future, not to simply have to respond to the budget requirements that are here, but to do it in a way that would provide a strong defense for the country in the future. >> as we end the war in a iraq and drawdown in afghanistan, we are at a turning -- turning point that would require us to make a strategic shift under any circumstances. the problem is that, unlike past drawdowns were the threats we confronted receded, after the vietnam war, after the fall of the soviet union -- the problem is that we continue to face serious security challenges in the world of today. we're still lead or in afghanistan. we still confront terrorism in

the somalia, yemen, north africa. we continue to see the proliferation of weapons of mass destruction. the continued see threats from iran and north korea. we continue to have the turmoil in the middle east. we see the rising powers in asia that represent a challenge in terms of stability in that region as well. and there are growing concerns about cyber intrusions and cyberattacks. we have to meet all these challenges and still meet our responsibility to fiscal discipline. i do not think we have to choose between our national security and our fiscal security, but at the same time -- and this is not an easy task -- to develop a force for the future, we have

five key elements. the elements that guided us in terms of our budget recommendations. we know the military will be smaller and leaner in the future, but it has to be agile, flexible, quickly deployable, and technologically advanced. second, because of the world we live in and where we confront our most serious problems, we have to rebalance our global posture and presence to emphasize the asia-pacific region and the middle east. those of the two areas where we confront the most serious challenges. third, we have to build for the rest of the world innovative partnerships and strengthen key alliances and partnerships elsewhere in the world. -- so that we maintain a presence in latin america,

africa, europe, and elsewhere. fourth, we must ensure that we have the force that can confront and defeat aggression from any adversary at anytime anywhere. lastly, this cannot just be about cutting the budget. it also has to be about investments. investments in new technology and capabilities as well as our capacity to grow, adapt, and mobilize as needed. in shaping this strategy, we did not want to repeat the mistakes of the past. our goals were the following. number one, maintain the strongest military in the world. that is what we have now. that is what we want to have in the future. secondly, we do not want to haul out the force. we do not want to weaken everything at the defense a pardon by our failure to be able to address the needs of that kind of force. that was a mistake that has been made in the past.

we do not want to make that mistake again, today, or in the future. we have to take a balanced approach to budget cuts. we have to take a look at everything. it also means that we do not break faith with the troops and families, particularly the troops that have been deployed time and time again. as a result of these efforts, both our military and civilian leaders, strong unified behind representations' we present -- this budget reflects that, in the next five years, we will achieve savings of almost $260 billion, with the 10-year savings of $487 billion. the savings come from four areas -- efficiencies, structure, procurement reforms, and compensation. let me walk through each of these areas. first, on efficiencies -- efficiency's yield about 1/4 of

the targeted savings we have in this passage. -- -- package. on top of $150 billion in thefy deval budget, we have added fy 12 budgest. as we reduce force structure, we have a responsibility to be cost-efficient in terms of the support for that force. that is the reason that the recommendation has been to authorize another base realignment and closure process for 2013 and 2015. as somebody who has gone through this, i recognize how controversial this is for the members and constituents. and yet we do need, if we will bring the four sound, we have got to find an effective way to achieve infrastructure savings.

that is the reason this recommendation was made. efficiencies are still not enough to achieve the necessary status. budgets of this magnitude requires significant adjustments to force structure, procurement investments, and compensation as well. we achieved those in the context of the elements of a new strategy i discussed. let me walk for each of those. first, we obviously have the force that is more and leaner, but it has to be more agile and con -- technologically advanced. we knew that the military would be smaller coming out of the wars. to insure an agile force, we made a conscious choice not to maintain more force structure than we could afford to properly train and equip. through implementing structure reductions consistent with this new strategic guidance, will have a total savings of about $50 billion over the next five years.

those recommendations were to gradually resize the active army down to about 490,000. this is about a 70,000 reduction over that period. it is a 470 a flexible, agile, ready -- a force that would be flexible, at all, and ready. we would still maintain 65 combat teams and 21 aviation brigades. we would do the same with the marine corps. we're at 202,000. would bring that down to 182,000 over the next five years. that is a reduction of 20,000. again, they would still remain the strongest expeditionary force in the world. it would have 31 infantry battalions, 10 artillery battalions, and 20 tactical air squads. we would reduce and streamline the air force's airlift fleet.

the air force would of a mate seven tactical air squadrons but would retain a robust force of 54 combat fighter squadrons. the current bomber fleet would be maintained. we would have faced -- we have a strike fighter in production. we will also develop a new generation bomber that we look forward to in the future. we have a fleet of 275 strategic airlifters and 18 of the c-one 30's. the navy would retire seven cruisers. we're focused on that because these cruisers have not been updated with ballistic missile defense capabilities. they're old and fate -- repairs. that is an area where we decided to produce savings. the navy would still have to

wonder and 85 ships. 82 cruisers and destroyers, 50 nuclear-powered attack submarines. we would achieve enable number of about 300 ships by 2020. secondly, in rebalancing our global posture to emphasize asia-pacific and the middle east, we make clear that we have to protect capabilities needed to protect power in asia-pacific and the middle east. to this end, the budget, as i said, maintains the current bomber fleet and our eight aircraft carrier fleet and our amphibious fleet. it restores army and marine corps for structure in the pacific. we're looking -- we have provided for a rotational deployment of marines in darwin, australia. we are looking to do the same thing in the philippines and elsewhere. the second thing is true with

regards to a strong presence in the middle east. we have maintained a strong presence of troops strength in that area as well. we're building innovative partnerships and trying to strengthen our alliances throughout the world. the way that we are doing this is by developing an innovative rotational presence, where troops will go into an area, exercised within, provide guidance and assistance, develop alliances, and build key partnerships for the future. that is the message i delivered to the pacific on this last trip. it was well-received. i delivered the same message to latin america -- it was well- received. these countries want to develop capabilities. this is not united states exerting our own power and telling countries we will defend them. they have got to develop their own capabilities to secure themselves for the future. that is what this proposal

provides for. we want to insure that we can defeat aggression from any adversary anytime anywhere. that goes to the force structure that will sustain a military that is the strongest in the world, capable of quickly and decisively confronting aggression wherever and whenever necessary. in the 21st century, our adversaries will come at us using 21st century technology. that is a world we live in. they have got to be able to respond with 21st-century technology. so we must invest. we got to -- we have to invest in space, cyberspace, long-range precision strikes, unmanned vehicles, special operations forces, the latest technologies to insure that we can confront and defeat multiple adversaries. last area to protect and per

caskey investments. i talked about some of the areas that we want to invest in -- this budget provides almost $12 billion of investment in science and technology $10.4 billion in special operations for fixes -- forces. $3.5 billion in cyber. we have to maintain a strong reserve and a strong national guard that can respond if we have to mobilize quickly. that has been a key to our ability to mobilize over the last 10 years. today, i have to tell you -- when you go to the battlefield -- you cannot tell the difference between active duty and national guard and reserve units. they're developing great abilities. i do not want to lose that for the future. i want to maintain that. the last area i will mention is an area that is extremely

important, fundamental to our strategy. that is our people. that is the biggest and three have in the united states. for all the weapons and technology we have, frankly it is the men and women in uniform that are the strongest weapon we have. we want to sustain the family assistance programs, the programs for wounded warriors, the basic support programs for our troops and their families. at the same time, i have got to focus on the savings and the compensation area. this is an area that has grown by 90%. frankly, we have got to be able to find some cost savings in that area. it is for that reason that when it came to military pay, we provide pay raises these next two years, but will try to limit these raises in the out years to provide some limits. we also do that with health care

costs. i realize that is sensitive and controversial, but it is almost $50 billion a year. we have got to do something to control health-care costs. we also looked at the idea of a retirement commission to look at retirement provisions for the future. we would like to grandfather benefits for those that are presently in the force, but we do need to achieve savings in this area as well. that is the package. this is not easy. it is tough. we need your support. we need your partnership in trying to implement this strategy. i know that these cuts are painful. the fact is that the impact all 50 states. but there is no way that you can cut half of $1 trillion out of the defense budget and not have an impact on states. that is a reality. so the key here is to try to do this in a way that relates to a defense strategy.

that is important theory -- important. the committees have excepted the recommendations were made for investment changes and we appreciate that. but some of the committees have also made changes with regards to our recommendations that we are concerned about. some of the bills seek to reverse decisions to eliminate aging and lower-priority ships and aircraft. my concern is that if these decisions are totally reversed, then i have got to find my somewhere in order to maintain this. that has me literally in a situation where i have to haul up a force to do that. we have got to be -- a hollow out of the force to do that. we have got to be able to retire what is aged. there are proposals to basically not provide for the measured and gradual reductions for the army and the record.

again, if i have a large force and i do not have the money to maintain it, i will wind up hollowing get it out. i cannot provide training, i cannot provide equipment. that is why if we will reduce the force, we have got to be able to do it in a responsible way. last point i would make is with regard to overhead costs and military health care and compensation. i understand the concern about that, but if i suddenly wind up with the reductions in that area, i have got to reach some place to find the money to maintain those programs. that, too -- somebody will play -- pay a price for that. there is no free lunch here. every costa is retained will have to be offset by cuts to comply. i recognize that there is nobody in this committee who wants to hollow out our force. so i would strongly urge all of

you to work with us to reach a consensus about how we achieve our defense priorities. our job is to responsibly response to what this congress has mandated on a bipartisan basis with regards to reducing the defense budget. i need to have your health -- help and support to preserve the strongest military in the world. let me say a few words about sequestration. obviously, this is a great concern. this would result in a doubling of cuts, another $500 billion that would have to be cut through this kind of formulaic approach that was designed into the process. it would guarantee that we hollow out air force and put severe damage on our national defense. i think you'll recognize that sequester would be entirely unacceptable. i urge you, both sides, to work

together to try to find the kind of comprehensive solution that will not trigger sequester, and to do this way ahead of this potential disaster we confront. members of this committee are committed to working together to stop sequestered. i want you to know that we're prepared to work with you to do what is necessary to avoid that crisis. the last point i would make is on fiscal year 2012. we have some additional needs that have developed during fiscal year 2012. just to summarize a few -- with regards to fuel costs, because of the increase in fuel costs, we are facing almost $3 billion in additional costs. obviously, if the price goes down that will provide some relief, but right now that is the number we are facing. we also have the closure of these ground lines, the so-

called g-locks in pakistan. the result is that is very expensive because we are using the northern transit route to supply our forces. the amount is about $100 million a day -- $100 million a month because of the closure. i n dunn, a system that we are trying to provide for the israelis, is another additional cost would like to be able to provide. also, we have had to provide additional forces in the middle east because of tensions in the gulf. because we have increased our naval and land forces there, those are additional costs as well. we have some on budgeted needs that we would ask for your support. i would ask for you an ominous -- i would present you on this

request, and we hope to resolve these in this fiscal year. we would hope all americans to be fiscally responsible in developing a force that can defend the country and defend our nation and support the men and women in uniform that are so important to the strongest military in the world. these last two weeks, i had the opportunity to travel throughout asia-pacific. i consulted with our key allies and partners. i think they are very receptive of the strategy we are proposing. there are enthusiastic about our engagement in the region. i think i have been able to assure our allies and partners that we have a strategy-based approach to dealing with national security. i come from this institution of the congress. i have great respect for you and for this institution. i look forward to a partnership here to try to develop the approaches that will be

necessary if we are going to meet our responsibilities to national security and fiscal responsibility at the same time. thank you. >> mr. secretary, thank you for your testimony. i called on general dempsey. >> thank you chairman, center cochrane, distinguished members. thank you for this opportunity to discuss the president's defense proposal for fiscal year 2013. this budget represents a responsible investment in our nation's security. it maintains our military's decisive edge and sustains the americas global leo, -- leadership. moreover, it keeps faith with the key source of our strength, america's sons and daughters to serve in uniform. out like to open with a few words about them and their accomplishments. in just this past year, our soldiers, sailors, and marines have further crippled al qaeda.

we closed more than 20 years of operations in and over a iraq. they continued a transition of security and responsibility in afghanistan. they help protect the libyan people from a regime of brutality and helped japan recover from a tragic disaster. there also were professionally and quietly behind the scenes, defending against cyber threats, sustaining our nuclear deterrent posture, and working with allies and partners around the globe to build capacity and prevent contact -- conflict. they did not destroy last year. they have been doing it year after year. during a decade of continuous cd women and their families have persevered and prevail. it is a genuine pleasure to work with all of them. they remain a great source of pride for us and our nation. we need to keep faith with them just as they were to keep faith

with the nation. when we to do this is to make sure our defense budget is part of a real strategy. this past january released a new strategy that anticipates a more competitive security environment in the future. it also acknowledges the reality of the new fiscal environment. it sets priorities for investment and it establishes a strategic focus. this budget uses that strategy. it divest capabilities not required in the active force or at all. it takes advantage of emerging capabilities, as the secretary said, such as special operating services and intelligence. it restores versatility and readiness. it is an important stepping off point on our task for the joint force we believe we will need in 2020, a military always ready to provide options for the nation.

keeping faith also means of corporate compensation for our troops. this budget proposes modest reforms to military pay and benefits. however, it does not place the burden of budget cuts on the shoulders of our men and women in uniform. there are no freezes or reductions in pay. there is no decrease in quality of health care received by active members and medically retired when the orders. that said, you cannot ignore hard realities. we need reform to deal with escalating personnel costs, and particularly in health care. we must make our office is a more sustainable. otherwise car risk the quality and continuity of care. we can perform in ways that are fair and modest. last, keeping faith also means managing risks, to our interests and our institutions. we are assuming some risk in this strategy -- all strategies have to accept some risk. that risk is not in what we can

do but in how much we can do and how often. the budget helps to take down that risk by investing in our people and the jointed abilities we need most. we have achieved a balance in this budget. keep in mind, please, this is a budget for a joint force. it should not be thought as a set of separate service budgets, but as a comprehensive and carefully device set of choices that reflect the right mix of structure, modernization, retinas, pay and benefits. different choices will produce different balances. before giving up on reforms that we do need, i would ask you to ensure that it is the right choice for our armed forces and for the nation. sequestration is absolutely certain to append this balance. it would lead to further reductions, the bourse council cancellation of weight -- major weapons systems, and the destruction of global

operations. we cannot say precisely how bad the damage it would be, but it is clear that sequestration would risk hollowing out our force and reducing its military options. we would go from being unquestionably powerful everywhere to been less visible globally and presenting less of an overmatched to our adversaries. that would translate into a different deterrent to oculus and, potentially, therefore increase the likelihood of conflict. in closing, i offer my sincere thanks to this committee and to the entire congress of the united states. thank you for keeping our military strong. thank you for supporting those who serve and have served and who will serve. i know you share my pride in that. i look forward to your questions. >> thank you very much. mr. secretary, your description of sequestration, i believe, is a candid and frighten one.

-- a frightening one. you indicated you would have less training at a time when he should be increasing training. it would mean the deferral of maintenance and equipment. you have fewer purchases of aircraft, ships -- but there is something else you did not mention. i would like you to comment on that. this sequestration, coupled with lower discretionary defense spending is, could add 1% to the national unemployment rate from a job losses in government, military, and private sector jobs within the defense and industrial base. does that description makes sense? >> mr. chairman, i think that that is the estimate that we

have seen in terms of the impact that would have. again, i stress -- the defense department is not a jobs program. it is a program to defend a nation. but clearly it would -- that kind of sequestration, across the board would have serious impacts not only on men and women in uniform, but on the personal and contractors who said -- serve the defense establishment. >> when you speak of deferral of maintenance on equipment, can you give us something beyond that? >> let me have bob hale speak to that. >> mr. chairman, we have not done a detailed plan, but one option we would have to look at is cutbacks in may and ends. that would mean we would push out -- in maintenance. that means he would push out the availability of ships and

planes. inevitably, it would delay some agents activities. i cannot to the details, but i think that it is almost inedible result of sequestration. >> the we sequestration works right now is it takes the percentage possible out of every area of the defense budget. this means that -- it is an almost 20% cut in weapons systems. a 20% cut with regards to training and equipment. it would impact every area of the defense budget. that is the way it was designed. it was designed as a new tax. it was designed to be a disaster. the hope was that because it is such a disaster congress would respond and do what was right. i'm here to tell you -- yes, it would be a disaster.

>> o the across-the-board cuts will not impact upon pay, health programs, anything else? >> it would. the president has the authority, mr. chairman, to exempt military personnel -- if that were the case, it would not affect military personnel. but other accounts would have to be cut by larger amounts. it would affect our ability to pay health care. it is in a separate account. meat axe cut -- to face a serious problem of not being able to pay all our bills. >> mr. chairman, could i add something? it is important to note that oco is now subject to sequestration. of the $80.5 billion that we ask

for to maintain our operations -- we have to fund that. that money will have to come from some program activity to move money to cover those were- related costs. that, in combination with the potential freeze in manpower -- exempting manpower -- means that a service chief can only find this money from three places -- training, maintenance, and modernization. that is it. there is no magic in the budget. those three council be cut to all the -- subject to all the cuts mandated by sequestration. >> i would not look at reprogramming as a way to solve this problem. we have legal limits, unless you change them, on the amount we can reprogram. we would not have the authority to offset all this changes, at least not readily. we could do some, but a year -- there will be very little flexibility if this goes into

play or into effect as it is currently designed. >> thank you very much. before i call upon my colleagues, i would like to know -- noted that we will have to limit the question period to five minutes. with that -- >> let me ask you, mr. secretary, what your impression is of amphibious ships. we've heard the navy and marine corps has determined in minimum force of 33 amphibious warships is the limit of except more risk in meeting the amphibious force requirements. what is your assessment of the risk that we are assuming with our current shipbuilding plan as proposed and requested by the

department? >> i will asked general denzil to comment as well. -- general dempsey to comment as well. i am trying to maintain our industrial base in the defense barton. -- department. if we lose more shipyards, if we lose more of the industry that supports our defense department, it makes it very difficult to mobilize in the future. my goal is to try to design a budget year that maintains the shipyards that we have, maintains the industrial base that supports our defense system. the reason that they are important is because of the agility issue i talked about. we will have a smaller force. the ships allow us to be very agile, quickly deployable, to be able to move quickly if we have to. that is the reason that we want to maintain those as part of our defense structure. just to add --

the number you excited is based on existing war plans any particular phase at which the amphibious warship capabilities are under the most press. what we are doing as a result of our defense strategy is opening up our plans to look at assumptions we make and see if we can adjust the way we conduct operations in order to mitigate that risk. at this point, the commandant and i are preparing a budget proposal. the number in that proposal are adequate to the task. it means to have to adjust the way in which we conduct operations. >> there is a suggestion that the current 30-year shipbuilding plant projects and inventory that will fall to 28 ships in fiscal year 2015. i wonder, general, if this is

below the level required by the department, and whether or not this is an increase in the assumption of risk -- do we need to revise upward? what you suggest that we do when we review requirements submitted by the marine corps and the navy? >> i would ask you to do -- i would ask you to take that question for the record. there's a bit of a crossover into classified information related to war plans. i would be happy to answer that. >> thank you very much. mr. chairman and secretary panetta, general dempsey, mr. hill, thank you for being here. i appreciate the chance we had to talk before the meeting. i did not mention that in the last 10 years we've had more men

than ever in our guard and reserve. i appreciate what you said about them in your testimony. i know we could never support two simultaneous wars without them. general vessey -- dempsey, i visited areas where we aren't combat. you do not see a difference a twin active guard and reserve. they're all out there doing their job, putting their jet -- lives on the line. i think that your strategy is a result -- many of us in congress -- senator gramm and i are co- chairs of the guard caucus -- there's a plan in 2013 to disproportionately cut the guard. i know there will be cuts and that we all understand that. but you are going after the

least expensive manpower to save money. that not make a lot of sense. manpower costs are considered more and more of the defense budget. i do not know how you shrink them and maintain a ready and capable force. my question -- does the department of defense maintain its earlier strategies, or is there an alternative? the air force budget does not appear to follow that idea. secretary panetta? >> center, again -- this was based on a new strategy. to develop a new force that provided a multi-mission support for the force.

as a result of that, i made decisions with regards to some areas that could be reduced in order to achieve, obviously, the savings we were required to achieve. i recognize the controversy involved here. it impacts on constituencies, on the guard -- >> i am afraid it impacts on readiness, too. that is my biggest concern. >> i understand that. but obviously we do not want to take it out of the active force. they are ready to deploy quickly. what i suggested is to try and see if there is a way that we can work to provide some restoration -- i suggested putting some of additional130's -- additional 130's in place. let me say this for the record.

i am prepared to work with this committee and a staff of this committee to try and see if there is a way to do this that can minimize impact but, at the same time, hopefully create the necessary savings -- >> you worked with senator gramm and i on the past on these issues. another matter -- going into the budget. as one of those on the committee who opposed the iraq war from the very start, i oppose it because i did not think it was the right decision for our national security. now we basically ran that war on a credit card. how we address the national deficit is not the sequestration -- we voted earlier, the majority of us did,

that sequestration be only if we are unable to agree to a consensus. the understanding is that we put everything on the table. but now there are people calling for more military cuts in other part of the world. at the same time, they did not want to consider any -- unlike we have always done in the past. " would-be the impact of gone to war again -- what would be the impact of going to war again without raising taxes, like we did in iran and afghanistan for the first time? like we did in iraq and afghanistan? >> the result would be adding more to the debt and deficit of this country for the future. we would put the burden on our

kids. i think we always have to be careful and make the decision -- in making the decision to put our men and women into harm's way. if that decision is made for the sake of the country, it is important that we recognize the costs that are involved. frankly, all of us bears some responsibility to pay some costs if we're willing to engage in war. >> thank you very much. >> than to, mr. chairman. and thank you for your service all three of you. secretary panetta, since the end of the cold war, nato has grown from 16 to 28 members, and yet we know that the threat of a soviet invasion into europe has virtually disappeared. only five members spend the of a terrace standard of 2% of their g.d.p. on a defense.

several refuse to the displayed in combat assignments. we are contributing 23% of the military construction for nato, which is approximately $254 million this year alone. we're spending virtually the same amount% of a --% of expenditure for operations of net nato. the question is, are you looking at the nato alliance and determining if it is serving the function for which it was intended? if there is a commensurate effort -- are you determining if there is a commensurate effort by the members, or if we are paying more for our pierre -- more than our fair share for what we are getting out? >> you have raised a legitimate concern here.

with regards to the responsibility of nato nations to assume a greater responsibility for developing capabilities and improving their defense posture. one of the things that came out of chicago and the nato meeting in chicago was developing greater capabilities for nato with regards to nacelle defense , -- missile defense, isr -- asking them to assume greater responsibility. also, as i have stated to my fellow defense ministers, we have great concerns because of the budget situation that faces many of those nations in europe. one of the dangers here is that they will constantly go back to defense and seek further savings there, which i think would be dangerous. right now, when it comes to a

nato deployment, libya is a good example. danita provided 60% of the forces that went into libya. now if you united states -- now the united states would have to pick up 80% of that responsibility. that is not something that really makes clear to those nations the responsibility that they have to be able to develop their own capabilities. i think that it is very important to continue to stress to those countries that they have to continue to invest in their basic security. there are some countries that are doing that. there are some countries that are investing well over 2% of their gdp in the defense budget. we commend them for that. but other countries have to be recognized that the last thing that we need right now is for them to have further cuts in

their defense budgets. that will put more burden on our shoulders in the future. >> let me to germany as an example. germany is certainly going to the hard times -- through hard times. but on our side, representing our interests, germany in military construction, they contribute 7% to the infrastructure costs that we make in their country. as compared, for instance, to japan, which provides 40% and sometimes more. germany has refused to contribute any resources into libya. in afghanistan, they limit what they will do and the number of troops to around 5000. now, the army is planning this year to spend 7% of its military construction budget in germany. that is on top of the nato part.

it will be about $243 million this year to build a project that is -- that is fine. i'm for that. but the other half is for new schools, elementary and high schools. obviously, if our troops out there, we need to furnish the schools that are good. my question is, the troops that are there -- are we over spending on military construction? are we looking at the future on whether, in fact, it might be the rotational forces that you mentioned as more of a strategy. maybe we would start doing that in germany and cut back on these enormous military construction costs. >> i will ask general done to

comment on this as well. we are doing exactly that. we're bringing bases home from europe. we intend to in -- emphasize more of a rotational presence that we have their and be able to do exercises. we do have some important infrastructure there. it is very important toward clements -- to our deployments in the middle east and the war zone. that is why some of that is continuing. i think you are right. i think we have got to increase our rotational clements. we have got to ask them to make a greater contribution to the infrastructure needs to do this. at the same time, let me make very clear -- the nato alliance is extremely important to our ability to deal with some of the challenges of the world. we cannot do it alone. we have to have alliances like nato, be able to work with them, and confront many john is that we face. >> we are out of time, senator. but i would offer a briefing as

to what we consider to be the enormous and important benefits of being part of that alliance. some of them are self-evident, but we have initiatives, allied ground systems. the activities in kosovo -- things that are behind the scenes that we need to expose to you so that you understand the reason we are still so deeply integrated into the nato command structure. we need to acknowledge -- acknowledging your point about investment and the fact that it is declining. if i could take that one as a task. >> i appreciate that. thank you, mr. chairman. i hope we're looking at a equalization of efforts. >> thank you. senator mikulski? >> thank you very much, mr. chairman, secretary panetta, mr. hale, general dempsey. we want to welcome you and thank you for your service. mr. panetta, you came to the

house in 1976. you are part -- we were part of the bicentennial year. it looks like we'll be here for the tricentennial. general dempsey, he graduated from west point at the same time we were getting started from congress. between you, you have 70 years of military experience. we thank you for your dedication and service to the country. mr. hale, you have been here. the role of the civilian work force in supporting our military and the secretary of defense -- we want to thank the civilian work force. we want to -- i want to raise questions at the priorities and new threats.

helping those with the permit wounds of war, andrews, aberdeen -- we are proud of the presence here. i want to go to the issue of cyber. mr. secretary, you have said publicly that you viewed cyber as a potential digital pearl harbor. general vessey, -- dempsey, you talked about the great sense of urgency. could you talk about what you mean by a digital pearl harbor? to feel that, as you indicated -- do you have the right money and the authority that you need to protect the nation? we have here, in addition to

appropriations chair senator epa and rent no. cochran -- senator chair inouye and ranking member cochran. could you elaborate on what you meant -- you have what you need, and should we have a greater sense of urgency in getting things done? what would he say they be? >general desi, i would like your comments as well. >> i appreciate your comments. there has to be a greater sense of urgency with regards to the cyber potential now and in the future. this is obviously a rapidly developing area. the reality is that we are the target of literally hundreds of thousands of attacks every day, in that government and at the

private sector. there are a lot of capabilities been developed in this area. i am very concerned about the potential insider to cripple our power grid, to cripple our government systems, to cripple our financial systems, would virtually paralyzed this country. as far as i'm concerned, that represents the potential for another pearl harbor. as far as the kind of attack that we could be the target of using cyber. for that reason, it is very important that we do everything we can, obviously, to defend against that potential. i feel very good about our capabilities in terms of defending our systems with the help of an essay -- nsa and the great technological capabilities. i believe that authorities and their -- it is not only in the

defense sector but also in the civilian sector that we need to improve this. that is the area where we need to deal with additional authorities. the bill is one that addresses that, and we support congress enacting that in order to try to fizzle -- facilitate that capability. >> i would add that we have seen the world go from distributed a denial of services -- hackers overwhelming it was said -- to incredible intellectual property and technology theft to destructive cyber. that has all happened in a matter of a few years. this particular domain has changed rapidly. to your question about a sense of urgency -- i cannot overstate my personal sense of urgency about this. secondly, i would like to pile onto the secretary and support

the pending legislation that encourages information sharing and takes a good, necessary, but only for a step. on the issue of authorities -- the president does have the authorities he needs. when we are rules of engagement, if you will. these things occur at network speed. this is not something where we can afford to convene a steady after somebody has knocked out the east coast power grid. we are working on it. >> what you are sent is that there is enough money in the appropriations. what gives you heartburn and .com.rn is protection of ,c the congress has to have a sense of urgency developing a legislative framework in protecting of .com.

>> may be sharpened that a bit. i have no intention -- that would improve -- that would include your personal e-mail address. i am fine with you doing that in your personal domain, but i am concerned about the defense industrial base and the critical infrastructure of this country. that is where we should focus our efforts. >> thank you very much. mr. chairman, i know my time is up. i have other questions. one final note, mr. secretary, i need to represent the comfort, tall ships coming into baltimore harbor. could you take a look at it -- if maryland can keep the comfort? >> thank you very much. >> than to bring much, mr. chairman, mr. secretary, mr.

hale. at one point, you chaired the house budget committee and i was one of real acolytes. he set the stage in our budget to reach a balanced budget which i'm very proud of. i know it was not easy. i ask the committee staff to compare spending when our budget was in balance to where it is today in three categories -- here is what they came up with. going back to 2001, in domestic discretionary spending, there has been zero increase. when it comes to entitlements spending, there has been a 30% increase in spending since we were in balance. with the budget we are proposing, the base budget, we are proposing for the department of defense -- it will be a 73% increase over what we were spending when we were in balance. in constant dollars. i might also say to you, though

i think that sequestration clearly it's hard, maybe too hard and too fast, that at the end of the day under sequestration defense would end up with the same percentage of gdp that it had -- gnp that it had when the budget was balanced. my question is to be looked at your history of the budget -- what is it fair number for us when it comes to the defense of this country and security? i know that we need every dollar it takes to be safe, but we will cut back in health care and education to provide more money on the military side, isn't that going to have an impact on the men and women who volunteered to serve in our military and whether there are qualified to serve? >> first and foremost, with regards to the defense budget, i do believe we have to play a role. the fact is that we are going to be cutting in half a trillion

dollars -- $1 trillion from the defense budget over the next 10 years under sequestration. -- if you add sequestration to that, you are looking at in other hunt of -- chunk of $500 billion on top of that. defense does have to play the role. at the same time, we have a responsibility to protect the strongest military in the world and help defend this country. on the larger issue, senator, you know this as well as i do. i think that every member of this committee knows this. you are dealing with a very serious deficit issue and debt issue. you cannot keep going back to the same while to try and resolve those issues. you can not keep going back to domestic spending. you cannot keep going back to the discretionary side of the budget in order to solve a multi-trillion dollar problem that faces this country.

if you are serious about taking this on -- it is about what we had to do at the beginning of the reagan administration, what we did in the bush administration, we did in the clinton administration. if you are serious, you have got to put everything on the table. you have to look at mandatory spending, revenues, and how you cap domestic discretionary. but you will not solve this problem with the domestic discretionary budget. you will not. >> when we brought in the experts to talk to the department of defense about saving money, the most startling testimony came when we asked about private contractors to work and the department of defense. the basic question we ask is how many there are? the answer was we do not know. we do not know. estimates are somewhere of 7 million. there are 2 million federal service in place. the disease in context. if he lifted the dollar amounts

in contractors as opposed to the civilian work force and those in uniform, it is substantially higher. for many of us, this outsourcing became given. people stop askinga question -- is it saving us money? i noticed that you are in sourcing more. you are bringing jobs backit sen documented waste when it comes to service contracts. when it comes to be a ticket items, i have not heard too many press conferences, but i know you would want to take this

personally. yet how much is still in when it comes to cost of project? >> this is an area of principal focus. we are adding another $60 billion on top of that. a lot of thought is aimed at trying to gain greater efficiency. i would be the last one to stay we cannot find those savings in the defense department budget. we can, and that is what we did, but the goal is not simply to walk away at it without tying it

a strategy. as long as we can make sense out of how we achieve savings, we can achieve $500 billion in savings we have been out who threw by congress -- we have been asked to do by congress triggered do not think the defense alone is going to solve of bigger problem we are facing. >> i have two issues i want to cover. we had a short conversation about what i was hoping would be the next step of breaking down discrimination against people with disabilities you're a good

reader with disabilities -- against people with disabilities. he was denied entry because he was deaf. they may not be a pilot in the air force or other things, but they can do a lot of things. i must tell you we have had some problems with the department of defense.

nothing is happening during road -- nothing is happening. we can never get their response until a couple days ago when i was going to ask you about this theory good -- asked you about this. i think this is one place where we have to break down some of these barriers. be able to dot everything, but they can do it within their abilities. i asked you to take a look at this and set up a pilot program, and if you cannot do this, let me know, and we will

try a legislative approach. >> i agree with you, and i think we can try to set up of a pilot program. wounded warriors come out with new legs, new arms, and they are doing the job, and they are doing it well. good evening. we can reach out to others as well. good like some of these young people are coming through who have a lot of ability.

the department of defense has been involved in a program of suffering small businesses in afghanistan. there is an eye of them labor law -- and afghan labor law against using child labor. we have said you work with the department of labor to use an ngo in terms of monitoring this and setting up an inspection system to make sure no u.s. taxpayer dollars are used to support the businesses with children and the worst forms of

child labor. we have had some progress. we are not setting up a mandatory verification system, and that bothers me curio -- that bothers me. i know it is a small thing. you have got a lot on your plate. this is an area where we can do a lot to support industry in afghanistan, and i would ask you to look up the contracts we have. >> i know we are aware of

concerns. >> they did do some delay trying to appropriate safeguards on child labor. >> there is an afghan law. they are aware of the concerns, and i think they have made steps in the right direction, but we will make sure we are doing all we can. >> we know what needs to be done in terms of verification. >> nino what needs to be done. >> let me thank my colleague for

bringing up the issue of cyber security interior regions of fiber security in. we have been working very hard and agree on and now it is important and -- and agree it is important to set up standards. i appreciate the endorsement. i also appreciate you are urging sooner rather them latean later. i think it would be a huge mistake to wait until is too late, and we need to tackle that issue now.

i think it would help us if you provide more information. let me turn to another issue that refers to our priorities. i am very concerned the ship building account is significantly undervalued. shipbuilding represents 2.2% of the budget requested a year ago -- of the budget requested. just to put this in perspective, our country currently spend as much on interest payments on the national debt every month when we do for shipbuilding and the

entire year cur. $15 billion a year on federal agency travel and conferences. i know they are trying to address travel and conferences, but that says something about our priorities you're a good i am concerned the commanders have testified repeatedly about the increasing importance of maritime domain and their responsibility. i recently returned from southeast asia, and i heard about china's aggressiveness in the south china sea and harassment of vessels from the

philippines a. the importance of our navy and our ability to project power cannot be overstated, so i am concerned the budget projects only 285 ships by fiscal year 17 when every study i have seen within the department, inside the department or outside the department, independent reviews have said we need a minimum of between 300 and 315 ships theory goe. the fact is while we are increasing with our ability, and quantities still counts if you are going to try to project power. i would like you to address my

concern and have this departments settled on a 285 ships when every study calls for 300. >> i appreciate the concerns you have indicated. what i asked the navy to do is to make very certain we have the ships the need to project a power in the middle east and elsewhere and to be able to do that effectively, and their recommendation is based on the number of ships in line to come a way to to do this in no wa

meet our needs, at 200 ships is a good baseline and we are ultimately going to move to 300 ship spiked to hundred 20 -- 300 ships by 2020. we are going to maintain our fleets. we are going to maintain a strong submarine fleet as well, and i am convinced we can do this in a way that protects a strong navy for the future. i am willing to make sure we are in the right place. if i am going to make sure we have a strong presence, i have got to have a navy, and i think

everyone i have talked to says we have got a force and we need to be able to make that happen you're a good >> i feel obligated to comment because of budget is a joint budget. really work on this as a joint team. every service paid a bit of that bill. given the navy paid least of all because we prioritized. wanted the council not only at sea but on the land. you -- quantity council not only at sea but on land. good >> are was thinking your

first appearance before the intelligence committee, you were somewhat reserved, and today i saw you at full volume, totally controlled, so it has been quite a revolution. let me thank you for the help you have given on afghanistan. it is very much appreciated your you. you were good enough to facilitate a meeting with general allen, and the four have the chance to spend some time. wasone thing that came ofup the incident in november, and there were mistakes on both

and general allen has taken six or seven steps to remedy some of the problems the reag. it is my understanding pakistan want some civilian announcement mistakes were made on our side, and i think mistakes were made on their side as well and that the glock problem could be solved. there was a meeting on the 11th a day or so ago, so they are prepared to dramatically lower costs, but the apology is important your you.

the national security of this nation is best served if we can develop a positive relationship with pakistan, and we know there might be an opportunity to make a change in that direction with the head of isi as well as some other things, so my question for you is why there cannot be some state men set says we do statement that says mistakes were made on both sides and of course the united states apologizes for any mistakes we have made, and we have taken steps to correct that and see it will never happen again. >> i appreciate your concern, and we understand the issues and

the dealings we have had with .akistan o you are right. it is a complicated relationship, but it is also necessary with our security needs in that area. this is still under negotiation. the issue we discussed is one of those areas. general allan has made clear mistakes were made on our side and the pakistani side, and we express condolences for the mistakes but were made your your -- mistakes that were made. and we make that clear and continue to make clear the

mistakes that were made. they are askings not only for the but other issues that have to be resolved. that alone is not the only issue that needs to be discussed and resolved. >> thank you for that answer. you believe the afghan military will be ready to take over by 2014 -- geithne2014? and -- by 2014? >> every time i go there i get the opportunity to see the afghan army and the improvement in terms of their operations.

you're right now they are 346,000. they are going to go to 352,000. they are doing a fantastic job. good i think they are improving during goo. our goal is to continue to improve them. i am confident we are going to be able to complete the transition in all the areas, the weekend to this because we have the afghan army and place, so i

think the combination of an afghan army that is able to do the job was the enduring presence we need to ensure the training continues, i think that does make clear they are going to be able to govern and secure themselves. >> thank you very much. >> two things i would like to raise three goo. as a director with control over the bin laden raid, three of us also served on the defense committee, and we have been alarmed with recent weeks that have occurred -- leaks that have

occurred during good one area of concern is this thing with hollywood filmmakers who regarding the bin laden raid. it has been allegedly one of our participants has been made public. of we are wondering what other details have been shared. this comes on the heels of other leaks that have put people's lives at risk. you are aware of all data triggere that. my question is about role of the department of defense with this situation and other situations

you're a good we are looking at every possible avenue to eliminate this type of leak, so working with you is going to be helpful. i am really not asking for details regarding this. we love to the hollywood movies, but to the extent information is shared to introduce a contributes to the problem, so we want to make sure each department is aware of the fact we need to thoroughly

investigate and put in place measures but will help prevent this from happening in the future. good are will leave that to you -- i will leave that to you. >> i deplore unauthorized disclosures of classified information. this is something that does have to be investigated, and it has to be clear this is intolerable. and we have to be able to protect those involved in clandestine operations triggere. we do have an office at the

pentagon that deals with people who want to do a movie or a book or an article or something related to defense, and we want to make sure the information we do use is accurate, but i can assure you i have i've now that western -- i have of that question. and no one release any information that was unauthorized. >> you and i were posted to europe during the same time, and i do agree with this rebalancing of global posture, we have to be very careful with taxpayer money, and i think she raised some legitimate questions.

at the same time, i want to make sure we are not new rebalancing to far greater -- too far. the arab spring and all those countries involved, also bogged in somalia, there are a lot of threats out there, and some of them require rapid response, and germany is a place where we have facilities of people who can train people who can be that response. have we gone too far, or are we have the coast of leaving too much, too fast, and in terms of

our need to continue to utilize and keep that organization and dynamic and of effective, what is your take on that? >> i have had 12 years of service in nato, so i tend to the northrld through and atlantic alliance. good when we enter into conflict, the first people we turn to to be partners are the members of the north america alliance. we should not discount the benefit of being able to fill part nurse -- to build partners. building their capabilities makes it certain we will not always have to be in the lead. i mention the ground

surveillance system, which is a defense initiative. we just shrunk the number of headquarters from about 12 to about six. i tend to be very strong with our relationship with nato. >> thank you both for your services. but i will have a vote on this and try to cover as much ground as possible. if we do not do something about it as a congress, when can we expect layoff notices to hit? >> industries makes that decision but under the law.

they have to do it 60 to 90 days before it takes affect. >> will they have any layoffs as a result of sequestration? fax i suspect if it takes effect we will have to do the same thing. >> would you do the same thing 60 or 90 days before? i just want you to make it real for us. it seems like who vegas bipartisan accomplishment we have is to destroy the defense department. i am not proud of that. as soon as you can tell us about the number of jobs to be lost, and the better for congress as a whole. you are telling me we have no budget problem. -- we have a budget problem.

i know we love our retired military members, and i hope to be 11 day, but isn't it unsustainable if we do not bring this program into some kind of sustainable footprint? you are having to compete against the benefits for today's force, against the ability to fight and win wars. is that correct? >> we are pain $50 billion, and if we do not control those costs, it is going to eat other areas. >> you are saying it is unsustainable. you are having to make choices between retired health-care costs and having to fight future wars. now i hope we can maintain a military budget. we are talking about shaping

retirement for the future, not today. maybe this is something we need to revisit. i wanted to be generous but sustainable. that is your message? >> ps3 good >> if you want to double it, you are going to destroy the best military we have ever had three good is not simply put? >> that is correct. >> what has been the percentage spent on the military? >> 5.5%. >> 5.5%. september 11 it was 3%. and world war ii it was 42%. vietnam, 7.65 to 10.86.

i would argue we are not going to get out of debt by lowering military spending alone. i am all about reforming the way we spend money. cost seem to be a bad idea. good night more it costs, the longer it takes for contracts -- the more it costs, launder it takes. did you are looking at doing a fixed cost. aid to pakistan. you consider the foreign office and budget of benefit, the state department's role in the world? >> yes. >> would you recommend we stop aid to pakistan right now? >> i would be very careful about shutting its down. i would look at when we expect

them to do. >> what about egypt? >> at this point in time -- >> could you write me a letter recommended to congress what we should do with our aid programs? >> yes, sir. it strikes you said something that went over everyone's head. did you are talking about shutting down financial systems, releasing chemicals, shutting down power systems that could affect the nation. what is the likelihood one of these major events will occur?

>> all i can tell you is technologically the capability to paralyze this country is there. i think the more this technology develops, the more the will to potentially use it. >> would you say there is a higher probability? >> i think there is a high risk. >> i will be brief. you mentioned this budget needs to relate to the full defense strategy. we understand that with the attention to the pacific. we think alaska plays a significant role historical a, but we think about to roll actually accelerates. there has been a proposal to

move it. we have raised many questions. it seems there are more questions being raised after corridor we just stop the review to look at feasibility of this move triggered the concern and we have, you have a situation where it is impacted needs to be of balance. we are looking at the impact to rd and how it will be impacted. and we looked at army training up north. we have got serious housing issues the need to be assessed.

we are in a situation where we are trying aggressively to get concrete answers from the air force on this. we have determined this proposal is going to cost $5.6 million, which does not fall in line with the present budget. the direct question i have to you is whether or not you will encourage their forced to in 2013.his linplan giving it the vetting it must have to ensure we are operating with the asia pacific, and this does reflect the new defense

strategy. >> i will have general dempsey respond as well. the air force is looking for ways to save money because of the budget control act. there are f16s, and they felt it was better to try to unify those stere. i just want you to know we have no intention of closing down. it is important to us in terms of the role we want to play in regards to the pacific, so nothing is intended to impact

as the future base for the air force. >> i will not commit to going back and talking them out of their plant your good -- out of their plan. i will make sure they understand it better. good >> i understand part of the proposed savings is demolishing several and buildings curio. it could sit in a situation where that is the consideration you're a good now i look forward to your -- aware that is consideration. i look forward to your appeal.

it always comes down to our human assets. i remain very troubled with the high level of suicides we are seeing with our military and our veteran population. and those are staggered to see we have more deaths because of suicide than in afghanistan. now how we deal with this reflects on assassination region reflects on us as a nation. i felt compelled to bring that up. >> i am very concerned about the high level of suicides. they highlighted the fact they are seeing a higher rate of suicide than we have seen in the past. what i have ask them to do is immediately looked at the situation and determine what is

causing it and what we can do to make sure it does not happen. leavinge we will be because there is a vote. bikes i appreciate that. i want to consider the thought process. gonew analysis is showing as thy committed suicide. we know a veteran commit suicide every 80 minutes. our service members and their families have risen to the challenge. we are a terribly grateful.

as we talked about, is resulting in extremes as suicide. our service members and veterans cannot get needed treatment without correct diagnosis. did it has been a major problem in my home state of washington. they were told they were exaggerating their symptoms, lying, and accused of shirking their duty, so a lot of our service members trust has been seriously shaken in the wake of these of cents. i have raised concerns about the consistency and accuracy of the diagnoses within the entire a

valuation system and have offered my recommendation on how to improve the system, and the army has taken some critically important steps on how to address these concerns. secretary panetta has announced a review of diagnoses back to 2001 to correct the errors of the past to make sure our service members get the services they deserve. i wanted to ask you, because this is not just an army disability system. this is a joint program that covers all services, so i want to ask why the department has not taken a lead in evaluating improvements in the entire system. >> i have asked the other chiefs to implement the same approach the army is taking.

>> to go back to 2001 to review all cases throughout the entire system? >> that is correct. >> we will be told the evaluations. who is heading that up? five the under secretary for personnel and for health care. that is the individual you need to contact. >> i would very much like to be kept informed, as i am sure other members of congress would. this needs to be transparent and clear. we need to make sure people are accessing the system, and the only way to do that is to be open and honest with everyone. give we did not know we were looking into the other services, and i would like to be informed as soon as possible what the timetable is and how that is going to occur. >> i appreciate your

leadership, and i am not satisfied either. i think the miss diagnoses that took place, what is happening between -- and we are doing everything we can to try to build a better system between the pentagon, the department of defense, but there are huge gaps in terms of the differences as to how they approach these cases and how they deal with them, and that is an area we need to do better on. >> you cannot imagine what it is like to talk to a soldier who told them and then when he went to the evaluation system he was told he was a liar, he was taken out of it, and he went out into the civilian world without being treated. i am share of the veterans affairs committee, and i recently held a hearing on the joint disability evaluation

system, and i am really troubled by what i am hearing. enrollment is continuing to decline. the number of service members is an unexpectedly low. the amount of time it takes to provide service to a service member who is transitioning has risen each year since we began this. we have heard from the department of defense and veterans affairs how five years after the walter reed scandal and this program was piloted they are just now beginning to map out processes to find room for improvement. that is unacceptable. we believe this was being taken head on, that we were dealing with it five years out is unacceptable, so i want to ask you what you are doing to deal with this five years into the program, and we are still

appearing on how this evaluation system is fundamentally flawed and disjointed. tell me what we are going to do. >> we have been meeting on a regular basis to try to do what we can to implement improvements, and we are not satisfied either. part of it is bureaucratic. part of it is complicated. but you cannot imagine what it is like to hear about that. if you are in the system. >> i see it every day. i am part of a very large bureaucracy, and sometimes the bureaucratic nature prevents it from being agile enough to respond, so a large part of this is making sure people are able to act outside of the box to do

what needs to be done. let us sit down with you and walk through some of the steps we are taking. >> i appreciate your commitment. i know you have not been here the entire five years, but we have been told for five years they are sitting down to address this, and i am talking to soldiers who are stuck. there are bureaucratic delays. the people who are supposed to help them, they are training them. their families are facing horrendous challenges as they try to figure out what the future brings. people at the top are saying this is fundamentally flawed. i appreciate your saying that to me, but sitting down when talking with the secretary, it is something we have been

hearing for a long time. we needed to be a top priority as we transition out of afghanistan. the complexities of reviewing all of these cases, you have people who are saying, what is going to happen to me? am i going to take another back seat as we deal with that? this is problematic, but it needs every effort from top to bottom. >> i share your frustration, and my job is to make sure we do not come here with more excuses but we come here with action. >> i appreciate that comment. we do a fantastic job of

training our men and women to go into service. we still have not gotten this right here again we have family and airmen we did we still have not not gotten this right. i will sit down with you the minute you tell me you are available, but i want more than . meeting yo-yoe >> i believe senator shelby is on the way. good >> we have a second vote. if i would ask for patients for him to return so i could return for the second vote, i would appreciate it and " the committee in recess -- and put the committee in recess.

where we are not going anyplace. >> thanks for that, and we are going into recess until senator shelby of lives. -- senator shelby arrives. thank you very much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

>> if you missed any part of this hearing, you can see all of it tonight at 8:00 eastern on c-span 2. in about 20 minutes president obama awards the presidential medal of freedom to israel's president. until then, we continued aren't series on federal financial agencies and we did we continue

our series on federal financial agencies. if cracks we have been looking at federal financial agencies. on monday we started with the security and exchanges commission. tomorrow we will take a look at insurance, and we will finish on friday with a consumer protection bureau. joining us is mary miller, the undersecretary of domestic finance. would you describe what you do as far asolane financial agencies? >> it is a pretty broad place. we do a lot of things. we print currency. we collect revenues, but we have a strong policy when it comes to

the parent -- to looking at regulation, so with the passage last yeard-frank act there is a good deal of work on the table. in my office is interested in looking at the impact not just on markets but financial institutions, protecting the broader financial system, and at the same time we are interested in the fiscal operation. there is quite a bit my office does in looking at guidance for regulators in the executive branch. >> what are some top policies you find yourself involved in? >> there are three that are the most important. financial regulatory reform, all the things that are in compass,

helping finance reform, which is important to bring stability to our housing department. >> where are we in terms of implementation of dodd-frank? a pivotal this thiis year. i think this is an important year. i see things going to conclusion. under financial regulation we have some very specific assignments at the treasury your good we have some coordinating assignments, -- now we have

some very specific assignments at the treasury. we have some coordinating assignments. our job is to coordinate and rulemaking. do we do not write the rules, but we have the job of taking a look at comments. there were 18,000 of them put out this year, but freeing them altogether -- is bringing them all together and taking them to the finish line. >> depending on the comments you received, did not influence the process? >> of course. we have all kinds of comments weighing in on these rules because they are influential they are quite useful, because they raise and lots of issues.

i think it is important to get all of these on the table and to bring that perspective. we are trying to bring that perspective so we can help regulatory bodies that have to do that. they have the information in a sensible way to get things done. >> how many of them were critical of the more parks region were critical. i would say there are 300 or 400 letters that were substantive. this is a tough piece of work, but i want you to understand there is a careful attention paid to this.

we think about what are the pros and cons on all sides. >> our next guest is going to talk about the treasury department's role. if you want to ask questions, here are the numbers. if you want to send us a tweet, and you can send us email, too. as far as bringing these people together to write the rules, when you seen the finished stagdate? but i do not have a specific date, but i think we will get that done.

after the rule is in britain, -- is written it will come out as a final rule, and there is time to comply. they provided guidance which reinstates what the law is. we do not know precisely what it is. but our she spent 26 years working at t. rowe price. she has a bachelor's from cornell university as well as other degrees. william fitts on our independent line from california. -- william is on. on. caller: yes, i'm a first-time caller. my question is about whether or not the glass-steagall act should be brought back. i have a concern that even with

the dodd-frank legislation, that the people who have deposits in banks are still at risk because of the merging of the bank's investment strategy with people's deposits. that should be kept. i would like to hear her opinion about that. thank you. -- i think that should be kept separate. guest: thanks for the question. our financial institutions today are large and complex, but i am not sure returning to the glass- steagall days is the answer. i think that some of the firms that failed in the financial crisis were quite distinct and i don't think that it lends itself to saying that would've been the answer to preventing that.

the things we need to do and financial regulatory reform are to make sure that our financial institutions of whatever size are protected in ways that keep those failures from spreading to the broader financial system. putting more capital in financial institutions, we see the amount of leverage they can -- reducing the amount of leverage they can have, providing more liquidity to financial institutions, these are the things we think will make the system stronger. we cannot go backwards. we have to go for words. the financial system is always evolving. there's plenty of innovation. we think innovation is good, but we have to make sure that our regulatory structure is keeping up with this. one of the key components is making sure the taxpayers are not at risk for losses. the dodd-frank legislation is very clear about that. also, taking a number of steps within the legislation and

outside that legislation to make sure finance law institutions are much stronger and can withstand the inevitable mistakes that managers will make. we need to make sure they don't spread to the broader system. we might think about some of the work that's going on through the banking regulation and some worked in housing finance. dodd-frank does a great deal. it's a very broad piece of legislation with a lot of very important safeguards. but i think we need to look beyond that to other things going on in the system. host: barry is on our democratic allies in florida. caller: hi, ms. miller. as someone who watched all the house and senate hearings during the really bad days, but there are common sense rules to change things, frankly, i don't see

that happening. mr. gary gensler spoke the other day about the differences that they have between his regulatory agency and the sec. it seems there's foot dragging. the major financial interests want to stall. the banks are not investing in our economy any more. where's the money going? guest: let me try to pick up on a couple threads of what you said. i think there's a great deal going on in washington in terms of changing the system. i appreciate the fact that from the outside it looks like it's not happening quickly enough. i would say we are interested in getting these things right, making sure there are tougher rules and they are enforceable and workable, that we preserve the good things about our financial system but we get rid

of the things that create. unnecessary risk so i think the important message i would send is we are very vigilant about the rule-writing process and changes that are taking place. we think that banks need to be held accountable. we understand that investors -- the public has had a very big shock and are very concerned. they need to have confidence in our financial markets and our institutions. we will take the time to get this right. we do listen to a lot of different opinions and perspectives on this, but i don't want to suggest we are backing away from tough implementation of these rules. host: this on twitter -- guest: i don't think size is really the right question. we have seen failures across the spectrum of sizes of financial institutions.

more broadly on the economy, on the financial markets? one of the things we are working resolution authority to wind down the very large financial institutions without creating havoc in the financial markets to counterparties and to the broader system. that is title 2 of dodd-frank and the ftse has put out the rules for doing this. is this easy? no. what we lacked in the financial crisis was a toolbox for doing this in a crisis. so i think we are better equipped today to think about how to do this, how to protect the financial markets, how to make the institution itself before the loss and not the taxpayer. host: is there a winding down

going on? guest: not of that scale. our system is much stronger today than it was in 2008. but we have the means to do it if we have to. host: jacksonville, florida, harley is on our independent line. good morning. caller: this morning. i was curious what your background was leading up to your appointment. second, which of the two presidents, clinton or bush, made the biggest changes in the financial markets that created the 2007 collapse? guest: my background is as an investor. i spent many years managing portfolios for large and small investors either through retail mutual funds or through institutional portfolios. i came to this job with a strong view that we need to make the system safer for investors and we need to restore confidence in our financial markets, our financial institutions. i think it is a very important

time to be in washington to work on those matters. i am deeply appreciative of the opportunity to do that. the second part of the question was -- host: asking about president clinton and bush. guest: yes, it is important to appreciate that markets across presidential terms, regulations across presidential terms. i'm not sure i could assign either praise or blame to any particular administration. the most recent history, i know that things done in 2008 to make the system stronger, the passage of the troubled assets relief program crossed administrations. one administration adopted it and another had to implement it. it is hard to draw lines. host: you put out a statement that says we stand at $60 billion still out as far as the money invested in tarp. guest: any losses that might be realized as a result of tarp

will largely be related to the housing programs that occurred under tarp that were not designed. designed recoup on the bank support programs, a lot of the other features, we have had remarkable recovery results. so i don't think in 2008 anyone imagined that we would be able to recover as much as we have through the tarp asset sales and payback from institutions that were assisted. i think the outcome is quite good. any spending will be related to housing assistance. host: what did we get out of the investment? guest: it put a very important safety net under the financial system. it provided some time for institutions to get back on their.

feet and to repay their. host: our banks' lending more because of it now? guest: we are seeing an improvement in lending. it is more pronounced among large institutions than among small institutions. that is an area where we have to focus. host: troy, montana, brian is on the republican line, good morning. caller: hi. i was calling because the bills that you guys put out, what about making them a couple pages instead of 1000 pages? when you do that, then the rules and regulations would be pretty clear instead of open to interpretation to all these lawyers that seemed to cause a lot of the problems because they look for ways to sneak around your bills and cause some of these problems for the banks when the going to the gray areas. going live now to the

eastern of the white house where president obama will award the presidential medal of freedom peres andnt shiomon then offer a toast. >> good evening. please, have a seat. welcome to the white house on this beautiful summer evening. the united states is to have many allies and partners around

the world. one of our strongest allies and one of our store tclose friend e state of israel. no individual has done so much over so many years to build our a buy it and bring our twa nations closer -- to build our alliance and bring our two nations closer. [applause] among many special guests, we are grateful for the presence of shimon's children. and their families. please, rides so we can give you a big round of applause. -- rise so we can give you a big round of applause. [applause] we had someone here representing

the family that has given so much for peace that carries on with the legacy of her father. we are grateful to have you here. leaders to have helped ensure that the united states is a partner for peace. in part to yeah, i am so pleased to see secretary -- in part, i am so pleased to see secretary madamadeleine albright and one f the great moral voices of our time and an insufficient to as inspiration to us all.

the man, the life that we honor tonight is nothing short of extraordinary. shimon took on his first assignment during the struggle for israeli independence in 1947. he was still in his early 20's. he ran for president of israel and iran when he was 83. i just learned that his son-in- law is also his doctor. tips.ed for all of his step shimon has been strengthening the bonds between our nations

for 65 years, at the entire life of the state of israel. these giants of the founding generation belong to the ages. is to be in the presence of a true founding father. you have never stopped serving. in two months we will join our israeli friends and joining am also, your 89th birthday. [applause] i think he would be the first to tell you that in the ups and downs of is really countpolitics predict of israeli politics, he has been counted out more than israeli politics, he has been counted out more than once. he asserted every position -- he

has served in every position, foreign minister, three times. try that, madeleine. now the ninth president of israel, and that the president clinton would agree with me, shimon peres is the ultimate comeback kid. he is still going on facebook and youtube, connecting with young people, looking to new technologies, all is facing tomorrow. recently he was asked what you what your legacy to be. he said, it is too early for me to think about it. shimon, you earn your place in history of long ago. i know your work is far from done. tonight is another example of how it is never too early for the rest of us to celebrate your legendary life.

shimon teaches us to never settle for the world as it is. we have a vision for the world as it ought to be. we have to strive for it. perhaps his. comes from the jewish -- satisfaction comes from the jewish dissatisfaction gene. there is an impulse to do better. we must keep challenging ourselves as striving for ideals for the feature that we know is possible. he knows the necessity of straiength. it can bring this. he is working with every american president than john f. kennedy. that is why i have for it with prime minister not now do to ensure the security cooperation between the -- netanyahu to

ensure the security cooperation between the two are good. [applause] he knows the security depends not just on the strength of his arms, but the right as that of its moral compass. he knows the scripture teaches us that we must not only seek peace but pursue peace. it has been the cause of his life, peace, security, and dignity for israelis and palestinians and all israel's arab nations. he has never lost hope in the middle east that is not a killing field but a field of creativity and growth. at times, some have seen his hope and called shimon a

dreamer. today are right. just look at his life. the dream of generations to return to israel. the historic homeland of the jewish people. the dream of independence, a jewish state of israel. he helped win its. the dream of an israel strong enough to defend itself by itself against any threat backed by an ironclad alliance with the united states of america. he helped build it. the dream of making the desert bloom. he and his wife for part of the generation that it cheated. the dream of the high-tech israel we see today. he helped spark it. that historic handshake on the white house lawn he helped to create it. that awful night and tell of and the grief that followed.

he guided his people through it. the dream of democracy and the help of a new generation including so many young arabs. he knows less welcome it and nurture it. shimon peres was birorn in poland to become the president of israel. he is a dreamer. rightly so. he knows we must never forget with faith in ourselves and courage and our hearts, and no dream is too big. no vision is beyond our reach. it falls on each of us to keep searching, it to keep striving for that future we know is possible for the peace our children deserve. it is a high honor for me to bestow this warrior for peace, america's highest civilian honor the presidential medal of

freedom. i ask you to join me in welcoming president perez to the presentation. -- peres to the presentation. [applause] >> the president of united states of america awarded this medal of freedom to shimon

peres. shimon peres has devoted his life to public service. he was awarded the nobel peace prize for the role he led in peace talks. he continues to serve the israeli people with courage and dignity. there its unwavering devotion to his country, he has strengthened the unbreakable bond between israel and the united states. [applause]

>> before in biting remarks from invite you remarks from president peres, i am by you for a toast with the words he spoke when he accepted the peace prize. from my earliest youth, i have known that while one can plan with care the stages of once a journey. one is entitled to dream and keep dreaming up its destination. a man may feel as old as his years yet as young as his dreams. to all our friends here tonight and to our fellow citizens across america and israel, may

we never lose sight of our destination. shalom. mary always be as young as our dreams. -- may we always be as long as our dreams. i have one last order of business to intended to before i asked our recipient to come to the stage. i was not yet sure whether one more or two more guests of honor is had arrived. i think it would be entirely appropriate for us to also acknowledge the two people who have constantly saw to achieve a peace not only in the middle east but all around the world. one of them happens to be traveling a lot these days on my behalf. i am extraordinarily grateful to

them. i know you are pleased to have two very dear friend. president bill clinton. [applause] and our outstanding secretary of state, hillary clinton. [applause] ladies and gentlemen, president shimon peres. >> mr. president, mrs. obama, it

is so hard to speak after you, my god. thank you. it was really profound. thank you forward me the presidential medal. -- awarding nea the presidential medal. to receive it from you in presence of my family is a privilege that i i will cherishe -- that i will cherish for the rest of my life. thank you so much. this is a testament to the stoic french between our two nations - to the stoic french siendship

between our two nations. i tried to grab their strength -- gather strength. i learned the public service is a privilege that must be based on moral foundations. i received this on behalf of the people of israel. they are the two recipients of this honor. with this moving gesture, you are paying tribute to generations upon generations of troops who fought for a state of their own, a state that would give them a shelter. president, you are honoring the

pioneers to build homes on mountains, on shifting land, whose sacrifice their lives for their country. on their behalf, i thank you. i thank america for caring for our safety, caring for our future. tonight even invited outstanding personalities use commitment to israel as that thing less than [inaudible] i offer them my gratitude of my people. he gave his life for peace.

you have pledged a lasting friendship for israel. you stated that the israel security is a priority for you. so you pledged. so you act. so you are active. ng. thank you again. [applause] we admire the united states for being the land of the free and helm of the brave, a nation of generosity. without the value of the united states, it would have been chaotic.

the profit isaiah promised a nation to take up sword against nation. the biblical promise became a grand american reality. when the bell rang in philadelphia, it resonated throughout the world. the world was surprised to witness a great nation becoming greater by giving and not by taking. by making generosity the wisdom of policy and freedom, freedom from oppression and violence,

freedom from discrimination and biggeit grants. liberty that is not interfere. we introduced a constitution based on balance, and not on force. they built the soldiers true heritage. we did not give up our virtues. we live this truth. we die this truth. we live as free jewish people. we are faced with humanity and

experiencing the best of humanity. we realized that we had the end of beatable human. . we turned our attention to the ever-growing promise of science. unlike land and water, science quered by armiesered b or won by wars. ed an exp ovidie unexpected economic goals. it enables us to build an

effective defense against armies end.to ean we reamimain the people of the book. they are living proof that democracy means focus. literature means enrichment. this is an innovating society where jews and muslims live in peace. it is not perfect but it is an example of what may be in the future. we are witnessing the departure of one page and the arrival of another.

the scientific age is still fresh. the scientifict th age has gained more than agriculture. it generated the global economy but not a global government. it gave all sorts of global terrorism without global [inaudible] the dangers are concentrated in iran. they are not our enemies. it is the present leadership that became the threat. it became a danger to world peace. it is a leadership that aims to woo the middle east, spreading terror all around the world. they are trying to build a

nuclear bomb. they bring darkness to a world of longing for light. there is irresponsibility to our own people throughout the world that the iranian threat must be stopped. cannot be delayed. mr. president, you worked so hard to build a world coalition to meet this immediate threat. he started with economic sanctions. you made it clear that all options are on the table. we clear the support you and your policy. -- clearly support you and your policy. [applause]

in many homes, families still the loss of their loved ones. ps of the palestinians is the most urgent, urgent than ever before. it is unnecessary. it is crucial. it is possible that delay may beat the chances. 19 years ago president clinton initiated the peace process. thank you very much. [applause]

since then, israelis and palestinians have come a long way to gather. hard work remains ahead. the palestinians are in my judgment right today to restart the peace process. a firm basis exists, a solution of two nations at states, israel and arab states in palestine. the palestinians are our closest neighbors. i believe they may become our closest friends.

peace with the palestinians will open peace. the duty is to pursue freedoms ceaselessly in the face of doubt and disappointments. just i imagine what could be. now a young arab generation has opened its eyes and stood up against oppression and corruption. they seek freedom. they need freedom. they understand that freedom begins at home. i pray for their success. i believe that their success may become the success of all of us. my vision is israel living in full peace, and joining with all

the people in the middle east and forming new friends alike. they are becoming the capital of peace. it is an issue of that is the scientific center, open to all without discrimination. my vision is an israel whose home is as old as the 10 commandments and imagination is new. together our modern vision can help bring this.

a better world will take you a bad time before they can become satisfied. i believe that israel will be a center of the latest development in the surge. as the secret of the human they are being rebuiltrevealed, are discovering a right and wrong. i'm extremely optimistic about the united states of america. you are going to be the real souls of our time. you are introducing a new industry which is not a massive but individual production. s but individual

production. i believe that israel will be a center of the latest developments in brain research. the secret of human brains are revealed, and people may improve their capacity of cyphering between right and wrong. the government can contribute to world peace. dear friends, my greatest hope is that they do not realize when and woman,syrian or lebanese, young people will wake up in the morning an dbe d be able to say to themselves "i am free to be

free." amen. c-span3

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> coming up, jpmorgan ceo jamie dimon testified before the senate picking committee about his trading loss. he told senators "we made a mistake. i am responsible." some of the event to tell you about. at 10:00 eastern, the senate finance committee but the medicare payments to doctors, a about waysearing from them they made their payment systems more efficient. then the faith in freedom coalition conference with ohio's senator rob portman. in the afternoon, the foreign relations committee have a

hearing on the law of the sea treaties. >> it has been 40 years for the watergate scandal began. this weekend they will air the port of conversations between richard nixon and members of this that concerning the break them. >> we have a cancer within the presidency that is growing. it is growing because of have compounded itself. people are going to start perjuring themselves very quickly. >> hear more of the nixon tapes this saturday at 6:00 p.m. eastern. listen at 90.1 fm.

we are streaming at c-span radio.org. >> is the department held its third annual u.s.-india strategic dialogue. speaking at the event, secretary of state clinton said the u.s. and india are forging a "more mature relationship." he said progress is being made. good morning. welcome. welcome to the third annual u.s.-india strategic dialogue. a warm welcome to you and your distinguished delegation. it is a pleasure to repay the hospitality you have shown me.

and to have this opportunity to bring together so many experts and officials from our two countries. the strategic fundamentals shared democratic values, economic imperatives, and diplomatic priorities and are moving as closer to an understanding and a trust that reflect the convergence of values and interests. to grow and prosper, we both need open, free, and transparent global economic systems. we both seek security. we understand the critical importance of a coordinated international response to violent extremism and other global challenges. as a result, under president prime minister's

leadership, we are implementing a critical bilateral relationship days. one defined by near constant consultation aimed at advancing the interests and values they share and working through the inevitable differences. daily collaboration is not always glamorous. it is strategically is it that against. it is exemplified by this dialogue. -- strategically significant. it is exemplified by this dialogue. this represents the topics we are working on together. we are committed to not only expanding our bilateral

relationship but to furthering the work we do regionally and globally. later this week, we will co- host an important local help conference on child mortality. the quantity of meetings old simile matters less than the quality of the results produced. the effectiveness of our partnership hinges on our ability to get there to convert common interests into common actions. it is not enough to talk about cooperation on issues ranging from civilian nuclear energy and attracting more u.s. investments to india are defending human rights. we have to follow through so that our people, citizens of two pluralistic democracies can see and feel the benefits. i think we're making progress.

that may quickly highlight five areas. first, a trade and investment. we have come a long way together. this may exceed $100 billion, up tenfold since 95 and up 40% since 20005. there is a lot of room for further growth. we need to keep up the momentum. we look forward to working to advancing the treaty to further reduce barriers to trade and investment in areas like multi brand retell antitrade hospital environments for each of our companies to do business. second, on science and technology, we have significant accomplishments. we have more than $1 billion

mobilize for clean energy projects, progress on the joint clean energy research and development center. yesterday, it is the clear power corporations signed an agreement committing both sides to work to site development work needed to begin construction of new reactors. done's a lot of work to be including the nuclear liability legislation. this is a significant step toward the fulfillment of our of landmark civil nuclear cooperation agreement. on education and people to weple ties, yesterday's discussed in depth how to increase educational exchanges and strengthen the ties between our universities. indians and americans are among the most innovative people on this planet. we have so much to learn from

each other. making the most of this will require investments from both sides and a strong focus on areas such as job training and digital learning where we can make a big impact. fourth, we have expanded coordination and information sharing in the fight against violent extremism. our military is our participating and increasingly cooperating to control vital sealanes and protect freedom of navigation. bilateral defense strays has surpassed $8 billion. we're convinced this partnership can grow to enclosed do my research in our discussions today, i hope we can focus on the need to deepen cooperation

on cyber security, which is a growing concern for both of us. let me add on the security challenge, we can see habit of cooperation paying off. the united states appreciates that india has made it clear and understand the importance of denying them a nuclear weapon and supports the efforts to ensure their compliance with international obligations. india has taken steps to diversify be sources by reducing purchases of iranian oil. the united states recognizes india's growing energy needs. we're working together to ensure not only stable oil market but also additional areas of cooperation. we are cooperating in the south

asia appeared walk on the contributions toward building a prosperous afghanistan including its more than $2 billion in assistance. we hope the conference will galvanize more international investment. together we must continue laying the groundwork for the long term vision of a new road that connects markets, businesses and consumers from the caspian and beyond. but the bar countries have significant stakes in the region. we need to expand our work both bilaterally and other

multilateral institutions. to build ang regional architecture that will boost economic growth, settle disputes peacefully. which the strategic fundamentals of our relationship are progressing. i'm very excited and appreciative for all the work that has been done by members of both of our governments, only some of whom are represented here today, to move our strategic dialogue further and to broaden and deepen our cooperation. let me again thank minister krishna for his leadership, and let me now turn and invite him to speak. >> thank you, madam secretary hillary clinton, distinguished members of the united states

delegation, it's a great pleasure for me to join you in chairing the third india-u.s. strategic dialogue. i would like to thank you profusely for hosting the dialogue, and for the warmth and hospitality. and we also sincerely appreciate the efforts that your team and our embassy here have put in to making this literally an india- united states fortnight in washington.

with all the other bilateral meetings scheduled in the past two weeks, it speaks to the depth of our relationship and the diversity of our engagement. madam secretary, i am particularly honored to be joined by my distinguished ministerial colleagues: mr. ghulam nabi azad, minister for health and family welfare, mr. montek ahluwalia, deputy chairman, planning commission, mrs. krishna tirath, minister of state for women and child development, mr. ashwani kumar, minister of state for planning, science and technology and earth sciences, and mr. sam pitroda, public information, infrastructure and innovation advisor to prime minister. i am also pleased to be joined by several of our most senior officials in the government of india. even by the high standards of india-u.s. relationship, we have had an unprecedented intensity of engagement over the

past years. yet the strategic dialogue is a unique opportunity to bring together all the threads of our cooperation that constitute the extraordinarily rich tapestry of our relationship. madam secretary, our two sides have a shared vision that our global strategic partnership could be one of the most important defining relationships of the 21st century. in july 2009 in delhi, we started a new chapter in an already exciting study of india- u.s. ties. our bilateral engagement as well as global developments over the past three years has only strengthened our mutual commitment to this partnership.

in every field -- political, strategic, security, defense, intelligence, nuclear cooperation, space, trade and investment, energy, science and technology, higher education and empowerment -- we are making tangible and continuous progress. what was once novel and unprecedented in our relationship is now almost routine and normal. in the process of our engagement, we have built something more precious: friendship, goodwill, trust, mutual confidence, candor, and belief in the importance of a successful partnership. sometimes there are questions and doubts about the

relationship. they are inevitable in something so unique and new. but i believe that having settled the question of whether india and the u.s. can or should work towards a close relationship, the question we ask now are how to harness the full potential of that relationship. if we go by the investments that the two governments are

making and the energy and enterprise of our people, we are, madam secretary, on the right track. but as i say, we have reasons to be satisfied but not complacent. so we hope, in the course of today, we will chart the course ahead both for the immediate future and the long term. i think the dialogue process will start. thank you. >> thank you very much, minister. >> on c-span, the ceo of jpmorgan chase testified about his $2 billion trading loss. his $2 billion trading loss. mitt