 Good morning everybody and welcome to the Center for Strategic International Studies. Thanks for coming to our briefing on the budget And then you know, we've got some serious number crunchers here and some serious policy people here I think Andrew Hunter will be joining us Shortly, but we wanted to get started With that many of you may have seen that you know Ryan Crowdy's been promoted to deputy director of CSIS According to the New York Times and so we would go to him first But I'll go to our senior vice president Kat picks really first and you all know Kat So I don't need to her she needs no introduction But Kat of course came here after serving as principal deputy under secretary for policy From 2009 to 2013 and so we're really glad that Kat came back to CSIS because you know, we just need you Cool, thanks very much Microphones right give you all an opportunity Early before the real press of next week is upon us to get some insight into what we expect to have in the budget And what you might want to be looking for we'll be doing some pieces More immediately after the budget comes out that gets into the specifics of what we're going to see in there So this is really a framing discussion focused largely on what Ryan's going to tell you this morning I'll just say three very quick things up front before turning it over to Ryan. There's sort of three. I think everyone knows this basic Elements that are framing the budget issue set as it relates to defense the first is of course the geopolitical The world is not slowing down. We have the threats currently of course from ISIS We have the Russian Ukrainian issues that have been hot really for a full year and heating up again today We have continued concerns in the United States about the Chinese in the South and East China seas And that's sort of just a handful then there's the bolas of the world other things that pop up that we maybe don't anticipate very well in advance It's across every region of the world. It's state and non-state. So the threat environment and the challenge environment is pretty phenomenal Second of course are the budget dynamics themselves and I'm going to really let Ryan speak to that But I would just say one of the things I have heard said by insiders at the Pentagon within the last year since the last budget came out The Department of Defense is still using the 2012 defense strategic guidance as its basic strategy framework It updated that in the 2014 QDR, but it's essentially the same Strategy and as I have heard insiders say that strategy was built a hundred billion dollars ago Sequestrations effects Are not yet fully felt but the strategy most certainly can be executed at those budget numbers So there is a mismatch underway and the White House's approach to that appears to be to be Putting the budget above sequestration which again Ryan will speak to and then the last is of course the political issues And that's at the macro level in terms of the partisanship in Washington and the ability to reach a grand bargain But it's also at a more micro level In terms of the ability to squeeze more out of the defense budget and here we get into issues like base realignment enclosure compensation of course compensation Commission will be coming out with its recommendations today health care issues relating to the force all of these Areas that we might categorize as efficiencies that eat away at the ability of the defense budget to fully fund the strategy Are immense political challenges facing the hill in the next few years So with those three framing comments, let me turn it over to Ryan for the real details All right. Thanks. Kat. I thought for a second that Strategy was gonna get to go before budget again the one time of year. I you know I get to lead Well So I'm just gonna try to keep this Definitely under ten minutes sort of go the get to your questions But I wanted to sort of put everything in context here So I'm starting out with just kind of the overall federal budget, you know I think of sort of the the budget season kind of kicks off with Mondays release of the economic and budget outlook from CBO and we saw exactly what we would have expected But you know, we're we're looking at a world in which deficits are back to their historical average as a percent of GDP back to pre-recession levels and Then CBO says we're in sort of a four-year lull here between You know deficits flattening out Our costs haven't come down and then before debt starts to rise again in 2018 Dead right now is is seventy four percent of GDP, which is more than twice the 2007 level back that pre-recession level over 18 trillion dollars and again in 2018 that starts to grow again So I think it's in this climate In that we look at the FY 16 budget process the final budget that will be both built and executed by this administration Providing a real opportunity to reconsider budget priorities across the federal government And which more germane to this conversation. I think Is going to be acting on what seems to be a broad consensus in both chambers and in the executive that Defense spending as it has been the last couple years is too low given the global threat environment that that Kath mentioned and so trade-offs between defense and non-defense discretionary spending mandatory spending and revenues will really be the big questions Because that's what's going to be required to increase defense spending above the sequester caps So to take that down to now to the defense budget more specifically So we all know sort of in the the federal budget picture this the positive economic story there sort of has a Paul cast over it from the budget caps Created in the budget control act of 2011. Those took 950 billion dollars out of the 10-year defense budget Now if you include 2015, we've actually you know, which has already been appropriated We've made it through 40% of those 10 years. We made it through four years already But because of the the structure of the caps in the way that relief has has been provided by Congress We're really only 30% of the way through the total dollars that we're supposed to come out from that from that trillion dollars in spending cuts So in some ways an under under sequester, even though the top line starts to rise the worst in terms of what had to come out Of the baseline 2012 budget is still to come So the BCA level in 2016 is 499 billion dollars Thereabouts and that represents a 28 percent cut down from the peak level In 2008 in constant dollars, that's including the 51 billion dollars that we expect to come in the OCO budget It's a 14 percent cut in the base budget from again from the peak And the 2016 BCA cap is about a hundred and ten billion dollars lower than the baseline Which I was just referencing so that would be the biggest one-year cut So far So that's what sequester looks like. We know that the president's budget is going to ignore that You know, as Kath mentioned, it's it's clear that you know, he sees the prerogative that if he's going to support the strategy that the administration of dod has has been relying on since early 2013 Then 499 billion dollars doesn't cut it and he's been very clear I think actually the the chiefs yesterday on the hill were very clear They went so far as to say things like we can no longer do two of the ten missions at an acceptable level of risk and There might have even been stronger statements than that but that is a I think actually general Odeir and I might have even said that that we can know or excuse me the the marine commandant said he was no longer sure that they would be sized to be able to do one major theater war much less to a sort of a win-hold situation so You know those are pretty stark reminders of what the budget goes to in supporting the strategy, but In that the president has given us a budget that's supposed to be 534 billion dollars So that's 34 35 depending on how the decimals end up in the final budget billion above the cap The OCO budget will be 51 billion, which is 13 billion dollars less than last year 20% less It's actually almost the same amount for the counter ISIS campaign 5.3 billion. I think it was just an even five last year Interestingly, they're bringing back the European reassurance initiative At about the same level. It was funded last year Which I found interesting because I know that there were definitely some officials quoted last year. This was a one-time ask And that is clearly not the case. I mean, it's obviously An important issue we can talk about that in terms of what What needs to be done with this budget, but You know that has clearly changed Again counterterrorism partnerships fund will has an ask again They asked for four billion last year and got something like 1.3. They're asking for just over two this year So all things combined here. We're looking at a total budget of about 585 billion dollars Which is equivalent if you look in constant dollars including OCO about the 2003 level Which is significantly lower than what we've seen the past couple of years even with this increased base budget You know, we're seeing sort of a Is shifting back to a Less wartime footing. So What's inside that top line? The fy 15 budget sort of provided a roadmap to what we should already expect this year The high and low priorities those first in first outs I think we already kind of have a sense of Because the opportunity growth and security initiative last year Provided that 26 billion dollars of of unfunded priorities. The first things that the president would have put back in had he not been restrained by The bipartisan budget act. So those were things like army rotary aviation Reapers p8 c 130s You know restoring some of the readiness funding to Especially army and navy and bringing back some of the milkan that had been cut very deeply Similarly, they provided, you know, those those first outs the the estimated impacts of sequester level funding We know that procurement took a the most significant hit under the sequester scenario for the fit up those Procurement is something like 18 percent of the budget, but it Would have had to take about half of the cut to get down to sequester over over the Over the fit up. And so I think that roadmap is largely what we should expect in fy 16 You can see many of those Exact programs popping up in the early sort of leaks coming out I think the last question that we have to ask is what are the priorities that need to be fit in for fy 16 That we didn't have in 15 because there's been a lot that I've popped up with last year I mean the european reassurance initiative is one but things like You know increases for modernizing the nuclear enterprise r&d plus ups for the long-range research and development plan the defense innovation initiative the aerospace innovation initiative just Brought up yesterday by secretary kendall Those are significant initiatives plus the efficiencies that were rejected in fy 15 You have uh, whether that was the the carrier overhaul Remember that the army and the marine corps were actually funded in the fit up that at a lower level at 420,000 and 175,000 respectively those need to come back up to the levels that have been agreed on Then see what efficiencies will be resubmitted. I think we all expect to see the a10 again probably Brack will probably be back in there. Maybe the u2 See what they do with Navy surface ships, whether they offer up the the cruiser layups again you know one of the things that we did see is that there was A few places where congress kind of took half steps toward allowing some of these efficiencies pulled in one of those was allowing a couple of The cruisers to to be put into phase modernization See if doD will start to try to put more money back into readiness accounts again Which congress sort of pulled back in the actual appropriation that shifted some of that money away So there are a lot of other long-term issues that we can talk about in your questions But I want to make sure we get to those so just a few things to remember coming up, you know, we have our budget release on the second the the public release of the Retirement and compensation commission Is going to be on the third on the fourth is dr. Carter's nomination hearing So a lot of big things, but then we also hit End of February is about when we're hearing the appropriation subcommittees Are going to start pulling in and then in March supposedly the the authorizing committees will have their hearings and then March 15th debt ceiling and april 15th budget resolutions Are due so those are some A lot of things to get through in the next couple of months You know, I think one of the things that I've been happy to see is that February 2nd the the statutory date of the budget. It's coming out Um, so the first step toward sort of a a regular debate and order of of the budget has started So we will see and hope if that continues But uh, I'll turn it back over to my colleagues here and then you guys can go to questions Andrew I'll be very brief, but uh, just to magnify a little bit some thoughts on modernization and acquisition and research and development I didn't get a chance to introduce Andrew, but if you all don't know Andrew Andrew just joined csis recently He worked for a guy named ash Carter at the Pentagon for a few years and and now we've got him here So we're very fortunate to have Andrew leading our defense industrial practice And so I should have introduced myself. Thank you Andrew Andrew Hunter Head of director of the defense industrial initiatives group at csis and lately three months ago out of the pentagon But excited to be here at csis So some thoughts on acquisition and modernization things to look for ryan indicated servo. Let me just amplify a little bit You know the decline and I want to focus mostly on the decline in the rd rnd budget It's actually been almost exactly followed and traced the pattern that ryan described overall Which is a 28% decline from the peak year To where it was in 2015 and of course we'll we'll see what happens in 2016 But I would draw your attention within that Within that budget There's a significant magnifying effect that's happened to the rnd funding that actually goes to industry to deliver technology For future procurement and that's because the s and t portion of the rnd budget has been protected Which is I think on the whole a good thing But the necessary effect of that is fewer and fewer rnd budgets Then are able to go out for the development of technology and to military capabilities You're doing more on the research basic research side. That means you're doing less on the end item development side and Also a portion of the rd teaming budget is is kept internal to the department And my suspicion based on what we're seeing And the contract numbers is that that internal portion of the rnd budget has also Been relatively protected, which is understandable because you don't just you know go out and fire all your civilians who are working in your government labs That's not really possible and maybe not wise And so that effect of that rnd decline is significantly magnified for industry possibly as much as double the impact And certainly for the army that has been the case the armies The contract spending the army has put out for research and development Contracts has fallen by 60 percent since the peak. So your 28 percent decline Basically doubled in the case of army's modernization as it goes to industry for developing capability So it'll be interesting to see essentially What happens in 2016 does that decline continue? Even if the rnd budget as a whole stabilizes that portion going to industry I suspect will still probably be on the decline unless there were heroic Hororic things that were able to be done And I know there were some attempts there on that end Ryan mentioned some of the potential investments for the defense industrial initiative That's definitely something to look for Along those lines that I would look and maybe ask about Whether there's specific efforts relating to prototyping that are funded in the in the fy 16 budget That's something that presumably would support the innovation initiative And potentially support retaining some of the design capabilities Within industry that are at risk in an in an era when we're procuring so few new build systems I would also you know keep your eye on programs that have maybe been indicated by the services in the past Maybe on the bubble or have historically been on the bubble And I think the thing to look for there is given that the budget request is coming in above sequestration Might consider that a little bit of a high watermark So then how good are things how good do things look in this budget keeping in mind that it's probably the best case scenario And my takeaway from ryan's comment was the worst is still to come A very cheery very cheery thought for this morning You know so as good as this budget may or may not be on some of these systems that have been on the bubble You know, that's the best case scenario and I'm thinking of things like tx Joint like tactical vehicle The procurement of amphibs things that either historically been right at the cut line and maybe haven't made it or have just squeezed in Or that the services have actually said, you know, this is right at our our bubble And right at the edge It's interesting to see where those are in this budget And then extrapolate what it means if we go back to the sequester levels for things like that Two more things It's worth I think looking at the acquisition workforce and the funding that affects it in this budget So that's the defense acquisition workforce development fund, which is the mechanism for continuing to professionalize and Increase the professionalization of the workforce And then just what's happening to the size of the acquisition workforce in this budget in terms of their numbers And what does that look like compared to what happened in the 90s to that workforce? And then lastly on rapid acquisition The department has been trying to create a Some enduring mechanisms to help finance rapid acquisition and obviously the peso operations has with the counter-isol mission has stayed relatively high Although not quite as high as it was But that is not going away. And so things like the gydo the budget for gydo The department has struggled to get that into the base budget, but it has included base budget funding In some prior years for that and that'll be something to look for Like to open it up to your questions Please use the microphone if it's near you And identify yourself and your news organization will be very helpful for the transcript and we will have a transcript out Later this afternoon as well as some audio from this event audio and video from this event. So questions, please Jeff Thank you. Jeff Mason with Reuters. Many of us have stories out this morning Based on info from the White House saying that they are going to propose an end to sequestration And a spending increase both for domestic programs and for military Can you give some thoughts about a the likelihood of that? ever happening And b how you see That sort of looking in the actual budget to the extent that you can on the domestic program side in addition to the defense side so the As I said kind of earlier with that consensus, of course the consensus is only on one of the three legs of what what needs to happen in order for Any real change to happen? That's that's on the side that we're talking about the defense side But the the non-defense the mandatory and the revenue There is distinct disagreement and certainly the political calculus that that says that you know the deficit can't go up Um Is really what actually drives you away from being able to change the spending levels change The caps. I am Somewhat pessimistic. I mean, I think that you've already seen Coming out of the state of the union and and as the budget stuff starts to roll out The immediate reaction from congressional republicans Reaction to what is you know seems to be a uh Tax loophole change as the most significant factor in in freeing up money for discretionary spending and There is just a poor disagreement between republicans and democrats about Where that money has to come from. I mean, I think that the paul ryan budget we saw Um Two years ago is really the the Benchmark for what can be expected out of house republicans what they want out of the budget They're gonna want to find money for defense in non-defense. That is so clearly anathema to the president Um, and what he sees this is priorities Um, I actually think that there is uh, not a high likelihood of us getting all the way back up to this to this budget level of Of spending on probably either the defense or non-defense side Um, I think that the the question is can they get another ryan murray style? um Sort of short fix that actually gets you uh You know, maybe 10 20 billion dollars this year um, and Uh, it sort of gives you another bridge to making an agreement. I mean, I made a mention of the four-year lull I mean, I do think that we are in in the moment where a grand bargain is really needs to happen Um, and I don't unfortunately I think the political calculus is still just too hard to get all the way there And it's going to be small changes. It's going to be add two years to the back end of um Of the bca to find some money there Maybe because of the way uh deficits have have dropped below expectation. Maybe you can find a little bit of money there Um, but uh, but I think that it's going to be pretty hard Sort of along the same lines congress or the the leaders of congress from uh, both The house and the senate have said they were going to try to have a regular order budget this year so, um Is that likely to happen And as far as the defense budget How are they going to handle sequestration At what point in the year are they going to you know, is everything going to go haywire like, you know Like they did a couple years ago. When is that going to happen this year? I'll start um the uh I mean, I think that the the biggest hurdle in regular order is going to be a concurrent budget resolution I think it's going to be very hard even with the Republicans running both houses um to get something that that uh House Republicans are going to put into a budget resolution that um senate Republicans who are Largely up for reelection in 2016 are are going to be willing to get behind and it will certainly be hard to find anything Um that gets the votes. I mean Andrew can talk about the potential for reconciliation maybe as as a mechanism For for finding some areas But I actually think that the head regular order breaks down on april 15th when we don't have a concurrent budget resolution So I think that we can expect Another cr now that the caps are slowly increasing each year You know a a continuing resolution at the beginning of the year doesn't trigger anything horrible um So I think that that is probably a likely mechanism and we start pushing up against uh, you know End of december january as we've seen the past couple years and that's when we find a small deal Yeah, I would agree. I mean there's a strong incentive for both houses of congress to use budget reconciliation as a mechanism to move their agenda forward Because it significantly Reduces the burden in the senate the number of votes that you have to get and many of their primary objectives are budget related So they're ideal candidates to be included in a budget reconciliation measure But as as ryan said, you know the the different political dynamic that faces republicans in the senate It's probably going to make getting to a consensus budget resolution, which is required to Enable the reconciliation process. They don't need the president's signature, but they do need a consensus between house and senate To to start the reconciliation process and to use that mechanism That's going to be pretty challenging because I think you know consistent with the way that ryan budget has done it in the past To the extent republicans in the house look to increase defense spending. It'll probably be offset from non Defense discretionary spending and that's going to be a much tougher political cell in the senate And they just don't you know then to get to the margins that they would need That's going to take some some tough votes from people who are up for re-election I actually It's a good question because I I'm curious to see what will actually be in the The dod request knowing that The the commission will have will be coming out essentially simultaneously with the budget I expect there will be some things in there. We already know what the pay raise is supposed to be They've asked for a 1.3 percent, which is still below below statutory, but above 2015 it's 1.3 percent. So So there obviously will be some there there have to be assumptions built into the budget and so, you know, we will absolutely have to see some of those I I expect there will not be any big proposals knowing that the if I just to come post budget You know, I know that with the commission, I think there are some expectations of a really significant um Thoughts for changes in the retirement system I don't know if you guys have heard anymore I have not heard more details. I have one Maybe borderline speculation to offer which is of all the components of the compensation piece You know the the pay piece It's a little bit arithmetical, you know, so you can say oh well 1.3 versus 1.5 or whatever the statute would imply It doesn't maybe raise hackles in the same way But the other thing that I would I would look at is really the health care budget Because on the pay side, you know the decision to increase compensation in the early 2000 period was very conscious one And something that the committees of congress and the congress was promoting and so Sort of shifting direction on that requires a shift a change of mindset That is not impossible, but that is hard And similarly on retirement Although there was a lot of decisions made by the congress to put in place the retirement system that it exists today On health care, I feel like much of the increase on health care spending has just sort of happened You know, there was no conscious initiative by the congress to say we really want to increase the health care benefit for You know, it was something that sort of evolved over time And with the exception to some extent of you know, try care for life and health care for retirees A lot of that health care expense growth has been Not something that was driven by any sort of policy decision So I think it makes it a little easier to then go back and say I don't have to change my mind to support Scaling back the the size of the health care spending budget. So I'm A little bit more hopeful that there's room for progress in that area We really take congressional action and I think that While that is possible I don't see any Big moves coming. I think that you probably get DOD reacts and says man, we'll have to think about how we would do that and then and then Really not expect much action until 2017. I have a stepped up posture For the united states as part of the overall NATO commitment And that largely is represented in terms of exercises and troop deployments Naval presence and air presence in the Baltic states And Poland. So I think it would be a continuation of that the specific Exercises and deployments probably aren't fully set yet for 2016 but it would be set at a level of effort to sustain that degree of u.s. Engagement. So Baltic air policing support for instance again troop deployments That Demonstrate our resolve for NATO, but I don't think that they'll have specific exercises set up at the time that they release the budget And I would just add to that as a broader Conceptual issue and one that Clark Merlach and I who unfortunately can't be here today, but Just wrote about You know it is we are reaching the point as we have Moved out of Afghanistan. I mean we we know about, you know, the the ISIS campaign is the big headline But it's really still a very small percentage of of OCO. It's only 10 That we are Now getting into continuing to add new things that we consider contingency operations and I think that One of the things obviously the caps have been sort of what has forced a lot of things into that And it is really important to start thinking about what is it that we That is our sort of peacetime baseline global presence because really you You know OCO is sort of becoming a reflection of just how the US operates in the world Probably for a long time going forward So, you know, whether it's You know operation enduring freedom things that are happening You know, I think the specific authorizations for for use of OCO is you know 20 countries, but also any other country you want to But explicitly I think it's something like 20 that fall into it And and it's really kind of everywhere now and so starting to rethink about what needs to be something that is a annual planned part of the budget And what is really emergency and contingency, you know, I think that that very very gray line Probably Especially if we get some kind of agreement should probably be something that we revisit As as budgets start to start to creep back up Um Because right now we're looking at a world in which the OCO budget is You know 40 billion dollars forever. I don't think that's how you want a budget for things Let me just Let me just comment on that to say uh Ryan's completely right and I just would say it the opposite way Which is to the extent that you do not get an agreement OCO is a politically expedient way um And is particularly expedient to the extent that the line is gray for all parties to Ensure that there's some funding on particularly for readiness and near other near-term requirements Um while you are not able to resolve the sequestration problem And I suspect back to the pessimism that ryan offered earlier I agree with that and I suspect that's the reality that we're facing for the next few years Is that you'll have OCO used as a relief valve You won't get a grand bargain as much as I would like there to be one And um if to the extent that the environment stays Rough and tumble. I think that's the world we're in if it gets much worse It might help push a grand bargain if it gets much better. You might see OCO come down Hi gen de massio from aviation week. Um, I wanted to follow up on the um the european initiative. Are there any um equipment? Is there any equipment that might be funded as part of that this year? I'm not aware of any in there and that's it is not related just to be clear to any ukrainian aid That would be a separate issue But I don't I'm unaware of any nato equipment support that's in that And then also I wanted to follow up on the aerospace innovation initiative What do you see kind of coming out of that and when you were talking about the r&d budget and the s&t budget being off balanced Do you see um that focus on innovation shifting that s&t to r&d balance at all or just shifting it for those Uh programs um like a future fighter Specifically and then draining accounts for for other r&d efforts Well, I will confess that I am not really familiar with what the content of the aerospace innovation initiative is So I can't really speak to what I think it'll do. I think in general You know the prototyping initiatives that frankendall has talked about in the past have all been designed Not to drain, you know Sort of designed in a way that they wouldn't drain from ongoing acquisition programs But they would sort of keep alive that design ability At a time when you know the programs we do have are a lot of cases Just upgrades to existing systems and so they don't involve a lot of design expertise So they do at the margins for whatever subsystem is being upgraded But they're not whole system design exercises, so You know, it's been in the past at least it has been trying to kind of find that balance between something that is not terribly expensive Keeps the design capabilities You know alive But doesn't become large enough that it eats into you know the base of Of what small amount of acquisition is still ongoing Uh, and I would you know, I would expect to see that going forward now over time as you get out three four five years into the future Obviously if this innovation initiative Defense or aerospace version going to be successful, you want to start to see some of those ideas that are small Turn into programs Or get incorporated into programs of records So to the extent that some of these innovations may be more at the subsystem level or at the you know sensor level Or you know kind of communication systems level you want to see those things migrate into an f35 program Or migrate into the lrsb program and be adopted And that's kind of the goal So I see it happening more that way than you know big new programs coming in and crowding out What's on the table today? It's not a statutory requirement, but the congress invites The secretary the secretary can choose to decline the invitation, but that would be unprecedented at least in my knowledge um What my understanding is what the agreement has been with the congress is that they have pushed off the posture hearings So that he has time to be First of all that he can be confirmed without having to defend it Um, which is why the confirmation hearing is right after the budget is released And he has no knowledge of that budget which makes his confirmation hearing much easier And then he has time to sort of become familiar with it. Um, you know, I'll turn this over to andrew who's had An experience I was going to say more experience on the hill, but I'll just say experience on the hill since I've had none Um, but I believe the secretary absolutely could work with congress And omb and the the president if there was something he wanted to change about that budget That's probably how he would do it quietly working with the committees um But it is actually not unprecedented for a secretary to walk in and defend budget that he uh has not built So I think that will be the case here You know two thoughts on that the the first is that Because ash carter was deputy secretary basically for the skimmer. Does anyone remember the skimmer? Uh, sorry, I just got a you just got us. Yeah, sorry cath um So, you know, which is where essentially I would say the shape of you know How the department intends to deal with sequestration and how it you know Where the department essentially drew its line, you know snapped a chalk line and said this is where we think that We don't want to go below Line is which I think their budget request will reflect kind of their bottom line. We need this At least this amount to do the strategy The shape of that was largely defined in the in the the skimmer and subsequent debates all of which Happened under ash carters leadership and certainly during his tenure. So Um, I There has been changed since he left the building So it's it's very true that the exact details of this budget. He'll he'll need some time to To become familiar with but on the other hand, I think he's very familiar with sort of the overall budgetary approach That this budget is likely to reflect So it will not probably take him a tremendous amount of time to get back up to speed On the congressional side Yeah, I mean, you know, there's only one secretary of defense the fact that here may or may not be familiar Terribly familiar with the budget that they're defending. That's always a problem when a new administration comes in And you have a secretary, you know, who didn't with the rare exception of gates, you know Comes in usually didn't have anything to do. That is just uh, that's just an understood dynamic And um, in a lot of cases the the questions then directed to the secretary would be much more high level And they won't expect uh him or her to have the same You know converse sense with the details that they would have later I haven't seen any evidence of anything personal to carter Or maybe personal is not the right word of anything that is particularly associated with him his views or his positions Or his prior service. So that's a pretty clean slate from my perspective I think it's several folks have been clear that they have serious issues with the president's policies And they're going to go after those policies And obviously the dynamic will be To see how adroitly uh, dr. Carter is able to defend those positions in a way that doesn't you know, sort of antagonize The members of the arm services committee and other members of the senate I personally believe that that he will be very successful in that So but obviously we'll have to wait and see Inevitably, yes, they'll have to do at least a in their power point presentation when they roll out They'll have to do at least a slide that says crosswalks What's and that's really what it will be what's in the budget and how it relates to the offset strategy So I think it will be up to all of us as we look at that to see how much we think it really supports What's in the hagel memo? Yeah, and I think right and I think that's sort of Andrew also Shred me a part of this is a lot of this is probably going to focus into rnd things or be Not necessarily budget focused items, you know, I think that a lot of the Better buying power 3.0 stuff that sort of feeds into the innovation initiative as part of it So I think there are some things that will be bullet points that are not necessarily budget bullet points um, but I would note that if if you go back and look at the You know, whatever way I guess we're calling the second offset strategy the the bill parry under harrell brown Uh, you I think you would have expected to go back and say oh wow look at like this huge rnd Surge behind all of this great stuff and you know, obviously we can't see what happened in the black budgets Which is probably where a lot of stealth was But when you go back and look that is not really the case you know, it is I think it's about a reformulating inside of the budget having a strategy to what you're doing with the dollars that you already have Not necessarily adding so again I think it's probably going to be more Bullet points and and text than it is dollars moving. Although. I think yeah, they will definitely have to address where it's going Um, but I don't I don't see huge budget impacts from it There is a little bit of a timing mismatch here I know I'd point out that the rfi that went to industry for their input on You know, where should the defense innovation initiative be focused? That's still open, you know So at a time when we're still the department It'll slip up there. I'm not there anymore when the department is still asking for feedback from industry about You know, what is uh, what is the hot stuff that's coming down the pike in 10 to 15 years that we need to be Ensure that we're going to be able to leverage and stay on top of They had to put together the budget, you know and going back, you know, probably four or five months most of this stuff was was was really late and and not in concrete but in some some me solid mix so So I I think There ought to be there probably will be maybe some I'm going to have to use the word funding wedges Associated with the defense innovation initiative But I don't think you're going to see hard programatics at this stage because a lot of that homework is still being done as we speak Analysis coming out. We're aiming for the day after the budget Andrew's going to have a piece on offset and innovation once we get a chance to look at that budget So See person in the room. So I'm not this is not my forte, but I've also been a manager in government for a long time So how does it happen? It comes down to how you count people is a big piece of it whether it's your counting full-time equivalents or bodies And that's different. There's also particularly since 9 11. There's just been a huge growth in non-traditional billeting So, um, you have temporary billets. You have a lot of contractors, of course Which I think everyone's familiar with those issues So oftentimes what they'll do is try to count computer accounts But then again, that's not the same as full-time equivalents you may have and you may have people with multiple computer accounts So part of it just gets down to how do you count the people? Do you just count full-time government employees and make that your cut bit? The the base upon which you're going to cut which is Honestly unfair to how you might want to cut you might want to cut a lot more contractors out of the system Depending on what the particular function of the headquarters is Um, so that's on that's how you get to that problem You have touched on more broadly an issue the department has long faced, which is how to be make a convincing case That cuts whether it's under sequestration or whatever the cuts may be are really that harmful when in fact There seems to be sort of the slush of money or an inability to account for the money We don't have great audit ability in the department Marine Corps and Coast Guard are good other services are lagging and osd is and is quite far behind the services So, um, there's a fair question and something that I think you have the comptroller and The chief the deputy secretary really focused on in the deputy chief management function You may know there has been legislation to create an undersecretary for management Which is part of the effort to get at issues just like this And I believe the statute requires that position to be established by 2017 I may have the date wrong But I think you'll see in the next two years movement toward establishing that position if not actually establishing it early And these are the kinds of things that they'll be trying to get after And I just I think one of the issues I haven't read the geo reports I'm at risk here But one of the issues I've experienced in the past is that there are different definitions of what's headquarters You know and so There's a definition. There's just there have been in the past statutory definitions Which there used to be an annual reporting requirement, which I think eventually was either softened or maybe done away with And so that's one definition of headquarters But then you find that I suspect if you go back and look you'll discover That's an unsatisfactory definition of headquarters. It made sense at the time it was adopted But you know as cath has indicated the way that Manning ability is a better word of of osd works has changed a lot. And so I think you'll find probably that older definition was found to be inadequate secretary haigle took on and You know established a goal to reduce headquarters by 20 percent And so obviously you have a different than definition of what that means for headquarters and My understanding of that initiative was that they they wanted to take account of this You know need for flexibility that cath mentioned of you know, let's be thoughtful about 20 doesn't necessarily mean reduce Every aspect of the workforce 20 percent just 24 20 percent in total Maybe a more contractor heavy. Maybe more government heavy depending on the organization And its structure And so I think that's where when gao kind of goes to say, you know, what's really happening It gets all muddled because everyone may be coming at it a different way and people may be using different definitions Of what constitutes headquarters. I don't my personally I don't draw from the conclusion from that that nothing's really happening And no reductions are happening. I think they really are and that's actually something to watch over time Because again the experience from the 1990s is we came out and we said, okay, we're going to reduce and the mechanism Of government left to their own devices will not necessarily reduce in a rational way And you know everyone's favorite way to reduce is through attrition because it doesn't require you to force anyone out the door But that doesn't necessarily allow you to control that you're reducing on the places where you have the most access Um, and just to take it past the just the specific headquarters, but to the efficiencies question very large. I mean, I think that uh A big question to be faced in the in the coming years we have Something like 245 billion dollars of of efficiencies in the 12 to 2012 to 2018 time period that that were um Literally negative funding wedges. They were assumed Um, and and whether we get any accounting of that. I mean that runs through 2018 2018 is not that far away in terms of Building a budget, you know, how how have we done? I think is a really good question because 245 billion dollars is you know Twice what the president has put in the fit up above the bca cash, you know, that's a lot of money that uh that Supposedly has has come out. So my honest answer is those are all Everything you have laid out Are part of how we Speak, you know the pro what the president has said certainly in terms of his emphasis on partners picking up You know burden for the counter ISIS certainly the iraqi government itself in the case of iraq the europeans and others um All of that is true that said It is not the case. I think that it would greatly affect in any way the defense Budget that we put forward. We tend to be very cautious in the united states about assuming What's going to be brought to bear by allies and partners? um So I think there's some amount of coordination, of course that's going on In terms of developing the budget for the u.s. And there is certainly some amount of funding In terms of the counter terrorism initiatives In particular and then as we mentioned before the the rap for Europe and then potentially a package for ukraine Um, those are examples of where it built into the budget that the president will release will be some of those initiatives Some of which that money will be in do d some of which will be in for instance the state department Um humanitarian aid to syria would be another big example of that where he's had a big push But by and large it's on the it's small amounts relatively speaking on the margin and The bulk of the defense department budget is settled without regard to what other partners are bringing to bear with the I should say more directly with the assumption that the u.s. Might have to act unilaterally in some cases I'd like to thank everybody for coming to csis this morning You can follow us at csis on the on twitter We're also on facebook and at csis.org. We'll be sending out a transcript to all of you Later this afternoon and thanks for coming during next week when the budget is actually released Please feel free to call us. We'll be sending out as cath indicated Manuscript of papers On this issue. Um, ryan. Do you want to give a sense of what we're going to be? Um What we're gonna get out and what we already have. Yeah, sure. So we we've got one piece out Yesterday afternoon on on sort of the the strategy budget alignment question and how we think about that going into a budget cycle Um, and then we're going to have a series of pieces coming out on tuesday Um, once once we see what comes out that addresses sort of the different, you know, our sort of our maritime forces Ground forces those sort of specifics Uh r and d some uh, some things on on that will wait to see what we actually get out of there Um, it's things that sort of the the post-oco and yeah, and actually we have a specific piece on partnerships and cocom priorities partner programs As well as uh, some some regional um, and uh regional deterrence issues. So uh, sort of try to hit the the large Swath of issues coming out of budget season here