defense strategy depends budget trends i'd like to thank chairman skelton for agreeing to hold this hearing on the subject not also like to thank our witnesses for being here your testimony this morning gives our members an opportunity to understand the impact of secretary gates april two thousand and nine decision to terminate several major defense programs as well as to help the committee prepare for the upcoming defense budget and the two thousand and ten quadrennial defense review in may secretary gates testified before the house on this two thousand and ten budget proposal and his april two thousand and nine program cuts and emphasize the need to balance a department focus on the conflicts in iraq and afghanistan are concerned the and what remains our concern today is the trade off that came along with the announcement secretary gates assured the congress that his program decisions were the product of a holistic assessment of capabilities requirements risks and needs for the purpose of shifting the department in a different direction today's hearing will help the committee understand the true impact of these cuts and whether the april decisions have indeed take department in the right direction many in the congress have a different perspective of defense budget and believe it is not headed in the right direction in my view the secretary's plan for balancing the department as has come at too high inflation other words real growth it's in an environment of fiscal restraint the department will pay for the cost of secretary gates balance by moving sixty billion dollars over the next five years from within the department to pay for programs supporting current operations equally alarming is that as the defense budget remains flat military personnel costs an operation and maintenance costs will consume an increasingly larger share of the budget does not include the cost of other big ticket items that will command more depends dollars such as the war supplemental costs will migrate to the base budget or the price of resetting the forces our forces return home from the  pressures on the defense budget that i've just described warrant in my view a higher top line when one considers the current threat environment and some alarming gaps in our capability the need for more dollars going to depends becomes critical as we saw with the april cuts a leaner budget resulted in changes to longstanding assumptions about the capabilities needed to hedge against the risk thank you  d were carried through that budget required would be lowered by some twenty billion dollars per year by two thousand and twenty that's probably an overestimate in that some programs have been removed and other programs that just money really focuses on four issues first of all by most accounts the defense budget is relatively robust right now it's about if you include war related funding it's about twenty percent higher than the spending in the hundred eighty s which in turn was the peak of spending in the post cold war world except for the very highest level of spending during the korean war at the same time many of the leaders in the military services  and i provided a number of answers to basically answer is that the cost of defense has climbed even more rapidly than the budget itself and there are five identified that have increased the cost of defense versus the increase in cost of military personnel by my account an average service member is forty five percent more expensive in two thousand and nine one thousand nine hundred eighty that's above inflation after adjusting for inflation  cost of doing business in the civilian sector of the economy and which most companies have reined in costs and have a lower cost of operation rather than hire third factor is apparently accelerating increases in cost from one generation of new weapons to another we always expect that for the next generation of weapons will cost somewhat more than earlier generations but at a certain point there has to be a limit to how far you can go in that direction you can't afford to buy weapons and replace the force on a one for one basis with new systems many new weapon systems appear to be dramatically more expensive than their predecessors and i identify it as an independent factor driving up the cost of acquisition is we tend to be to systematically underestimate the cost of new programs resulting in unplanned growth and schedule delays forty four percent of new weapons programs according to the twenty five percent or  challenges in the national security environment conditional to disrupt to catastrophic to the homeland to irregular warfare and we're trying to figure out ways to adjust to all of the second major point is  secretary gates announced a member a number of changes and major weapons programs how will that affect this disconnect between the cost of the growing cost of programs and the and and the budget and my answer is it  fourth point that i addressed and i'll just skip over it very briefly but we can talk about it more in the deficit situation that we face now is one in the past has led to constraints on the defense budget over the long term if the defense budget were not to grow over the next ten years and we had the kind of growth we've had in military personnel and accounts in recent years out funding for acquisitions so there wouldn't be enough money left by the end of the decade to support the two colleagues who preceded me here today because i knew that there is wood and i basically use data in the c r s data for much of our analysis anyway so we took advantage of that what my statement does is look at some of the key issues and it's a process and i'd like to summarize it now and ask the full statement be submitted in the record the pentagon's biggest problem today is that they are facing probably the most significant set of challenges in at least the last twenty years perhaps a good bit longer than that and yet they're not recognizing that that's the situation that we've had more money than we've had ever over the last ten years and yet  shortfalls are actually bigger than they've ever been as well or at least in relevant memory i think the korean war probably is an exception but it goes back to far to be relevant today and i think the saddest thing in the most difficult thing for this committee to wrestle with is dave keeping score there is no longer a process a rigorous process inside the pentagon that tries to capture what its requirements are and what it shortfalls are to go mention the absence of a fit up with the f y eleven budget or the f y ten budget and that's actually true and quite disgraceful but the reality is there has not been a fiscally disciplined fit up put together by the pentagon since before september eleventh two thousand and one the existence of supplementals has made it to fix a problem by putting it into the supplementals and funding it there and so there hasn't been a disciplined attempt to figure out what the real defense program is what it would cost up today and laying out those options and they're not doing that so the challenge this committee has is how do you assess the options and determine the priorities without the data that you would get from a discipline fit without the information on acquisition systems necessary from the reports or maybe the q t r will fix this right that's the kind of the idea that's why we do a q t r the impact of the nondisclosure agreements of course has made it more difficult for those of us who think we like to watch what the pentagon is doing and make intelligent commentary on it it's been a little more difficult for us because we don't actually get much visibility into what's going on there's nothing wrong with that as long as we had some comfort assurance of what's going on is going to produce that will answer the kinds of questions that we raise here this morning but i'm afraid that much of what we have seen indicates a lack of a willingness to wrestle with those questions at the broad level  so i think those who believe that will have all the answers may end up being sorely disappointed there are a lot of unspoken risks as well that are worth addressing today i suspect we'll come back to them during our questions in addition to tell us in your opinion  preparing for irregular warfare the big change in strategy has been that the increase in size of ground forces in particular in order to provide a rotation base for deployment of a pretty substantial number of forces abroad contingency operations like that in iraq and afghanistan but beyond that i see a little bit of a shift in defense strategy in the direction of maritime forces  part of that's the shift in focus away from europe which would have been primarily a ground theater of operations into the pacific which is mainly maritime  it hasn't been simply a matter of making tradeoff between one set of priorities and another we've tried to add capabilities pretty much across the board and that's one reason why i think the budget has been driven up in the direction it's been driven of what the administration terms and asymmetric warfare and that's the notion that future foes of whatever capability will try to challenge the united states in areas in which we're relatively weak and that means to me even now potentially attacks on the homeland attacks on communication systems as well as efforts to drive u s power projection forces further offshore so all of these to me are driving requirements  constraints we are going to have to figure out how to set priorities in a situation in which there's not enough money to do all of the above and as evidence of that let me just make a final kind of closing point and that is that to me the big change that's going on in your national security environment doesn't have to do with military forces to do with financial power and the financial shifts are all away from the united states and  the projection used to be that china would have a larger economy states in forty years or so now it's down to about thirty years or so after this last financial crisis and that has to affect the dynamic of u s planning in the past we could assume that we could build up melt miller capabilities to such a degree that it would potentially future foes from trying to challenge us in building up military capabilities i'm not sure how long that's doable given the shift of financial resources toward  so it puts an emphasis on building cooperative relations with potential future posed to the extent that we can in areas like checking the global com including maritime but also cyber cyber space and things of that  shift away from american military predominance towards something different still for several years clearly going to be technologically predominant military capability how long we'll have the ability to do all of the above to project power in every kind of ground forces maritime forces the air force and i don't know but it's a roading slowly over time and the more we can rely it seems to me on allies to do a part of that work for us the better off we'll be in the long term and the more we can avoid conflict the better off we'll be and i don't know if that's a precise answer to your question but i think it you know the days of the american century were really the last fifty years of the twentieth century and the twenty first century is turning into something different which is a much more about much more balance in the international security environment the u s can still budget cuts that secretary gates has announced that are starting to be built into ten budget and presumably the eleven budget will have an effect on defense contractors i should point out of a few things that some of the some of the programs that have been cut areas given the growth of requirements to deal with high end asymmetric threats and things of that sort increasing demand for new designs of systems for our in lots of other areas to degree offsetting those kinds of changes on shipbuilding in general it's long been the case that the u s ship building industry pretty much strictly on military production  the changes that the secretary gates announced in navy ship building in my view lead to any substantial decline in the budget for navy ships that will lead to it being focused on a smaller number of ship designs and actually i think that could lead to some cooperative effort with the defense industry to improve the efficiency of ship building production and maybe increase numbers by doing it that way in other areas the industrial base is not as  bust helicopters for example most of the recent helicopter programs that we've had have been based on european design helicopter frames with electronics built by the united states reflects  the europeans just have been building more helicopters for a long time for commercial as well as other purposes and electronics and things of that sort again i see a relatively high demand if there's a shift it will be away from platforms and and toward for i r in the military so that may be a relatively robust period in the future it all to a to some degree depends on the top line is that as i said the defense budget is frozen for the next ten years then that leads to a decline in acquisition which i think would make it very difficult for defense industry to sustain the kind of zine capabilities we look to it for in the past i don't necessarily really foresee that happening  but you know instead we would we would look at if necessary cuts in the size of the four stands certainly increases in the top line to sustain some level of defense acquisition but that's an outside possibility it could be simply a decline in the industrial base mr mccann i think there are two parts to your question one which is specifically what you asked which is what is the impact the second implied part is what can we do about it because ultimately that's the real challenge the industrial base has had think we have to keep our eyes on as well has doubled in that period of time but the future doesn't look nearly as good and i think that from the point of view of the hardware side of an r and b all of the testimony this morning is consistent with our  s which is that that will be shrinking both and potentially in real terms and certainly in relative terms to the to the requirement it's also getting harder and harder for defense to use commercial variants theory it would be  save money and time by starting with a commercial platform and then militarizing that platform to study we did as part of a defense science board task force that i was on showed that it's pretty hard to find cases where it actually did save time and money and so our consider the industrial base the impact of decisions on major weapon systems consider of course is a very soft word here and in our study i think we have yet to find in recent years any single decision which was changed as a result of the consideration of the industrial base in other words the documentation basically says we've made the decision how do we line up the industrial base impact to be consistent with that decision the bigger challenge is it doesn't look at the whole industrial base it just looks at the piece necessary for that particular weapon system and you can always define the universe in such a way you will have enough we'll be able to get what we need materials technology skills etc over the long run  you have good competition do you not only get better price control and schedule control but you get better technology development because that's where the technology comes from is a competitive environment if we're at the point where the only place we can get competition is by going universe but i don't think it's true in terms of where global technology is going at all i don't think we have a lock on new technology anymore and so that very delicate balance of how do you balance competition domestic protection with wrong this is only my personal belief but then would talk about the how the benefits to the our soldiers and and pay has gone up what bothers me is  that this has created a problem because the soldiers that were trying to get out their time ended they spent time and they were getting out and then they called the backdoor draft and they wanted to come out because they were going to get a job go and you visit the national guard units and the reserve units you will find that most of the equipment that they had before the war has been left behind in iraq or afghanistan and we have to realize that they fight to master the federal government and the state looking at this problem that i have mentioned to contractors to pay increases the weapons that maybe we don't need how can we grasp it and bring it in rein it in so that we can reduce the money and and i throw this question for you and maybe i'm wrong but i see a lot of things that need to be done but how do american american veterans were hired at some of the high salaries that you mentioned a lot of a lot of the third country nationals are paid considerably less because they don't have the options that we have here and other another thing about back to the to the state where where they were getting ready for more than missions i just make one point echoing that we've begun now doing a couple we have a couple reports that have looked at new information that is providing recently  contractors specifically in iraq and in afghanistan as matt said the bulk of the contractors particularly in afghanistan are third country nationals neither us nor nor afghan and they form a lot of the basic function purposes they're for food services and transportation and things of that nature which otherwise would be more expensive they were handled by u s military personnel you know and the numbers that i'm giving you from what i understand or not contractors from those countries i'm talking about american contractors who are paid one hundred thousand dollars while they're there contracted by american firms generally but the people they hire for most of these activities again food services and transportation very under matic kinds of things are mainly other nationals of other other countries the high profile contractors really are blackwater and things of that sort and have gotten the bulk of the attention those people do tend to be considerably higher paid special forces american special forces personnel have been leaving the force join those kinds of contractors and that is presented a problem in retention in special forces yes but it's that's a relatively smaller part of the whole are involved in and the that we will be attacked where we are weak and perhaps here in the homeland i would suggest that one of our greatest vulnerabilities not just in the homeland and in our military is our susceptibility to to p we may avoid that sir but what we will not avoid is a major solar storm of the harington magnitude a high official told me that if that happened our grid would come down cascading effects would bring down some of the major transformers it would be perhaps several years before the grid was back up i asked him the consequences of that he said probably eighty percent of our population would die i see no activity on the part of either the military or missile if that is a cruise missiles supersonic it way thought we have no defense against that but at the standoff twelve hundred miles from any land where an enemy had that kind of a of a weapon i see no indication that we're addressing that and reordering our military for the future to that reality which is here and will increase and thirdly mr donnelly you mentioned that our military expenditure today is less in terms of g d p than it has ever been i would suggest there is no shortage of money what there is a shortage of is our ability to convince the american people that we need more money the american people will support any level of funding of the military which is necessary to address our national security interest and i wrong in having these concerns beginning to address that the decision to terminate the one thousand and use instead fifty one as a basis for water forces reflects i think in part a decision that it's more difficult to  said i think they could in the future become a pretty significant budget driver defense infrastructure in the us had its own independent power sources today that's no longer true we've now privatized and d o d s largely depended on the commercial grid in certain we've gone in the wrong direction haven't we all that tell you how to be able to ireland itself we have a bunch of our electric production which cannot do a black start to have electricity to start if it goes down and they'll be incapable of that it wouldn't be a good idea for a military could island itself could be a starter for this and i suspect there's a third option there  members who disagreed with president bush's war policy in iraq fully funded essentially every request to support the forces in the field that was made over dozens and dozens of votes personnel i'm curious how that track historically if we were to go back ten years twenty years thirty years is that about how it's always been or one portion of this getting out to kilter and i'm particularly well thank you mr chairman thank all of you here today mr donnelly if it's all right i'm going to start with you you know i know the administration continues to talk about the nominal increase in the defense budget but do you point out so their challenge is complicated by the fact that so much of the time their baseline budget is being eaten up by personnel issues and there's a there's a major shift and mr taylor i think was trying to get at that point and if i can just be very very direct your scheme just administration finds massive amounts of money for bailouts and economic stimulus packages but not enough to fund the basic money needed for the defense hardware and the equipment reset for this country and there is of course a point i will say of no return but where it becomes very difficult to on do all of that because w america's military capability and our influence is diminished and more balanced in the world and i think that has pretty profound implications for the future and for freedom itself and so with that when do you think or do you think we are actually facing some critical juncture here where if we don't react it could become some tipping points in our future that would be very difficult to recover from and i'll ask that generally and pretty clear the conversation quickly in the congress this coming year is going to be really quite critical conclude with i don't believe that for effect in the world it would love me so much you know i wouldn't mind handing over some of this responsibility to china if i had the confidence that they would take care of freedom given their own record it makes even the  most casual among us a little concerned and you know i'm i'm also seems like there's there's an old saying you know that there's nothing so tragic in the world as a beautiful theory that becomes totally destroyed but i don't really set of facts and time i'm just concerned of the more pressure we put on our military and our defense capability to the the more significant those risks grow in the future and that we asks we ask very noble people to do things that are really  most impossible to do and we keep handing them that equation so let me ask you what do you think the proper percentage of g d p should be for the military and the fact that you know if it's a percentage  have here on the hill we don't really balance a lot of helicopters versus the budget and our budget process it will be a basically a top line the top line on the floor of the house which i don't think it's at to solve the long term problem and to be able to build the capacity that you referred to which i think is essential we really need a larger dose of broader fiscal discipline to rob the defense said if i could add a couple things to that you'll recall that the president in announcing his initial afghan strategy back in march part of the element of that was what i believe he referred to as the civilian surge and it's interesting to compare what civilian surge capability is with what military surge capability is and orders of magnitude or wildly different you can cripple the capacity or the  delivery of certain services in afghanistan and you're still talking fewer than thirty people if you triple the military surge capacity you're talking to one hundred thousand people so i think that the orders of magnitude are so different that we have a lot of work to do in terms of not only building the resources and putting them in place but building the capacity and the capability to use those resources that's a very significant challenge is one of the best responses to the strategy the role of defense in conjunction with the other agencies of government policy in the international environment and i think there is a starting point for talking about actually work done by the intelligence community the national intelligence policy access to other kinds of resources limitations on water resources is a potential source of conflict in many areas of the regional conflicts over various other kinds of issues the impact of  whole needs to address and then what agencies of the government are most appropriate to take the lead in addressing those kinds of challenges audit it and so i want to i beat on the administration to continue this effort to get the numbers correct now with fifty thousand feet which is what we're talking about right now you would take a spectacular error to sway these numbers much but every one of those dollars we spend gets appropriated one of the time even though in mass and i just spent one of the time and the d o d along with intelligence community neither one of them can show us that they know for sure where all this money is going  compensation is up forty five percent above rate of inflation which i think is reflective if you look at mr daggett chart of underpaying our military for a long long time we made a concerted effort before i got here a logical capacity from an avionics perspective from a drive train perspective from a turban engineering perspective has evolved more dramatically with the commercial industry on the european side than it has on the u side and i think there were being were being put at risk of future technology developments in the rotary wing industry not from the electronics packages from an equipment package point of view from a mission package point of view but from a platform missed it all together how did it come to be about twenty years ago we had the idea that we could push in the defense industry what we call dual use technology that we could simultaneously have companies that were satisfying highest level military needs and at the same time use much of the same fundamental core business base to satisfy commercial needs that has proven to be a much more  objective than we thought it would be in the early one nine hundred ninety s i have not done a thorough assessment of this off the top of my head i would say it's that in part the gap in europe and the gap elsewhere in the world between  military and military technology in commercial use in commercial technology it's a more narrow gap elsewhere than it is in the u s in the u s is a bigger gap always pushing the latest technology edge that makes it harder for our guys to bridge that dual use gap there  concerning the commitment of the production of submarines per year so if we go to a once per year build that concerns me also about the overhead cost also those up and down cycles in manpower as you know the folks requirements in the navy in general a big issue for the ship building industrial base has been the navy has been trying to put pressure on ship builders to invest in improvements in efficiency and to my way of thinking the more you know the more you have predictability in the shipbuilding plan the more you can insist on it is important for the navy to settle on a long term sustainable shipbuilding plan and i can only think that the recent decisions will help to some extent in that regard at least it's identified we're going to build one carrier every five years and as long as we follow through on that commitment we can plan on that basis it would be well the comment i made in my testimony is to the extent that we do have relatively long production runs of fairly stable designs of major ships and other systems as well then we can focus on efficiency improving measures including with strategic planning authorization and budget being in the proper balance to make sure that we provide for the robustness in our fleet in our capability but also making sure that we're looking at sustainability as far as our industrial base  you know on the one hand we do want to belittle shipbuilding in areas like that we want to get there but the discussion of strategy has really been moving in the direction that i think is coming to grips with actual you know real changes in the mine that we are so focused right now on a measure of warfare or counter insurgency operations that require very light forces are we losing our focus  things that would i think advance our understanding and probably come to some sensible answer and be able to balance these things appropriately but i'm less concerned about the dialogue inside the pentagon than i am part of  the rest of us so i think we're ok for now i think the bigger question is what's the longer term structure look like and and what are we willing to invest over the long term and we really just don't have the visibility that we need to have into the pentagon's thinking today to be able answer that i'm going to be cautiously optimistic for a little while until i see numbers that make me pessimistic if i don't see numbers it's insane cautious optimism by next february though i'm going to start turning more  maintain you know large armored forces with the offensive capabilities and so on which you know some argue are becoming less relevant and it's really a very vigorous debate going on inside the army over you know how to how to square the circle and i you know i i think what what the army and what i see the army is coming down to is trying to maintain across the board capabilities and really struggling with with the best way to of forces and brigade combat teams in cases like iraq and afghanistan will be augmented to be able to carry out training for military but they will still be the basic unit we're not vs greater information awareness in the army and the army itself narrowly as well as in the past is rethinking that whole strategy what kind of men because they want to and i think that's really where the debate is i don't know it's going to turn out but in the mr kaufman could i add wondering to both my colleagues to the right indicated this is primarily a ground forces or an army issue i think it's important to keep sight of the list problem as well much of my career we've had more army than we can move  calculation and the calculation is pretty straightforward it's the most recent estimate of cost of an afghanistan is that about sixty eight billion dollars in fiscal year two thousand and ten and that's for roughly sixty eight thousand troops so the  math is pretty simple it's about a million dollars per troop but that's really just taking the top line total amount of spending that's allocated to afghanistan and scaling it to the number of boots on the ground in afghanistan and if you know if you make an in mental change in the number of troops does it scale one for one and the answer is a big part of it does eighty percent of that is military personnel in operation and maintenance and that likely would scale pretty closely there are some parts of it activities which might not have to increase and quite in proportion to the increase in the size of the force that said if if it's not a million dollars per troop it's not far off i think again it similarly sir we have we have not looked at that specific question but i think that i would probably agree with the front end of mr daggett's calculation but not necessarily the back i think that the marginal change u down for troops is actually quite dramatically different and my own estimate based on the cost we have looked at is that drawing down would not save you anywhere near a chunk of a million dollars per person  afghanistan for example been responsible for the afghan army training mission one of the things that you would want to pick apart to understand where the money is actually going is how much of it is going to enacted to the point where i think we have achieved a comparability and we've improved benefits improved housing that and there's a momentum that carries those benefits forward and there is no way to cut the benefits there very been enacted and similarly you know thank you very much there is a reality that's very hard to avoid and that is that the urgent almost always the important off the table dynamic along with the assumption that the e m p threat is a very esoteric threat probably coming only from russia or china which would result in all out war and therefore very unlikely to happen so we're not scud launcher which they can buy on the open market and a crude nuclear weapon perhaps one loose from the soviet union dissolution or one from iraq or afghanistan and you know if they miss their target by a hundred miles it won't make any difference now this can reach the center of our country three hundred miles high and therefore take down our whole country but it could take down all of new england which would be katrina ten times over and we are not certain but what the cascading effects of the collapse of the grid there would take down the grid and the rest of the country damaging some transformers so that we could not bring the grid back up i know that the military is now taking a new look at e m p thank god because during the clinton years we we wave e m p hardening of all of our weapons system i asked why as solemn energy says we don't need any of this high tech stuff to fight the enemies we're now fighting and when we will need is against a peer or near peer and one of the first things we do is hit all of their war games all that are open literature one of the first things that was an e m p lay down was to deny us the use of all the equipment that is not imposed e m p hard which is essentially all of our equipment understand now that the pentagon is taking a new look at e m p but you're looking at either the thirty or fifty it's not clear to me which kilovolts per meter the russian generals told the e m p commission that the soviets had developed and they had a weapon which would be would produce two hundred at the center which was a hundred kilometers per meter at the margins of our country and we have not as i understand it built or tested to anything at that level which would mean that what we think is hardened is not hardened about all we have hardened now is our command and control it's a little bit like me having my brain and spinal cord work in my arms and legs well understand what good i would be in fighting a war if that's true i'm are my concerns unrealistic i have to say mr bartlett that i came in here today with a long list of things that i was worried about bad at one time that list and i'm going to have to tell you that i don't have a response to the challenge you've laid out there certainly seems to me to be worthy of more attention than i've seen it by the way so that the tramp steamer they launch that from will be sunk it will be no fingerprints on it you know this is a huge huge limited understanding of the technology but i think it's also becoming increasingly aware that there may be other means for generating for sort of tactical purposes you're exactly right directed energy weapons thing i mentioned previously previous question was that of an absolute certainty there will be another major solar magnetic storm perhaps of the carington magnitude and if that happened tells me it would take down our grid and it would cost a trillion to four trillion dollars i think to bring it back and take perhaps several years i ask in the consequences of that to our country this is a magnetic storm by the way the same thing you do to protect against that protects you against e m p and i asked what would be the consequences of that he said probably eighty percent of our population would die you're totally immune to e m p you wouldn't even know it was happening if you looked in the op a direct opposite direction that you know you can't see if there's no electricity there's no anything in our culture i just think that that we're permitting the urgency of these immediate problems this week really important things off the table and this is one of them there are others but this is a major one