days in the minds of congress remains the economy jobs in the future of our health care sector but even as we continue to address these challenges others are coming to a head among them of course is how we're going to handle afghanistan and iraq as well as other developing threats like iraq and iran and north korea so even with the countless competing demands on the budget this congress must continue to honor the primary role of the federal government providing for our national defense in short that means ensuring america's men and women in uniform have whatever resources are necessary to complete their missions we simply cannot take our national defense for granted now that being said i did not mean to imply that there is not a great deal of room for improvement on duties budgetary front there sure is there's clearly an opportunity for savings particularly in the procurement programs so i look forward to exploring how the department might more efficiently meet its critical mission but i also want to discuss how this congress might avoid the growing temptation to raid d o d s budget for more domestic spending as resources get tighter that is my current budgetary concerns when it comes to discretionary spending we saw this in the one nine hundred ninety s i fear we may be returning to a time where orating defense not necessarily for efficiency gains but just for the sake of rating defense in order to place up more domestic spending building in a higher spending baseline and creating more deficits i hope we can reach that temptation while we do get the kind of savings we need from defense for deficit reduction i'm eager to hear from both members and witnesses on their thoughts on how we can achieve savings  fense program which generally takes the budget out and projects another five or six years the first year in the new administration the budget came over but without a fit up so we're working at a bit of a disadvantage this year especially in light of the changes that secretary gates announced two acquisition programs and we don't have full information on how those programs will play out indeed i don't think those decisions have been made so we're actually projecting projection for presenting today projections  carrying out those plans would require a larger amount of require five hundred sixty seven billion otherwise some thirty billion more than what's currently planned we estimate would be required to carry out those plans in the future to continue buying the systems that are in the programs of record to continue the that military pay raises have generally been higher than the employment cost index which is a measure of parity and in the in the civilian sector and in fact this permit permanent law that that passed in two thousand and three that would have the military is equal to the change percentage change in the cia and many us congress has chosen to to to grant higher pay raises a half percent point percentage point above the u c i so that that compounds over the years into military pay this year we have we had the administration's request for the overseas contingency operations as one hundred thirty billion dollars that's on top of the five hundred thirty four they requested in the regular budget and that reflects a shift  earlier this year we are estimating that in march there one hundred seventy five service members in the iraq theater and forty thousand in the afghanistan theater the administration's request of one hundred thirty billion would support hundred thousand i smaller number in iraq but a larger number sixty eight thousand troops on the ground in afghanistan we in our projections we we have a category of call it we call those contingency on budget costs there's the that are somewhat higher than that and that's what we call continues the on budget costs and then we have other types of on budget costs other things that could happen as they have in the past that could cause the need for defense resources to be higher that's what's in the budget for example weapon systems often end up costing more than eliminating estimates we have cost growth in weapons systems as medical costs often grow faster than what what has been in the  systems and health care and other places in terms of the share of gross domestic product we're projecting that defense spending would nonetheless decrease below four percent of  computed by going back to one nine hundred eighty two which was a year when after two big pay raises when it was why they thought that military pay was brought into parity into equity with civilian and then the issue is whether the military pay raises have kept up since eighty two  argued that a better measure of military pay is not basic pay but what we call our regular military compensation which includes the food and housing allowances and also accounts for the fact that those allowances are not subject to caught up and then since what it would have been based on the benchmarks are in one thousand nine hundred two so those considerations apply to the military pay raise they also apply to the civilian pay raise to the degree that civilians are granted the same pay as military with the same justification compared to the compared to the pay gap nonetheless in our estimates in our high high case and we call on budget pay increases which is the high dash lines and your figure one we do have military and civilian pay raises above the employment cost index by half a percentage point for each in the next five years twenty eleven to twenty fifteen and that would fund those pay raises would cost about two point eight billion in military personnel account and two point three billion in the zero m account by two thousand and fifteen and those raises would contain a compound so that by two thousand and twenty eight it would cost three point six billion in the the research in development accounts we are actually projecting less in those accounts than we were last year at this time based on the two thousand and nine set up again we don't have a fit this year we just have the twenty ten budget we don't have the out years that ordinarily come with that up however based on that and other information that we do have if you go out to a common year comparing up objections now to projections that were briefed a year ago based on the two thousand  we're projecting that procurement funding by two thousand and twenty would be eight billion dollars lower than what we thought it would would have been in two thousand and twenty as of the information year ago and that total investment will be called  would be seven billion lower so there is some impact that we see immediately from some of the changes that secretary announced so they gates announced that built into the two thousand and ten defense budget and let's talk about a little bit about three or four of those if i could  the active army had started off with forty two brigade combat teams and the plan in the two thousand nine hundred up was to to grow that number from forty two to forty eight we we  observed earlier this year that it would probably take additional and strength to fill out an army with forty eight brigade combat team to probably take about twenty three additional soldiers twenty thousand additional soldiers and that would cost about sixteen billion over the next five years in fact what the secretary announced enables that rather than going all the way up to forty eight brigade combat team to stop at forty five so roughly speaking the sixteen billion for those last three brigades is forty six seven eight as avoid is contained by stopping a forty five combat teams and that's reflected in our projection the probably the biggest change single change regards the f c s program the future combat system where the the ground vehicles portion was suspended by by secretary gates we had been projecting based on the two thousand feet up that is a year ago that for the next ten years from that point that is ten upgrade to two combat vehicles that we thought were the necessary keep them modern would have cost another twenty eight billion the total of ten year cost of those three aspects would have been ninety eight billion ten years worth of f c s and related programs and light of what secretary gates announced we're projecting a smaller number eighty billion eighteen billion less over ten years and i should say that this is a very preliminary estimate and that i don't believe the department has decided initially have it announced exactly where they going with the stryker vehicles that would cost you about forty three billion between twenty thousand and twenty nineteen and that spin out of communication and other equipment would cost another thirty seven billion so i'm told those related programs would cost about eighty billion given our current current understanding of where the part it's going that may change and that's again as compared to ninety eight billion the estimate a year ago this time i want to talk finally about ballistic missile defense as you know as the chairman there  several important announcements made in april the secretary announced plans to freeze the number of ground based interceptors in alaska top of that announcement the president in september announced that he was canceling for now the previous administration's plan to field a tracking radar in the czech republic and ten ground based interceptors in silos and in poland and that land based element as well as upgrades to the to the standard missiles some of which are still under development the thing i want to point out here and again this is very much a program that's in flux and we don't know where it's going to nobody has announced where it's going them to do the ballistic missile defense mission one thing i should point out is that if you want three ships permanently on station around the ward is a you need to you need to dedicate nine ships in total because reid ship that on station you have another ship that's roughly speaking in training the next one to go out another ship that's been made into an overhaul so three three stations require about nine ships the secretary asked for two hundred million to upgrade six ships six  may ultimately be and c b s s mission nine ships to do the mission that's the lowest cost way to do the mission is to take existing ships and convert them the problem then is that you have nine ships dedicate this mission that can't do something else that's a trade off or you could build new ships nine new ships that are dedicated to this mission and then the question is what kind of ships do you want to build all the burkes configured for this mission nine of them would cost about six billion sorry one thousand billion in total there's another option that we've looked at which is to take a ship that looks more like a littoral combat ship the l c s which is a less expensive ship and a spy one radio and vertical ourselves to the l c s and that would cost about six billion in total for the night ship so six billion for the converted l c s versus about one thousand billion for the aegis destroyers for the same miss secretary defense asked for one point four billion less than the prior year and were estimated on average two thousand and twenty eight that was with all the changes that were announced the the total bill for missile defense could average about two billion less per year than the number of little help at the time in the month since february the defense department isn't announced a number of significant changes in the in the defense program particularly in acquisition programs  and i wanted and is also engaged in a quadrennial defense review which will look ahead ten to twenty years to two with a view toward future requirements in this statement i want to address first of all the impact of the changes that secretary gates announced last april second talk about what kind of additional trade offs the department of defense might face given the possibility of limited budgets over about the next ten years not just within the current future years defense plan but a little bit beyond that and then third say a few things about what i see is kensho leave in longer term challenges that the quadrennial defense review appears likely to  address when i when i testified in february i laid out six major factors that had driven up the cost of defense dramatically in recent years one was the increase in cost of military personnel by my account military service member in two thousand and nine was about forty five percent more expensive than in one thousand nine hundred eighty after adjusting for inflation increasing cost of operation and maintenance which has continued to grow by two and a half to three percent per year per troop above base inflation every year since the end of the korean war and appears likely to continue to do so the apparently accelerating rate of increase in cost from one generation of weapons to another fourth factor was just apparently worsening  d ability to estimate the costs of major programs resulting in cost overruns and delays of a factor was increasing demands and budget requirements therefore for ground forces which entailed a pretty substantial increase in ground force and strength and also substantial new acquit requirements and then finally d o d over time has been seeing itself facing  expanded a ray of challenges in the an international security environment not just traditional state on state conflict with other militaries but also irregular warfare disruptive challenges by enemies that would try to exploit vulnerabilities and potentially catastrophic effects on the homeland and i also i saw all of these factors as driving up the cost of defense more rapidly than even very rapid increases in the top line for defense which as mr spratt said by historical standards appears to be very robust the changes that secretary defense announced in april may have some effect on all of these some of the changes will drive up costs he announced some increases in particular in medical care and also social services particularly for service members returning from abroad he reaffirmed increases in army and marine corps and strength and  ill be taking those costs into the base budget which also implies driving up costs at least in the base defense budget he also announced some increases in production rates for a couple of weapon systems  thirty five in the littoral combat ship but the main effect was the main impact of the statement was to announce terminations of a number of major weapons programs and my view as matt said is that these will likely drive down costs over the long term i think they may serve to drive down costs even more than the immediate impact of the cuts in those programs themselves and the reason is this that the administration decisions appear to go in the direction of narrowing down the number of different new kinds of major platforms that we're building and to the extent that that remains the case it creates means for d o d to really pursue increased efficiencies and production if you look at tactical aircraft  production the decisions that secretary gates announced reduce production really to two major systems variants of the f a t s a hundred fighter aircraft for the navy and marine corps and of the f thirty five for all of the services in shipbuilding  we're now focused on producing a d d g fifty one destroyer and perhaps with variants of that for future missions ltd seventeen and to be a ships or a combat ship and virginia class submarines even in satellites giving up the transformational communication satellite means we'll be going back to producing satellites for similar missions of quite proven designs to the extent this leads to our focusing production on a relatively smaller number of relatively mature technologies with relatively stable designs i think there's a possibility for d o d to really work with defense industry to drive down production costs to make productivity improving investments on the basis that there's a guarantee of income coming in in the future to work on production practices to use more multi year contracting which improve the financial stability of the program and also drive down costs to require the industry to engage in much broader competition at the subcontractor level so the potentially biggest change is not necessarily in the specific weapons programs that the secretary announced but in the long term kind of pattern of defense industry production same thing in the development side the terminations of the transformational communication satellite of the presidential helicopter of the combat search and rescue helicopter for the air force these are all programs that had had real technical difficulties that in effect each tried to go a technological bridge too far and therefore had run into technical problems and schedule delays and big cost increases now there's still debate about the wisdom of terminating each of them and of the cost of potential alternatives but leaving that aside what i what i see reflected in this is a determination that in the development process we're going to be more careful about the technical risk that we're taking and the acquisition reform act that congress passed in may by the way reflects the same basic principle it requires in general that before there is milestone approval to go ahead with the next stage of design and invest more money we are assured that of the technological maturity the technologies that are going into the system it means we're not going to try to make as great technically to head and that to some degree may be a cost but the vent if it is much more predictability in the cost of our of systems at the inception and and much more stable cost trends in this is in systems as we develop them so i you know i don't think we have a full answer as to the long term impact of the effect of the changes secretary gates announced the effect depends on the extent to which they represent their continued in the future and recent represent changes in policies that will apply to weapons production in the future that said  looking ahead beyond the current fit up and beyond the changes that secretary gates announced in april unless defense budgets begin to turn up to some extent the defense department is going to face inevitably face a real budget crunch and and face some very difficult budget tradeoffs and just not as a way of predicting what the budget would look like but as a way of illustrating the possible tradeoffs i prepare the chart that's now now open is in figure one in your written testimony and what i did here was just assume that the defense budget is frozen at the fiscal year two thousand and ten level for the next ten years which about five hundred thirty four billion dollars in two thousand and ten just the d o d budget and then i said suppose that military personnel costs and all and costs grow at a given level for military personnel i assume just growth at the employment cost index which is matt said is a measure of costs in the civilian sector that has typically increased by about zero point seven percent per year above inflation get a rope to do does does this include hundred thirty billion hundred fifty billion for overseas no it does not this is excluding overseas contingency operations i don't talk about that at all this is just the base defense budget and we know that those will come down as well and affect tradeoffs as well but i just wanted to look here at the base defense budget so military personnel i assume grow at a cost of zero point seven percent per year above inflation that's a pretty limited rate of growth it is a lot slower than growth in recent years and the premises the military service support organizations have gotten for servicemembers most of what they were seeking so cost growth can level off from now on that may or not may not be true but that's the projections in operation and maintenance i assumed that all when i'm costs are going to increase by two point seven percent per year above base inflation as they have historically since the end of the korean war what happens to the defense budget in ten years under those assumptions the answer is that the remainder of the amount of the budget that remains for defense acquisition declined substantially it goes from one hundred eighty six billion dollars for procurement and r and d to about thirty five percent of the budget in two thousand and ten down to about one hundred twenty seven billion or twenty four percent of the budget in two thousand twenty so it's a decline in real terms after adjusting for inflation about thirty two percent almost one third at a time when the q t r is projecting that we will face a larger number of challenges in the future it would be very hard to sustain anything like a robust weapons modernization program with that kind of funding so i think we face some of the other tradeoffs and those tradeoffs include first of all potential reductions in the size of the force or we're going to give up on the increases in the army and marine corps that we will just have completed in about twenty by the end of two thousand and ten which added ninety two thousand troops to the force you can make a strategic argument for doing that and that is that based on lessons of iraq and afghanistan we're going to be more reluctant in the future to commit forces to military actions that would go all involve a constant rotation of large numbers of forces into long term stability operations so you can make a case for that but it certainly will be a contentious argument will we reduce the size of the navy and the air force and reliance that on higher technology systems those are the kind of tradeoffs that we face an alternative is to modestly increase the budget if we increase spending by about two percent per year above inflation that adds about ten to eleven billion dollars per year to the top line if you did that for five years you'd have bout fifty billion dollars more by the end of that period and if you put that into acquisition that would get the acquisition accounts up more toward what they were in two thousand and ten another alternative that the q t r certainly will explore is to try to look at ways to rein in operating costs can we pull a draw down the two point seven percent per year increase and all of them account for my part d o d has tried to do that in the past by the way in the one nine hundred ninety s they always projected from year to year that all of them accounts would level off and they engaged in a number of management vigorous managed risk management reforms to try to accomplish that they also closed a number of military bases in the one nine hundred ninety s with three rounds of military base closures dry to get infrastructure cost down none of that really succeeded in drawing down the rate of growth of all an m so my view would be to be quite skeptical about potential impact of efficiency measures it doesn't mean you shouldn't try but in the past these efficiency measures seem to have served to keep calling them growth down to the historical level rather than to achieve additional savings so budget tradeoffs over the next ten years look potentially pretty severe unless there is some room to have at least increases in the top line for defense final discussion i'll be very brief about this but it opens up a very very wide array of questions and that has to do with the current quadrennial defense review q t r as in the past have often been subject to quite a lot of criticism frankly for not being radical enough the argument has been it's been very difficult to trace  quadrennial defense review to any significant changes either in the size of the force of the composition of the force or the decision whether to go ahead with certain major weapons programs or not my view is that's a bit unfair  that it's it's i think more realistic to look at q t r as as snapshots of an ongoing discussion inside the defense department and in the broader national security community of changes in the international security environment and  how the defense department as well as other agencies need to adjust to that and when you look at q p r as that way you can see a real progression the initial pre q t r defense reviews the base force for you in one thousand nine hundred the bottom up review in hundred ninety three really provided a rationale for maintaining strong military forces after the end of the cold war but those forces looked very much like a smaller version of cold war force beginning in one nine hundred ninety seven and with the two thousand and in two thousand and six q t r d o d began to to say quite explicitly that that wasn't adequate that the requirements of the new requirements of changes in the international security environment required not just a smaller version of cold war forces but other kinds of capabilities in the army for example required in particular the ability to rotate forces forward on a regular basis without direct disrupting personnel patterns throughout the force  r it was pretty clear that the senior leadership of d o d regarded that is inadequate and finally in two thousand and one the army adopted a new organizational structure around modular big brigades that could be deployed separately but most importantly were fully manned in peacetime and therefore could rotate into a conflict and rotate back without requiring that you drop personnel from other units their vote thereby disrupting their readiness of the army over time although very slowly  adapt to changes in the international security environment the new q t r is based on what senior officials have said likely to address some very different kinds of challenges in the future  the discussion has been first of all about not just irregular warfare or catastrophic dangers to the homeland but what people term hybrid threats that is think of hezbollah and hamas using relatively shaped charge munitions to it to attack our armored vehicles that's pretty advanced technology in the hands of what we used to look at as the low end of the conflict spectrum similarly we think that even future near peer competitors  countries that can match our technological capability to some extent it at least wouldn't limit their themselves to fighting us force on force where we have advantages they would use irregular warfare they would use other advanced means to try to exploit our weaknesses we call them high and they call it high and asymmetric warfare that could include cyber warfare efforts to disrupt communications and ai satellite weaponry efforts to deny access of u s military ships or ground based forces to the region through anti access strategies that can use some older technologies but also new means of attacking and the new q t r really appears to be focusing on that on that based on speeches under assessments who by the way has invited been invited by d o d to sit on a red team that is reviewing the q t r has been very critical of d o d he says for not adjusting rapidly enough to these changes that high end asymmetric warfare are creating specifically he's talked about area denial strategies he argues that it will be very difficult in the future for the us to get naval forces anywhere close to the literal areas near a conflict  zone and he believes that that implies much there should be much less investment in short range tactical air and much more investment in longer range systems and and in other technologies like submarines that are more difficult to attack that can launch missiles ashore his he was starkly at odds with what michele flournoy the undersecretary of defense for policy is laid out in an article in the proceedings of the u s naval institute  she acknowledged that over time these kinds of technologies were developing but she said that for many years ahead the united states appears to have a margin of security in these kinds of technologies i can't think of a starker difference of view  some time my view is we need to face that debate head on and discuss it directly and it ought to be a matter for discussion in the q t r and also in the congress and it and these and other asymmetric challenges really have important long term budget impacts will reduce the impact of investments in things like f thirty five in favor of long range strike systems that could be unmanned aerial vehicles that can  loiter how much what do we need to do to deal with an eye satellite threat do we need to develop a whole new generation of satellites that are smaller that can be kept in reserve and launched when needed to do that we need a much larger launch capability as well that could be fairly expensive in the past we've tended to look at these kinds of asymmetric reflective threats as requiring only marginal changes in investment my youth you is that's not necessarily the case it could require much larger changes that a good sweep of not just where we are but where we seem to be going with some of our peers or would you just for the record for elaboration give us an idea of what's happened in acquisition program for a long time there isn't really been much change or progress yet let me actually when i was here last last february i provided a chart and actually i did corporation cecil black did this and i've just adopted a little bit and what he did was look at production rates of major weapons programs in one thousand nine hundred eighty five compared to production of similar systems in two thousand and eight starting from the premise that in constant two thousand and eight dollars we were actually spending about the same amount in acquisition there was about two hundred billion dollars in retirement and in r and d here's the chart in both years so with two hundred billion dollars in money for acquisition how many of different kinds of various systems could we buy into in eighty five of those two thousand and eight and here and here's what he found for tactical fighters in one thousand nine hundred eighty five we bought three hundred thirty eight new tactical fighters their ships for similar missile missions yeah but they are much they have become much more expensive individually and because they've become that much more expensive individually we can afford only so many fewer of them i mean it does address your point in general but that is that that's the key point that the intergenerational cost growth between major systems has accelerated so much that we're finding it very difficult to replace existing equipment on a one for one basis given budget constraints in fighter aircraft the the meaning alone when fighter in one thousand nine hundred five was the f sixteen which at the time cost about sixteen million dollars a copy of the f thirty five will cost about eighty three million dollars a copy if you adjust for inflation it's a little bit it's about twenty four billion dollars twenty four million a piece for the f sixteen versus eighty three for the f thirty five but that's been the pace of intergenerational cost growth and you can't sustain that over time that you have to do something to rein it in and i think that the changes that secretary gates announced in april many of those changes appeared to be moving in that direction not going ahead with d g one thousand as a basic whole design for surface combat but instead d d j fifty one which is a much smaller and presumably less it's less expensive call relying more on the total combat ship for many missions useful and i would say a better approach than saying well we can afford to spend three or four percent of our economy on defense would be more from the bottom up is to say whether what the q t r is attempting to do we get to see what successful have is to ask what  threats what we have in the amatory what do we need to buy to meet those threats and whatever percentage it turns out to be i would i would rather build it up from the bottom than to say that we should we should flatlined the defense budget at on defense and so i i think that with a better approach would probably be to figure out what do we need how much would cost rather than starting off by saying we need to mean maintain this this much top line my view is that talking about defense is four percent of g d p it's perfectly reasonable to to use that as a way of arguing that if we choose to do so we can afford it it's a measure of the impact of defense spending on the economy and to say that it's four percent of g d p says that relative to what it's been in the past it's less of a burden in that sense so it's perfectly legitimate as a measure of the kind of economic burden  of defense spending what it what it misses is the overall budget environment and the budget environment has changed dramatically as well the federal spending has stayed stable at about twenty percent of g d p going back  forty almost fifty years what has happened is major entitlement programs have climbed dramatically as a share of g d p and its share of the budget while defense and other discretionary programs have declined so you know while it's reasonable to look at defense of the share of the economy you also need to look at defense as a share of the overall budget if you want to increase the budget above twenty percent then there's room for for a bigger increase in defense but you want to accomplish in the international environment what kind of military forces do you need to accomplish that and with the unlimited resources how can you best do that and that's quite apart from the level of defense spending as a share p we need to be looking at what china is doing in military spending more than we need to be looking at what's happening to our spending as a share of g d p and in dealing with china we also need to take a count of the fact that within forty years china is going to have as large a g d p as we do they will be the largest economy in the world so the way in which we address how china is evolving militarily has to take account of this q bring up chart nine that the point i guess behind my question is what we're hearing more often these days is that if it weren't for the war we wouldn't have these big budget deficits the blue line the blue graph shows you the war spending in the red shows you the deficits so we're seeing that war spending which peaked i think in two thousand and eight is really actually quite a small fraction of our office it do we make a distinction as to what is deficit finance and what is not deficit finance when it comes to federal spending in a deficit climate that c b l we do not and we are reluctant to do that because it's very difficult to say that that this this particular dollar that i'm going to spend on defense whether that's a dollar they raise the taxes of that that's a dollar for which i had a lot of and so we prefer not to make that distinction because i think it's important but these these these conversations in perspective as to their impact on our fiscal situation and our deficit i want to go to your missile defense line was very interesting to me and i'm not a services guy so i need a break and you need to break it down for me looking at the decision that was made to withdraw our systems out of the czech republic and  what is the cost difference between the current plan for missile defense under the various scenarios you described and the cost projection we are on with a land based system and what are the costs associated with this containing the land based system i ships and just convert them upgrade them so they could perform this mission and there would be about three hundred million in total for the nine ships two hundred million has already been requested for six ships and that is that assuming we don't replace those existing ships with because we're changing their missions we would not replace them that's correct that's assuming assuming that that we would be dedicated to this mission and therefore not be available for other missions are there terminations costs associated with any terminating any contract terminating costs it's hard to answer this question because the navy was buying the standard missiles anyway and they may continue to buy just as many missiles regardless how this option plays out so it's hard it's hard to say that involve so if i could talk about the land based piece because i have some some numbers we estimate that to develop the land based version of the s m three the standard missile for this purpose would take four hundred million in r and d and then for every additional site maybe another seven hundred million or so four hundred to develop it and seven hundred million site the land how many sites were being contemplated in the full build out would we have medicare medicaid you know the demographics the health inflation being what it is give us a sense of the crowd out of defense spending with respect to try care and i assume you have the same kind of fiscal pressures we've seen these numbers  think you've testified on that give us a sense of the crowd out with respect to health care on legacy costs in india in fiscal year two thousand and ten budget total health care costs include costs in the opera operation and maintenance counts for care of uniformed personnel and their dependents through tri care clude military personnel and if you include a cool payments the d o d makes for future health care benefits for current employees about forty five billion dollars this year increase within five years to about sixty four billion dollars so you know in real in that's in constant two thousand and ten dollars so it's about five percent per year growth in line with growth of health care costs in the overall civilian sector so another almost twenty billion dollars of additional expenses just in a five year period so it is yes health care costs are a major factor that he is concerned about it's a major factor that's driving up costs of operation and maintenance by two point seven percent per year and it's a real matter of concern to thank you thank you  both for your testimony my questions concern afghanistan and i'll address them to mr daggett during the long deceit and denial days of the bush cheney rumsfeld administration it was almost impossible to determine or estimate the cost of our go let alone invasion of iraq it seemed as if they had a grand don't ask don't tell policy whenever we sought to get the facts about what american taxpayers were being asked to do to commit to their as some people now are calling for expanding the number of young americans who will be who will be asked to face the harsh realities of afghanistan  i want to be sure that we replace deceit and denial and don't ask don't tell with as accurate a fax as we possibly can and certainly so that this committee can fulfill its responsibilities in budgeting  first let me ask mr daggett just as it refused to break out the cost of iraq the pentagon as i understand the way they present their figures on the cost of afghanistan they have intermingled them with the cost of what they're doing is certainly is possible if they want to provide the american people with the information to break out separately the cost for afghanistan yes absolutely and let me focus your attention on the specific cost as best you can determine what it what we are committing to each time we send one additional service member to afghanistan is it correct that the best estimate we have is one soldier one year in afghanistan and one million american dollars that's about right my colleague amy blast go has actually done numbers on this extensively as has by the way and from your review of the literature and i understand that's all you have to rely on is it also correct that the cost of maintaining one afghan soldier one year in afghanistan is about twelve thousand dollars those are we've seen that just  american people was that they would announce a one set of troop figures when in fact they were actually committing us to much larger set and i was troubled yesterday to see on the front page of the washington post support tr  well and u s force in afghanistan that while we had had an announcement that we were expanding the number of troops there in the spring by twenty one thousand in fact when you count the support troops that are being added there twenty one becomes the new thirty four and we actually have thirty four thousand more troops going there is that correct that you have and in calculating the cost million dollars one soldier one year you have to include the support troops to give well an accurate indication don't you yes right now anyone who is advocating again asking you from your review of the literature because i know you followed this have you are you aware of anyone who is advocating more troops for afghanistan now that has suggested a timeline that they can stay for less than a decade and i've heard of anyone out there know i have not heard any particular timeline  on when we talk about one million per soldier per year we're not just talking about one year and certainly in your estimate you don't look to just one year do you know we don't let me ask you also about what and it's a  strange term to me but it is the term i heard from the pentagon the so called monthly burn right how much money is being burned each month is the muscly burn right in afghanistan now without all these additional troops about three point six billion dollars per month through the first seven months of fiscal year two thousand and nine the average monthly burn rate is three point six billion dollars per month and if we deployed an additional fifty thousand troops including support personnel to afghanistan will the burn right in afghanistan be equal about equal to the bar and right we currently have in iraq precise almost precisely the three point six billion dollars per month supports an average troop level of about fifty one thousand in iraq and afghanistan if you added another fifty thousand to that that would double  which would bring the burn rate to seven point two billion per month to burn rate now in afghanistan in iraq is about seven point three billion per month and you referenced your colleague amy belasco who's helped this committee in the past and her objective studies as she analyzed the defense financing finance and accounting data the fast data to show that actually even what the washington post reported yesterday understate the true cost of the war in afghanistan because there are many other support troops that are actually when you look at those records are actually supporting afghanistan well understates the number of troops that doesn't necessarily revise the cost figures are just supporting a much larger number of support troops in the region may not actually be in country like you very much thank you mr chairman this is a tremendous cost in addition of course to the cost in blood and sacrifice of military families that we must consider as we evaluate our towards further reductions in our strategic nuclear arms by renewing start this is a concern to me because space is in my district district of wyoming and we oversee the nation m force and i know that there are strategic factors that play into a nuclear force reduction decision what can you tell me about the comparative cost per warhead delivery vehicle in our i c b m forces opposed to a submarine launched missile bomber we did a study last spring for senator conrad that addressed specifically that question and what we did was look at  depends on on warhead loadings and they can be quite variable so that's the big variable factor in this and excuse me for interrupting but i'm really more interested in the delivery system or the be delivery vehicle rather than the warheads because i know you can load multiple warheads on one delivery vehicle yes you can well what we found was that each minute me and three missile cost about two point nine million dollars cost because the tridents deploy somewhat more warheads than the minimum and i recognize the role of bombers and submarines in our nuclear posture but the i c b m force possesses unique characteristics to land deterrence and stability to ourselves and other nuclear powers around the world the silo locations are publicly known yet because they're so dispersed they make a preemptive disarming attack almost impossible in today's world so our side be an i c b m force has contributed to global stability for decades and and i've been visiting with air force officials and they confirmed that they remain vital to our national security and so i just wanted to point out that as between the two warhead delivery platforms that we get a lot of bang for our buck without you know  saying that term my next question mr daggett is also for you if you look at the larger defense budget your testimony mentioned that the administration's current defense plan differs significantly from the needs articulated by the joint chiefs of staff last december in their own defense plan for twenty ten alone the obama administration is requested a two point five percent increase in the defense funding while the joint chiefs called for a twelve percent increase do you know what underlying defense policy differences account for this discrepancy two point five years is twelve percent no i actually haven't i didn't do those numbers i did not look at specifically the difference between earlier d o d plans earlier those earlier plans i do know that there was some discussion early in the year of a request the d o d presented to the office of management and budget for i think it was a fifty seven billion dollars increase in the top line and that may be what that's referring to that top line increase though was in large part involved taking into the base budget costs that earlier had been in the supplemental is about thirty billion dollars that's fifty seven billion additional amount as i understand it was simply to take in house into the base budget costs of iraq and afghanistan and all and be did not sign off on that so there was a much smaller real additional increase in the top line some of the proposals involve creases in air force and navy acquisition accounts biggest increase in increases in navy acquisition accounts on the order of five to six billion dollars a year i think i don't know precisely what those changes were for thank you mr goldberg you mentioned in your testimony that the obama administration is not submitted the customary five dep for two thousand and ten and that you had to rely on press releases and briefing papers in addition to the twenty ten budget requests by the last administration spy dept so i have a of at least a plan there are outyear funding numbers in there that of course won't won't be enacted until future sessions of congress or the place so that the plan they're not actually actual commitments by anyone but nonetheless it gives us a good idea where the department thinks they're going with i'd like to go our projection was much more difficult this year by not having i might if i could also add one other thing that was missing as well the selected acquisition reports the essay or the source which which are produced periodical a but the the sounds like mr chairman my time is up just for clarification not having a bit of a frenzy is pretty standard procedure two thousand and one the bush administration did i want to frankly cheney ones and their information as of december and they might typically be released a month or two later so this number zero eight so i would have been released early discount a year should have been and wasn't without a been held back by this it was in fiscal ten that money would be taken out of heidi wasn't asking for any additional funding to those folks and it was it remains to be seen how that would be funded and eleven and twelve so  in order in order to keep those twenty two thousand troops in the army for the purposes of population unit so that's the point soldiers get well time and to avoid stop loss tradeoff we face is are we willing to fund those twenty two families and a lot of what deity is been doing has been that meal a meal or rating that problem both in the short term in the long term the increases in the size of the army and the marine corps in particular were designed to fill out deployable units so that  it would be less disruptive on other units when you deploy one unit forward they actually found it's more difficult even than they thought so the most recent decision in april was to reduce the number of combat brigades in the active duty force from forty eight down to forty five so they could all be fully manned in order to be ready for deployment but in the difficult problem using a bit the whole process we're actually using our guard and reservists at a much more rapid rate and they're becoming part of while they're now becoming part of the rotation be yeah and to the extent that we maintain the current level of deployments abroad in iraq and afghanistan it's going to continue to be a strain on the reserves because the active iraq so the situation should get somewhat better over time but i think that is the real pressing issue for what we see lee by the way is that you know da da da da is always tracking very closely retention rates and of new personnel and they've both been doing pretty well lately now part of that is the economy when you condom use bad being in the military and signing up looks better  but i think part of it is also that people are looking military families and we can shine rates in particular military families are looking ahead to things easing up a bit if it does and if it gets worse then we could face a real a real  crunch and we look very closely at that too it's been a real matter concern since two thousand and five let me say that the army by the way when we looked at the retention agreement rates in two thousand and five we were all very concerned that the army was going to have a bad a bad problem with it and they took a number of steps to try to handle it including the the you know accelerating some changes in the force structure including dramatic increases in listening reenlistment bonuses and things of that sort and somewhat  to some degree reducing requirements for new personnel and there was a price to pay and that the quality personnel declined to some extent but they met they ended up meeting their targets so the army did its thing and you know by every realignment closure funding are provided out of a separate account the military construction budget so presumably that is a given amount and it will be it's supposed to be provided on a regular basis to carry on the activities that  that are identified with base closure this last round of base closures had a very high investment cost associated and part of it was is it was done not just for reasons of efficiency but also for security reasons and things of that  o the costs associated with this round make me question whether in the long run the savings will last that with the investment in the past the evidence is pretty clear that in the very long run at least we don't have precise measures but  in the bush administration were the architects on this committee the architects of frankly taking the largest surplus in american history and turn it into the largest deficit in american history then with a new democratic president i've heard a lot of focus on reducing the deficit and yet some of these same republican colleagues have criticised the democratic health care proposals because they are too expensive and also because they reduce spending for medicare mr ryan said earlier that it's important to put things in perspective in talking about the cost of iraq and afghanistan war it's a fair comment  i would just add to that perspective that that hundred fifty five billion dollars a year as i understand it is almost twice the annual cost of the health care plan passed out of senate committee yesterday intended to provide health care for the vast majority of americans but that perspective i think what surprises me is not a number of our republican colleagues would support general mcchrystal number of troops in afghanistan by forty thousand that seems completely inconsistent with their new found focus on trying to reduce the deficit in my opinion many of them helped create that in perspective i believe that is more than the proposed cost of the senate health care plan that passed out of the senate finance committee yesterday let me ask you this if you estimate one million dollars per serviceman or woman in afghanistan i think you reference another person study to that and if you had forty six thousand troops today and added another forty thousand that would be one hundred eight thousand thousand and ten budget which includes about or we're just in the process of passing it includes about one hundred thirty billion dollars for the operations of which about sixty eight billion dollars as for iraq in two thousand and ten that's for a troop level of about you've got equipment to be replaced and everything else what portion of the total kind of lifecycle costs would be added to the million of you your point is a good one that the the  the costs that we talk about are the incremental cost of the operation incremental now being broadly defined but it is still the cost of deploying a trip to afghanistan over and above the cost of keeping the same service member in  fort hood or whatever and that is a limited part of the total cost of the service member over the total whole lifetime of the service member so there are follow on costs for veterans administration benefits and so on some of those are incorporated because to service member pay in benefits include contributions to the military retirement fund  for retirement costs and for these days concurrent concurrent receipt of military retired pay in v a disability benefits some of those long term costs are included in the in the current pay of personnel we do it on a cool basis we pay now the actuarially determined future costs of current personnel but to some extent they're not  billion dollars is the estimated cost in fiscal year two thousand and ten that includes funding for equipment including for reset and other purposes that does include an investment piece of it not just the operating  in terms of cost for a true gentleman from texas mr dogood mentioned the cost for an afghanistan troop being essentially diminish compared to american troops were contracting and talked about other support staff what is the economic impact on contracting out rather than using troops then and when we use contracting out now as in the national guard you know what you're talking about k p c you don't have to peel potatoes but they're actually doing what are essentially military functions now what is the budget impact of contracting out particularly when you're contracting out to small source providers without much limitation on what they're charging there are as many contractors in afghanistan working for the united states now as there are service members or more it is part of the cost when we talk of the cost of a million dollars per troop that incorporates the cost of support activities including contractors who do food services and transportation and to some degree security and so on although many of them receive lower pay than military personnel members and some receive higher pay a few do for security when it's u s personnel for security activities and things of that sort yes but actually the bulk of most contractors in afghanistan are third country nationals are neither us nor nor afghan afghans they are from places like the philippines or the persian gulf countries and so on you know the net effect of contracting out service activities is a matter of some debate because it's been a very high cost to the premises it's cheaper to contract out on a temporary basis even if you pay a premium for it than it is to maintain in the force the permanent structure that would be necessary to carry out those operations back to the first question which is how much do how much more the cost when you said asymmetrical challenge we're talking about the use of one hundred thousand troops in afghanistan to chase after one hundred warfare they are using less technologically sophisticated means than the israelis have but to pose a real military challenge so think it's incorporated and any future fall iran would  use all of the means at their disposal in a conflict with the united states including those kinds of irregular activities use of terrorists thank y chairman i think we're obsessed with this line of questioning but i want to pursue it just a little bit further apparently looking at the data the actual one m for an individual american troop but it is hard it is hard to get there admittedly we have taken my colleague amy blass going particular has taken a very close look at that and it incorporates acquisition and incorporates investment accounts were buying very large numbers of m wraps investing a lot in defense and things of that sort of a large acquisition of new systems for these for intelligence and reconnaissance activities and things of that sort all of that included  the operating costs include you know the cost of deploying forces in a war zone that's very difficult to get to so it has very high transportation costs and of hiring contractors who are expenses as well  to carry out support activities that said you know if you compare costs in iraq and afghanistan recently the cost of earlier operations in and kosovo or haiti and somalia before they're vastly more expensive now than it has been in the past and jumped up not quite exponentially but almost and i think that has to be explained that's a matter of ongoing discussion so is there ever a point at which there is an economy of scale that you know if there were a million troops would it still be a million dollars a person i there has to be an economy of scale and i think if there's an increase of forty thousand troops in afghanistan that would begin to show up it cost a certain amount just to have the infrastructure support infrastructure established in the region build the bases have the transport facilities providing fuel water food a lot of which is shipped in the transportation is contractors who do that kind of work and then there's a lot of cost when the when equipment gets sent back home and it's been beaten up  and has to go to depots and get refurbished that's also known as on unfunded activity so a lot of it's a lot of things so it really doesn't matter where that troop comes from if it's new and training going to afghanistan or iraq or shifted from another theater it's still going to be the same central cost the cost of war of all those that are is actually the smaller part of it and in fact the the base the base salaries are already in there with a regular budget the only part that you see in for this supplemental in what's called the overseas contingency operations explicit budget would be the special pays for a period for serving in the combat theater and the activation cost for reservists who would otherwise be home to repair a clinician i'm going to try a quick question with a forty seconds may not be able to get out of this but with the projected increase with the experienced already increase in health care costs for military tri care and so forth and the projected increase to sixty four billion dollars  n another five years if we adopt health care reform of taking a look at the health care reform proposals to see if if in fact they're successful in bending the health care cost curve that could have a beneficial impact positive impact on to the demand side how much care people demand one of the big one of the big initiatives on the supply side is what if you had health information technology electronic medical records do you do you ready has health information technology probably not as good as what the v a has but the problem through the private plan provided by his or civilian provider can they exchange data electronically if that can happen that will help in the curve if it's much harder and this is a problem it's endemic to big health care well economic conditions are certainly much much better than we saw three six twelve months ago but the truth is there's still a lot of questions that remain once we get through this initial period of recovery what we're looking for is sort of a longer term lower growth outlook and that suggests that perhaps even the credit markets and the equity markets as well maybe a little bit ahead of themselves are ahead of fundamentals do you think that the dow could still hit ten thousand if not this week well it's certainly possible in the sense that earning season seems to be progressing pretty well here but we're again and number one behind this ability to spend is the idea that liquidity is no longer a big concern the fear that fundamentally sound corporation can go under because they can't access borrowing well that's really something that's now in the past  up his or her wallet and actually drive this recovery critical at the end of the day because the consumer accounts for roughly seventy percent of the domestic economy corporations in the housing market along for only so long before we need that fundamental that able we also are looking for a relatively extended period of higher unemployment and the unemployment rate to reach ten percent i think what it really means is that stimulus sort of in the tail end in the coming months and years is going to be particularly important