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recommendations to cut $100 billion a year from defense. >> welcome to "this weekinn defense news." i'm vago muradian. many military members believe in smart power. will arepublicann house agree. a top consultant on how companies can weather a leaner defense spending future. first the national debt reduction commission chaired by alan symptom and erskine bowles issued bombshell draft recommend sayings to save $400 billion annually starting in 2015, a quarter of which would come from defense spending by applying secretary gates planned efficiency savings to debt reduction instead of new weapons freezing military pay for three years, cutting weapons procurement by 15% and research and development by 10%.

terminating programs like the v 22 off spray tilt rotor, marine fighting vehicle, army ground combat vehicle and fighting the joint stryker program. here is todd harrison for the renne ser for budgetary assessment and gordon adams from the simpson center. todd, what is the significance. >> what the commission did, the two cochairs came out with a draft report where they make a number of recommendations. they intended this as a starting point for discussion. if you look at what they did beyond defense spending, about $400 billion in total savings in the year 2015 to rehas the deaf -- help reduce the deficit. so, they spread it around. >> tested entitlements, social security, defense spending and

discretionary spending that is not defense. fairly equitable package. most of the things on discussion or highly discussible. they are not wild whacky off the wall options. some are difficult but not off the wall. >> gordon, what is next. this commission was set up to float the ideas. it then goes to a panel and congress votes it up and down. >> not that simple. this as todd says is something the panel has to discussion. it's not a slam dunk that the panel will endorse it. they have to get 14 of 18 votes to put anything in the panel's name. it's not the only game in town. next week the bipartisan policy center, will issue a report dealing with many of the same issues covering some of the same ground and some differences in the way the report will deal with it. >> how long is the processing to take. >> it could take many months. they will issue the final report if they get a consensus by december 1st. there will be many months of debate if congress choses to act on it at all.

>> what are some of the complete nonstarters? there are some that say freezing military pay is a nonstarter. >> i think that is one of them. also some of the hot button issues like addressing the cost of military health care and how much military retirees pay for health care, congress said no. >> what will make it interesting, everybody knows we have to solve the problem. you can't do it unless all the pieces are on the table. you can't get a deal unless all the pieces are on the table. everybody in the bowls erskine piece will do this, say everybody has to give something at the office in order for a deal to be agreed to. that may put things that look too hard back on the table because they are part of a deal. >> the only way you will make meaningful progress is if everyone is equally happy with what you propose. >> what kind of impact on defense. folks are saving the 100

billion in the pentagon to by new weapons. >> if the v 22 and f 35 are two big pieces that end up at the end of the day and congress is willing to vote it, a hard obstacle, that will have a serious impact on the companies involved in the program. no question about it. historically you have to keep in mind when we bring down defense, it's for structure and procurement that pat price. it's always been true. >> todd, the last 30 seconds that we have left, do we end up making short-term cuts that give us long-term cuts. drawing basis out of europe, military construction goes through the roof. >> we have weapons systems that are just getting older and out of date. it's costing more and more to maintain the systems every year. if we don't recapitalize them now, we will have a larger bill in the future. >> if you take it out of the force structure, then you get real savings. one of the things you will see

is really mission orientation. what you do with the future of the force structure. >> that is all the time we have for today. thanks very much. coming up, selling power to a gop house. must do to

reduce defense spending. first, 80% of military officers think it's important for the united states to invest in nonmilitary tools such as diplomacy, food assistance, education and economic

development, according to the u.s. global leadership coalition, a nonpartisan lobbying group focused on advancing smart power as a means of u.s. international influence. will they be able to convince a new congress to set aside more funds to the state department, for example? i'm joined by former comirl james loy and retired air force lieutenant general harry ratigee, they are both members of the leadership coalition national security advisory council. welcome to the show. >> thank you. >> welcome back in your case, admiral. >> thank you. >> the poll results found an overwhelming number in your survey, thought it was a great idea. there was difficulty in selling it to a democratically-controlled congress. doesn't your challenge, admiral, become harder with the republican congress? it's historically more skeptical and stronger on deficit control at this point? >> i don't know i would make the distinction between the republican and democratic congress though the return in the house is as evidence as you can possibly be.

i think the challenge will be in the overall pressure downward on the budget to allow the numbers to be revealed that we would like to see revealed, for example, the foreign aid budget. the last numbers we saw coming out of both the senate and house, before the election were somewhere around $56 billion. would probably be the compromise in the final bill. the president had asked for $58 billion, now you hear thoughts on the wire about let's return to 2008 levels. that is dramatically less than that. even gaining the support that we need from the existing congressmen that are returning, plus the education process associated with all the new players in town. it's going to make it a pretty interesting challenge the next couple of months. >> do you think your job will get harder? will they be somewhat more skeptical? >> i'm not sure i would offer skepticism as the word but i would say our job is going to get a little more difficult and we have to put our -- keep our feet to the ground and be

willing to do the education effort that is necessary. >> general, there are -- the amount of folks who are backing this as an idea, senior military leadership, retired senior officers like yourself as well as combat troops say it's a great idea. why is it such a hard sell? >> i think there's misunderstanding at times but i think most military individuals who have had the opportunity of serving our nation understand that there's really a balance that is needed between defense diplomacy and development operations. that's why i think our survey shows that so many of the american military, both retired and active duty support that type of a concept. i think it's very important that with the bipartisan support we've seen for our international funding over the last years, that we have the opportunity to continue that and have a working relationship with this incoming congress and be able to tell our stories, because the stories are the

things that quite often are not well known but i think really drive home the point of how important this is. >> have you had a chance to talk to incoming members and brief them? >> we have not had briefing opportunities yet but it's evident in the campaign end there's those that have been identified as being supporters and we'll certainly go there as a starting point. >> to help you? >> to help breed the process elsewhere in the committee structure. interestingly, the committee structure on the house side of course is going to turn over dramatically with all the chairs turning over and all the rankings turning over. there will be new players in there as well as just people changing positions with respect to the leadership of committees, subcommittees as well as congress overall. my sense is that the notion of u.s. influence around the world has to almost be a generational rededication to the principles that make america, america. as long as we're able to get those kinds of conceptual levels across, then the

difficulties in the trenches of actually plowing through and getting things done and votes recorded will come along. >> what is going to happen to the administration's request, $3.2 billion requested for afghanistan. it looks like it will be a smaller number. what is going to happen? are we make to make that up in this congress? >> we're hoping to. i think we all realize with our smart power operations and opportunities that it's both critical and cost-effective for the long term national security for our nation. >> it says secretary gates said we spent a lot of time fighting but not enough time winning the peace. >> ex what will separate

the wars in iraq and afghanistan drove defense spending to record levels. now belts are tightening. what is it going to take to survive and thrive in an age

tom, welcome to the show. i would like to start off by asking you, defense spending, the administration says defense spending is going to remain flat. there is an expectation of leaner times ahead. companies are constricting and there are some people who say deficit reduction starts to pick up in a couple of years, defense spending is going to drop. what is your sort of near mid long-term prognosis for defense? >> thanks for having us on the show. we are for leaner times. in the united states, we are seeing a reduction. across the world and the free world at least, we are seeing a reduction of up to 8% as we now know with the strategic defense review in england. that means that there's not enough work to go around and in that particular case, we worry about industrial policy around saving the kind of technology invasion, the staff, the skill sets that are out there so that it we can live to get to the other side of this. what that means is that you're going to find some consolidation activity. you're going to see companies

needing to grow in other nontraditional areas not in the united states and adjacent technologies. >> where are you going to be seeing the growth? obviously there are going to be winners and losers in all of this. >> the growth is going to come from three places. one is through the consolidation effort. there will be an effort to scale up and beef up for the smaller companies. so there will be certainly a consolidation in tier one and tier two arena. the bigger companies are going to need to fill the gaps in the new areas. we are seeing that already with the addition of cyber capability by many companies. you'll also see much effort in selling across the world. particularly in the bright spots of the gulf coast countries. we hear about a great big sale in saudi arabia. >> $60 billion. >> and you will probably see another $10 billion in india. there's $80 billion expected to be spent over the next five

years in india. and brazil. you'll see a lot of foreign military sales. the third area is going to be in mergers and acquisitions. so i think you'll see a lot of activity there. >> i know that you guys do some advising on this, but what kind of transactions do you expect to be seeing over the coming years? because the megadeals, nobody has expectation of the merging and the government does put a premium on competition. what deals are we going to see? >> i think you are seeing a 400% increase in the deals that have been announced and completed. year to date compared to last year. that is a big deal. that's an inflection point that says the wave is coming. there's not enough work to go around, so there's going to be consolidation and as i mentioned, the big firms are going to look for gap fillers to grow. frankly for the last 18 months, revenue and profits have been flat and these companies need to grow and we're going to see

that happen. the kind of deals that are happening now will be a lot of the smaller companies around washington and in the invasion labs across silicon valley and other places that are creating the invasions that will be tomorrow's iconic capability in weaponly. that's going to be in precision strike. it's going to be all kinds of things around lasers and all kinds of things around directed energy. it's also going to be the next generation of intelligence surveillance and reconnaissance that can pinpoint where trouble is and watch it create the kind of software to recognize patterns and then it will also be the strike capability to keep people out of harm's way. >> what do you think are going to be the base characteristics that are going to define the winners and losers? >> those that create premiums through invasion. this is an industry that created and maybe defines the word invasion over the last 106 years, since the wright brothers first flew. if you think about it, this is the industry that created gps, which has been a game changer in many different ways both

consumer as well as in the military. as well as lasers and put a man on the moon and essentially has helped us reduce the casualties in warfare. in afghanistan or iraq, 4,000 people were killed in the u.s. army or the services, but if you look back in the prior generation, we have reduced the casualty rate some tenfold over because of the invasion that has come out of this industry. we expect to see more of that. >> let's look a little bit on the efficiency drive. you know, everybody -- the administration says they don't want to put pressure on profits. they want to increase industry profits in some cases. but overhead is under pressure by companies. it is going to be a very tough environment as companies constrict spending. you guys are a major consultant to industry. how do you make sure you grow in an environment like that? >> our clients are asking us to do things for them to create value. one of those is how to grow.

so in all those areas we talked about, whether it be moving into adjacent markets or to help with acquisitions or help them strait strategy. it's not well known, but over the last 15 years, they have increased their profit per employee 103% after inflation. so they have done a very good job of becoming more efficient and reducing their overhead. now there have been reports widely held out there notions that perhaps after eight years of pentagon growth as a secretary says, it's time to reduce overhead and reduce the spend. eight years of growth from something on the order of 60% growth in the budget, there's probably opportunities there as a secretary has said. >> let's talk about that. one of the things you guys specialize in is advising companies on how to become more efficient.

you have seen what the pentagon unveiled. what's your view of the pentagon's efficiency moves and what are things you would add and other ways you would add to become more efficient? >> i'm very hopeful that the 23 efficiency initiatives that have been announced in the new policy that came out recently are the right ones. they talk about simplifying, they talk about weapons programs that are shorter in duration. lessening the change requirements. more collaborative approaches, working with contractors so there's alignment of goals so the best value is produced for the money that is spent. i think that i probably wouldn't add too much more than what we have out there. the 23 initiatives. what i would say is that we haven't seen the results of that yet and it will take time. very hopeful -- the acquisition reform act of 2009, plus the new efficiency initiative for

the $100 billion of costs reduction, or really cost reallocation, because we are expecting to see a 1 to 2 percent above inflation rate of improvement and we arnk their w through on what is going to be acceptable and what is not going to be acceptable. do you think the pentagon is going to sit with pieces in front of them and start mapping out what they want to see and where they want to see the industry going as opposed the industry opposing things and having to say no. >> that's a collaborative question as well as a collaborative answer process. it's not clear that we can afford to have two navy shipyards in two different companies. both shipping back and forth, the submarine holes to make the one virginia class submarine. i'm not sure there's enough work to go around to support four or five different fighter aircraft lines around the world. so you use that by proxy, the

nation probably does want to have some core capabilities and it will take a combination of industry working with government to create a policy to protect some of that industrial cape bilityd. very excited about secretary lambert's abilities and his initiatives now to look very much at industrial policy to see what it is that the united states needs to have to get through to the other side and support those industries. >> tom, thanks >> coming up [ male announcer ] washington, d.c. a landmark of liberty and opportunity. at bank of america, we live and work here, with thousands of employees and hundreds of branches and atms. every day, we're working to help set opportunity in motion... from supporting the arts and howard university to helping revitalize anacostia and downtown d.c. because when you're giving, lending, and investing in more communities across the country,

more opportunities happen. ♪ ♪ where'd you learn to do that so well. ♪ ♪ where'd you learn to do that so well. ♪

the new cadillac srx. the cadillac of crossovers. cadillac. the new standard of the world. for years protecting mounted soldiers from mines and improvised explosive devices meant novel armor. that may be changing. a new technology by darpa, vehicle maker am general and armor maker hardwire funnels explosive force out the top of a vehicle through a built-in chimney protecting the crew inside. in recent tests the 7-ton humvee survived the blast that larger vehicles must withstand and did so without losing tires, structural integrity or injuring test dummies. it's a potential game changer given the need to protect troops from roadside bombs,

shaping all combat vehicle programs. as the army shapes its armored vehicle plan it's time for a strategic pause to keep from developing new vehicles that could be outmoded before they enter service. case in point, army leaders are rushing ahead to develop a new ground combat vehicle and say it will be as heavy as needed to protect the troops inside. which could yield a vehicle so heavy it lacks agility and can't be transported quickly. the new air technology promises fewer future vehicles that are lighter than what is currently in vision. technology always changed history. it's now up to the army to seriously consider and more extensively test this new technology as it plans its own future. thank you for joining us for this "this week in defense news." i'm vago muradian. you can watch this program on-line at defensenewstv.com or you can e-mail me at vago@defensenews.com. i'll be back next week at the same time. until then, have a great week. [ female announcer ] why is travel these days

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