 Thank you. It's my pleasure to introduce Peter Spiegel, defense correspondent of the Wall Street Journal, who will moderate this session to discuss some of the issues that General Schwartz has broached for us earlier this evening. So, Peter, Spiegel, it's the floor is yours. Thank you very much. Thanks for sticking around. And, General Schwartz, I see you've stuck around as well, so I'll have to monitor my words here. I think we could all agree that General Schwartz is a very modest and certainly compared to his predecessor, an even-tempered man. But I think in some of his remarks, he has underlined some of the challenges he is facing. I noted in my notes that he's looking for an even-handed strategy that is fiscally sound. To me, in the media, who tries to sometimes sensationalize otherwise sound language like that, that to me really underlines what the challenge is for the Air Force now, which is, Secretary of Defense says we don't have enough money and we want to do more things with it. It's a real challenge. I think the panel here today is a pretty good one to address that. Actually, quite a good one to address that. And I've asked each of them to look at the O-10 budget and the QDR and look at the very stakeholders and how they might react to it. Because I think we all have been through budget processes before where Secretaries of Defense and Chiefs of Staff of various services have tried to either kill or modify systems only to find a whole lot of pushback from industry, from the Hill, and frankly from within the Pentagon itself. So I've asked each of them to take a bit of that. I'm going to introduce each of them briefly. I know you have all biographies of everyone, but I just want to do my own introductions and tell you where I've pushed them to talk about in case they try to get off the message. First of my right is with Trabalofia. I have relied on him now for, I'm embarrassed to say, 10 years over three different newspapers to discuss the aerospace industry, both civilian and military. I think he's regarded in the press as one of the most straight shooting people on this, and we go back to him repeatedly. He's Vice President Teal Roup has been an analyst of both military and civilian aerospace industries for almost 20 years now, and his views on the industry are very well respected. And I've asked him to look at the industry a bit of it. We've heard Bob Stevens at Lockheed say he's not going to be lobbying on the F-22. What does that mean? That he's doing because, you know, is the Georgia delegation going to be doing it for him, or is that a genuine thing? Obviously, Boeing Company also has some of these systems here that have been lost from CSARX to some of the missile defense elements. How does the industry going to respond? Sitting next to Richard is Sid Ashworth. Sid is now with the Ashworth Group, but I have asked her to deal with the Hill, because prior to that, she spent 14 years at the Senate Appropriations Committee. Most recently, as chief of staff of the full committee, but before that, spending five years as staff director of the Military Construction Subcommittee. And before that, you were in the Army doing force structure issues. So I think very well positioned to talk about the Hill and the extent to which both members on the appropriation committees and the authorizing committees could affect change on the Pentagon's plan thus far. Last is the gentleman who probably needs the least introduction of any of us up here, Rudy De Leon. His bio encompasses both the Hill and industry and the Pentagon. I asked Rudy to talk about the Pentagon, because I think for those of the media, remember him most as spending quite a bit of time during the Clinton administration in varying positions within the Pentagon, culminating with Deputy Defense Secretary under Secretary Cohen. He's now at the Center for American Progress, which has sort of become a breeding ground for policies and personnel for the Obama administration, so still has quite a bit of say. After the Pentagon, he spent five years with Boeing Company. We all knew him from that as well. And prior to that, spent quite a bit of time on the Hill. So he could talk about all three, but I've asked him to focus on the Pentagon, because as we've seen most recently, frankly, with the Crusader where Secretary Rumsfeld tried to kill that and saw quite a bit of pushback from the Army, sometimes it's hard to get the Pentagon in line on this. And I'm curious to hear from him how General Schwartz's own service and how others in the Pentagon might react to what thus far by Secretary Gates has been a rather disciplined budget process and whether that will hold as the hearings go forward. So I'll turn it over first to Richard. Why don't you start? We'll press that button. Great. Terrific. Well, thanks very much, Peter. It's really an honor to be here and to follow on to the general's comments about the state of things. I look at things from an industry analyst's perspective. And one thing that's often said about Washington, of course, that there is a kind of inertia, sort of, well, a problem with entrenched both bureaucracies and political industrial constituencies that keep things rolling. And right now I'm thinking, oh, thank God for that, really and truly, because I think it's... if steering strategy both for a service and from DOD is the proverbial supertanker in terms of course corrections having an enormous impact years out, the national defense industrial and technological base is, I don't know, a mega supertanker. It's something even bigger. And it seems to me that because of the requirements of Iraq and Afghanistan, of course, the immediate need, as well as the budget constraints that we're all facing because of the economic crisis and because of wealth, it looks like the end of a very big but ultimately finite boom cycle in defense spending. It looks like there are very serious changes ahead. And I don't think that maybe for understandable reasons the national defense industrial base is a terribly high priority. And General Schwartz accurately used the term definable end state about the force structure. The problem is that, of course, we're heading towards some kind of definable end state from a national technological and industrial capability, too. And we have to be really careful about that. One thing that hits me on a day-to-day basis is that given this limited budget, there's a force structure crisis, so there's stuff that simply has to be done to reset existing capabilities. And if you retire, as per the current budget, 250 legacy platforms, you still have to spend an awful lot on recap. And then another is, of course, the requirements of force in Iraq and Afghanistan, hence the emphasis on UAVs, precision strike, short-term lethality fixes and improvements, all quite understandable. But there are enormous changes. If you look at this current force structure and the current defense budget, we're clearly headed towards one fighter prime, if you believe in the impact of ending the alternate fighter engine, one engine program, one radar house. It's all coming down to that very definable end game, and I think I'm extremely cautious about this. And when I get back to my theme of thank God for inertia or thank God for obstacles that are placed, you know, the general talked about AC-130s as the likely short-term answer for ground support. And for that matter, the Marines in SOCOM are suddenly buying all of a sudden AC-130s and C-130s, KC-130s, MC-130s, believe it or not, HC-130s were running out of letters in the alphabet. Everybody has a procurement program. The last time I was in this position of having to debate budget requirements was right in the middle of PBD753, which tried to kill the C-130J. And there's absolutely no replacement on the horizon. Is anyone proposing to insert $10 billion into the budget to create such a replacement? So I'm thinking that while there are big plans to change, and of course there are big requirements in the short-term, perhaps a little bit of inertia or a little bit of stability and conservatism is exactly what the industrial base could use, because we don't know exactly how long this particular Iraq-Afghanistan emphasis is going to last. You could regard counter-insurgency as somewhat cyclical, too. Victorian England followed by World War I, Vietnam followed by that central-front Europe emphasis. It could be that in a few years we'll be facing a resurgent country X and that, oh yeah, hunting guys in Toyotas. Remember when that was the emphasis, and we might have a defense industrial base that was fully prepared to go hunt guys in Toyotas rather than something more elaborate and high-end. And the other is there don't appear to be any safe havens in this budget. For example, killing the F-22 or the C-17. Those are understandable. I'm not saying I'm for it or against it. It's just that within the requirements as set forth of moving towards an emphasis on counter-insurgency and ISR and all of those things, that's a rationale. I understand that. But then NGLRS dies and CSRX, too. So in other words, there don't appear to be any safe havens. This appears to be a resource constrained budget, a recapitalization budget when absolutely necessary with the case of F-35. But beyond that, it's tough to see how the national defense technological industrial bases capabilities and direction are going to be preserved unless additional resources are added or programs are protected. And I think that's the end of my upfront comments. Okay, well, let me just say, and I think there's general appreciation for the significant challenges that Secretary Don Leung and Journal Schwartz faced in putting together the 2010 budget in that there wasn't enough money to go around. There were too many programs. They inherited a lot of very expensive programs for which no one had really figured out how they were going to solve the funding shortfalls in the out years. So there's understanding about that. There's also an understanding that the Air Force is kind of one of the losers of the budget wars, if you will, meaning that the Air Force and the Army kind of took it in the shorts and having almost no growth and having to pay for things out of hide. So they were kind of forced to take some drastic measures. And let me just kind of discuss a little of those things that might, you know, we like to say when you work on the Hill that the President proposes and the Congress disposes. So as you look forward, these are might be some of the issues that you'll see. And first of all, you know, we talked about F-22, but, you know, that's kind of been front and center for a long time. I think people were a little bit surprised when they saw the F-22 decision not to go forward. But I think the wind is out of the sail of that issue. Now, it is true that the Senate Appropriations Committee didn't include closed-down funding in the 2009 supplemental. But I think that they're headed to do that probably in conference. The House included the funding. I think you'll see many speeches, maybe, against closing down the line. But I think the handwriting is on the wall. You know, the company is surrendered, and I think the Congress is really ready to go lockstep along with it. So it will be painful, but I think that we're there. But I guess my next thought is the other issue that's kind of closely tied to it is a joint strike fighter. And the reason why I mentioned that is that, you know, it's good news that there's more funding for it, but is the ramp sustainable or achievable in 2010? The President and the Secretary have proposed increasing the amount of aircraft that the country would procure from 14 in 2009 to growing to 30 in 2010. And traditionally, the committees have taken a serious look at whether that can really work, and they're not in the business of banking money. There's too many other bills. So in the past, we've scaled back procurements when we felt that that ramp was too steep, and the money is almost doubled in one fiscal year. So stay tuned to see if, in fact, there's maybe a scaling back or slowing down of the ramp. And I know the Air Force wants to go really fast on this and, you know, getting up to plus 100 in production in the future. But the question is whether or not that's how fast you get there. And I would be remiss at not mentioning the Joint Strike Fighter Alternative Engine, which has been sort of a favorite of the Congress for the last four years. The Congress has added funding to keep that program alive. And although the President did say he wants to terminate the program, doesn't need the funds, no thanks, I think you will find the Congress may be very inclined to support it yet again. There's a couple more years of funding. The engine is supposed to go into production in 2011. So I think the Congress is in this for the long term. And keep in mind, last year, all four oversight committees, the two armed services committee and the two appropriations committees, added funding and supported. They were all locked up. And last year it was $465 million, so it's not insignificant what was added. And then there's another issue that's bubbling out there, and that's the retirement of the older legacy aircraft. And the Air Force has plans to retire early 250 F-15s, 16s, and 8-10s. Now, this becomes significant because there's already a perception there's not enough iron on the ramp out there. And you look at it across the Guard and Reserve components, not only the active components you've got, real trouble. You stir up that kind of political dilemma. So the problem with retiring the aircraft early is that the Joint Strike Fighter really doesn't begin to field until 2015. So you have a gap of at least two to three, sometimes maybe could be five years. And therefore you're going to have a lot of units sitting there that are going to cease to exist. And that really will become an issue when you start looking at additional rounds of base closure, which we all know will come somewhere later in this administration or into the next administration. So those communities will start feeling very vulnerable. There will be a lot of agitation. So I think you've got quite a fight on your hands on retirement, and no one likes giving up aircrafts. And then there's the issue of strategic risk. I mean, you're really retiring your aircraft early and we don't have anything to replace it. So it's going to be an interesting fight. And then the C-17 aircraft, although the administration says they're done buying aircraft, I don't believe the Congress has done yet. They believe themselves as a champion of that program. And they feel if it weren't for them, we wouldn't have the lift capability and the global reach capability that we have now that allows us to do both Afghanistan and Iraq. So the House has added eight C-17s in the 2009 supplemental bill. The Senate did not add any, so it will be a conference issue over the next month. And the question is whether or not the Congress then decides to add additional aircraft in 2010. If I were betting, I'd say there's more than a 50% chance that we'll see additional C-17s. And then the other issue that got people stirred up is the tanker competition. And I mention that because it's been a lot of frustration with the committees about the pace and the delays of the tanker competition and the complexities of it, not saying whose side is on, but there's a general sense that maybe we need to just put this out of its misery and decide on a dual buy strategy. Now, as we know, the department is opposed to that strategy, but I think if they continue to stumble around and can't get this going and there's further protests which makes this really untenable, you may see that emerge later this fall. So I think there's a sense of sitting back and waiting and letting the department see what they can do over the next three months. And then if it fails to kind of get going and the companies are complaining, continue to complain, then you'll see a movement to split the buy and move forward and irrespective of the cost. And then the last thing I would just mention is the joint cargo aircraft and the C-27. And the president proposes moving the money from the Army, taking the mission from the Army and giving it to the Air Force. So I think you have a roles and mission fight on your hand. Most of those aircraft are in fact operated and run by the Army National Guard. So you then have a political element that's going to be in play. And I think how many aircraft is bought and where they go will be at the issues. Thanks, Sid. General Schwartz, excellent presentation. If you're sitting in the earring of the Pentagon, all of these issues come to a leverage point. Richard raised outstanding industrial base issues. You could have a whole discussion and put together a complete program about what you're going to do on the industrial base and to answer Mitchy Wertheim's question. We probably aren't producing enough technical people to maintain the leading edge that is marked the U.S. In terms of programs that Sid has just gone through, each of those is contributing in a very dynamic way. And we have this acquisition system that can develop a superb 183rd copy of a program and almost kill the program developing the first one. And, you know, struggling to get the first copy out the door. But sitting with Secretary Gates right now, A, he's got the eighth year of a ground war that needs more ground troops. So he's buying more ground combat capability, which is the single most expensive piece of defense that you can buy, but you are wearing the people out and you have to do it. Second, the whole national security team and the new administration is dealing with an economic crisis, not seen since the Great Depression. Truman's people, when they worked on the Marshall Plan and the containment policy, before he was Secretary of Defense, one of the leading intellectuals in the Truman Rump Group was Robert Lovett. And he wrote a memo. It was sort of parallel to George Kennan on containment. But Lovett's term was the grand expectation post-World War II and the grand expectation was the combination of America's unique and superb military capability and an unprecedented time of economic vibrancy. That the combination of the strength of our military and the strength of our economy was going to dominate this post-World War II period. So Secretary Gates and the entire Obama administration has to deal with the fact that, indeed, the grand expectation may be broken and that there is significant economic distress ahead. Third, Secretary Gates has appropriately pointed out to the national security team that the State Department and the Agency for International Development need to become more operational. There are issues like the lieutenant that General Schwartz identified who was killed in action. There are personnel in the field associated with the nation-building mission that are best performed by U.S. government civilian agencies. And you can't put unique contractors in the field. Don't get me wrong on this. But creating functioning municipalities or tribal governmental structures requires unique skills. Right now we're calling up the National Guard and we're calling up Air Force and Naval specialists to contribute to this. But when Secretary Gates says we need non-kinetic capacity, we can go through Somalia, Bosnia, Kosovo, Iraq, and Afghanistan, and we need the civilian capacity for the post-security phase, meaning after your military has structure on the streets. ISR, a very interesting topic. In the world of the Pentagon of the 1990s, nothing was more controversial dealing with the component commanders than I want dedicated ISR coverage. And in those days, that meant U-2 sorties. So if you were the commander in Korea, you would get maybe three U-2 sorties every 10 days. You'd get the data and you would analyze it. Now you have unmanned vehicles. I think the term is persistent coverage. So you went from doing the surveillance three times in 10 days to doing it 24 hours a day. And so for that to have value to the chain of command and to the combat warrior, that data needs to be analyzed real time. And so it turns out it requires more capacity analyzing persistent data than it does to fly that very capable U-2 three times every 10 days. So all of these issues are there, and yet the tightening process has begun. One, the war fighting supplementals are shrinking from last year's high water mark of 210 billion down to this year, it's somewhere between 130 and 150. So the bulk of that contraction are procurement items that are now going into the base build. And then let's just complicate life, but it's real as the SECDF starts to do the QDR and as this tremendous number of resources is being consumed by the ground campaigns and the need to support the war fighters, he's got to reinvigorate the Pacific strategy. The Wall Street Journal noted that the Australians are planning that they may become the critical power in the Pacific. I think that would come as a surprise to our Navy and Air Force, but as the focus has been on Iraq and Afghanistan, we probably have not spent as much time on the Pacific and it definitely needs attention right now. And just the final thing to add to the mix is that the greatest practitioner of soft power right now in the world are the Chinese. And so at our center as CSIS, all of the foreign delegations that come in to visit the State Department and go to the Hill come to places like the Center for American Progress and CSIS, although when they hear that cocktails are being served at CSIS, I think I've already written a memo to John Podesta on that. But that basically the Middle East, the source of oil, a delegation will come in, the first issue they'll raise will be a two-state solution and the need to move forward. The second issue they'll be talking about is the economic grants that they're receiving from the Chinese. Pakistan, which is in a motion of crisis in the past as their global debt would need to be renegotiated, it would be U.S. and Saudi banks that would be at the heart of the financial reconstruction and now it's the Chinese. And so all of these factors are on the table as the Secretary sits down and starts working with Michelle Flournoy and Ash Carter and Jim Miller and Bob Hale and gives Bill Lin the instructions for the QDR. Thank you very much. I'm going to, before I open the floor, I'm going to take the moderate's prerogative and ask a question of all our panelists. Richard Oakland up talking about the tendency towards inertia in the budgeting process. Sid picked up and listed quite a few programs where Congress is proclivity to add back in the second engine on the JSF, tanker programs split by, and yet Rudy finished off saying, this is a different world now. This is a world where we don't have the monetary capability to fund all these things. I want to focus in on one of these programs because I see Rob Prosby in the audience and representatives of the Boeing company, tanker as an example. The Secretary of Defense has said, we're not going to do a twin buy. We take seriously the issues of financial restraint can't do a tinted twin buy. I already brought up the issue of Lockheed Martin saying they're not going to lobby on F-22. Is there new pressure now in industry to back off on the lobby? Because in tanker, frankly, what it seemed to be is two companies in a death spiral vowing to sort of kill the other one as long as it goes for a customer who directly needs a tanker. Is there new pressure now on industry and frankly on the hill to back off and play nice if not in best corporate interests but perhaps in the interests of the warfighter because of the restraints going on right now? Go for it and pass that down the road. It's the defense industry. We've always been nice. It seems to me that the political dynamics that made this the worst defense contract ever are still very much in play and that everybody represented in this room, every other part of the industry could suddenly decide to walk away from it all and go play some golf together and you'd still have the same fiercely competitive and contentious dynamic that's hobbled this procurement program for quite some time now. It's exacerbated by the fact that I believe this is the only time I've ever seen a direct competition where one plane is vertically Democrat and the other is vertically Republican. That makes it a whole lot worse so unless you think the Democrats will somehow prevail and sweep the field and the spelling tanker will win, it looks like quite possibly you're right. I tend to agree it might be the only way forward to have a split by just because of this political gridlock and I don't think it comes down, I guess the answer to your question we could all decide to play nice tomorrow and you still have exactly the same industrial and political constituencies in play. I'm not sure we can afford to have a loser in this competition. I think the stakes are too high, I think there's too many equities and I think too much has happened. So if there's indications that this is going to just be a repeat of where we've been and there's no confidence in the direction they're headed, I think the committees, we certain members will want to seize the objective and frankly we came really close last year in the 2009 bill to including language which directed a split by. And then again in the 2009 supplemental just the last couple months I think if the White House hadn't exerted pressure there would have been a directive language on a split by. So it's out there and I think it's just a question of seeing what the Pentagon can do over the next few months and whether there's confidence that they can run a good competition but even having said that maybe not even that we want this competition. Can I ask you to answer the question in a slightly different way? Is there a point at which the Secretary of Defense or the Chief of Staff of the Air Force picks up the phone and calls the CEOs of one of these companies and says stop. You know these, I gotta say from a layman's point of view these are commercial derivatives. They're not hugely technical issues. They're two planes, they pick one. Does the SEC DEF or the Chief of Staff of the Air Force pick up the phone and say you are, we are your customer. Please stop challenges in court. We need this for the warfighter. You're challenging me because I have one of my great ambitions in life is to never talk about three topics. Tankers, base closure and depot privatization. I saw the first version in a sequel is no better. Just to answer, I do not believe that Navy shipbuilders would act in the way that sort of the Air Force contracting community is. Meaning that it really is very aggressive, very competitive and I'll leave it at that. With that, let's open the floor. Vago, do you want to start? We have a microphone here and also just introduce yourself also. Let's copy up. Vago Marani from Defense News. But to follow up on your point, Rudy, you were saying about how shipbuilders, the Navy sort of covers for its shipbuilders and does everything it can to pretty much assume that the entire organism is greased, even if parts of it are defective. The Air Force has a tendency of beating 11 daylights out of its contractors when they don't perform. So how do you get that yin and yang? I totally understand the point Peter is making. But how do you get it resolved? I mean, why would, and Ralph is here, why would in a highly competitive circumstance where he's got a couple of hundred airplanes on the line and he feels that he's got a better product than that Boeing doesn't, want to cede when he's got a lot of P&L on the line, a lot of his employees on the line and something which is an important strategic drive for the company and just put it down, even if you have a political hard spot where that's right, the Democrats are in control and one is a Democrat airplane. I yield the balance of my time to this thing we're showing. Well, let me just say I think the equities are so huge and nobody's going to back down. I mean, and there's too much water under the bridge. I mean, look how public the campaigns got in defense. I mean, you know, every defense magazine, Washington Post, you know, ads, it kept all the advertising budgets up high, but frankly it was very destructive and other companies were asked to choose sides. So I'm not so sure we can make nice and just, you know, one company wins and goes away. I just don't see that happening very easily. Okay, another question, please? Should I ask another tank of questions? I'll threaten you with another question. In the back. Jim Rahachek from National Security Space Solutions. Recognizing the two out of the three on the panel have had extensive experience on the Hill and the moderator, I'd like to go back to the previous question. Looking at a playbook that President Clinton did where there was a lot of rancor, albeit with the Defense Authorization Bill, and he vetoed it, what is your take as far as the Congress if President Obama took the same tap with some of these very rankerous issues and just vetoed the bill, sent it back to Congress? And said, do it over. I'm trying to remember what Defense Authorization Bill was vetoed by President Clinton. What year? I forgot the year, but it went all the way to February before it was, and it was over a missile defense issue. Bob Bell did negotiations with Kurt Weldon and a number of other people on language as to whether or not you could proceed with, as a matter of fact, you were there. But I mean it was a minor issue, but there were 10 issues, nine of which were resolved in the administration's favor and our favor. And there was one outstanding issue and Bob Bell went back to the President and said no and it was vetoed and it lasted until February. So if the President, I mean if President Obama's been able to surprise the nation, surprise the Congress, surprise a lot of people, and if he were just to turn around and say, hey listen guys, I'm tired of business as usual and we're going to take care of these issues. C-17 and all the other issues that are out there, the C-17 billion dollar cut that he wants and he vetoed one bill, the appropriations bill. You know, obviously two out of three of you have extensive hill experience and still know a lot of people up there. What is your take as far as the possibility of what Congress is going to act on? Well, vetoes are unusual in there, they're the last resort and so what the issue was on the weld and language and there had been actually Bob Bell and Arnold Pinero, the whole defense process came to a complete stop. It was either, I think it was 1992, over strict versus broad interpretation of the ABM treaty. What year was that? Right, but I mean I remember that the House had, we had to go to an extraordinary process, the House had to pass. We did a conference report without a Senate passed bill and you create a new bill that is the conference report and I always remember Senator Nunn sitting on the floor with all of the House members as it was passing and Sonny Montgomery managing the bill because Les Aspen was up in New York getting Governor Clinton ready for the presidential debates. That's usually the last resort and usually the only veto I remember in 37 years over a procurement item because that was the ground-based deployment was really a policy question, was Jimmy Carter over a Kennedy class versus CBN carrier and that was in the late 70s. Otherwise the two of the four vetoes have been over missile defense language. So I wouldn't see the hard ball occurring in a veto message. I see shrewd negotiations and what is interesting is the total defense budget is in the range of, it's on the upside of $700 billion and so how, and I did a talk show and someone asked, this is a war-fighting budget. This is not a peace dividend budget. This is a war-fighting budget and it is largely comprised of consumables. Percentage of GDP, it's slightly smaller than the Reagan budget at the height of the Reagan build-up but that's also because GDP is so much bigger in 2009 than it was in 1986 but I don't see, I think, negotiations back and forth and here's the challenge for Congress and I yield to CID that Congress can work programs by putting long-lead items into the budget because long-lead items are $200 or $300 million but if a SECDF does not put the base funding in the base bill, then those are huge ads of which the shipbuilders struggle the most on adding ships so the SECDF has enormous influence in this process. Let me ask that question in a slightly different way and push back a little on that. Those of us who follow Secretary Gates, the Pentagon press corps in particular, have sort of speculated that this is his last great fight, that he really wants to transform priorities in the Pentagon budget and he'll leave shortly thereafter. It's his fight. It's not the President's fight, frankly. He's the one who proposed the President to do this. The President clearly has other priorities, healthcare, environment, all these other issues. To what extent will the SECDF allow Congress to put stuff back in that he fought so hard to take out during the whole budget process inside the Pentagon and to what extent, it's called for speculation, obviously, does he have support for the President on that since the President has other priorities? I mean, Secretary Gates is fighting two wars. We're in year eight of ground wars. The notion that we're going to have an Article I, Article II crisis over F-22 funding or missile defense component, they'll go back and forth. I think what Secretary Gates has said loud and clear the last 18 months is that the country is it, our military is at war, our country isn't necessarily at war, and we have to fund the priorities of the people in the field. And the MRAP is a success story as far as saving lives. It is not a success story in terms of the acquisition process. You know, we couldn't produce a vehicle to deal with a low-tech but highly lethal threat without bringing back a retired four-star general and giving him $5 billion a year. And so that's not a good story in terms of the acquisition process, but it's important to note that among the issues that really brought the casualties down in Iraq, are new strategy initiatives, you know, General Petraeus, the Marines in the N-Bar province, but the MRAPs are game changers as well, right? So I would see that Secretary Gates has a very strong point of view and he has earned a tremendous amount of credibility from the Congress and from the American public, and so the challenge is whether he is entitled to that same amount of respect from, you know, Washington insiders. Brett Lambert, just since the general's been so nice to stay with us, if you have one shot to say, what are the two things, given all of the things we've talked about, cyber, 130s, 22s, 35s, what are the two things that are atop a year old's mind in terms of what he might be thinking about over the next QDR and the slick and everything else that's coming up? Thanks, Peter. Well, General, it seems to me, of course, the most important part of the process and I think you used the eloquent term, you know, budgetarily, taking it to the shorts or whatever it was. To me, the Air Force's strategic relevance is, at its greatest and therefore its budgetary relevance is at its greatest when we're not convinced of a strategic situation like this. And if, getting back to your previous question, this really is the high priority making ourselves a power that, you know, is so horrified, you know, that the Obama Party administration, the Obama Party plank, you know, oh my God, Iraq was a terrible idea. Let's remake our military to do lots more Iraqs. You know, I don't quite understand it, but assuming that this is the flavor of the moment, keep the faith this too shall pass and keep the idea of the Air Force as a strategic asset that prioritizes long-range air power, air dominance, and ISR, and all the priorities you eloquently outlined as something that needs to be kept in place with its traditional share of the budget for the long haul. I guess right now there is an emphasis on MRAPs, and that's understandable, given the requirement. But in a few years, you won't be able to give these things away as long ornaments, but that's my, that's my, I guess, charge. And thank you for being here and doing a great job. Well, I guess I worry about the future of where we're headed with increasing military personnel costs, spiraling health care costs out of control largely, and great emphasis on quality life, and not that it's not deserved, but I worry that there has to be balance, and what I see in your budget is largely taking care of a lot of those things and not taking care of some of your modernization challenges, and that as we plan for the future that we don't end up in a place like we did in the early 70s after Vietnam where we didn't have bullets to train with, we couldn't fly, and you can only justify so many simulators, but I hope that we can keep our eye on the ball in the future. Just to know, I think Richard just outlined one of the key strategic issues that we deal with work. We debate F-22s and C-17s and all of this, but Richard has noted, and it should be the fundamental debate, and that is the national security strategy going forward, and should it be focused on sort of the counterinsurgency mission or should it be the deterrence prevention mission? Shali Kashvili in the 90s did something called the Partnership for Peace where he brought all of the former Warsaw Pact, or several of the Warsaw Pact, into NATO, and he did that by using the military in the presence, in the mil-to-mil relations, in sort of the deterrence mode. And I think it's a profound question in terms of are we going to focus exclusively on actually fighting the irregular war? There's a great new Gingrich speech out there that he gave in a New York synagogue where he talks about we shouldn't have gone to war against Iraq because we needed to go to war against Iran, and it's a very well-spoken speech, but if you read it, you come away that, you know, the U.S. would be in ground wars for 20 years versus the more strategic approach of, you know, previous eras where we're really trying to shape and to deter these wars from being fought in the first place and, you know, or debating just the 1991 Desert Storm approach versus the Iraqi Freedom approach. But those are for another discussion, and I know Ray Dubois will make sure that there's those. But, you know, the one issue, you know, our airmen do incredible things, and it's sort of been lost. I mean, personnel wounded in combat have every confidence that doctors and Air Force personnel are going to not just simply get them to the hospital, the whole strategy is you go, you do a triage, and you get them to Germany. And so the survival rates are better than they've ever been. You know, 2,000 close air support sorties and 30,000 airlift missions and 7,000 ISR missions annually to support, you know, the current military operations and then to do humanitarian assistance on the side. But the one question I get asked the most from airmen is that they wish that when they had critical personnel moments in their life they could talk to somebody instead of having to do it online. And that that seems to be a huge quality of life issue is that everything is done online and it's probably very efficient to do. But that's what they say. So there it is. I'm going to do a special pleading on behalf of the media. I was actually a very great fan of your predecessor and I spent a lot of time talking to him and knew he cared very deeply about the current fights both in Iraq and Afghanistan. And yet the image was portrayed in the public and in OSD that he didn't care. And I don't know how that image came to be, but I suspect it was communication strategy. I don't think he was very good at engaging with the media and I think that has cost the Air Force quite a bit. How the public and OSD could perceive that the Air Force is not actively engaged every day in the current fight is beyond me, but I think that is a problem of communications within the Air Force and I would encourage you to do a bit more on that. All right, with that special pleading, does anyone besides Vago have a question? I already made the media special question. Do you have a question back there? Sure, if I may. Now that the QDR is going on and starting to happen, I think that the counterinsurgency emphasis is being very apparent here in the U.S. while some of our partners in the Western Pacific are going in another direction, seeing maybe the emergence of more multi-polar world, stronger Chinese military, et cetera, et cetera. We're seeing Australia in particular. How is the U.S. going to credibly have a presence in the Western Pacific and try to convey this in the QDR in our posture for the next four, eight years, even if maybe we're not making the military modernizations necessary to do that? I think along with Richard, you have framed what the QDR needs to do. You know, I think that is dead right on and that is a macro decision that has to be made. And to take Peter's point, that debate has not yet been framed and if the first step in a policy process is to frame the question, I think this group has framed it correctly. It's getting the broader community to start talking about it in those terms. The endless spigot of military benefits. I mean, I'm not trying to put anybody down. Everybody in this room served in one capacity or there were many of the people in this room did, but didn't have sort of 7% annual pay raises, try care for life. I mean, all of these issues, I mean, it's almost like a crazy race between the administration and the Congress who now do the other one in terms of increasing military benefits. I'm sure that most of the people in this room would have loved to have had these kind of military benefits when they did their national service. It's not as though their national service during Vietnam, Korea or at any other time was any less than what people service today is. So it's almost like a guilty conscience trying to assuage itself that we may not have gotten into very smart wars and now we're going to try to do the best we can for it. My question is, how do we break this cycle because that part of the budget is growing at a rate that is going to squeeze everything else out? Let me just say it. I think there's a fundamental difference. It's an all-volunteer force and that's not lost on the members. I mean, people recognize that, you know, you have to have attractive incentives to keep people and although they make challenges, there have to be some kind of monetary awards that you can't expect people to serve in the military to be on food stamps. You have to provide a decent quality life for them and I think that's fundamental. But I think there's in this game going on for the last eight, nine years since the war. Primarily, it's been the Congress outbidding and trying to up-bid the administration on personnel and, you know, there's been very little interest in about affordability. We've thrown on benefits and enhancements that have been, you know, seem like the right thing to do at the time and I'm not being partisan. I'm just saying that it was, you know, getting caught up in the moment. It happened. I mean, the most recent thing is the GI bill. It's a huge benefit and it's hugely expensive. So, I don't know. I mean, you know, and we didn't really have good solid data to back up some of these decisions. We had antidotes. I mean, frankly, we did things, you know, in the heat of the moment. So, I think at some point there has to be kind of a relook. Do we relook tri-care for life? I mean, that was done. We changed the retirement system. We basically went away from the retirement system that had been put in to be more affordable. So, maybe somewhere down the road, there has to be more of a systematic approach to really, you know, where we are. I don't think you can undo. I don't know how you walk back, but maybe try to constrain things in the future. And the pay raise. I didn't even talk about that, but that's largely probably going to be bid up from what the president proposes because the Congress believes it's probably not enough. So, you're going to see an increase in the pay raise for military and probably for civilians, which will then further exacerbate General Schwartz's problems, trying to pay all the civilians that added increment. There's an enormous sacrifice that is occurring by a small percentage of the population. And so, I think we need to err on the side of being more generous than Stingy. And, you know, some of these debates were having in the whole society in terms of the cost of medical. Things like that. Just as we just had the framing of, you know, what are we going to do in the Pacific versus two ground wars? Are we going to deter wars? Are we going to focus on the irregular? There was excellent testimony to the budget committee by the Congressional Research Service Analyst, Steve Daggett. And he goes through the seven parts of the DOD budget that are broken. Cost of the all-volunteer force. The tremendous growth in O&M funding over the last 20 years. The fact that we've gone from a forward-deployed ground force to a continuously-deployed expeditionary ground force. So you are in a three-to-one ratio for every soldier or marine or special-apps-deployed. You've got to have one in the pipeline ready to go and one coming out, recovering the fact that our acquisition priorities are out of sync with war-fighting needs and then the fact that from a national security point of view, post the fall of the Berlin Wall, the use of U.S. military personnel has become the default position for national security policy. So all of those things have enormous drivers on the budget back to Peter's point of the budget, but the debate we're having in Washington right now is over a handful of procurement systems and not these larger items that have tremendous out-year consequences. If I may, you're absolutely right. Given the sacrifice that the forces are making, it's best to not err on the side of Stingy. That's for sure. But, you know, Vago, this is a market. Labor is a market like any other. And, of course, the price set by a market depends both on the job you're asking the person to do and the broader economy. And for the past five years, you've had an extremely robust economy up until it came screeching to a halt in the fourth quarter of last year. You had a robust economy rising wages, and you were asking people to do, looking at the OpTempo, an incredibly tough job. If you accept that, and you accept that this may be a market that, no matter how non-agile it appears, eventually does respond to those kind of inputs, then as that OpTempo diminishes, and, frankly, as the economy stays weak for a few years, most likely, that dramatic rise in wages and benefits will diminish. That's how a market behaves. Can I ask one question about a topic that hasn't come up? It's not an Air Force-specific topic, but it is an airframe topic. And that's by America. You know, we haven't reared its ugly head yet, but this obviously is an administration that owes a lot to labor movement. I'd also point out that three of the programs that have either been really problematic or have been whacked during the budget process are basically foreign airframes. The EH-101 for the presidential helicopter, the A340 for the tanker, and the C27J. Is there a risk that, A, by America will rear its ugly head again, and, B, is there a risk also that foreign companies, having seen this recent process, will get the message that we say we're an open market but, frankly, we don't like the foreigners. I'd like to chime right into that one. That's a huge issue. It's not just three, it's actually four. Yeah, an aerial common sensor with Embraer as regional jet. You've got all of them perfectly explicable, as program problems or failures or whatever you'd like to call them. ACS being a turf war, JCA being turf war on steroids, KC30 and KCX being in its own economic and political universe, and, of course, BH-71 requirements process completely out of control. But you assess these four data points together, and you might be sending this not very secret message to foreign bidders that they're really not welcome over here. And you've got to be really careful about that message. Maybe this gets back to your point about being there an awful lot of water under the bridge with this tanker issue. That's certainly a cause for concern, because that's clearly wrapped up in all of this. It looks the only thing in our favor, I guess, if you've gone into the U.S. market, biggest and most promising market in the world from the standpoint of acquisitions, so BAE and Rolls Royce being the best examples, certainly now FinMechanica with TRS. It seems to be okay. There's no kind of backlash against, oh, you don't get contracts because you're a foreigner. But platforms, that seems to have a certain special, as you're implying, Peter, in industrial, very often machinist union constituency and the politicians who love them, and that appears to be a potential problem moving forward. And we don't know, because the Obama administration so far has been pretty good about being relatively market economy oriented, relatively free trade. The dire predictions of many anticipating socialism have not been borne out. But on the other hand, they are beholden to any interest, just like any political entity. So there is that risk, there is that risk that foreigners begin to get the message, retaliate those who haven't closed their markets due, and this could even spread to the commercial segment, which would be catastrophic from an aerospace industry perspective. I'm worried. Sid, can you tell me about, I mean, that's more of a house issue than a senate issue, frankly, over the last few years, but is that something you worry about? Not so much. I think it's really been a house issue. And, you know, there's been compromises worked that have given an appearance of protecting, you know, American jobs, but providing waivers to the secretary to procure whatever he needs to if it's a national security issue. So, you know, it's certainly out there, but it's always kind of managed, and it's really more of the Armed Services Committee that has to deal with those issues. We'll just wrap it up with one last question. Is there anyone else who wanted to chime in here? I'm going to go ask all the questions. If not, we'll wrap it up a little bit early. I want to thank General Schwartz for sticking around the whole time and listening to us blather for a while, and I appreciate my panelists. Thanks for your time. Thank you.