee when you deal with members of congress, are they often on the same intellectual plane you aree is that hard for you -- how do you deal with that? >> the joke that everybody tells me, not with congress wit specifically in mind, is that i have finally -- they were two e completely separate majors. they were kind of a left brain/right brain kind of thing. i liked them both. i but people now say that i work m in a field that is the perfect union of medieval history and physics.m but for congress i'm going to say something that may surprise you. goin memb i find that the great majority e of members of congress that i interact with are really serious, thoughtful, want to doh the right thing. they sometimes find themselves

in a situation where they can't find a way to do the right thing. i think that's frustrating for r when lot of them.uge that's why when we do come together behind this budget deal and so forth, i think it's a huge triumph. the folks who did that, despite all odds sat down, worked it out, the old-fashioned way in congress, i really think deservt o think a lot of credit for the -- it wasn't everything everybody sn' wanted, wasn't forever. it was for two years.body that's the way things ought to sn't ne. you can't just pound your spoon on your high chair in this country and get what you want. i can't do that. i have to work with other eople. want. >> final question. what's the best part about being secretary of defense? >> the troops. absolutely. it's being among the people.mong that's what lifts you up every time.y you look at them and you say --u it's just -- it's incredible. my wife works -- she can't spenk a lot of time doing things.nd but when she does, she loves the troops.

they are families. these are fantastic people. that's by far and away the best part. part. >> and the worst part i should say is having to write the letters to families? >> yeah.tofamam you never get used to the loss.e i've been at this now seven years. fortunately, the numbers are re less than they were when i came in.en i c but that never stops being harde >> thank you very much for yourr service to our country. >> thank you for having me. >> appreciate it. [ applause ] ♪

if a caucus is the test of a candidate's organization, which is what we saw in iowa, a primary is really a test of the candidate's message. a primary is different because you go in, you cast your ballot, and then you leave, versus a caucus where you have to spend a couple hours in a room hearing speeches and then making decisions. so what we'll see in new hampshire and what we've seen in the past is the field really begins to winnow out, especially on the republican side. it's a two-person race for the democrats. and it's a question of expectations and which candidate is able to meet or exceed those expectations, and we see that in new hampshire because it is of course a real test from voters who go to the polls. if you saw our coverage right before the iowa caucuses, the one thing that we were able to do that no other network did is really take you to the campaign rallies, take you to the venues as the candidates try to close the deals before the iowa

caucuses. we'll be doing the same thing right before the new hampshire primary on tuesday. so as the candidates crisscross the state, whether it's a small event or a large campaign rally our campaign bus will be on the road as well and really give you a sense, a flavor of whapgz in this key state. it's the first in the nation primary. new hampshire has a long and rich history. and for those of you who are not in new hampshire, a chance to watch it all unfold. >> our road to the white house coverage continues in manchester, new hampshire ahead of tuesday's primary. first a campaign event with carly fiorina live at 8:30 a.m. eastern on c-span 2. then vermont senator and democratic presidential candidate bernie sanders at a politics and eggs breakfast live at 10:00 a.m. eastern on c-span and c-span radio. friday evening, democratic presidential candidates hillary clinton and bernie sanders will speak at a new hampshire democratic party dinner.

that's live at 7:00 p.m. eastern on c-span, c-span radio, and online at c-span.org. colombian president juan manuel santos is in the u.s. this week to meet with president obama. after a meeting in the oval office the two spoke in the east room of the white house. this is just over 20 minutes. ladies and gentlemen, the president of the united states and the president of the republic of colombia. [ applause ] >> thank you so much. please be seated. well, good evening. bienvenidos a la casa blanca.

thank you all for being here as we reaffirm a great partnership between the united states and colombia. and as we celebrate a decade and a half of progress under plan colombia. it's a great honor to welcome my good friend, president santos, the first lady, ms. rodriguez desantos, their outstanding sons, who are -- one is at uva and he reminded me that the basketball team there is better than the kansas jayhawks, his father's alma mater. i want to recognize former president pastrana. we are honored to have you here as well. and i want to thank all the leaders, all the members of congress who have been critical to this partnership over many

years. it's been a bipartisan effort of support, democrats and republicans. business leaders, faith communities, civil society. our military that has done outstanding work. and i especially want to recognize someone who's played a vital role in the peace process. that's our special envoy bernie aaronson. so thank you, bernie, for the good work you're doing. in the united states we are big fans of colombia. we love its culture. we love its contributions. we love shakira. carlos vides. sofia vergara. i really, you know -- [ laughter ] we're joined by many friends from colombia. we have a lot of proud colombian

americans. and that includes some of the great talents who are here tonight. we've got actors like jon leguizamo. where's john? right there. [ applause ] juan pablo montoya. [ applause ] there he is. former shortstop for my beloved chicago white sox, orlando cabrera. there you go. [ applause ] so the bonds between our country are not just at the level of government. they're people. they're cultures and friendships and family. and reflective of that, president santos and i just had another very productive meeting. this is one of the strongest partnerships in the hemisphere. and increasingly, we're global

partners. it's a partnership grounded in mutual interests and mutual respect. and juan manuel and i discussed ways that we can continue to strengthen our ties with more trade, more investment and clean energy, ever deeper combination in the region. of course much much our work seized on how to seize this incredible moment of promise in colombia. we all remember a time not long ago when colombia was torn apart by terrible violence. plagued by insurgency and civil war. . many of you who are here lived through those times. some of you here lost loved ones or friends. cleegz. and that's why the united states and colombia forged what became plan colombia. starting with president pastrana and transcending the administrations in both of?kcñ countries. we were proud to support colombia and its people as you

strengthened your security forces, as you reformed institutions. so plan colombia has been a tribute to the people of colombia and their efforts to overcome so many challenges. and after 15 years of sacrifice and determination a tipping point's been reached. the tide has turned. as president santos would be first to tell you, obviously serious challenges remain. but from cartagena to the campo there's no denying colombia's remarkable transformation. today colombia is a country of artists and entrepreneurs and dynamic cities in the barrios of medellin new businesses along with giant outdoor escalators up the hillsides are literally lifting people out of poverty. children who once lived in fear

now have the chance to pursue their dreams. in short, a country that was on the brink of collapse is now on the brink of peace. i had the privilege of seeing some of this change myself when i visited cartagena. i still believe what i said then. in colombia today there is hope. fully realizing that hope requires a just and lasting peace. so president santos, i've said to you privately. i want to reiterate publicly how much i admire the great courage and resolve you've shown in pursuing negotiations to end the war. you've committed to an agreement that upholds colombia's national and international legal obligations and you've put victims at the center of this process. i want to thank all of the parties for their efforts, including the government of cuba for hosting the talks. we all know it's easier to start wars than end them. but after half a century of wrenching conflict the time has come for peace.

it's time to make real the words of the young colombian who said "the only thing i want to see die over here in the west side of town is the sun at the end of the day." of course, peace will just be the first step. any agreement will have to be implemented. and just as the united states has been colombia's partner in a time of war, i indicated to president santos he will be your partner in waging peace. so today i'm proud to announce a new framework for the next chapter of our partnership. and we're going to call it peace colombia, paz colombia. [ applause ]

so as colombia transitions to peace, the united states will work with you hand in hand. i'm proposing that more than $450 million be devoted to helping to reinforce security gains, reintegrate former combatants into society, and extend opportunity and the rule of law into areas denied them for decades. we will continue to stand for human rights and justice for victims. and we will keep working to protect our people as well as the colombian people from the ravages of illegal drugs and the violence of drug traffickers. as part of our global demining efforts the united states intends to support colombia as it works to remove every landmine in the country within five years. that's our goal. and secretary kerry will lead this effort. [ applause ]

. i want to thank our partner norway. and we invite others to join in this really important work so that every colombian child can walk into a brighter future free of fear. i can't emphasize enough how this is a concrete manifestation we can achieve in a relatively short time frame that not only ensures that innocents are not injured or killed but it also means that land that may have been very difficult to develop or to farm now is available. and we're very proud to be part of that effort. i indicated to president santos that as the negotiations conclude, assuming success, assuming an embrace by the colombian people, we will continue to solicit ideas from your government and the colombian people about how else we can help and mobilize the international community to

support your efforts. but the point is that because of the vision and leadership of not only the colombian people and colombian government but also democrats and republicans and members of congress and so many who invested so much in this effort many years ago, we want to make sure that we are showing that same commitment going