```

[Senate Hearing 115-167]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 115-167

          THE DEFENSE BUDGET FOR FISCAL YEAR 2018 AND ONWARDS

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON ARMED SERVICES
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                       TUESDAY, JANUARY 24, 2017

                               __________

         Printed for the use of the Committee on Armed Services

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Available via the World Wide Web: http://www.fdsys.gov/

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                      COMMITTEE ON ARMED SERVICES

                    JOHN McCAIN, Arizona, Chairman 
      
JAMES M. INHOFE, Oklahoma            JACK REED, Rhode Island
ROGER F. WICKER, Mississippi         BILL NELSON, Florida
DEB FISCHER, Nebraska                CLAIRE McCASKILL, Missouri
TOM COTTON, Arkansas                 JEANNE SHAHEEN, New Hampshire
MIKE ROUNDS, South Dakota            KIRSTEN E. GILLIBRAND, New York
JONI ERNST, Iowa                     RICHARD BLUMENTHAL, Connecticut
THOM TILLIS, North Carolina          JOE DONNELLY, Indiana
DAN SULLIVAN, Alaska                 MAZIE K. HIRONO, Hawaii
DAVID PERDUE, Georgia                TIM KAINE, Virginia
TED CRUZ, Texas                      ANGUS S. KING, JR., Maine
LINDSEY GRAHAM, South Carolina       MARTIN HEINRICH, New Mexico
BEN SASSE, Nebraska                  ELIZABETH WARREN, Massachusetts
LUTHER STRANGE, Alabama              GARY C. PETERS, Michigan
                                     
                    Christian D. Brose, Staff Director
               Elizabeth L. King, Minority Staff Director

                                  (ii)

  

                         C O N T E N T S

_______________________________________________________________________

                            January 24, 2017

                                                                   Page

The Defense Budget for Fiscal Year 2018 and Onwards..............     1

Wood, Dakota L., Senior Research Fellow for Defense Programs, the     5
  Heritage Foundation.
Mahnken, Dr. Thomas G., President and CEO, Center for Strategic       9
  and Budgetary Assessments.
Korb, Dr. Lawrence J., Senior Fellow, Center for American            12
  Progress.

                                 (iii)

 
          THE DEFENSE BUDGET FOR FISCAL YEAR 2018 AND ONWARDS

                              ----------                              

                       TUESDAY, JANUARY 24, 2017

                                       U.S. Senate,
                               Committee on Armed Services,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:30.m. in Room 
SH-216, Hart Senate Office Building, Senator John McCain 
(chairman) presiding.
    Committee members present: Senators McCain, Inhofe, Wicker, 
Fischer, Cotton, Rounds, Ernst, Tillis, Sullivan, Perdue, 
Sasse, Reed, Shaheen, Gillibrand, Blumenthal, Donnelly, Hirono, 
Kaine, King, Heinrich, Warren, and Peters.

       OPENING STATEMENT OF SENATOR JOHN McCAIN, CHAIRMAN

    Chairman McCain. Good morning.
    The Armed Services Committee meets this morning to receive 
testimony on the defense budget for fiscal year 2018 and 
beyond.
    I would like to welcome our witnesses: Dakota Wood, Senior 
Research Fellow for Defense Programs at The Heritage 
Foundation; Dr. Thomas Mahnken, President and CEO of the Center 
for Strategic and Budgetary Assessments; and Dr. Lawrence Korb, 
Senior Fellow at the Center for American Progress.
    As President Trump assumes the awesome responsibilities of 
his office, he has inherited a world on fire and a U.S. 
military weakened by years of senseless budget cuts. I am 
encouraged that he recognizes these problems. In fact, the 
White House website now features President Trump's promise to, 
quote, end the defense sequester and, quote, rebuild our 
military. I know the President will find many allies on this 
committee who share these goals.
    The world order that America has led for seven decades, 
which has benefited our people most of all, is now under 
unprecedented strain. We have entered a new era of great power 
competition even as we continue to face an enduring global 
conflict against violent Islamic extremist groups. Too many 
Americans seem to have forgotten that our world order is not 
self-sustaining. Too many have forgotten that while the threats 
we face may not have purely military solutions, they all have 
military dimensions. In fact, too many have forgotten that hard 
power matters. It is what gives our Nation leverage to deter 
aggression and achieve peace through strength.
    The epitome of this forgetfulness is the Budget Control Act 
of 2011, which cut and arbitrarily capped defense spending for 
a decade. At a time of growing threats, this law led to a 21 
percent reduction to the defense budget from 2010 to 2014. 
Across the board, the military got smaller and, worse, less 
capable. Critical investments in new technologies were 
deferred, which helped adversaries like Russia and China to 
close the gap. At the same time, the combination of rising 
threats, declining budgets, aging equipment, shrinking forces 
and high operational tempo produced a military readiness 
crisis. In other words, President Trump is now Commander-in-
Chief of a military that is underfunded, undersized, and 
unready to meet the diverse and complex array of threats 
confronting our Nation.
    That is why every member of the Joint Chiefs of Staff has 
testified to our committees that years of budget cuts have 
placed the lives of the men and women of our armed forces at 
greater risk.
    Despite the damage done to our military over the last 
several years, there are still those that argue we should not 
be so concerned. They say America's military is still the 
greatest fighting force ever known, that our military 
capabilities are still, quote, awesome, that we spend so much 
more than Russia or China or that we spend roughly the same 
amount as we did during the Cold War.
    True as these statements may be, they say little or nothing 
about whether our military can achieve the missions assigned to 
them and at what cost. In fact, the testimony of our military 
leaders in open hearings and closed briefings leads me to 
believe there is real reason for concern. We do not fight wars 
by comparing budgets. That is why this kind of happy talk is 
not just unhelpful, it is dangerous. It breeds the kind of 
complacency we cannot afford with the world on fire.
    It is time to change course on America's defense budget. We 
have to invest in the modern capabilities necessary for the new 
realities of deterring conflict. Our adversaries have gone to 
school on the American way of war, and they are investing 
heavily in advanced capabilities to counter it. After years of 
taking our military advantage for granted, we are now at 
serious risk of losing it. We cannot just buy a bigger version 
of the military that won the Gulf War 25 years ago. We have to 
invest in the new technologies and capabilities that will allow 
our military to prevail in a conflict 25 years in the future.
    We also have to regain capacity for our military. Put 
simply, our military today is too small. It does not have 
enough ships, aircraft, vehicles, munitions, equipment, and 
personnel to perform its current missions at acceptable levels 
of risk. Adding capacity alone is not the answer and any 
capacity that we do add must be done deliberately and 
sustainably. Add we must.
    Of course, rebuilding our military must be done smartly. We 
must seek to make our military better not just bigger. We must 
continue our reform efforts to make the Department of Defense 
more effective and efficient, while cutting wasteful spending.
    We must also be clear about the challenge of rebuilding 
America's military will not be cheap. In my estimation, our 
military requires a base defense budget for fiscal year 2018, 
excluding current war costs, of $640 billion, which is $54 
billion above current plans and sustained growth for years 
thereafter. It will not happen overnight. The harm done to our 
military over the past eight years will not be reversed 
quickly. The longer that we wait, the worse it will get and the 
longer it will take to fix it.
    It will not be easy. Rebuilding America's military will 
require spending political capital and making policy tradeoffs. 
That is why national defense must be a political priority on 
par with repealing and replacing Obamacare, rebuilding 
infrastructure, and reforming the tax code, indeed, more so 
because national defense is job one for the Federal Government.
    None of these challenges should obscure the fact that 
rebuilding America's military is the right and necessary thing 
to do.
    I look forward to the testimony of our witnesses on the way 
forward.
    Senator Reed?

                 STATEMENT OF SENATOR JACK REED

    Senator Reed. Well, thank you very much, Mr. Chairman, for 
holding this hearing to consider funding levels for the 
Department of Defense and to maintain our Nation's military 
forces.
    I welcome our distinguished witnesses this morning. Thank 
you, gentlemen, and I look forward to your testimony.
    Last week, Chairman McCain issued a White Paper 
[``Restoring American Power''] detailing his spending 
priorities for the new fiscal year and beyond. As this 
committee begins its work on the defense authorization process, 
the chairman's proposal includes many policy objectives that 
deserve capital consideration by this committee.
    In addition to the chairman's budget proposal, the 
committee will also be considering the upcoming fiscal year 
2018 budget request that will be submitted by the Trump 
administration. President Trump has stated repeatedly that he 
will focus on rebuilding our Nation's military, but there have 
been few specific details on what that will include.
    Furthermore, as this committee has done in the past, we 
will have several posture hearings with senior civilian and 
military leadership to hear directly from the Department 
regarding their resource requirements.
    Finally, like today, we will have hearings with outside 
defense experts that will help provide an alternative view for 
this committee to consider.
    I am very proud that this committee has always worked in a 
bipartisan fashion during this process, and I look forward to 
working with the committee and the chairman and all that are 
here to continue that process.
    While there has been a change in administration and 
administration priorities, this committee is still governed by 
the funding constraints enacted under the Budget Control Act, 
the BCA. President Trump has stated that he will end the 
defense sequester. As my colleagues on this committee are 
acutely aware, current law restricts both defense and non-
defense spending. Many of my colleagues will maintain that the 
defense bill is not a vehicle to discuss the fate of domestic 
spending. However, for the past several years, I have argued 
that when it comes to questions of adequate funding, we need to 
consider all of the security responsibilities of our Nation not 
just those that are executed by the Department of Defense.
    For example, as numerous witnesses have testified over the 
years, our Nation's fight against ISIL [Islamic State of Iraq 
and the Levant] consists of nine lines of effort, only two of 
which are controlled by the Department of Defense [DOD]. 
Increasing the BCA caps for DOD alone will not support the 
State Department's diplomatic engagement with the Government of 
Iraq. It will not support State and USAID's [U.S. Agency for 
International Development] delivery of humanitarian aid to 
refugees and displaced persons. It will not support the 
Treasury Department's disruption of ISIL finances, and it will 
not support Department of Homeland Security, the FBI [Federal 
Bureau of Investigation], and the Justice Department in their 
efforts to protect the Homeland by thwarting terrorist threats.
    I would further argue that protecting our country goes 
beyond funding our national security agencies alone. Domestic 
agencies need funding to ensure the resiliency of our 
electrical grid, the safety of our food, water, and medicine, 
and the protection of all of our cyber networks. From those 
that regulate dams to those that are used during our elections, 
the cyber infrastructure is critical to the country and is not 
within the strict purview of national security agencies.
    One of the military and diplomatic tenets of combating 
extremism is to provide the populations with security and basic 
needs. While we help the Afghans build roads, schools, and 
clean drinking water systems for the villages, I believe we 
should do the same for the American population.
    While we are deploying troops to Poland and Eastern Europe 
to support our NATO [North Atlantic Treaty Organization] allies 
against aggressive Soviet actions, we also need to provide the 
funding necessary so that Americans feel safe in their 
neighborhoods and on their computers.
    As we examine what funding requirements are necessary to 
the safety and security of our country, we need to look at our 
federal budget in a much broader context recognizing our 
strength also depends on the health of our economy, reliability 
of civilian institutions, our scientific preeminence, and the 
health and education of our citizens.
    The BCA delineation between defense and non-defense 
spending has had the unfortunate effect of pitting each 
category of funding against the other. Instead, we would be 
better served if we considered the needs of our Nation 
holistically.
    I would also like to note that President Trump has not 
provided many details on what our defense posture will be under 
his administration. He has stated that eliminating ISIL is his 
top national security priority, which is a continuation of 
present policy. However, other public statements, from calling 
NATO obsolete to developing closer relations with Russia, could 
counteract that goal and suggest a critical program such as the 
European Reassurance Initiative may be rolled back or 
eliminated. Such policy changes will have an effect on 
strategy, force structure, and funding.
    Therefore, as our witnesses discuss their recommendations 
for military funding, I hope they frame their proposals, first, 
in the larger context of what they believe American strategy 
should be and, second, what force structure will be necessary 
to achieve the specific goal of that strategy.
    Finally, like Chairman McCain, I believe it is time to 
repeal the BCA's arbitrary spending caps. The BCA has not made 
this country safer and it has not resolved our fiscal 
challenges.
    Likewise, I am deeply concerned that the Trump 
administration plans to pursue massive tax cuts for 
corporations and the well-off while simultaneously seeking to 
increase military spending without working to develop any new 
revenue that we need to invest in our country. It could lead us 
into a situation where the deficit becomes significantly 
encumbering of our whole economy.
    Let me be clear. I am not opposed to increasing military 
spending. In fact, I think we have got to do it. It is the duty 
of the committee to carefully review the proposals to ensure 
the men and women we are sending into harm's way have the 
resources necessary to complete their mission and return home 
safely. It is a duty we all take very seriously here. We have 
to act responsibly in terms of the Nation's entire fiscal 
health.
    I look forward to our testimony today and to continuing 
this important work with the chairman. Thank you.
    Chairman McCain. Mr. Wood? Welcome to the witnesses.

STATEMENT OF DAKOTA L. WOOD, SENIOR RESEARCH FELLOW FOR DEFENSE 
               PROGRAMS, THE HERITAGE FOUNDATION

    Mr. Wood. Thank you, Mr. Chairman. Chairman McCain, Ranking 
Member Reed, distinguished members of the committee, I deeply 
appreciate your invitation to appear before you today to 
discuss the defense budget for fiscal year 2018.
    The views I express in this testimony are my own and should 
not be construed as representing any official position of The 
Heritage Foundation, where I am a senior fellow.
    This committee has already fully explored defense budget 
cuts in real terms over the last several years, so I do not 
think it worth this committee's important time for me to dwell 
on the details of that topic. The military Service Chiefs have 
repeatedly testified before you describing the condition of 
their services, how budget cuts and sustained high operational 
tempo have affected them, the challenges of carrying out their 
mission in such a budget-constrained environment, and their 
forecasts of the future condition of the services if current 
trends are not altered.
    The military budget was certainly increased following the 
attacks of September 11, 2001, but those increases were 
immediately consumed by the operations in Afghanistan, Iraq, 
and elsewhere. What was not addressed was the baseline force 
and all the things that make it possible to organize, equip, 
train, deploy, and sustain combat power.
    As Chairman McCain has noted in his just-released White 
Paper, the combined effects of nearly $1.5 trillion of cuts 
over a decade have been devastating to our military. It seems 
odd since we spend more than $600 billion each year on defense, 
and the military appears to do what is asked of it. The 
military's dedication to accomplishing the current mission has 
come at a substantial cost and there is an increasingly 
worrisome cost to the Nation in strategic terms. To sustain 
current operational readiness for deployed forces, all of the 
services have sacrificed readiness and capability in all other 
areas of military affairs, to include preparing for the future.
    For reasons already well known to this committee, Congress 
has been unwilling to make investing in the defense of the 
United States and its interests a high enough priority among 
the many competing interests within the federal budget. 
Consequently, defense spending has steadily declined since the 
end of the Cold War to a point of historic lows for the modern 
era.
    Rather than rehash budgetary details, I would like to share 
some thoughts on what the fiscal year 2018 budget represents 
for the United States, its friends and competitors, and those 
sitting on the fence somewhere in between.
    The news has certainly been awash in reports of degraded 
unit and material readiness: ships unable to get underway, 
aviation mishaps, ground combat units that are under-strength, 
at low levels of readiness, and so few in number that 
servicemembers and their families are being worn out as quickly 
as their equipment.
    Both our friends and our enemies can count the number of 
units, squadrons, and ships the U.S. maintains abroad. They pay 
close attention to service testimony that has increasingly 
highlighted growing risk in the military's ability to perform 
its functions. They read the same headlines and watch the same 
news programs we do reporting the consistent message of a U.S. 
military that is under-strength, aging, and challenged to 
defend U.S. interests at an acceptable level of risk. They 
track the reports of problematic acquisition and modernization 
programs stemming from poor program management but also the now 
routine shortage and variability of funds that has driven the 
military to be smaller, older, and less ready than at any time 
since the 1930s.
    A robust investment in defense, via the fiscal year 2018 
budget, will not only be an important first step in rebuilding 
the U.S. military, but it will also send a profoundly important 
message to the rest of the world that America is once again 
serious about protecting itself and its interests, standing 
with those who choose to align with it in common cause, and to 
serve as a bulwark against forces of disorder.
    It is not a matter of figuring out what problems need to be 
addressed or where additional funds can be best spent or 
savings obtained. My personal observation is that the Military 
Services have done this analysis. They know what they need and 
have prioritized those needs for every additional dollar that 
might be provided. In my judgment, their analysis is, by and 
large, right on target.
    What they fear is imbalance. They are concerned about 
having too many people and too little equipment, or the 
reverse: too much equipment and too few people. They understand 
the difficulty of generating new units, the time it takes not 
only for individuals and small units to become tactically 
proficient, but also for commanders and staffs to become 
operationally competent.
    Stability is important in buying new equipment that is 
critical to keeping the force relevant in future years, while 
repairing aging equipment to keep it in the fight until the new 
equipment arrives.
    Stability over time is also essential to building and 
maintaining a healthy and diverse industrial base that enables 
the government to leverage competition to get the best product 
at the best price. Highly constrained and unpredictable budgets 
inevitably lead to consolidation in the manufacturing sector, 
which results in fewer companies able to produce the tools 
needed by our military. Sometimes this leads to a single 
manufacturer, a government-driven monopoly, if you will, that 
effectively eliminates the government's ability to compete a 
project for best price and innovation in design.
    The point here is that the fiscal year 2018 budget 
represents an absolutely critical opportunity for the United 
States to tell itself and the world where its priorities are 
and can serve as a much needed first step toward rebuilding the 
military we need. It will put our potential adversaries on 
notice that the U.S. intends to operate from the position of 
strength, and it will give assurance to our allies that we will 
fulfill our commitments to them.
    Once again, I thank you for this opportunity to speak about 
the health of our military, and I look forward to answering 
your questions.
    [The prepared statement of Mr. Wood follows:]

                Prepared Statement by Mr. Dakota L. Wood
    Chairman McCain, Ranking Member Reed, and distinguished members of 
the Committee, I deeply appreciate your invitation to appear before you 
today to discuss the defense budget for fiscal year 2018.
    The views I express in this testimony are my own, and should not be 
construed as representing any official position of The Heritage 
Foundation.
    This committee has already fully explored the extent to which the 
U.S. defense budget has been cut in real terms over the last several 
years, so I do not think it worth this committee's important time for 
me to dwell on the details of that topic. The military Service Chiefs 
and senior members of their staffs have testified before you on 
numerous occasions, describing the condition of their services, how 
budget cuts--combined with sustained, high operational tempo--have 
affected them, the challenges of carrying out the tasks assigned to 
them in such a constrained budget environment, and their forecasts of 
the future condition of the services if current trends are not altered. 
To be fair, the military budget was certainly increased following the 
attacks of September 11, 2001, but those increases were immediately 
consumed by the operations in Afghanistan, Iraq, and elsewhere. What 
was not addressed was the baseline force and all the things that make 
it possible to organize, equip, train, deploy, and sustain combat 
power. That includes the institutional elements of the services: the 
physical infrastructure of bases, air stations, and maintenance 
facilities, training ranges, and so forth.
    As Chairman McCain has noted in his just-released White Paper, the 
combined effects of nearly $1.5 trillion in cuts over a decade--which 
includes Secretary of Defense Robert Gates' $200 billion in 
``efficiency cuts'' during roughly the same ten-year period--have been 
devastating to our military. I realize this may seem odd to the public 
and even to many in Congress, since we spend more than $600 billion 
each year on defense, and the military appears to do that which is 
asked of it. But the military's dedication to accomplishing the current 
mission, their ``can-do'' spirit if you will, has come at a substantial 
cost that is less well known or understood. There is a growing and 
increasingly worrisome cost to the nation in strategic terms--a 
situation that perhaps is even less well known or understood. To 
sustain current operational readiness for deployed forces, all the 
services have sacrificed readiness and capability in all other areas of 
military affairs. This has taken a toll among programs to modernize 
their forces, to prepare for the future, and to maintain their physical 
infrastructure.
    For reasons already well known to this committee, Congress has been 
unwilling to make investing in the defense of the United States and its 
interests a high enough priority among the many competing interests 
within the federal budget. Consequently, defense spending has steadily 
declined since the end of the Cold War to a point of historic lows for 
the modern era.
    As mentioned, it is not worth the committee's valuable time for me 
to rehash budgetary details it already knows so well. Rather, I would 
like to share some thoughts on what the fiscal year 2018 budget 
represents for the United States, its allies and friends, its 
competitors and enemies, and for countries ``on the fence'' somewhere 
between friend and foe.
    The news has been awash in reports of degraded unit and material 
readiness:
      Ships unable to get underway, delayed getting out of the 
repair yards, or suffering engineering casualties while deployed;
      Aviation mishaps resulting from both equipment failures 
and pilot or crew error due to lack of adequate flight hours for 
training, aging planes; and
      Ground combat units that are understrength, at low levels 
of readiness, and so few that service-members (and their families) are 
being worn out as quickly as their equipment.
    Both our friends and our enemies can count the number of units, 
squadrons, and ships the U.S. maintains abroad. They pay close 
attention to the Service Chiefs' testimony provided to Congress that 
has, for the last several years, increasingly highlighted growing risk 
in the military's ability to perform its functions. They read the same 
headlines and watch the same televised news programs we do, reporting 
the consistent message of a U.S. military understrength, aging, and 
challenged to defend U.S. interests at an acceptable level of risk. And 
they track the reports of canceled, truncated, and delayed acquisition 
and modernization programs stemming from problematic program management 
but also the now-routine shortage and variability of funds that has 
driven the military to be smaller, older, and less ready than at any 
time since the 1930s.
    A robust investment in defense, via the fiscal year 2018 budget, 
will not only be an important first step in rebuilding the U.S. 
military to the size, modernity, and readiness essential for it to 
perform its function in protecting America and its interests, but it 
will also send a profoundly important message to the rest of the world 
that America is once again becoming serious about protecting itself and 
its interests, standing with those who choose to align with it in 
common cause and prepared to lead like-minded nations in the effort to 
preserve peace, enhance stability, and expand freedom and opportunity, 
and to serve as a bulwark against forces of disorder.
    It isn't a matter of figuring out what problems need to be 
addressed or where additional funds can be best spent or savings 
obtained. Nor is it a matter of quantifying shortfalls and their impact 
on military operations. My personal observation is that the Military 
Services have done this analysis; they know what they need, and have 
prioritized those needs for every additional dollar they might be 
provided. They have analyzed their forces and institutional ability to 
generate and sustain those forces and how they would spend additional 
funding to generate near-term readiness and longer-term preparedness in 
a balanced manner. In my judgment, their analysis is, by and large, 
right on target.
    What they fear is imbalance, usually driven by spending decisions 
imposed on them. They are concerned about having too many people and 
too little equipment or the reverse: too much equipment and too few 
people. They understand the difficulty of generating new units, the 
time it takes not only for individuals and small units to become 
tactically proficient but also for a commander and his or her staff to 
become operationally competent.
    They must balance repairing aging equipment to keep it in the fight 
(while awaiting replacement items) with buying new equipment that is 
critical to keeping the force relevant in future years. Rebuilding a 
force, especially one that has been depleted over so many years, must 
be done in a balanced way.
    Stability over time is also essential to building and maintaining a 
healthy, diverse, and innovative industrial base that enables the 
government to leverage competition to get the best product at the best 
price. Highly constrained and unpredictable budgets inevitably lead to 
consolidation in the manufacturing sector, which results in fewer 
companies able to produce the tools needed by our military. Sometimes 
this leads to a single manufacturer--a government-driven monopoly--that 
effectively eliminates the government's ability to compete a project 
for best price and innovation in design.
    The point here is that the fiscal year 2018 budget represents an 
absolutely critical opportunity for the United States to tell itself 
and the world where its priorities are and can serve as a much needed 
first step toward rebuilding the military we need. It will put our 
potential adversaries on notice that the U.S. intends to operate from a 
position of strength, and it will give assurance to our allies that we 
will fulfill our commitments to them.
    Once again, I thank you for this opportunity to speak about the 
health of our military and I look forward to answering your questions.

                                     * * * * *
    The Heritage Foundation is a public policy, research, and 
educational organization recognized as exempt under section 501(c)(3) 
of the Internal Revenue Code. It is privately supported and receives no 
funds from any government at any level, nor does it perform any 
government or other contract work.
    The Heritage Foundation is the most broadly supported think tank in 
the United States. During 2015, it had nearly 600,000 individual, 
foundation, and corporate supporters representing every state in the 
U.S. Its 2015 income came from the following sources:

    Individuals 75%
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    The top five corporate givers provided The Heritage Foundation with 
2 percent of its 2015 income. The Heritage Foundation's books are 
audited annually by the national accounting firm of McGladrey, LLP.
    Members of The Heritage Foundation staff testify as individuals 
discussing their own independent research. The views expressed are 
their own and do not reflect an institutional position for The Heritage 
Foundation or its board of trustees.

    Chairman McCain. Thank you.
    Dr. Mahnken?

 STATEMENT OF DR. THOMAS G. MAHNKEN, PRESIDENT AND CEO, CENTER 
            FOR STRATEGIC AND BUDGETARY ASSESSMENTS

    Dr. Mahnken. Thank you. Chairman McCain, Ranking Member 
Reed, distinguished members of the committee, thank you for 
this invitation to appear before you today to discuss the 
defense budget for fiscal year 2018 and beyond.
    Chairman McCain, at the outset, I would like to commend you 
for ``Restoring American Power.'' It was a thoughtful and much 
needed contribution to the debate over defense strategy and 
resources. CSBA's [Center for Strategic and Budgetary 
Assessments] diagnosis of the situation and recommendations 
accord with those detailed in the paper in many respects.
    Now, the bottom line that I have for you today is that the 
United States requires more resources for defense if we are to 
continue to safeguard America's national interests in an 
increasingly competitive environment. Specifically, in my view, 
we need increased investment in both readiness and 
modernization.
    I had the pleasure of serving on the staff of both the 
congressionally mandated 2010 Quadrennial Defense Review 
Independent Panel and on the staff of the 2014 National Defense 
Panel. Both of those bodies achieved a bipartisan consensus 
that the Defense Department required additional resources. 
Seven years on from the first and three years on from the 
second, today's situation is even more dire.
    First, as has already been noted, additional resources are 
needed to restore the readiness of the U.S. Armed Forces. As 
Dakota said, I need not detail the path that has gotten us 
here. You are aware of that, the circumstances we are in today. 
It is worth emphasizing, however, that our drawdown has 
occurred all the while the United States has been at war in 
Iraq, in Afghanistan, and across the world, a situation that is 
historically unusual, to put it mildly.
    Second, there is growing need to modernize U.S. 
conventional and nuclear forces. eight years ago, when I last 
served in the Department of Defense as the Deputy Assistant 
Secretary of Defense for Policy Planning, the risk calculus was 
that we could afford to take some additional risk in preparing 
for high-intensity war in order to focus on counterinsurgency. 
As Secretary of Defense Gates frequently put it, we needed to 
focus on the wars of the present rather than the possible wars 
of the future.
    Eight years on, I believe the risk calculus has 
fundamentally changed. Whereas we have spent the last 15 years 
focused on counterinsurgency, we are now in a period 
characterized by the reality of great-power competition and the 
increasing possibility of great-power conflict. We see China 
and Russia acting aggressively both in their own regions, as 
well as beyond them. China is busy remaking the geography of 
the western Pacific, but is also increasingly active elsewhere. 
Russia has not only used force against Georgia and Ukraine and 
threatened other neighbors, but is also waging a high-intensity 
military campaign in Syria. Moreover, both China and Russia 
have been investing in military capabilities that threaten 
America's longstanding dominance in high-end warfare. We have 
given them a decade and a half to catch up.
    In other words, the wars of the future may no longer lie 
that far in the future. Moreover, they are likely to differ 
considerably both from the great-power wars of the past, as 
well as the campaigns that we have been waging since the turn 
of the millennium.
    That is not to say that battling radical Islam will not 
continue to be a priority. However, it has been the focus of 
U.S. investment over the last decade and a half. By contrast, 
we have neglected the capabilities needed to deter and, if 
necessary, wage high-end warfare.
    That includes our nuclear deterrent. Historically, when the 
United States has drawn down its conventional forces, as it did 
in the 1950s and after the Vietnam War, we came to rely 
increasingly on our nuclear deterrent. In recent years, by 
contrast, we have both drawn down our conventional forces and 
our nuclear forces. Now both require modernization.
    Needless to say, the tasks of improving readiness and 
modernizing the force will require additional resources beyond 
those permitted by the Budget Control Act.
    In closing, as we seek to rebuild American military power, 
we need to keep a couple of things in mind.
    First, the Defense Department's capacity to absorb an 
infusion of resources is limited. The Pentagon today is a lot 
like a person who has been slowly starving for years. There are 
limits to how effectively it can spend a large infusion of 
cash.
    Second, that which is available is not necessarily that 
which is necessary. One byproduct of our neglect of 
modernization over the past decade and a half is that there are 
few programs that are ready right now to accept new funds. 
Rebuilding the American military will take time. To take but 
one example, achieving the 350-ship Navy that President Trump 
has pledged to deliver, or the 355-ship fleet that the Navy now 
says it needs, or the 340-so ship fleet that CSBA believes the 
Nation needs cannot be accomplished in four or eight years. Our 
analysis, using the Navy's own models, show that it is 
affordable, but making it a reality will require a sustained 
commitment on the part of the executive and legislative 
branches.
    The capabilities that the United States needs to remain 
dominant on the land and in the air against great-power 
competitors will similarly take time to field. The 
modernization of the U.S. nuclear deterrent will require time 
to accomplish as well. Maintaining U.S. military effectiveness 
over the long haul will, thus, require more than a quick, 
though much needed infusion of cash in fiscal year 2018. It 
will require sustained support for defense investment in the 
years that follow.
    Thank you, and I await your questions.
    [The prepared statement of Dr. Mahnken follows:]

                Prepared Statement by Thomas G. Mahnken
    Chairman McCain, Ranking Member Reed, and distinguished members of 
the Committee, thank you for your invitation to appear before you today 
to discuss the defense budget for fiscal year 2018.
    At the outset, I would like to commend you for ``Restoring American 
Power,'' which is a thoughtful and much needed contribution to the 
debate over defense strategy and resources. CSBA's diagnosis of the 
situation and recommendations accord with those detailed in the paper 
in many respects.
    The bottom line is that the United States requires more resources 
for defense if we are to continue to safeguard America's national 
interests in an increasingly competitive environment. Specifically, in 
my view we need increased investment in both readiness and 
modernization.
    I had the pleasure of serving on the staff both of the 
Congressionally-mandated 2010 Quadrennial Defense Review Independent 
Panel and the 2014 National Defense Panel. Both achieved a bipartisan 
consensus that the Department of Defense required additional resources. 
Seven years on from the first and three from the second, today's 
situation is even more dire.
    First, additional resources are needed to restore the readiness of 
the U.S. Armed Forces. I need not detail the path that has gotten us 
here. Nor do I need to detail the corrosive impact that sequestration 
has had on the readiness of the U.S. Armed Forces. The members are well 
aware of that. It is worth emphasizing, however, that all this has gone 
on while the United States has been at war--in Iraq, Afghanistan, and 
across the world--a situation that is historically unique, to put it 
mildly.
    Second, there is a growing need to modernize U.S. conventional and 
nuclear forces. Eight years ago, when I last served in the Department 
of Defense, as the Deputy Assistant Secretary of Defense for Policy 
Planning, the risk calculus was that we could afford to take additional 
risk in preparing for a high-intensity war in order to focus on 
counterinsurgency. As Secretary of Defense Gates frequently put it, we 
needed to focus on the wars of the present rather than the possible 
wars of the future.
    Eight years on, I believe that the risk calculation has 
fundamentally changed. Whereas we have spent the last fifteen years 
focused on counterinsurgency, we are now in a period characterized by 
the reality of great-power competition and the increasing possibility 
of great-power conflict. We see China and Russia acting aggressively 
both in their own regions as well as beyond them. China is busy 
remaking the geography of the Western Pacific, but is also increasingly 
active elsewhere. Russia not only has used force against Georgia and 
Ukraine and threatened other neighbors, but is also waging a high 
intensity military campaign in Syria. Moreover, both China and Russia 
have been investing in military capabilities that threaten America's 
long-standing dominance in high-end warfare.
    In other words, the ``wars of the future'' may no longer lie that 
far in the future. Moreover, they are likely to differ considerably 
both from the great-power wars of the past as well as the campaigns 
that we have been waging since the turn of the millennium.
    That is not to say that battling Radical Islamism will not continue 
to be a priority. However, it has been the focus of U.S. investment 
over the last decade and a half. By contrast, we have neglected the 
capabilities needed to deter and if necessary wage high-end warfare.
    That includes our nuclear deterrent. Historically, when the United 
States has drawn down its conventional forces, as it did in the 1950s 
and after the Vietnam War, it came to rely increasingly upon its 
nuclear deterrent. In recent years, by contrast, the United States has 
both drawn down both its conventional and nuclear forces. Now, both 
require modernization.
    The tasks of improving readiness and modernizing the force will 
require additional resources beyond those permitted by the Budget 
Control Act.
    In closing, as we seek to rebuild American military power, we need 
to keep a couple of things in mind.
    First, the Defense Department's capacity to absorb an infusion of 
resources is limited. The Pentagon is like a person who has been slowly 
starving for years; there are limits to how effectively it can spend an 
infusion of cash.
    Second, that which is available is not necessarily that which is 
necessary. Indeed, beyond an infusion of cash, the Defense Department 
requires a sustained increase in resources. To take but one example, 
achieving the 350-ship that President Trump has pledged to deliver--or 
the 355-ship fleet that the Navy now says it needs--or the 348-ship 
fleet that CSBA believes the nation needs--cannot be accomplished in 
four or eight years. Our analysis, using the Navy's own models, show 
that it is affordable, but making it a reality will require a sustained 
commitment on the part of the Executive and Legislative branches.
    The capabilities that the United States needs to remain dominant on 
the land and in the air against great-power competitors will similarly 
take time to field. The modernization of the U.S. nuclear deterrent 
will require time years to accomplish as well. Maintaining U.S. 
military effectiveness over the long haul will thus require more than a 
quick (though much needed) infusion of cash in fiscal year 2018; it 
will require sustained support for defense investment in the years that 
follow.

    Chairman McCain. Dr. Korb, welcome back.

 STATEMENT OF DR. LAWRENCE J. KORB, SENIOR FELLOW, CENTER FOR 
                       AMERICAN PROGRESS

    Dr. Korb. It is nice to be here again, Senator. I was 
trying to reflect about the first time I ever came before this 
committee. I do not even remember how many years ago it was.
    Chairman McCain. It was during the Coolidge administration.
    [Laughter.]
    Dr. Korb. If I can put my prepared statement in the record.
    Chairman McCain. Without objection.
    Dr. Korb. I will summarize it so we can move on to the 
questions.
    I think the first thing to keep in mind, when you are 
deciding how much to spend on defense, is no matter how much 
you spend, you cannot buy perfect security. There are always 
going to be risks. From my own days in government and in the 
military, a lot of people always complaining we needed more 
money for something else.
    Second is that it is not just the Department of Defense 
that protects our national security. State Department, AID, 
Homeland Security--these are all part of it. For years, we 
urged--we could never get any administration to adopt it--to 
have unified national security budget so we could see all of 
these together.
    The third thing is you cannot be strong abroad unless you 
are strong at home. Go back and look at what Presidents Truman 
and Eisenhower began talking about that you could not just do 
one and not the other.
    The next thing is no matter how much you spend on defense, 
you need a strategy. I am not quite sure what the new 
administration's strategy is. Does President Trump believe, as 
Chairman Dunford said, that Russia is the biggest threat? I am 
not quite sure.
    Then finally, it is not just us. We have our allies that we 
work with. When we are talking about dealing a threat, we have 
to take all that into account.
    Now, people urging more money for defense usually make two 
arguments. One is a share of the GDP [gross domestic product] 
should go to defense. Well, again, I think that in fact if the 
threat goes up and the GDP goes down, I would hope we would not 
be bound by that. Or if the economy recovers more, as it has 
under President Obama--recovers very rapidly--obviously, the 
share of the GDP that he allocated to defense did go down.
    The second is--and I am sure we will be talking about it--
the current state of our military. As I mentioned in my 
testimony, I was very impressed with the article that General 
Petraeus and Mike O?Hanlon wrote in ``Foreign Policy,'' as well 
as their op-ed in the ``Wall Street Journal'' last summer which 
in fact they said there is no procurement holiday. Readiness is 
getting back to where it needs to be.
    The next thing is that no doubt about the fact that the 
Budget Control Act is not the way to run the government. We all 
agree with that. In terms of the caps put on, remember, as a 
result of actions by the Congress, we have given about $100 
billion in relief since that law was passed. Also--Senator 
McCain has mentioned this several times--the OCO [overseas 
contingency operations] budget has been used as a way to get 
around the caps.
    All right. Now, in conclusion, basically I do not believe 
that the Department of Defense has a resource problem. I think 
the resources, the $620 billion that was allocated in fiscal 
year 2017. I believe, as I point out, that it has a management 
problem.
    I was appalled when the Defense Business Board recommended 
making $125 billion in cuts over 5 years. The Pentagon tried to 
bury it. Had it not been for Bob Woodward from Watergate fame, 
we would not even have known about that. The cost growth in 
weapon systems, which GAO [Government Accountability Office] 
has talked about, $500 billion--and I commend President Trump 
for talking about the cost of the F-35, and I hope that we can 
do something about that.
    Senator McCain, I like the things in your proposal, some 
things that we could do to save money. Conventionally powered 
smaller aircraft carriers, cutting down the buys of the F-35, 
substituting the F/A-18E's and F's for some of the F-35's for 
the Navy.
    Then finally--and I would urge the committee to take a good 
look at what former Secretary of Defense Perry and General 
Cartwright have said about the nuclear modernization program, 
particularly when it comes to the air-launched cruise missile. 
I noticed Secretary General Mattis expressed some concerns 
about that in his confirmation hearing. The land-based and the 
air-launched cruise missile.
    Then finally, if you decide to raise defense spending, as 
recommended by President Trump and the campaign--and, Senator 
McCain, I ask you to consider how are you going to pay for it. 
Do not take it from other things that make this country strong. 
One, the debt and then, of course, funding for our programs, 
the infrastructure, education, climate change, all of these 
things.
    Thank you very much.
    [The prepared statement of Dr. Korb follows:]

                 Prepared Statement by Lawrence J. Korb
    Chairman McCain, Ranking Member Reed, and members of the Senate 
Armed Services Committee, I appreciate the opportunity to appear before 
you, with the other distinguished panelists, to discuss the appropriate 
size and distribution of the defense budget for fiscal year 2018 and 
the defense program for the fiscal year 2018-2022 period.
    In my view this is the most critical national security issue facing 
the new administration and Congress because in defense, dollars are 
policy. In deciding how much of our scarce resources to allocate to 
national security it is important to keep several things in mind.
    First, no matter how much this nation or any nation spends on 
defense, it cannot buy perfect security.
    Second, the Department of Defense is not the only federal agency 
responsible for protecting our national security. The State Department, 
the Agency for International Development, and the Department of 
Homeland Security all play a vital role in protecting this country. If 
we provide so much of our limited resources to the Pentagon that we 
cannot fund these agencies adequately, our national security will 
suffer.
    Third, we cannot be strong abroad if we are not strong at home. As 
presidents like Harry Truman and Dwight Eisenhower realized a strong 
economy at home is the basis for our military might abroad. Therefore, 
running up large deficits or not providing adequate funds for 
education, health, or infrastructure as a result of providing too many 
of our limited resources for defense will impact our national security 
negatively.
    Fourth, whatever level of funding we provide for national security 
is not as important as having the appropriate strategy to deal with the 
current challenges facing the nation. Spending large sums of money to 
deal with threats from a bygone era will not enhance our national 
security. Just as sequester was, is a non-strategic and unwise way to 
limit a budget, increased funding that is not connected to a sound 
defense strategy for the demands we face today will be non-strategic, 
wasteful, and do more harm than good.
    Fifth, in most cases the U.S. does not have to deal with threats to 
our national security by itself. Nor do we have to use military power 
as a first resort. Whether it is dealing with Russia, China, North 
Korea, Iran or ISIS, the United States can work most effectively with 
allies and partners. The United States-led sixty nation coalition 
fighting ISIS, the buildup of military forces by our NATO allies to 
combat aggressive moves by Russia, and the economic sanctions we and 
the European Union placed on Russia after its annexation of Ukraine, 
are examples of leveraging all the instruments of our own power and the 
contributions of our allies to protect our national security.
    Despite the many contributions of our allies, Republicans and 
Democrats, including many of you on this Committee and all recent 
presidents, have expressed dismay about inadequate defense spending by 
our partners, even calling them free-riders. That kind of behavior is 
enabled by profligate U.S. defense spending. We need to spend wisely as 
we call on friends to honor their side of our common-security bargain.
    Many of those who advocate increasing the current level of defense 
expenditures substantially make two arguments. First, the Pentagon is 
not receiving a large enough share of the nation's gross domestic 
product (GDP). Second, our military is not prepared to deal with the 
current threats because of the limitations placed on all discretionary 
budgets, of which defense represents half, by the Budget Control Act 
(BCA) of 2011. But objective analysis demonstrates that these arguments 
are incomplete and somewhat misleading.
    For fiscal year 2017 the defense budget of about $620 billion will 
account for 3.3 percent of the nation's GDP as opposed to the 4.7 
percent it received in Obama's first year in office. But, this decline 
in the share of GDP devoted to defense is not a significant reduction 
in defense spending, but is mainly a result of the fact that Obama's 
economic policies have led to an economic recovery in the wake of 
national and global financial disaster. In fact, in real dollars the 
baseline for the non-war defense budget for fiscal year 2017 is higher 
than it was when Obama took office. Giving defense a 4.7 percent share 
of our $18 trillion GDP or even 4 percent would increase current 
defense spending by over $100 billion. An arbitrary level of defense 
spending is just as non-strategic as sequester. What if we require more 
than 4 percent in a crisis or war? What if an economic boom makes 4 
percent grossly excessive? The budget should be tied to the 
requirements, not to arbitrary numbers.
    Moreover, analysis by experts, like General David Petraeus and 
Michael O'Hanlon of the Brookings Institution, makes it clear that the 
current state of our armed forces is ``awesome,'' that we are not 
facing a readiness crisis and the current level of defense spending on 
readiness and procurement is more than adequate \1\. This does not mean 
that the new administration will not face challenges but the challenges 
are not as much monetary as they are management. Even with the limits 
placed upon the Pentagon under the BCA, the amount of funding for 
defense in the National Defense Authorization Act (NDAA), as recently 
signed by former President Obama, amounts to more in real terms than 
the U.S. spent on average in the cold war and more than we spent at the 
height of the Reagan build-up. This amount is three times more than our 
nearest competitor, the Chinese, will spend this year and accounts for 
more than one-third of the world's total military expenditures. In 
addition, our allies account for another one-third. In fact, for 2017, 
the top ten major powers will spend about $1.33 trillion on defense. Of 
these ten countries, only China and Russia, which between them spend 
about $230 billion, can be considered potential adversaries.
---------------------------------------------------------------------------
    \1\ O'Hanlon, Michael and Petraeus, David. (2016, September/
October). America's Awesome Military And How to Make It Even Better. 
Foreign Affairs. https://www.foreignaffairs.com/articles/americas/2016-
07-22/america-s-awesome-military
---------------------------------------------------------------------------
    The BCA caps have not constrained defense spending as much as many 
assume. The Congress has provided about $100 billion in relief from the 
BCA since fiscal year 2013, and at least half the Overseas Contingency 
Operations (OCO) account, which is not subject to the BCA caps, has 
been used for enduring programs that have nothing to do with the wars 
in the Middle East or Afghanistan. In other words a significant part of 
the OCO account is a slush fund that allows the Pentagon to get around 
the BCA limitations.
    Before the new administration and the Congress adds significant 
funds to the fiscal year 2018 budget, as recommended by President Trump 
and Chairman McCain, they need to take a close look at how the Pentagon 
is currently spending the large amount of funding it currently 
receives, especially in at least four areas.
    First, as noted in a recent report by the Defense Business Board 
the Pentagon could save $125 billion by cutting the size of its 
headquarters or administrative staff which has grown by 38 percent 
since 2001. However when this report, which was commissioned by the 
former administration, came out, rather than endorsing it, its leaders 
tried to bury it in no small part because they believed it would never 
get support from the Congress. Congress should be leading on finding 
savings, not just adding dollars to our defense budget.
    Second, the Pentagon needs to curb the cost overruns on its major 
acquisition programs. In 2015, according to a report by Deloitte, the 
combined costs overruns for the major acquisition programs was $468 
billion, something Government Accountability Office (GAO) has been 
pointing out for years. Chairman McCain himself has called these 
overruns absolutely outrageous. Congress and the new Administration 
should take advantage of their unified political control of the 
government to get an actual audit of the Pentagon and begin a clear 
process of reform to improve acquisitions.
    Third, the Pentagon should adopt some of the recommendations made 
by Senator McCain in his excellent report, ``Restoring American 
Power.'' Specifically, the Pentagon should: develop a high-low mix of 
aircraft carriers by building smaller conventionally powered carriers 
rather than simply continuing to build only $15 billion nuclear powered 
Ford-class super carriers; cut the total number of Air Force F-35's 
from 1,732, a number Chairman McCain correctly points out is 
unrealistic; and get the Navy to stop production of the poorly 
conceived and managed Littoral Combat Ship (LCS) at 28, as opposed to 
the Navy's goal of 52. The Navy should also buy more F-A 18 Super 
Hornets and fewer F-35's.
    Fourth, the Pentagon and Congress should adopt the proposals put 
forward by former Secretary of Defense, William Perry, and former Vice 
Chairman of the Joint Chiefs of Staff, General James Cartwright, and 
cancel the new land-based missile and air-launched cruise missile 
portions of the multi-billion dollar nuclear modernization the Pentagon 
is currently undertaking, something we endorsed in our report, 
``Setting National Priorities for Nuclear Modernization.'' These steps 
would be a good start toward improving the management and stewardship 
of our defense dollars and should be implemented before Congress 
approves major spending increases.
    Thanks again for the invitation to once again appear before the 
Committee. I look forward to your questions as you deal with these 
critical issues.

    Chairman McCain. Thank you, Dr. Korb. I just would like to 
point out that over the last eight years, defense spending, OCO 
and everything included, has declined by some 21 percent. I do 
not believe that most observers would agree that America is 21 
percent safer.
    You mentioned President Truman, and I am a great admirer of 
President Truman. It is a fact that we were not ready when the 
Korean War took place. In fact, we were not only not ready, we 
sacrificed so many brave young people who simply did not have 
the ability to counter the North Korean attack.
    Then, of course, we get back into the 1970s after the 
Vietnam War when the Chief of Staff of the United States Army, 
General Meyer, testified before this committee that we had a 
hollow Army.
    Well, our uniform military today are testifying before this 
committee that we are putting the men and women in uniform at 
greater risk. That is the opinion of those who we ask to lead 
the uniformed military. That should disturb all of us. It is 
our young men and women who are now serving in uniform in 
harm's way, and if their leaders say that their lives are at 
greater risk, we should be taking whatever steps we can to make 
sure that their lives are at less risk. That means, in my view, 
first of all, repealing this mindless sequestration.
    I do agree with you, Dr. Korb. There are other areas of 
national defense. Homeland Security is a major one. CIA 
[Central Intelligence Agency], all of these other agencies that 
are not strictly defense, particularly in this new kind of 
warfare that we seem to be engaged in, which I guess brings me 
to my question.
    We will begin with you, Mr. Wood, and this may be a little 
bit generally. We have a new President, and there are 
conflicting statements being made. This new President has said 
he wants to rebuild the military. Yet, at the same time, he 
says he wants better relations somehow with Vladimir Putin. At 
the same time, I think most of us--I think all of us--would 
agree we have an outstanding national security team and one 
that has gotten near unanimous agreement of Members on both 
sides of the aisle. Here we are in a very interesting time, 
which is one of the reasons why we had this hearing.
    Beginning with you, Mr. Wood, what would you recommend to 
the President as a correct defense strategy?
    Mr. Wood. Well, I do not think there are internal 
inconsistencies or contradictions. I mean, we think back to the 
Cold War--you are very familiar with that--that even while we 
tried to maintain a very forceful posture militarily--NATO was 
certainly there on the inner German border across from Warsaw 
Pact countries--you still had open lines of communication with 
Moscow. I think we should always be striving to do things 
diplomatically, economic initiatives, those sorts of things to 
lessen the chance of war.
    Chairman McCain. I would also remind you that the first 
thing--the first thing--that President Reagan--his first 
priority was rebuilding the military.
    Mr. Wood. Absolutely. Along with that, that does not mean 
that you keep your military depressed. The economic and the 
diplomatic initiatives are amplified. They are made more 
effective by a strong military posture. Where we have declined 
in that regard, our words are taken much less seriously in 
capitals around the world both by competitors in Moscow and 
Beijing and Tehran, but also by our own allies. I think 
rebuilding the military is the first step to making more 
effective the diplomatic and economic levers that we would have 
in other areas.
    Chairman McCain. Dr. Mahnken?
    Dr. Mahnken. Mr. Chairman, several things.
    I think we need a truly global strategy. We are the world's 
only global power, but at the same time, we also deal with 
competitors in different regions and beyond. We need a global 
strategy that also deals with regional challenges. I think the 
new administration is going to have to make up its mind as to 
which of the challenges deserve the greatest attention and 
which lesser attention. I tend to believe that great-power 
challengers such as China and Russia really do deserve the 
greatest attention, and then we should stress test our 
capabilities and our force against regional challengers such as 
North Korea and Iran, all the time acknowledging the need to 
continue the campaign against ISIL and al Qaeda.
    Chairman McCain. Dr. Korb, which would be not only your 
view on the strategy but of priorities?
    Dr. Korb. Well, I think the two biggest challenges we face 
are Russia and China. I think President Obama's European 
Reassurance Initiative is the way to go, and I agree with 
President Trump and also the last four Secretaries of Defense 
that told NATO that you have to step up more to be able to deal 
with it and I think we are.
    I think President Obama's rebalance to the Pacific showed 
that China is a much bigger threat to the United States than 
what is happening in the Middle East. I think we need to add 
more ships to the Navy. I think your suggestion about 18 more 
ships I think would be good over the next 5 years, and also 
stopping the littoral combat ship and getting these smaller 
aircraft carriers would be a way to have the presence.
    I think that basically we ought to not just use military 
power but economic. I think the sanctions were the way to 
handle what happened in Crimea. They are beginning to have an 
impact. The Russian military budget is going down. President 
Putin has had to back off from his modernization plan.
    I think the way that we are fighting ISIS with the other 60 
countries in the coalition is the way to deal with it.
    I think that the sanctions brought Iran to the table. Now, 
we can debate whether that was a good deal or not, but the fact 
of the matter is we did get a deal that is a step in the right 
directions, and it was without military power. I think the 
economic thing.
    Then finally, I think North Korea--you are going to have to 
work with China and the countries in the region. I applaud the 
decision to put the THAAD [Terminal High Altitude Area Defense] 
missiles in South Korea because that has got China's attention. 
They do not like that. Hopefully they will do more to bring 
North Korea to stop their provocative actions.
    Chairman McCain. Thank you, Dr. Korb. You sound a bit 
hawkish this morning.
    [Laughter.]
    Chairman McCain. Thank you. I have enjoyed our exchanges 
over the years, and I think you have contributed a lot to the 
dialogue.
    Senator Reed?
    Senator Reed. Well, thank you, Mr. Chairman. Thank you 
again for holding this hearing because this is going to be one 
of the most significant issues we discuss not just today but in 
the many, many months that follow.
    Dr. Wood, the concept of national security extends beyond 
the Department of Defense--I think you would agree with that--
so that any relief from the Budget Control Act would logically 
have to extend to at least those agencies. Is that your 
viewpoint?
    Mr. Wood. Yes, Senator, it is. I mean, I think the first 
and foremost responsibility of the Federal Government is to 
provide for the security of the United States. Other things 
that it does oftentimes overlaps with what can be done at the 
State and local community, religious group types of levels. 
Where you see 70-plus percent of the federal budget dedicated 
to social and economic programs and an increasingly smaller 
percentage dedicated to defense, I think priorities are out of 
whack there. I agree completely with my fellow panelists and 
with yourself that the intelligence community, Homeland 
Security, activities of the Coast Guard, all those things 
contribute to the security, and that should be taken in total, 
not the Defense Department specifically as some exclusionary 
account.
    Senator Reed. Dr. Mahnken, your sense?
    Dr. Mahnken. Look, I would agree that national security is 
more than defense, and in recent years, because of the 
incapacity of other parts of the national security community, 
the Defense Department has been forced to step in, whether it 
was after Katrina or in other circumstances. I would also say 
that unless DOD and the U.S. Armed Forces excel at their core 
mission of fighting and winning the Nation's wars, nobody else 
is going to be able to do that. With that in mind, I absolutely 
agree.
    Senator Reed. Dr. Korb, I think you have said you agree.
    Dr. Korb. I can agree with you. I agree with you 100 
percent. I think we have got to have a unified national 
security budget. Whatever amount you decide to spend on the 
Department of Defense, the Homeland Security, the State 
Department, AID, we have got to look at it together so we can 
make some tradeoffs to make sure that things that we would like 
to do are more important for Homeland Security than the 
military because there is never going to be enough money to buy 
perfect security. It is always going to be limited. I think, 
therefore, you need to make these particular tradeoffs.
    The budget, for example, for the State Department and AID 
together is about $50 billion. Okay. We have got more people in 
the military bands than in the Foreign Service. Is that really 
the way that we want to do things? Those are the things I think 
we need to take a look at.
    Senator Reed. I can recall listening several years ago to 
the Chairman of the Joint Chiefs of Staff saying that the 
number one national security problem was the deficit. I am just 
trying to do the math in my head. If we significantly increase 
military spending, if we significantly invest in 
infrastructure, which is one of the commitments both sides made 
during the election campaign, and then we cut taxes, there is a 
strong argument that we are going to have significant deficit 
repercussions. How do we avoid that other than by trying to 
find revenue?
    Mr. Wood. Well, again, I think it is reassessing what your 
priorities are in terms of what the Federal Government is 
supposed to be doing and where it decides to spend its money. 
This issue of debt, inflation, economic trend lines has been 
appreciated by every President that I can think of. Eisenhower 
made a great argument about the devastating impact of inflation 
on the U.S. citizen. It is not really a matter of decreasing 
defense spending or defense spending at the expense of the 
intel community, it is really about what is the priority of the 
Federal Government and how does it choose to spend the taxpayer 
monies that are provided to it. To the extent that it takes 
risk in security for the country and its citizens and our 
interests globally, that is a choice that Congress is making 
and the President when he or she submits the budget.
    Senator Reed. Dr. Mahnken, quickly.
    Dr. Mahnken. No. Look, I would agree. Providing for the 
common defense is one of the core functions of the Federal 
Government. We can disagree about other functions, but that is 
core.
    Senator Reed. Dr. Korb?
    Dr. Korb. I think one of the biggest mistakes we made was 
when we went into Afghanistan and Iraq, we did not raise taxes 
to pay for it. Those wars were fought on the credit card, and 
that created some of the deficit problems that Admiral Mullen 
was concerned about when he was on Active Duty and since he has 
retired. Not only did we not raise taxes, we cut them twice, 
and we are still paying for that. The Brown University, the 
Watson Center in your State has talked about the cost of these 
wars is going to be somewhere between $3 trillion and $6 
trillion that we did on the credit card. We need to understand 
that.
    If in fact we decide that the threats are increasing and we 
need to rally the American people to spend more, let us talk 
about ways in which we are going to pay for it because I think 
that would get people much more involved. You may remember that 
in Vietnam when Wilbur Mills got Lyndon Johnson to put a surtax 
on, that got people's attention about what was happening there.
    Senator Reed. Thank you.
    Thank you, Mr. Chairman.
    Chairman McCain. Senator Inhofe?
    Senator Inhofe. Thank you, Mr. Chairman.
    Dr. Korb, I observed the same thing the chairman did. I am 
a little more hawkish. I was ready to talk and to kind of 
pursue the statement in your written record that BCA caps or 
sequestration have not constrained defense spending as much as 
many assume. If you go back and you look at the hearings that 
we have had before this committee in the last couple years, 
without exception every combatant commander, all the rest of 
them who have come before us have disagreed with that 
statement. Did I understand this right?
    Dr. Korb. What I was saying is that when people talk about 
the BCA caps, they do not take into account the fact that you 
have given them relief. I looked it up going back to when it 
was passed. Roughly about $20 billion a year over the last 5 
years. That is about $100 billion in relief. For example, the 
budget in the NDAA [National Defense Authorization Act] this 
year was roughly--you added $3 billion more to the number that 
you had given last year.
    The other is--and lots of people, including Senator McCain, 
have pointed this out--the OCO budget, or the warfighting 
budget, has been used to get around it. The best estimate by 
the DOD comptroller for fiscal year 2017 is about $30 billion. 
Therefore, when you say the BCA cap was 500 or 50, or whatever 
it might be, by putting that OCO money, you really got more for 
the base budget.
    Senator Inhofe. Okay. I understand that.
    Dr. Korb, you talked about--you criticized the percentage 
of GDP. When you just look at the raw figures and you see that 
we are spending now 16 percent of our defense spending--on 
defense spending of our total budget, and as recently as 1964, 
it was 52 percent--I mean, something has changed. We were wrong 
then or are we wrong now? What do you think, Mr. Wood?
    Mr. Wood. I think we need to fund defense commensurate with 
our interests and challenges to those interests. I agree that 
there has been some relief given in BCA. The BCA was never 
intended to provide adequate security. In fact, it was the 
opposite. The Budget Control Act and sequestration levels were 
meant to be so painful that it would force the Super Committee 
to find $1.2 trillion in savings in other areas of the budget. 
When that failed and these painful cuts were enacted, it was 
supposed to be painful, and we are seeing the consequences of 
that.
    Further, the relief was not total relief from BCA cuts, and 
it certainly does not account for the ongoing cost of 
operations. Where things get worn out, blown up, people are 
injured, you are using fuel and bombs and those kinds of 
things, a marginal relief on a year-by-year basis does not 
account for that. I think the priorities are out of whack.
    Senator Inhofe. That is key right there because people say, 
you know, where is it going to come from? Priorities. I 
disagreed with--I do not remember which one of you said that it 
is an equal concern. I think defending America is the number 
one concern. I mean, that is the way I have always thought. In 
fact, the old measure that we should size the posture and fund 
our military to fight and win two major wars in different 
regions of the world near simultaneously--is that still a good 
idea? What do you think, Dr. Mahnken?
    Dr. Mahnken. I do because we always want to have that 
margin of safety, and we also want to have that margin of 
deterrence. I think unfortunately in the last Quadrennial 
Defense Review, the previous administration walked away from 
that two-war standard and I think that needs to be 
reestablished.
    Senator Inhofe. Yes, I think so. During the last 
administration, it was pretty well decided by the President--
and a lot of the Democrats agreed with him--that if you address 
sequestration for the military, you have to do an equal amount 
for the non-defense spending. To me, that tells me that that is 
not the priority. How did you interpret that?
    Mr. Wood. I agree. I think it was appealing to various 
constituencies and your prioritizing spending in other areas, 
social spending, agricultural bills, those kinds of things at 
the same level as defense of the country. I agree with Dr. 
Mahnken that defense of the country should be the priority.
    Senator Inhofe. Thank you, Mr. Chairman.
    Chairman McCain. Senator King?
    Senator King. First, I want to commend the chairman for the 
White Paper. It is a very thoughtful and important document, 
and I have always thought that the first person to put pen to 
paper has the maximum amount of power. I appreciate that. I 
think it was a brilliant step to begin this discussion.
    One of the things the White Paper talks about is 
assumptions and faulty assumptions. We have been talking about 
all strategy is based on assumptions. We need a strategy.
    One of the assumptions is--several of you mentioned China. 
Clearly, we can see from the facts on the ground that Russia is 
in a new phase of aggression in the Ukraine and Crimea, in 
Syria, other areas. I am interested in what your assessment is 
of China's--what is your assumption of what China wants? 
Because they do not seem to be demonstrating that kind of at 
least military ambition. Is it economic hegemony in their 
region? We all know about the South China Sea. What are the 
assumptions about China, and are they the same level of threat 
to the United States from a military point of view as Russia? I 
see them as distinct. I would be interested in your thoughts. 
Dr. Wood?
    Mr. Wood. I think different countries and different leaders 
in different countries, different cultures behave in different 
ways that correspond with their particular perspectives even if 
they have the same objectives. I think Russia and China both 
have objectives of being hegemons in their respective regions, 
Russia much more in a militaristic sense, China in an economic 
sense. China does not have to do the same sorts of things that 
Russia is doing in Ukraine and in Syria to have a dominant 
influential posture relative to the neighbors in its region. If 
it keeps everybody intimidated, kind of cowed, it has economic 
dominance, it causes its neighbors to account for Chinese 
interests in their calculations----
    Senator King. That is not a military threat. My question 
is, how do we adjust our military in relation to the threat? 
Other thoughts? Dr. Mahnken?
    Dr. Mahnken. I would say one common thread between China 
and Russia is that they are seeking to revise the international 
status quo that has governed for decades.
    Senator King. It is an economic status quo you say.
    Dr. Mahnken. Political and military. I think they are all 
intertwined. More than what the Chinese Communist Party 
leadership wants, I think, is what they believe they deserve, 
and I think that is an important distinction. We look at 
building new geographic features in the South China Sea, and we 
see that as kind of creeping expansionism. No. Look, they 
believe that it already belongs to them. They believe that they 
are merely asserting control over what is justifiably theirs. 
That to my mind poses a much greater challenge than a country 
that is sort of being opportunistic. I think whereas Russia is 
in many ways a declining power--and it has already been alluded 
to in the economic dimension. It is also true in demography and 
other ways as well--the Chinese leadership at least sees China 
as a rising power and sees this century as being theirs. Again, 
I think that makes them a greater challenge as well.
    Senator King. Do they have military designs on Korea or the 
Philippines or Japan?
    Dr. Mahnken. I would argue that even short of military 
designs on Korea, the Philippines, or Japan, merely what the 
Chinese leadership sees as theirs, large parts of the South 
China Sea, Taiwan, parts of India--merely that poses a threat 
to the international order. It poses a threat to allies and 
also poses a threat to U.S. territory, including our 
territories in the Western Pacific.
    Senator King. Dr. Korb, I am almost out of time, but your 
thoughts.
    Dr. Korb. I think basically China is trying to assert 
control, I think as Dr. Mahnken said, over what it sees as its 
proper territory. They are not an aggressive power in the sense 
that they worry about the Japanese. If you go to China, they 
still have not gotten over World War II when it comes to the 
Japanese. They are concerned about their economic growth 
because they cannot keep going like they have, and I think that 
is why they try and get more of these resources in the South 
China Sea. I think that is why President Obama correctly had 
the pivot to the Pacific, or rebalance, to show them that there 
is a line if they upset the freedom of navigation, that we will 
take action.
    The other thing is in the long term, these actions that 
they are taking will hurt them. The Japanese are spending more 
on defense. South Koreans are. The Vietnamese are very 
concerned, and they are beginning to work again with us. 
Unfortunately, the very erratic person that just took over the 
Philippines is not doing what needs to be done.
    Now, I want to say this and it will not be politically 
popular. Not supporting the TPP [Trans-Pacific Partnership], 
even if you wanted to modify it in some way, is the worst 
signal we could have sent to dealing with China because had we 
done that, I think that that would have united a lot of the 
countries in the region against them and would have got them to 
modify some of their behavior if they wanted to be part of it.
    Senator King. Thank you.
    Thank you, Mr. Chairman.
    Chairman McCain. I agree.
    Senator Ernst?
    Senator Ernst. I agree as well.
    Thank you, Mr. Chair.
    I would like to start with a fairly small program that I 
believe has significant impact overall. To you, Dr. Mahnken, I 
know that while you were serving as a Navy reservist, you 
deployed to Kosovo. I want to thank you for that service very 
much.
    Kosovo is important to me personally but also to the State 
of Iowa as well. Iowa's National Guard and Kosovo worked 
together through the State Partnership Program, a program that 
was started to strengthen our security in that region after the 
fall of the Soviet Union. I believe it is a great, great 
program with a lot of impact in that area.
    Last year I was pleased that my efforts ensured the program 
was permanently authorized, and going forward, I want to make 
sure that it is properly funded.
    To you then, Dr. Mahnken, would you agree that we need to 
ensure our budget properly funds programs like the National 
Guard State Partnership Program? Then if you could in regards 
to Kosovo specifically, can you talk about how important it is 
to have those relationships in that area for their own 
security?
    Dr. Mahnken. Thank you, Senator. Good catch on my bio. That 
seems like a lifetime ago, but I do appreciate you bringing 
that back.
    Look, I do think that programs like that are very 
important, and I think they really leverage expertise in the 
Reserve component and they also build enduring relationships.
    I think one of the problems that we have encountered, one 
of the challenges that has come with our operational deployment 
pattern over the last 15 years is a lot of habitual 
relationships have been disrupted. I mean, traditionally it was 
not just National Guard but special forces we relied upon to 
develop habitual relationships with partner militaries across 
the world. In an era when, for good reason, many of those 
relationships have been disrupted, I think things like the 
National Guard partnerships really have filled a key role. I 
think going forward, establishing and maintaining those 
relationships with not just our allies but our partners is 
going to be all the more important. I am fully behind programs 
like that.
    Senator Ernst. Thank you very much.
    I know, Dr. Korb, you had stated that we do need to involve 
more partners. I think this is a way of developing some of 
those partnerships with nations that really share a lot of our 
same values as well. Do you have any input on that?
    Dr. Korb. Well, I do and I think, as Dr. Mahnken pointed 
out, this is very critical. We are not in this alone. Threats 
that we face are global. We work with various countries at 
different times. At the beginning of the Obama administration, 
the United States worked with Russia to allow our supplies to 
go through Russia to go to Afghanistan. There are areas that we 
can work on. We have had arms control agreements going back to 
the Nixon administration.
    The other thing I think is important to keep in mind is 
that the National Guard and the Reserves are not just 
strategic. They're operational.
    Senator Ernst. Absolutely.
    I have fought that for years to get it funded. In fact, 
before this committee, General Kaine and I almost came to blows 
one time when he objected to my saying that. I think that's so 
critical because it is a total force. As we found out during 
the height of the wars in Iraq and Afghanistan, even today, 
those folks can add to the capacity that we have.
    Senator Ernst. Thank you very much.
    Dr. Mahnken, just very briefly. I have got about a minute 
left. You are the author of a book entitled ``Strategy in 
Asia.'' One of my greatest concerns is the Islamic State and 
its spread into Southeast Asia. If you could, talk a little bit 
about our forces and how you would say we should budget and 
prepare those forces to deal with issues like ISIS [Islamic 
State of Iraq and Syria] in Southeast Asia.
    Dr. Mahnken. I think that is just one area where we have 
some very strong partners, non-allies, but countries like 
Singapore and Malaysia and others. I think they have, by and 
large, been doing a very good job by bolstering the identity of 
their citizens and hardening their citizens against influence 
by groups like ISIL. I think working with partners is 
absolutely key.
    I think we can play a role. I think largely that role is 
behind the scenes, supportive. I think that is as it should be. 
As I look at kind of the global campaign against ISIL, 
Southeast Asia still remains I think largely a success story, 
and I want it to remain that way.
    Senator Ernst. Fantastic. Thank you, gentlemen, very much.
    Thank you, Mr. Chair.
    Chairman McCain. Senator Warren?
    Senator Warren. Thank you, Mr. Chairman.
    Thank you all for being here today.
    The debate over defense spending is often about the 
importance of the top line numbers. The efficient distribution 
of those dollars is also critically important. Part of 
achieving our efficiency is making sure that we are spending 
money in a way that aligns with our priorities and our 
positions and that positions us to address current and emerging 
threats. While states like Russia and Iran and North Korea and 
others threaten our interests, our military engagements today 
are increasingly low-intensity armed conflicts and cyber-based 
conflicts against both state actors and terrorist groups and 
other kinds of non-state actors.
    Let me ask you this. Dr. Korb, can these modern threats and 
challenges be fully addressed by large spending increases on 
traditional military investments like troop levels, ships, 
planes, and nuclear weapons?
    Dr. Korb. I think you raise a great point because of the 
fact that the Military Services basically have an identity and 
they always try and move ahead with that identity. Threats like 
cyber, for example, which are seen as nontraditional--for 
example, the special forces would not even have gotten the 
funding that they have gotten over the years unless Congress 
set up a separate Assistant Secretary for Special Operations 
Forces because they were getting lost in the budget.
    I think you have to be careful. As I pointed out in my 
testimony, you do not want to deal with threats from a bygone 
era. Secretary Gates said any Secretary of Defense who 
recommends to a President to send large land armies into the 
Middle East or Africa should have his head examined. Then you 
ought to say, well, why do you need a large land Army? Those 
are the type of things that you need to do.
    I think it is important to keep in mind if you go back and 
you look at the history, in the 1990s the military fought 
against developing drones. It was the CIA drones that we used 
in Afghanistan after the attacks of 9/11. So, yes, you have to 
because they always want to stay with their traditional 
missions.
    Senator Warren. That is very helpful. Thank you very much. 
I appreciate that, Dr. Korb.
    It is easy to talk about spending more. The hard question 
is spending smarter and budgeting our defense resources based 
on 21st century threats in a way that enhances our military 
strength and lets our diplomacy complement our military 
strength.
    Efficient spending is also about eliminating waste. In its 
annual report last April on wasteful and duplicative programs 
across the Federal Government, the GAO identified several areas 
where the Defense Department could achieve savings in areas 
like acquisition, contract management, and facilities 
maintenance. According to this report, from 2011 to 2016, GAO 
directed 152 recommendations to DOD to achieve savings, but 95 
of these recommendations--that is about two-thirds, 63 
percent--remain only partially addressed or not addressed at 
all.
    Dr. Korb, what are some of the major reforms that would be 
most effective toward eliminating wasteful spending?
    Dr. Korb. Well, I think the first thing to take a look at, 
as I mentioned in my testimony, is what the Defense Business 
Board said is the buildup of the administrative part of the 
Department of Defense. The committee last year in the NDAA told 
them to cut back. It is not just civilian, but it is also the 
military staff I think is important.
    The other is--and I commend President Trump for doing this 
in terms of the F-35 contract. I hope that rather than just 
tweets, he really gets involved in dealing with it because I 
think that is very, very, very important. These cost overruns--
we have not done as much as we should for the penalties. I 
think that, as I mentioned in my testimony, some of the things 
that Senator McCain recommended in his budget in terms of 
letting the Navy who for years wanted to buy F/A-18E's and F's 
rather than the F-35's because they felt that they could deal 
with the threats that they would face--the littoral combat 
ship, when it turned out to be a disaster, nobody did anything 
about it. So, yes, I think there are things that we can do.
    I have written this several times. Unless you get a Deputy 
Secretary of Defense like a David Packard or Charles Duncan, 
who came from Coca-Cola, or Don Atwood from General Motors to 
do these things, it is going to be very, very hard.
    Defense--they have not even passed an audit yet. Okay? We 
keep waiting and waiting, and you keep saying, well, when is it 
going to happen? Well, you have got to have it.
    Senator Warren. Well, I appreciate that. I know there are 
always push-backs on audits and they cost time and money, but 
there is a lot of cost of not doing an audit as well.
    Thank you, Mr. Chairman.
    Chairman McCain. Senator Perdue?
    Senator Perdue. Thank you, Mr. Chairman.
    Last week now Secretary of Defense Mattis agreed and made 
the comment that the greatest threat to national security is 
our own federal debt. Mr. Wood, do you agree with that?
    Mr. Wood. From a non-military standpoint, yes, I do. I 
mean, to the extent that the Nation is evermore in debt, $20 
trillion, it lessens your ability to spend on defense.
    Senator Perdue. Thank you.
    Mr. Wood. Debt does not bomb cities. It depends on how you 
define it.
    Senator Perdue. Right.
    Dr. Korb, I agree that--and there have been studies that we 
can certainly procure better and smarter. The Federal 
Government does not even have a capital budget, and so it is 
very difficult to plan for a multiyear acquisition.
    I totally agree the Department--I think I agree with our 
chairman. The Department of Defense does need an audit. I think 
it would help us see a lot of things and actually become more 
efficient in our procurement.
    I want to focus on a couple things that we have talked 
about today.
    We are talking about the needs in the military without 
talking about the missions and the mission requirements from a 
bottom-up standpoint. The last time anyone really did that was 
Bob Gates in 2011, and he made a five-year estimate and for 
fiscal year 2016, his estimate was some roughly $100 billion 
more in current dollars, greater than what even the President 
was asking for for this year, at the very time that I would 
argue that we are facing threats. I agree with my colleague 
from Massachusetts that we are facing various different 
threats, but they are additive. They are not replacement 
threats.
    We have a five-plus-one mission today versus a one-plus-one 
mission through most of my lifetime through a nuclear 
deterrent. When you look at Russia and China being symmetric 
threats--you have asymmetric threats in ISIS and all the 
terrorist activities. Then you have the rogue nations of North 
Korea and Iran with a nuclear threat. Cyber we are beginning to 
talk about. We are not even beginning to talk about the arms 
race in space yet.
    I would argue that at a very time when our threats are 
additive, we are talking about reducing to the point where 
today we have the smallest Army since World War II, the 
smallest Navy since World War I, and frankly the oldest and 
smallest Air Force ever. I do not know what that size should 
be, but there are experts. If we would do it from the bottom up 
based on missions, we would get there.
    I just have a simple question very quickly. Mr. Wood, do 
you agree that the Budget Control Act today is an inhibiting 
factor that is arbitrary in terms of what we are doing in terms 
of evaluating what we need to spend in light of the fact that 
we do need an audit, we do need better procurement practices 
and a more efficient way to actually run the Department of 
Defense? Do you agree the BCA now should be repealed?
    Mr. Wood. I do and without reservation.
    Senator Perdue. Mr. Mahnken?
    Dr. Mahnken. I do, Senator.
    Senator Perdue. Dr. Korb?
    Dr. Korb. I do not think any arbitrary ceiling should be 
there. However, I think that roughly $620 billion for fiscal 
year 2017 was more than adequate to deal with the threats that 
we currently face.
    Senator Perdue. Thank you.
    Mr. Wood, at current levels of operational tempo, the 
concern I have is deployments are getting longer, families are 
being broken up. The number is certainly questionable in terms 
of how many troops we actually need in a voluntary military. I 
am very concerned about the increased deployments and our 
inability--and I can tell you from trips around the world where 
we are not able to fulfill the missions today because either we 
do not have the equipment--you both talked about balance of 
manpower and equipment, and I certainly agree with that. I am 
concerned today about the shortage of certain pieces of 
equipment in certain theaters that keep us from meeting certain 
mission requirements today. They are very real and they are not 
yesterday's war. They are the current issue. We saw in 
Benghazi--that is not a state-on-state war, but we had men die 
there. I am very concerned that we continue to look at the 
operational tempo.
    Do you believe that we can maintain this current tempo at 
the current size without really looking at the mission 
requirements going forward?
    Mr. Wood. I do not. There is a huge imbalance that you just 
so well described. We are currently in a death spiral where you 
have lack of money to repair things and send it back. That 
means you have fewer end items. Fewer end items means that the 
things that are in the force should then used more, and so you 
consume the life of that end item, whether it is a ship or a 
plane or a tank, that much more rapidly. It just feeds on 
itself, and unless we get BCA relief by getting rid of that and 
expanding the force--we currently have two-thirds the force 
that we need based on 70 years of experience. That is the only 
way we are going to get out of this death spiral.
    Senator Perdue. Mr. Chairman, I am out of time, but I fully 
support this effort to look at this from all angles. I am very 
concerned that over the last 30 years, our history has been 
that in the 1970s disinvested in our military, in the 1980s we 
recapped it, in the 1990s we disinvested, in 2000 we recapped 
it. Now after 15 years of war, we need to think about how to 
replace and recap our military at the very point in time when 
we have $20 trillion of debt and we have our Social Security, 
Medicare, and mandatory expenses over the next 20 years running 
away from us. This is a time, Mr. Chairman, we have got to get 
serious about how we look at our debt crisis and how we look at 
our allocation of limited resources across the entire Federal 
Government and actually be smarter.
    I certainly applaud today's hearing. I hope we have many 
more. Thank you.
    Chairman McCain. Senator Gillibrand?
    Senator Gillibrand. Thank you, Mr. Chairman.
    I focus a lot on military families and their wellbeing, and 
one of the things we have heard about from our families is the 
current rules do not accommodate them. If someone gets 
transferred somewhere, the husband might leave, the family 
still has school to finish, get a change of job. There is no 
accommodation for when they move.
    We are trying to change that. Senator Blunt and I had a 
bill that was passed by this committee in the NDAA but taken 
out in conference.
    Just a more general question. We are really dealing with 
21st century families in a 20th century military personnel 
system. It is really set up for the days when mom and dad did 
not both work. It is set up for the days when mom stayed at 
home. It is set up in the days where a lot of the military 
personnel were single.
    What can we do to change the system to address the 
challenges military families confront today?
    Mr. Wood. Anyone in particular?
    Senator Gillibrand. Anyone.
    Mr. Wood. Over a 20-year career and something like a dozen 
moves, my wife certainly has an experience with schools and 
finding new doctors and what church do you plug into and the 
whole bit. We are very sympathetic to that problem.
    One problem the services have is these continuing 
resolutions where money is put on hold. That is money that can 
be used for PCS, or permanent change of station, types of 
moves. Under normal circumstances, the military tries to do 
most of its moves during the summer season between academic 
years, but when you have very short notice about how much money 
is available, sometimes you have these interruptions that come 
in. Then you have unexpected openings for a variety of reasons 
and a billet just needs to be filled.
    The Military Services are extraordinarily sensitive to and 
sympathetic to the toll taken on personnel policies and the 
movements of these families. They have done a lot to look at 
that. Stability in funding would go a long way to stabilizing 
these sorts of moves and enable families to better prepare with 
longer lead time. Again, I go back to the funding issue. 
Continuing resolutions, bad; BCA, bad. We just need more and 
stable over time.
    Senator Gillibrand. Similarly, we have had a number of 
hearings about the importance of cyber defense, cyber warfare, 
cyber expertise. We have talked a lot about making sure we are 
using the National Guard effectively because if you have got a 
guy working at Google who is the best computer scientist and he 
happens to be in the National Guard, he should be part of that 
work.
    More broadly, what is the most effective employment of 
additional funding in addressing the current needs for the 
military's cyber needs? How can we more effectively recruit and 
retain our cyber warriors?
    Dr. Mahnken. Senator, I think the answer both to your 
previous question and to this is flexibility. I think trying to 
bring in cyber expertise through the Reserve component is part 
of it, but I think more broadly the military, I think for 
understandable reasons, tends to accord rank with seniority 
with pay. In the cyber world, certainly in the private 
industry, those things do not always align. I think what we 
need to do is think about some authorities that give the 
services greater flexibility to really tap into the deep 
expertise that we have in our society and bring it into the 
service of our Nation's defense.
    Senator Gillibrand. My last question is about--and, Dr. 
Korb, you can answer this one--this issue of sequestration. I 
did not vote for sequestration. I thought it was a terrible 
idea, and I knew it would end up where we are today. Do you 
think that if we raise the defense budget, we should also raise 
our domestic budget?
    One of the reasons why I ask that question, there are 
certain accounts in the domestic budget that very much affect 
the wellbeing of the men and women we are recruiting for the 
services. If we neglect or ignore those accounts, we will not 
have the fighting force we need. I'd like your thoughts on 
that.
    Dr. Korb. Yes, Senator, that is an excellent point because 
you want to recruit the best and the brightest to come into the 
service, but if they do not have good education, they are not 
going to be able----
    Senator Gillibrand. Even good nutrition. I mean, we had a 
whole hearing in the Ag Committee [U.S. Senate Committee on 
Agriculture, Nutrition, and Forestry] about obesity, that so 
many of our recruits are coming in not physically fit and obese 
because our nutrition policy is not supporting fruits and 
vegetables and healthy foods in schools.
    Dr. Korb. Similarly, if you do not fund health adequately, 
for example, like we do through the Affordable Care Act, you 
are not going to have them come in. So, yes, it does contribute 
to national security.
    I think it is important to keep in mind something President 
Eisenhower did. When he built the federal highway system that 
we all use, basically he said that will contribute to national 
defense. After the Russians launched or the Soviets launched 
Sputnik, we needed a National Defense Education Act because if 
you want to bring in these people--and I go back to the point 
that Dr. Mahnken made--you are going to have more flexibility 
of people coming in and out of the service or not just coming 
in and you got to stay for 20 years if you want to get these 
people.
    The other thing. You know, your first question about 
military families--I got to tell you something. We have a 
policy about how long you should stay. The services violate it 
all of the time. They move people around. When I was there, I 
said, you know, you had 3 years of minimum, and people would 
come at their retirement system, like Colonel Wood said. This 
family moved around 18 times in 20 years. I said what happened 
to your policy. There are things that you can do.
    You can also look at the spouse's employment. If you have a 
chance to put a Navy person in San Diego or Norfolk and his or 
her spouse is a lawyer in Virginia, you ought to send him to 
Virginia. I mean, just things like that to try and get them, 
but the bureaucracy--oh, no. They have got to do more of this 
for the families because given the strain that they have been 
under for the last 15 years or so.
    Chairman McCain. Senator Tillis?
    Senator Tillis. Thank you, Mr. Chair.
    Senator Gillibrand, I am looking forward to serving with 
you on the Personnel Subcommittee because these are the kinds 
of things that we can do a better job of I think.
    Dr. Korb, I wanted to start with you. You said something in 
your opening comments and your answer to Senator Perdue's 
question. I liked all of your answers, but I liked your answer 
best. That had to do with sequestration. I am curious as to all 
your reactions.
    I have spent two years and I have spoken with a number of 
people in uniform who are very capable managers of the 
organizations that they are responsible for. Most of them have 
more of a concern with how they are allowed to spend the money 
than how much money they have to spend. I think a discussion 
about let us plus up defense spending so that we can plus up 
non-defense spending, some of which complements defense, some 
does not, is not necessarily the best way to start looking at 
how we do a better job of budgeting and executing in a more 
fiscally sound, sustainable way.
    I think that if we started by looking at sequestration for 
the person around the kitchen table to understand that 
sequestration is a blunt force object. It is a budgeting 
technique that would never be used in a Fortune 500 company 
because it would cut evenly your programs that are the most 
promising, most productive with those that are the least 
promising, least productive. Do you all agree with that?
    I want to get to something else, though, because I think we 
can only go so far with improving the fiscal execution of the 
DOD unless we recognize that some of the inherent 
inefficiencies are a product of decisions made by Congress. I 
remember when the 440th was removed from Pope Army Airfield 
last year speaking with someone in the Air Force who said, you 
know, Senator, we are sorry but it was sixth on the list. The 
question was, well, why not one through six? Well, they were 
protected by BRAC [Base Realignment and Closure] or they were 
protected by statutory action which made it impossible for us 
to do the thing that we wanted to do which was spend the least 
amount of money while preserving the best capability and 
readiness that we have.
    Has there been much work done over, say, modern history to 
say if you really want to set people before this committee and 
tell them to be more efficient and use the dollars more wisely, 
that you need to go back and relook at constraints that 
Congress has placed on them in Republican and Democrat 
administrations so that you can truly achieve the efficiency we 
would like to? I open that up to anyone.
    Dr. Korb. Yes. I think very definitely. People do not 
understand why you need a BRAC to close bases. Up until the 
late 1970s, the Pentagon could decide what bases it wanted to 
open, to close. Then the Congress put an amendment on that said 
before you did that, you had to basically do all these studies. 
They brought the process to a halt. I worked with the late 
Senator Goldwater to deal with this thing and that led to the 
setting up of the BRAC. We have not had a BRAC since 2005, and 
the Pentagon estimates about 20 percent excess capacity. Just 
think what you could do with some of that.
    Senator Tillis. My time is limited. Unless you all disagree 
with that--to me a part of what we have to do is transparency 
in these decisions. You know, when a decision is made that has 
a material effect on the presence of any area of the DOD, if it 
comes down to--while I recognize that maybe we are optimizing 
training, readiness, et cetera by moving here, a decision or a 
constraint that was placed on us is going to require us to 
sacrifice some of that because of the congressional mandates 
that you have on factors that have nothing to do with that. I 
think that our process really needs to start looking at that.
    I will fight for North Carolina when it makes sense for 
North Carolina. I would never advocate for a change in the 
recommendation from the DOD if I am completely convinced that 
that is a dime better spent in some other State.
    Do you agree that we have some work to do there as Members 
of Congress to really recognize that we are impeding some of 
their progress?
    Dr. Mahnken. Senator, absolutely. When it comes to 
infrastructure, when it comes to acquisition, when it comes to 
a whole host of areas, I would agree.
    Senator Tillis. Dr. Wood, I?ll let you finish.
    Mr. Wood. For a long time, sir, for the best of intentions, 
Congress will mandate some increase in pay raises, or what have 
you. The services realize that they have to take that burden 
for years and years and years, and they would much rather get 
an airplane back onto the flight line. Flexibility and 
accounting for service priorities where trying to execute the 
mission that the country is telling them to do I think would be 
greatly appreciated.
    Chairman McCain. I would just like to say to the Senator 
that Senator Reed and I are seriously considering the issue of 
BRAC, and obviously, we want to talk to the now Secretary of 
Defense about it. It is a little bit like sequestration. It is 
an act of cowardess. We cannot make the decisions ourselves. We 
leave it up to a commission. Frankly, the last commission made 
some very bad decisions, for example, closing Naval Air Station 
Cecil Field in Florida. Now we only have one base on the whole 
east coast, and that is Naval Air Station Oceana. This whole 
issue of Walter Reed. We need to talk about it and I think it 
has to be considered, as all things should be on the table. 
Like sequestration, it is kind of a cowardly act because it is 
authentication that we cannot make the tough decisions 
ourselves.
    Senator Peters?
    Senator Peters. Thank you, Mr. Chairman.
    Thank you to our panelists for very interesting testimony 
about an incredibly important topic as we are grappling with 
how to use taxpayer money as efficiently as possible and 
provide for, without question, the number one role of 
government, which is to keep us safe. I appreciate your 
thoughts on that.
    I would like to take a look at the future. I know several 
of you have mentioned how we prepare for future wars and that 
the landscape is changing. It is certainly a very dangerous 
world, but we are going to see a different type of war five, 
ten years from now than we see right now.
    When I had the opportunity to spend some time with General 
Mattis, I was struck by a comment that he made in which he said 
that he knows--when he was a battlefield commander, that he was 
really benefiting from decisions that were made 10 years prior 
to him being on the battlefield and investments that were made 
and equipment and personnel and strategic ideas that came up 
during that time.
    I would just be curious. As we are talking about budgeting, 
I do not want to ever fall in the trap that too many folks 
throughout history have, which we always prepare for the last 
war and spend a lot of money to fight the last war which never 
comes. There is always a new war. If each of you would tell me 
where you think we should be focusing for a war in the next 10 
years where we are simply not spending the type of money we 
should in a particular area. If you have an idea, I would 
certainly appreciate you sharing it. We can just go right down 
the panel.
    Mr. Wood. Senator, thank you. I think that the operative 
word here in all of this is ``additive.'' I know we are in the 
21st century, but if you look at what is going on in Ukraine, 
very non-21st century in many ways, multiple launched rocket 
systems, some of the warheads, artillery, armor, anti-armor 
fires. The idea of contests on the battlefield--your opponent 
figures out where you are strong and then does something 
different. You do not want to meet strength with strength. 
Right? You attack a vulnerability. It has to be additive.
    I think as we move forward, the military has to retain 
conventional capabilities while also improving its ability in 
cyber, hyper-velocity munitions, directed energy types of 
systems, the ubiquity of everything from social media and 
information types of campaigns to how you use satellites. I 
think it is additive.
    What I am driving at is the capacity within the force that 
is uncommitted to current operations so that they can do the 
types of experimentation that reveal the insights that you are 
looking for. Right now, the military is 100 percent committed 
to current ops and it has no capacity to do the sorts of things 
that you are looking for. It is additive, be called upon to do 
more.
    Senator Peters. Thank you.
    Dr. Mahnken. I would agree but also add that for decades 
the United States, U.S. military has enjoyed a unilateral 
advantage in being able to identify, track, and strike targets 
with precision, both fixed and increasingly mobile targets. 
That capability is spreading, and that which we have been able 
to do to our adversaries our adversaries very soon will be able 
to do to us. We will be subject to our adversaries' precision 
strike, whether from drones or from missiles or other means. 
That is a very different world. Not only will our forces be 
vulnerable, but increasingly the U.S. Homeland will be 
vulnerable not only to nuclear attack, which we have been for 
decades, but to precision conventional attack and cyber attack. 
I would say that that is a very different world, and even to 
the extent that many leaders will acknowledge that we are 
entering that world, as Mr. Wood said, we have not as a defense 
community, as a defense department really systematically 
thought through the deep implications of that not just for U.S. 
forces but for U.S. national security.
    Senator Peters. Thank you.
    Dr. Korb. Senator, I would take a look at what is called 
the Third Offset strategy, which I support as a strategy, but 
make sure that you fund it adequately. The Under Secretary of 
Defense for Acquisition has said, well, I do not have enough 
money to do it. I would give that a priority because, as Dr. 
Mahnken said, you want to maintain your technological edge.
    Cyber is something where you have to invest more in. It is 
not as expensive as some of the more traditional areas. I think 
you need to build a new generation of nuclear-powered 
submarines. I would not go with as many as they want, 12. I 
think you can do with eight or nine. I think you also need to 
build a new bomber because it has both a conventional and a 
strategic role.
    Senator Peters. Thank you. I am out of time.
    Thank you, Mr. Chairman.
    Chairman McCain. Senator Sullivan?
    Senator Sullivan. Thank you, Mr. Chairman.
    Gentlemen, thank you for your testimony. I very much 
appreciate the different issues you are focusing on.
    I want to kind of take an earlier focus when you were 
talking about the debt and the deficit and touch on a related 
topic with regard to our national security that I do not think 
often kind of gets tied into national security, and that is the 
strength of our economy just in general.
    The last 10 years, we have had a lost decade of economic 
growth. We have not had 3 percent GDP growth, which is not even 
that great for America. Our traditional rates of growth have 
been closer to 4 for the last 200 years. We have not had 3 
percent GDP growth in almost 15 years, not 1 year.
    Can you just tell us from your perspective--obviously, that 
would help on the deficit, on the debt. Just as a symbol of 
American power--you know, in the Reagan years, we were growing 
at 5.5, even 6 percent; the same with the Clinton years. Can 
you explain just how that helps us in terms of getting our 
national security objectives, not just our economic objectives, 
the attractiveness of a robust American economy which, to be 
honest, we have not had in well over a decade? I will offer 
that to anyone.
    Dr. Mahnken. Senator, well, I would say two things.
    The first is like Dr. Korb, I am not a fan of pegging 
defense to GDP, but certainly the more your economy is growing, 
the more affordable defense becomes. The more your economy is 
growing, the more vibrant it is, also the more innovations that 
that economy is producing.
    Senator Sullivan. Does it not also give us power to get 
things done when we are strong economically, particularly in 
Asia?
    Dr. Mahnken. It also I think gives confidence. You know, it 
gives the American people confidence in the United States in 
our international role, and it also gives our allies and our 
friends confidence in the United States as well. Conversely, I 
would say part of the questioning that we have had of America's 
international role has domestic roots because people do not 
feel confident in our economy at home.
    Dr. Korb. Senator, I think it is very important. You 
mentioned the 1990s. At the end of the decade of the 1990s, the 
Republican Congress and President Clinton had come up with a 
budget plan that not only balanced the budget but gave us a 
surplus and predicted that in the first decade of this century, 
the debt would be wiped out. Then we had the attacks of 9/11, 
the wars, as I mentioned early, we did not raise taxes to pay 
for. We ran up a big deficit. Then, of course, you had the 
economic collapse because of some decisions that were made in 
the 1990s in terms of some of the regulation of the banks. That 
is what we are recovering from right now.
    You are quite right. Go back. I mentioned about President 
Eisenhower said, you know, it is a robust economy that is going 
to enable us to eventually undermine the Soviet Union. We are 
not going to end up fighting them on the battlefield. It is 
important to keep in mind that it is very hard to be strong 
abroad if you are not strong at home. If you have a larger GDP, 
it allows you to do things.
    There are problems that you know better I do in terms of 
dealing with things like the age for Social Security. When I 
worked for President Reagan, we were able to move it up a 
couple of years. Maybe we ought to think about doing that 
again, for example, for certain people, or raising the amount 
that you pay Social Security taxes on that would help that.
    There are a lot of things that I think that the Congress, 
working with the new administration, can do to get our economy 
back up again. I happen to believe--free trade. I think the TPP 
and a lot of these others, North American Free Trade 
Agreement--that was the way to go. We should not be backing off 
from those.
    Senator Sullivan. Let me ask just one other question on 
another element of strengthening our national security, and 
that is our allies. As you all know and you have testified, we 
are an ally-rich Nation. Most of our adversaries or potential 
adversaries, whether it is Russia, China, Iran, North Korea, 
are ally-poor.
    Fortunately, I think a number of the Trump administration's 
cabinet officials, certainly General Mattis during his 
confirmation hearing testified about the importance of allies. 
I think Rex Tillerson has. The President in his inauguration 
address talked about deepening our traditional allies.
    Can you just talk briefly about just how important that is? 
Because I think there are some of our allies who are 
questioning our commitment, but to Americans, how important 
that is to strengthening our national security and what a great 
strategic advantage it is that we have these allies all around 
the world. Again, most of our adversaries do not have any.
    Mr. Wood. I would say the more allies you have, the more 
legitimacy you have in taking actions, the more access you have 
to regions, the expanded amplifying capability set that you 
have where the U.S. can bring some capabilities to bear. Our 
allies might have things that are more uniquely positioned in a 
given region. It allows you to shape an environment 
economically, diplomatically not only at the international 
level like U.N. [United Nations], et cetera, but even 
regionally in these regional consortiums of sorts of 
agreements, you know, in trade and access to resources and 
movement of people. You would much rather have more friends on 
your team than lacking friends, and I think the American people 
appreciate that. I think that money spent in ways that go to 
other countries are often criticized, but it is such a very 
small percentage of the budget and we reap such great benefits, 
you know, pennies on the dollar, so to speak, that this 
alliance structure should not only be appreciated but matured 
and expanded over time.
    Dr. Mahnken. Yes. I think if we start with the premise of 
your first question, just thinking about economic weight, I 
mean, our allies are not--it is not just numbers, but these are 
some of the biggest economies in the world. They add to our 
economic weight.
    We have allies because we have common interests, and we 
have allies because we share common values. I think it is 
worthwhile to keep both of those in mind. Where we have common 
interests and where we have common values, we have very deep 
alliances that are not only additive but I think in many cases 
also multiplicative of American power.
    Chairman McCain. I thank the witnesses. This has been very 
helpful, and we look forward to working with you and appreciate 
your being here today.
    This hearing is adjourned.
    [Whereupon, at 11:03 a.m., the hearing was adjourned.]

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