 We have Dr. John Hamry, the CEO, and let's say I'll introduce him as they're coming up on the stage. General Ron Fogelman, former Chief of Staff of the Air Force, who was only responsible for a few years of the last budget drawdown. Mr. Sean O'Keefe, who was Defense Comptroller and Secretary of the Navy after the end of the Cold War. Dr. David Chu, who was Program Analysis and Evaluation at the end of the Cold War, and then had to come back and live with the results of the 1990s drawdown as the Undersecretary for Personnel and Readiness. And chairing the panel and running the show from this point forward, Dr. John Hamry, the CEO and President of CSIS, who I think all of you have seen on virtually every panel we've had up to now. Thank you. I'll turn that over to you, sir. That's because I didn't charge. Well, thanks everybody. Thank you for, David, thank you for setting up this session so very well. I think we have a chance to see the kind of the scope of this problem. I mean, we're looking at, if we are looking at the same kind of environment that we had back in 1988, we've got a tough time coming here. And so let me first begin by, well, let me just so that everybody knows. I know most of you know these guys, but of course Sean O'Keefe was the Chief Financial Officer of the Comptroller at DOD during a lot of that drawdown the first time, went on to become the Secretary of Navy. And so in that sense had the responsibility to design the overall health of the Navy going forward. Ron Fogelman, the greatest programmer that the Air Force ever had. And that was before he became Chief of Staff and just did a remarkable job shaping the modern Air Force. And David Chu, who was my very first boss when I came to town. And was the head of PA and E. So he was really the architect of the drawdown back then. And then of course came back and then served as the Secretary for Personnel. And so I'm going to save some personnel questions for you, David. I mean, but let me just start with the three of you to ask this question. How bad is this going to get? I mean, none of us really knew what the bottom was going to be in 88. But we were so fresh out of the Cold War, people were still pretty cautious. How bad is it going to be now? I mean, what are we thinking that the country wants to have going forward? I mean, we tend to be conservative, but there's also a war wearing this here. So Sean, you start us off. How bad is this going to be, do you think? Well, I think the context, can you turn them all on so we can get there all on? Okay. The context of this particular phase of where the overall national security agenda is going, I would submit is not as clear as it was 20 years ago. In the sense that while you're right, the end of the Cold War posed the challenge of trying to find what the bottom was, but at least it did define the context of it didn't need to be the force structure and capabilities that we had had throughout the entire Cold War. So the strategy was open for debate and discussion in an entirely different way. And what resulted from that I think immediately was, or near immediately, was the Desert Shield as a storm phase defined that in very clear ways, relatively speaking, and gave a better frame of reference and guidepost of exactly what kind of new world order future and strategy we'd be looking at. So what proceeded from there was, I would hardly argue, was an orderly drawdown, but it was one that nonetheless had a framework and a context that evolved rather rapidly, relatively speaking. In the span of two or three years, it was pretty evident of where that had changed from what was a stunning development in November of 1989 when the Berlin Wall first fell to the point of conclusion of that drawdown, which was arguably in the mid-90s or so. There was at least a frame of reference that got more and more specific of who I belong. This is a different environment. In which there are competing views of what the framework of that strategy ought to look like. Secretary Panetta, or soon to be, has a huge challenge to look at exactly how that framework ought to be organized to match up to, and what the force director ought to be, in order to match up to a relative threat that has been defined very, very abstractly. It comes to clear in cases in which we see very evident circumstances in which forces deployed to Iraq and Afghanistan have evolved several times in terms of its context, its overall mission, force, intent, everything. So how that gets defined in the future and what kind of condition we want to prepare for is going to answer the question you posed much more specifically, because much like in 1989, the bottom is not defined. The only issue at question is whether or not there will be greater clarity of that as time marches on here to help this particular drawdown match up to something that looks even relatively like what we saw in the early 1990s. Ron? I guess I would pick up on a theme that Sean has relative to the clarity issue. One of the things that I think contributed to that was when we had come out of the first Gulf War, the edict came down from the Congress that, you know, new administration, it's time to do a bottom-up review. And so this time we have a DOD instigated or formulated comprehensive defense review. It doesn't have quite the same sort of gravitas, I guess. But there's two things that I think are very interesting, back to Sean's thing. When the bottom-up review started, the civilian leadership and some of you all were part of that had not all migrated to the building yet. And so to a great degree, the uniformed guys were able to set the rules of engagement in the bottom-up review. And there is this old dictum here in Washington that whoever is in charge of the assumptions is going to sort of drive the outcome. And the key assumption that the military put into the bottom-up review was this two major regional contingencies. Which guaranteed that you are not going to do anything dramatic with this Cold War force. It then led to years of salami slicing, you know, whether it's base closure, personnel drawdowns, all those kinds of things. That's lacking this time, and so I think the opportunity to step off a cliff is even greater. The other thing that's different in my view this time is that when we did the bottom-up review, when we started the cuts in the early 90s, we had only been in the all-volunteer force for about 20 years. And the real impact of it had not started to be felt yet. And almost as dramatically, during the 80s while we were still involved in the Cold War, there wasn't a real shooting war out there that was generating the kinds of benevolence on the part of the Congress. And I don't begrudge any of our young men and women any of the benefits that they have received over the last 10 years, but the cost of the all-volunteer force has gone up tremendously. And so here we are 40 years later, and I think that I have seen only references to attacking this issue on the margins. I think that until the nation and the Department of Defense comes to grips with the fact that we cannot, the all-volunteer force, as it exists today for the size of the force, is unaffordable. It's just simply unaffordable. And I'm not an advocate of going back to the draft. I just think that we can talk more about where this leages in terms of assumptions about what we ought to be doing in the world and how big we have to be to do that and all that. But I think those two things, so to answer your direct question, which I saw my colleague over here didn't do, but that's the way these budget guys are. I think it says the potential will be a lot worse than we had in the past, because the parameters are a lot less well-defined. We heard in Secretary Lynn's speech this morning, we want to do it all. We can't afford not to do it all. The question is going to be that balance. And so we'll see. Well, I certainly agree with my colleagues. This is not the well-defined problem of the 1989-93 period. And I think Sean opened the door on a bumper sticker way of describing it. As he suggested, the issue then was, how low do we go? What's as Colin Powell said, what to be the base force, the minimum there is they should have. The question now is, well, how much are we willing to sacrifice as a country to have military capability? What's the ceiling? What's the top end? And as Secretary Gates has argued in Colin's conference review, if you're going to make reductions of significant size relative to the current base budget set aside the war costs, you're going to have to take missions off the table. Now, I do think Ron opens the door on a prior debate that will occur, and I would broaden the charge. There's not so much the compensation existing for the issue. It's the broader challenge in my judgment of, are there ways to reduce the operating costs of this force before you have to turn to either shrinking its size or savaging the investment accounts in order to sustain military capability? And as Dave Britault pointed out so nicely in his introduction, we don't have the overhang of equipment bought for a larger size force as we did in 1989 that we can use to coast for a while. That was largely how the defense budget was, not large, that was importantly how the defense budget was reduced in the early 1990s as we basically stopped new procurement for a period of time as a practical matter. Now, we did make major force reductions. I think I ripped it for a little bit with Ron on that point. So the force comes down relative to the 1987-88 peak about one-third to 40 percent in both terms of the number of active duty personnel and in terms of units of usual structure measure. But also at one other point, the personnel cost issue today isn't really for those currently certain. Yes, they have got, the department's been more generous for obvious reasons, but the big cost changes in personnel have been, as Ron suggested, the Congress wanting to reward those who have already served. That's understandable as a matter of basic political science, but it's not a very efficient compensation system because those are benefits largely received much later in life. So it's tricare for life, for example. It's repealing redux, for example. It's the whole question of can you collect both the VA disability payment and the DOD annuity, for example. Those may all be meritorious as gestures of national gratitude, but they are expensive. And what we might want, 22-year-olds to pay attention to what the Depends Department annuity offering is. Let me tell you as an expert now, officer, that's not where their heart is. Their heart is in the bonus payment to buy a new car, not in where they're going to get annuity 20 years from now. Because most of them, of course, won't collect the annuity. So each of you, in your own way, have brought up this question of people. I mean, we were able to accommodate the drawdown in the 1980s, well, from in the 90s, largely by living off the fat reserves we built up in the Cold War. I mean, they weren't huge, but they were strong modernization programs, so we were able to scale back and we were able to cut back what we bought from industry, etc. We don't have that option anymore. I mean, we now have an aging force. We arguably, well, I'll come back to this question about what it is that we need to be buying for. But each of you, in your own way, have said, you know, this is really not going to be about people. What do we do about people? And yet I would guess to say, we'd probably all say, we don't want fewer shooters. So what do we do? Because it's a balance here. David, you said that we've got to find a way to lower the operating cost. Ron, you've struggled for years with how do I sustain a quality of life with a rotation base without putting everybody out in point and burning them up. So let's drill in a little bit on this people side. What are we going to do on the people side? David, do you want to start as you started? Well, I would start with the way we use people and the business practices we accept. Now, they're all well-known and understood, and each has its defender. So let's take an obvious one. By statute from the Congress, same Congress is generous with the later life benefits, 50% of the department's departments must be done in government facilities. As an economist, that's my original personal training. That's a signal that that isn't exactly competitive. If you have to put a floor on it and guarantee somebody business, it means if there were open competition for that work, not all those people would win. Now, that's a very emotional decision with the Congress. But it's a business practice, not necessarily the department's choosing actually. In the 90s, Paul Komisky argued very successfully to get it cut from 60%, which is the old floor, to 50. But why do we have a floor at all? If we want to be more efficient with the operating cost of the department. Otherwise, as you suggest, we are going to hurt real military capability. So there are a whole set of business practices, I would say. In bed in the department, many by statutory direction that make it more expensive to have the people or to use the people or the way we can use the people that we need to be in. How much is there? That's an excellent question. It may not be enough to get to the numbers politically the country desires, but it ought to be, in my judgment, the first payment made, not the last payment made. I would pick up on that a little bit from this perspective. When you start to draw parallels with what are described as the issues with the federal budget where the entitlement portion of the budget has become so large and takes on a life of its own. And again, closely guarded by our friends on the Hill, we have now got embedded in the Department of Defense budget our own version of entitlements. And then they're not all related to personnel, although many of them are, as David has said, but some are these other programs. And they have been untouchable. And unfortunately, because of the nature of this being a DOD internal look, I don't think we're going to be able to touch a lot of those things. And some of the ones that have already been put on the table where they're out there just testing how hot the third rail is, things like retirement benefits and maybe a variable kind of retirement system, things like that, our friends who lobby on behalf of the service members are already up on the net. I mean, I get three emails a day that are just shotgun emails going out there to, oh, guys, oh, do you care? While I care, I also see a problem here. I also think that part of the deal is, as a nation, we've got to sort of figure out what our appetite is. And maybe this debacle in Libya is the beginning of reining in our appetite. On the other hand, it may turn out to be such a bad lesson that it will end up stimulating our appetite for getting engaged in places. But I don't think that we can get enough savings, as David, and he's closer to it, but living on a mountain top in Colorado and bushes don't burn and I don't get rocks, but you can make pronouncements. I get the early bird every day. And so I just don't think that we're going to be able to get the kinds of dollars out of the efficiencies we're talking about. And so we are going to have to take down force structure. We're going to have to take down people. And when you do that, you're going to have to, you know, we've got excess base capacity in the continental United States. The only problem there is we all know, is every time David Patau runs a base closure thing, we lose money. We don't gain. We just lose real estate. But, you know, he argues that he actually made save money. But anyway, that's my point. I guess I don't think you're going to get the savings on the margin. I think eventually every one of these drills I've been part of for the last 25 years or observed, starts out with some lofty strategy review and ends up in a cut drill. And let me just an observation on cut drills, you know, because I'm surrounded by, you know, Comptroller's and PA&E guys. I mean, it's just like the old days, you know. You know what I mean? You don't sound nostalgic about it. Yeah, don't take my money. Gordy Sullivan didn't show up. Take the army money. You know what I mean? We're, there's nothing changing. So much for being the ace programmer. That's right. No, I think, yeah, reformed. But as I, as I sit out there and I, you know, kind of look at this thing, I think that there are some mission areas when each of the services, I think one of the really great moves, and my point was going to be, we're 20 years further down the road on jointness. So an interesting aspect of this is going to be the services are going to have less input. They may, well, the services have as much input as they always want. They have less ability to influence the outcome in this drill than they have in the past. And so, you know, the first step in this comprehensive review process has been for the principals to assign to the joint staff the identification of redundancies. Okay, so that's the slickest way to do a roles and missions deal that I've seen in a long time and not call it roles and missions and not get everybody all excited. But at the same time, once the joint staff declare something as being redundant, I think the services are going to have a tough time fighting that. And I could mention a couple of areas that were there, but I won't because I want my chief to still take my calls in case. Sean, I have a deeper appreciation for this challenge of being surrounded by financial types than you may think. I found myself in the odd position when I became Secretary of the Navy of reading the budget guidance thinking what idiot sent this only to find my name at the bottom of it. So receiving your own mail is sometimes a really dangerous thing. I grew up. And it all depends on where you sit. There's no doubt about it. But they were just kind of reviewing the thoughts on this one in particular of what the effect is on the force and people. I jotted down the thought of exactly what were the four really inviolate principles that Secretary Cheney then and Chairman Powell then really reinforced with great regularity. The first one was that the drawdown had to be commensurate once we established what that floor was going to be and the base force said it's free. It finally arrested what was a freefall and an environment in which there were folks and old friends and colleagues running around Capitol Hill talking about budget or peace dividends and you know, maybe a plow all of us into lots of other things. And as a consequence it was open season for the better part of a year that then arrested itself based on the base force concept. So the insistence that the two of them had was that everything that came forward had to be consistent with what that base force condition looked like. So numbers, what the force structure would look like, divisions, airwings, battle groups, et cetera, all had to be commensurate with that and then it motivated some careful picking and choosing over what got retired and naturally the stuff that went out first were either assets that were older in the inventory or those that were designed perfectly for Cold War scenarios. So the new attack submarine, you know, that was a painful one to see that go. The end of the F-15 production line, you know, it was just a horror to the guys who talk with their hands. The notion that we would just terminate the M1 tank line is that that's it, we've got the number of tanks you need to match up to those divisions. But those two guys supported that without reservation because it was tied to specifically how you structured what the size of the force would be. And even championed with, you know, lots of determination, although, you know, it was difficult to do at times, provisions in the appropriations that would insert poison pill provisions that ended the line at the conclusion of X number of aircraft, ships, tanks, whatever else. It was a courageous move. It was one that was, I would argue a little bit, not a salami slice, this was great deliberation and it was difficult. And every time anybody would bemoan the fact that you're losing that great capability of the following things, the greatest of Cold Warrior champions, Dick Cheney would sit back and say, they gave up the bastards. But that drove the point home of saying, this is what it's gotta be. And they were, you know, unwavering on that. Secretary, or I should say Chairman Powell, I think, inserted an extremely important backdrop of the second principle, which was, let's not, under any circumstances at any time, duplicate the experience we had post Vietnam, in which we drew down very quickly, dropped folks off the edge and said, you know, it's been your great pleasure to have served the nation today and see you later. He was really, really consumed with that and I think every general officer of that era were very, very articulate in saying, this is a legacy we do not want to see ever repeated again. And it started the very environment we just talked about. Not with the intent of saying, let's reward those who have left more than what you can do. It's originally the ideas, and I'm sure David remembers this as clearly as I do, was looking very specifically at what recruiting objectives and what retention objectives we would enforce for the purpose of retaining the folks that were in the skill sets you specifically wanted. And for those who did not, and for those parts of the force structure that did not support that angle, that they got the thanks of a grateful nation on the way out the door at the insistence of Chairman Powell and all of his colleagues. I think that was a very, very powerful shift of the mindset that occurred at that time that said, this is not numbers, this is not just inventory. These are folks who have actually put themselves on the line and we had the Desert Shield, Desert Storm experience to demonstrate it very clearly. The third one was that whatever size force you get, whatever that base force would turn out to be, that the readiness objectives be maintained at the highest possible levels. And this begat the very ear, I think that David's willing to, in the door he opened, that the operations costs now have run entirely different than what was intended at that time. What was a noble objective to say, this is where we're going to go. And then finally, again, the investment portfolio was a procurement holiday that occurred. If you go back and inventory a lot of that, what ended at that time were, again, assets that were either retired from the inventory and the new procurement that was discontinued were those that were perfectly designed for a Cold War scenario that didn't exist anymore. That was the dominant savings that occurred there. Every other asset, F-16 procurement, all the different programs that were in support of the wings, the divisions, and the battle groups that had been determined to be the size of the force continued along. So it was not a complete cratering of the procurement investment portfolio at the time. It just had a lot of visibility over the things that were discontinued. And yes, there was a living off the inventory for a period of time, which did not require the same volume of procurement and assets replacement. So the overriding backdrop, I think, was the treatment of the force and how you conduct that drawdown. And what it has become, these objectives we've just talked about here, misplaced focus on rewarding those who have served, which is noble. And again, an important kind of American value that's being exemplified here, but exceedingly expensive and would miss the original point, which was retention and recruitment of very specific individuals. So it's a different formulation today that turned in something that was never done at the time. So each of you have done a lot of budgeting programming. And as you guys know well now, our audience probably doesn't know as well. We've got two budgets in DOD. We've got a budget that we manage centrally, procurement, R&D, you know, and then we've got a budget that we don't manage centrally. It's the operating budget, which is really, you know, you hand the money out and you kind of think you can track it, but you can't really track it. And of course that really creates an asymmetry at times like this when you have a build down, because when you've got to put real dollars against real things, you know, you can cut F-16s or you put a wedge, you know, against O&M, and of course you never know if that's real. So what, David, do you start with this? I mean, what would you do? I know you wrestled with this. You wrestled with it when you were PA&E and you wrestled with it in your last job. What do we do about this fact? Because we now need to manage the unmanaged part of the budget and we don't really have the tools for it. What would you do? Well, I do think something which Sean led in the last drawdown period ought to be considered more widely applied, and that is, can we create within the department more, I have to use this phrase, because it has the more kinds of, more business-like organizations. So the whole idea of working capital funds of various kinds did bring, in my judgment, a somewhat more efficient use of operating monies in that period of time. So the notion, for example, that when you had a depot reprobable, you didn't just turn it in, you sold it back and you had to buy one out of your operating monies brought greater discipline. Now, the force is clever. So this is a multi-sided game. And if you price the exchange wrong, as you know, people went out and started their own little depots in their service backyards and a whole host of management channels made that work. But I think the more you can bring business practices to bear on those parts of the fence operation where they won't, where they will not do good, because in some areas they might do harm. The better, I mean, take communications, for example. Department provides most communication state free to the user. There's some exceptions to that statement. There is some disappricing out there, but not much. That leads to everybody wanting loads of information. If there were some way to get the users to understand this ain't free and we have to invest in this and the capacity and the ongoing maintenance and so on and so forth, I think you'd seem to be a little more efficient about how they behaved. And so as a starting point, I started asking where can you replicate, what kind of incentives can you put out there where the incentive, as you suggest, in the field aligns with that of the headquarters? You know, only 10% of the servers in DOD are operated by DISA. Think about that. I mean, for 25 years we've made them the central communications steward, and they only own 10% of the servers. And our average utilization rate for servers is 28% of capacity. I mean, there's something wrong here. Clearly, Ron. I'll take a little bit more of maybe a tactical approach to the issue in the sense of, if you look at the O&M budget, which was really kind of what we're talking about at this point, and you begin to break it down, there's a couple of things that have happened to it. Some of these entitlement programs have migrated into O&M, so you've got to be careful about how big is this pot and what's it being used for. And particularly the biggest one and the growing one is the health care that's funded out of O&M. And the numbers you see there are kind of horrendous. The other thing is that for at least two of the services, and it's true to a lesser degree for the other two, but for the Air Force and the Navy, the energy costs are really horrendous. And so I think that while it breaks a paradigm, and there's no experience like sailing a ship and being at sea and doing these things, and the same thing with flying airplanes, except there is, and I think in the future, as we look at these aircraft that we're buying, fifth generation kinds of aircraft, we have got to do a lot more of our training in simulators. One, because the systems are going to have to last longer and the other one is just the cost of operating. Now, the problem with that in some cases is if you don't watch it, the simulators cost more than flying the airplane because we decide we want to have such a high degree of fidelity. So I think we have some of those kinds of things that we should be looking forward at that we're not. Another one, I'm going to, because I'm sure I'll get another opportunity, but I'll come back on the personnel costs again a little bit. One of the things that I think we, another paradigm that's changed since the early 1990s, the late 1980s is the way the Air National Guard and Air Force Reserve and Army Reserve and all that, the way they have stepped up. But as we have, as they have done that, the old, they only cost a third of an active duty person is kind of out the window because they've gotten, I mean, if you're working every day, you get paid every day kind of thing. But I think going forward, we need to look at smarter ways or recognize what they've demonstrated and then recognize that there's an opportunity here, perhaps, to make better use of Guard and Reserve forces going forward. There may even be better ways to organize them. You might even ask the question, do you need both a reserve and a Guard given the homeland security issues? Is the paradigm maybe more of a Guard thing with your Title 32 title? Yeah, I don't know, these are some issues. Sean, did you want to... I'll just pick up on two points I think that were raised very succinctly here that I think are really going to be huge cost drivers. The first one is the proposition, I think David opened the door in terms of the discussion of how you employ business practices. The wrong implementation turns out to be worse. But if you never touched it. The federal government has an unblemished record of adopting best practices from industry just about the time industry are abandoning them. There's perfect correlation to this. And even in terms of language, terminology, it means totally different things. The term sunk cost in corporate finance means you've already spent that, it's a waste, it's time to stop the bleeding, discontinue it and call it quits. Call it a loss, period, walk away. Sunk cost in public finance means we've already invested this much, we can't walk away now. So the terminology used, particularly now which we're about to see a perfect storm begin to develop, is at the same time that there is a rationalization if you will of new starts and whether or not you really need it and how you define what the mission objectives are which therefore causes delay, everything pushes to the right. Means we spend a hell of a lot more on modifications, upgrades, band-aids, etc. on assets that are really ready for retirement. And we're about to do that. You can see it already built into the budget scenarios. The only thing that's going up is operations. The cost of personnel is of course unless there's a major force director change, but it's the only thing that CBL and everybody else is projecting as it's going to go up by a factor of five, six percent. And that's the scenario we're about to see play out if we're not really careful is the insistence that no, we're not going to start anything or not think about anything or acquire whatever until such time as that's verified is we'll continue to operate assets that are really, really quite well beyond the service life and putting more into it is the public finance definition of cost. It's going to be a real disaster. Second scenario that I think that run raised that I think is important is how you use the total force. It's an extremely important point that the overlay though that I would differ with you a little bit run is that in these last few years we've used the total force in ways that certainly were designed for that purpose. But even in an area that you're extremely familiar with on airlift mobility and so forth, a few thirds of that is operated by the Guard Reserve and operated today at rates that are commensurate with what you see of active forces. Now how much longer we're going to see people who are willing to walk away from their day job as it were for extended periods of time and then be able to return to them may be a diminishing margin here and it's going to be a very much harder situation to work through. So I agree for a little bit different reasons that Ron's point is dead on. We've got to really rationalize what the total force is going to look like, how we're going to assign those missions and that in turn may open the door for active force as well as total force reconsideration of what that may look like. But it is clearly not going to work the way we're doing it right now. This can't sustain itself. There's no way. And we're going to come to a point where we're just not going to find ourselves supporting the force that we have today if we maintain this current rate of operations now. David. I know. I would not be so pessimistic whether it's the right thing to do or not is a matter, but I would not be pessimistic about ability to sustain significant use of the Guard Reserve. What's interesting to me is that in this last decade with very heavy use used in some cases you point out parallels the rate of deployment for activity personnel. Guard Reserve attention rates have stayed up there at peace time levels and they are all volunteers and not actually a great compensation expense. Some additional money has been spent but it's not all that extensive. So what we have developed to the great credit I think of the service leadership and the Guard Reserve leadership is a way to reach Americans who want to serve but not 20 years in a row. And the other interesting finding which Rand's research points out is that many are actually paid better on active duty. In the essence the old model which was the Guard Reserve was the second job that's been reversed. For many of these people for professional pride, the military job is really the first job and they more or less sustain themselves and keep their families happy which is I think the larger issue actually with their quote civil employment. Now there are exceptions to that statement but likewise on the employer front. Yes there are some employers that are encouraged by this but actually in the duties looked into this the average cost to employer for quote losing someone to mobilization is actually quite small. There are some small businesses some of the law enforcement agencies in a different situation but in general I would disagree with it this is sustainable and the point is we want to sustain it that's what Ron's question is right about. I would like to pick up if I may take one more minute on the practical. I think he's right. You're not going to address these operating cost problem adjustment by believing there's one grand policy the secretary could sign the single page memo and you'll get there. There's a series of issues he's touched on healthcare costs he's touched on training. Training is a big one and not just flight training but all training machines could be we looked at in terms of could we do this in a way that's actually friendlier to the students and attracts more people to want to serve and to take the necessary training with modern technologies the kind of asynchronous learning that is possible but we don't use to the extent that might be feasible so I think part of the answer on the operating cost side is understanding it's a series of significant issues no one of which is a panacea. Let me go back to a controversial issue which we talked about very early which was I think it may have been you that said that the all volunteer force is unaffordable going forward the way we are right now we're not going to go back to a draft the country isn't ready for that and of course the hard part about any military conscription program is how do you find a fair weight only draft 15% of the cadre you know usually rich people get out of it so we've never found a fair way to do that so we're probably going to have an all volunteer force but if it isn't affordable in this current form we've got to think about some new things now let me take your mind to back in time Ron you and I were there at the time I think it was on the edge of you guys when Carl Mundy very provocatively suggested that he wanted a Marine Corps of more bachelors now that was controversial at the time of Clinton he didn't say it that bluntly Carl forgive me but let me just be honest it's expensive having a married force you buy housing for families you have daycare centers we've got 350,000 kids in daycare you know now there are downsides with a bachelors force you know drinking and accidents and all kinds of stuff so there's a trade off here should we put that issue on the table do we want to set more of a tradition towards a bachelor enlisted corps for junior ranks I don't know how you could practically do it and I'm not I'm not sure that it's a I remember Carl's model and Chuck Krulak and I used to talk about this all the time is the ideal enlisted troop for the Marines was you get them when they're 17 they're full of lots of toxic energy and all that kind of stuff and you train them and you teach them their jobs to rush up that hill and do that and that works pretty well for that first tour and maybe even a little while into the second tour but by the third tour this guy's saying you want me to do what and you know I think all the services have become much more technical the whole issue of once you recruit them and train them we think it's more cost effective to retain them and maybe it's because we don't look at the total cost of retaining them with the families and everything but I I think that from my perspective when I say I think the force is unaffordable I think it's unaffordable with the size it is and with the mix it is and you know the way I would try to attack the affordability thing is one I would like to get the national command authorities to sort of tell me what they think from a strategic perspective what's our appetite going to be going forward are we going to every time there is an incident somewhere or are we going to try and intervene in that or are we going to let things you know sort of lead the world on the big issues and let the world sort out some of the smaller issues sort of thing and if you had some clarity on that and some agreement and I recognize it's hard to keep that from succeeding administrations then I think you could go to a situation where you had a smaller active force and you could better utilize the garden reserve you know in a way that would and quite frankly I think this the idea that DOD is moving away from the two major regional contingency assumption which was really what gave us the base force in a sense but it also locked us into something I think gives us some new latitude if you will to look at what the force makes will be etc. The other thing that I don't think because you know for a lot of time for a lot of a period of time the idea of true jointness was sort of lip service and you know we'll do as much as we have to to get along you know the idea that that I would depend on somebody else for close air support or something of that nature if I were an army guy or a marine I think some of those barriers are being beaten down and I really do believe that there's still mission capability to be sustained with joint capabilities that some people can give some things up some can take them totally off their chores list and they'll get done Okay let me open this up for questions we'll start right back here in the center to stand up so that the people of the microphones know you. She's coming right behind you. Thank you. My name is Yone Yama from Mitsuen Company, Japanese multinational. First of all thank you so much for Pentagon's pay comms and the USJ forces in Japan support for disaster relief. It was so impressive and so quick to return the Japanese Tohoku infrastructure back to normal. My question is about your drawdown implication to your foreign presence and operational cost for disaster relief and collaboration with R&D with international partner. What kind of implication this drawdown could be made? I don't think we heard last part of your question. Hold it just a little bit further away and speak a little louder. Okay. A question is about the possible implication of this drawdown to foreign presence of military, US foreign presence in military like forces in Japan and also the disaster relief operational cost and the collaboration with R&D with international partner. The role of allies especially when we pull back from Asia. I'll take a shot. Please. Not only do I live in a mountain top but kind of like living in a holiday inn or whatever it is that makes you the smartest guy in the block. Hell, I just been to Asia you know, 10 days but it was a fast trip and on that trip I spent a fair amount of time in China with senior retired Chinese folks and I stopped in Japan and spent some time with retired Japanese senior officers and so in preparation of that I had to kind of take a look at what our government is saying about Asia right now and I don't think that you're going to see us backing away from our Asian commitments. If anything they're stronger there's been sort of a renewed reinvigoration if you will of these things and so I think that that you will continue to see force levels generally on the same level. I have one you can't do one of these things without making somebody mad right? So there's one notable exception to force structure in the Pacific that I would change if I had the ability to change it and I base this on my knowledge of the war plans and where they get utilized and that is we have had this festering sore over what to do with the Marines in Okinawa we ought to bring the Marines home because you've talked to a series of commandants and the sole rationale for having those Marines in Okinawa was force structure. If they brought them home they would have to take them out of the force but we're about to go through some force structure reductions we have an opportunity here to do something that would be good for a lot of people and I'm not just picking on the Marines but we have a problem that we have turned into a festering long term problem but in general I think everything I've seen and heard and when you talk to the retired senior Chinese folks this is not unexpected that the US wants to maintain its presence in the western Pacific to say that they accept it may be too strong but I don't think they're going to resist it but if I might I know you were there a month earlier so you're smart I'd like to if I may just paint it a little bit more around the edges of the canvas on this I think that the great security challenge we're going to have I think over the next 20 years is finding a stable environment in Asia China is rising that's not a bad thing but everyone in the neighborhood is nervous about it and what makes it tolerable is having the reassuring presence of the United States as a force in the region that's not interested in territory it isn't fighting over any territory it's not interested in territory and it has the capacity then to be a stabilizing presence I think we have to be very careful during this period not to create power vacuums and I think that this is more a case frankly for in the South China Sea and more a case for our maritime operations and our reconnaissance operations I think we have to maintain that and if there are to be changes of the magnitude you're describing Ron I think they ought to be done in the context of a strategic assessment of the whole region and when we do that then I think it's possible to make a dramatic change of that nature if that's what we conclude but it really needs to be done in the context of this geopolitical framework which is potentially unsettled as we're seeing China rise and they're feeling us out we're trying to assert a relationship with them without it becoming tense and dangerous and I know you don't understand all that and I just want to make sure we round it out the conversation in that way Kim Wynk up Thanks it appears that the budget process will precede any strategic readjustments with the debt ceiling production that are likely to occur pretty quickly rather than the what you would do tell us what you would recommend or how you would do it would you stay within the normal budget process and just hope it's going to come up with the right reductions would you try and come in from the outside somehow how can you get it done in a reasonable period of time before the budget completely overruns whatever strategy we have That's a good question Stop and start this In this respect I think Ron's assessment of the very boldly asserted that this is going to be a real wreck without reservation on that point this is the scenario that creates that exactly as you just framed it Kim if there is not a strategic framework to this that's what will happen you'll get a process takeover and you know the building is structured for serving the process it's always way out of whack relative to what the objective was to serve decision making and instead in the absence of any strategic framework it will go on and that inertia will produce the kind of wreck that I think Ron very accurately predicts as a case and it will be as a consequence of that so it is a tremendous burden on the department's leadership just coming in to really set that you know establish what that strategic framework is going to be as early as possible absent that this is going to be a programmer being counters everybody in the process frame driving the train on this to meet a number and the number will be passed down and it will go through its usual cycle and that will be how it works could I jump on that too because I think if somebody feels a false sense of pressure to make decisions to drive this thing to conclusions too early it's just going to exacerbate this thing I mean the FY 12 budget is it's out of there yeah you're going to be able to marginally probably impact FY 13 although I'm sensing and hearing that that's where everybody wants this to roll in there's not enough time to do it in a deliberate fashion so this is one of those things where you would almost be better off if you could get everybody in a room and say 13 is going to be our transition thing we're not going to have this strategy we're going to kind of let it go on autopilot whatever but by golly by the time we get out there to FY 14 we're going to have a new strategy we're going to understand what we're doing but I don't know what the pressure I suspect that as Secretary Gates gets ready to leave as Chairman as Mike gets ready to leave they want to leave their mark on what's coming down down the road and a looming election it's coming up and you have I think you have this natural tendency to try and build something but if you build it's going to be built out of paper it's going to be blown away within a few years and it's going to screw things up so I would hope that somebody would step up and say let's do this right you know and hopefully I don't know David was always the guy who had his hand on the TNT plunger and you know he probably has a different perspective on this did you want to comment on the process here I think maybe I should pass I think to your point this budget there's not much we're going to do on this budget in front of the hill right now at best we're going to get I think the most likely outcome is going to be a CR which is a $26 billion cut against the President's submission the chance you really have to shape this is going to be in the budget that comes up in January and in that time you've got to define as strongly as possible what it is the rationale you think you're planning for and I think what's missing right now is what are we really trying to plan for as a defense department that's good for 20 years are we just going to get the hell out of these wars and never fight them again is that what we're going to do what are we preparing for that's going to have to be the framework of what I think is the work of the next six months let me go back here in the center and then we'll come over here Gene Rennyard former Northcom Commander now at BA Systems great to see all of you David you're looking pretty spry there buddy two gorillas we haven't really talked about in this discussion and they influence heavily and that's OMB in Congress and there's an education piece that has to occur in order for them to buy into this process do we see that there is the kind of engagement that's going to take to convince Congress to give us the space to put the framework over top of this or are we going to get steamrolled by Congress and it then kind of doesn't matter what we think we're just going to be issued a solution which one of you guys want to shoot your son? let me touch on the OMB part first I think this is the Defense Department and OMB have an extraordinarily unique relationship that doesn't exist in other agencies having served in other agencies the fact it is very different it is a very collaborative approach it's part of a joint review I think it was very successfully managed in terms of that objective the top line is set by the leadership there just isn't any argument about how that framework reference works and once established that's what everybody pulls to it these are all fouls from time to time sure but it by and large it is a very collaborative relationship I don't think there's a lot of reintroduction of issues or education need to be done there in terms of the national spirit of being in itself that's been a timeless long standing kind of relationship now whether the budget director himself has a different direction from the president that's going to be revealed in a different context that's going to look like so that's the only wild card on that piece Congress is in a entirely different manner there is as much as I respect and admire Ron's sense of order it will be necessary in order to lay this out I don't think they can afford the time I really don't I think this is something I think John's dead on if there isn't some very clear of what the strategy direction is released in January consistent with the release of the budget this coming year in the beginning of what's going to become the campaign season this could be a real wreck and I just don't think they have the luxury to say everybody's going to take a time out for a year we'll see it could come FY14 this is a collision of the high school we've got 535 folks over there and every one of them think they're in charge and they've got every different idea how to do this it is a very different kind of scenario over there so if this isn't a clear lay down of exactly what the again it would be objection by lots of folks plenty of people who argue with it but if you don't have some benchmark to work with you don't have some lightning rod that can be struck to start this through as part of the strategic framework is going to be a real tariff it will be random and I think to DOD's credit what I'm seeing is that they're very much cognizant of that and they're trying to move in that way and I just think that with the leadership transition and all the things it's really going to be difficult it's going to be extraordinary and when you start to look at who the who the drivers are going to end up again on this thing you've got your old organization and they're one of the designated capes you've got policies so there's some stability there the services with the exception of what the army's going through now with a chief that's moving very quickly to be the chairman and again the chairman and the vice general joint staff that's another part of the dynamic that I don't think was there back in our day not really as strong although truly Colin Powell understood and did drive the bottom up review in a way that a few few chairman would have or could have so I agree with you that as much as I would like to see this done in some larger national perspective I think it's going to do the best they can to get something over there it may be the right tactical move David, any comments? Chief Pickett I'm an ROTC student with David over there that tells you how old we are this is like a gathering of great pessimists and the real question that seems to be on the table is what that's going to get let me put it to you in another way there's a difference between what went on in 1985, 1995 and what's going on today and the difference is that the size of the numbers in 1980s were only measured in a few hundred billion and the finger was normally pointed at defense today the administration is talking about how to take four trillion dollars out of 14 trillion one of the most intriguing aspects of this is the way they're changing the entire debate it's all about national, about the debt now it's not about deficits and so on so let me ask you this what's the possibility that the problem is so severe that in essence defense gets nicked it doesn't get hammered because principally in order to deal with the problem you've got to go take on a whole series of problems that are far more severe and far more likely to create political problems in the United States and in that environment the constituency that actually believes in strong national defense but that constituency is strong enough that falling off the end of the cliff which is a term you use is something that in fact doesn't occur just because the numbers are so bad nobody can master them let me take your crack at it because I think you make an excellent point the real debate, the real fiscal debate is over the so-called entitlement programs and the larger federal budget not defense I think the difficulty however is two fold and I give credit to Doug Amendorf of the Gresham budget office who has given an excellent talk that makes this point if you look back on the last 50 years in other words since the end of World War II as far as federal budgeting is concerned the headline story in terms of purpose is we've reduced the burden of defense over time in order to have social transfer programs keeping federal expenditures as share of gross domestic product roughly speaking the same until very recently that's over as a mechanism for expanding social entitlement and that's the problem that's the central problem the downside is defense gets crushed in the process of redoing that that social bargain moreover the problem is all three of us are agreeing this afternoon is the margin in defense to make adjustments without giving up a significant amount of American ability to be effective in the world the question about the Pacific for example specifically is so much smaller it was in 1989 in 1989 we had built a force to deal with a competing world power as we all know the world power disappeared so the question became well okay what do we have to keep around what's the base force now the problem is we have all these challenges out there Ron points out we don't have to take them all on unless they're going to be challenges out there challenges of the pacific how much are we willing to afford as a country to keep I think that's where the trainwreck could occur that in the commotion over not wanting to give up various other federal programs and not willing to see the tax burden go much higher that defense will have to take in quotes too big a reduction I think for those of you who were here this morning with secretary he in his remarks fully acknowledged that the defense is going to have to you know be part of this solution didn't talk about magnitude but clearly it's been socialized and you know the president's already put a number out there and I guess on the going off the cliff or the trainwreck kind of thing there are different sized cliffs you know you can survive some some you can but this one has the potential to I think be a pretty rough landing again if folks aren't paying attention just very briefly I think the frame of reference you've contrasted here is dead on this is a very different world than the one we looked at 20 years ago because of not only the dynamics we've talked about here but because of the budgetary challenges to the United States at that time were dominantly more more or led folks to focus more on discretionary spending today it's a small fraction of what we're spending it is but it is the first time in any serious way I mean I shouldn't say it that way this is the first time in a serious way in which we see real horsepower behind it that the Congress and the administration appear to be really aggressively looking at the question of how do we address entitlements and lots of lip service to it over the last 20 odd years several really noble attempts to try to take it on and this is the first time you see some real generated energy that may do that and if that happens that rather than be the panel of pessimists we've got an opportunity here to rationalize the entitlement programs in a way that hasn't been for the last couple of decades at least that said failure to do it that way turns out to be David's scenario defense case kind of crushed in the sequence because of the fair share arguments and all this nonsense that in turn will really obliterate any rationale on that so hopeful that yes indeed we see the energy that's behind the entitlement reform objectives that are underway right now and if that happens you've got a different scenario we could be paying that's true I'm going to give the last question to Ray Dubois and we've got a mic right over here Ray tomorrow Leon Panetta appears before the Senate Armed Services Committee for his confirmation hearing and assuming he's confirmed 21 days later he becomes Secretary of Defense I'd like to ask each one of you were he to call you in and say what are the two possibly three most important issues that I as Secretary as a new Secretary of Defense must concentrate on intellectually policy-wise my energy in my first six months in office what are those two or three issues I'll give each one because we're on one issue again I'll go back to the strategy framework it is imperative that they frame the debate by the time the January budget is released it has to be framed and it's got to have a frame of reference to it that will establish exactly what the strategy objectives should be and therefore what will flow from that in terms of capabilities mine would be the Secretary as it's presently constructed and with its size you're all volunteer forces unaffordable so you've got to think about that I would think the other side of that coin which is how do I sustain the quality and morale of this force because it's the quality of the people whatever size the force is in margin which is successful performance that was the big difference as Sharon points out in the 1989-93 period of time relative to past draw that and deliberate including as Sharon pointed out for the first time we paid people to leave because we had gotten them to join as volunteers and so we owed them a transition back to civil life of a different kind than had been true before so I pay first attention to the people in the force because if they don't stick with you if the institution is broken and he gets elated in Ron's comments as well all the rest of this is academic Ray I know you directed it to those guys but let me offer the one thing I would say to the Secretary designate is there are four people that are going to make a difference with his success and they're the chiefs of the services the coherence of any plan is going to depend on their goodwill to work with him to come up with it everybody else in the department is a supplicant there are supplicants in one sense but they also have the responsibility of balancing people and installations and procurement the future they're the present they are indisputably his essential partners to make it work and making that partnership viable for the next 18 months would be I think his highest priority collectively an innovation would work internally next listen folks thanks so much for staying and please reward these guys 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