 We're here this morning to try and ponder uncertainty. It seems like the Defense Department has more of that these days than ever. So we thought it would be useful to have a discussion on some of the major upcoming events that need to be dealt with. And one of those is the QDR. So we're trying to set the stage a bit. And that really is one of the few certainties that's out there. And then USC 118A says the Secretary of Defense shall. And unless somebody relieves him of that obligation, he will. So we thought it would be useful to talk a little bit about what that's going to be. We're going to kind of start from the right and go left. David's going to tell us a little bit about what we know to date. Clark's going to talk about what it should be. Stephanie's going to clarify the Hill's position on all this, which will be useful because none of us understand it otherwise. And then finally, Sam will tell us about the independent panel. And then we're also looking for the chance to have this dialogue with you in the audience because we appreciate your views on this also. So David, please lead us off. Thank you, Kim. We only have a couple of charts this morning just to kind of frame the discussion, if you will. As you all know, the Quadrennial Defense Review is by statute not required to be fiscally constrained. In fact, it's kind of required to be fiscally unconstrained. And yet the environment in which we operate is nothing if not fiscally constrained. So I want to just put a reminder chart up here and then a second chart, which will kind of lay out the situation going forward. This is the past and the current projection to the present, if you will. It shows the buildup through the aughts. The blue at the bottom is the base budget, the red is OCO. And then you get to FY13 and you see the drop in the blue budget and that's a result of sequestration. But the real interesting part is to the right, the FY14 through FY19 parts of the chart. And each of those columns is divided into three pieces. These are constant dollars and so you have inflation discounted out there. The top bar, the little purple part, is the 257 billion or 280 billion that was cut in the first tranche of the Budget Control Act back in August of 2011. This was under Secretary Panetta and it essentially flattened out all projected growth in the defense budget from FY13 and beyond. The middle little color piece at the top there, the light green, is what we call in this chart the excess over the final caps. This is the impact of the second half of the Budget Control Act. People call it sequestration even though the sequester only occurs in the year of implementation and execution if the appropriations acts fail to comply with the Budget Control Act. But that's basically the difference that we're arguing over right now is that little small green piece. The bottom light blue is really what you would have left if you took the $50 billion a year out of the defense budget that the Budget Control Act requires you to do. So that's what the future looks like from a statutory point of view. This is what it looks like from a current situation point of view if you will. There are four lines on this chart. These are in current dollars and so this is unlike the previous chart which had constant dollars. It shows you the growth that you would get just from the inflation index put into play. On the left you have fiscal year 14 and you see the gap. You have that square at the top and that's essentially the same number for the president's budget, the house budget resolution and the senate budget resolution. The blue line down at the bottom is where the Budget Control Act caps would have you be. So that's your $50, essentially slightly over $50 billion, $52 to $54 billion gap in the O5O account between what everybody on the hill is debating today and what the law says you have to comply with. That gap extends all the way out. This chart only goes to 18 because that's as far as the budget resolutions go. But you can see that the gap extends out there. So these are the facts that we sit with. What else do we know? We know that there's a defense strategic guidance issued January a year ago. It has the 10 core mission areas. It has the four things that you need to do, pursue counterterrorism, defend the Middle East, rebalance to Asia, et cetera. And it has the one thing you're not supposed to do which is invade another country and create stabilization and reconstruction. We know that we're in, it does tell you that actually, slightly less blunt than I just put it. We know that we're cutting sequester in 13 and we know we're not preparing for it in 14 as this chart clearly demonstrates. We know that the strategic choices and management review is done. We actually haven't seen a document that says it's done, but we know that the director of cost analysis and program evaluation says she was not going to leave until it was done and if you go by her office, she's gone. So we know that the review is done. We know what the guidance is basically for fiscal year 15. We know it because it was in the deputy secretary's memorandum of May 29th that laid out the strategic choices in state and we know it from the OMB guidance that was issued the same day. So we know that all across the government and in DOD in particular, there's guidance to prepare fiscal year 15 and beyond budgets with cuts of 10%, either with flexibility, that is, you have some choice in where you cut or without flexibility, which is what you would do under a sequester. So we know that guidance is out there. We also note that the law has not changed. That bottom line, that blue line that says cut $50 billion out of defense for the next seven years, actually eight years is the law and there is no viable proposal on the table to change that law that's coming up for a vote. We know we're doing a QDR because the secretary of defense keeps saying it in his speeches, but we've seen nothing in terms of schedule or process or terms of reference. And we know that furloughs have hit DOD. And I think there's, I'd like to say something here. I mean, this is the civilian workforce in DOD is in my judgment and experience and I think a lot of people in this room would share that, the best civilian workforce in the federal government. And yet they are the ones that are having the biggest impact from furloughs, from sequestration and I think that impact is going to extend for a long period of time. In many parts of DOD now, you've effectively gone to a three-day work week because furloughs on Friday mean you can't get stuff done with people who aren't there on Friday. Furloughs on Monday mean you can't get stuff done on Monday, so you got to get it done in Tuesday, Wednesday, Thursday. And under furlough rules, we've discovered we have to work to the rules, which means eight hours a day. So effectively, we've got a 24-hour work week in the civilian part of the Defense Department and I think we've dramatically underestimated both the impact of this and the long-term consequences. What do we look for? This is sort of what I've got five things I think are worth watching for that will become things we know but we don't yet. One is fourth-quarter contracts and obligations. You all know the history. Typically in the fourth quarter, there's a lot of money and it needs to be spent and we put it out the door. But I think this fourth quarter could be very different and it's important to watch that as we go forward. There is money, not with standing sequestration, there is money. But I'm not sure that the obligation is there to spend it the way it typically is and I suspect the capability is not there either. When you take a contracting workforce and you furlough it and you work to the rule in the remaining days, you are likely, we are already seeing plenty of signs of we can't get that obligated this year. Now what happens with that money, whether it becomes part of the unobligated balance that allows you to absorb sequestration in FY14 and therefore creates an incentive to do so, bears very close watching over the next two or three months. The next thing is the continuing resolution that we're likely to have for FY14 and in particular, how long that CR is for? Is it just through Thanksgiving? Is it through Christmas? Is it six months like we had last year? And what degree of flexibility or anomalies, as the Congress calls them, are built into that continuing resolution? We have to watch the debt ceiling deal, which now looks like it may not be until November or perhaps even later, it turns out. In June alone, for instance, revenue exceeded expenditures at the federal government level by $150 billion. That does a lot to postponing hitting the unlimited part of the debt ceiling. And we're likely not to have that negotiation until after the continuing resolution comes into play. In addition, more than likely, Congress will do what they did last time, which is a very clever way of punting the issue down the road. We have to watch for the January sequester. Even if the continuing resolution is at the same level as 13, there's another 17 billion has to come out in January or 15 days after Congress adjourns, whichever comes first. And we have to watch for the President's budget for FY15 and whether or not it is consistent with the Budget Control Act caps or continues to pretend, as this chart shows, that there's $50 billion more for defense each year than there actually is. Those are the five things that we watch for. With that, I will turn over to Dr. Murdock who'll talk a little bit more about what we should be doing as opposed to what I've described, which is what we are doing. Or not, as the case may be. Or not, as the case is. Thank you. It's a great pleasure to be here, and thanks everybody for coming. Thinking about what the QDR should do, I think it has to be looked at within the context of the physical realities that, as a good friend of mine used to say all the time, denial ain't just a river in Egypt. This is a case where the building and the White House and the Congress is illustrated by this chart right here, continue to act as if the law isn't the reality that they have to adjust to. So the first thing is recognizing reality. There's always strategic unreality, I mean strategic lack of certainty because that's the nature of life. But there's not this kind of fiscal uncertainty and the denial that a law will go into effect that's going to affect how much you have the way of resources. Another thing as part of the context, I think is what I call QDR fatigue. Same people make the same decisions, they just make them different forms. We have had in rapid succession the 2010 QDR than the 2012 DSG, which was done in parallel with the FY13 budget request, so a constant iteration back and forth. I actually think that the 2012 DSG is a pretty good document as these documents go. I myself have participated many times in writing of such documents, dueling documents within administration, and I would say the 2012 DSG is a pretty good one as these go, far better than any of the ones that I participated in. But it's supposed to establish priorities, and my friend and colleague, Sam Brannon, did an audit of the 2012 DSG. There are 28 in-states and objectives in the DSG. Yes, it identifies 10 primary missions. Yes, it says that four of those primary missions will be the principal ones that are driving the size of the U.S. military. But there are nevertheless 28 in-states and objectives in the DSG, and the DSG itself is titled Sustaining Global Leadership. How much capability do you need for global leadership? Well, that's an unending demand, and so we still haven't learned what it means to act in constrained circumstances. We're not saying to ourselves, we've got an affordable military, we have to have an affordable military, and we have to have a living within our means foreign policy. The gap between our strategy and our resources, the missions that we want to do and the resources we have to do them, continues to widen. So what do I think the next QDR should do? Well, the first thing is, it has to overcome this lack of reality and set out and say, in 2012, this is what we had, because everybody looks at the FY13 budget request and the FIDUP projection as being the baseline, as indicated over here, and we have to look out two FIDUPs beyond that, even though the QDR legislation says 20 years, you can only think about two FIDUPs, one FIDUP and then the FIDUP beyond the FIDUP, the five-year defense plan. And we have to put into budget caps that are there and say, okay, these are the dollars available to you. The second thing we have to do is take advantage, not take advantage, take recognition that we've been living with internal cost growth for decades. Sometimes we budget for it. Sometimes we don't. Most of the time we don't. We know that our O&M budget goes up 2% every year. But we never budget for it. We just have that broken glass at the beginning of the execution year. I call it the double whammy effect. You're going to have fewer dollars. That's the drawdown, but you're also going to have weaker dollars in terms of their purchasing power. And so that the internal inflation is going to make what looks like a $20 billion, you know, $20 billion, 20% decrease, look like and feel like a 40% decrease. So we've got to build that in. Bob Hale, the comptroller, indicated when he was proposing before Congress that in FY 13, you know, they made proposals for the Tricale Health Program that would have saved $2.5 billion in 2018, the last year. $2.5 billion in one year, the final year of the fit-up at the time he was testified. And then he said, if we don't have to do that, we have to cut forces to offset it. That's about 25,000 people. Well, of course, Congress didn't pass any of those. And we haven't cut those extra 25,000 people. This is what I think has to be done in the 2013, 2014. QDRs, you have to go through and say, this is where our current trend lines take us. CBO has a great term for it. When they footnoted their recent analysis of four ways to address DOD's underfunding of its own fit-up, they say, our projections reflect one, actual DOD experience, what a novel concept, and two, recent congressional decisions, which means that every cost-saving, you know, whether it's BRAC or whether it's tricare or whether it's pay that the Pentagon asked for, Congress says no. So what should we do? First thing we have to do is be absolutely honest and dispassionate and say, these are the amount of resources. These are the dollars you have, the people you can afford in 2012 or 2011, whichever final year you want to take, 2022, 2021, sorry, senior moment of my own, chronology problems. This is what you have. And then, as Secretary Hagel said only yesterday, the Pentagon must set clear strategic priorities to implement the President's defense strategic guidance within the framework of a new physical reality and fewer resources. Yes. You should actually make those decisions. You should say, given the 2012 defense strategic guidance, given our current set of priorities in the way that we envision them, this is the force that you can buy in 2012 and 2021. And then that becomes the point of departure for saying, okay, are you going to do something about sequester? Are you going to do something about the squeeze on discretionary spending? Because looking at current trends, by the time you get out to 2040, you don't have any discretionary spending. None, either domestic or defense. It's all been crowded out by the entitlement spending. So the first, as they say in the business world, we've got to level set our expectations. People have to have an understanding of what current trends will do to the Department of Defense and what it will look like two fit-ups from now. And that becomes the basis from which you look at strategic excursion. We always talk about, my final word, strategy-driven process. Well, right now, I'm not sure we have any discretionary dollars for strategy. We may only have sufficient defense dollars for those must-have capabilities that you know you have to have, regardless of what your strategy is. Next. All right. So I'm beginning to think Congress may not be that far off from their frustration, because given this panel, I think we've all heard what Congress has expressed. The QDR, as defined in Title X, is supposed to be a comprehensive examination that expresses defense strategy and establishes a defense program for the next 20 years. And it's supposed to not start with resources. Our panel, unfortunately, started with resources. But I think it's worthwhile to look back at where the QDR requirement came from. Back in the 106th Congress, they decided to establish this requirement. And since then, Congress has grown extremely vocal and more and more explicit in saying, and it's now actually in the statute that the QDR must make recommendations that are not constrained to comply with and are fully independent of the President's budget. There are five other areas where the QDR requirement has also changed. One is an increased emphasis on understanding the role of contractors. Second, they've added language on homeland defense and support to civil authorities. Third, they've added a focus that's interesting on climate change and the effect of climate change on facilities and missions. Fourth, overseas basing. And fifth, they've required an independent assessment or a national defense review that Sam will go into later. But these six changes, the five that I just mentioned, plus the overarching explicit language that says, please make recommendations that are not constrained to the President's budget, I think really show why Congress is frustrated with the QDR process, and in particular the QDR report that comes across their desks every four or so years. A few weeks ago, representatives Forbes and Larson, so a Republican and Democrat and the Readiness Subcommittee on the House Armed Services Committee, said that real strategic choices should not be built on fair budget percentages, but on hard calculations about the types of capabilities that combat commanders need to meet the missions we ask them to execute. And this sentence in and of itself kind of encapsulates what the congressional vision for the QDR was. Basically, representative Forbes also went on to outline disappointment on past QDRs, calling them a rubber stamp to justify and improve existing strategies, rather than a fresh look at national defense. He further stated that QDR could be a valuable tool, but they need to get back to basics. Really, there are just four questions that Congress is looking for answers to. The first, define what are we trying to do? What are the defense objectives? Now, Clark mentioned the defense strategic guidance from January of last year that lays out 28 end states and missions, but that in and of itself is not a strategy. The strategic guidance was guidance. It wasn't a strategy, and I think we've heard DOD officials come back and say, listen, the DSG is guidance. It's not a strategy. It's not a replacement for the QDR. The second question that must be answered from congressional perspective is to identify the environment in which we're trying to accomplish those objectives. What are the assumptions? What are the threat scenarios? Are they realistic? What assumptions are we making about the environment that's out there and about the tools that are currently available to the Department of Defense? The third question is, what do we need? What are the capabilities for structure, infrastructure, budget plans that would be required? Notice that this is very deliberate. What Congress is looking for is a very step-by-step QDR that lays out, okay, objectives, what's the environment, and what do we need? And then, and only then, what are the costs? What I've heard members of Congress complain about most is that, you know, a QDR was budget informed, you know, and that is putting on the layers that Clark and David have described before even beginning to answer those initial questions about missions and the environment. And what Congress is looking for is not necessarily a revamped President's budget. What they're looking for is what is the Department of Defense trying to do? And I think if I were to put myself in the executive branch of shoes, maybe it's easier to get blasted for not following directions than getting blasted over your assumptions. I'm guessing that it is very risky to put out your assumptions about what the world's gonna look like in the next 20 years. It's a lot easier to say, well, this is what we're dealing with now. These are the budget figures that we're working with now, and, you know, 20 years is unknowable. Got it. But what are your assumptions? And that's what Congress is looking for. Now, from a broader interagency picture, and I say this as the Acting Director of the Homeland Security Project or program here at CSIS, QDR defines the defense strategy you're supposed to, but it's supposed to operate within an overall national security strategy. And domestically, DOD plays a supporting role, support to civil authorities in the Homeland Defense, consequence management, critical infrastructure protection to include space and cyber, the role of the Army and Air National Guards. The skimmer really looked at effectiveness and efficiency, probably why it came under the purview of CAPE. The DSG last year looked at missions and 28 end states. But now is the time as Representative Forbes has said is to get back to basics. What is the strategy? Let's talk about the missions, lay out the assumptions, and then, and only then, talk about the budget. Sam? Thanks, Stephanie. I actually left the Pentagon, so I would not have to talk about the QDR, but here I am. I see others of you out in the audience with the 1,000-yard stare and the three scarlet letters too, so we know how hard it is to keep away. I was just going to talk a little bit about the role of this independent panel in the QDR process. As many of you know, with the first QDR that was mandated in 1997, you had a national defense panel, and that's considered by many to be one of the most successful external efforts to government in thinking through our nation's defense. So in the 2009 NDAA, Congress added this QDR independent panel for the 2010 QDR cycle. Unfortunately for the panel, it had a really tough environment to walk into. There was the Gates budget cuts had been released for FY11. There were accusations of this procurement holiday, ending F-22 production, Army FCS, Navy CGX, delay of the follow-on bomber, ending of C-17 production, and the list goes on and on. It was a highly charged environment for the QDR independent panel to come into. And even more so was the late start that they got. They only started in really February of 2010 after the QDR was well underway and actually weeks before it was released, and they were not able to release their final report, which was titled the QDR in Perspective, Meeting America's National Security Needs in the 21st Century until July or August. And so I think a lot of us probably actually missed the report to some degree. And going back through the report, it has some interesting ideas, and it represented a bipartisan consensus among its 20 members, which is no small task. But as a result, it also became something of a storage unit for good ideas. And some of the good ideas floated to the top, and some have gotten lost. But it was one of the first voices in town to call for a BRAC-like committee on military compensation. It talked a lot about acquisition reform again, national security budget executive and legislative branch oversight of national security reform. And a lot of good ideas that perhaps didn't get as much play as they should have and have kind of gotten forced to the wayside. Where it was deficient, at least from a Pentagon perspective at the time, was it made some pretty big claims on the insufficiency of the force structure, but without any independent force structure analysis of its own. It actually used the 1993 bottom-up review numbers as a basis to make its assumptions from, which is strange on a variety of levels. But their argument was if the security environment was so much less threatening in 1993, then in 2010 that should be very sufficient to show what a minimum force might look like. Nonetheless, the independent panel did have a great working relationship with DOD, requested all of the data, received all the data requested, and it has provided Congress with a document that's an alternative to the last QDR and Congressman Forbes and many others bring it out on a regular basis, usually to make force structure-related arguments. This year, the 2014 QDR National Defense Panel, it's back to being called the National Defense Panel in an aspirational way, was supposed to start on February 1st. It hasn't. And in fact, Secretary Perry and General Abizade are the co-chairs. There was not an official press release when the Secretary named them, along with eight other very capable members who will be participating. So, so far, it's kept a pretty low profile. There's some Haas language out there, I understand, that might survive conference that will actually give this independent panel, or National Defense Panel, a purview of a review of the skimmer as well, an interesting event, and probably cause pretty quick tension with the Department of Defense. So, not sure if that's actually going to be helpful to its charge of reviewing the QDR. So, what should this commission do that didn't happen last time? I would recommend that it needs to take on the really tough issues. Last time it did highlight military compensation, but again, that got lost along with all the other tough ideas that it took on. So, be a very good idea to pick one or two big issues that are going to be tough for Congress, tough for the executive, and offer really thorough analysis and an alternative voice on those issues. It's also, I have to disagree with Stephanie on the issue of fiscal discipline, though I do take her point on the congressional perspective on the issue. It's definitely the point of contention on the QDR. But it might be a good idea for this panel to turn on its masters on that chart a little bit more. I think it's a pretty Soviet concept to do a resource unconstrained defense budget and not a good model for what our country needs right now. I don't think a 500 ship navy or a million man army coming out of the panel is going to be all that helpful. Again, on the alternative force structure analysis, I think something more rigorous would be helpful to its outcome. IDA, lots of FFRDCs and others, I'm sure are happy to help provide that to the panel and the panel should turn to them. Asia Pacific rebalance and independent assessment would probably be a useful thing. CSIS has done a look, but another look at what has been the centerpiece of this administration's defense policy over the past few years could use an independent check on it. And there are a lot of other ideas out there that I think you could take on. Do we need a USDI? Do we need a separate Northcom and Southcom? There's still a lot of low-hanging fruit in terms of headquarters efficiencies that are sacred cows inside of DoD and unlikely to be taken on and with Congress as well. Thanks. Stephanie, your name was used. Would you like to rebut? I would just like to note that I didn't say that it should be a resource unconstrained budget, but that the QDR should introduce budgetary assumptions and information, but after they've already established kind of the strategy and the missions and the objectives. I'm not sure that you would argue with that, but I just wanted to clarify at that point. And if you do argue with that, I'd be interested. Well, let me just take the presumption of the moderator and ask a question to the panel because we've heard kind of a range of issues, a range of points. One is a lot of discussion and the relevance of making sure that this document and this concept is resource constrained as against the law that says it shouldn't be. I'm wondering whether the fact of the creation of the independent panel is working against what the Congress wanted here because I think it takes the onus off of the department who feels the budget constraints, who feels the pressure from the White House about trying to come up with something separate from and it just allows them to walk away from the requirements of the QDR. I'd just be interested in anybody's thoughts in that regard. I would just say that it does add a layer between congressional oversight to a certain extent and the department and it adds a layer of complexity that DOD has to manage in addition to trying to be responsive to congressional requirements. It does in some ways take away the involvement of Congress if they're instantly looking for an alternative and I wonder how much of the alternative analysis couldn't come from their own staff. We didn't see a whole lot of that last time but interested in Stephanie's perspective on that. All right, so back in 2006 with a QDR that came out the House Armed Services Committee undertook what they called a committee defense review and given that the committee staff was only 62 members strong compared to the QDR staff, if you look department-wide it was certainly more than 62 but 62 staffers strong on the task. We undertook that committee defense review to kind of turn on its head the capabilities approach that the department was espousing and took on a threat-based approach and we did end up with interesting force structure implications. I won't say it was a 500-ship navy but it was probably more than what the department was comfortable with in terms of carrier strike groups and whatnot and submarines in particular and that had nothing to do with some vocal C-power advocates within the membership of the HASC at the time but I would say that exercise that the HASC undertook was exhausting but really opened up the eyes of the staff members and the members themselves that how hard the QDR must be but also knowing that the committee staff couldn't undertake a committee defense review in tandem with the quadrennial defense review every single time and that's where this requirement for a national defense panel was born. Not to add an additional layer but to put another set of eyes. I think there is a great disappointment among senators and members that in essence sometimes the independent panels come back with they buy into certain parts of the quadrennial defense review and I think that's fair. As long as the independent panel has a fresh perspective and sees the bad as well as the good as well as the ugly I think that's where Congress will be most satisfied but again I take your point that congressional staff and the process and the implications a little bit better and this is not to make an excuse for them but I really think that asking for a committee defense review every time there's a quadrennial defense review probably is a bridge too far. Like Stephanie and like Kim I'm also a former member of the HASS staff although I worked for less has been and the job I had back then probably doesn't exist anymore because I was there strictly for policy reasons I think the legislation is quite disingenuous on the part of Congress they're asking the executive branch to give them the ammunition that they can then beat the executive branch over the head for trying to cut bases in their districts. How many people are on the armed services committee now it was at 54 at one point that isn't a serious policy review committee that's a protect the bases in your district committee and so I think the motives of Congress are far from pure in this analysis why do they want an independent panel they want another source of ammunition at the executive branch over the head for trying to do things in their districts they don't want them to do so I question the basic congressional intent in there should the president have signed the legislation well he has to sign the legislation there's too many equities involved does that mean he abides with the spirit of the legislation or tries to sneak around it that's part of the problem in Washington we know the answer to that people try to sneak around everything independent of congressional intent or motivation though the governance of this situation is really intriguing the Pentagon has by statute an independent body of pretty august members if you look at the list that really has two charges one is in fact to be involved in parallel in the process and so to some extent their existence is to verify and validate that the process was followed properly and the second is to adjudicate and comment on the results and from a governance point of view from the Pentagon this presents a really unique challenge there are not a lot of places where the defense department goes through its own internal exercise of the participation of an outside body that's reviewing both the process and the results and I don't think the Pentagon has thought this part through very well I don't think the panel has thought this through since they haven't yet convened I suspect it would be difficult for them to have thought this through the only parallel I know is actually in the base closure process itself where by law the government accountability office is involved in the internal Pentagon review all the way through with dozens of staffers in the process on the process alone not commenting on the results and it's mandated by law that within I think five days or ten days after the Pentagon maybe it's 15 but it ain't much time after the Pentagon releases its base closure recommendations the GAO has to issue a report to the Congress and the public commenting on how well the Pentagon followed its own requirements in this role in the process or anything and it's something that's easier for the Pentagon to wrestle with because basically you're not worried about them using what you looked at and did not do against you and I don't think this has been thought through very well at all if the panel does its job properly and constructively rather than just providing ammunition to people to shoot down the results then it'll be a major accomplishment in spite of the dynamics I'll open this up to questions I have two quick comments before we do that one is in other lives when we were with the government we always told and were encouraged not to make headlines or policy Clark one of the benefits of being a think tank is I guess you can do that because I think you just did that a bit earlier in your description of the committee I expect there are members who are turning over in their grave good the other point is I think that in spite of the QDR fatigue in spite of all this uncertainty I think the department will decide not only does the law requirement but that it's in their benefit to issue this report next year it'll take them a while to get there they'll be uncomfortable as they grind through the process but ultimately I think they'll decide it's a useful document so what we want to do to continue to do is to help the department and the government make better decisions in this regard so please, questions help us think about how we can make this better lady in the center please wait for the microphone because we're on a webcam and we want the audience to hear you also wonderful I have a question for Ms. Castro I think that I would actually challenge the idea of not being based on any sort of assumptions of the budget because if you look at a lot of the different aspects of the threat environment that we're facing right now it actually is the result of the economic recession if you look at the wave of uprisings and revolutions in the MENA region if you look at a lot of the conflict in the South China Sea a lot of this has economic underpinnings a lot of it has to do with the downturn in the economy I would argue that the downturn in the U.S. economy and its result in the effects on the defense budget are an outgrowth of that or one of the underlying causes of it and so to tell the department not to take budget constraints and likely economic constraints into into account when they're planning their baseline assumptions about the threat environment and planning their baseline assumptions about their capabilities seems to me to be completely divorced from reality it's like walking out the door with Mickey Mouse ears and expecting like everyone's going to treat you like you're not wearing Mickey Mouse ears people are going to respond to the fact that you're wearing Mickey Mouse ears regardless of whether you're planning for it or not so the other countries in the world including our NATO allies are planning based on our decreased budget and so how can we not again what I was saying is that you can make assumptions about costs you can well let me put it this way you can make assumptions about the economic environment the economic environment here and at home and that all works into what the environment is that you're facing the security environment what you're talking about I think is the budget implications of that which is not an assumption necessarily and what I was saying earlier is that you do have to consider cost it's the fourth of the four questions but I think you should really think about what are the missions that you're going to be undertaking what are your defense missions regardless of what it's going to cost for you to fulfill those missions what are the missions then you talk about where you're going to perform those missions and what kind of environment and that could be economically recessed or depressed it could be politically unstable those are assumptions that should be laid out then you talk about the capabilities to perform those and then you talk what is it really going to cost and at the end of the day I think Clark is right in that it is disingenuous for Congress to say to make recommendations because the law says make recommendations that are divorced from budget I too think that's disingenuous but what I think Congress is now asking for is lay out those things and then at the end talk about costs don't talk about here's what our pot is so that's going to define our mission set I think that's backwards and I have no comment on the Mickey Mouse years well let me just make one quick comment if I might because I find myself on both sides of the issue here having been a heal guy you know article one section eight says that Congress is responsible for defense not the executive branch and so I think that Congress needs to be informed about what the executive branch's best view of the threat should be in some manner I know this is kind of unreal the way it's set out now but I don't think it's unreal for the Congress to ask for that they aren't going to get it but I think it's not unreal for them to ask someone right here Frank Hoffman National Defense University a question for Clark and perhaps for Sam because he's got some expertise in this area how important is a force construct in the process and output of a QDR in both sizing and shaping the future force we've had the discussions here in the past on that yes thanks Frank I've done a lot of work on force planning constructs the last specific one 1421 was associated with the 2001 QDR that is protect the homeland priority number one for critical regions in terms of deploying forces to them two sort of rapid halts one size of wind so gave you some idea of what you're trying to do and how you're trying to do it well it's been announced in September of 2001 within a month we were fighting in a non-critical region of the world and we're just beginning to wind our ways out of it so the certainty that you get out of force planning constructs while I would like to do it it's partly what the business I was in I don't think they work anymore what you need to do is to look at alternative force structures and you need to look at it in the context of the many missions that are out there and make decisions on which ones you could afford to do during that time which ones you have the capability to do and you test alternative militaries to see alternative force structures to see which are the more most robust in your judgment because it's a judgment call in dealing with the myriad of contingencies and challenges that are going to come up so I'm no longer you know I've been a long proponent of or a student of force planning constructs I don't believe they're useful anymore I'm a student of Clark on the issue the only thing that I would add is that you have the issue too of two theater war, one theater war how many can you do at once and I think that is a little bit up for grabs now and there's not a lot of certainty in the department on what you can do under the kind of force that you're going to have to cut to under sequestration so that is an important component of this QDR is measuring the sufficiency of the force at a degraded level to a certain extent and being honest I think with the American people about what kind of defense you can have with that kind of force structure gets back to Clark's point about what the military will look like for the next few years from now under sequestration I'd like to add one thing to that even though I'm clearly not an expert in force planning construct scenarios the second disconnect that I think in addition to what Clark described is if those scenarios if those constructs are used for narrow purposes that is for example a quadrennial defense review but there are other constructs which are used for other evaluative purposes which are actually in 2009-2010 where the scenarios used as the basis for the mobility capability requirement study were dramatically different from and inconsistent with the scenarios being used for the QDR so you could come up with a conclusion from the mobility requirement study that says we've got all the lift we need whereas if you actually ran that study against the same force planning construct you'd come up with a very different conclusion and consistency it seems to me is at least as important as whether or not you actually have those scenarios and those force planning constructs in place and are using them Otto Kreischer with C-Power magazine I guess I start with a basic question of should we do QDR at all I mean you started out and by noting you have the same people doing the same thing under different venues with the costs with the money problems and everything we have you know could we save the dollar and time just by forgetting the whole thing and let Congress and administration deal with the reality of the budget situation they have In my book any process should be evaluated according to the value of the decisions that were made during that process the skimmer is said to have identified the kind of choices that have to be made if you go to a budgetary level that bends the strategy or if you go to a budgetary level that presumably breaks the strategy it's my own belief that the Department of Defense gets changed or transformed one big decision at a time you have to have processes that yield strategic choices QDRs can do that budgetary processes rarely do so I'm a believer in QDRs but in this particular case because of QDR fatigue I think it should be a much slimmed down process it shouldn't be a big bureaucratic process the Secretary of Defense should just lay out if it was less acid it would be Saturday morning meetings because he was particularly inhumane to his workforce but you just say at this Saturday morning meeting we're making decisions on these two things two weeks from then these two things two weeks from then these two things then you have your action group so where they do business in military services you have your action group summarize up the decisions that were being made sign actions to implement them and send out the taskers that's what the QDR should be doing at a slightly larger level we have a strategy the President has made it clear that that is his strategy and will be so until his term comes to an end and we have a resource limit it's the law, it's right up there and so what I think the Department of Defense should be doing is saying this is how we execute the strategy with this level of resources but they're going to have to do it one big decision at a time and as I understand it Secretary Hagel at the end of the skimmer process said I haven't made any decisions yet and I said what was all that effort for then but that's another issue Otto the question of whether we need a QDR should not bother actually I think it goes back to the core really that Kim Windcub laid out it is true that Article 1, Section 8 of the Constitution gives the Congress the constitutional responsibility to raise and support armies to provide and maintain a Navy but Article 2, Section 2 says the President shall be Commander-in-Chief of the Army and the Navy so the Constitution set this up why do we have the QDR's statutory requirement it's because the Congress didn't trust making plans and building strategies and building budgets without letting the Congress in on what they were thinking as they did it the point of the QDR is to get that exchange back and forth between the legislative and executive branches whether you have the QDR as part of that process or not that dynamic is going to have to be met and dealt with year in and year out and it's been true since the dawn of the Republic is the QDR I mean the better question is is the QDR a more effective way of doing that I think Kim Windcub pointed out at the beginning the Statute says the Secretary of Defense shall there's no ambiguity there but I would also note that there's no enforcement mechanism built into that statutory requirement failure to comply does not produce $10,000 fine in 10 years in jail it does produce an ongoing political dynamic which is going to be there anyway and so the real question to the Pentagon is do we use the QDR as a way of furthering this discussion so that is the outcome we need to achieve or is the QDR a sidebar that's not involved in it I think that's the choice the Pentagon faces and that's the choice that they ought to own up to today just to add one point on that thinking about overall defense governance processes from my former boss Catholics who wrote a monograph on defense governance when she was here the QDR is whatever the Secretary wants it to be so you're going to do it anyway you might as well use it effectively especially if people are fatigued of overall reviews and you still got decisions to make so it makes a logical sense that you now take the skimmer that did not produce a lot of decisions and you feed it into a process that does so I strongly agree with Clark on leveraging this and Sean Brimley and others have written a lot about this so I it's in the law it serves a purpose and you can make it as effective as you want to make it I would just add that the law talks about it being due to Congress every four years it doesn't say anything about what the QDR process should look like so I see no reason why the Department of Defense can't use all of the work that they did with the DSG with the skimmer and actually fold that into the QDR process to make it a lot slimmer as Clark just laid out and just talk about alright so now that you've done the DSG work you've done the skimmer work what else needs to be done in order to have an effective QDR and then make the decisions that need to be made so I actually think a QDR is useful to have at this point to advance the discussion as David laid out but also I don't think they need to have the behemoth that has been the last couple of QDR processes Good morning everyone I'm Lieutenant Colonel Burke with headquarters Marine Corps QDR integration group Sam first thank you for the 1,000 yard stair analogy I'm almost there especially after skimmer as good as the DSG is and I agree it is a pretty good document by the time the QDR is released in 2014 the DSG will be nearly two years old a lot has happened within that two years further uprisings in the Middle East draw down in Afghanistan and a shift to the Pacific number one does that DSG need to be revisited and number two is strategy as a whole is that prepared for a QDR because I don't believe OSD strategy policy I'm not too sure that they have the basis of what we're supposed to do our QDR study on it's supposed to be based on a strategy and I don't see a firm strategy that we're supposed to work with opinions are appreciated I have to admit I'm I'm prejudiced on this issue I'm an unpaid I'm an unpaid consultant to OSD strategy policy and worth every penny during that time and in my mind the real force structure the real advance of the 2010 QDR was that it was a little bit to the back to the future because like the bottom up review and like the first QDR there was actually a statement of what the U.S. force structure would look like and it said we intend to buy this many attack airwings we intend to buy this we intend to buy that so you knew the physical output that is this is the military you're buying not a military that has more carriers and fewer attack airwings this is the military you're going to buy that's what this process does and it has to do it under physical constraints because otherwise you're creating a bigger force that's hollowed out one of the things that's absolutely clear in this process is that everybody has learned the lessons of the post-Vietnam drawdown they will have a smaller force it will be ready Secretary Hegel said only yesterday we are going to have a smaller force if we can't afford to equip them and to train them because otherwise we're dishonoring the service that they're making to the country so this has been you know a gradual shift in the consensus that as you do a drawdown we are not going to hollow out things and we're going to cut the number of general officers and we're going to cut staffs because we all know that when you do that it has a ripple effect that goes out through the services and out through the headquarters and this includes the commands as well the combatant commands which in many ways have grown the fastest during this time so my belief is that what you're doing in a QDR is you're developing a force structure that actually executes many strategies Dick Kugler former colleague of Frank's over at NTU once used the term dial a strategy force structure you know the force structure that won the first Gulf War was a force structure that was designed for the Cold War and the fact is is that what you have are military capabilities men and women trained in how to use a weapon and the weapon that they have and they're capable of many different missions and capable of executing different strategies and so to me this notion of a strategy driven thing you know tends to be at the big level during the Cold War we knew what our strategy was contain the Soviet Union we had a grand threat as Peter Fever says as you can see I'm a bear it grand threat force the coherency in our actions that we haven't seen since I would argue right now this isn't a grand strategy time the country the United States is up to its keyster and alligators you know and what they've got to decide is how to most effectively use their money and recognizing that they're going to have lots of challenges and execute lots of different challenges take advantage of different opportunities they have to get this indispensable nation concept some boundaries because we can't afford to be the indispensable nation to everyone so we just have to make those choices and you make them under the hard pressure of resource constraints I would like to add a bit of a contrarian view to that I think that the defense strategic guidance and particularly the implementation of a number of both the core mission areas and the key priorities there have a much more insidious dynamic at work I think that in many ways the actions, activities and expenditures of both resources and programs to implement that strategy bear little or no relationship to the force structure of the military departments and military services and I think it's very under recognized in DOD today when we did our study a year ago this week on what the force posture options were with the rebalance to Asia the vast focus of our efforts was on things that has no impact on force structure at all and in fact that you could sustain and maintain with a much diminished force structure over what you have today when CSIS did its report earlier this year on beyond the last war looking at ground forces requirements in both the Central Command and the Pacific Command post-Afghanistan we found a host of scenarios called them vignettes because we didn't want to dignify them as scenarios a host of scenarios that in fact you could meet and again didn't drive force structure at all and I think that disconnect is a fundamental disconnect both inside the QDR and inside the FITUP and the budget that near DOD nor Congress has come to grips with yet whether you could use this QDR as a way of dealing with that is a bit obscure to me because it requires some pretty good guidance up front and a very different terms of reference in terms of how you do the exercise but sooner or later DOD is going to have to come to grips with this because the kinds of issues that we're going to face and have to assign our military to from both the tactical and operational point of view over the next decade are fundamentally different than the kind of dial a strategy force structure that Clark described historically. That actually encouraged a question on my part. I'm Matt Levincher I'm at George Washington University I just want to hear more about what you just said namely tell us more about these vignettes and about how what kinds of responses that you envisioned to those vignettes and to what extent were those responses involving military force at all and if so what kinds? It's probably a topic for a longer and different discussion than the one we have up here today let me briefly just pick a couple of examples in the strategic rebalance to Asia the opportunities given to the United States to engage and participate with old allies and partners and new allies and partners across the region from Northeast Asia around through the Indian Ocean region largely driven by China overplaying its hand basically over the last three or four years and creating uncertainty in the countries of the region who took Henry Kissinger's advice the US really has two responsibilities don't leave and don't make us choose in other words it's a future scenario that requires a relationship with China that's not a Cold War containment strategy that's not a structure that we tend to fall into when it comes to a rising power and that history says all great powers tend to fall into the opportunities for shaping an engagement if you will don't necessarily require military although in many cases the military are the only capability in the region to be able to do that at the humanitarian assistance and at the preparing for disaster recovery and disaster response at building up infrastructure of things like airfields and storage capacity and communications to deal with essentially a host and disaster related issues that's not really the military's job but there's nobody else who's equipped and capable of doing that and resource to do that and so what you need is an integration at the whole government level that has been historically very hard for us to do that looks at taking advantage of those opportunities not from an opportunistic point of view but from a there's a need here and somebody has to meet it and if we leave the field empty we'll know who will come in and begin to fill that and not necessarily to the advantage of the countries involved you can make a thousand item list of that and in fact there is such a thousand item list out there but they don't penetrate their way back up to headquarters they're what in the vernacular of the defense of the deputies management action group budget dust these are very small dollar things zero in the billions of dollars that the debates come forward and yet they shouldn't because the consequences are quite profound even though small but added up collectively quite robust over the long run Roman Schweitzer from Guggenheim Securities I'm struck by the fact that as we discuss this we have those charts right there and whether or not you count the president's budget or any of the House or Senate budget resolutions or even sequester I'd like each of you to ask whether or not you believe the trajectory of those lines will continue and as a bonus question whether or not you think the FY14 base budget will be higher or lower than the appropriated amount for FY13 and my point of this is that at the end of the day this all gets to the reality or unreality of how the assumptions in the QDR will eventually play out I'll start but I think we probably all have a view on that the the strength of DoD is its ability to do fiscally disciplined programming stretched out over a six year period and we're out of practice because of supplementals and OCOs for the last 12 years or so and we're out of practice right now because we're not really being allowed to do it there is no incentive for any military department to put on the table how it really would comply with that blue line at the bottom of that screen because absent some mechanism where everybody else is doing the same thing you'll just be offering up takes that the budget guys will take and then when your time comes you get to do it again so there's no incentive for anybody to get ahead of anybody else at this stage of the game it's hard for me to see any political scenario either with or without a grand bargain on entitlements and tax revenues or tax expenditures as they are referred to now that doesn't include at least this big a cut in DoD out over the next decade it could be distributed differently it could be more at the back end of the decade and less at the front end if that were part of a deal but I see no scenario in which DoD gets by with only $100 billion worth of cuts instead of $500 billion worth of cuts over the next decade I am slightly more optimistic than David in the sense that it's not hard to do on that is there will be no grand bargain there will be no lifting of the sequester cuts until after the midterm elections which means you're going to have an FY 14 continuing resolution that will probably be renewed twice at least maybe three times during FY 14 you'll probably start out FY 15 with a three month CR until they see what the midterms look like and then I could foresee some results out of the midterms you know that could create the makings of a new bargain but I could also see far more scenarios in which it wouldn't happen just so it doesn't pass me by too quickly I guess I'll do it real quick I think it's the sequester levels and tell or if there's a grand bargain or an event in the world what is going to push a grand bargain because if people are looking right now at what's going on at the Pentagon and looking at the cuts right now I don't think Congress is understanding what furlough means that David and I have been talking about this it's not that someone is working 80% of what they should be working it's that if my furlough day is on Monday and I work with David but his furlough day is on Friday there are three days where we can work together right so it's not it's actually less than 80% of the work that can get done now at the Pentagon but what is going to be the forcing function I think my colleagues are alright I think right now the trajectory is going to be the same but I also agree with David that there is going to be some deal when the pain is felt and not by members of the Department of Defense community but on the hill when they actually start hearing from their constituents that this is a real problem an 80% paycheck is a real problem then you're going to see them load the cuts in the out years so you'll see some relief from that trajectory in the near term but I think David's right they'll figure out a way to back load a lot of the cuts but they're going to happen I agree with my colleagues I would just say that I see this as the Washington Recession it's a recession that hit the rest of the country and it's a delayed effect here and it will probably last for longer I don't have any impetus for any political change but I don't see it until you get a new president in office frankly or you have a real change in either chamber or congress I would just say that's a fairly bullish case what you're talking about are sustained defense spending well above traditional trough levels or well above pre-911 levels and with no tip over what the implication was if you're going to do a QDR that projects out in the future would you have to prepare for really a scenario that was well below sequester and obviously we're dealing with the short term politics but in real terms it is far below the sequester and that's because of the continued internal cost growth which is happening at the same time and almost at the same rate as the drawdown so that the actual loss of purchasing power is about twice what the drawdown looks like the real impact that's masked by this we have other charts and other presentations we've done on this is that your investment in the investment accounts procurement, research and development military construction by the time you get to the right hand side of this chart in 2018 is down to historically levels lower than they've ever been and by the time you get into the 2020s goes to almost zero essentially we will not be buying and investing in any technology and equipment that's the scenario that unless we get O&M cost growth under control military pay and benefits cost growth not just cost but cost growth under control and there's no indication that Congress either believes this or is ready to vote on it at this stage of the game it's not clear to me what trigger mechanism I'm Kim said grand bargain or event in the world and it's not clear to me that either one of those things will actually force the Congress to come to grips with the internal cost growth and the dynamic that that occurs so unless you believe that the kind of military we want is a highly paid poorly equipped military in 2030 and beyond that's what we're headed for now as a vivid particular we traditionally we I'm sorry the Department of Defense traditionally spends about 30% of its budget on modernization which is RDT&E and procurement in order to restore 30% level of effort on modernization in 2021 you have to cut 450,000 people out of the force structure that's the trade off Gerald Chandler could you go into more detail how the mission is set the QDR the process simplified is set the mission figure out what forces you need and then figure out how much they cost but who sets the mission in what detail and how much argument is there about that historically that's actually done at the beginning of each QDR cycle and it's usually documented in the sometimes implicitly other times explicitly in a document called the terms of reference that are agreed to and finalized there have been historical times where the terms of reference were never finalized until after the QDR was done so you sort of had to back out what the guidance was I think in this case we may well see a quadrennial defense review that is done without a document that sets that which is particularly troubling because my comment earlier about part of this is have you followed the process if in fact the process isn't laid out it's pretty hard to tell whether you followed it or not but in any case there would be an implicit set I think that implicit set my assumption starts with the defense strategic guidance that was issued by the president in January of 2012 the one with the 28 in-states that say we're going to pull that list up and post it on our website so you can see those 28 in-states which essentially would be the surrogate for a mission set absent any document that would do otherwise that's my take on it you guys see it differently no it's part of what happens the first year when a new administration comes in they want to identify the deltas between their strategy and the existing strategy during that time so there's a good bit of debate at that time but again when it comes down to the real decisions of what you buy that in a sense is really setting what your priorities are or what your priorities aren't you try to do a little bit of everything and I would just say the DSG does have a lot of agreement still in the building in terms of what it lays out on the future security environment it was endorsed across the building all the service chiefs joint staff was on board with it combatant commanders so it's a good starting point they're not starting from zero it's not a new administration but gets back to the prioritization issue and there's some artful dodging in the DSG too in terms of saying for instance that the future is so complex that we need to maintain maximum resiliency to generate any kind of force I think what you'd want to see is what are the complexities let's start to pull that out and then you get into pretty quickly on the one hand you have a military that needs to prepare for a war against a super high-end adversary in an anti-access area denial environment and on the other as a result of Benghazi the department has been tagged to be responsible for security at any diplomatic outpost anywhere in the world basically at any time can you do both of those things at once so agreement on what the threats are and which ones you can take risk on is going to be an important component here I think the point that Sam ended on there the question of risk is the under-addressed question in this dynamic the Pentagon especially the military leadership of the Pentagon almost from the time that the strategic guidance came out has been saying you know if we don't get enough money we're going to have to revisit this strategy and rewrite the strategy I think that's a little bit misleading because it's really not rewriting the strategy it's reordering the priorities and reorienting the acceptability of risk and the trade-offs implicit in how much risk are you willing to accept how much you will accept the possibility that in fact you'll undertake a mission and fail how much are you willing to accept the responsibility the president will call and say I need guys over here and you say I'm sorry Mr. President there's nobody who can go that's a level of risk that I think we have failed to assess and articulate and under this even this rosy scenario of a flat budget with inflation built in which is what that blue line shows you but with the internal cost growth that's a question we're really going to have to come to grips with and I don't see any sign that the Pentagon's ready to do that yet I don't think the situation is dire enough that it's forcing that and we'll try to end on a happy note so maybe there's a positive question out there huh and I'm positive things are bad and they're going to get worse well it sounds like the problem has been solved so as a project of the moderate I'm just going to make one final final comments first is I think there are there's some naivete in the department about whether sequester is going to occur I think naivete over is an exaggeration well they're way off base but I don't think there's any likelihood that they're going to get relief from the QDR requirement so I think there's going to be a QDR this year and I think that the department will decide that it's in their interest for whatever message they want to get across they're going to decide since they have they can see it coming it's worse to challenge the congress on process than it is on substance so I think they will do a QDR well it will probably be the QDR light that Clark mentioned so stay tuned and we'll all get a chance to watch the agony of our friends across the river as they go through it thanks for being with us this morning