this is the second in a series of public briefings on how congress and the president could work to provide armed services with the resources and authority they require to keep our nation safe in a time of growing threats across the world. this morning, we'll hear from senator tom cotton and following his keynote, i will handoff to rachel hoff, who will introduce and moderate a discussion by a panel of experts featuring mackenzie eaglen, david adesnik, and douglas j. holtz-eakin. first, it's my pleasure to welcome the keynote speaker. senator tom cotton was raised on his family's farm in arkansas and he attended harvard and harvard law school. after a clerkship, he entered private practice. like all of us, his life was disrupted by september 11, 2001. in response, he left and joined the army to serve as an infantry

officer. he was deployed to iraq and served in the 101st airborne division and a reconstruction team in afghanistan. between his tours, senator cotton served at arlington national cemetery. after his military career, senator cotton served briefly in the private sector and was elected to the u.s. house of representatives in 2012. last year, he was elected to serve in the u.s. senate. now serves on the senate committees on banking, intelligence, and armed services. he is the chairman of the armed services committee -- the subcommittee. his maiden speech delivered last week, senator cotton warned we have "systematically underfunded our military." i look forward to the insights you offer on important issues today and ask you to please join me in welcoming senator tom cotton.

[applause] tom cotton: thank you. thank you all. good morning. thank you. and chris, thanks very much for the kind introduction. thanks to fpi and aaf for hosting me this morning for the very important work you do. as the senate prepares to debate and vote on a budget resolution this week for next fiscal year i have a very simple message this morning. the world is growing ever more dangerous. and defense spending is wholly inadequate to confront the danger. today, the united states is engaged again in something of a grand experiment of the kind we saw in the 1930's that allowed hitler to rise to power in nazi germany. as then, military strength is seen in many quarters the cause

of military adventurism. strength and confidence in the defense of our interests, our alliances, and liberty is not seen to deter aggression but to provoke it. rather than confront our adversaries, our president apologizes for our supposed transgressions. the president minimizes the threats we confront in the face of territory seized, weapons of mass destruction used, and proliferated, and innocents murdered. the concrete expression of this experiment is you're collapsing defense budget. for years, we have systematically underfunded our military. marrying this philosophy of retreat with a misplaced understanding of our larger budgetary burdens. we have strained our fighting forces to the breaking point. even as we have eaten away at investments in our future forces. meanwhile, the long-term debt crisis hardly looks any better even as we ask troops to shoulder the burden of deficit reduction. rather than shouldering the arms necessary to keep the peace. the result of this experiment should come as no surprise, or little different than the results of the same experiment in the 1930s.

>> ladies and gentlemen, you're welcome to be here. >> you will be arrested, your one and only warning. tom cotton: as much as these fellow citizens support negotiations with iran, so do i support negotiations with iran. but negotiations from a place of strength. where we -- where we are dictating the terms of the negotiations. not -- not the circumstances -- just two days ago, two days ago, let me remind you, ayatollah mainny whipped up the crowd in tehran to say, "death to america." two days ago, ayatollah in his annual speech whipped his crowd into a frenzy saying, death to america. what was his response?

"yes, certainly, death to america." this is not the man or the regime to whom we should ever make nuclear concessions. and in fact -- [applause] and in fact -- in fact, the president's series of one-sided nuclear concessions is of a piece with his philosophy of retreat. that apologizes for american conduct and actually undermines our efforts to stop iran from getting a nuclear weapon, rather than secures it. now, not just with iran but all around the world an alarm should be sounding in our ears. our enemies sensing weakness and hence opportunity have become steadily more aggressive. our allies uncertain of our commitment and our capabilities have begun to conclude that they must look out for themselves. even if it's unhelpful to global stability and order. our military suffering from years of neglect has seen its relative strength decline to historic levels. let's start with the enemy who attacked us on september 11th. radical islamists. during his last campaign the president was fond of saying al qaeda is on the run. in a fashion, i suppose this was correct. al qaeda was and is running wild

all around the world. it controls more territory now than before. this global network of islamic jihadists continues to plot attacks against america and the west. they sow the seeds of conflict in failed states and maintain active affiliates in africa, the arabian peninsula, the greater middle east and south asia. al qaeda and iraq was off the mat when the president disregarded his commanders' best military judgment and withdrew from iraq in 2011. given a chance to regroup, al qaeda and iraq morphed into the islamic state which now controls much of syria and iraq. the islamic states cuts the heads off of americans, burns alive hostages from allied countries, executes christians and enslaves women and girls. the islamic state aspires and actively plots to attack us here at home, whether by foreign plot or by recruiting a lone wolf in our midst. and the threat of islamic terrorism brings me to iran, the world's worst state sponsor of terrorism. my objections to these nuclear negotiations are well known and i don't have to rehearse them

here. i will note, though, that the deal foreshadowed by the president allowing iran to have uranium enrichment capability and accepting any expiration date on an agreement, to quote prime minister netanyahu, it paves iran's path to a bomb. if you think as i do the islamic state is dangerous a nuclear armed islamic republic is even more so. recall, after all, what iran already does without the bomb. iran is an outlaw regime that has been killing americans for 35 years from lebanon, to saudi arabia to iraq. unsurprisingly, iran is only growing bolder and more aggressive as america retreats from the middle east. ayatollah khomenei did in fact two days ago call for death to america. just as in recent months he tweeted the reasons why israel should be eliminated. iranian-backed shiite millitias control much of iraq.

a man with the blood of hundreds of american soldiers on his hands. iran continues to prop up bashar al assad's outlawed regime in syria. recently seized sunna, a cap -- capital of yemen, just over the weekend we had to withdraw further troops from yemen. hezbollah remains iran's catspaw in lebanon. put simply, iran dominates or controls five capitals in its drive for regional hegemenity. further, iran has rapidly increased the size and capability of its ballistic missile arsenal, recently launching a new satellite. three weeks ago iran blew up a mock u.s. aircraft carrier in naval exercises and publicized it with great fanfare. iran does all these things without the bomb. just imagine what iran will do with the bomb. and imagine a united states further down the road of appeasement, largely defenseless against this tyranny.

but you don't have to imagine much. simply look to north korea. because of a naive and failed nuclear agreement, that outlaw state acquired nuclear weapons. now america's largely handcuffed, watching as this rogue regime builds more bombs and missiles capable of striking the u.s. homeland and endangering our allies. regrettably, the results of this experiment of retreat can also be felt in other parts of the world. take, for example, the resurgence of russia with whom president obama conciliated and made one-sided concessions from the outset of his presidency. or china's military buildup which is directed quite clearly against the united states as china pursues an anti-axis and aerial denial strategy to keep american forces outside of the so-called first island chain and therefore to expand china's hegemony in east asia. now while america's retreated, not only of a our enemies been on the march, our allies anxious for years about american resolve, now worrying increasingly about american

capabilities. with the enemy on their borders, many have begun to conclude they have no choice but to take matters into their own hand often in ways unhelpful to our interests and broader stability. we should never take our allies for granted but we shouldn't take for granted the vast influence our security guarantees give us with their behavior. this kind of influence has been essential for american security throughout the post-war period. it has begun to wane as our allies doubt our commitment and our capabilities. and make no mistake, our military capabilities have declined. today, defense spending is only 16% of all federal spending, a historic low rivaled only by the post-cold war period. to give some context, during the cold war, defense spending regularly accounted for 60% of all federal spending. but if we don't end the experiment with retreat, this president will leave office with a mere 12% of all federal

dollars spent on defense. the picture is no prettier when cast in light of the economy as a whole. in the early cold war, defense spending was approximately 9% of gross domestic product. today, it sits at a paltry 3.5%. our defense budget isn't just about numbers and arithmetic. it's about our ability to accomplish the mission of defending our country from all threats. the consequences of these cuts are real, concrete, and immediate. as former secretary of defense leon panetta explained, these cuts have put us on the path to the smallest army since world war ii, the smallest navy since world war i, and the smallest air force ever. these impacts won't just be immediate, they will be felt long into the future. key programs once divested will be difficult to restart. manufacturing economy will be lost. the skilled labor pool will shrink. the defense and manufacturing

base with atrophy. today's beps systems and equipment will age and begin to break down. our troops won't be able to train and their weapons equipments won't be ready for the fight. in short, we will have a hollow force incapable of defending our national security. what is then to be done? our experiment with retreat must end. this congress must again recognize that our national security is the first priority of the government and the military budget must reflect the threats we face, rather than the budget defining those threats. this week, the senate budget resolution will reflect a base defense budget of $523 billion and emergency supplemental spending of $89 billion. while better than the defense spending mandated by the budget control act, this is still insufficient given our readiness crisis, the shrinking size of our military, and the immediate need to modernize aircraft ships, vehicles, and so forth. the national defense panel, a bipartisan group of eminent national security experts convened by congress unanimously recommended a $600

billion floor for the defense budget. not a ceiling. i agree that $611 billion is necessary and i agree it's also not sufficient. what then should our budget be next year? well, i will readily acknowledge that we can't be sure how much is needed above $611 billion. the national defense panel explained why. because of the highly constrained and unstable budget environment under which the department has been working, the quadrennial defense review is not adequate as a comprehensive, long-term planning document. thus, the panel recommends that congress should ask the department for such a plan which should be developed without undue emphasis on current budgetary constraints. i endorse this recommendation. in the meantime, though, even if we can't specify a precise dollar amount, we can identify the critical needs on which to spend the additional money.

first, our military does face a readiness crisis, from budget cuts and a decade of war. we must act immediately to get our forces back in fighting shape. from live fire ranges to flight time and so forth. second, and related, our military is shrinking rapidly to historically small levels. this decline must be reversed. end strengths of the army and marine corps, the number of platforms in the air force and the navy. third, we must also increase research, development, and procurement funds to ensure our military retains its historic technological advantage, particularly as our adversaries gain more access to advanced low-cost technologies. these critical priorities will no doubt be expensive. probably tens of billions of dollars more than the $611 billion baseline suggested by the national defense panel. because the massive cuts to our defense budget resulted in part from record deficits, the question arises, can we afford all this?

the answer is, yes. without question, and without doubt, yes. the facts here as we have seen are not disputable. the defense budget has been slashed by hundreds of billions of dollars over the last six years. the defense budget, as i said, is only 16% of all federal spending, historic low and heading much lower if we don't act. and using the broadest measure of affordability and national priorities, defense spending is a percentage of our economy. last year we only spent 3.5% of our national income on defense. approaching historic lows. and it makes to pass it by 2019. to provide context, when ronald reagan took office, we spent 5% of our national income on defense. and president reagan and congressional democrats considered that to be a dangerously low amount. that is the point from which they started the defense buildup. if we spent 5% of our national

income on defense today, we would spend $885 billion on defense. furthermore, trying to balance the budget through defense cuts is both counterproductive and impossible. first, the threats we face eventually will catch up with us. as they did on 9/11. as they did in the late '70s. and we'll have no choice but to increase our defense budget. when we do, it will cost more to achieve the same end state of readiness and modernization than it would have without the intervening cuts. this was the lesson we learned in the 1980's after the severe cuts to defense in the 1970's and in the last decade. second, we need a healthy growing economy to generate the government revenue necessarily to fund our military and balance the budget. in our globalized world, our domestic prosperity depends heavily on the world economy which of course requires global stability and order. and who provides that stability

and order? the united states military. i would suggest a better question to ask is, can we afford to continue our experiment with retreat? and i would suggest the answer is, we cannot. imagine a world in which we continue our current trajectory. where america remains in retreat and our military loses even more of its edge. it's not a pretty picture. to stop this experiment and turn around american retreat, we must once again show that america is willing and prepared to fight a war in the first place. only then, only when we demonstrate military strength and moral confidence in the defense of america's national security, will we make war less likely in the first place. our enemies and our allies alike will and must know that aggressors will pay an unspeakable price for challenging the united states. bringing about this future by being prepared for war will no doubt take a lot of money. but i will leave you all with

two questions. what could be a higher priority than a safe and prosperous america? leading a stable and orderly world. and what better use of our precious taxpayer dollars? thank you all, god bless you. >> thank you for your insights. let us welcome rachel. rachel: thank you again, senator cotton, for joining us this morning, for your insights. i would like to welcome our panel.

i want to follow up on the senators remarks and dive deeper into these capabilities and able to meet rising national security threats. we are joined by three experts who are qualified to comment. he served as director of the congressional budget office. next is david a dozen of previously who is a visiting fellow at the enterprise institute and also served in the u.s. department of defense. and mckenzie egeland who will start us off is a resident

fellow at the american enterprise institute. mckenzie has served as a staff member on the defense panel. mckenzie, if you start off the discussion. mckenzie: great, thank for having me. welcome, everyone. i'm not really sure where to start, although i guess we can pick up where senator cotton left off and talk about where the senate's going to go this week in the house with their budget resolutions as opposed to what's required and what's needed. it's a long way from even the president's budget to i think the kinds of investments that senator cotton has outlined that are required that are very similar and in line with the national defense panel. which we can speak more about in q&a. i think the biggest question on the table, or put another way, the elephant in the room is, ok. so $39 billion extra in overseas

contingency operations spending or war spending to get the defense budgets in the neighborhood ballpark of where president obama has them. or a billion over, depending how you calculate it. how's that for defense? well, i'm here to say that as somebody who helped the national defense panel think through some of these issues, it's completely inadequate. it's not just bad budgeting and bad governing. it's bad defense policy. 39 extra billion dollars in war spending isn't the same defense budget as plussing up the base budget. i know that's hard, i get it you've got to rewrite the bca. but congress has done it twice already and we know they're going to do it again, follow-on. but they're not going to do it until they've exhausted every other available option and they've gone through this long torturous path to get there. there are two defense budgets. the base budget that invests in

america's military, and basically the size and structure and standing responsibilities, the daily global responsibilities in reach of that military. the supplemental spending is intended for emergencies. that's why it's called emergency supplemental money. there are two defense budgets and they buy presumably two different things. in fact the defense budget, the second budget, one for war spending or emergency spending has been constricted over time in part because of congress. congress has wanted to restrict the use of those funds which i think is a good thing as a taxpayer. it's often in years past, particularly when defense budgets were going up, it was the christmas tree. the emergency war spending account became everybody's favorite place to stock every stuffing -- every stocking stuffing you could imagine that had nothing to do with iraq or afghanistan or anything closely related to intelligence and military operations in either place. so to think that even, one, $39

billion is ok, and that it's going to buy you the same kind of defense, is completely flawed and inadequate. and i know that it's something that policymakers really struggle with and they don't want to hear. but there are two defense budgets and they buy two different things. and then, two, trying to get that discussion started on what's required for the long-term defense, what's required for changes in the budget control act, why a base budget increase is more important than a one-term shot in the armband aid fix in the oco. is i think the conversation we might want to get into a little more later. really quickly, why two defense budgets, why do they buy two different outcomes? well, the emergency spending money is mostly for supplementals. it's for consumables. it's for perishable items, like milk in your refrigerator or bread on your counter. or wherever you put it. this is for short-term investments and even things like readiness. there are different types of readiness. short, medium, and long-term readiness. there's individual and small-unit readiness and there's

large-scale, maneuver, full-spectrum readiness. for example if you were just to take readiness and whittle it down this kind of spending in the emergency bill doesn't buy you the same kind of investments and it certainly doesn't buy you long-term modernization and health of the force. so with that i'm going to turn that cheery note over to david and stop talking. david: thanks. i'm on? yeah, i only probably have more depressing information to add. somehow it seems when fpi discusses the state of the world it's not your upper for the morning. but what i'd like to do is expand on some of what senator cotton said about long-term trends in defense spending and why is it important to company -- why it is important to do that. of course, we here at fpi and af, we talk about the national defense panel's recommendations for increasing defense spending. and you get a lot of the push-back when you talk about those things and it comes from a couple of directions. so interestingly, this advocacy

for greater defense spending is often a plank in the center of the political spectrum you look if you look at the more than 85 experts who signed fpi's open letter to the leaders of congress, you saw notable democrats alongside notable republicans making the case. and then we hear more from people on both sides. on one end i've discussed this even with veterans who consider themselves progressive and they say, no, how could you want to add more dollars to defense when there's not enough for education? isn't this country's real strength in our economy and education? we need educated people for tomorrow. then on the other side it tends to be but look at our debt, look at our deficit, how can you advocate more spending when these are at historically high levels? it's really, if you look at the context that senator cotton began to talk about, you understand why those are not actually the case. so, for example, if you look at a choice between defense and education spending, in the very constrained political environment where we have sequestration capps that equally apply to defense and nondefense spending, one dollar for one is one dollar less for the other. the fact is we have

sequestration because there's never been either the political will or the right answer that helps people take on entitlements which are almost entirely domestic spending. so when you really look at it, when you hear senator cotton say that anywhere from 12% to 17% of -- from this year to the next five years is consumed by defense spending, that means 80% plus is on nondefense spending. overwhelmingly on the increasing share that goes to entitlements. so it really doesn't need to be a one for one trade-off. it's really that we have one part that's somewhat out of control and another that has been decreasing sharply. that if you look at the overseas contingency operation budget which mckenzie just described quite well that peaked at almost $200 billion in re terms. -- in real terms. now we're talking about whether it should be $50 billion as the president proposed and some other people proposed or slightly more. so 75% there, sort of reaping that dividend of not having troops on the ground in iraq and afghanistan. and then the base budget has fallen by 15% in real dollars as well. so these are cuts across the board.

now, when it comes to driving the deficit it's really the same story a lot of the time with entitlements. those are the areas where you're getting more and more spending year after year. they're not brought under control by the bca. so senator cotton mentioned we were at 5% of gdp in the reagan era in defense spending. if you go back further, it was in the 9% or 10% range in the 1950s, the early cold war norm. it gradually began to come down on a glide path. we probably got close with supplemental dollars for the wars in iraq and afghanistan to 5% again. but now we are headed down to a place where it's less than 4% and maybe even going down to less than 3% if the current projections hold. so that's really a remarkable decrease historically. and if you think there are three basic ways to look at the size of the defense budget, one is as a percentage of gdp, of our national income. what that tells us is given the size of our economy, can we afford this much? so when you see that at one point spending 10%, now spending under 4%, that tells us the overall growth of our economy has far outpaced the change in

defense spending which actually sort of followed a up and down shape over the years and there haven't been dramatic gains whereas our economy has grown tremendously. the way of looking at things is second a percentage of every federal dollar, how many cents spent on defense. so again, the sort of norm in the early days of the cold war was almost half the entire federal budget, something utterly unthinkable today. that would be like spending $1.7 trillion every year on defense. no one's proposing that. what the panel wants is a third of that. you'd have a little more in you added in oco. you've seen that constant downward trend, why? because domestic spending, entitlements, has moved and expanded to fill that gap tremendously. so i think it's really, when i talk to people, i try to add these historical context factors. because sometimes they understand it's really a different question we should be looking at. it's not how do we trade one for the other? it's how do we get the really out-of-control spending areas under control so we can control to spend what we need on certain

areas of domestic spending we value, whether it's more scientific research or education, and of course on security spending as well. i think i'll leave it there and turn it over to dr. holtseke who can tell us a lot about the broader economic context. dr. thank you. : i want to thank fpi for joining with aaf for this prevent and i appreciate the chance to be here. the larger budgetary dynamics have been in play for some time. it has been utterly foreseeable that the baby boom generation would age one year at a time every year. and that ultimately we would get to the point as we are now where we get 10,000 new beneficiaries every day flowing into social security, flowing into medicare, where we see rising spending on medicare, medicaid, the affordable care act, social security, the other components of entitlements, so-called mandatory spending, which are driving two things. number one, they are driving an enormous amount of projected debt in the united states. if you roll the clock forward ten years on auto pilot as the

cbo projections do, we find we're running a trillion-dollar deficit. of that, $800 billion is interest on previous borrowing. we as a nation are getting to the point where we're taking on a new credit card to pay off the interest on the old credit card. an extraordinarily dangerous financial position for the u.s. the second thing it's doing is driving out of the budget the kinds of things the founders would have recognized as the role of government. it's driving out investments in infrastructure and research on the nondefense side. it's driving out spending on national security. and those budgetary dynamics have been predictable and they have been in play for quite some time and they're really starting to show up right now. now, faced with budgetary crisis, congress did what it often does which says, how do we -- how did we solve this last time? last time was the mid to late '90s. and the quote solution was, put caps on defense and nondefense spending. don't touch the entitlement programs. and pray that things break your

way. well, the problem is that unlike 20 years ago, the baby boom is not 20 years from retirement it's here, it's retiring now and those spending demands on the mandatory side are going up. we're not going to solve the problem. number two, ultimately we solved it with pretending that we had a peace dividend with the fall of the soviet union that turned out to be illusory. we weren't as safe as we thought. we went on a procurement holiday for half a decade which we had to make up in the early 2000s. the budgetary gains were at significant defense losses. and then third, ultimately we balanced the budget by having a dotcom bubble. we've had enough bubbles, we don't need to try this again, we need a new strategy. unfortunately they've codified the basic problem in the bca. it's attacking the wrong part of budget and it's put these caps enforced by sequesters in play. the ultimate solution as david has pointed out is the trade. we need to spend more on defense and nondefense discretionary

spending and take money out of mandatory spending to do it. that's the fundamental budgetary trade. needs to be undertaken every year. and in increasingly large amounts. that solves the debt problem which former admiral mullen identified as our number one national security threat. that solves the ability to develop the investments and readiness and repry and -- and weaponry and strategic capabilities that we need on the defense side. so it is unusual for me as the budget guy to be the ray of optimism in an event. so let me try. this is a different moment than a lot of the moments i've witnessed on this discussion. in the past, the only people who are ever in favor of entitlement reform are people like me. budget geeks who drew lines and said, that's going to be bad. everyone else said, no, we don't want to touch -- we wanted me -- medicare as we know it, we want social security as we know it. and now this is changing.

it is increasingly recognized that, number one, we've done all this but we don't have good programs. the social security program stays solvent, in quotes, by promising to cut benefits 25% across the board in 20 years. disgraceful way to run a pension program. the medicare program runs a cash flow deficit of $300 billion every year and doesn't deliver high-quality care to our seniors. there's a recognition these programs have to be better in their own right. it's not just the financial issue. and there's now advocates for changes to the entitlement programs. they are in the defense community and the nondefense community. i spoke recently to the nondefense discretionary coalition. it exists. it is the single-worst-named coalition in washington. they need a better name. but these are now advocates for entitlement reform. because there's the recognition we need to get this done. and so that's at the bottom up pressure politically from the grassroots. from the top down, anyone who runs for president in 2016, near as i can tell everyone's running. anyone here running? anyway. lots of people running. their advisers are going to tell them, look, you want to be

governing in 2024. if so, if we don't change something, you're the president overseeing the debt crisis and the defense readiness crisis. and it's highly unwise for a president to surprise people with big changes. so the '16 cycle is going to have to foreshadow the need to improve these programs and get the budget in order. that's top-down politics that have been missing recently. no leadership from the top. to make big changes. so i think there is a chance we can get this fixed. it's never simple or easy. it's always sort of complicated in the united states. but the recognition of these budgetary dynamics is here. and it's time to change the bca so we haven't codified the wrong policy and get the right policy in place. >> thanks very much. a bit of a ray of optimism at the end which is unusual. >> always go for an economist when you need some fun, right? >> it's true, it's true. let me start off with questions of my own and we'll turn to the audience for your questions here in a few minutes.

let me start with david. you outlined several different ways to conceive of the defense budget. percentage of gdp, share of the federal budget. another way the defense budget is often portrayed is within the context of global defense spending. critics of increased domestic u.s. defense spending would often point out that we spend more than any country in the world on defense. can you help provide context for u.s. defense spending by putting it within the context of global trends in defense spending? >> absolutely. glad to do so. so, you know, that number you hear is correct. we do spend more than the next seven, eight, nine countries combined. but there is important things to consider. usually people say, that must be evidence that we're spending too much. but you ask what is the role america has in the world? senator cotton hit this head on. we are the guarantor of stability when in the expansion of freedom to more people. if you look at how the world was

before 1945 when there was no single dominant power you could have a major systemic war that left vast destruction in its wake every 30, 40, 70 years, they kept occurring from napoleon, go back further to the mid 17th century, world wars i and ii. it hasn't been a sure thing but since 1945 there's been one more dominant power with a second super power beside it causing a lot of trouble for the firsttry -- first 40 years or so. but with one dominant one in place that could help secure the order as well as have an expansion of freedom because there had been a dramatic increase in the number of democracies. if we continue to see ourselves playing this role it has implications for defense. so how much does china spend on defense? we don't exactly know. relatively credible estimates, there's a swedish think tank the pentagon does some. people think the neighborhood of $180 billion. so around one-third of u.s. defense spending. but china doesn't think about spending in order to achieve global capability. -- global stability.

it's more about, this is how we can push the u.s. and its allies back in east asia near our shores, we're going to design an asymmetric strategy. therefore we have the burden of going to meet that strategy. we're going to be playing an away game. if it's march madness, the nfl you want to play a home game. in war it's better to play an away game, you don't like what's going to happen in your homeland if the war takes place there. the air force and navy cost money and they are what allow us to project power pretty much to any corner of the globe and have us deal with the crisis or a threat there. and of course, china's not the only region. whether it's iran and isis in the middle east, we are investing in the ability to project power there so we can deal with their issues. we are in the threats they present. if you look at what vladimir putin is doing, of course he only spends a fraction of what we do. it's not like the soviet union, which may have outspent us. the fact is, we have to look at the obligations of nato.

so it's really only the united states that has this global role. and so even if you add up the value of the next seven or eight or nine, however many other powers, it's not going to give you the right answer. that's not a way to arrive at what we need. you have to take a strategic approach which says, what are the threats we're facing to stability and freedom, what are the military force wet need to -- military forces that need to deal with those. one last note, it is worth observing that certain countries, china and russia especially, have increased their spending dramatically. in a decade it's been almost double, if not more. they were starting from a low if you go back further base. , the chinese have increased something like five or six-fold, the russians four-fold. it's disturbing and they're increasing their capability and it may mean that we need to spend more. ultimately the bigger question is how much power do they generate with that spending? it's about spending efficiently. finally there's the question how much bang are we getting for our buck? one of the pessimistic notes sorry to break up the optimism train, wife been getting less

bang for our buck in the defense department. some of it is the fact that we're a prosperous economy and you have to pay highly qualified personnel more to be part of an all-volunteer force so personnel costs ride over time. we have persistent rise in the cost of operations and maintain -- maintenance and of course we have had trouble with acquisition. so it's more of a complex strategic question. if someone wants to frame the debate and even senators, not senator cotton have done this said we're spending too much because we spend more than the next seven or eight powers combined. think about america's interests, not just about global dollar figures. >> thanks david. doug, you say this may be a different moment and we may have a chance to finally fix some of these problems. zooming in particularly on the fy16 budget resolution, it includes deficit-neutral reserve funds for defense. can you provide context in terms of these reserve funds? how have they been used historically? often they're included and not funded. is there any reason to believe

that this year may be different? doug: so it is such a joy to see people pay attention to the budget resolution. it never happens. so for those who don't follow this, and i recommend that that be everyone in this room, the budget resolution is not a law. it is passed as an agreement between the house and senate on how it will conduct budgetary operations for the year. it often includes, as it does this year, both an allocation for spending on defense. this adheres to the cap in the bca. and then other mechanisms should you wish to raise that allocation. and the mechanism in play this year is a deficit-neutral reserve fund. what that says in english is suppose they pass a defense appropriations bill that comes in above the allocation of $499 billion. then the budget chairman can stand up and say, i invoke the deficit-neutral reserve fund you can spend $525 billion as long as we get $26 billion in

offsets somewhere so it's deficit-neutral. so it allows the congress to break its own budget and in the process it avoids having a point of order against proceeding to the appropriations bill. so it's a procedural mechanism that gets taken out of the way allows you to go forward with the defense bill. those have been around a long time. when we passed the prescription drug bill in 2003, there was a reserve fund for $400 billion, budget chairman invoked it. all of this, it's important to remember, is very nice. but it doesn't change the law. the fundamental problem is we have a budget control act that says, no matter how much you appropriate, we are going to cut it back to 499 unless we change the budget control act. for that purpose the budget resolution sets the debate up but it doesn't solve the problem. we need to pass appropriations bills and pass changes to the budget control act that give greater funding. mckenzie: --

>> mckenzie picking up on this question, provided there is no change in the law, what are the consequences for these short-term fixes for our military and our pentagon. mckenzie: the first consequence is what's going to happen on the floor when there's a defense appropriations bill. not the budget debate this week or next week or however long it goes on. we've already seen in the recent past, boy, if anything is predictable it's these congresses. the last six years. and, well, i should actually -- it's already been outlined. they like to take ideas off the shelf from 20 years ago. so this group is a highly predictable one. what we've already seen in recent congresses are members banding together on the left and the right to strip oco money that wasn't requested by the pentagon. you've heard this line before. my good friends, colin and john, have written this story a thousand times.

the pentagon didn't ask for it and therefore, it becomes a justifiably -- discussion about, does that need more money? if not, we're going to vote did -- votes to take it out. chris van hollen, congressman from maryland, rick mulvaney are two that have banded together many types repeatedly to do this. there was an amendment, it was a total account of $5 billion, they took $3.5 billion out congress agreed to it. that's exactly what's going to happen this time. $39 billion in extra oco money is an allowable amount. it's the ceiling. that's not what's going to get appropriated for defense. and there will be fair and legitimate arguments to take a lot of that money away. congress itself said no to f-22s in the emergency spending bill several years ago. the pentagon is going -- the leadership in the services is going to want to put a lot of hardware and equipment and modernization programs into the oco and that's not going to be a voting majority, supportable proposition by most members of congress. and so first problem is what's

going to happen on the floor? the pentagon's going to lose a lot of this money. once it starts losing a lot of money it thinks it might be able to get it's going to take us back to the last four years of all of this wild swing in defense planning, that there's no fiscal certainty for the department, and that alone is one of the most inefficient things you can do for pentagon program managers. what happens, there's a whole source of internal bureaucratic decision-making that again is justifiable but incredibly expensive and wasteful for taxpayers. if they're watching this a -- this debate and don't know what's going to happen, program managers hoard their cash. they understand that there's the likelihood they're going to have to cough up some of it at the end of the year, whether it is sequestration, or a bill coming in at caps or continuing resolution that starts the fiscal year. whatever it is, however it turns out, it's definitely not going to be the number we're talking about this week for defense. it will be a number lower. that's a fact. that's a guarantee. if you're a betting person, go to vegas, you can tell them mckenzie sent you. it will be a number lower than what's being debated this week. when that number is finally

appropriated and the president signs it into law, whenever that is, it could be 2016 when that happens, it will be a number lower than the total amount we're talking about this week. so that creates all these wild inefficiencies in program managing. contracts are held in abeyance awards are delayed or deferred or simply not granted altogether in anticipation of the chaos and uncertainty on capitol hill that's a second consequence. then the third is what the money can buy. even when the money is approved you can buy readiness but there's a debate how much more readiness certain components and certain services need at certain times, particularly right now. for the readiness crisis broadly speaking in the department there are pockets of incredibly high readiness at d.o.g. and that's good, great, i don't think anybody has a problem with that. you can only pour so much money into readiness over that overspending money and wasting it. some -- most of the readiness challenges right now are in large-scale maneuver, they're in longer-term readiness. some of it is a function of

time, not dollars. so certain army brigade level training can't get through the national training center. we don't have another national training center, you're not going to build one, more money isn't going to solve that problem. so this -- the third consequence is what you can buy with that money and what is needed is modernization. and some readiness. and what you can't spend a lot of this money on is modernization. >> let me sneak in one more question for doug before opening it up to the audience. you spoke about the context -- how defense spending might play a role in the 2016 presidential -- fixing these long-term problems might play a role in the 2016 presidential conversation. one of the pieces of doug's bio i neglected to mention is he served as economic and domestic policy director for john mccain's 2008 presidential campaign. so asking more of a political question to close out my questions here. how do you speculate not just

fixing these long-term problems and the question of entitlement looking forward to 2024, but how might the conversation around sequestration and defense spending issues play out among the 2016 candidates? on both sides of the aisle. doug: so my reasoning on this comes from really two pieces. number one, it's always better to figure out what people have to do than what they want to do. and we have to fix this. the numbers are overwhelming in terms of the accumulation of debt, the financial instability of the federal budget, if you stay on auto pilot another eight to ten years. so politicians have correctly stayed away from these programs because everyone's seen the ads about granny getting thrown off the cliff and she's quite durable, she comes back every election. but, you know, that's got to change. and anyone who does the arithmetic knows that and knows it's a very bad idea to surprise people with big changes. so they're going to have to

start laying the groundwork. i don't think you're going to see big detailed proposals in '16. as you move '16 to '18 to '20 you are going to see increasingly the acknowledgement that medicare as we know it is not serving our seniors, we need to fix it and make it more sustainable, social security all of those things. the second piece is if you look at the polling on the ground right now, people are scared about our security. period. i mean, the american public understands this is a dangerous world and if you sort of ask all the questions about -- that the fiscal fiscal talk saver, about controlling spending, getting deficits down, they 100% agree with that. asked -- ask them questions with securing national interests around the globe, they support all of that. if you pit them head-to-head the defense hawks beat the fiscal hawks on the ground, in the polling. presidential candidates are going to know this. they're going to poll all of the time. they're going to acknowledge the

fiscal problem but they are going to talk about the need for stronger defense budget and better national security. >> we've got about 30 minutes to take some of your questions. three quick advisory points, please wait for the microphone to reach you. identify yourself before acting -- asking a question and be sure that it is in fact a question. we'll start out just in the front row here. >> so i don't think there's anybody around here who would disagree that something has to be done. so far, nothing really has been. as you guys look over the next couple of months, what are the

appropriators going to do. >> they've been broadcasting it loud and clear. they are going to appropriate for cats. $499 billion for the base budget. that is a certainty. the author risers are a different story. that would be interesting. i believe both chairmen are leaning towards marking towards the president's budget request of $535 billion. now, the question is so what will they do with occo. it seems as if both chambers are going to go over new fund required, which is troubling for other reasons because this is pretty much all debt finance anyway, when you're talking emergency spending money. half of it they were trying to

make offset allowable is going to be taken away. so they are up to $90 billion for supplemental for the emergency department. 51 billion the president requested for okinawa was too low anyway. just last time around, it was summertime saying hey, things have changed. ebola, isis, et cetera. what is the new number? the first question is how much is actually needed. it is probably in the 60's range. i think that money will easily flow to the department.

the other question is, so then you have an extra 25-30,000,000,000 that you can play with that is allowable for the contingency operations account. the question is what does pentagon leadership do? that is something being discussed by civilian leadership right now. it is possible that the pentagon leadership says they do not want this money. that will change everything. congress is going to -- they are going to say that is not what we want. that will keep the number of lower. it would keep it closer to 70 billion. i don't think we will get near 90 billion. >> to add a >> note. one of the attractive things in theory about adding oak of money

is that you do not have to do a trade of one to one. you have the advantage, oh seo -- oco is not affected. there are ways where everyone could agree to go along. the appropriators and the administration can be used for anything. once you get away from the people who need to put together a budget resolution that tallies in the right way, you'll have problems. mckenzie already explained quite well. if the pentagon says they don't need it, it's especially problematic. i think there is the potential that omc -- omb might not want

to. if the omb does not agree that something is contingency operation, they do not have to go along with it. that may be a bargaining tactic. obviously the administration does not want it to be a way to fuss up the defense budget. while they cannot did in the way of republican majorities passing budget resolutions there will be point for the democrats have their say. >> sorry rachel, i left that point out. i believe the president is going to do that. i think we will start the fiscal year with a resolution. >> the outlines are clear.

the tools are there to get it done. you will spend more in the base budget on defense and he will exceed the cap's. the price will be more nondefense spending, the president will demand it democrats will demand it. that is no big deal in the senate because all that you have if you exceed the allocations is a six seat boat. -- vote. the deficits are dealt with by reducing mandatory spending. they have included reconciliation instructions to all of the committees at mental amounts. they littered it with the capabilities to get mandatory spending reductions to offset. reconciliation is only useful if the president wants to sign. otherwise it is a long way to

get a veto. that means you have to get a deal. you have to get presidential leadership that says, i want this, you want that, i will sign the offset to make sure that we retain our deal. we have not seen this white house successfully pull that off in any setting. it is on the table. that is the right policy argument. >> my concern is that the pentagon does not seem to be getting up on the future of swarmed warfare. imagine hundreds of drones instead of an f 22. imagine if we lose an aircraft carrier. what can the congressional budgeteers do to tell the

pentagon, to take a hard look at buying millennium falcons instead of a death star. >> it is definitely part of the discussion and debate in the policy making community. numbers matter. it is not just about the extraordinary capability the u.s. could bring. normally would people talk about capacity -- it could apply across the fleet. there is an appreciation and that is the kind of thinking that is required. these budgets do not generally supported. if you look at how, starting back in 2013, not just the budget control act cuts, but

sequestration that has hit the pentagon. the hardest hit is not just modernization, but procurement. we typically think of the health ---profile programs and they had taken reductions. really it is the 60% of that spending on the little things. it is the death by a thousand cuts story. as this debate continues pentagon leadership has already said the reductions that will happen will come out of the same account and will happen in a similar way as his happened in recent years.

right now it is important we have a nice -- a discussion. there will not be action until there is more fiscal certainty. >> i would add part of the question is built around, is it possible for a congress to exercise that kind of leadership. in general, i am not especially optimistic. the pentagon is larger. i don't think congress is that inclined to challenge fundamentally the kind of strategy and technology the defense department proposes. the most effective channel for reform might be the schoolhouse, or defense intellectual community. congress does clearly say we do not like certain things, but it

is too early to cut the a-10. what is an aircraft carrier was sunk with that require a war with china for that to happen? there is certainly a possibility for unexpected events. >> i'm not a defense expert. they don't want to change it. that is a common dynamic. >> other questions, yes sir. >> i have a question about

foreign propaganda. i still has videos -- isil has videos where they are executing russian intelligence agents. i believe that is for western media. it is not for those particular countries. my question is given russians stage in syria, they sponsored the regime. once they took over, they became a superpower. they have better terms of going through the turkish straits than we do. the syrian ports are the first to come because they can expand their navy. i think the shooting down of the malaysian air could be an offense -- article five offense.

the afghanistan war -- how do you maintain a balance and dispassionately plan your defense budget when there is propaganda designed to provoke rage and passion. >> a lot of the propaganda is targeting the west. i'm not sure how much of an impact it has on her defense spending. some people say the decision to execute american journalist has led to us taking more action. on the other hand, i think there is a strong case we were ignoring the threat and they did us the favor to alert the american public of just how

grave it was. this was a group who helps no limits. -- has no limits. in terms of balancing between regions, the administration proposed a few years ago the pivots to asia. they wanted to be leave europe was a place spreading security. we could afford to do less in the middle east and put more into asia. part of the challenge is we cannot do this trade-off, they each have the potential to be threats. you have to have a force structure to deal with threats.

that doesn't mean the budget would go higher, not by historic levels. it would not be as high as reagan levels. if we went up to the low 20's, we could handle all of these. i am more concerned about having our balance distorted by propaganda. except the chinese. they are having the opposite propaganda. the other regions tend to have propaganda that exaggerates the threat. >> i appreciate your point about emotional reactions and congressional reactions. this town has become too good at managing crises and i don't think we should expect much

different for the next two years. senator cotton mentioned there will come a moment when you will spend more. when i would say is, there is turning on defense regardless of threat. a couple of things, one is that there is a conventional wisdom that i can deal with anything. it has to deal with what it's got. as that happens, we are dialing down the strategy. we are dialing down our objectives globally which is its own challenge.

i don't see a threat that could cause a windfall in defense spending. this is a discussion for beyond 2016. when it is time to rebuild, if that is what is agreed upon where do we put those investments. washington does not have a good proven track record, particularly in response to crisis. i don't want a dni. i don't want a new department of homeland security. there are so many things wrong with the dollars we poured into security after 9/11. >> next question to here from jordan? >> thank you, naval special operations headquarters.

my question is larger and broader. our partners and allies watch our budget debates. they actively watch our congressional engagement. and they see the dysfunction that we portray. on the flip side, we have our leaders criticizing partners and allies that they don't spend enough or don't spnd accurately. -- spend accurately. i guess my question would be what advice can you give partners not only to spend more, but how do they spend better. i think that's the biggest question. it's not just pouring more dollars into it. but what should those dollars go towards. >> sure, that's a fair point. we have had defense secretaries from both sides. i don't think the message was sinking in and tell now when our friends and partners would turp -- charge the hill and we're not

, there. so, really, it's only a function of reality. we could talk until we're blue in the face. our smaller military really, truly can't do anything that has promised in the past. in some cases, probably overpromised. now, it's obviously a whole worrisome problem as an american for other reasons. but it is really, truly what it is. we have declining capacity and capability and technological security. -- technological superiority. so it is really not a function of naked self interest. i think we have to have those adult conversations. it is completely unaffordable. david and i will not see social security. you will not either. let's have the adult conversation. >> i'm probably willing to think i'll get half. >> no.

>> oh, question right here. >> good morning, everyone. my name is joann chase. i wanted to thank every member of this panel. you mentioned something about no matter what the interest we had an increasing the budget, the will was not there within our congress. is that correct? >> we will? joann: the will. >> as we've seen recent threats emerge, like the annexation of crimea, none of those have been -- no one has made the case in for more defense spending in reaction to the world of rising threats.

they are not asking for significant increases. joann: is there anything we can do? can we make a difference? are we just have any conversations so we can educate people for the next administration? is there something you can do right now? >> that is the right question. i am going to let you guys take the 1st avenue at that. >> i was going to say what is blocking greater defense spending. obviously, democrats control the white house. if you look -- listen to many hearings, you hear people from both parties denounced sequestration and its limits again and again. if the armed service committee

or the entire house and senate, they would be fired up to do something. they would hit a roadblock because when democratic members of those committees speak what they cannot say is they need to have that one for one. to bring the whole party on board you need another dollar of nondefense. the security threat is so acute but yet the party as a whole is not the place to be comfortable with that trade-off. with sequestration and its problems a fair number of people on the republican side say this is the rare case where we brought down federal spending by $100 billion a year. even if we come to a deal, it is inefficient. only half of the increase can

ever go to defense. even if they are willing on either side, the rillettes -- related conditions don't want to go along. you can imagine a major tilt in either direction. if republicans had all of the cards, they controlled the white house, senate, and the house they could push through entitlement reforms in order to generate money for other concerns. without one side having a dominant hand, the condition imposed prevents them from doing that much. >> thank you. >> i am more optimistic.

>> because you are getting social security. >> true. post 2016, there is the chance to fundamentally make changes. in terms of incremental funding of the defense department's, i think there is more will then these folks believe. the president came and above the cap's. he has laid down a marker. yes there will be people who hate that, that is the nature of deals. deals are not clean victories. they are about getting half of what people want. the key is going to be what are the offsets. there should be an offset in the mandatory counsel.

if the president hangs the republicans out to dry, nothing gets done. if the president does what the president should do to get the right policy, there is a chance to get a little deal and 16. ryan murray -- there will be it makes involved here as well. it will be tiny amounts of money and they will decide to stop this nonsense into something bigger. i think there is a chance for that dynamic to prevail. >> i believe that is where they are. that is incredibly true. >> it might not be incredibly true. >> that is how it will ultimately happen. i never discounted politics here.

my colleague says when a politician says something three times they own it. they want to make an issue. congress is human beings. they will deal with whatever is the next crisis at the front door. they will not fix the leaking roof if the car has a flat tire. we are talking about the leaking roof here. it is the squeaky wheel metaphor , that will get the grease. if they do not think this is a priority those who spend time with both branches. it will not get the attention it deserves. i keep reading headlines with shock and all -- awe that nancy

pelosi is working for a permanent dock six repeal. -- doc fix repeal. every time the deal comes through they continue to pass bills that never make it a reality. there seems to be a will and a way when it comes to a big three entitlement program. they have shown they can do stuff. he has shown they can find the money, so this clearly is not a priority. >> i want to point out they went 17 times so there is a slow learning curve.

>> thornberry spoke this morning on acquisition reform. the post had an article on it this weekend. i'm curious what you think about thornberry's reforms and their possibilities? >> i was so busy preparing for this i have not seen the article. thornberry previewed what he was going to do in acquisition. he talked about the fact that it will be bite-size. i think is a good thing. usually when you add more people, dollars, bodies it means more reform problems.

i don't know the specifics of the proposal, but i think his approach is unwinding. i am more interested in what you are going to take away. >> not in a position to comment -- comment on expensive the -- comment on the specifics. one thing you often hear from both sides whenever you talk about the need is how can you asked for a single dollar when so much is being wasted. intel you exterminate the waste, how can you asked for more? -- until you exterminate the waste, how can you asked -- ask for more.

procurement has the greatest trouble. in some ways the jury is still out on the reform. they tend not to generate big ticket savings in the near term. even if you had savings, it may take a long time to even achieve those savings. there is an. where so much intellectual effort has been invested, it is more of a cultural problem. it is about the leaders who can force someone to be accountable. you may be familiar with senator mccain how much was this over budget? and he will say, how many people lost their jobs? the answer will always be none.

it is hard to find a single point of responsibility. you could not say there was even if we did these reforms as well as we could, we would not generate what was necessary to make up the difference between sequestration and a national defense level budgets. >> i never wanted to learn about acquisition reform. the thing i would stress is the pentagon budget has a same problem the united states budget has on a smaller scale. it has a retirement problem on health care problem and there is not enough reform to compensate for those things crowding out real military capability. there has been a panel to propose reforms.

that is important and that's the reform we do see move forward if you want to clear out some room in the budget. >> i agree with that. when we think about money going to troops, there's no way you can compensate them for their restrictions in their lives clean on active duty or the risks they take. there is never a right answer. we need some way to control the cost growth. proper compensation is muslim at other parts of the budget. -- muscling out other parts of the budget. the benefits are important in

terms of pension, health, other things. she is a mom with a son going to annapolis. she is more worried about my son having all the right equipment and things they need to encompass the mission and survive it --. it is politically different. as a huge amount of pressure from the will who don't want the benefits cut. the line you hear is where we going to balance the budget on the backs of veterans for we take on entitlements for people who haven't served the country? >> we will even on that note. panel for a wonderful discussion. [applause]

>> the senate confirmation for sally yates. your calls and comments on "washington journal." on "newsmakers," they discuss the roles in vetting presidential candidates. they will talk about preparations for 2016. they will discuss issues and

groups to watch in their states. today on c-span. tonight on "q&a," eric larson on his new book. >> the story gets complicated when that question arrives, what happened to the lusitania? why was it allowed to enter the sea without escort, without the morning the could of provided to the captain but was not? this is led to some very interesting speculation about was the ship set up for attack by churchill or someone? it's interesting. i found no smoking memo. i would have found one if it existed.

there was nothing from churchill or somebody else saying let's let the lusitania go into the sea. nothing like that exists. >> tonight at 8:00 on c-span. othe senate judiciary committee held a hearing at tuesday on the nomination of sally yates to be the next deputy attorney general. she serves as the acting deputy ag. she was nominated january 8. questions included mandatory sentencing, human sex trafficking, countering violent extremism. this is just under two hours.