guest: the president and john boehner talk about being the adults in the room. i've never seen to adults get in cars and drive each other 100 miles an hour. at some point, someone forgot to put on the brakes and get out and -- because occasionally people do not swerve, and everyone ends up in a fiery crash. i think most people hope that will not happen. they are surly positioning themselves and posturing, each side, to make sure they went a little bit of a concession appeared host. host: mr. jordan belize city captures the -he- believes he captures the american people's sentiment. john boehner saying that they could lose hundreds of millions of jobs and saying, so biet.

will yoube it. will you comment about setting the stage for the cuts that people might feel are necessary, beyond your own constituency? guest: right now, the comments by congressman george reflects the fact that they think of the public understands that we are broke and that cuts are going to need to be made -- comments by congressman jordan reflect that. when he said, so be it, i think he also thought the public was with him. the public is ready to accept some pain, some sacrifice to get this deficit and this debt under control. in the democrats, so far, at least on the house side, are betting that that is not becthe case. they are playing traditional politics with social security and federal jobs and sang the voters will not go for it.

host: what is the most interesting thing you have seen this week'. guest: the vote on the second engine for the joint strike fighter. the pentagon and the white house are happy with the engine. there is one made by ge that members of congress have liked, that liked, the conservatives in the house and those that support that were able to defeat the second engine. i do not think that is stostorys over. the rank and file defeated the leadership, particularly john boehner raúl has a lot of jobs associated with that second region. host: your most interesting thing? guest: they did not know how it will turn out -- things that are coming to the floor. that could change than the last couple of years, where things have been very scripted.

host: thank you both for being here this week. >> what we face today is that the american a dream is under attack because america is on the wrong track, but we are fighting back, and we will get it back. >> today on c-span's "road to the white house," herman caine is now a potential 2012 republican presidential candidate. watches appearance from all lincoln day dinner in plymouth, new hampshire. a year from now, the state will host the first in the nation primary. c-span's "orroad to the white house." >> donald rumsfeld was the youngest and oldest person to serve as u.s. secretary of defense perry >> if you of proximity to the president, you have an obligation to tell the truth and what you believe, because people do not have proximity and only go in to see

him occasionally simply do not want to do. >> tonight, he will discuss his philosophy of presidential staff leadership, a process of writing his memoirs, and address some of the book's critical and positive reviews on c-span's "q&a". [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] \ white house budget directr jacob lew testified tuesday on the president's 2012 request. he called it a down payment for fiscal solvency and says that congress needs to work together to address the long-term aspects of the budget. the budget totals $3.70 trillion. it would reduce the deficit by $1.10 trillion, according to the administration. this portion of the hearing is an hour and a half.

>> "the president punted. having been given a chance, cover and a pledge by the fiscal commission he created to create bold steps and curb entitlement spending, president obama and his fiscal 2012 budget proposal chose to duck. he just heard from the cbo director and the chairman of the federal reserve one of the best things we can do for the economy is put in place a plan that gets this deficit and debt under control. why did you cuk? duck? if george bush brought this budget to the house, i would say the exact same thing. you know the drivers of our debts. you understand this issue. the fact the president gave us this fiscal commissioner, acknowledges that we agree on the size and scope and nature of

the problem. why did you duck? why are you not taking this opportunity to lead? >> i think the president budget addresses the fiscal challenges we face in the short and medium term. he has called a down payment, acknowledging we need to work together and the long term. if you look what the mandate of the fiscal commission was it was to bring the deficit down to 3% of gdp by the middle of the decade. our budget does that. there are things in our budget we will have disagreements about. we will have a serious debate about portis, of the president's budget accomplishes that goal. -- we will debat a serious have a serious debate, , the president's budget accomplices that goal. a mandatory savings are very real. there are other things we will need to work on together to address long-term challenges, but if our goal is to get to a sustainable deficit by 2013, i

think the president does that. >> using your own table on page 176, you do not get the primary ballots in your own numbers until 2017. then -- he did not get the primary balance in your own numbers until 2017. >> where it starts is the deficit is 10.9% of gdp. it comes down to 3.2% in 2015. we then stay with an 2.9%, up 3.2%, in that area for the rest of the decade and if you had a series that went beyond, it would go on for years beyond that. i think that it is a mistake to think of 3% of gdp as a bull's- eye. i think if he compared 10.9% to 3.2% or three. it is a world of difference. >> let's get into what is behind your claims the balance.

hiking go to the tables, but am i correct that the budget -- we can go into the tables, but what am i correct that the budget -- with in your policy baseline, you have a $807 tax increase built into it, because it assumes a the the tax cuts for higher income earners reverts back to 2009 levels? am i correct that that is what your baseline assumes the? >> arkansas baseline assumes, consistent with where there was bipartisan agreement in december, that we would permanently extend the middle class tax cuts. and we would have a state tax relief. we did not have long-term agreement on the upper income tax relief. we tried to construct a bass lines of the difference could be cleared. >> so adding the addition and the baseline revenue increase, that is $1.60 trillion in additional revenues from where we are today. correct? >> the upper income tax cut is

$709 billion. and the a state provision is $98 billion. and there is debt service on top of that. it's $953. >> what about debt service? >> your economic assumptions which is how you achieve the claims you're making, i will ask you what you make these economic assumptions. you are expecting very robust growth in the coming years. your forecast calls for real gdp growth well above 4% in 2013 and 2014, much higher than the blue chip consensus or cbo. i find it interesting that 2013 also marks the year where you are calling for a big rise in

taxes across all segments of our economy carrot you basically are raising taxes on successful small businesses, on investment, on part of the expiration of the 2001 and 2003 tax cuts. there is a new 3.8% tax increase on investment. the top income-tax rate will rise from 35% to 44.8%. the tax on dividends could triple from its level of 15% to 45.4%. but you are calling for a robust economic growth. do you think the tax increases you are planning on in 2013 on a mostly successful small businesses, on job creators, who you think it will not impact the economy? are you think that is the year with the economy takes off? and because of it doesn't, you never reach primary ballots as you are claiming. >> there was in december, there

was an agreement that we should extend certain tax provisions for two years. there are some provisions that do take effect or go out of affect because of that. if you look at our economic assumptions, the economic assumptions in the short-term are actually a little bit more pessimistic than some of the outside observers. in the long term, they are a little bit more optimistic and it is driven by one difference which is a consensual. the question is -- will recover from this recession the way we have recovered from past recessions? if you look historically, a financially-led recession had slightly longer periods of recovery, but in the end, we get back to where the economy would have been. we assume that is the case. we are within the range of recovery is a from has financially-led recessions. and we think that they are prudent, reasonable assumptions.

undoubtedly, i apologize, i am a lawyer not an economist so i can get into a level of detail which is probably beyond my own training. economists can disagree about what your what happened and they can disagree about whether or not we will get back to what was the potential gdp before. we think it is the right thing to do to get our economy back. it is one of the reasons we put forward a budget that invests in the things that it takes to keep growing the economy carrot including, education, in addition, and infrastructure. >> here is what does not add up to me. you are sitting in 2013, you will have economic growth 1.3% higher than what cbo believes, 1.4% higher than what the blue chip believes. and you are claiming that this explosion of growth at a year where you are raising taxes across the board on small businesses, investors, investment. history does not square with your comment.

if you are right in your wrong about this, you will never reach primary balance. the $1.70 trillion your climbing in extra revenue because of a higher economic growth you are claiming, above and beyond what cbo claims, does not materialize and we are in a world of trouble. i will finish with this. what is so frustrating about this is you know the drivers of our debt are the entitlement programs, and yet you are doing nothing to address that carried a mean, -- we are in different parties, that is fine. when people like the president, they expect the president to lead and take on the countries biggest challenges before they become crises. and we all know that this debt is becoming a crisis. and you are not even touching these programs. you are assuming the economy will take off in a year and which are raising taxes everywhere, all over the economy. and if your math does not add up, then we are all in the world of hurt and this will cost us jobs occurred >> mr. chairman,

if you look at the tax provisions, the vast majority are of the revenues you are talking about are associated with the tax rate at the top end. the tax rates for people who earn $250,000 orr more. during the clinton administration, at those tax rates we had the longest period of uninterrupted growth in american history. so they are not tax rates that have historically been challenging to growth. if you look inside our budget with new proposals, we had a lot of tax cut proposals that are designed to promote the kind of investment we need in this country. and we net have $360 billion of new revenue. >> i don't knoknow where you're from. most of our jobs come from successful, small businesses. in wisconsin, you drive to any city with a sub-s with 300

employees, they file taxes as individuals. most of the top tax rates are small businesses. when we are taxing our small businesses, that rate is above 50% in misstates like wisconsin, 44.8% in this country, where most of our competitors are taxing their businesses at rates lower than we are, how we expect to win global competition and create jobs, when we are taxing the engine of economic growth and job creation, small businesses, at rates in excess of 50% in most states? >> if we'll look at who are the taxpayers in $250,000 or above, and where the revenue goes. i'm from new york. a lot of it goes to finance and a lot of it goes to law. it is not the case were the top rate is principally a small business issue. we have a lot of tax proposals that would make taxes easier for small businesses. the right way to target small business is to make sure we do things that are targeted to

investment and not to the kinds of income that drives people into the top bracket into most cases -- in most cases per . >> mr. van hollen? >> thank you, mr. chairman. director lew, as i indicated in my opening statement, i think it is important achievement that in this budget you reach primary ballots by the year 2017 and begin to stabilize the problem -- enrich primary balance. i think we all need to work together to take actions now to deal with what will be projected deficits in the next 20 years. can i think that conversation should begin now. -- and i think that conversation should begin now. this is not easy to do when you have dug herself into a deep hole, digging itself out. there are other alternatives out there. and the chairman of the committee has put forward an

alternative and our roadmap, in good faith, in a sincere effort to reduce the deficit. so it is in that spirit, that i point out that when the cbo scored that budget, cut as a proposal, that they indicated that in the year 2020, the deficit would be 3.7% of gdp. and that the budget would not be in primary balance in that plan as of that day. if you go out another 20 years until 2004, the deficit with a% of gdp is 4.5%, and the budget is just getting into primary balance. i point that out to show you how hard it is.

as some criticize the president's effort, just recognize that other sincere efforts that were made actually brought the deficit into primary balance later than the president's budget. these deficit numbers were the result of a good-faith effort. and i think the president has made a good-faith effort. we all do need to get together. i want to focus to discuss the longer-term outlook. i want to discuss what is happening today on the floor as it impacts, as it draws contrast with the approach the obama administration is taking with respect to the deficit. as you indicated, you are talking about significant cuts and a discredit -- domestic discretionary spending as you . these will have a painful impact in many people's lives. but you have decided that in

order to get the deficit under control, we will have to make those tough decisions, and we agree. at the same time, today on the floor, there are proposals to cut immediately and deeply. i want to read you a statement from the president's bipartisan deficit commission that we're hearing lots of positive things about from our colleagues about their recommendations and approach. here is what they said. "in order to avoid shocking the fragile economy, the commission recommends waiting until 2012 to begin enacting programmatic spending cuts. another bipartisan commission, the rivlin-domenici commission render the same advice. marc sandy and others have indicated that deep immediate cuts in contrast to irresponsible and planned cuts over period of time, that deep,

immediate cuts could harm the fragile economy and hurt job growth." if you could please comment on the proposals today for deep and immediate cuts and the impact it would have on the economy and job growth, in your opinion. >> mr. van holland, i think we have a tough balance we have to strike. we agree that it would be a mistake to do drastic deficit reduction in this year that we are in a, beginning of next year. we had bipartisan agreement in december on the tax bill i largely because we could not afford to drag that a tax increase in general would have had. at the same time, need to focus on reducing spending and focus on making decisions that will turn the corner on the deficit, and we cannot really wait years to do that. our budget has a frame that we

think is the right frame for making the tough tradeoffs. and we are going to have to work as we go through the remainder of the legislation up for fiscal year 2011 and then as we work together on next year to come up with the right balance. i think it is important that we have the right balance. you do not need to make the kinds of cuts you are describing in order to get on the right path, but you do need to tighten the belt, which is what our budget is saying. we are watching carefully as the house continues work. we will be working with the house and senate and ultimately together to do the responsible thing and find the government. but i think it is a question of not mixing too many things together. the long-term challenge is that we have to keep -- is what we have to keep our eye on. long-term, and this window of the next 10 years, we need to look to the middle of the decade and are we on a path towards getting down to a deficit where

we stop adding to the dead? that is what we have tried to do in the budget. >> as some of our republican colleagues have indicated that if they do not get their way in terms of these very deep and immediate cuts that could harm the economy, if they did not get their way on those cuts, then it would shut down the government. now, , we have seen this movie before. i know you have. if you could make clear what some of the impacts of that would be on things like the social security administration and other essential functions of government. >> well, i take the congressional leadership at their word and that we all want to avoid a situation like that. it is not the right way to run the government. and i think we have a broad agreement, that we have to keep essential services going. when the government shutdown in the mid-1990s, it was very unpleasant. it was unpleasant when people needed to apply for passports

because of relative was ill or passed away and they could not get a passport. people start to appreciate things they took for granted, but when the government shutdown, they stopped. i hope we do not get to the point where wer are having to go through that again. if we work together and a bipartisan way to look for the things we can agree on and take some of the things we cannot agree on and put them off to the side, we can accomplish a great deal. >> thank you. i will simply say for the record, it is not our desire to see the government shutdown, but equally, we do not want to rubber-stamp these elevated spending levels occurred we want to see the beginning of a down payment on spending reductions. mr. simpson? >> thank you. what we want to do is reduce spending, and that is what we are trying to do with the budget. everybody talks about draconian cuts. you have to remember this is on top of enormous increases that

have occurred over the last couple years. it is not as draconian as a lot of people would like, but i appreciate your testimony and your hard work on this budget. i know it is hard to put together a budget, even if it is one that most people -- i want to say this respectfully, most people do not take this seriously. did not think it will be enacted. all right words are used. it is a tough love budget. if this is the tough love that my father had shot me when i was young, i would still be a juvenile the wind would-- had showed me when i was young, i would still be a juvenile delinquent. some people think i still am. we have to live within our means and make tough choices. let me ask you. this budget theoretically goes to balance in 16 years? >> it is going to take a long time to go to balance. we first have to stabilize.

>> is there ever a balance projected up there? >> to get the balance will require a set of decisions that are beyond what anyone is discussing right now. >> why is no one discussing this? >> the last time i testified before this committee i presented a balanced budget with a surplus. understand what it takes. we have gone through 10 years of a combination of things that have driven the deficit up. we attended economic crisis, but we also have decisions to not pay for what we were doing. we now are going to have to do with the results of that and it will not be a quick process. i know i left things in good shape 10 years ago. i look forward to leaving it in better shape this time. >> i do not deny you did. we have a tendency in this committee to sit and look back at certain indicators that proves our point of view. all those to not really matter. what matters is where we are today and where we were we in the future. what the american people are saying is get your fiscal house in order. i do not see this as getting our

fiscal house in order. everybody says, we will have $400 billion in cuts and savings, like that is some big deal. yes, it is a lot of money. over 10 years? that is a $40 billion per year. the deficit is $4 trillion? that is around 1% in savings. this is not tough love. this is continuing the path we are currently on with no future balanced budget ever in this proposal. and the american people are rejecting it, quite frankly. >> congressman, let me say a couple of things. first, we have. what we believe to be a very serious proposal of comprehensive -- 4. we do not think we have a monopoly on all wisdom. we look forward to seeing the ideas that are put forward. when you put forth a budget that reduces the deficit, i am sure there are things we can agree and cannot agree on.

this is the first step in the process. i know it is easy for pundits of the outside to dismiss the starting point, but the president's budget is a frame, a comprehensive frame. and i think it does achieve something very important, which it stabilizes the deficit at 3% of gdp by the middle of the decade. while i agree that we need to be on a pass beyond that, and i wish we were, until we stop adding to the national debt, we cannot talk about getting to balance. and this budget will get you there. we do not agree on the details. i know some of the actions that have been taken in this house to do cut spending. i have not seen the actions yet that reduce the deficit. and i look forward to that. it is beginning of the process, and we will work together when we see your proposals. >> we all understand that he will not get to balance by simply cutting spending. it is a portion of how you get there. you also have to look at entitlement programs, which this

budget totally left out in terms of reform. everyone, i think the american people understand that we have to address entitlement reform, and leadership has to come from the white house to do that, quite frankly. >> congressman, we agreed that we need to reduce spending. if you look in this budget, this is possibly the toughest budget certainly a democratic president has ever put forward, putting things that are very, very important priorities. things that many of us have worked for decades because we believe in to grow. we have said, we have got to tighten our belt and do what every american does and make the tough choices. there are real tough choices in this budget. i do not think it is fair to say that we have not dealt with entitlements. we certainly have not dealt completely with entitlements, but $62 billion of savings to pay for medicare in the next two years is something. it is real. it is a first step, is a down payment. if we are going to work together on entitlements, we also have to

acknowledge that social security is not driving the deficit between now and 2021. i worked on social security reform in 1983. i was working on the reform bill. i deeply, deeply believe that we have an obligation to current and future workers, current retirees, to have a system that is sound and reliable for decades and decades. but it is not contributing to the short-term deficit. we should do it because it is the right thing to do. >> appreciate it. thank you 3 >> thank you. . >> thank you very much. good to have you here, and thank you for your good work on this first budget you are presenting. i appreciate your written remarks, but you did reference how we got here. i do not want to dwell on this but i appreciate the fact that you laid out very clearly that the national debt and economic

crisis that the president inherited, and the work the president and the democratic congress did in the last two years to bring us out of what a deep and broad and the devastating recession for this country. it is being clear that the president inherited a $10 trillion debt. it did not happen in the last two years. and the the recession meant that there are fewer people paying taxes. it has reduced our revenues. >> the president's budget make clear that we cannot accept the status quo. we have got into a better place and are beginning to see the growth in the economy. we are beginning to see some growth in jobs which is good and we cannot sit on our hands. the notion is being rejected that we can get to a place where we can balance the budget and growth economies simply by spending cuts.

a republican colleague acknowledged that. i appreciate that. that is their proposal now. the only thing we can do with spending cuts and tax cuts. that alone will not get us there. that is what is being presented by the public and maturity. -- by the republican majority. budgets are about priorities and values. i think this is something the president has made clear is that we cannot only focus on deficit reduction. we need to reduce the deficit. if we are going to grow the economy and put people back to work, we have to invest in the future. that is what i wanted to ask you about. i want to acknowledge that the budget does reduce the deficit by $1.10 trillion. and that is real money for most of us. it is not easy to get there.

he brings fiscal stability to the nation. in 2017, the primary balance will be down and that is not easy. this budget makes strategic investments in the future. for many of us in our districts across the country, if we are going to see growth in this economy, the focus on energy, on innovation, and education, infrastructure is important. every business i talked to says to me we need incentives for innovation and infrastructure that allows us to move our products. is there an educated work force? they ask about taxes, too. it starts with where is the infrastructure and the advantages for innovation for . i think we need to talk about that. otherwise, we're looking at just cutting and the budget deficit

commission said it is not a good idea and a fragile economy. i would like to elaborate a bit on the tax credits that are available to businesses to incentivize research and development which are key to our growth. it is the private sector in this country that creates the new discoveries and new technologies and new products. they often look to us for that helping hand. >> thank you. if you were to ask most businesses that are in the high- technology area what is the single thing they can do that would give them stability looking forward, it would make permanent the r &d tax credit. the uncertainty is a very difficult way to do business. in washington, there's a kind of conventional wisdom that we know it will be extended because it has to, if you are a business person trying to make a decision and getting financing and investors, having that

ambiguity out there can be life or death. putting in our budget and a permanent extension in the context of a fiscal policy that pays for it is very important for it is also important to remember that there is a role for government-funded programs and tax support in r &d. basic research in this country has been enhanced by what we do at the national institutes of health and the national science foundation and the department of energy. what has made us the leaders in innovation is the technology that is discovered in places where the risk should be shared by all of us, it has been handed off to the private sector that has the capacity to implement it more effectively than any other in the world. we have tried to balance that. >> i hate to cut you off. >> we will keep working together on that theme thank-you. >> in your budget, you proposed

to increase civilian federal employment outside the department of defense and the coming fiscal year, 2012. seriously? he wants to increase the number of federal employees now? >> we have many agencies that are going down very the increases are very much concentrated in areas where there are new missions and they are missions that are shared concerns. if we put in place new screening procedures at airports and we put in place the machinery so we can make sure that no one gets on an airplane with an explosive, we also need to have the inspectors there who run the machines. if you go through the increases, they are very heavily in areas where there are new missions we are undertaking buried i am happy to get back to after and go through some of them. >> ok, you do propose to increase by 22,000 employees?

>> in general, there are many agencies that go down we don't have a general approach. >> that is the net increase outside of defense. your predecessor, dr. orszag, said that the current fiscal projection of the country was unsustainable. do you share that view? >> i think this budget stands for the principle that we have to get our fiscal house in order and we have to take seriously stopping the practice of treating deficits like they don't matter and we have put a plan for that would eliminate and get us a primary balance by the middle of the decade. that was the challenge he was describing ahead of us at the time. >> do you agree that the current trajectory is unsustainable? >> if you look at what is driving the deficit down, part of it is getting the economy moving again. >> i understand you are a

lawyer, but is it unsustainable? that word is used by many people >> hi was going to answer your question. i need to break into the pieces. we need to keep the economy growing in order to not have an unsustainable deficits. the kind of financial crisis within the recession create enormous problems in our fiscal policy. we've got policies in place to do that. we cannot stay at deficits that are 5% of gdp which is roughly where we would be if we did not make policy. we need to bring that down so we can get to primary ballots. we have done that and that is what we have to do to have a sustainable fiscal policy. >> is this budget sustainable? does it solve the problem? >> those are two different issues. sustainable is a step along the way. the problem is bigger than that. i prefer the sitting in this state -- seat when i could project surpluses in healthier economic times. we are a long way from being able to do that on either side

of the aisle. we will need to work together to get to a point where we start adding to the problem and we will need to work together to solve the rest of it. >> earlier, use the word sustainable with this budget. do you believe that if we did this budget and it was enacted for the next 10 years exactly as it is on this paper that we would move along fine. we would not have a debt problem. >> no, this budget produces a deficit that is sustainable for a period of time so that we can work together. it is a down payment and not afterwards, the deficit goes up after 10 years? >> it starts to creep up and after 20 years, it's ours to be a problem again. there is more work ahead of us. i agree with the notion that we cannot just look at the next five or 10 years. we have to start by looking at that time period. >> we have to deal with the entitlement programs? >> the president said that we have to look to the short term

and long term. >> why not propose something now? >> this budget proposes a great deal to get us to primary ballots. it gets us to a place that is sustainable and it extends the offer to work together. we have tried to leave options on the table and tried to create an environment where we can work on things that have historically been challenging. we need to do both. >> i think i am out of time. >> we will get the clock effects. >> thank you for your service. i want to draw attention to the last time you came before this committee. it was an unusual time in which you did not just talk about a balanced budget, but as you made reference in an earlier comment, you working with president clinton and this congress produced a balanced budget, something that no republican president before or after has done in decades.

the unfortunate thing is that having produced that a balanced budget, our republican colleagues in the bush-janey administration, is the building on that success, squandered that success. they did not meet a tax break it did not like are they believe in the alchemy that every expert who came here, republican or democrat, told them that those tax breaks would not pay for themselves but they abandoned pay-as-you-go government. in addition to the tax breaks bay advanced, they advanced one increase in spending after another, increasing government spending and an incredible rate but not wanting to pay for any of it. after eight years of running our debt often our economy down, they are complaining today that you have not solve all the problems they created in eight years fast enough. i think that is basically this circumstance in which we find ourselves. with reference possibly to the question you just passed about

-- just assked about the 22,000 police, isn't that related to the honesty that this administration brings to federal employment that you can contract out and create the appearance that you are reducing the size of government, but many of these contract in experiments of last eight years ended up costing taxpayers more and producing less? >> that is part of it. we also have a very large work force. this is a very small percentage of the total. >> i want to ask you about what type of entitlement spending that i am encouraged to see. this is something the administration is focusing on for the first time. this is the whole area of tax expenditures. they amount to entitlements of they are out of the budget process.

for the first time since 1993, you have revised that section of your budget. it would appear that tax expenditures which now rival direct discretionary expenditures will receive some type of thorough evaluation by the administration. i would ask you to comment generally about what you see going forward and whether perhaps we will eventually have a tax expenditure budget to allow a more thorough comparison. >> the issue of tax expenditures is very important. if you look at the work of fiscal commission did, one place they made a real contribution was in having a conversation about spending on the revenue and the direct spending side. if you look of the president's budget, the proposal i described as the way we pay for the

alternative minimum tax extension is a prime example of how we begin to get that spending on the tax side. it says that we have a host of provisions in the tax code that are more valued. = you get into a higher tax bracket and we should limit that to a family of $250,000 and above for them to get the same value as those below. it does not take the deduction away. it starts to trim the value. we think that is a measured way to start getting at this issue of spending in the tax code. we think is something that should be the basis for being able to begin a serious conversation. >> do you envision an evaluation of these tax expenditures? >> the president has proposed in this set of the union and the budget that we begin to work together on corporate tax reform. we have a general bipartisan

consensus. >> on that point, i am please that he and secretary gunnar have indicated that that must be revenue-neutral. i think it should be revenue- increasing to deal with this problem but that is a non- negotiable position. we will not see as borrow from the chinese to give tax cuts to corporations only. >> the principle was that we should broaden the base, lower the rates so we can be more competitive and it is principally a way to drive our international competitiveness. that will be challenging because once we have agreed on that principle, broadening the base means you take away special interest tax provisions. >> thank you, mr. chairman. i want to make a point -- my friends on the other side of the aisle took over the congress in 2007. that is when you see significant

spending increases. congress does have something to do with spending around here. that is a big part of it. i want to thank our guests for coming out today. i understand the traffic was bad. a couple of things you pointed out to drive people to investment. i'm a small businessman. how do you drive people to investment if you have significant increases down the road in capital gains? >> the responsibility that we have is to keep healthy growing economy where there is demand and where there is business activity out there. the most important thing we can do to promote investments is to be responsible in the way we conduct our fiscal policy. within that, we have made the kind of choices we think we're

the government can really be helpful in terms of driving the economy of the future. when you talk to business leaders and i talk to them frequently, i hear where they have problems is hiring people with the right skills, engineering skills, technical skills. by producing the work force that businesses need, we are helping to promote business in this country. >> i find it difficult to believe that the folks i did business with finding the capital gains going up significantly will make it easier for them to do business. i have another question i am on the defense appropriations committee. i want to understand this new account you have to cover the diplomatic and development costs of u.s. involvement in iraq and afghanistan and pakistan. in past years, that was handled

in the regular base budget. what standards were used to determine what costs were appropriate for inclusion in this account? can you send us a written guidance for the account for the record? >> i am happy to get back to you on the record. here is a brief answer -- the funding for military operations overseas are funded through overseas contingency operations funding. it has not historically been an issue for the civilian side. with things like the withdrawal of the troops in iraq and a buildup of civilian mission which is labour intensive, it creates the same challenges that the military does. the simple rule that was used in putting it together was to the extent that we have activities that would not carry on once we normalized our diplomatic footprint, those should be handled in the base. the activities more like military search, they should be

in the overseas account. >> i would like to have that in writing. the budget request of $117 billion for dod account for the war and of afghanistan is dependent on u.s. troop level in iraq and afghanistan. we are bringing down or reducing the force in iraq. at the end of this caliber -- calendar year. the size of that withdrawal is still yet to be determined. on your assumption, what troop level are you assuming for afghanistan and iraq in this funding? >> in iraq, we have a clearly stated policy to withdraw our troops on schedule. the funding levels reflect that policy. in afghanistan, our policy is that we will begin to withdraw troops. we have not used the budget as a place to project specific

numbers. that will have to be worked for by the national security team. >> the last question -- do you expect additional war supplement to be asked for? >> we have requested funds that we know to be needed for the coming fiscal year. we have not yet seen what the preparations are for fiscal year 2011. we don't know what the appropriations will be for fiscal 2012. i cannot give you a guarantee of knowing what will be appropriated. we have estimated what the cost will be. >> thank you for being here today. we have three challenges facing us and they need to all be addressed simultaneously. we need to reduce the deficit. we need to grow the economy and create jobs that will keep america competitive the best way to reduce the deficit is to get america back to work.

we have tough choices to make. the difference between making sound investments or cuts, the tea party republican colleagues are taking on the f y 2011 budget with ideology. over the next years, congress -- over the past years, congress has provided tax breaks, tax cuts, tax loopholes, and special tax parts estimated to reduce revenues by more than $1 trillion. in the legislation in december to extend the bush tax cuts, the beneficiaries of these taxes e breakarmarks or nascar honors, caribbean rum manufacturers. the discretionary defense spending over the next five years will approach $3 trillion. that does not include the cost

of the wars in iraq and afghanistan yet this budget proposes only a $78 billion reduction in defense spending which is nothing more than a rounding error. congress is part of the problem despite the pentagon's objection. the republicans have include an alternative engine for thef-35 a joint strike fighter in be fy 2011 budget. this is a total waste of taxpayer dollars an example of congressional pork and it should be eliminated. my questions are -- the defense discretionary spending is warping all other domestic investment. where can greater defense spending reductions take place over the next decade? could you also elaborate on the administration's plan to close tax loopholes and special tax per cent cut off the special tax interest giveaways that are

adding hundreds of billions of dollars to the deficit? if you have time, can you explain more about how to grow the economy and create jobs? >> let me start dod. we share the belief that we have a co-responsibility to provide for national defense. over the last 10 years, the spending on defense has been considerably above inflation. it was not subject to the same kind of rhetoric that other things were. we were going through extraordinary times. this is not a judgment about the past. as we look to the future, this budget says we have to start pulling back and not pulling back in a way that sacrifice is national security. the policy in this budget says the department of defense will tent down its increases so we will have no real growth in the five-year window. that is $78 billion worth of

savings compared to their five- year plan. we think that is an important step which requires tough choices braided means to canada for the second engine that you don't need for the joint strike fighter. it means you can't afford the marine expeditionary vehicle. there are tough decisions that have to be made. we have a secretary of defense and leadership and our military is prepared to make the tough choices. there are things that are made now that will not be made in the future. that is what will take to start getting our defense budget under control. on the question of closing loopholes, the president's budget includes a number of specific proposals. i mention the oil, gas, and call provisions. there are provisions that would take away the tax benefits that come to companies that export jobs. we think it is important to have our policies and our tax code be designed to reflect what we need to do in our economy.

for the future, we need to develop the new renewable energy technology industry. that will create jobs in the future. we will build the new economy in nobles and in clean energy. that is where we need to put our investment. when you look at the withdrawal up of the special provision for oil, gas, and coal it tells the story about how we think you invest in the future. >> a couple of thoughts -- years ago, i was taught what was called the harvard case study approach to solving problems. it was taught in business schools. the idea is that you're given this complicated situation and you can see all sorts of things that would be good to do.

part of the discipline was to pick the number one thing. what is the very first and essential element you've got to deal with? that was frequently the situation that would determine whether a company would succeed or fail. if i take a look at many things we have discussed this morning and you are dealing with on the budget, we are dealing with some peripheral things. it seems like there has been good emphasis but the elephant in the room is the tremendous growth of entitlements. i heard references to the fact that maybe the defense budget is the bugaboo. you go back may be 9% being in gdp. we talk about cutting this

expeditionary fighting vehicle for the marines. if you believe in marines, you have to get them from the ocean to the shore. i am not sure that you have cut the percentage of gdp for defense, not quite in half. in the meantime, entitlements have gone from 2.5% if you go beyond medicare and medicaid and social security. if you put that together with debt service, that is what our revenue is for the elephant in the room is the entitlements. courageous leadership will acknowledge that. faq fact. we know we are talking about heavy cuts in discretionary but that is the tip of the iceberg. i guess it is disappointing not to say that we cannot make the main subject to the main subject. i don't understand the phrase

and the idea that we are somehow going to shock the fragile recovery by cutting discretionary income. that is assuming the discretionary income helps the economy. can you enlighten me in that car -- a line of reasoning? >> i have a soft spot for the business school case studies. i produce those case studies. i think the court challenge we have, the first thing i would do looking at university class of how to solve the problem is to ask where we need to be on the bottom line. we need to have 3% of gdp deficit in order to say we are not adding to the debt. then i would ask what we are doing to get there and we have put forward a plan that gets there. you separate the question of what you need to do for the long term.

that is exactly what we have done in this budget. we are dealing with a short-term and medium-term and we are saying in a very direct way that we need to work together on the long term. we are trying to leave as much open for discussion so there is an environment where we can reach agreement. the easiest thing to do is to pulverize the environment. we are deliberately leaving room for that conversation. >> let me jump in. in order to come up with the numbers you have come up with, some of the assumptions strike me as being a lot. some of my democratic colleagues have talked about when president bush took office that everything was rosy and perfect. i recall there was quite a recession going in 2000-2001. i remember the numbers in may of 2003. we did three unpopular tax cuts, capital gains, dividends, and death tax. it was set weir's sticking up for the rich guy. but the rich guys own the

businesses that hire people. if you overtax the owners of small business, you don't have any jobs. i took a look at those numbers after capital gains, dividends, and death tax and we saw that the gdp jumped and have the kind of growth you want to make the budget numbers work. we did it by cutting those taxes on small business and investors. we also saw that the employment turned around. we got -- we went from unemployment to jobs being created and last of all, according to history, government revenues jumped up. i don't understand how you make it work with growth and still raising taxes? >> i would like to respond but i don't think we have enough time them up thank you for your service. i find it remarkable and i say

this with fondness, mr. chairman, [laughter] you have become an existential party. you have any about the past. and how we got to this place and you don't want us to invest in the future. we are stuck with the here and now. i don't think we are stuck. i think this is a pretty credible blueprint. it will not be like this when we are finished but it is a credible blueprint to begin with. there is a simple juxtaposition going on here. the president's budget, correct me if i'm wrong, mr. lew, the president's budget achieves substantial deficit reductions and achieves a sustainable debt

of 3% of the gdp by 2015. is that correct? >> it would be the deficit >> is sustainable deficit. i'm sorry. the second question is -- is the true that when this president's budget there is $5 billion in small-business tax cuts for 2012 and if you add up the tenures, there is $116 billion in real tax cuts for small businesses? is that correct? >> there are substantial incentives for small business. they add up to a number like that but i don't have the exact number in front of me. i assume you have the correct number. >> this is my first "-- this is my second question. some of my colleagues who i

admire and respect and that is nothing to smile about, i mean it but i don't have to agree with them, right? some of my colleagues criticize the president's budget that it does not cut entitlement programs like medicare. i went outside for water and the president was providing us with his address at 11:00 about the budget and that was his first question, why did you not show leadership going after medicare and social security? social security has little to do with the deficit. i personally believe we can balance the deficit without cutting medicare for seniors. that is my own personal belief. however, is it not true,mr. lew, that federal health care reform adopted many recommendations from congress's own independent

advisory commission, the medicare payment advisory commission, we established that, did we not? that by having a medicare center for innovation, medicare now can test and use new payment models. we fought to have that in there for a very specific reason. it was not only to improve patient care but are national spending on health care. would you respond to that, please? >> there are many, many things we have done last couple of years that are important and health care. we have real savings in 10 years and we have put in place like mechanisms you have described it give us the ability to get best practices which is the way we will will reduce spending overall. many of those things don't score easily because there is a question about when they will have results. we believe they have -- will

have results and we have to stay on the course of implementing so we get the benefits. >> many of those were not even scored. >> correct, it does not mean they are not real. you first have to demonstrate it. >> why should we be paying for police to patrol the report -- a ka streets ofbul >? why is that exempt. but not cops on the beach in paterson, new jersey or anywhere. why? >> we provide funding to make sure we can keep cops on the beat in camden, new jersey. it is not either/or. we have tried to preserve funding for the cops program. why are we supporting the training of police in afghanistan? to withdraw troops, afghanistan will need the ability to protect

itself so we are not put at risk and that is part of our plan. >> i was talking about the security in our own country. >> we have witnesses in high demand and want to make sure every member gets a chance. please reduce your questions to four minutes each so we can accommodate everybody. >> i was going to object because it was my time variant [laughter] . [laughter] we need to get taller or you guys in the front row need to get shorter. i find myself leaning forward a lot. i have three areas i would like to ask you about. looking at your budget, you basically keep 80% of the bush tax cuts for about 95% of the people that receive them. does that suggest that you don't

think those went to the rich, particularly, and two, that you see them as having been and continuing to be beneficial for the economy? >> we believe that tax cuts for the middle class are a good thing. it was too high of a tax burden. we should continue to do what we can to minimize the tax burden on the middle class. we don't take the benefit of those tax breaks away from anyone even if they are above $250,000. we say there should not be additional tax breaks. >> i understand that. we can disagree about 20% but 80% we agree on. the second question gets to your philosophy -- in your budget, the deficit reduction plan over several years, you have some tax

increases and spending restraints. roughly, what is the balance that you strike between tax increases and spending cuts or restraints? >> i apologize but it is a complicated answer. i want to be clear. we start with a baseline that assumes that the tax rate in the top bracket stays where it will be when the provisions enacted in december expiry. e. we will have netted $60 billion of additional revenue. we have $392 billion of tax cuts. after you pay for the tax cuts, net $360 billion of new revenue. >> how much spending restraint? >> $751 billion in mandatory and non-security discretionary savings.

we cannot debt service as spending because we have to pay for debt service. >> we probably disagree over whether letting the tax cuts run out amounts to a tax increase or not. let me put that aside. this is my last point which gets down to some questions that were raised. we all know entitlement spending will be a major focus. i will be thrilled the day we finally moved to tax expenditures and entitlement to expenditures. that is where the problem is. since you have expressed what the president wants to do and does not want to take options off the table, i am disappointed we have not seen more. can you tell me when that discussion would begin? is the president going to propose a format in which it will take place? does he think he should lead with a proposal of his own or wait for congress to put one out?

i am mystified about how we get to the elephant in the room that we were talking about. >> this is the first step in the process. we have a lot of work to do together in terms of the finishing the work of 2011 and getting to work on 2012. from my own personal experience, having watched and been part of the deficit reduction efforts in the late 1970's and 1980's, when we have had real success on a bipartisan basis, it has come from people working together behind the scenes and in an environment where there could be the kind of open conversations were there is trust. if we concentrate on developing that kind of conversation, we will again produce the best results for the american people. >> thank you. >> i would like to show you a chart.

your the head of omb in the last few years of the clinton administration where there were burgeoning debts and deficits. at the end of the clinton administration, is it true that you left when we had projected a 10-year surplus of $5.60 trillion? >> o i was director >mb three years ago -- i was director of three years in a row when we had surpluses. >> we were facing an $8 trillion, a 10-year deficit with president obama? it must be frustrating during the eight-year period to watch what happened to the surpluses left at the end of the clinton administration. >> i don't exaggerate when i say it breaks my heart. when you look at what drove the deficit -- some of it was not

under our control in terms of the economy. when there is a recession, there is loss of revenue and spending you have. some of it was because of wars which you don't necessarily choose. if you go to war, that is an extraordinary circumstance. some of it was because we suspended the basic common sense of paying for what we did. we had tax cuts and spending increases that were not paid for. that is what has created a long- term problem we are dealing with now. the economy is recovering and we will see revenues and spending get back to normal levels. the wars will come to an entry we are pulling our troops out of iraq. war is creating a problem we have to deal with. >> i am grateful you are taking on this new challenge. we all agree that government has got to rein in its means. we've got to build on the

economic foundation for the future. i am focused on job creation and our work force. my district is home to one of the largest universities in the country. i am 100% behind you on what this budget does to maintain a break for students. the pell grant helps over 9 million students across america for college. over the last couple of days, there has been confusion over what is happening with the pell grants. it appears that president obama maintains the maximum pell grant at 5005 under $50 for 2012 for students and you pay for it --

$5,550 for pell grants. i was not aware the students could get two of them. are you aware that in contrast to what the president's budget is trying to do, right now on the floor of the house, it -- the republican continuing resolution has proposed cuts in the bob grant by $845 per student for 2011 tax i think that is moving in the wrong direction. we want to make sure we have the most competitive work force across the globe. could you explain your budget and why you view this as a priority and your view of the republican efforts to diminish support for students and how it will hurt our national goal of supporting an educated work force back in and out-compete the rest of the world. >> we think of grants are important. we have taken the tough steps in this budget to pay for it.

we look at the increases in spending since 2008, pell grants is one of the biggest and we think is one of the best investment in our future. >> if you ask a question at the end of your statement, it is taking away time from your colleagues. >> thank you so much for joining us. some of our friends on the other side of the aisle, one of them said there was an amnesia about the past. hughes said the last time you were before this committee it was a good time because you had produced a balanced budget. what party was in control of the house of representatives at that time? we worked on a bipartisan agreement. we worked with republican leadership and democrats alike. >> what was the debt in this country at the end of 2006? >> i would have to look that up.

i have many numbers in my head. >> when the republicans ended their control of congress in 2006, it was $8.40 trillion. is that about right? >> when we took office, it was approaching $10 trillion. >> so that would be about right in 2007? and the debt right now? >> the debt right now, that i can look up, about $14 trillion >> so about $6 trillion in the last four years under democratic leadership. is that correct? >> i think one can go through these numbers and we can look up the book and we can establish what the numbers are. one has to understand what was going on. we were going for the worst economic conditions. >> i only get four minutes. the elephant in the room has been discussed. it is a remarkable display we

believe has command of the administration. when i was a kid, we used to play kickball industry or backyard. when we headed to our house, we knew the house would be there. the house is burning down, mr. director. the administration is playing kickball and not attending to the work that needs to be done. to put a budget before the american people that does not address the entitlement issue is reckless and irresponsible. you talk about getting to balance with a set of decisions that needs to be discussed and no one is discussing right now. we -- our constituents are discussing them. they are scared to death and they don't see any leadership coming out of this administration as it relates to entitlements. one is that discussion begin? >> mr. congressman -- >> when does that discussion began? >> i would be happy to answer your question if you let me. >> you have not answer the

question. >> the president has put down a budget of putting the first step as to how to get to a sustainable budget by the middle of the decade. the president says we need to work together on a bipartisan basis. i think we cannot confuse the two issues. >> does this budget deal with the entitlement issue? >> this budget begins to but the entitlement issue did not cause the increases you have just described. the worst economic recession since the great depression drove those numbers. we need to take the steps we have put forth in this budget on a bipartisan basis. >> look forward to that. as you well know, this budget does not deal with the entitlement issue. let me turn to the tax issues. the assumptions under this budget a sound that the tax increases will occur for those making more than 200th $50,000? >> it assumes that the ones in

current law are in effect. >> so that occurs within this budget window? >> individuals and families over $250,000 per year will pay the same taxes they did at the end of the 1990's when the economy was growing. >> the amount of this tax increase is about $1.60 trillion? >> it gets to the question of measurement. i have tried to be clear that there is a portion we are not taking credit for because it is in the baseline. >> we already established that number. >> bank of joining us. >> excuse me, what happened to me? >> ms. moorre, the rule is in the order in which you show up. >> ok, i want to make sure i had not disappeared. >> you are still there. [laughter]

>> thank you for providing insight on the proposed budget. i am aware that you are a fellow new yorker. members of the new york merc delegation of the house wrote to you about extending the federal state health partnership. this innovative partnership between new york and the federal government has led to significant modernizations and improvement for several hospitals and health systems. it was established by former governor pataki to improve the outdated new york alceste and refunds have been allocated already but not all projects have been authorized by the agreement. the new york delegation wrote to urge you and secretary sibelius to extend the waiver for three years. my concern is that he agreed to hear. it is a common-sense thing to do. if omb stands the waiver before

it expires late this year -- >> it is under review. there are two waivers under review. i have been at omb for eight weeks and i have not looked at it yet. we will continue to work with the state and review it. >> great, the president's budget i am concerned about the investment in r &d. the president's budget proposes to invest $148 billion in r &d and enter the efficiency -- and energy efficiency and key research. the republican spending plan would slash r &d. there are also robust investments in the national institutes of health where they were to cure cancer and other diseases. claimed the lives of millions of americans every year the gop

spending plan on the floor today cuts the nih budget by about $1 billion. medical research has proven to expand life expectancy from 50 years in 1911 to nearly eight years more in 2011. can you explain the approach taken with r &d and basic research in the president's plan? some call it spending and others call it investing. >> i am happy to. we have taken a close look at the r &d budget and look beyond traditional boundaries. biomedical research is important that we agree with that. we have an increase in biomedical research. we have looked areas like energy research. we put significant resources into developing the technologies that will make us the most

competitive country. these are the technologies of the future. we have to have a comprehensive research agenda in order for us to be in a place where we can out-innovate other countries. it has been an area historical of enormous strength in the united states. we spend more as a country today on research than any other country in the world. there are certain aspects which don't happen in the private sector alone. there is too much risk. there are too many experiments and things that will not become commercially viable but you need to go through that process in order to get the material and knowledge out there. we have had a history of very effective partnership in this country of transferring research from government-funded research to private sector development. we have tried to put together a budget that will continue what we think is the best of the american tradition. >> welcome, i want to join other

is a complement to you on the job you did under the clinton administration. you guys did a magnificent job of managing the nation's fiscal affairs. you cut spending by a miraculous 4% of gdp during your years. you did historic reform of entitlements, ending welfare as we know it. you did what amounted to the biggest capital gains tax cut in history. four years of budget surplus, give credit where credit is due, you did a great job. i look at this budget. it seems to be exactly the opposite. >> i want to say thank you. >> with all sincerity, thank you. i look at this budget and it is exactly the opposite. record increases in spending, biggest peacetime deficit in american history, no effort to

address entitlements which have grown significantly more challenging over the last several years. would you call this the anti- clinton budget? >> no, i am proud of the work i did in the clinton administration. one of the reasons that spending was falling as a percentage of gdp was the economy was growing so fast. we had a good fiscal policy that promoted confidence and economic growth. if you look at the projections today, spending and in the future, we are projecting the retirement of the baby boom. we are seeing more people become 65 and climbing their benefits. >> that is my next question. >> i think it is part of the reality of projections that even if we cut spending in the policies we are making as we pay the benefits of people, there will be areas of the budget where spending goes up. we don't want to say that people should not be able to collect their social security benefits when they are 65.

that and medicare is driving the aggregate spending levels. we are cutting spending on the discretionary side. >> which is why we are all baffled that you have not tackle entitlements which are driving our long-range projections off a cliff. speaking of the long-range projections, look at the claim that you are reducing the deficit in the long term. we have enough trouble projecting into the future. a look at what you are doing and detained the current year's war funding of $164 billion this year to pay for operations in iraq and afghanistan, including the surge, you then take this level and project it out for 10 years and this represents your current policy base line. you then assumed a place holder of $50 billion for the war from 2013-2021. there is a $1.10 trillion

spending cuts over 10 years. take the related debt service which is another $1.30 trillion. are you planning on staying in iraq at current levels and continue the search for the next 10 years? yes or no? >> this reflects our withdrawal from iraq. >> you claim that as savings? you climb one under $65 billion per year and you count everything below that has savings. we are planning to do that any way. >> we're almost out of time. the overseas contingency operation account is something that solves the problem that the obama in administration inherited which is there was no orderly way to fund war operations. supplemental appropriations were reviewed as a way of not having an honest budget the.

>> this is an intellectually dishonest way of presenting the budget. >> that is an important issue and i would love to respond in more detail. >> how about in writing? >> to save medicare and social security and make those systems work better, we have to change. >> ohio republican and head of the study committee, jim jordan on spending issues, the tea party, and president obama's proposed budget today on " newsmakers." donald rumsfeld was the youngest and oldest person to serve as u.s. defense secretary. >> if you have approximately president, you automatically have an obligation to tell him the truth and what you believe. people who don't have proximity and only go in and see him occasionally simply don't want to >> do it> tonight he will discuss his philosophy of presidential staff leadership,

the process of writing his memoirs, and address some of the critical and positive reviews of the book on cspan's "q &a." >> defense secretary robert gates said thursday that the prospect for closing the u.s. detention facility at guantanamo bay are very low. testifying before the senate armed services committee about the administration's 2012 budget request for the pentagon, he talked about funding to expand afghanistan's security forces by 70,000. the secretary is joined at this three-hour hearing by admiral mike: mullin, the chairman of the joint chiefs of staff. c-s[captioning performed by

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the committee this morning welcome secretary of defense robert gates, chairman of the joint chiefs of staff, admiral michael mullin for our hearing on the fiscal 2012 budget request. , the associated future years defense program and the posture of the united states armed forces. we also recognize secretary hale and a welcome him this morning as well. we are thankful to all of you and your families for your dedicated service to the nation and to the soldiers, sailors, airmen, and the marines at home and in harm's way around the globe and to their families. your personal commitment to the welfare of our troops and their families shines through all that you do. the american people are grateful for that and we are grateful and eager to help wherever weekend.

the department of defense is currently operating under a continuing resolution. that expires on march 4, 2011. if the current cr is extended for the whole year, the department's based on the other $526 billion for fy 2011 would be $23 billion below the original fy 2011 request of $549 billion. secretary gates will describe to us this morning this situation as a crisis on his doorstep. i hope we will soon, as the committee, be in a position to enact a full year appropriation at an appropriate level and that the full senate adopts such an

appropriation. at a time when we face a budget deficit in excess of $1 trillion and many in congress are convinced that we need steep spending cuts to put our fiscal house in order, no part of the government, including the department of defense, can be exempt from close examination. the secretary of defense has subjected the department's budget to close examination. he has insisted on efficiencies, streamlining, cuts, and cancellations that total $178 billion over the course of the next five years. the fy 2012 base budget request of $553 billion is $4 billion higher than last year's request, but it is a reduction in a inflation-adjusted terms. we will closely scrutinize the secretaries efficiency

initiatives and we will be looking for additional efficiencies as we move through the legislative process. the total defense budget which includes base funding for the department of defense and additional funding for overseas contingency operations or oco, that total defense budget declines from $708 billion in f y 2011 to $671 billion in f y 2012. that decline is largely from our continued withdrawal from iraq which results in the budget for the overseas contingency operations falling from $159 billion in 2011 to $118 billion in f y 2012. even as the defense budget request reflects difficult choices, it rightly requested

increased funding for military personnel and health care. it includes funding sufficient to continue initiative supporting wounded and six service members, continued research into traumatic brain injury, tbi, post-traumatic stress disorder and psychological health, and fully funds a variety of family support programs. notably, the budget request would reduce active-duty army and navy in strength by 7400 soldiers and 3000 sailors respectively. the army has announced plans to reduce its so-called temporary end strength by 20 to hop thousand soldiers over the next three years followed by an additional reduction of 27,000 soldiers between 2015-2017. as the services of resize their forces according to anticipated

demand, we must ensure that any reductions avoid unnecessary increased risk for stress on our service members. the budget request prioritizes funding for ongoing major operations in afghanistan and iraq. as the senators heard during our visit to afghanistan last month, both of to withdraw all u.s. forces from iraq by december 31, 2011. as we drawdown, our goal is to leave behind an iraq that is stable. iraq will continue to need support in meeting its security needs. the budget request includes significant funds for starting

up the office of security cooperation with in the u.s. embassy in baghdad to make our security assistance available to iraq. the transition from a dod lead to a state department lead for numerous bilateral activities in iraq can only be successful if the department of state and our other civilian agencies receive the resources that they need to take on these missions. in afghanistan, july 2011 will mark the date set by president obama a little over a year ago for the government of afghanistan to take more and more responsibility for afghan security and governance and, by july 2011, for the beginning of reductions in u.s. forces in afghanistan. the president's decision to set the july 2011 date has increased

the urgency to the efforts of afghan leaders to prepare for this transition. general david petraeus told us that nato and afghan officials are preparing to provide president karzai by the end of the month the recommendation on which provinces and districts should be transferred to an afghan security lead in the coming months. during our visits to afghanistan, we saw significant signs of progress over the last six months, although great challenges remain. the afghan army and police have surged by an 11,000 gain. they are on track to meet the target of 305,000 forces by the end of this year. president obama's request for fiscal year 2012 includes a

substantial resourced, the continued support of those afghan forces which will bring closer the day when afghan troops will bear the weight of afghan security. that is the key to success in afghanistan. on february 15, 2011, in an op- ed, general caldwell said "while the international community has expanded tremendous blood and treasure for this just cause, the remarkable story of the surge of afghan, the people committing themselves to the defense of their country, is a reason to hope for successful long-term outcome." in an e-mail message to me, general caldwell who is in charge of training afghan forces followed up that op-ed by saying, "it has become truly the untold story of the last 15

months. in that time, afghan men and women have swelled the ranks of the afghan national security force to levels more than double the u.s. and nato serge." he continued, "while the quantity is significant to the security of afghanistan, our focus on the improvement of quality is even more important." and those two documents will be made part of the record. the administration is also considering a proposal to grow the afghan army by 35,000 men and the afghan police by a similar number. that would bring total afghan security foresails to 378,000 by the end of 2012. these additional forces would add important enablers, logistics', engineering,

intelligence, and others that would reinforce the sustained transition of responsibility for afghanistan's security to the afghan security forces. i support this proposed increase and i know, from our conversations, that secretary gates and admiral mullen support it as well. i urged president obama to approve the request. u.s., afghan, and coalition forces are taking the momentum from the insurgency, particularly in former taliban stronghold in the south. the afghan army is increasingly in the lead in planning and executing operations. that is what the taliban feared the most, afghan security forces, as opposed to foreign forces, out in front providing security to the afghan people.

as support for the afghan army and police gross, a lower level insurgent fighters are slowly beginning to reintegrate -- army and police grows, in local insurgent fighters are slowly beginning to reintegrate. we must remain attentive to threats in that region and around the world. i outlined those threats in some detail in the remaining of my comments. >> thank you, mr. chairman. now want to join you and welcoming secretary gates and secretary hail for fiscal year 2012.

secretary gates, you were asked to return to public service at a time when this country was embroiled in the turmoil of an unpopular war and another deteriorating war. pentagon critics were abounding. you're a star tenure has been marked by a surge to victory in iraq, a new strategy to defeat our enemies in afghanistan, and the department's lead on humanitarian responses around the world. your service will also be noted for the substantial reforms for the defense acquisition process and your decisive actions to stop wasting taxpayers' funds on unneeded and outdated systems. on behalf of my fellow citizens, i want to thank you for your outstanding service. i view you as one of the greatest public servants that i have ever had the opportunity of serving with.

today, we are faced again with the demand for change. we are facing the harsh reality that runaway federal spending has put the spending on ia sustainable has put spending in this country on a sustainable path. the competing demands for research service and the imperative we face provides congress more leadership than it has shown in the past to restore fiscal responsibility. i believe we took a step in the right direction in last year's defense authorization act by stripping the ear march from the bill. both the house and senate have put a moratorium on your marks for 2012. on earmarks 40- fro doesn't well. i commend my colleagues -- on

earmarks for 2012. i commend my colleagues. we have had many briefings and discussions, but it has been a source of great frustration to un to me and to members of this committee. most of all, it has been an incredible waste the taxpayers' dollar. it hurts the credibility of our acquisition process, our defense industry, and reinforces the view of some of us that the military industrial congressional complex that president eisenhower warned us about is alive and well. i hope that we can make your position absolutely clear to the senate today to prevent further wasteful action by congress that will deny the resources it

really needs, but at the same time give us the kind of assurance that the f-35 can be put on the right track. i believe that, as we move to try to reduce the deficit and the debt, almost everything will be on the table. overall, a base budget request of $553 million is $13 billion less the amount projected last year. i commend your efforts to get out ahead of the cuts by finding ways to improve efficiency of the department, your decision to reduce the number of senior military and civilian officials, freeze civilian pay, and the process of expanding the civilian work force as sound decisions. i worry that we might, however, do some things that might cause us to see what we saw again in the 1970's and the 1980's. reducing flying hours, deferring aircraft maintenance, and

proposed -- and postponement of training upgrade facilities. i have long said that the defense department does not deserve a special pass for spending american tax dollars efficiently, but the ascending -- and hope the savings will identify will be reinvested in priorities. one is the increased efforts to combat the trafficking of drugs and illicit materials through mexico. this has become an issue of national security. i look forward to working with you and our allies in mexico to combat this search. -- this scourge. yesterday said "on our part, there is an interest in having an additional presence. the truth of the matter is that the iraqis will have some problems that they will have to deal with if we're not there in

some numbers." i agree. we are now scheduled to be completely out by the end of this year. i think it is time we engaged in active discussions with the iraqis as to their future needs as well as any threats there might be to our national security if there is a complete withdrawal by the end of this year. in addition to iraq, which will still have 90,000 forces in afghanistan. i expect our troops will remain there until they are no longer needed. a couple weeks ago, i was at munich. our estimate to me and said, "you say you are beginning to withdraw in the middle of 2011. why should we not good to our constituents and say that we are beginning to withdraw?" i think that one of the worst announcements ever made in a

conflict of war is the statement that we would be "beginning with a drawl in two dozen 11." i'm glad to see the 2014 is now the operative year. but it is still very unsettling -- in 2011." i'm glad to see that 2014 is not the operative year. but it is still very unsettling. we face many challenges in the year ahead which will require your continued skill and tenacity. i thank you, mr. chairman. >> thank you, senator mccain. we have a quorum here in a moment. i will ask approval of a number of nominations and the committee budget. before i do that, i want to say, mr. secretary, i join and concur

with senator mccain and his comments. both you and your tenure has been extraordinary. you have brought great capability, object to be, thoughtfulness to the job and great strength, independents and courage. i very much commend you for it. i look for too many more times when you will be before this committee and i am sure that you do, too. [laughter] so i do not want to make this sound like this is your anywhere near your tenure here. i discussed the matter of the budget with senator mccain and i now ask the committee to consider and approve the seventh revolution of rising from before our committee for march 1 this year through february 28, 2013.

>> i second the motion. >> it is consistent with the joint majority leader and the republican leader agreement on committee funding and with the funding provided to us by senate rules committee on february 7, this matter is time sensitive. all committees have been asked to report their budgets to the senate by not later than today. i would know entertain a motion to favorably present this motion. all of those in favor? all of those opposed? the ayes have it. we have some discussion ahead of us on the rules. i would ask everyone to read the rules next week and we will take up the matter of the rules on monday or tuesday after we return. we also have in front of us say 670 military nominations.

is there a motion to favorably report those nominations? is there a second? all in favor? all opposed? the motion carries. thank you all. we now call on you, mr. secretary. >> chairman 11, senator mccain, members of the committee, i appreciate the opportunity to appear before you to discuss the president's budget request for fiscal year 2012. first, want to thank the members of this committee for your outstanding support of the department of defense, but especially your support of the men and women in uniform serving any time of war. i know you will join me in doing everything to ensure they have all they need to accomplish their mission and come home safely. the budget request for the department of defense being presented today includes the base budget request of $553 billion and an overseas contingency operations request of $117.8 billion. these budget decisions have

placed in the context of a nearly two-year effort by this department to reduce overhead, cultural and access programs, and rain in personnel and contractor costs, all for the purpose of preserving the global reach and fighting strength of america's military at a time of fiscal stress for our country. in all these budget requests, if enacted by the congress, there will continue our efforts the way the department -- efforts to reform the way the department does business. it will reaffirm and strengthen the nation's commitment to care for the all-volunteer force and ensure that our troops and commanders on the front lines have the resources and support they need to accomplish their mission. my submitted statement includes more details of this request. now want to take this opportunity to address several issues that i know have been the subject of debate and concern since i announced the outline of our budget proposal last month. first, the serious damage our military will suffer by

operating under a continuing resolution or receiving significant cuts -- funding cuts during fiscal year 2011. second, the project is slowing and the eventual flattening of the growth of defense budget over the next five years. the third, the planned future reductions in the size of the ground forces. fourth, the proposed reforms and savings to the tried-care program for working-age retirees. a loss express the hope that the senate will continue to reject the unnecessary extra engine for the f-35 as it did the last time the senate spoke to this issue in 2009. i want to start by making it clear that the department of defense will face a crisis if we end up with a year-long continuing resolution or a significant funding cut for fiscal year 2011. the president's defense budget request for 2011 was $549 billion. a full year continuing

resolution would fund the department at about $526 billion. that is a cut of $23 billion. the damage done across the force from such reductions would be further magnified as they would come halfway through the fiscal year. let me be clear. operating under a year-long continuing resolution or significantly reduce funding with a severe shortfall that it entails, that would damage procurement, research programs and cause delays, rising costs, no new program starts, and serious disruptions in the production of some of our most high-demand assets. cuts in maintenance could force police to be grounded. cuts in operations would mean fewer flying hours. few were steaming days and cutbacks in training for home- station forces, all of which directly impacts readiness. similarly, some of the appropriations proposals under debate in congress contemplate

reductions of up to $15 billion from the president's personal fiscal year 2011 request. i recognize that, given the current fiscal and political environment, it is unlikely that the defense department will receive the full fiscal year 2011 amount. based on a number of factors, including policy changes that led to lower personnel costs and reduced activity forced by the continuing resolution, i believe that the department can get by with a lower number. however, it is my judgment that the department of defense needs in the preparation of at least $540 billion for fiscal year 2011 for the u.s. military to properly carry out its mission, maintain readiness, and prepare for the future. which brings me to the proposed $78 billion reduction in the defense budget top one of the next five years. to begin with, this so-called cut is to the rate of predicted growth. the size of the base defense budget is still projected to increase in real inflation-

adjusted dollars before eventually finding out over this time. . or significantly, as a result of reforms taken over the past year, we have protected programs that support military people, readiness, and modernization. these efforts have made it possible for the department to absorb lower projected growth in the defense budget without sacrificing real military capabilities. in fact, the savings identified by the services has allowed the military to add $70 billion beyond the program of record toward priority needs and new capabilities. of the $78 billion in proposed reductions to the five-year defense plan, about $68 billion comes from a combination of shedding excess overhead, improved business practices, reducing personnel costs, and from changes to economic assumptions. only $10 billion of that five- year total is directly related to military combat capabilities.

$4 billion comes from restructuring the joint strike fighter program, i stepped driven by the program's development and testing schedule that would have taken place in respect of the budget topline. the rest, about $6 billion, results from the proposed decrease in and strengthen the army and marine corps starting in 2015, a decision i will address now. just over four years ago, one of my first acts as defense secretary was to do -- was to increase the permanent ground forces. at the time, the increase was needed to relieve a severe stress on the force from the iraq war as the surge was getting underway. to support the latter tossup, the letter + up in afghanistan, a further authorize an increase in the army of 22,000, an increase always planned to end

in 2013. the objective was to reduce stress on the force, limit and eventually end the practice of stop-lossed, and to increase troops home-stationed. according to our agreement with the iraqi government, the overall deployment demand on our forces are decreasing significantly. just three years ago, we had 190,000 troops combined in iraq and afghanistan. by the end of this calendar year, we expect there to be less than 100,000 troops deployed in both of the major post-9/11 combat theaters. virtually all of those forces will be in afghanistan. that is why we believe, beginning in fiscal year 2015, the u.s. can begin reducing army active-duty strength by 27,000 and the marine corps by somewhere between 15,000 and 20,000. these projections assume that the number of troops in afghanistan will be

significantly reduced by the end of 2014. if our assumptions proving correct, there's plenty of time to adjust the size and schedule of this change. it is important to remember that, even after the planned reductions, the active army and strength would continue to be larger by nearly 40,000 soldiers than it was when i became secretary of defense for years ago. i should also note that these reductions are supported by both the army and the marine corps leadership. finally, as you know, sharply rising health care costs are consuming an ever-larger share of this department's budget. growing from $19 billion in 2001 to $52.5 billion in this request. among other reforms, this budget includes modest increases to try-care enrollment fees, medical increases for working- age retirees, most of whom are employed while receiving full pensions. all six members of the joint

chiefs of staff have strongly endorsed these and other cost- saving reforms in a letter to congress. i understand that any kind of change to these benefits props vigorous political opposition. let us be clear. the current arrangement, one in which fees have not increased for 15 years, is simply unsustainable. if allowed to continue, the defense department risks the fate of other corporate and government bureaucracies that were ultimately cripple by personnel costs, in particular their retiree benefit packages. all told, the cumulative effect of the department savings and reforms combined with a host of new investment will make it possible for protecting the u.s. military combat far despite the declining rate of growth and eventual funding of the defense budget over the next five years. as a result of the savings identified and reinvested by the services, the military will be able to meet unforeseen expenses, refurbish war-worn

equipment, by new ships and fighters, begin the development of a new long-range bomber, boost our cyber warfare capability, strengthen missile defense, and by more the most advanced uav. this will be possible of the efficiencies, reforms, and savings are fall through to completion. in closing, want to address the calls from some quarters for deeper cuts in defense spending to address this country's fiscal challenges. i would remind them that, over the last two defense budgets submitted by president obama, we have curtailed, canceled our access programs that would have cost more than $300 billion if seen through to completion. additionally, total defense spending, including war costs, will decline further as the u.s. military withdrawal from iraq. we still live bait -- still live in a very dangerous and often unstable world. our military must remain strong enough and agile enough to face a diverse range of threats, from

non-state actors attempting to acquire and use weapons of mass discussion and sophisticated missiles to more traditional threats of states using their conventional forces and developing new capabilities to target our national strength. we shrink from our global security responsibilities at our peril. entrenchment brought about by short-cited cuts could lead to costlier and more tragic consequences later. indeed, as they always have in the past. surely, we should learn from our national experience since world war i. with an unacceptably high cost in american blood and treasure. mr. chairman, i look for to working through this next phase of the president's defense reform effort with you and your colleagues in the weeks and months ahead to do what is right for our armed forces and what is right for our country. thank you.

>> thank you very much mr. secretary. >> thank you, mr. chairman. the services have already taken irreversible steps to live within the confines of the current cr. steps ultimately make us less effective at what we're supposed to do for the nation. the navy did not procure government-furnace equipment for a destroyer.

all the services are now prohibited from issuing contracts for construction projects. i urge you to pass the fiscal year 2011 defense bill immediately. even at a reduced top one, it will provide us the tools we need to accomplish the bulk of the missions we have been assigned. accomplishing those missions and into the future demands support for the president's fiscal year 2012 proposal. this budget, combined with the efficiencies in the effort he led, providing for our troops families helps balance global risk and streamlined organization, smarter acquisition, and improve modernization. the army, for instance, will cancel procurement of a surface-

to-air missile. but it will continue production of the joint light technical vehicle and spearhead the development of a whole new family of armored vehicles. the navy will give up its second fleet headquarters, reduce its manpower a short, and increase its use of multi-year procurement for ships and aircraft. it allows it to continue with the next generation ballistic missile submarine, purchased 40 four liberal combat ships, and more. the marines will cancel the expeditionary fighting vehicle. but they will reinvest the savings to sustain and modernize the amphibious assault vehicle and the light armored vehicle, even as they advance a new concept of operations and restore much of their naval expeditionary skills. the air force will be able to

continue to develop the next tanker, the new bomber, and modernize its aging fleet of f- 15 fighters. all the while, they will find savings of $33 billion through reorganization, consolidation, and reduced the list -- reduce facilities requirements. nothing will come at the cost of the backs of our deployed troops. nearly $5 billion for increased eyas our capabilities and more than $10 billion for recapitalized rotary fleet. we must also give them and their families everything they need to cope with the stress and the

strain of 10 years at war. that is why i'm so pleased with the funds devoted in this proposal, almost three-quarters as much as the $2 billion for operation and maintenance, to personnel, housing, and health care issues. as you may know, the chiefs and i sent a rare four-star letter to congress this week expressing our unqualified support for the military health care program changes included in this budget. we sought equity across all health care programs, with beneficiaries and health care delivery providers having the same benefits and equivalent payments systems regardless of where they live or work. that, in turn, led us to propose increases and tri-care enrollment fees for working-age retirees. these increases are modest unmanageable. they leave fees well below the inflation-adjusted out of pocket costs set in 1995 when the current fees were established. we sincerely hope you will see

fit to pass these increases. please know that we will continue to invest wisely in critical care areas to include research, diagnosis, and treatment of mental health issues and traumatic brain injury, enhance access to health services and new battlefield technologies. we understand that changes to health care benefits cause concern among the people we serve and the communities from which we receive care. but we also understand and hold sacred our obligation to care completely for those who have borne the brunt of these wars. as well as those for whom the war never ends. i am convinced that we have not begun to understand the toll in dollars and in dreams that war extract from our people. as grandson's and granddaughters of world war ii who still struggle to understand the horror that those veterans conceal.

i believe the investments we are making in wounded care and family readiness will pay off. but it will take time and patience and money, three things that we seem so rarely to possess in this town. that brings us back to this particular budget request. with limited resources and two wars in progress, which should be prudent in defining our party is coming controlling costs, and in saving our thirst for more and more assistance. we should be clear about what we expect from our interagency and international partners. our global commitments have not shrunk. if anything, they continue to grow. the world is a lot less predictable now than we could have ever imagined. we need look no further than liberation square to see the truth in that. foolhardy would it be forced to make hasty judgments about the

benefits, tangible and intangible, that are to be derived from forging strong military relationships overseas, such as the one we enjoy with egypt. changes to those relationships in either a your assistance ought to be considered only with an abundance of caution and a thorough appreciation for the long view rather than a flush a public passion and the urgency to save a buck. the $1.3 billion would provide the egyptian military each year has helped them become the capable professional force they are. in that regard, it has been an incalculable value. a greater or equal value is the preparations for the state department. i request something called the global security contingency fund, a three-year pooled fund between the pentagon and state, that will be used to build capacity, prevent conflicts, and

prepare for emerging threats. the request is modest, additional $50 million over preparation, along with request of a party to reprogram and additional $450 million if needed. what it will buy us is an agile and cost-effective way to better respond to unforeseen needs and take good vantage of emerging opportunities for partners to secure their own territories and regions. we must get more efficient, yes, but we must also get more pragmatic about the world we live in. we can all over afford bloated programs -- we can no longer afford bloated programs. we can no longer afford to put off investments in future capabilities or relationships that preserve that power across the spectrum of conflict. i have long said that we must not be exempt in the defense department from belt-tightening. in truth, there's little discretionary about the security

we provide our fellow citizens. cuts can reasonably only go so far without hollowing the force. in my view, this budget balances what we set to achieve last year. i would be remiss, indeed, if i did not close by letting the crowding efforts of our troops overseas and their families. as they finish 1 war in iraq and begin to start corners in afghanistan. i am sure that you join in my pride in them and their families. i'm sure you'll keep them foremost in mind as you consider the elements of this proposal. i thank you for your continued longstanding support of our men and women in uniform and their families and and look forward to your questions. >> thank you so much, admiral mullen.

secretary hill, you have anything to add before we begin? we have a seven-minute first round. secretary, you indicated that we are on track to end the presence of our combat troops in iraq by the end of this year, decided upon by president bush. do you continue to support that decision? >> yes, i do. >> and are you planning to begin reductions of our troops in afghanistan by july of this year as ordered by president obama with a pace to be determined of the reductions, determined by a conditions on the ground? are you supportive of that decision? >> yes, sir. >> can you tell us why? >> frankly, this was the most difficult part of the afghan

strategy going forward. i steadfastly, as someone this committee will remember, oppose any deadlines interact -- in iraq. i came to this with some skepticism. but i also realized that there is a difference between iraq and afghanistan in this respect. the truth of the matter is that the iraqis want this out of the country as soon as possible. on the other hand, the afghans, at least a certain number of them, would like us to stay forever. they live in a very dangerous neighborhood and, having u.s. forces there to support them and help them often in the place of their own troops is something that they would like to see.

so it seemed to me that we needed to do something that would grab the attention of the afghan leadership and bring a sense of urgency to them of the need for them to step up to the plate to take ownership of the war and to recruit their own young men to fight. i think that the comments you quoted earlier from general caldwell has illustrated that, over the last year or so, the afghans have in fact done this to a considerable degree. particularly in terms of their own troops. i must say that i was very pleased to have -- and i recognize the risks of the message we were also sending to our adversaries, to the taliban. however, it seemed to me that, the teller of bonn was messaging to all their people that we were leaving -- it seems to me that, if the taliban was messaging to all their people that were

leaving, there would be very surprised in october when we were still hunting them down in large numbers. i think it was a close call for me. but i became -- but i came to believe that it was the right thing. i very much support and applaud nato's decision to except the idea of full turnover of security responsibilities to the afghans by 2014. i think that bookends the july 11 statement and lets everyone know that we're not leaving precipitously. we will do this by conditions on the ground and continue to carry the fight to the taliban. >> thank you. admiral mullen, would like to add anything to that? do agree basically with what the secretary said or do have a different view? >> no, i agree with that. a very tough part of the whole decision process, certainly not the signal that we are not

staying is one that is of great concern in that part of the region for a long time. at the same time, sending the message that we, in fact, would get to a point where we would turn this over to them, i think, was very important. i have seen the effects of that in their leadership, in the military and the police. it has given them a sense of urgency that they did not have before the decision was made. i also think, with respect to the taliban specifically, where we are right now, they have a lot more things to worry about in terms of just how well they are doing. because they are not doing very well and they know we will be there beyond july. they had a really bad year. that does not mean this year will not be tough. it will. it will be very difficult on both sides. but we made a lot progress because we committed the resources to get this right.

>> comparative to the size of the afghan security forces, there is a request proposal currently under consideration within the administration to increase the size of the afghan national security forces by around 70,000 personnel. that would raise the target and strength for the security personnel of the afghans to about 378,000. those forces, as i indicated, would include some key enables, including intelligence statistics. as i also indicated, i spoke with the president was on the subject and very strongly support the increase that is being considered for reasons you have just talked about and which i talked about in my opening statement in terms of the old port -- the importance of the afghan security forces taking

responsibility for their security. they are supported by the afghan people and they are targeting an enemy that is detested by the afghan people, to wit the taliban. part ring with the security forces has improved -- partnering with the secret forces has improved greatly. training is very intense unsuccessful. the operations are joined. we witnessed that in canada are. -- we would is that in kandahar. do you support the proposal to increase the size of the afghan national security forces as is being considered? >> first of all, i would say that we all recognize from the beginning that be able to turn to carry over to afghan forces to deal with a degraded taliban was our ticket out of

afghanistan and to accomplish our goal of making sure that we are not attacked out of there again. i think the issue is under discussion within the administration. we do have a request from the commander. the issue is under discussion in no small part because of the question of sustainability. how big an army can we afford? let's not kid ourselves. no one else is contributing to this in any significant way. and we have in our overseas contingency operation budget for 2012 $12.8 billion to pay for the afghan national security forces. so the question is how long can we afford to do that? you cannot do that indefinitely. so can you look at an increased number of afghan forces in the same terms as you look at our

search as something that is temporary until this problem -- at our surge as something that is temporary until this problem numbers go back down again. this is one of the issues we are discussing and i expected decision in the fairly near future. but this is really the core issue that i think is under discussion. >> @ rolan -- >> i think you know that the recommendation was teed up from two hundred 52,000 to 378,000. i share the concern that the secretary has spoken of in terms of the sustainability of this. you're also characterized in your opening statement a specific recommendation from me. we're still very much in discussion inside the a ministration on where this comes out. as the secretary said, in the near future, we will have that.

there are a lot of issues at play. none of us disagree with your assertion or your statement about the importance of this part of the mission, training them and turning it over to them. it has gone over incredibly well over the course of the last year. so how fast we can move and how much more there should be is still very much in discussion. the comprehensiveness of the issues that are associated with this are being reviewed as we speak. i think it will be resolved in the near future. >> in the bottom part of that range, there would be an increase from the current poll, is that correct? >> yes. we are at 305 at the end of this year and 352 is in the discussion. >> even if the approval or at the bottom of the range, that would represent about 45,000 increase. >> yes.

>> you would save a lot of money having their forces trained and equipped rather than our forces, in terms of relative costs. you would both agree to that, would you? >> yes, sir. >> absolutely. >> thank you, mr. chairman. secretary gates, did you recommend to the president the date of july 2011 as a date to begin withdrawal? >> no, sir, did not. >> to do, admiral mullen? >> no. >> on the issue of our continued presence in iraq, obviously, the casualties have been reduced dramatically. but i think it is also obvious that the iraqi military does not have a lot of the technological capability that they need to combat this kind of insurgency that is still out there.

also, if they want to have an air force, it seems to me they need that kind of technical assistance. and number of other areas of modernization of their forces as well. it is necessary -- we're not talking about continued combat operations on the part of the united states. but they do need the kind of technical assistance that they will need to maintain their security. do you agree with that? >> yes, sir. >> is there any discussions that you know of going on with the iraqi government concerning the future role of the united states interact besides the fact that we are now scheduled to leave by the end of the year? >> there have been in number of informal conversations with the iraqis about this. our concern, as i indicated yesterday, is principally in three areas -- intelligence