Testimony by Secretary Panetta and Gen. Dempsey Before the House Armed Services Committee

     REPRESENTATIVE HOWARD "BUCK" MCKEON (R-CA): The hearing will come to order.

     Before I begin, please let me welcome members of the public who are in attendance, but remind our audience that the committee will tolerate no disruptions of this proceeding. This includes standing, holding up signs, or yelling. If anyone disturbs these proceedings, we will have the Capitol Police escort you out immediately.

     The House Armed Services Committee meets to receive testimony on the future -- the committee will stand in recess until the Capitol Police escort the disruptive individuals out of the hearing room and restore order.

     [Recess.]

     REP. MCKEON: The House Armed Services Committee meets to receive testimony on the future of national defense and the U.S. military 10 years after 9/11: Perspectives of the Secretary of Defense, Leon Panetta, and Chairman of the Joint Chiefs of Staff General Martin Dempsey. This hearing is part of our ongoing series to evaluate lessons learned since 9/11, and to apply those lessons to decisions we will soon be making about the future of our force.

     As our series draws to a close, we've received perspectives of former military leaders from each of the services, former chairmen of the Armed Services Committee, as well as outside experts. Today, we will change direction, as we look to the viewpoints of our sitting secretary of defense and chairman of the Joint Chiefs of Staff.

     Our witnesses today have spent decades serving our nation. Thank you both for being with us and for your public service.

     As I continue to emphasize our successes in the global war on terror and in Iraq and Afghanistan, we appear to be lulling our nation into a false confidence of a September 10th mindset. Too many appear to believe that we can maintain a solid defense that is driven by budget choices, not strategic ones. While I agree that the military cannot be exempt from fiscal belt-tightening, we have to put this debt crisis into perspective if we're to find our way back into fiscal responsibility.

     Defense has contributed more than half of the deficit reduction measures taken to date. There are some in government who want to use the military to pay for the rest, to protect the sacred cow that is entitlement spending. Not only should that be a non-starter from a national security and economic perspective, but it should also be a non-starter from a moral perspective.  

     Consider that word, "entitlements." Well, entitlements imply that you're entitled to a certain benefit, and I can't think of anyone who has earned that right ahead of our troops. By volunteering to put their lives on the line for this country, they are entitled to the best training, equipment and leadership our nation can provide.

     But all this talk in Washington lately about dollars doesn't translate well into actual impacts on the force and the risk to our nation. Yesterday former chairman Duncan Hunter encouraged us all to answer these questions before we voted to cut any more from defense. Isn't our primary constitutional duty to defend our nation? Is the world suddenly safer today? Is the war against terrorism over?

     I hope our witnesses today can help us understand the ramifications of these possible cuts in relation to our force structure, as well as our ability to meet future needs of our national defense. How can we make sure that the Department of Defense is a good steward of the taxpayer's dollar without increasing risk to our armed forces? The U.S. military is the modern era's pillar of American strength and values. In these difficult economic times, we recognize the struggle to bring fiscal discipline to our nation, but it's imperative that we focus our fiscal restraint on the driver of the debt instead of the protector of our prosperity. 

     With that in mind, I look forward to hearing from our witnesses today.

     PR0TESTER: [Inaudible] -- military complex -- [inaudible] -- killing this country.

     REP. MCKEON: The committee will be in recess while the disrupter is removed.

     PROTESTER: [Inaudible]

     REP. MCKEON: Committee will be in order. And I yield now to the ranking member of the committee, Mr. Smith from Washington.

     REPRESENTATIVE ADAM SMITH (D-WA): Thank you, Mr. Chairman. I hope my comments will perhaps have a more calming effect on the audience. But I doubt it.

     Well, I thank you very much for having this hearing. We've had a series of hearings with a number of experts analyzing our national security needs and the budget threats that they face. But now, of course, we have the two people who are most in charge of making those decisions. It's a great honor to have the secretary of defense and chairman of the Joint chiefs of Staff here. They do not have an easy job as they try to wrestle with the budget challenges that we face.

     And I agree with the chairman that the cuts that we are facing in our Department of Defense budget do place national security issues at risk. We have difficult decisions to make to figure out how to accommodate even the cuts that have already been put in place for the next 10 years. There will be difficult challenges that are contained in that.

     And I think we should also point out, in addition to the sequestration threat -- and it's not just that sequestration would require further cuts in defense -- and, I should say, further cuts in all discretionary spending. And I am concerned about infrastructure and education and innovation and a number of other areas that face -- that have already been cut, number one, and number two, face the severe cuts of sequestration. 

     But I think it's really important the committee understands, the way that was crafted, it requires across-the-board cuts. If we go to sequestration, every line item in the defense budget -- and, frankly, every line item in all discretionary spending -- has to be cut by the exact same amount, which is, frankly, insane.

     I mean, it would get us to the point where we would have to build, like, one and a half aircraft carriers. Well, you really can't do that. So if we go to sequestration, it's not just the cuts, it's the crazy way it was written that would frankly make it impossible to budget.

     The second piece that I don't think that folks have a full understanding of is how devastating running a government on a continuing resolutions is. The gentlemen before us have to make budget decisions week in and week out when we can't pass appropriations bills, and they have to do it on a CR which doesn't really fund the government the same way as an appropriations bill. It continues it from last year, but it doesn't give clear guidance on what programs are to be continued. That costs us money and creates problems. So I would strongly urge this Congress to pass appropriations bills so that we can fund our government in a responsible and reasonable way. It's costing us money and leading to inefficiencies and making it more difficult, certainly at the Department of Defense, but throughout all discretionary spending, to do their job. So both of those things are threats.

     But as I've mentioned before with this committee, I'm also mindful of the budget challenges that we face. They are real. Our budget is 40 percent out of whack. We borrow 40 cents of every dollar we spend. That's not sustainable, and it needs to be fixed. And in fixing it, I believe everything has to be on the table.

     Now, I'm very much aware of the choices that are faced by the Department of Defense, the threats and risks that are contained in making those cuts, certainly above all, the impact on our troops and our ability to continue to adequately provide for them, and to make sure of the one thing that I think should always be without dispute in bipartisan agreement.We can disagree about what the mission of our military should be, but once that mission is set, there should be no disagreement that we have the highest obligation to make sure that we give our troops the support, equipment, everything they need to carry out the mission that we've told them to do. It would be irresponsible not to.

     And with that challenge, I believe that we need to put everything on the table in trying to deal with our budget deficit. As I've said before on this committee, I am so concerned about cuts -- not just in DOD but in other parts of our budget -- that I'm willing to say that we need more revenue, that we can't take that piece off the table if we're truly going to meet the concerns that I think we're going to hear expressed today and then again, as I will continue to emphasize, that also exists for other parts of the budget as well.

     So I hope we will consider that. I look forward to the testimony of our witnesses and their guidance on how to deal with the challenges we face both on the budget side and on the national security side. And I'll just close by saying we could not have two more able people in those positions, and I look forward to their testimony. I yield back.

     REP. MCKEON: Thank you. And now -- excuse me -- now let me welcome our witnesses here this morning. We have Secretary of Defense Leon Panetta, Chairman of the Joint Chiefs of Staff General Martin Dempsey. Gentlemen, welcome to your first hearing in your new positions before this committee. I look forward to a candid dialogue. And the time is now yours, Secretary Panetta.

     SECRETARY OF DEFENSE LEON PANETTA: Thank you very much, Chairman McKeon.

     AUDIENCE MEMBER: [Inaudible] -- Iraqi War -- [inaudible]. 

     GEN. MCKEON: Gentleman will suspend.

     AUDIENCE MEMBER: You are murdering people! You are murdering people![Inaudible.] 

     AUDIENCE MEMBER: [Inaudible] -- how many lives around the world -- [inaudible] -- how many lives are going to be sacrificed for -- [inaudible]?

     GEN. MCKEON: Gentleman will resume.

     SEC. PANETTA: Mr. Chairman, Congressman Smith, distinguished members of the committee, it really is an honor for me to have the opportunity to appear before you for the first time as secretary of defense. I'd also like to join you in recognizing General Dempsey. 

     Marty Dempsey is a brilliant soldier, and he's someone who is a proven leader on the battlefield and off the battlefield. And I'm delighted to have him alongside of me in his new capacity as chairman of the Joint Chiefs.

     On behalf of the men and women of the Department of Defense, I want to thank the members of this committee for your support and for your determination to join me in every way possible to try to ensure that these men and women succeed in their mission of protecting America. As a former member --

     PROTESTERS: [Inaudible]

     REP. MCKEON: Gentleman suspend.

     Gentleman continue.

     SEC. PANETTA: As a -- as a former member of the House for 16 years, I really do believe that Congress must be a full partner in our efforts to protect the country. And for that reason and in that spirit, I've had the opportunity to consult with many of you and will continue to consult with you as we face the challenges that the Department of Defense must confront in the days ahead. These are difficult times, and I really do need your full guidance, your full counsel and your full support.

     I'd like to thank you for convening these series of hearings -- this is an important effort that the committee has engaged in, looking at the future of national defense and the U.S. military 10 years after 9/11 -- and for giving me the opportunity to be here today to add my perspective to that discussion. We've been at war for 10 years, putting a heavy burden on our men and women in uniform to defend our nation and to defend our interests. More than 6,200 have given their lives, and more than 46,000 have been wounded during these wars that we've engaged in since 9/11.

     The conflicts have wrought untold stresses and untold strains on our service members and on their families.

     PROTESTER: [Inaudible.]

     REP. MCKEON: Gentleman suspend.

     PROTESTERS: [Inaudible]

     REP. MCKEON: Gentleman will proceed.

     SEC. PANETTA: These conflicts have wrought untold stresses and strains on our service members and, obviously, on their families as well. But despite it all, we really have built the finest, most experienced, most battle-hardened all-volunteer force in our nation's history. Our forces have become more lethal and more capable of conducting effective counterterrorism and counterinsurgency operations. New or enhanced capabilities, including the growth of special operations forces, unmanned aerial systems, counter-IED technologies and the extraordinary fusion that I've personally witnessed between the military and intelligence operations have provided the key tools that we need in order to succeed on the battlefields of the 21st century.

     And make no mistake: We are succeeding. Ten years after 9/11 we have significantly rolled back al-Qaida and al-Qaida's militant allies. We have undermined their ability to exercise command and control and to do the kind of planning that was involved in the attack on 9/11.

     We are closer than ever to achieving our strategic objectives in Afghanistan and Iraq, and we continue to be a bulwark for democracy in confronting countries like Iran and North Korea and others that would constitute a threat to our security.

     Bottom line here is that these conflicts that we've been through -- that while we are moving in the right direction, the fact remains that we are at a turning point, a turning point not only with regard to the challenges we face but a turning point with regard to the military as a whole. 

     As the current mission in Iraq comes to an end, as we continue to transition security responsibility in Afghanistan and as we near the goal of disrupting, dismantling and ultimately defeating al-Qaida, the department is also facing a new fiscal reality here at home. As part of the debt ceiling agreement reached in August, the department must find more than $450 billion in savings over the next decade. 

     Our challenge is taking a force that has been involved in a decade of war and ensuring that as we build the military for the future, we are able to defend this country for the next decade at a time of fiscal austerity. We need to build a force that can confront a growing array of threats in the 21st century. As I pointed out to some members the other day, one of the differences is that as we came out of past wars, we essentially were able to enjoy a peace dividend at a time of relative peace. Now, as we confront the fiscal challenges that this nation faces, we're doing it at a time when we are continuing to confront a series of very real threats in the world to our national security.

     We continue to confront the threat of terrorism. Regardless of what we've been able to achieve -- and we have achieved a great deal -- there remain real threats out there, not only in Pakistan but Somalia and Yemen, North Africa and other places -- those terrorists who continue to plan attacks in this country.

     We continue to have to deal with nuclear proliferation in the world. We continue to have to confront rising powers in the world. We continue to have to confront cyberattacks and the increasing number of those attacks that threaten us every day.

     And yet as we confront those threats, we have to meet our fiscal responsibilities.That will require setting a very clear set of strategic priorities and making some very tough decisions.

     Working closely with the service chiefs, the service secretaries and the combatant commanders, I intend to make these decisions based on the following guidelines.

     First, we have and we must maintain the finest and best military in the world, a force capable of deterring conflict, a force capable of projecting power and a force capable of winning wars.

     Second, we absolutely have to avoid a hollow force and maintain a military that even if smaller will be ready, agile and deployable.

     As I said, after every major conflict -- World War I, World War II, Korea, Vietnam, the fall of the Soviet Union -- what happened was that we ultimately hollowed out the force, largely by doing deep, across-the-board cuts that impacted on equipment, impacted on training, impacted on capability. 

     Whatever we do in confronting the challenges we face now on the fiscal side, we must not make that mistake and we will not make that mistake of hollowing out the force.

     Third, it demands a balanced approach, and we have to look at all areas of the budget for potential savings, from efficiencies that trim duplication and bureaucratic overhead to improving competition and management and operating in investment programs, procurement programs; tightening personnel costs that have increased by almost 80 percent over the last few years; and re-evaluating our modernization efforts. 

     All of that needs to be considered. All of that needs to be on the table if we're going to do a responsible job here that addresses the areas where we can find savings without hollowing out the force.

     And finally and most importantly, we cannot break faith with our men and women in uniform. The all-volunteer force is central to a strong military and central to our nation's future. We have a -- we have a lot of very effective weapons at the Pentagon and at Department of Defense, a lot of very sophisticated technology. But very frankly, we could not be the finest defense system in the world without the men and women who serve in uniform. They're the ones that have made us strong, and they're the ones that put their lives on the line every day in order to protect this country. We have got to maintain our faith with those that have deployed time and time and time again. And that's something I intend to do.

     If we follow these four principles, I am confident that we can meet our national security responsibilities and do our part to help this country get its fiscal house in order. To achieve the required budget savings, the department also must work even harder to overhaul the way it does business. And an essential part of this effort will be improving the quality of financial information and moving towards auditable financial statements.

     Today DOD is one of only two major agencies that has never had a clean audit opinion on its financial statements. That is inexcusable, and it must change. The department has made significant progress toward meeting the congressional deadline for audit-ready financial statements by 2017, with a focus on first improving the categories of information that are most relevant to managing the budget.

     But we need to do better, and we will. Today I am announcing that I've directed the department to cut in half the time it will take to achieve audit readiness for the Statement of Budgetary Resources so that by 2014 we will have the ability to conduct a full-budget audit. This focused approach prioritizes the information we use in managing the department and will give our financial managers the key tools they need to track spending, identify waste and improve the way the Pentagon does business as soon as possible.I've directed the DOD comptroller to revise the current plan within 60 days to meet these new goals and still achieve the requirement of overall audit readiness by 2017. We owe it to the taxpayers to be transparent and accountable for how we spend their dollars. And under this plan, we will move closer to fulfilling that responsibility.

     The department is changing the way it does business and taking on a significant share of our country's efforts to achieve fiscal discipline. We will do so, but we will do so while building the agile, deployable force we need to confront the wide range of threats that we face.

     But I want to close by cautioning strongly against further cuts to defense and, for that matter, to other discretionary accounts, particularly with the mechanism that has been built into the debt ceiling agreement called sequester. It is a blind, mindless formula that makes cuts across the board, hampers our ability to align resources with strategy and risks hollowing out the force.

     I understand this formula. When I was in the Congress, serving on the Budget Committee, I served on the conference that developed the so-called Graham-Rudman approach to dealing with these kinds of cuts. But even then, every time the cuts were to take place, the Congress basically postponed it because it was mindless, because it was across the board. It was designed as a gun to be put to the head of the Congress so that it would do the right thing.

     And I guess what I'm urging the committee -- the supercommittee to do is do the right thing, come up with the decisions that should be made, frankly, on the two-thirds of the budget that is still yet to be considered for deficit reduction. They're working with the one-third of the budget in discretionary spending, and it's taking a trillion- dollar hit, and defense is going to have to pay up almost half of that.

     If you're going to be responsible in dealing with the deficit, you have got to consider the mandatory programs and you've got to consider, obviously, revenue spending that's part of that as well.

     I truly believe that we do not have to make a choice between fiscal security and national security. But to do that, to do that will require that we have to make some very tough choices. And I have to be frank with you: They are choices that could have some impact on the constituencies that you care most about. 

     As a member of Congress, I've been through this. I represented an area that had significant military installations -- Fort Ord and a number of other installations. During the period following the reductions after the fall of the Soviet Union, during the BRAC process, I lost Fort Ord. Fort Ord was taken down. That represented 25 percent of my local economy. So I know what it means to go through this process.

     We have to do this right. And we can do it right and we can do it responsibly, but to do that, I need your support to do everything possible to prevent further damaging cuts and to help us implement a coherent, strategy-driven program and budget that we will identify in the months ahead as critical to preserving the best military in the world.

     This is tough, it is challenging, but I also view this as an opportunity to create a military for the future that will meet the threats that we have to confront. 

     I pledge to continue to work with you closely as we confront these challenges, and I thank you once again for all of your tireless efforts to build a stronger military for our country that can protect our people in the future.

     Thank you.

     REP. MCKEON: Thank you, Mr. Secretary.

     Mr. Chairman.

     GENERAL MARTIN DEMPSEY: Thank you, Chairman McKeon, Ranking Member Smith, members of the committee. Thank you for the opportunity to testify before you today on the future of national defense and our military 10 years after the attacks on September 11th.

     I want to begin by introducing the handsome Marine over my right shoulder here, who I just recently appointed as my senior enlisted adviser. So he -- this is Sergeant Major Bryan Battaglia, 32 years United States Marine Corps, served this country and the corps with great distinction and great honor. And he has now been appointed as my senior enlisted adviser so that he can help us accomplish the tasks that you just heard the secretary articulate and ensure we remain in contact with the young men and women who -- America's sons and daughters who we place in harm's way. So if you'll join me.

     As this is my first time before you as chairman of the Joint Chiefs, I want to make note that I look forward to our continued cooperation, for all the very important reasons outlined by the secretary of defense.

     I also want to affirm that I take seriously our shared responsibility of maintaining a military that preserves the trust that is placed in our hands by the citizens of the Untied States. And I believe we can sustain that trust while also being good stewards of our nation's resources.

     In the past decade, over 2 million men and women have deployed overseas in support of operations in Afghanistan, Iraq and elsewhere.

     Our joint force has demonstrated great initiative, great strength and great resolve.

     The security landscape has also shifted during this period, and our military has demonstrated its ability to adapt and to learn. So from my vantage point, and in keeping with the theme of these meetings, let me point out a few lessons that stand out.

     First, we live in an increasingly competitive security environment. Capabilities that previously were the monopoly of nation states are now proliferated across the security landscape. As a consequence, we must learn faster, understand more deeply and adapt more quickly than our adversaries.

     Second, relationships matter more than ever. Coalitions and partnerships add capability, capacity and credibility to what we see as shared security responsibilities.Therefore, we are committed, even in the face of some of the budget pressures that have been described, to expanding the envelope of cooperation at home and abroad.

     Third, our Army, Navy, Air Force, Marines and our Coast Guard brothers and sisters combine to field a truly unmatched team. We still need our services to maintain and be the masters of their core competencies and their unique service cultures, but they must operate as a single cohesive team. We must continue to value and advance joint interdependence.

     Fourth, innovation is instrumental to the future of our joint force. We've expanded many of our -- what we refer to in years past as low-density capabilities, and we've fielded many new technologies. We must continue to unleash innovation in the ranks and challenge ourselves to leverage these emergent capabilities in new and creative ways.

     And finally, leadership remains at the core of our military profession. It's why we've been able to learn, adapt and achieve the results that I've described over the past decade.Now developing the next generation of joint leaders will preserve our nation's decisive advantage over any would-be adversary.

     With these lessons in mind, we're working to build -- to conceive and then build the joint force we need in 2020. This force must be powerful, responsive, resilient, versatile, and it must be admired. It must preserve our human capital and have the capability and capacity to provide military options for our nation's leaders. 

     And it must be affordable. Be assured, I am fully committed to reducing costs without compromising our nation's security needs. We must make our choices at balanced risk, and as the secretary mentioned, avoid hollowing the force. These choices need to be deliberate and precise. Indiscriminate cuts would cause self- inflicted and potentially irrevocable wounds to our national security.

     To close, I would like to again thank the committee for your commitment, your support to men and women in uniform as well as to our families. They deserve the sacrifice -- they deserve the future that they have sacrificed to secure.

     Thank you, and I look forward to your questions.

     REP. MCKEON: Thank you, Chairman.

     Congratulations, Sergeant Major, on your new appointment. President Reagan once said that many people go through lives wondering if they've had any impact on their fellow men, that they've made a difference in life. And he said the Marines don't have that problem.

     Chairman, the first round of cuts from the Budget Control Act will reduce the funding for the military over the next 10 years from 450 [billion dollars] to 480 [billion dollars] to $490 billion. What types of risk does the Department of Defense face as you implement these cuts over the next 10 years? Will there be any missions that you can no longer do, or is this a fallacy? Will you simply have to do the same missions with less?

     GEN. DEMPSEY: Thank you, Chairman.

     And as you know, the -- we're involved in trying to figure out exactly the answer to that question. But I can share some emerging insights with you. And the emerging insights are that it will require us to look at what our national security strategy has been, as articulated currently in the Quadrennial Defense Review.

     To your point about missions, in my statement I mentioned that what we owe our nation's leaders and our nation's citizens are options. It's somewhat inconceivable to me that we would roll back into this committee, to the -- to the leaders of our national security apparatus and say, well, we're not going to do this because if the nation needs us to do it, you know we have to find a way to do it.

     That's going to require us to build, and we'll have to prioritize. But we've got to build in some versatility because, as many have testified to this committee and elsewhere, we generally find that we don't predict the future with any degree of accuracy. So it's got to be a combination of options and versatility.

     It's got to be capabilities and it's got to be capacity. We need -- we need the capability to do things, and we need the ability to sustain those capabilities over time: That's capacity. Tell me what you want me to do, how often you want me to do it; I can build you a joint force. And we're working on that now. But the risks will accrue as we determine where we have to limit capabilities, if we get to that point. And it could accrue as we determine we need less, and then find ourselves using it more and asking more and more of our young men and women on a rotational base that we can't sustain. So the risks are both to mission but also to the institution.

     REP. MCKEON: Thank you.

     Mr. Secretary, you know, many have said that defense has to be on the table, and I -- and I understand that. And the first tranche of cuts of the Deficit Reduction Act -- military paid for about half of the table. You know, I made the comment that we can't solve the financial problem that we have on the backs of the military, or who will have our backs the next time we're attacked?

     I don't believe that the DOD should have to pay one penny more in discretionary budget cuts. I know you commented on this in your opening statement. And based on our conversations and our visits up to this point, I think we're of a like mind, but I would like to confirm your position, get it on the record.

     Do you agree with me that the national defense has contributed enough to deficit reduction and that no further cuts should be recommended?

     SEC. PANETTA: Absolutely. The fact is, we're having to cut a half trillion dollars -- almost a half trillion dollars out of the defense budget. And that's going to take -- it's going to take, as I said, some very difficult choices. 

     I think we agree that as tough as it is, it's manageable. We can do this in a way that protects our force for the future. But it's going to take us to the edge, and if suddenly on top of that we face additional cuts, or if this sequester goes into effect and it doubles the number of cuts, then it'll truly devastate our national defense, because it will then require that we have to go at our force structure. We will have to hollow it out. We will RIF [reduction-in-force] people. It will badly damage our capabilities for the future. 

     I'm -- you know, I don't -- I don't say that as scare tactics. I don't say it as a threat. It's a reality. And the reason I can say it's reality -- because we -- we have been going through how we take 450 billion-plus [dollars] out of this budget, what weapons systems do we look at, what force structure reductions do we make, what kind of benefits in terms of personnel and compensation do we have to look at, what do we do with regards to areas that have to be tightened up in terms of procurement, et cetera -- these are -- these are all going to be tough decisions.

     Now, you know, as I said, there's an opportunity here, and we can do this the right way. But if suddenly we are facing additional cuts and if suddenly we're facing a doubling of those cuts, a responsible approach to doing this right is going to be impossible.That's what I'm saying.

     REP. MCKEON: And I think you mentioned the word RIF. If it came to that, we would be breaking faith with the very men and women who have been laying their life on the line for us. I think that is inexcusable, and I think no one on this committee would support that. Thank you very much.

     Mr. Smith.

     REP. SMITH: Thank you, Mr. Chairman. I do think it is important to emphasize that, you know, we have not said take defense off the table. In fact, defense has already been on the table; it was, along with the rest of the discretionary budget, what was cut as part of the debt ceiling agreement, cut as has been mentioned by somewhere in the neighborhood of 450 [billion dollars] to $490 billion, depending on how you add it up. And that's the challenge you gentlemen are faced with, is how to make that work. So we're not suggesting it should be taken off the table.

     I think as we look at how we're going to deal with those cuts and then about the potential sequestration and trying to prevent that, it's helpful to sort of understand what the threat is. 

     And -- couple phrases that are used frequently that I think I would like you gentlemen to explain a little bit better is we've heard that it increases the risk. But that's never really actually explained. What does that mean? And another way of looking at it is what missions would we not be able to do specifically in terms of, you know, a given region of the world, a given threat that we wouldn't be as robust against? Throw it open to both of you: Can you tell us a little bit more specifically, when you say it increases the risk, what risk specifically? What won't we be able to do that you think we should be able to do for national security reasons? Mr. Secretary, if you want to start, and then General.

     SEC. PANETTA: Congressman, obviously, we're going through the process now of -- I mean, what we want to do is establish what is that larger strategy. So this isn't just numbers-driven. It's not budget-driven. It's driven by a strategy that we can -- we can shape that tells us, okay, what kind of force do we need. We know it's going to be smaller. We want it to be agile. We want it to be deployable. We think we have to have multimission kind of weapon systems to help support that force.

     You know, if that's -- if that's the larger strategy -- and we're still shaping that in conjunction, obviously, with the service chiefs, but also with the president. Once we've done that, then obviously, we're going to have to start making specific decisions about, you know, where the reductions are made. I mean, you know, without telling you that decisions have been made -- and no decisions have been made. And I can give you an example.

     For -- you know, for example, if we decide that we've got to maintain our force structure presence in the Pacific in order to deal with China and China's expanding role in that part of the world, if -- and because of the other issues that exist, obviously, in that very sensitive part of the world, and if we decide that the Middle East is also a very important area where we have to maintain a presence as well, then just by virtue of the numbers that we're dealing with, we will probably have to reduce our presence elsewhere, presence perhaps in Latin America, presence in Africa.

     REP. SMITH: And what --

     SEC. PANETTA: And so if you're talking about risk, you know, part of the risk would be, you know, having less of a presence in those areas.

     REP. SMITH: Play out a little bit what that presence does for us. I could do it, but I'm curious to hear what your answers -- well, you said that the American people understand.

     GEN. DEMPSEY: Yeah, sure.

     REP. SMITH: You've created -- so we're there. What does that do for us? Why is that in our national interests?

     GEN. DEMPSEY: Yes, sir. Let me, if I could, elevate a -- 10,000 feet or so, look down, and then I'll eventually land on the African continent.

     The way we measure risk is the likelihood of something occurring and the consequence of it. So you know, thermonuclear war is highly unlikely, with an enormous consequence, and therefore, our nuclear deterrent -- we will be able to assess the risk to our nuclear deterrent as it is affected by potential budget cuts. And if you work your way from nuclear deterrence down to irregular conflict, we can do that at every grade, if you will, of the kind of threats we face.

     But to your point about what do we get by our presence on the African continent, we are engaged in a conflict today, and have been probably, if we -- if we look back carefully enough at our history -- if we look back to about 1993, the attack on the World Trade Center the first time, we have been involved in a -- in a conflict with violent extremist organizations -- call them terrorists -- who are networked globally, who are syndicated and who are decentralized. So they're not sitting in one place to be -- to be acted against.They are networked.

     One of the places they sit is Pakistan. One of the places they sit or sat is Afghanistan.One of the places they sit is the African continent. In order to defeat a network of adversaries, we have to be a network. We can't be this hierarchical Cold War military, and we're not any longer.

     And so our presence on the African continent is part of our network of building partners, of gaining intelligence. And then when targeting approaches or targeting reaches the level of refinement, we can act on it. But we have to be networked against the specific threat you're talking about, and part of that requires our presence in Africa.

     REP. SMITH: That's an excellent answer. I think also part of our presence is, you know, deterring our enemies from doing things. And you know, it's an instructive point that we're now dealing with the high likelihood that Iran felt comfortable, you know, doing an assassination on our soil. And part of that has to be at least a calculation that they don't fear what the consequences of that would be. And you can extrapolate that out to a North Korea, to a whole lot of other places. And there are consequences, and those are choices.

     That -- excellent answers. I thank the gentlemen, and I yield back.

     REP. MCKEON: Thank you. 

     We will now proceed to the members having the opportunity to ask questions. I know you all want to ask questions, so I will be following the five-minute rule, ask you to consider that in your questions and our witnesses to consider that in their answers, please.

     Mr. Bartlett.

     REPRESENTATIVE ROSCOE BARTLETT (R-MD): Thank you.

     Usually the resolution of big-issue matters requires the aggregation of decisions about a number of smaller issues, and today I have a question about two of our programs that I think are -- could be very effective in reducing our costs and improving our capabilities.

     The first relates to the C-27J. Mr. Secretary, yesterday in our subcommittee hearing, near the end of the day, your generals voluntarily brought up the issue of the C-27J. As you know, sir, there has been a confirmed requirement for 78 of those planes for a number of years now. We have procured only 38 of them. As a result of that, as one of your generals said yesterday, we're flying the blades off the lift helicopters to meet these lift requirements, and these helicopters are enormously more expensive than the C-27J. 

     Mr. Secretary, just yesterday, I think, a letter reached your desk signed by 12 members of Congress relative to the C-27J. We'd appreciate your personal attention to that, Mr. Secretary, if that's possible.

     SEC. PANETTA: You will get that. I'll look at it. 

     REP. BARTLETT: Thank you very much.

     The second issue. The original acquisition strategy for the F-35 Joint Strike Fighter included a competitive engine program because of the thousands of engines projected to be procured to reduce cost and development risks through competition, and because of the department's positive experience with the alternative engine for the F-35 16, beginning in the mid-'80s.

     Contrary to assertions by some, there never has been an F-35 engine competition where the 135 won. In fact, in 2006 the deputy secretary of defense sighed a memorandum of understanding with the F-35 international partners to procure the competitive engine.That same year, the department, due to cost pressures on the F-35 program, sought to cancel the development of the competitive engine, changed its acquisition strategy and used the R&D funding planned for the competitive engine to cover overruns in the F-35 aircraft program. In spite of these department actions, Congress funded the competitive engine program through 2010. 

     Now the manufacturer of the competitive engine wants to self-fund the R&D for its engine beginning as soon as possible. The Department of Defense continues to be the major proponent of competition in its programs, except for the F-35 competitive engine, opposing self-funded competition of the F-35 competition engine program.

     In your speech at the Woodrow Wilson Center you said, and I quote, "We will look to procurement reforms and improved competition, cost control and delivery when examining modernization and operating costs."

     Mr. Secretary, what kind of message is the department sending to all contractors by opposing the efforts of the competitive engine manufacturer to self-fund R&D for its own program?

     SEC. PANETTA: Congressman, I'm a strong supporter of competition, but I don't want competition to cost me more money. I want it to be cost-efficient. And with regards to the program you've identified, the problem is that all of those that have looked at it indicate that it's going to result in more cost to the Defense Department to proceed on that path.

     Now, I will say this. That the manufacturer that wants to engage in self-funding has developed an approach. I think we need to look at it to determine whether in fact it is cost-efficient. 

     If in the end it's going to cost me more money, that's not what I call good competition.If in the end it saves me money, then I'm willing to look at it.

     REP. BARTLETT: Mr. Secretary, isn't it true that GAO continues to contend that pursuing the 136 engine will probably save us money?

 SEC. PANETTA: There are those that have indicated that there is some savings here and that we could achieve, you know, better competition. But frankly, it's disputed within the department and I've got to work through that dispute.

     REP. BARTLETT: We'd appreciate your attention to that, sir. As you know, competition always makes things better and makes them cheaper. It should be no exception here.

     Thank you very much for your commitment to look at this personally.

     Thank you.

     REP. MCKEON: Thank you.

     Mr. Reyes.

     REPRESENTATIVE SILVESTRE REYES (D-TX): Thank you, Mr. Chairman.

     Mr. Secretary and General, thank you for being here, and thank you for your leadership at this -- these critical times that are -- that face our nation.

     The other night, Mr. Secretary, I made mention about the concerns that were expressed to me last week in a number of meetings with military families. Today I want to ask a question about military retirement reform, because there is a -- there is a -- or there are a number of proposals, largely through the Internet, that are concerning our retirees.

     Recent budget pressures within the Department of Defense have resulted in greater awareness of the increasing cost of military personnel programs to include military compensation, health care and military retirement. The Defense Business Board recently declared that the military retirement system was unaffordable and that -- and proposed a plan that would convert the military retirement system from a defined benefit plan to defined contribution plan that is common in the private sector. Benefits would vest at three to five years, as opposed to 20 years in today's system, and would not be payable until age 60 or 65, as opposed to immediately upon retirement under the current system.

     This would -- this would seem to be a very significant change in the culture of our military retirement benefit. So the questions I have, Mr. Secretary -- and also General, if you want to comment -- we -- have we arrived at the point where reform of military retirement is necessary?

     Second, is the proposal of the Defense Business Board the right solution to maintain retention and combat readiness? If the Defense Business Board proposal is not the right solution, what would be a model that you believe might work?

     And finally, should the payment of benefits immediately upon retirement be continued as part of any proposed reform initiative? Those are -- I ask those questions because those are concerns that have been expressed to me several times last week.

     SEC. PANETTA: Yeah. No, I understand. And as a result of that report that came out, there were a lot of people that were nervous that somehow that would -- that would be implemented. And again, the bottom line is that we have made no decisions with regards to that. As a matter of fact, the president has proposed a commission -- one of the recommendations to the committee was a proposal to establish a commission that would look at retirement and provide grandfather protection for those in the service, and I would support that.

     But, look, this is what it comes down to: When we're looking at 450 billion-plus [dollars] in terms of where we find savings, I've got to put everything on the table and take a look at it, and compensation in the retirement area is one of those. But at the same time, I've made very clear that we can't break faith with those in the service. We made a promise to people who are on duty that we're going to provide a certain level of retirement. We're not going to back away from that. We've got to maintain that promise. Those people have been deployed time and time again, they've put their lives on the line in the battlefield, and we're not -- we're not going to pull the rug out from under them. We're going to -- we're going to stand by the promise that was made to them. So one of the commitments that I've made is that in any circumstance related to this issue, we are going to protect those that are in the service today, and we're going to grandfather them in.

     Now, having said that, you know, are there areas in the retirement area that need to be looked at? For example, there are individuals that serve 12, 14, 15 years. When they get out, they have no retirement to take with them. And, you know, is that an area that we ought to look at, to determine whether or not they ought to be able to move some of those benefits to other areas? Is -- you know, are there some reforms that can be made along those lines?

     I mean, I think those are the kinds of issues that we ought to be open to consider. But I only think it ought to be done recognizing that we have to protect those that are on duty.

     GEN. DEMPSEY: And, sir, if I could, thanks for the opportunity to comment on this because I do want to address something I've seen in the discussions about this. I reject the characterization of our military retirement program today as kind of gilt-edged, and the comparison to civilian retirement programs.

     Look, it might turn out that our current plan is unaffordable and we'll have to do something about it. But when we put a retirement program together, it's because these young men and women, who become old men and women, who serve for 20 years, who put themselves in harm's way, who move 10 or 15 times, who can -- some of them can buy a house, some of them can't, the spouses rarely can have employment because we move them around -- not voluntary, they move because we tell them to go where the nation needs them -- that retirement program needs to be fundamentally different than anything you find in the civilian sector, in my view.

     We can figure it out. We need the time to do so. If it's unaffordable, we'll react. But I want to reject outright the idea that somehow my retirement program or, more important, Sergeant Major [inaudible], should be compared to someone else's.

     REP. REYES: Thank you. Thank you, Mr. Chairman.

     REP. MCKEON: Thank you. 

     Mr. Thornberry.

     REPRESENTATIVE MAC THORNBERRY (R-TX): Thank you, Mr. Chairman.

     Mr. Secretary, today, and when I've heard you previously, you've seemed quite clear that you believe -- or -- that we should make no further cuts in the defense budget beyond those which have already been enacted. Is that true?

     SEC. PANETTA: Correct.

     REP. THORNBERRY: Does the president share your view on that?

     SEC. PANETTA: He does.

     REP. THORNBERRY: So as commander in chief, I think it's important for him to be able to speak out and also say, we've gone as far as we can go. We've gone to the edge, to use your words, and that no more cuts should come from the defense budget. I'm hopeful we can have bipartisan agreement on that.

     General Dempsey, you used a word that caught my attention in your statement. You said, if there are further cuts, there could be irrevocable damage to our military.

     Now, a fair number of folks here, I think, have the opinion that, OK, so if there are cuts either enacted by the supercommittee or through sequestration, we can always make up for that the next year and put some more money and everything will be okay. Explain to us what you mean by irrevocable, and how can a cut do damage that can't be corrected the next year with some extra money?

     GEN. DEMPSEY: It comes down to what I described in the statement, Congressman, as the core of our profession, and that is the men and women who comprise it and who we develop as leaders. You know, we are the military. We consider ourselves to be the preeminent leader development institution in America. And I think we have a case to make that.

     So if some of the cuts occur in the magnitude, and more important, with the targets as they are described right now in sequestration, and it causes us to RIF -- this goes back to the notion of, do we have the time to reduce the force over time, responsibly and predictably? That's one thing. If we don't, if we begin to have to RIF to meet the budget targets imposed by sequestration, we lose that core. 

     We've seen this happen in the '80s -- a correction, the '90s, right after Desert Storm, where we had a -- we created a bathtub, if you will, of captains and majors who exited the service. And then when we had to regrow the Army by 65,000 as a result of the conflicts in Iraq and Afghanistan, where we suffered was not in the basic rifle infantrymen -- we can grow them; we can grow them in 20 to 30 weeks -- you can't grow a captain, a major, a lieutenant colonel or sergeant major in 20 to 30 weeks. And if we don't -- if we're not careful with this and we have a migration of that talent out of the Army, that's irrevocable for probably 10 or 15 years.

     REP. THORNBERRY: Mr. Secretary, let me turn back to you for one other question.This series of hearings has been about 9/11. Ten years ago, one could see a clear trend towards terrorism, but the method of attack was certainly unexpected. It is undoubtedly true we will face unexpected things in the next 10 year that will be affected by our actions here.

     One of the concerns I have is that it's -- for things like research and development, those kind of not specific programs, you don't know how they're going to play out, and yet they lay the foundation for our future. As you all go through implementing what's already been passed -- and hopefully that's it -- tell me how you take into account preparing for uncertainty, because it seems to me that that is absolutely central to national security in a complex world.

     SEC. PANETTA: Absolutely. I mean, I -- you know, in all of the past planning that's gone into developing the defense budget, the one thing that everybody agrees is that no one has accurately predicted the future and has anticipated the kind of attacks and crises we've had to confront. You can identify kind of large areas where you would expect that a future crisis might lie, but the reality is that if we're going to have a strong defense, we've got to be prepared to react to a surprise. 

     We've got to be prepared to react to something we're not expecting. 

     And that's the reason -- I mean, I think you've hit on something very important, which is we need to have research and development, we need to have those kind of creative areas of the department that look at those kinds of potential problems, that develop approaches to those kinds of -- those kinds of possible crises in the future.

     That -- I mean, to have that kind of imaginative look at where we will be, what kind of potential enemy will we confront -- that gives us the capability to begin to design our truly agile force that can respond to those kinds of threats. That's the difference. And I need that. I can't lock in, you know, that there are three or four threats out there, and we're just going to deal with those. We've got to be flexible and agile enough to respond to any threat, wherever it comes from.

     REP. MCKEON: Thank you.

     Mr. -- 

     STAFF: Ms. Davis.

     REP. MCKEON: -- Ms. Davies -- Ms. Davis. 

     REPRESENTATIVE SUSAN DAVIS (D-CA): Thank you, Mr. Chairman, and thank you to both for your -- for your leadership and also thank you for your statements about the military and their families. I think that's very important for them to hear and for us to obviously be very engaged in. And I certainly would encourage all of my colleagues here to join us on the Personnel Committee. Sometimes the committees are a little slim, and we need all of your support.

     I wanted to ask you about our commitments and how we close the gap, because we do know that our resources, if we wouldn't use the word "shrinking," they certainly would be diminishing, unlike the unprecedented rise that we saw in the last two years. Is there anything in addition to what's been said that you would like to share about how we close that gap?

     SEC. PANETTA: I -- explain that question -- 

     REP. DAVIS: The gap between the -- our resources and our commitments. I think the general did speak to that, but I'm just wondering -- 

     SEC. PANETTA: Yeah.

     REP. DAVIS: -- if there's anything additionally from where you sit, Mr. Secretary, as well, that you would like to say about that.

     SEC. PANETTA: Well, I mean, I'll just -- let me re-emphasize a point that I've made time and time again. You know, the problem is, yes, you know, we need to make these reductions. We know -- we know we're dealing with more limited resources.

     But at the same time, I've got a responsibility to defend this country. And you know, neither Congress or the president did away with the challenge of terrorism. That's still very real out there. We've got -- we've got terrorists out there who continue to plan to attack our country. We've got to stay on top of that. We've got to be able to go after them and dismantle that -- those kinds of operations.

     We still have two wars that we're in. Now admittedly we're drawing down in Iraq, but we're still fighting a war in Afghanistan, and we're trying to transition there, but we're in a war.

     We have -- we've got the threats from Iran and North Korea. They are engaged in nuclear proliferation. They're trying to develop a nuclear capability. As we saw within the last few days, these are pariah nations that constitute a threat to our security. They constitute a threat to the security of the world. They're still there. We've still got to deal with them.

     We've got cyberattacks that are coming at us, left and right. We've got to deal with that threat. It's the battlefield of the future.

     We've got rising powers in the world that constitute a challenge to us. I mean, China in the South China Sea has created concerns for us as to our ability to be able to use international waters -- 

     REP. DAVIS: Mr. Secretary, if I -- if I could just interrupt, is there a way that --

     SEC. PANETTA: -- that's -- those are the threats.

     REP. DAVIS: -- is there a way that Congress can -- and the committee can better assist you in that strategic planning over what our role has been today?

     SEC. PANETTA: No, you sure can. As we got -- as I -- as we go through the process of developing that larger strategy, I need to be able to sit down with you and brief you on that and get your best input on that, because that will be the place where we have to make choices as to what are the those threats, what are the things we have to be ready for, and also consider what are the risks. The issue was raised, you know, what are the -- what are going to be the risks involved here? There are going to be risks here. I'm not -- I'm not kidding you. When you're -- when you cut the budget by $450 billion, when you make the choices we're going to have to make, there are going to be some risks that are going to be out there. Those risks have to be acceptable, but there are going to be risks. We need to know that.

     REP. DAVIS: Thank you.

     When General Pace testified just a few weeks ago, he mentioned that we don't really have a cohesive national security strategy, and he suggested that we need something more akin to Goldwater-Nichols when it comes to interagency collaboration, looking at the whole of government approach.

     Would you agree with that? And what, again, do you think that we should be doing to promote it? Should their be more reporting mechanisms to the committee in terms of what actually is being done about that? We know things have changed since we entered Iraq, certainly great progress in many ways. But on the other hand, I think a lot of us would agree we're not there yet.

     GEN. DEMPSEY: Yes, Congresswoman. I'm not going to sign up for the extra reporting here, but I would like to respond to the question about are we -- what are we doing to get after General Pace's advice.

     The secretary has us -- embarked on our strategic review, the idea being that we really need to understand what we must do for the nation. And we've projected it out to 2020 so we can look back and have four program operating memorandums to march toward it.So we're trying to jump across the immediate fiscal crisis, determine what does the nation need -- not what does the Department of Defense needs, what does the nation need.

     And one of the answers to that question is, in fact, greater -- we have tremendous integration with other agencies of government that have -- those relationships have accrued over the course of the last 10 years in ways that are absolutely remarkable.We've got to keep that going. And that's also some of the ways we can close this gap you described between what the military has to do and what the nation has to do. That work is ongoing, and it's on a very fast timeline, being led by the secretary of defense.

     REP. DAVIS: Thank you.

     REP. MCKEON: Thank you.

     Mr. Jones.

     REPRESENTATIVE WALTER JONES (R-NC): Mr. Chairman, thank you very much.

     And Mr. Secretary, General Dempsey, thank you for being here today.

     Tuesday I had the privilege and the honor of visiting Walter Reed Bethesda and saying thank you to so many soldiers and Marines that have lost both legs. That brings me to this point: A lance corporal -- his mother is sitting in the room -- asked me this question.Why are we still in Afghanistan? Mr. Secretary, great respect for you. [Inaudible] -- and I know you will develop your own policies. And that leads me to my question.

     In February this year we had Secretary Gates to testify before this committee. And I'm going to read enough that I think I can get -- you will understand the question. "By the end of this calendar year we expect less than 100,000 troops to be deployed in both of the major post-9/11 combat theaters. Virtually all of those forces will be in Afghanistan."That -- this is the key point. "That is why we believe that beginning in fiscal year 2015" -- 2015 -- "the United States can, with minimal risk, begin reducing the Army active-duty end strength by 27,000 and the Marine Corps by somewhere between 15[000] and 20,000. These projections assume that the number of troops in Afghanistan would be significantly reduced by the end of 2014 in accordance with the present strategy. If our assumptions prove incorrect, there's plenty of time to adjust the size and schedule of this change."

     Well, you're here today, and I support the chairman and most members of this committee that we don't want to see cuts to the military that just would decimate the military. But with $120 billion being spent each year in Afghanistan -- Karzai is a corrupt leader. In fact, a Marine general -- I hand this out to everybody that comes to my office. It's got the Marines carrying a flag-draped coffin, and it says the amount of -- number of people who had been killed in Afghanistan and the cost. And everybody that wants to see me about any issue, I hand this to them, and I say please call the White House, the speaker of the House and the leader of the Senate and tell them to get our troops home before 2014, 2015.

     So my question is this: How do I answer the lance corporal who's been there twice, severely wounded the second time, and many of them that have been over there four or five or six -- you testified to that. Will you re-evaluate and not just accept what Secretary Gates said, that we will be there until late 2014 and significant reduction in 2015?Because Mr. Secretary, you know it is a no-win situation, and the general -- I'm going to read this, and then please -- I'll give you the time to answer.

     I've had a Marine general as my adviser for 21 months, e-mails -- anytime I e-mail, he e-mails me back.

     What do we say to the mother and father, the wife of the last soldier or Marine killed to support a corrupt government and a corrupt leader in a war that cannot be won?

     We continue to stay there until 2015? How many more have to die? How many more have to lose their legs and Uncle Sam would take care of them -- as he should take care of them -- for the next 50 years of their life?

     So Mr. Secretary, if you would give me an answer -- are you willing to reconsider what Secretary Gates testified before this committee?

     SEC. PANETTA: Congressman, our present strategy in Afghanistan is one that was developed by the president of the United States and by our allies in NATO at the Lisbon Conference, which was to gradually transition our forces out of there by the end of 2014. And that's what we're doing, and that's what we'll continue to work at in order to do it right.

     We're in the process of making that transition. We've already taken down, by the end of this year, the first 10,000 of the surge that was put in. We'll take out the remaining part of that surge next year by the end of the fighting season. We'll then begin to take down the remaining force through the end of 2014. So we are on a path to gradually transition down and remove our combat forces from that area.

     I -- you know, I have to tell you that talking with General Allen, I feel that, you know, as difficult as that war has been, that the fact is that good progress has been made. In terms of security, we have trained the Afghan army and police. They are operational now. We are making transitions. We've already transitioned seven areas. We're going to transition another group of areas in the fall to Afghanistan's security and governance, and we're going to continue that process through the end of 2014.

     Yes, there are concerns; yes, there are problems that you've identified. But in the end, there's only one reason for this mission, and that's -- that lies in the fact that Afghanistan was a safe haven for the Taliban and for al-Qaida to conduct the 9/11 attack on this country. And one thing we do not want is Afghanistan becoming a safe haven again for al-Qaida. That's what this mission is all about.

     REP. JONES: Mr. Secretary -- and last point, Mr. Chairman.

     REP. MCKEON: Thank you.

     REP. JONES: We got bin Laden and al-Qaida is dispersed all around the world.Let's bring them home.

     REP. MCKEON: Thank you very much.

     Ms. Bordallo.

     DELEGATE MADELEINE BORDALLO (D-GU): Thank you very much, Mr. Chairman.And thank you, Secretary and General, for testifying today. And as we say on Guam, "hafa adai": Welcome.

     My first question is for you, Secretary Panetta, and has to do with the military buildup on Guam. In a recent Senate hearing, now Deputy Secretary of Defense Carter indicated that the Guam realignment was on the table for cutting. I fear this comment is in direct contravention of our country's agreement with Japan, which was reaffirmed in June of this year. These comments, along with certain actions by the Navy, have created a sense of uncertainty about the buildup, and that is unhelpful. Does DOD remain supportive of the Guam realignment as outlined in the Guam international agreement and the agreed implementation plan?

     SEC. PANETTA: Congresswoman, we made an agreement with Japan related to the situation in Okinawa. Obviously we continue to stand by that agreement. We'll continue to work with Japan on this. But the challenge is going to be to try to make sure that we do it in a cost-effective way. That's going to be the challenge.

     But as to what we need to do, as to the -- you know, the effort to try to reduce our presence there, I think that's something we're committed to.

     DEL. BORDALLO: Thank you. Thank you, Secretary, that's what I wanted to have on the record.

     GEN. DEMPSEY: Congressman, may I just very briefly -- 

     DEL. BORDALLO: Yes, certainly, General.

     GEN. DEMPSEY: I mentioned this strategic review we're undergoing.

     DEL. BORDALLO: Yeah.

     GEN. DEMPSEY: One of the questions we have -- we have to confront -- and we are -- is forward -- the issue of forward presence vice power projection; how much forward and how much from CONUS; how much rotational. And this conversation will occur in that context.

     DEL. BORDALLO: Very good.

     The next question is for you, General, as well. There have been a number of positive developments this year for the military buildup, but the Senate has raised concerns, and suggests that we rethink the entire program. I believe this is unwise, given the current threat environment in the Asia-Pacific region.

     What are we doing, as DOD and other interagency partners, in getting the government of Japan to achieve tangible progress in Okinawa? And further, what is our government, specifically DOD, doing to help the government of Japan achieve tangible progress?

     GEN. DEMPSEY: Is that me?

     SEC. PANETTA: Yeah.

     REP. BORDALLO: Well, whichever. General?

     GEN. DEMPSEY: Yes, Congresswoman. Thanks.  

     Well, to kind of spin off of the -- of my earlier answer, I mean, what we're trying to do is become articulate with our friends and allies about our intentions. We're not the only nation in the world that's facing a new fiscal reality, and so our Japanese partners are facing some similar cases. And we've got some issues on the Korean Peninsula, as well, related to our future strategy and the new fiscal environment. I can just assure you those conversations are ongoing.

     REP. BORDALLO: Good.

     Secretary, another problem here is, can the Hill expect to see a final master plan for the military buildup from DOD? You know, cost increases are becoming an issue. I think that's what you mentioned. Can you give us some answer on that?

     SEC. PANETTA: First of all, I'm not sure about a military buildup at this point. I think what we're engaging in right now, as result of the number we've been handed by the Congress, is going to be a -- you know, an effort to reduce the budget in a responsible way.

     But what I can share with you is that as we develop the strategy for what we're going to need in the future, and as we develop, obviously, the decisions that will be part of our budget presentation early next year, I fully intend to consult and advise with you in that process.

     REP. BORDALLO: Very good.

     And one final question. General, as we move to a post-Iraq and Afghanistan military, what are some of the biggest challenges you see that face the military? And what areas of the world do we need to refocus on, to put more emphasis on in the coming years?

     GEN. DEMPSEY: Again, that conversation is occurring, even as we sit here, among the -- among the -- those who are -- been charged by the secretary to answer that question.But I mean, clearly we've got some emerging regions of the world that we have somewhat neglected because of the demands in Iraq and Afghanistan. 

     You ask what concerns me in the post-Iraq/Afghanistan. I'm concerned that we will convince ourselves that the job of defending this nation is complete and that we can somehow go back to where we may have been in the mid-'80s, which is a military that wasn't sure of itself or its support. And that concerns me.

     And again, back to one of the earlier questions, about leaders, we've got to keep the right leaders in our military. That means we've got to train and educate them, we've got to continue to inspire them, so that when we need them, and we will, they'll still be there.

     REP. BORDALLO: Thank you very much.

     Thank you, Mr. Chairman. I yield back.

     REP. MCKEON: Thank you.

     Mr. Forbes.

     REPRESENTATIVE J. RANDY FORBES (R-VA): Thank you, Mr. Chairman.

     And Mr. Secretary, you heard the chairman say we only have five minutes. If I had longer, I would compliment you more on all the things you've done which I think have been very good up to this particular point in time. I'm going to go right to my question.

     Less than a month ago when you appeared in a Senate committee similar to ours, you made a statement that if we allowed the trigger of the sequestration to take place and had $600 billion of additional cuts, it would be like shooting ourselves in the head. And I think that was a good analogy, but I also come back and say that was more than just the fact that these were across-the-board cuts. Because even if we said $600 billion but you allocate the cuts, it would still be like shooting ourselves in the head.

     But I took it from that that what you really mean is that for us to ask to make $600 billion of additional cuts to defense before we've done a strategic analysis and review would be perhaps reckless, irresponsible, even dangerous to the country. Is that a fair depiction?

     SEC. PANETTA: All of that.

     REP. FORBES: If that is the case, Mr. Secretary, then would it not also be reckless, irresponsible and dangerous for us to do the $450 billion of cuts we've already done before we did a strategic review and analysis in the same way? And if not, differentiate for me the two.

     SEC. PANETTA: Well, you know, the reality I'm dealing with is that the Congress --

     REP. FORBES: I'm not blaming you.

     SEC. PANETTA: No, I understand. But, you know, I'm dealing with the reality of having to reduce $450 billion and do it, you know, over these next 10 years. I mean, obviously, the better approach, you know, had we the resources in this country and had we, you know, managed our budgets more responsibly -- the better approach would have been to develop the strategy to be able to discuss exactly what we need, determine what the resources would be in order to meet that strategy, and then come to you and say this is what we need in order to do the job.

     REP. FORBES: But the two are essentially the same. So if one of them was perhaps reckless and irresponsible and dangerous, you can make the argument that the other one would be, too.

     And the other thing that I wanted to raise is, we've heard a lot about risk, and both you and the chairman mentioned that they were risks to missions and institutions. But as you probably know, yesterday we had three former chairmen in here, all who had tremendous wisdom, expertise. Former Chairman Skelton made an interesting observation. I asked him to give us the biggest warning that he would offer us as a committee, a Congress and a nation. And he said it was, over his tenure in Congress, he'd had -- he'd seen 13 different contingencies, conflicts; 12 of them were unpredictable. That means that the president, whoever he might be, is going to have similar unpredictable missions that we can't foretell right now.

     When we talk about acceptable risk, isn't it true that we're not just talking about risk to the mission or the institution, but we're talking about risk to the men and women's lives who are performing those missions, if we make those and we're wrong?

     SEC. PANETTA: You're absolutely right.

     REP. FORBES: Good.

     With that, Mr. Chairman, I yield back.

     Thank you both for your service to our country and for being here today.

     REP. MCKEON: Thank you very much.

     Mr. Courtney.

     REPRESENTATIVE JOE COURTNEY (D-CT): Thank you, Mr. Chairman.

     And I want to thank the witnesses, and congratulate them on your new positions.And I also want to take a moment to at least highlight your announcement today about moving up the auditability target to 2014. I sit on the subcommittee with Mr. Conaway and Mr. Andrews. This committee actually has been moving on this issue. That is no mean feat, what you have announced here today, but it will in fact help us get towards the goals which we're talking about this morning in a smart way. And certainly, waste, fraud and inefficiencies are things that I think -- you know, having an auditable set of books really helps us accomplish, and doesn't affect our ability to defend ourselves. So congratulations on that announcement.

     SEC. PANETTA: Thank you.

     REP. COURTNEY: You said a moment ago that you want to have a military that's capable of reacting to surprises. Last March, President Obama had to react to a situation that arose in Libya, where we had a humanitarian disaster in Benghazi on the brink of happening. What he did at that time -- which I think was the right call -- was exercise what I think he described as unique capabilities to help NATO intervene. We had a submarine fleet in the Mediterranean -- the Scranton, the Providence, the Florida -- which in a matter of 48 hours neutralized Gadhafi's air defenses. And, you know, in this era, I mean, there's some people who feel that, you know, our submarine fleet is sort of a Cold War relic.Obviously, the events in Libya demonstrated that it gave this country the ability to react to a surprise.

     We are at a point, though, where all three of those boats are going to be going offline in roughly 10 years. We are now at a point where our sailors are being deployed at seven-month stints undersea, as opposed to six months which has always been the Navy's -- again, to deal with a shrinking fleet size. And I just wanted to ask you, Mr. Secretary, to just sort of get your views on the roles of our submarine fleet post 9/11, particularly in terms of, you know, other areas of the world that you mentioned earlier, where undersea warfare seems to be sort of on the upswing with some of our potential threats.

     SEC. PANETTA: I -- you know, I've always considered our submarine fleet to be an essential part of our forward presence projection, and also the capability of being able to respond to the kind of surprises that we run into in the defense business. I -- you know, I think we need a full range of capabilities in order to be able to address the threats of the future and the threats of the present. Submarines have actually provided that additional arm, particularly with regards to our fleets, that I think is absolutely essential to our defense in the future.

     REP. COURTNEY: Good. Well, thank you. And maybe we can get you to come up for the commissioning of the Mississippi in December in Groton, Connecticut.

     SEC. PANETTA: [Inaudible] -- I'll do that.

     REP. COURTNEY: Yes.

     GEN. DEMPSEY: And if I could add, Congressman?

     REP. COURTNEY: Yes.

     GEN. DEMPSEY: Except for one Saturday every year in December, I completely support the United States Navy. 

     REP. COURTNEY: Thank you. You know, a corollary, though, is -- to that issue, is obviously the SSBN replacement program which -- again, we've spent a lot of time in this committee and on the Seapower Subcommittee. You've mentioned, General, the issue of nuclear deterrence, which is, thankfully, a low-risk situation right now, but nonetheless a risk. And I just wonder if you can share your thoughts in terms of the need to move forward with the SSN -- SSBN replacement program that the Navy has worked hard on.

     GEN. DEMPSEY: Well, as you know, we've been studying and must continue to study the capability given to us by the triad, and of course the SSBN fleet is our most survivable leg of the triad, and therefore I consider it to be indispensable. As we go forward and as we understand the future of nuclear nonproliferation talks, I mean, that could change, but for now I think we're exactly where we need to be.

     REP. COURTNEY: Thank you. 

     One last question. Mr. Secretary, Secretary Gates about a year and a half ago announced an initiative within the Department of Defense to really look at our regime of export controls --

     SEC. PANETTA: Yes.

     REP. COURTNEY: -- which, again, really are sort of in Cold War -- 

     SEC. PANETTA: I know.

     REP. COURTNEY: -- you know, sort of mentality. Again, I realize you're pretty new into the saddle --

     SEC. PANETTA: Right.

     REP. COURTNEY: -- if you -- any updates you can give us in terms of, you know, how that's progressing --

     SEC. PANETTA: I -- 

     REP. COURTNEY: -- and your own -- and your own views in terms of -- 

     SEC. PANETTA: I fully support what Secretary Gates is trying to do in that -- in that arena. We really do have to update our export laws and begin to bring them into the 21st century, frankly, not only for purposes of, you know, the technology and the industries that we have here but I think, you know, we're at a stage now where, very frankly, as we develop those alliances, as we develop -- I mean, NATO performed pretty well in terms of Libya, and the real question is, if we're going to develop those kinds of capabilities, if we're going to develop those kinds of alliances, they have got to be able to have the latest in terms of technology and in terms of weaponry. And that means that we've got to be able to share that kind of technology. 

     So I'm working very hard to try to see if we can try to do away with some of the barriers that were established by those laws.

     REP. COURTNEY: Well, some of us would want to work with you on that effort. 

     Thank you, Mr. Chairman.

     REP. MCKEON: Thank you.

     It'd probably be a good time to wish the Navy happy birthday. 

     REP. MCKEON: Mr. Miller.

     REPRESENTATIVE JEFF MILLER (R-FL): Thank you, Mr. Chairman.

     General Dempsey, General Amos has been pretty adamant about the F-35B, and I agree that it does increase capacity, certainly, and range, but I'm interested in knowing, since this is the first opportunity we've had to hear from you directly, do you share his enthusiasm for that aircraft and will you commit to helping make sure that we move forward with it?

     GEN. DEMPSEY: I am supportive, without caveat, of the development of a fifth-generation fighter. I'm -- I am concerned about the three variants and whether, as we go forward in this fiscal environment, whether we can afford all three. But I am eager to learn more about that, and I do have great respect for General Amos' judgments. 

     But I'll tell you, that's something we have to keep an eye on. Three variants is -- creates some fiscal challenges for us.

     REP. MILLER: Secretary Panetta, good to see you. Look forward to working with you in your new capacity.

     Also talking about the STOVL aircraft, I watched a video last week of it landing on the Wasp, and my question is, with sea trials ongoing now, basically -- and the aircraft appears to be performing well -- it has been on probation, which -- the term "probation" doesn't exist in any of the acquisition areas, and I think probably it has created or could be considered a black mark on the STOVL aircraft. But what remains now as far as items that would allow it to be removed from its probationary status?

     SEC. PANETTA: I -- you know, all these planes are now being fully tested, and that's one of the good things. I mean, this is -- this is the fifth-generation fighter. It's something we absolutely need. It's a -- it's a remarkable plane. And it really -- it really does the job well.

     But what we want to do is to make sure that as it goes through this test period, you know, we're able to understand all of the -- all of the issues involved with it; that we're able to be fully confident that this plane, once it goes into production, is going to be something that will be totally effective and will be totally capable of serving the mission that it's required to do. 

     So yeah, I mean, the term "probationary" is out there, but frankly what that essentially means is, give us a chance to test it, give us a chance to see how it performs, and if it performs well, then obviously it'll be able to make the grade.

     REP. MILLER: Thank you. And the other thing was, OMB released guidelines for 2013 and the budget where it actually states that the department should identify programs to double down on because they provide the best opportunity to enhance economic growth. I did have the opportunity to go visit the line in Fort Worth for the F-35 --127,000 direct and indirect jobs right now. Certainly, if we can remove some of the instability in our purchasing of this aircraft and move forward with what we originally intended to do -- and I understand the budgetary constraints that we are in right now. I still contend -- and I don't think you meant it the way you said it -- we have the resources. You know, we don't -- we don't have a tax revenue problem in this country; we have a spending problem and an allocation of where those dollars go.

     But, you know, I would hope that if that is what the administration would like -- and we are trying to increase jobs; and this is an aircraft that we do want to go forth, looking at what China is doing and how fast China is producing their aircraft now -- significantly quicker than what we originally anticipated -- I hope that you would look at the F-35 very carefully as meeting OMB's challenge.

     SEC. PANETTA: I will certainly do that.

     REP. MILLER: Thank you.

     REP. MCKEON: Thank you.

     Mr. Loebsack.

     REPRESENTATIVE DAVID LOEBSACK (D-IA): Thank you, Mr. Chair.

     I want to thank both of you for your service; look forward to continuing to work with you into the future. I think we can all agree that, you know, under the current fiscal constraints that we're operating, we've got to make wise decisions, the best decisions we can make. I think we can all agree with that on a bipartisan basis; make sure that we don't draw down too much because, as Mr. Forbes said and Ike Skelton said, there are contingencies, things are going to happen. We're going to have to be prepared. There's no doubt about it.

     And I have two areas of inquiry that I want to explore with you briefly. The first has to do with our organic manufacturing base at installations like the Rock Island Arsenal. In the past, I think it could be argued that we probably drew down too much. And so when contingencies came up, when issues came up, it took too long for us, probably, to go back to that organic base, build that up again and those capabilities. Congressman Schilling and I in this committee, we've been working across the Mississippi River, across the political aisle, to make sure that facilities like the arsenal can engage in unlimited public-private partnerships, so we can maintain those skills of those workers there; not let the organic manufacturing base decline to such an extent as we did before.

     The second issue has to do with the reserve components, the Guard and Reserve. A lot of us have concerns that -- as we begin to draw down, that we're going to see the capabilities of those forces also decline -- and across the spectrum, including Title 32 duties that they have as well.

     So first, I'd like to ask both of you to respond to the issue of the organic manufacturing base: How does that fit into the overall plan, making sure that those capabilities remain, that they don't decline the way they did before?

     SEC. PANETTA: Congressman, thank you for the question. Two very important issues. One, one requirement that I have with regards to our overall strategy is to make sure we maintain our industrial base. I absolutely have to have that. If we're going to -- if we're going to be able to have a strong defense, if we're going to be able to maintain a strong defense, if we're going to be able to respond to the crises of the future, I've got to have an industrial base that can respond to that. If we have to mobilize quickly, if we have to weaponize quickly, I've got to have that industrial base in place. And if we cripple that, we will cripple our national defense.

     So what I'm asking is, as we develop a strategy and as we, you know, go through some of these decisions, we make very sure that we are protecting the base that you talked about, so that those skills, those capabilities are always going to be there for us when we need them.

     It's going to -- you know, it's going to require some decision- making here. We're going to have to be able to -- you know, to get the cooperation of the private sector as well in this effort. But I've met with them, and I'm fully confident that we can get that done.

     On the Reserve and Guard -- and I'll let the General speak to that -- on the Reserve and Guard, we have -- we have gone through a remarkable period where the Reserve and the Guard have really performed in an outstanding fashion with regards to the wars that we've been in. We've been able to rotate them in. They've gotten battle experience. They're better; they're more capable; they're more experienced. I don't want to lose that.

     And as we go into the future, what I want to do is, A, try to retain that kind of experience to the best we can.

     But secondly, I'd like to keep them on some kind of operational capability so that we can basically move them into roles that will continue to -- continue to benefit from that experience that we've gotten from them.

     REP. LOEBSACK: Thank you.

     General.

     GEN. DEMPSEY: Thank you, sir.

     I don't have anything to add on the defense industrial base other than to assure you it -- that it is prominent in our -- in our strategy review.

     As far as the Reserve component, if we are true to what we say we are, which is a learning organization, we need to learn some lessons as we've -- as our relationship with the Reserve component has changed over the last 10 years. And as we develop this strategy, we might find things that we decide we don't need immediately. They can be placed into the Reserve component. And things that were in the Reserve component that we now realize we need immediately, we might migrate them into the active.

     So I'd say what you'll see, and what is ongoing right now, is a very healthy discourse among the three components, active, Guard and Reserve, to determine what is our new relationship now based on the last 10 years at war.

     REP. LOEBSACK: Thank you.

     I thank both of you for your service, your -- for your support for these issues. And General, just one little area of disagreement in December that -- we're going to have to disagree on the outcome of that game. I have two children who are Naval Academy graduates, so I apologize, but that's how it is.

     SEC. PANETTA: Thanks very much.

     GEN. DEMPSEY: Well, I have two children who are West Point graduates.

     REP. LOEBSACK: There you go. That's right. 

     GEN. DEMPSEY: We're really at odds. 

     REP. LOEBSACK: Thank you, and I yield back. Thank you.

     REP. MCKEON: Thank you.

     Mr. Wilson.

     REPRESENTATIVE JOE WILSON (R-SC): Thank you, Mr. Chairman.

     And thank you, Secretary, for being here, and General Dempsey. Thank you both for your service. And Mr. Secretary, I want to thank you for the clarity of your response that there should be no further cuts in our military defense. Equally, I appreciate you stating your belief that that is the position of the president. This is so important that our country know and that our adversaries around the world know that we will be prepared, and we will be able to defend the American people.

     And General Dempsey, in fact, with that -- with the number of threats the secretary identified that are rising, not being reduced, it's very important that we be able to fight a two-conflict war. I'm very concerned with the drawdown, the Army below 520,000, the Marines below 186,600, that that puts at -- puts us at risk. Will we be able to face a two-front war?

     GEN. DEMPSEY: That analysis is ongoing, Congressman. But what I can assure you is that I would never advocate a strategy for this nation that would limit us to being able to do one thing at a time because that's not the world that we live in.

     REP. WILSON: Thank you very much.

     And Mr. Secretary, I am really honored. I work with the ranking member, Susan Davis, to promote military families, service members, veterans. An extraordinary benefit that they have is the resale system, PXs, NAVEXes, MCX, commissaries. They operate in the most bizarre locations around the world. It's a really great morale builder, a way of showing our respect to our military. And we have extraordinary facilities such as at Fort Jackson and Parris Island that I represent.

     What is your view about our military resale system? In light of the budget constraints, can we count on behalf of this benefit to be available?

     SEC. PANETTA: We -- I view that as a very important benefit for the families that are -- that are out there. I mean, having served two years myself and had my family benefit from that, you know, I understand how important that is. And it's something we'll -- you know, we'll continue to provide. I -- you know, as we go through the process of looking at the infrastructure, you know, there may be some areas where, you know, we may have to reduce the presence. But for the overall benefit, that's one that we think -- we believe we ought to maintain.

     REP. WILSON: And a side issue that's been raised is the number of military families that work in the resale in remote areas around the world that simply couldn't find employment otherwise. And so it has so many side benefits that should be considered.

     And I'm really pleased that Congressman Loebsack has really already brought this issue up: the importance of the National Guard Reserves. As a 31-year veteran of Reserves National Guard, as the extraordinarily proud father of three sons in the Army National Guard, as we really get into the circumstances of budget cutting and determining prioritization, if you could state further -- I can't hear enough because I do know firsthand of the extraordinary success, like the 218th Brigade of South Carolina, of their service in Afghanistan, how much our Guard and Reserve appreciate serving overseas and in the country.

     SEC. PANETTA: I think, you know, I mean, I -- there is another factor here that I think is extremely important to the Reserve and the Guard, which is that the Reserve and the Guard reaches out into every community across this country and it makes every community a part of our national defense system. And to some extent, every community has to participate not only in service but in the sacrifice that's involved when we defend this country. So for that reason, I think, you know, the grass-roots operation of having a strong -- strong Reserve, strong Guard that can help us as we confront the crises of the future is something that I want to assure you we are not only going to maintain, but strengthen.

     GEN. DEMPSEY: And I'll add, Congressman, that having served multiple tours in Iraq and Afghanistan, and having -- most of the time when I get on a C-130 to go someplace, it's an Air National Guardsman. I've driven up Route Irish between the airport and the center of Baghdad and being defended by the Fighting 69th out of New York. And the highest compliment, I think, we can pay the Guard and Reserve now is you can't tell what soldier is an active, what soldier is a guardsman and which soldier is a reserve component soldier. We are truly one force now.

     REP. WILSON: Thank you so much.

     REP. MCKEON: Thank you.

     Ms. Tsongas. 

     REPRESENTATIVE NIKI TSONGAS (D-MA): You've got it right there.

     Welcome. It's so good to see you both here for your first testimony before this committee, and we look forward to many more to come.

     And I don't relish the job you have. You have a very difficult task in view of the extraordinary challenges we face as a country. We all have known for some time that as we face the debt and the deficit, the Defense Department was going to have to absorb its fair share. But we all know we want to do it in as thoughtful a way as possible.

     And what I appreciated, General Dempsey, was when you said that you are a learning organization. And as you've talked about the assessment of risks, how you develop strategies as you assess those risks -- just a comment -- I would hope you also take into account that not every risk can be dealt with through military response; that there are limits to our capacity to deal with every threat militarily; that there are perhaps other ways as well. So just a comment for the record. And as a learning organization, I'm sure that that is something you will take into account as well.

     And also I wanted to reiterate the importance of the National Guard and Reserves. I know in the 5th District of Massachusetts, most who are serving today are doing it through either one of those great organizations and they have done it with such dignity and professionalism.

     But I wanted to go in a slightly different direction. Yesterday the former chairman of our committee, Ike Skelton, testified in a hearing that, quote: "The strength of the U.S. military flows from the dedication and skill of our all-volunteer force. Indeed, the new defense budget must maintain our nation's security by keeping, quote, "the profession of arms," unquote, professional." And I believe this is a view you both share.

     With women now playing an ever-increasing role in our military, supporting our all-volunteer force requires an understanding of the issues and challenges confronting both the service and the service- woman. An issue I'd like to address today is the issue of sexual assault in the military, which is reported with alarming frequency.

     Mr. Secretary, in 2010 there were 3,230 reported sexual assaults in the military. But by the Pentagon's own estimate, as few as 10 percent of sexual assaults are reported. The VA estimates that one in three women veterans report experiencing some form of military sexual trauma. And I can tell you that from the anecdotal evidence I hear, the stories I hear both from returning women veterans but also the VA organizations in Massachusetts, that those numbers are accurate.

     Obviously, it is unconscionable to begin with that so many of our brave service members are subjected to this criminal and predatory behavior. However, what also concerns me is that this systematic abuse will hurt our readiness by deterring highly skilled and patriotic women from enlisting or re-enlisting in our armed forces. 

     In a time of two wars and massive budget cuts, our military needs to attract and retain the most capable personnel possible.

     In 2008, when Ann Dunwoody became the first woman in our nation's history to be confirmed as a four-star general, women made up 14 percent of our active-duty personnel. We must make sure these women's needs are being met.

     The House version of this year's National Defense Authorization Act, which passed in May, takes several important steps to address sexual assault in our armed forces. This work has been done through the combined efforts of many of my colleagues -- Representative Davis, Representative Pingree and Representative Turner. 

     When he appeared before our committee in February, I raised this matter and our responses to it with your predecessor, Secretary Gates, and asked him why the department had previously resisted efforts to put certain protections in place. He responded he hadn't realized that the department had resisted; he would look into it and find out why they opposed it, why not, and why they shouldn't go forward.

     I have a very simple question. Mr. Secretary -- to Secretary Panetta. In this time of austerity, where we face massive budget cuts to the Department of Defense, and potentially threatening cuts if the sequester is exercised, can I count on your support to find -- to fund new initiatives aimed at preventing sexual assault in our armed forces? I don't want to see this budget environment become an excuse to not fund these initiatives.

     SEC. PANETTA: Absolutely. I thank you for your leadership on that issue. 

     It's an issue that I'm paying a lot of attention to because women -- women are performing in an outstanding fashion for the Department of Defense. They put their lives on the line. They're doing great in terms of helping to defend this country. And I think we have to -- we have to make sure that we provide all of the protections necessary so that what happens in these horrendous sexual assault cases, A, should not happen; but B, if it does happen, that justice is rendered quickly.

     REP. TSONGAS: Thank you. I look forward to working with you on this.

     REP. MCKEON: [Inaudible].

     REPRESENTATIVE MICHAEL TURNER (R-OH): Thank you, Mr. Chairman.

     General, in your discussion of the range of threats that we might face, you said that nuclear conflict is unlikely. It is unlikely because of the strength of our nuclear deterrent; it is both credible and reliable. Cuts that are currently pending before Congress to our nuclear deterrent could affect both that credibility and its reliability. At a time where China and Russia are investing in their nuclear weapons infrastructure, we're looking at proposed cuts that would create vulnerability and instability. After years of disinvestment, our current -- proposed plan for modernization really looks at the issue of deferred costs. 

     Mr. Secretary, I'm going to ask you a question that I know your answer, because we had the opportunity to discuss this at the Pentagon on Tuesday. I appreciate your commitment to fully funding the modernization program of the NNSA -- of our National Nuclear Security Administration.

     It's important, though, in this venue to have you to express those opinions, because, as you know, we're right now heading to the prospect of an omnibus in which there could be significantly [inaudible] that occur to our nuclear weapons infrastructure.

     Now, I know you're aware that as the new START treaty was being proposed, the president came forward and was asked for a commitment to modernization of our program. The president and the Senate, taking up the issue, recognized that as you go to lower numbers, that you actually have to set aside increased dollars so that we can have both security and, understanding that we've had deferred maintenance, that we need to go forward with our modernization program.

     The president said: "I recognize that nuclear modernization requires investment for the long term in addition to this one-year budget increase. This is my commitment to Congress that the administration will pursue these programs and capabilities for as long as I am president. "

     The program included an $85 billion investment for modernization. And I know as you both are aware, that this program resides in DOE, the Department of Energy, as opposed to DOD, the Department of Defense. And Secretary Gates, in showing his commitment to that program, set aside $8.3 billion over the next five years to invest in that program; Gates then saying: "This modernization program was very carefully worked out between ourselves and the Department of Energy, and frankly, where we came out on that I think played a fairly significant role in the willingness of the Senate to ratify the new START agreement. So the risks are to our own program in terms of being able to extend the life of our weapon systems. This modernization project is, in my view, both from a security and political standpoint, really important. "

     Now, Mr. Secretary, so my question to you is, do you agree with Secretary Gates on the importance of this modernization program? And what is your assessment of the proposed cuts? As we know, this -- the modernization program, in addition to coming across from the president's budget as fully funded, was included in the House budget as fully funded; came out of this committee with our National Defense Authorization Act as fully funded; and then stumbled as it came out of the Appropriations Committee -- both the House and the Senate Appropriations Committee taking a whack at the program.

     As we know, the omnibus is moving forward. Your statements are even more important now. And I want to highlight that one of the issues with Gates' and your support of 8.3 billion [dollars] to the Department of Energy programs is that, as those funds come out of the Appropriations Committee with cuts, in effect, your funds are being stolen for water projects across the country. And I think you might have an opinion about that. Mr. Secretary.

     SEC. PANETTA: Well, as a former member, I know the -- you know, in those committees, they're going to reach for whatever they can in order to try to see if they can fund those projects, and I -- I mean, I understand that process. But I think it's tremendously shortsighted if they reduce the funds that are absolutely essential for modernization.

     I -- Secretary -- and Gates, are in lockstep with regards to our positions with regard -- and, frankly, with the president -- that we have got to fully fund -- fully fund -- the modernization effort with regard to the nuclear area. I mean, I -- this is -- this is too important. You know, we have always been at the cutting edge of this technology, and we have to stay there. There are too many other countries that are trying to reach out to develop this capability. And if we aren't staying ahead of it, well, we jeopardize the security of this country. So for that reason, I certainly would oppose any reductions with regards to the funding for weaponization.

     REP. TURNER: I appreciate, because your statement's very important to identify that this is not an area where we can find savings. This is an area where cuts actually expose risks.

     SEC. PANETTA: That's right.

     REP. TURNER: General, you might wish to comment on the modernization, as our warheads continue to age, the infrastructure continues to atrophy. You know, it becomes a decrepit state that we look to our nuclear deterrent. Our -- as we look to lowering numbers, we lessen our ability to hedge as our nuclear weapons infrastructure ages and has disinvestment. Do you have comment on that?

     GEN. DEMPSEY: Just to reinforce what you said --

     REP. MCKEON: General?

     GEN. DEMPSEY: Sir.

     REP. MCKEON: Could you please do that for the record?

     GEN. DEMPSEY: I can.

     REP. MCKEON: Thanks very much.

     Ms. Pingree.

     GEN. DEMPSEY: There is a -- there is a nexus -- oh, for the record. I'm sorry. Got it.

     REPRESENTATIVE CHELLIE PINGREE (D-ME): Thank you very much, Mr. Chair.

     Thank you, Mr. Secretary and Mr. Chair, for being before our committee today and for your diligence in answering a great diversity of questions.

     I want to first just echo the remarks of my good friend and colleague Mr. Jones. And I know he's no longer in the room, but I really do appreciate his vigilance and courage in continuing to highlight the importance of ending the war and bringing the troops back home.

     I know we started the day with protesters in the room, and sometimes they seem disruptive or their tactics are some we might argue with, but frankly, we are facing a time when there are protesters in almost every city where we reside or represent and there's huge dissatisfaction in our country about the representation that they feel many of us give them in Congress. And one key area is about ending the war, the fatigue that people have. Many people feel we were misguided getting into Iraq, that we've been in Afghanistan for too long, and in this time of budget deficits we can just not justify $120 billion a year.

     And I just want to echo Mr. Jones in saying that I've been on this committee only -- this is my third year. But I have the feeling that we find ourselves often in somewhat of an unconscionable inertia around the war. It's hard to end; 2014 turns to 2015 turns to 2016, and people continually wonder when will we end the war, particularly after the capture of bin Laden, after the reduced number of al-Qaida operatives, and in fact in the light of, as you said, huge security concerns in countries all over the world which we're not adequately prepared for or perhaps ready to defend ourselves.

     I don't think it's unrelated that we're facing these huge needs for budget cuts and there is this dissatisfaction out there with the way we do things. On the right, it's about our growing deficits and the irresponsibility many people feel around that. On the left, it's this idea of why don't we end the war and why are we spending $120 billion if we significantly need to cut defense. And I think that is why we're facing such difficult cuts today. And I just feel it's important to echo that.

     I agree with so many of my colleagues, that we need to have a strong defense. I'm proud to represent the Bath Iron Works and the greatest shipbuilders in the world, the Kittery Naval Shipyard, where we keep our submarines safe and working. And I understand that we don't have a strong enough Navy, that there are pending threats from China, and we don't want to be a smaller force than they are there. So there are true needs in our military. There are huge security needs around the country. I just believe that this war, which has been crippling us as a nation, which has had excessive costs, which has forced us to prepare for exclusively ground wars and not be prepared in other areas, has to end.

     All that said -- and I know you stated your own opinion on that, so I just feel the importance of reinforcing it and think that I reflect the thoughts of many, many of my colleagues in Congress, and certainly the majority of residents in my district. It's an issue I hear about frequently.

     On a completely different topic, as you're pondering the difficult cuts that will need to be made, one way or the other, I want to echo the remarks of my colleague Mr. Reyes, who talked about the Defense Business Board. And I do appreciate your response to that, that it's still a plan that's under consideration. 

     Thank you very much, General Dempsey, for really talking about the difference in a retirement system for the military than in civilian life. You, I think, said it extremely well, that people move constantly. They serve the country in ways that we don't do in other lives.The people's spouses often can't work and build a retirement. And I strongly oppose that plan. I disagree with the idea of making those kinds of cuts.

     And I frankly would say that with a commission on wartime contracting finding that we've wasted between 30 [billion dollars] and $60 billion in Iraq and Afghanistan, a billion more in -- billions more in wasted weapons programs that never make it into war fighters' hands, it's hard to justify targeting military families, those that serve our country, when it seems to me, again, there are other places to be cut.

     You've stated your opinions eloquently on both of these things. If you have other comments, I'm pleased to hear them, but I wanted to add my voice to others who feel like we're not moving fast enough on ending the war.

     SEC. PANETTA: I mean, I -- you know, obviously I respect your concerns and I recognize the frustration, you know, having been through these wars and the losses that we've incurred. But we are -- you know, we are in the process of ending the war in Iraq.By the end of this year we will have withdrawn all of our combat forces from Iraq. That's going to happen.

     And with Afghanistan, I am fully confident that the president of the United States is committed to ensuring that we transition our combat forces out of there by 2014.

     REP. PINGREE: Thank you. Thank --

     SEC. PANETTA: We just -- we just have to do this right. I mean, what I don't want to happen and what I think all of us need to be concerned about is, if we do this in the wrong way, if we do it so fast that, all of a sudden, Afghanistan falls apart again, becomes a safe haven for the Taliban or al-Qaida, and suddenly we're subject to attacks again, then, you know, the world is going to look at us and say, how could you have let that happen? So that's what I'm trying to prevent, is to be able to do this, but do it responsibly.

     REP. PINGREE: Thank you for your comments.

     GEN. DEMPSEY: I'd like to answer that one for the record too, Chairman.

     REP. MCKEON: Would you, please?

     GEN. DEMPSEY: Yes, sir.

     REP. MCKEON: Mr. Kline.

     REPRESENTATIVE JOHN KLINE (R-MN): Thank you, Mr. Chairman. Thank you, gentlemen, and congratulations on your appearance here in your -- in your new roles.

     I want to thank you, Mr. Secretary, for your comments about responsibly disengaging from Afghanistan and not precipitously so. I mean, we have many, many of our sons and daughters who have served, are serving and will serve there. It would be a terrible, terrible disservice to them for them to serve with no chance of succeeding, as well as an incredible danger to our own country. So thank you for that.

     And I want to congratulate you -- sort of -- I want to congratulate you on your announcement about 2014 and 2017 -- way, way long overdue to have an audit; 2017, I dare say that perhaps neither one of us will be here, so I'm cautiously optimistic that might occur. But nevertheless, I really, really appreciate your take in the [inaudible], so to speak, and trying to get that done.

     We -- looking at these budget cuts -- those in the works, and horrifyingly, those that are potentially out there -- I'm mindful of a former chief of staff of the Army who used to talk about the tyranny of personnel costs. And I know that's of some concern as we have stepped up to meet our obligations to the men and women who are serving, in terms of medical care, pay raises, retirement benefits and so forth.

     And I am very concerned that we honor your pledge to keep faith with those who have served. 

     And I want to get to the question and underscore a discussion that I think was started by Mr. Reyes, about retirement benefits. As it happens, I was recently in Fort Bliss, Texas, visiting my favorite soldier and his family and talking with families and soldiers about the story that was ripping around the United States Army, in the Army Times and elsewhere, and the high, high level of concern that the retirement benefits that they had served and worked for were going to be -- were going to be yanked away. And I -- clearly, I think that would be breaking faith with those who have served, and horribly irresponsible.

     And the same can be said of other benefits that we put forward. But I want to focus on this retirement rumor which was ripping through and which they were taking as real, as being actively considered, that after having served 20 or 15 or a number of years, that they were going to get something substantially less than what they had signed up for.

     So, for the record, absolute clear, I'd like to hear from both of you that you are adamantly opposed to that happening, to changing those retirement benefits for our serving men and women.

     GEN. DEMPSEY: I am adamantly opposed to changing the retirement benefits for those who are currently on active duty. But I'm also open to look at potential changes to the retirement system as part of our overall look at compensation --

     REP. KLINE: For the future.

     GEN. DEMPSEY: -- for the future.

     REP. KLINE: And Mr. Secretary?

     SEC. PANETTA: Absolutely. We just -- we cannot break faith with those that have served and deployed time and time again and were promised the benefits of this retirement program. Those benefits are going to be protected under any circumstances.

     REP. KLINE: Thank you. Outstanding.

     Mr. Chairman, I yield back.

     REP. MCKEON: OK. Thank you very much.

     Mr. Johnson.

     REPRESENTATIVE HENRY "HANK" JOHNSON, JR. (D-GA): Thank you, Mr. Chairman.

     Secretary Panetta, General Dempsey, General [inaudible], I want to congratulate each one of you-all for your new positions and look forward to working with you. I have served on this committee almost five years now, and one thing I have noticed is that from time to time we've needed the presence of Capitol Hill police officers to maintain order in the room while we conduct our business. And I certainly respect the rights of people to come in and protest what we're doing, but don't have a right to interrupt our meetings. And so it's -- we had a large contingent of protesters today, and we were able to proceed with the meeting because we had adequate resources to maintain order, the Capitol Hill police department. I appreciate their service. 

     I've also noticed during history that from time to time there are disturbances throughout the world, and these disturbances may interrupt some of our various interests around the world and it's necessary for us to have some kind of force to maintain order. And I hate that human beings have to have some protection, the weak over the -- excuse me -- the strong over the weak, the weak who seek to get stronger and then take over from the then-strong folks. But this is just something -- is like competition, like capitalism, it's just a naturalhuman phenomenon, and we must have sufficient force when necessary to bring about the kind of relief that we need in terms of maintaining order throughout the world.

     And that's why we need a sufficient military force that's ready to respond immediately to whatever the circumstances may be. And of course, people are always trying to get more innovative and coming up with new ways of doing things, of hurting people, and hurting us, Americans.

     And so we got to stay a few steps ahead of that at all times because if we don't, then we are not taking care of our business as elected officials in this country.

     That having been said, Mr. Secretary, I believe that global nuclear disarmament is necessary if our country and our species are to survive and flourish. I understand the need to maintain a deterrent capability for the time being, but we can nevertheless dramatically cut our stockpiles and slow investment in new weapons. Mr. Secretary, do you agree that nuclear weapons programs should be on the table as the Department of Defense determines how to reduce its spending over the next 10 years?

     SEC. PANETTA: Well, again, you know, we obviously strongly believe that we have to maintain a strong deterrent against those countries that could potentially use nuclear weapons against us. With regards to reducing our nuclear arena, I think that is an area where we -- I don't think we ought to do that unilaterally. We ought to do that on the basis of negotiations with the Russians and others to make sure that we are all walking the same path.

     REP. JOHNSON: Certainly, and I definitely agree with that comment.

     The Army has spent $2.7 billion trying to build an intelligence analysis platform, the Distributed Common Ground Systems program known as DCGS-A. That's -- that program is now five years behind schedule, vastly over budget and fails to meet the needs of our soldiers. An article appeared in Politico earlier this summer detailing some of those failures, and it explained that the program was unable to perform even the simplest tasks and frequently crashes. Is this system -- we've already spent $3 billion on this system.

     REP. MCKEON: The gentleman's time is expired.

     Mr. Lamborn.

     REPRESENTATIVE DOUG LAMBORN (R-CO): Thank you, Mr. Chairman.

     And Mr. Secretary and Mr. Chairman, I welcome you both to the committee also, and I congratulate you both on your new responsibilities, I think. And I look forward to many more sessions with you.

     My first question has to do with missile defense. Mr. Secretary, as you know, the president's budgets to date have cut a total of $1.65 billion out of the ground-based missile defense system, the only missile defense system currently in place to defend our homeland. Are you committed to the adequate resourcing of the ground-based missile defense system in the future?

     SEC. PANETTA: Yeah, no, I am committed to adequately resourcing what we have in place.

     REP. LAMBORN: Well, then, as a follow-up, do you believe there are now an adequate number -- I think it's too limited of a number, but do you think there's an adequate number of ground-based interceptors both to counter the threat to our homeland and to provide for testing?

     SEC. PANETTA: You know, I've had the chance to visit NORAD and STRATCOM as well, and I had a chance to really look at our capabilities. I mean, I think -- I think we're in good shape with regards to our ability to respond. Doesn't mean that we shouldn't continue to upgrade. Doesn't mean that we shouldn't continue to look at other ways to try to -- you know, to expand that capability. But you know, we really do have a very remarkable defense system set up to deal with that challenge.

     REP. LAMBORN: OK, well, I look forward to continued conversations on this with you both. 

     And now a separate question, but having to do with capability, and this is for both of you. As already-scheduled budget cuts to the Department of Defense in excess of $400 billion for the next 10 years begin to take place, and apart from sequestration, do you anticipate the Army reducing the number of brigade combat teams?

     GEN. DEMPSEY: As the former chief of staff of the Army and currently chairman, I do anticipate that the Army will reduce the number of brigade combat teams, but not just because of the pressure of a new fiscal environment. Again, I'm all about trying to understand what the nation needs in 2020 and what have we learned over the last 10 years of war. So there is a plan that General Odierno, the current chief, is working, with my support, to take a look at how many brigade combat teams you need if you change the nature of the brigade combat team, so roll back in another maneuver battalion, some intel assets, things that we didn't know we needed 10 years ago, we -- now we know we need them.

     So we will reduce the number of brigade combat teams, but the number remaining will be more capable.

     REP. LAMBORN: Are you talking about doing something simultaneously with anticipated drawdowns of the numbers of troops in both Iraq and Afghanistan?

     GEN. DEMPSEY: Well, let -- yeah, stated another way, even if we had all the money we needed, we would want to make some changes based on the lessons of the last 10 years of war. And so we need to -- we need to do that.

     REP. LAMBORN: But are you mostly anticipating a reduction of the number of teams that would correspond to the number of troops being brought home from those two countries?

     GEN. DEMPSEY: No, sir. There is a relationship between what the combatant commanders establish as a demand. So we know what a steady- state demand is, and part of that demand is articulated by what we see as the future of Iraq and Afghanistan. So we know, for example, if the demand is 10, we have to have a minimum of 30 because there's one in the demand cycle, one just out, one getting ready to go. But 30 is not the number, but I'm just using that illustratively.

     REP. LAMBORN: Yeah. Okay, now, if there is sequestration, how would that impact the ability of our military to address the kinds of threats that you both talked about earlier in your testimony?

     SEC. PANETTA: I mean, all bets are off because it would -- sequestration would demand such drastic, across-the-board cuts that it's pretty clear that the force structure would be reduced drastically. We would be looking at having to increase the number of RIFs within the military. And in addition to that, there's no question that we would hollow out the force because it would require these drastic, deep, across-the-board cuts that would affect training, equipment and everything else. It would really be devastating in terms of our national defense.

     REP. LAMBORN: And General, is there anything you would care to add to that?

 GEN. DEMPSEY: As a -- as a former service chief, the way that a service chief maintains the balance of his force is he has three [inaudible] stats. One is manpower -- end strength. One -- that's one -- one [inaudible] stat. The other -- [inaudible] -- is modernization and equipment. The other is training and maintenance. The impact of the sequestration is not only in its magnitude, it's in what it does -- what it directs the service chiefs to do in each of those [inaudible] stats. We lose control. And as we lose control, we will become out of balance, and we will not have the military this nation needs.

     REP. LAMBORN: Thank you.

     REP. MCKEON: The gentleman's time expired.

     Mrs. Hanabusa.

     REPRESENTATIVE COLLEEN HANABUSA (D-HI): Thank you, Mr. Chair.

     Thank you, Mr. Secretary, and thank you, General.

     Let me begin first with Mr. Secretary. My questions are on the line of the future. As you know, the chair has put these series of hearings together about 9/11 and the future, and you are the fifth in the series. General Cody, retired, said this in his testimony, and I've written it down because it's something that stuck with me. He says the real question with regard to services budget are simple. What missions do you want our military to continue to perform? What threats do you want our military to counter? What level of readiness do you want the military to sustain? And history has taught us that we're not very good at any of that. We don't predict well. But we are here, and that's almost what we are kind of forced to do.

     So Mr. Secretary, from your vantage point, what is this vision for -- that you want to share with us that you perceive this military has got to look like?

     And General, so you can start thinking about your response, I'm very curious about your 2020 joint force statement. And if you could start with that.

     But Mr. Secretary, can you begin with that first?

     SEC. PANETTA: Yeah, I think that the general who testified, you know, hit the right buttons. We've got to look at the threats that are out there. And as I indicated, we are dealing with a variety of threats that remain out there that are serious and that challenge our security.

     It begins with terrorism, the ability to respond and keep the pressure on terrorism so that people can't attack this country, the ability to bring these wars that we're engaged in to an end. We are involved in those wars. We've got to bring them to an end. Thirdly, the area of dealing with Iran and North Korea and not only the nuclear proliferation from those countries, but the threats that they constitute in the regions that they're involved in.We've got to be able to deal with the Middle East and the unrest that's going on in the Middle East. We've got to be able to deal with the challenge of China and rising powers. We've got to be able to deal with cyber.

     You know, that's a quick rundown of the threats that are out there. We've got to be able -- if we're going to defend this country -- be able to have an agile, deployable, effective force that can respond to each one of those threats. That's what we've got to do. And that's the vision that we've got to create.

     REP. HANABUSA: Before I get to the general, Mr. Secretary, that's -- but isn't that the problem? I mean, I've had these discussions -- and I represent Hawaii. And of course, China and North Korea, they're very real. Is the fact that, to be agile, aren't we looking at different types of forces? I mean, you know, we have always thought about -- I think [inaudible] force, I think, is one of the words that the general used it for -- but it's -- we have counterinsurgency, counterterrorism, and all of that are different to attack different kinds of problems.

     Now, if you've got a limited amount of resources, what rises to the top, or can anything not rise to the top and we've just got to do it all?

     SEC. PANETTA: You've got to be -- you've got to be damn flexible, and that's what we're going to have to be in the future.

     General.

     REP. HANABUSA: General.

     GEN. DEMPSEY: Thank you, Congresswoman. Well, this is exactly the conversation we're having with ourselves, so if you're -- if you're not too busy, we wouldn't mind having you on our committee because -- 

     REP. HANABUSA: I'd love to come. 

     GEN. DEMPSEY: Okay. The sort of intellectual framework is that, when we get to 2020, we need to have taken into account the capabilities that we -- 10 years ago, we didn't have a capability in cyber. Ten years ago, our special operations forces were nowhere near as capable as they are today. There -- these two areas are exponentially more capable.So what we're looking at in 2020 is, what is this exponential improvement and capability in those two areas that didn't exist 10 years ago? Ten years from now, what will that -- what will that allow us to do with the conventional force? And how do we integrate those capabilities, not just keep piling them on top of each other? Because as we continue to pile, we run the risk that you just articulated of becoming unaffordable. So that's one answer to your question.

     Secondly, we will have to make some decisions about where in the world we will -- we will take more or less risk, and that's a matter of understanding demographic change, climate change, economic change, and which countries in the world are appearing to align themselves against our interests. And our interests are actually not going to change.We need access to resources, we need to have freedom of navigation, and we need to be partnered on issues of common interest with our allies and partners.

     So we'll be able to articulate that world and then look back at where we are today and use the next four years when we submit four POMs, '13-'17, through '16-'20, to build that force.

     REP. HANABUSA: Thank you. Thank you, Mr. Chair.

     REP. MCKEON: Thank you.

     Mr. Wittman.

     REPRESENTATIVE ROB WITTMAN (R-VA): Thank you, Mr. Chairman. Secretary Panetta, General Dempsey, thanks so much for joining us today, thanks for your service to our nation, and thanks for coming here to discuss with us what we know to be some of the most important decisions that we all will make in a long time.

     Secretary Panetta, I begin with you, your statement earlier talking about those four decision-making guidelines. I'm in full agreement with clear, strategic priorities, making sure we have a ready, agile and deployable force, making sure we have the capability and the capacity as was spoken of. I think those are absolutely critical.

     As we look at that clear strategic program, plan, whatever you want to call it, for the Department of Defense, as you spoke of, there are going to be some risks that are out there within that decision- making framework. The question then becomes, as you are faced -- both of you are faced with $450 billion in reductions in the next 10 years is, how do you calculate those risks? How do you make priority decisions in a realm that, as you said, is very dynamic, changes all the times -- threats emerge, threats disappear? My question is this: As you look at prioritizing, can you tell us this -- prioritizing, what are the three areas that you say have to be preserved, and what are three areas most likely to be cut?

     SEC. PANETTA: You know, it -- again, it really wouldn't -- it wouldn't be fair to try to throw those issues out there, because we're really in the process of looking at all of those areas and trying to decide, you know, what -- as we -- as we deal with the threats that are out there, what do we need to confront those threats, and how can we respond, and where is it that we can seek some reductions.

     Now, you know, look, let's just begin with what I think is going to be, you know, something that is pretty clear. We're going -- we're going to have a smaller force.

     And if you have a smaller force, you're not going to be able to be out there responding in as many areas as we do now. 

     So the decision, then, is going to be, you know, what are the areas we have to prioritize. For example, Korea. You know, we have a large presence in Korea. Korea remains a real threat. I think we've got to maintain that presence there. Are there other areas, then, you know, where we -- for example, in Europe, we've got, you know, base structure in Europe that is pretty broad. You know, do we need to maintain all of that at the same time that we're dealing with these other needs? So you can see the kind of trade-offs that are going to have to be made, based on the threat, based on the nature of the threat. 

 But by doing that, you know, I guess what I need to make clear to everyone, particularly on this committee, is that when you do that, then there are some risks associated with that.What are the risks, for example, if we reduce our presence in Europe?

     Well, it's the relationship with NATO and the role that NATO plays. You know, are we going to be able to then to fully -- you know, to be able to provide the kind of support that NATO needs in order to do its job? Those are the kinds of issues that I think we're going to have to debate.

     REP. WITTMAN: Gotcha. Very good.

     General Dempsey?

     GEN. DEMPSEY: Yes, thank you Congressman -- just to be clear about the end state, I mean, we -- I didn't become the chairman of the Joint Chiefs to oversee the decline of the armed forces of the United States and an end state that would have this nation and its military not be a global power. So you're never going to hear us say: Well, we're going to be really good in the Pacific, but we're going to completely ignore the Indian Ocean and its littorals. We just can't do that. That's not who we are as a nation. 

     And so we will remain a global power, and the armed forces of the United States will remain the most dominant military on the -- on the planet. I mean, we owe the country and we owe the young men and women we send into harm's way that.

     So as we look at the future and priority -- and prioritization, it's not a matter of ignoring anything, because, again, that's -- we can say that. It'll look good on a PowerPoint slide.It'll make us feel good. But at the of the day, we're not going to ignore anything that threatens our nation or threatens our interests.

     Risk is generally managed in terms of time.

     REP. WITTMAN: Right.

     GEN. DEMPSEY: Now that's a -- kind of an indelicate answer. I could certainly flesh it out for you over time, but -- so if we were to say that we have to do two, three, four things at a time, we could add up the resources required, put a bill -- I could put a bill on the table for the SECDEF and say, here's what we need, but I know you don't have that kind of -- so you're going to take all the risk. I'm just telling that that's -- and that's not where we need to go.

     REP. WITTMAN: Right.

     GEN. DEMPSEY: Where we need to go is say: Look, there's 10 things we need to be able to do. These we can actually take some risk in terms of time, whether it's the time to activate the reserve component, whether it's the time to generate it.

     So time is the -- is the independent variable here, and we're trying to determine how to use it.

     REP. WITTMAN: Very good.

     Thanks, Mr. Chairman. I yield back.

     REP. MCKEON: Mr. Ryan.

     REPRESENTATIVE TIM RYAN (D-OH): Thank you, Mr. Chairman. And congratulations to both of you.

     Secretary Panetta, my mom is 100 percent Italian, so congratulations on being the second Italian-American secretary of defense. 

     Let me associate myself first with Congressman Loebsack's remarks regarding the defense industrial base. I represent a district in northeast Ohio, as you know, and it is critical that we have this money that we're spending, the billions of dollars, invested back into our country. 

     And I spent years when I was first on this committee dealing with the Berryamendment, and sometimes the waivers that were granted through the Berry amendment for specialty metals was happening way too often when we have American companies -- titanium and others -- who could provide the materials for the military. And so I hope as you continue to push down through the bureaucracy your view and your vision, that some of this taken into consideration.

     The one issue I do want to talk to you about -- we see often in our districts, when young kids come back and they've been killed in action, they're on the front page of the paper and we have parades and gut-wrenching services with their high school buddies and the whole nine yards. One of the issues that I've been concerned with too is the issue of the kids who come back, can never get re-established, are dealing with high levels of PTSD, and they're in the obituary section in the back of the paper and there aren't parades and there's no banners and there's no huge services and community recognition. 

     And one of the issues, I think, that is dealing this blow to these kids is the extreme and prolonged levels of stress that they have in multiple tours and in being able to deal with this, not only as combat troops but also trying to deal with the stress afterwards.

     And so I want to call to your attention a program called the Mindfulness-Based Mental Fitness Training program that was established by a woman named Liz Stanley at Georgetown. And it is beginning to show, both in trials within the Army and in the Marines -- there was an article in the Marine Corps Times a couple of weeks ago called "Bulletproofing Your Brain," and it basically helps these folks deal with the stress levels that they're -- they deal with in combat.

     And we see with high levels of stress, prolonged and extreme levels of stress, you have diminishment in your cognitive abilities, diminishment in your situational awareness, your ability to focus; and causes a lot of problems while in theater. But what they're starting to see here and study in the field of neuroscience is that you can actually change the shape of your brain; you could make new neural connections. And I think this is important when you begin to teach these soldiers both to raise their performance and improve their performance as soldiers, being able to focus better, having more efficient use of their faculties as they're dealing with this stuff, increased levels of situational awareness; but also, being able to deal with the stressful situations afterwards when they come back.

     And I think this program, if you will look at it and start looking at what some of the studies are suggesting -- I think it can have a transformational effect. It's my own personal opinion. The science is still -- the case is being built. But I think it can have transformational effects on giving these soldiers the tools that they need for when they go back home -- benefits now and benefits when they go back home.

     And the reports we're getting back in some of these articles from people in the Marines, in the platoons, is that they think something is there; they feel it work. And one quote from the Marine Times article was a soldier who said -- who's been to, I think, Afghanistan once and Iraq twice; learned of this program after he got back, and he said: Boy, I wish I would have had this before I went over.

     So I want to just bring that to your attention and ask, you know, your opinions on trying to look at some of these alternative approaches to training our soldiers and getting them maybe prepared in better ways to deal with what they're going to see, hear, smell and have to deal with at war. So --

     SEC. PANETTA: Congressman, I want you to know that I'm willing to look at anything -- anything that can help be able to serve these men and women when they come back from the battlefield to be able to adjust and be able to deal with the pressures and the stresses that they bring back with them. This is -- this is a real problem. We -- you know, we have a -- too high a rate on suicides taking place, and it's an issue that bothers me terribly because I'm writing condolence letters now to those families. And that just -- you know, that -- it's unacceptable.

     We have got to -- we ask these guys to go into horrendous conditions. They put their lives on the line. They have to face incredible threats to them and to their buddies. And suddenly, you know, they're pulled out of that and brought back to this country and having to face some of the pressures here of having to adjust. Whatever we can -- whatever we can do, we have to -- [inaudible].

     REP. RYAN: I'd love to -- I'd work with you some more on this program, the general as well. And hopefully at some point we could have a committee hearing on it and bring the neuroscientists, bring Liz and bring the crew here from some of the folks who've experienced it already.

     REP. MCKEON: Good idea. Gentleman's time is expired.

     Mr. Hunter.

     REPRESENTATIVE DUNCAN HUNTER (R-CA): Thank you, Mr. Chairman.

     Thank you, Mr. Secretary and General, for your -- for your service and dedication to duty. And it's an honor to be with you today.

     One, General, I'm reassured by your comments you just made. It sounds like you just said not having a global influence is not an option. But it is if a trillion dollars worth of cuts goes into effect over the next 10 years.

     So a lot of folks and my colleagues on both sides have hit on the high-level points, but I think what we need to do is have the conversation with the American people; that if we have like a Checkpoint Charlie, Berlin, situation in the Luzon Strait or the Strait of Taiwan, we have to build up there for some reason; and we have a humanitarian disaster, we have a nuclear fallout in Japan, like we had with their -- with their new plants, Mediterranean, Indian Ocean, like you mentioned, other parts of the South China Sea, Atlantic, Pacific -- there's not going to be a way for us to respond to everything if we break down the military with those cuts. So we're going to have to have the conversation with the American people: Do you not want to help Israel? Because we can't help Israel if we have a buildup at Taiwan or some other area where we have to stare the bad guys in the eye and build up in that region.

     So I'm just saying we have that that conversations -- I don't think the American people realize that not helping Israel, for instance, is one of the options that will need to be on the table if those cuts go through. 

     So bringing it down from that 10,000-foot view down to ground level -- talk about IEDs -- I think that a lot has happened. Under Secretary Gates, you had the UAV Working Group, the IED Working Group, Dr. Carter, General Paxton, JIEDDO, all of these different groups that -- getting together, but it still takes a long time, sometimes months, sometimes years to field, deploy, do R&D and get stuff to the field, even if it's only an 80 percent solution.

     For instance, the newest thing with the Marine Corps -- I was there literally not as a Marine but as a civilian when they got the silk underwear because of the IEDs and the way that things are going with IEDs and the types of injuries that they have. But that's the extent of what the American might and the American industrial base can provide to our Marines and soldiers -- is hopefully a cleaner extraction of the fragmentation, as opposed to a way to combat it.

     So my question is, what fresh thinking, what kinds of outside-of- the-box ideas are you bringing to the fight on the number-one threat to our men and women -- and 70 percent of our casualties and KIA are caused by that -- historically low casualty rates, compared to any other war in human history, but it's still there, and that's my question.

     And then if I could, how will these budget cuts, if they go into effect, affect our counter-IED fight? Thank you.

     GEN. DEMPSEY: Thank you, Congressman. Thinking of defeating the ideas thought about in three aspects: You have to defeat the device. You also have to defeat the network that produces it, which is the supply chain, the leadership, the facilitation and the financing of it. And then there's an issue called signatures, which is one of the creative ways we've been getting after identifying with, through various sensors, the signature component of an IED so you can track the network and defeat the device. And that work is ongoing.

     What we -- what we've done in the Army is essentially said, the IED is the enduring threat to our force for the foreseeable future, so we need to institutionalize. It can't any longer be thought of as a one-off threat -- it's there, and it will always be there, because the enemy knows that, asymmetrically, they can attack us that way.

     JIEDDO is an important organization. It's fully funded in the budgets we've submitted so that we can do the kind of work that you're describing. And so at this point I can tell you that even in the 450 billion-plus [dollar] cut or reduction, we can account for what you said.

     If the -- if the reduction goes deeper than that, I'd have -- we'll have to take a look.But it will -- it -- everything will be affected if there's another phase of this thing.

     SEC. PANETTA: I -- one -- I think one of the real success stories of my predecessor, it was the ability to develop the vehicles; that had to be done on a quick -- a quick timetable to get them out to the -- to the battlefield.

     Under most circumstances, that would have taken eight or 10 years. What they did was they basically said, we need them, we need them now. They made the contract. They required that it be produced within a time frame. They got it done. We got it out there and we provided it out in the battlefield.

     That's the model I think we have to follow as we deal with these kinds of threats. We can't -- we can't just sit back and allow this thing to go over a long period of time. We got to get it and get it done now.

     REP. HUNTER: The normal acquisition process had to be bypassed --

     SEC. PANETTA: That's correct.

     REP. HUNTER: -- by this Congress and --

     SEC. PANETTA: Exactly.

     REP. HUNTER: -- by your predecessor for that to happen.

     Thank you both.

     I yield back.

     REP. MCKEON: The gentleman's time's expired.

     Mr. Garamendi.

     REPRESENTATIVE JOHN GARAMENDI (D-CA): Gentlemen, thank you very much.Mr. Panetta, it's always good to share a table, or at least an opportunity with you. And General, thank you for your service.

     I have a series of questions, actually three. I'll send them to you in writing and save a little bit of time around here.

     In discussions about maintaining our industrial base, which we like to call Make It It America, numerous questions have arisen about the outsourcing to other countries of key military equipment. For example, the fuel for the Hellfire missile is made in China.Raises a bit of a question. Many of the components that deal with the targeting of critical weapons are also made overseas, in China and other places.

     Is this a major concern? And I'll send you a more detailed question on it.

     The other point that I'll just make is that from the far left to the far right, various think tanks have been thinking about what to do with the military. A very interesting matrix can be put together. It was put together by my military fellow. And it's very interesting where both come down, from the far left to the far right and in the middle, about things that can be done. 

 I'll send you that matrix, and I think you might find it a useful exercise if -- and maybe you've already done it -- about where at least those two spectrums -- far-out spectrums find similar potential. I'll let it go at that. You can comment if you like, or you can take a deep breath and take a pass.

     Thank you very much.

     SEC. PANETTA: Thank you, John.

     REP. MCKEON: At this time Mrs. Roby from Alabama.

     REPRESENTATIVE MARTHA ROBY (R-AL): Thank you.

     I just want to say personally what an honor to be here in front of you both today. And I just appreciate your willingness to serve our country in this capacity.

     I want to touch on something a little bit more on the personal side as it relates to our troops. We've talked about strategic planning, and certainly that's very important as we move forward with these cuts. But we got to talk about the morale of the men and women who are currently serving our country both here and abroad and what this whole discussion is doing to them as they move forward in their day and nights away from their families and really what that looks like.

     I had the opportunity several months ago to sit down with some soldiers at Fort Rucker, Alabama, and talk to them about what can we do to help support them. And this one soldier looked at me, and his pregnant wife was sitting at his side. And he looked at me with tears in his eyes and said, Ms. Roby, don't worry about me; just take care of her. And we're fast approaching, as we move towards the realness of this sequestration -- because as I've said many times that this joint committee, in a lot of ways, is a microcosm of all the problems we already have in Congress.

     And as we move towards this deadline date, it's that soldier and his wife and his family that is the real victim in this.

     Time and time again, over the course of my short time here in Congress, our military families have been the ones that have been the insurance policy against political debate here in Washington, and I think it's unconscionable.

     And I think what -- all of your answers that you've provided today are important, as they relate to specific operations within our military. But I just really want to give you both an opportunity to talk about the effectiveness -- you know, with the 24/7 news cycle, our military families are certainly not immune to the very discussions that we're having here.

     And I have small children and I work, my husband and I, very hard to ensure that they know that they're loved and that they feel secure. And when you have a soldier serving overseas whose spouse is at home having to worry about whether or not that paycheck is going to come for them to put groceries on the table or to make the car payment or the house payment -- you, General, said that no matter how awesome our technology is, as moving forward as a progressive military, our men and women in uniform are what make this military great. So I just wanted to give you an opportunity to both respond to that aspect of what we're looking at down the road.

     SEC. PANETTA: Congresswoman, I thank you for that -- for that question. Our men and women are out there putting their lives on the line in order to defend our democracy. I think that one of the great national security threats is the dysfunctionality of the Congress in its inability to confront the issues that we face now.

     And I think your concern is that this committee that's been established might fail to provide the leadership that it's been given -- or the responsibility it's been given to be able to come up in a responsible way with additional deficit reduction. And that concerns me, as well.

     I have to share with you, I'm -- you know, I served in this House for 16 years. During that 16 years, we faced a lot of great threats. We faced a lot of problems. But the leadership was there on both sides of the aisle, Republicans and Democrats, to work together to try to find solutions to these issues, not to walk away from them. 

     And I think what's very important, for the supercommittee and for all members of Congress, is to take the time to think about the sacrifice that those men and women go through to put their lives on the line in order to be able to defend this country. And if the members of the Congress would be willing to engage in the same kind of sacrifice, then I think they will have earned the right to represent those constituents in the Congress.

     REP. ROBY: Thank you. I appreciate that. 

     General?

     GEN. DEMPSEY: It's hard to do a better job of answering your question and the concern behind it than the secretary just did. But in everything we're doing right now, in every deliberation about strategies and how we're going to absorb different reductions, the family -- the soldier, the family, veterans, the wounded warriors, Goldstar families -- are always the first issue that we discuss. And if we only end up with one dollar at the end of all this, it will go to a family.

     REP. ROBY: I appreciate that.

     Mr. Chairman, I yield back.

     REP. MCKEON: The chair now recognizes Mr. Coffman from Colorado.

     REPRESENTATIVE MIKE COFFMAN (R-CO): Thank you, Mr. Chairman. First of all, thank you so much for your decades of distinguished service, Secretary Panetta, General Dempsey, and for your dedication to maintaining a strong military. I am reminded of the history of Great Britain after World War II where they -- where they still saw themselves as a world power, but they came out heavily in debt, they were weak, weakened by World War II. They were still engaged in anti-communist operations in Greece and Turkey, but then they had to turn to the United States. And we assumed that role, and there's nobody behind us.

     China is a rising power, and I don't think we'd ever want to return that responsibility over to China. And so we have to maintain that strong military, that global power, as both of you have so well articulated today.

     Let me put three questions forward, and if we run out of time in terms of answering them, then if you could answer them on the record.

     The first one is that we still have a selective service system in place. Yet according to the Army Recruiting Command, individuals between the ages of 18 and 22, 75 percent of them, I believe, are ineligible today for enlistment in the United States Army, of young people between the ages of 18 and 22. And 1973 was the last year that we had the draft. In 1974, we disbanded selective service. In 1979, Jimmy Carter put it back on the table as a response to the Soviet invasion of Afghanistan. And it's never -- and it still exists today. And it's not even in your budget; it's an independent agency. And it's under the Financial Services Committee; it's not even under this committee. And so the question is, do we still need it?

     The second is, in South Korea, I believe the -- we are moving from one-year assignments to three-year unaccompanied -- three-year accompanied tours for our 28,000 force presence there.

     The -- that decision was made, I think, really during the height of the Iraq war, when dwell times were next to nothing.

     But we're phasing out of Iraq now. We'll be phasing down in Afghanistan. Dwell times will expand. And the question is, do we really need to spend the $13 billion that I believe is necessary military construction to accommodate that change in policy? Can we do something that's more cost-effective, given the expansion in dwell times, like deploying battalions for six-month rotation to and from CONUS?

     The last issue is -- concerns -- I think we have rank inflation in the military, and I'd like you to take a look at that. I believe that if we look at the height of the Cold War, when I was in the United States Army, we had a military much larger then. But I believe that there are more four-star flag officers in the military today in a much smaller force. I think we have as many admirals as we have ships in the United States Navy, and I think that that is duplicative through the rest of the military, and I would certainly like you to take a look at that and the costs associated with that, 

     Could you go through those three questions, please?

     GEN. DEMPSEY: No, we are looking at -- I'll just go from bottom to top --

     REP. COFFMAN: Sure.

     GEN. DEMPSEY: -- and the secretary will take the question about selective service. 

     We are looking at rank. Some of the rank inflation is the result of international partners and their desire for flags, but we are looking at that, believe me. 

     Secondly, on Korea tour normalization, it's part of our strategy review to look at our forward presence -- and wherever we happen to be --

     REP. COFFMAN: Sure.

     GEN. DEMPSEY: -- but notably in Korea and in Europe, and again, to determine how best to do it in an affordable way.

     And I assure you that we are alert to the fact that tour normalization to three-year tours might become cost-prohibitive. We do need some structure there with families because of the message it sends, and the readiness increases when you have soldiers there for a longer period of time.

     SEC. PANETTA: I mean, I've -- we're in the process of looking at everything that costs a lot of money. And that's one of the things that costs a lot of money that we need to look at and determine whether or not we can find some savings in the way we approach that.

     On the selective service -- the registration, registration is still required. You're right that there is a system. It's not associated with us. But you know, my view is that we ought to maintain the registration aspect because, particularly as we go through these budget cuts, particularly as we go into the future, if we -- if we face, you know, one of those surprises, if we face one of those crises that suddenly occurs, we've got to have some mechanisms in place in order to be able to respond.

     And while, you know, right now I have to tell you the volunteer force is the best -- I wouldn't trade it for anything. It really has served its purposes. But I think we always have to be ready for that possible contingency in the future if we suddenly had to face an unexpected event.

     REP. COFFMAN: Thank you.

     Mr. Chairman, may I have 30 more seconds?

     REP. MCKEON: Without objection, so ordered.

     REP. COFFMAN: Thank you, Mr. Chairman.

     I would -- in terms of looking at forward bases and whether or not we can demonstrate our support for our -- for our allies, whether in NATO or South Korea, through scheduled, regular, routine joint military exercises in -- we're spending almost 4 percent of our GDP on defense. I think only four of our 28 NATO allies are spending the required 2 percent required under the NATO charter.

     In South Korea, they're spending 2.7 percent of their gross domestic product on defense. I believe we're at north of 3.6 percent. It seems like we care more about defending the South Koreans and the Europeans than the Europeans and the South Koreans.And so I think that we need to strike a balance in that.

     Thank you, Mr. Chairman. I yield back.

     REP. MCKEON: The chair now recognizes Mr. Scott from Georgia.

     REPRESENTATIVE AUSTIN SCOTT (R-GA): Thank you, Mr. Chairman.

     General, Mr. Secretary, I appreciate you being here. And we've talked a lot about the cuts on the top line. And I represent Robins Air Force Base in Georgia, and we have Moody to my south, Benning to my west, Kings Bay to my east, Stewart, Gordon -- I should -- I should not have started naming all of the bases. But the military-industrial base and the men and women of the armed services are very important to us. And I did not vote for the sequestration. I think it's too much.

     Now, I do believe that, properly managed, we can -- we can take our cuts. And I believe that the -- I couldn't think of a better person to help us manage through that than you, Mr. Secretary.

     One of my concerns is, when I look at the things that we're doing that are cost drivers, the Energy Policy Act of 2005 says that in our -- in our new facilities we can have zero percent of fossil fuels in -- providing the energy for those facilities by 2030. That means no natural gas, it means no coal, it means no petroleum. And I guess one is, is that realistic? And two is, if -- I think this is just one example, I would say, of a -- of a policy that's been put in place with well-meaning intentions, that is going to take energy as a percentage of your operations from approximately 3 [percent], 3 1/2 percent, as I understand it today, up to a much more significant portion of your budget.

     And I guess my question is what other cost drivers are there like that that we could make some changes to that would help you in reducing your cost?

     SEC. PANETTA: Congressman, you know, as part -- as part of this strategy approach to look at, first of all, the overall needs, and then determine where we go, I really do have to -- I got to put everything on the table, including what you just discussed. I mean, I think we have to look at all of that to make sure that we're implementing the most cost-efficient approach to dealing with these issues. I mean, I -- you know, I understand, you know, at a time when, you know, we were getting a blank check and things we're doing fine, you could -- you could do all kinds of things. But now I'm in a situation where I, frankly, have to tighten the belt. And that means I have got to look at everything. And I think, you know, the areas you pointed out are something we have to look at to make sure it makes sense.

     REP. SCOTT: Well, I hope that -- I hope that you'll give us a list of the things that you need us to help you with along those lines because I do believe that in order -- in order for us to reach our top-line goals without affecting national security that we're going to have to look at cost drivers like that.

     And with that said, I know that y'all waited three hours for me to ask that question. I'll just tell you we're ready, willing and able to work with the two of you to solve this challenge.

 SEC. PANETTA: Thanks.

     REP. SCOTT: I yield back my time.

     REP. MCKEON: All right, the gentleman yields back.

     The chair now recognizes the gentleman, Mr. Young, from Indiana.

     REPRESENTATIVE TODD YOUNG (R-IN): Thank you, Mr. Chairman.

     And thank you, Mr. Secretary and General Dempsey, so much for visiting us today. I have to say I've been incredibly encouraged, more so than any HASC hearing that I've attended thus far during my first term here, because you've discussed in a very direct way the need to assess risk, to accept risk, to articulate precisely which risks we're willing to accept, to do the whole probability of risk times anticipated cost of any given threat.

     That's exactly the sort of analysis that I've been pushing for for months here, and I know others have as well. And so I thank you for your leadership.

     Coming out of that analysis, of course, we'll be able to, I hope, prioritize missions, and that in turn will inform our spending decisions here in Washington. Where do we fund personnel? What skill sets are needed? What weapons platforms? That's the way we do business, and it's really refreshing.

     I'm going to pivot a bit, having given you those kudos, to the war in Afghanistan, where I see less clarity. And I hope in coming weeks and months -- perhaps years will be required -- to get some more clarity as to what our nation's doctrine is.

     Mr. Secretary, you indicated that we're in Afghanistan to keep Afghanistan from becoming a safe haven for terrorism. True, it seems, and I hear that from many. That's a bit too vague for me. We did, as Mr. Jones said earlier -- we got bin Laden. Al-Qaida has dispersed around the world. If a save haven for terrorists exists, it's right next door in Pakistan.

     So what is this doctrine that justifies a massive ground presence in Afghanistan?How do we measure success, in that theater in particular, but also in other theaters? If it's justified to have an American presence there. What's the exit strategy? 

     It's going to take well past my reserved time here for you to be able to answer that.As you get halfway into answering the first question of that litany, my time will expire.

     So I just want to encourage you to clarify these things. People are losing their legs, people are dying, and we owe it to all of them and their families and the United States of America.

     I'm going to focus narrowly on one aspect of our exit strategy though, and that is our fiscal commitment to the region. It remains open-ended. Right now we're spending $120 billion a year. And as far as the eye can see, from my vantage point, we're going to continue to spend money in that region in the form of foreign aid and military assistance to harden the police and military forces there.

     What is this administration's -- Mr. Secretary, what is this administration's economic strategy for Afghanistan, which it, under the law, was required to present to this Congress before you were sworn in, back in June, and we're still waiting on it?

     SEC. PANETTA: Congressman, you know, again, I really understand the concerns and all of the issues you raised, and I think -- you know, we -- frankly both of us can more fully respond to it.

     But I mean, I didn't -- I didn't support going into Iraq. But when you look at Iraq today, Iraq is a more stable country in a very important region that is exercising self-government. It is exercising the kind of rights and responsibilities that it never enjoyed in the past. And as a result of that, it becomes a more secure area and it becomes an area in which they can govern themselves, and more importantly, they themselves can exercise the responsibility of maintaining stability there. That's an important achievement. That's an important achievement. I hope that we can do the same in Afghanistan.

     REP. YOUNG: And so that is, as you've articulated at least in summary fashion, the economic strategy for Afghanistan? That's narrowly what I'm asking for here. And if you wish to follow up, I certainly understand that.

     SEC. PANETTA: Well, I think -- I mean, obviously, in Iraq, the economic strategy's a lot easier because they have an oil resource. In Afghanistan, it's much tougher. Now, they do have minerals, they do have resources. None of that has really been fully developed.But I think, you know, providing that kind of support and allowing them to be economically independent is going to be part of the -- of the solution here. Otherwise, it's not going to work.

     REP. YOUNG: And as you say independent, I think trade.

     SEC. PANETTA: Yeah.

     REP. YOUNG: Might trade be part of the answer, not just in Afghanistan but regionally?

     SEC. PANETTA: Yes. Very much.

     REP. YOUNG: Well, I'm very encouraged to hear that, and I look forward to working with the administration, this department and others, to move that ball forward. Thank you.

     REP. MCKEON: The chair now recognizes Mr. Platts from Pennsylvania.

     REPRESENTATIVE TODD RUSSELL PLATTS (R-PA): Thank you, Mr. Chairman.

     Mr. Secretary, General Dempsey, an honor to be with you, and first want to thank both of you for your many, many years of dedicated service to our nation. We certainly are blessed by both of you, what you've done in the past and what you continue to do now in your new positions.

     I want to first express, on policy, gratitude to the frank assessment of where we are, that while we are addressing fiscal challenges of our nation, that we don't do it on the backs of our courageous men and women in uniform and at the risk of our national security. And you both have been very -- have, you know, played very important roles. And your assessment of where we are with the 450 billion-plus [dollars] cuts that are already coming and what that will do to national security, and our commitment to our men and women in uniform and their families, is so important to this dialogue, this debate, that's ongoing.So I thank you.

     Mr. Secretary, I want to also commend you and your testimony. I'm running back and forth between a markup in oversight and government reform, but did get to hear on C-SPAN Radio your opening statements, although I wasn't here in the room, and your focus on financial management within the department. In the Oversight and Government Reform Committee, I chair the Subcommittee on Financial Management; just three weeks ago had Undersecretary Hale's deputy before us and talking about where DOD is moving to the 2017. I was delighted, as I listened to the radio this morning, and heard your reference to trying to expedite the process and getting to that clean audit.

     And just, I guess, two words of caution is, one, that it's so important that we get there because it will allow a better management of your resources, especially in tight fiscal times, but that it be true systemic changes, not ultimately an heroic effort to go to clean audit, and [inaudible] reference in your testimony, financial controls, internal controls is where it's at. And the second is that we not repeat the errors of the past with the DIMHRS plan, the Defense Integrated Military Human Resource System, that over 12 years we spent over a billion dollars on and unfortunately it did not get a result from a billion dollars of taxpayer funds. We learned from that and not repeat that.

     But your leadership on financial management on the civilian side and, General Dempsey, on the uniform side, is going to be key. And this ultimately is making sure we have the resources to provide the training, the equipment that our men and women need and we do right by them and their families -- so your focus on that.

     A final one, really, maybe beyond the general scope of today's hearing, but just a concern I have regarding our efforts in Afghanistan, and that is when the president announced the surge, which I commended back in December 2009, and then the goal of starting to draw down troops this year, an important aspect of his statement was based on the facts on the ground.

     And I accept the decision of the -- he is commander in chief, and our military leadership at the department that we can begin a 10,000-troop drawdown this year.

     My concern is that we're already committed to 23,000 next year when we don't know what the facts on the ground will be next year. And if we're going to stick by that number, I hope within the department and with the Joint Chiefs that we'll look at at least moving it back to December 31st once the winter sets in and the true fighting season is over because I think now it's currently September 30th, and I think that creates a hardship for our commanders on the ground in how to deal with the full fighting season in Afghanistan next year.

     So no questions. I'll let you wrap up. You've been very patient with all of us. But again, just conclude with a thanks for both of your leadership.

     GEN. DEMPSEY: Thank you.

     SEC. PANETTA: Thank you.

     REP. PALAZZO: So we're blessed because of both you being in the position you're in.

     SEC. PANETTA: Congressman, thank you for all your remarks. On the last point, I want to assure you General Allen has just been outstanding in the way he's addressed his command position there. And I'm going to rely a great deal on his recommendations as we go through this process.

     REP. PALAZZO: Great to hear. So thanks again, and I wish you both great success in your new assignments. And again, just as a nation, to have both of you in those positions is a blessing for our nation, for our security.

     So with that, I yield back, Mr. Chairman.

     REP. MCKEON: All right, the gentleman yields back. And seeing now more questions, I'll reserve the last question for myself. 

     Secretary Panetta, as others advocate for immediate and sharp cuts to defense, the actual implementation of such cuts are rarely discussed.

     I'm concerned that such a rapid decline in funding could result in an increase, not a reduction, in short-term cost for things such as termination costs on contracts you have already committed to and increased unit procurement costs as production quantities are reduced.

     Can you describe to the committee how such unplanned reductions, should they result, be implemented? And what liability could we face because of termination of many of the planned procurements?

     SEC. PANETTA: You know, I think we've got to take a those issues into consideration. Otherwise, you know, I don't want to cut off my nose to spite my face in this process. And if we try to get savings that we've identified and wind up costing us more because we've done it in a stupid fashion, I think that's a mistake.

     I mean, as I mentioned earlier in my testimony, I went through the BRAC process.And I know that -- all the dollars that people looked at for, you know, huge savings in BRAC, and yet when you -- they didn't take into consideration the cleanup, they didn't take into consideration all the work that had to be done, they didn't take into consideration all of the needs that had to be addressed, and in many cases it wound up costing a lot more. I don't want to repeat that mistake.

     REP. MCKEON : Very well. Again seeing no questions. Members may have additional questions. Please response to them in writing. 

     I want to thank the witnesses for their service to their country and for their testimony here today. The witnesses are excused.

     This hearing's adjourned.