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BUDGETING FOR AMERICA’S 

NATIONAL SECURITY 

HEARING 

BEFORE THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD IN WASHINGTON, DC, JULY 7, 2011 

Serial No. 112–11 

Printed for the use of the Committee on the Budget 

( 

Available on the Internet: 

www.gpo.gov/fdsys/browse/committee.action?chamber=house&committee=budget 
(II) 

COMMITTEE ON THE BUDGET 

PAUL RYAN, Wisconsin, Chairman 

SCOTT GARRETT, New Jersey 

MICHAEL K. SIMPSON, Idaho 

JOHN CAMPBELL, California 

KEN CALVERT, California 

W. TODD AKIN, Missouri 

TOM COLE, Oklahoma 

TOM PRICE, Georgia 

TOM MCCLINTOCK, California 

JASON CHAFFETZ, Utah 

MARLIN A. STUTZMAN, Indiana 

JAMES LANKFORD, Oklahoma 

DIANE BLACK, Tennessee 

REID J. RIBBLE, Wisconsin 

BILL FLORES, Texas 

MICK MULVANEY, South Carolina 

TIM HUELSKAMP, Kansas 

TODD C. YOUNG, Indiana 

JUSTIN AMASH, Michigan 

TODD ROKITA, Indiana 

FRANK C. GUINTA, New Hampshire 

ROB WOODALL, Georgia 

CHRIS VAN HOLLEN, Maryland, 

Ranking Minority Member 

ALLYSON Y. SCHWARTZ, Pennsylvania 

MARCY KAPTUR, Ohio 

LLOYD DOGGETT, Texas 

EARL BLUMENAUER, Oregon 

BETTY MCCOLLUM, Minnesota 

JOHN A. YARMUTH, Kentucky 

BILL PASCRELL, JR., New Jersey 

MICHAEL M. HONDA, California 

TIM RYAN, Ohio 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

KATHY CASTOR, Florida 

HEATH SHULER, North Carolina 

PAUL TONKO, New York 

KAREN BASS, California 

PROFESSIONAL STAFF

AUSTIN SMYTHE, Staff Director 

THOMAS S. KAHN, Minority Staff Director 
(III) 

C O N T E N T S 

Page 

Hearing held in Washington, DC, July 7, 2011 .................................................... 1 

Hon. Paul Ryan, Chairman, Committee on the Budget ................................ 1 

Prepared statement of ............................................................................... 2 

Additional submission: 

Prepared statement of Hon. Peter T. King, Chairman, Committee 

on Homeland Security .................................................................... 62 

Hon. Chris Van Hollen, ranking minority member, Committee on the 

Budget ............................................................................................................ 3 

Prepared statement of ............................................................................... 5 

David E. Mosher, Assistant Director, National Security, Congressional 

Budget Office (CBO) ..................................................................................... 6 

Prepared statement of ............................................................................... 8 

Hon. Jim Talent, distinguished fellow, the Heritage Foundation, former 

U.S. Senator from the State of Missouri ..................................................... 8 

Prepared statement of ............................................................................... 11 

Dr. Gordon Adams, professor of international relations, School of International Service, American University, and distinguished fellow, 

Project on Budgeting for Foreign Affairs and Defense, Stimson Center .. 18 

Prepared statement of ............................................................................... 21 

(1) 

BUDGETING FOR AMERICA’S 

NATIONAL SECURITY 

THURSDAY, JULY 7, 2011 

HOUSE OF REPRESENTATIVES, COMMITTEE ON THE BUDGET, Washington, DC. 

The Committee met, pursuant to call, at 10:00 a.m., in room 210, 

Cannon House Office Building, Hon. Paul Ryan, [Chairman of the 

Committee] presiding. 

Present: Representatives Ryan, Garrett, Calvert, Akin, McClintock, Stutzman, Lankford, Ribble, Flores, Mulvaney, Huelskamp, 

Young, Amash, Woodall, Van Hollen, Schwartz, Kaptur, Doggett, 

Blumenauer, Yarmuth, Ryan of Ohio, Wasserman Schultz, Moore, 

Castor, and Tonko. 

Chairman RYAN. Welcome to the reason everybody came here 

today. Today’s hearing on the strategic choices we face in budgeting 

for our national security. I want to thank my colleague Mr. Van 

Hollen for requesting this hearing. We may differ over the appropriate level of defense spending, but we stand united in our commitment to America’s security and a strategy-based debate when it 

comes to funding our military. Indiscriminate cuts in defense 

spending that are budget-driven, and not strategy-driven, are dangerous to Americans here at home and to America’s interest in the 

world. Former Defense Secretary Gates put it quite well when he 

said, ‘‘That is math not strategy.’’ 

This Committee has examined, in depth over the last six 

months—and has advanced solutions to address—the fiscal challenges that stifle job creation today, threaten the economic security 

of American families and jeopardize our national security commitments, as well. 

Our fiscal crisis is above all a spending crisis driven by the 

growth of our major entitlement programs: Social Security, Medicare, and Medicaid—critical programs that help provide health and 

retirement security for millions of Americans. In 1970, these programs consumed about 20 percent of the federal budget. These 

autopilot spending programs now consume about 40 percent of the 

federal budget. 

Over the same period, defense spending has shrunk as a share 

of the federal budget from about 39 percent to 19 percent, even as 

we conduct an ambitious global war on terrorism. Clearly, defense 

spending is not driving our unsustainable fiscal path. There is, of 

course, considerable waste and inefficiencies at the Pentagon, 

which Secretary Gates did a great job of identifying. The Housepassed budget builds upon this effort, devoting $100 billion of the 
2 

savings the higher priority defense programs and $78 billion of savings to deficit reduction. 

We must work together to address the real drivers of our debt. 

We must advance solutions like those included in the House passed 

budget that strengthen our social safety net, save our critical 

health and retirement security programs, lift our crushing burden 

of debt, and spur economic growth and job creation. 

America remains the greatest force for human freedom the world 

has ever seen. Lifting millions out of poverty and liberating millions from the shackles of terror and tyranny. Our leadership in 

the world is threatened by a fiscal crisis from within, and the 

stakes could not be any higher. It is critical for our national security and our economic security that we advance solutions that 

match the magnitude of the challenges before us. I thank our witnesses for joining us today and for bringing considerable expertise 

to help us frame the strategic choices we face. We have David 

Mosher, did I pronounce it right is it Mosher? David Mosher serves 

as Assistant Director for CBO on National Security. We will also 

hear from a former colleague of ours here in the House, former 

Senator Jim Talent, who is now a distinguished fellow at the Heritage Foundation and a member of the bipartisan panel that provided an independent assessment of the most recent QDR. Welcome back Jim, it is good to see you. We also have Dr. Gordon 

Adams, a distinguished fellow at the Stimson Center and a former 

national security budget official during the Clinton Administration. 

The final point I want to make is this—a sentiment that I know 

Mr. Van Hollen shares: The men and women in uniform are not 

mere line items on our federal budget. Our budget debates must 

never lose sight of our solemn obligation in Congress to provide our 

troops fighting overseas with the resources they need to successfully complete their mission, and our commitment to them upon 

their return. We owe a debt of gratitude to our military families 

that have taken untold sacrifices for our security and our freedoms 

we hold dear. I want to thank the witnesses, and I now yield to 

Mr. Van Hollen for his opening statement. 

[The prepared statement of Chairman Paul Ryan follows:] 

PREPARED STATEMENT OF HON. PAUL RYAN, CHAIRMAN, 

COMMITTEE ON THE BUDGET

Welcome all to today’s hearing on the strategic choices we face in budgeting for 

our national security. 

I want to thank my colleague Mr. Van Hollen for requesting this hearing. We may 

differ over the appropriate level of defense spending, but we stand united in our 

commitment to America’s security and a strategy-based debate when it comes to 

funding our military. 

Indiscriminate cuts in defense spending that are budget-driven and not strategydriven are dangerous to Americans here at home and to America’s interests in the 

world. Former Defense Secretary Gates put it well: ‘‘that’s math, not strategy.’’ 

This Committee has examined in depth over the last six months—and advanced 

solutions to address—the fiscal challenges that stifle job creation today, threaten the 

economic security of American families, and jeopardize our national security commitments as well. 

Our fiscal crisis is above all a spending crisis driven by the growth of our major 

entitlement programs: Social Security, Medicare, and Medicaid—critical programs 

that help provide health and retirement security for millions of Americans. 

In 1970, these programs consumed about 20 percent of the federal budget. These 

autopilot spending programs now consume 40 percent of the budget. 
3 

Over the same period, defense spending has shrunk as a share of the federal 

budget from about 39 percent to 19 percent—even as we conduct an ambitious global war on terrorism. 

Clearly, defense spending is not driving our unsustainable fiscal path. There is, 

of course, considerable waste and inefficiencies at the Pentagon—which Secretary 

Gates did a great job of identifying. The House-passed budget builds upon this effort—devoting $100 billion of savings to higher priority defense programs and $78 billion to deficit reduction. 

We must work together to address the real drivers of our debt. We must advance 

solutions, like those included in the House-passed budget—that strengthen our social safety net, save our critical health and retirement security programs, lift our 

crushing burden of debt, and spur economic growth and job creation. 

America remains the greatest force for human freedom the world has ever seen, 

lifting millions out of poverty and liberating millions from the shackles of terror and 

tyranny. Our leadership in the world is threatened by a fiscal crisis within—and the 

stakes could not be higher. 

It is critical for our national security and our economic security that we advance 

solutions that match the magnitude of the challenges before us. 

I thank our witnesses for joining us today, and for bringing considerable expertise 

to help us frame the strategic choices we face. 

David Mosher serves as the assistant director of the Congressional Budget Office 

for national security. 

We’ll also hear from a former colleague of ours here in the House, former Senator 

Jim Talent who is now a distinguished fellow at the Heritage Foundation, and a 

member of the bipartisan panel that provided an independent assessment of the 

most recent Quadrennial Defense Review. Welcome back Jim. 

We also welcome Dr. Gordon Adams, a distinguished fellow at the Stimson Center, and a former national security budget official during the Clinton Administration. 

A final point worth keeping in mind today—a sentiment that I know Mr. Van Hollen shares: the men and women in uniform are not mere line-items on the federal 

budget. 

Our budget debates must never lose sight of our solemn obligation in Congress 

to provide our troops fighting overseas with the resources they need to successfully 

complete their mission, and our commitment to them upon their return. 

We owe a debt of gratitude to the military families that make untold sacrifices 

for our security and our freedoms we hold dear. 

Thank you to our witnesses—and to all for joining in today’s discussion, and with 

that, I yield to the Ranking Member, Mr. Van Hollen. 

Mr. VAN HOLLEN. Thank you. Thank you Mr. Chairman, and 

thank you for holding these hearings. As you indicated we requested a few months ago a hearing on the role of defense spending, security spending within the overall budget as well as a hearing on tax expenditures at some point; and I thank you for holding 

the hearing today. I hope we can do the other one. And I want to 

join the Chairman in welcoming all our distinguished witnesses 

hear today. The Congressional Budget Office just released a new 

updated report on the Pentagon’s current plans that concludes historical cost growth will continue to put upward pressure on the 

budget at a time of large deficits, and we will hear more about that 

today. As Republicans and Democrats come together to work out a 

plan to get deficits and debt under control, we must get a better 

understanding of all the elements of the budget that continue to 

put pressure on the budget’s bottom line and what options we 

should explore to get the most out of every tax dollar spent. There 

is no higher priority than providing for the security of our country 

and I join the chairman in expressing our gratitude to the men and 

women in the military who help keep our country strong. We all 

want a military that is second to none, but during this difficult fiscal period we have to be much smarter and more efficient in how 

we go about providing for one. The economy, the source of our ability to provide for a strong security apparatus, is at risk because of 
4 

large deficits and rising debt over time. Admiral Mike Mullen, the 

Chairman of the Joint Chiefs of Staff, warned the policymakers of 

this growing risk when he stated, ‘‘Our national debt is our biggest 

national security threat.’’ 

Over the last decade the base Pentagon budget has nearly doubled, and spending at the Pentagon is now at its highest level since 

World War II. The United States currently outspends the world’s 

second largest military, China, by a factor of 7-1. Roughly $700 billion to $100 billion, and from 2001 to 2010, security spending including Pentagon, State Department, VA, and Department of 

Homeland Security, excluding emergencies and war costs, grew on 

average 1.5 percent per year more than non-security spending. 

Over the last decade the Pentagon was able to avoid making difficult choices because of this permissive funding environment. This 

is not my opinion, it is the opinion of the highest ranking officer 

in our military, Admiral Mullen said, and again I quote, ‘‘With the 

increasing defense budget, which is almost double, it has not forced 

us to make the hard trades. It has not forced us to prioritize. It 

has not forced us to do the analysis.’’ 

We can no longer afford to spend tax payer resources without ensuring every dollar is efficiently and effectively invested. There is 

now bipartisan consensus that all spending, including spending at 

the Pentagon, must be on the table as we figure out how to get our 

finances back on track. Many Republicans have expressed their 

support for reviewing defense spending to find savings, including 

Governor Haley Barbour, former Majority Leader Dick Armey, 

former Senator and three-term Chairman of the Senate Budget 

Committee Pete Domenici, and many others. Even in this year’s 

Defense Appropriations Bill, Chairman of the Appropriations Committee, Hal Rogers, and Appropriations Defense Subcommittee, Bill 

Young, made the case that Defense cannot be excluded from this 

debate. Others have proposed far deeper cuts to security spending. 

The President’s Fiscal Commission, co-chaired by Democrat Erskine Bowles, and Republican former Senator Alan Simpson, proposed more than a trillion dollars in cuts to security programs over 

10 years, including illustrative examples of how to save $100 billion per year at the Pentagon as part of a balanced plan to reduce 

the deficit. A majority of the commissioners voted to approve that 

plan by vote of 11 to 7, including a number of Republican Senators. 

Even in this committee, where agreement is hard to come by, the 

notion that all spending, including spending at the Pentagon, needs 

to be on the table was agreed to by a majority of the members this 

spring in Sense of the House language. So where do we look for 

savings? We should look at all aspects of the budget, but the very 

first item to examine should be inefficiencies and wasteful practices. 

After years of trying, the DOD is still the one agency, the one 

agency that cannot pass a standard audit. It does not keep track 

of the number of service contractors even though it spends roughly 

$200 billion a year on such contracts. Major weapon acquisition 

programs have experienced hundreds of billions of dollars in cost 

overruns in recent years. The GAO recently estimated cost growth 

of these weapon systems totaling $300 billion, and the GAO has 

identified a number of persistent, high-risk management areas at 
5 

the Department that need improving. There are also seemingly 

endless examples of stories of abusive contracting practices. 

Last Friday, Leon Panetta was sworn in as Secretary of Defense, 

someone who is well prepared to deal with our fiscal challenge because of his vast security and budget experience. He released a 

message on Friday saying, ‘‘A choice between fiscal discipline and 

a strong national defense is a false choice.’’ I agree with the incoming Secretary of Defense in that regard. We can make both tough 

decisions to put spending at the Pentagon on a more affordable 

path and still maintain a military that is second to none. Again, 

Mr. Chairman, thank you for holding this hearing. The Defense Department budget alone makes up approximately one-fifth of the entire federal budget, and more than half of all discretionary spending. So I think this hearing is an important exercise in our oversight responsibilities. Again, thank you. 

[The prepared statement of Chris Van Hollen follows:] 

PREPARED STATEMENT OF HON. CHRIS VAN HOLLEN, RANKING MINORITY MEMBER, 

COMMITTEE ON THE BUDGET

I would like to thank the Chairman for holding this hearing. I requested a couple 

of months ago that we hold a hearing on Pentagon spending and tax expenditures 

and I welcome this opportunity today. I would also like to join you in welcoming 

our witnesses. Mr. Mosher, Senator Talent, and Dr. Adams, thank you for coming 

today to share your views and analysis on the Pentagon’s budget and budgeting for 

our national security in general. 

The Congressional Budget Office just released a new updated report on the Pentagon’s current plans that concludes historical cost growth will continue to put upward 

pressure on the budget at a time of large deficits. This report is very timely. As Republicans and Democrats come together to work out a plan to get deficits and debt 

under control, we must get a better understanding of all the elements of the budget 

that continue to put pressure on the budget’s bottom line and what options we 

should explore to get the most out of every tax dollar spent. 

There is no higher priority than providing for the security of our country. We all 

want a strong military that is second to none, but during this difficult fiscal period 

we have to be much smarter and efficient in how we go about providing for one. 

The economy—the source of our ability to provide for a strong security apparatus— 

is at risk because of large deficits and rising debt. Admiral Mike Mullen, the Chairman of the Joint Chiefs of Staff, warned policy makers of this growing risk when 

he stated, ‘Our national debt is our biggest national security threat.’ 

Over the last decade, the ‘base’ Pentagon budget has nearly doubled, and spending at the Pentagon is now at its highest level since World War II. The U.S. currently outspends the world’s second largest military—China—by a factor of seven 

to one (roughly $700 billion to $100 billion). And from 2001 to 2010, security spending (including funding for the Pentagon, State Department, VA, and Department of 

Homeland Security), excluding emergencies and war costs, grew on average 1.5 percent more per year than non-security spending. 

Over the last decade the Pentagon was able to avoid making difficult choices because of this permissive funding environment. This isn’t my opinion; it is the opinion of the highest ranking officer in our military. Admiral Mullen said, ‘‘* * * with 

the increasing defense budget, which is almost double, it hasn’t forced us to make 

the hard trades. It hasn’t forced us to prioritize. It hasn’t forced us to do the analysis.’’ 

We can no longer afford to spend taxpayer resources without ensuring every dollar is efficiently and effectively invested. There is now bipartisan consensus that all 

spending, including spending at the Pentagon, must be on the table as we figure 

out how to get our finances back on track. Many Republicans have expressed their 

support for reviewing defense spending to find savings, including Governor Haley 

Barbour, former Majority Leader of the House Dick Army, and Former-Senator and 

three-term Chairman of the Senate Budget Committee, Pete Domenici. 

Appropriations Committee Chairman Hal Rogers and Defense Appropriations 

Subcommittee Chairman Bill Young also made the case that defense cannot be excluded from this debate when they brought a defense appropriations bill to the 
6 

House floor that, while still increasing defense funding over this year’s level, contained $9 billion in cuts below the President’s February budget request for 2012. 

Others have proposed far deeper cuts to security spending. The President’s Fiscal 

Commission, co-chaired by Democrat Erskine Bowles and Republican Former-Senator Alan Simpson, proposed more than $1 trillion in cuts to security programs over 

ten years, including illustrative examples of how to save up to $100 billion per year 

at the Pentagon, as part of a balanced plan to tame deficits. A majority of Commissioners voted to approve that plan by a vote of 11 to 7. 

Even in this committee, where agreement is hard to come by, the notion that all 

spending, including spending at the Pentagon, needs to be on the table was agreed 

to by a majority of its members this spring. The Committee voted to include ‘Sense 

of the House’ language to that effect in the 2012 budget resolution. 

So, where do we look for savings? While we should examine all aspects of the Pentagon budget, the very first item to examine should be inefficiencies and wasteful 

practices. After years of trying, DoD still can’t pass a standard audit. It doesn’t keep 

track of the number of service contractors it has even though it spends roughly $200 

billion per year on such contracts. Major weapons acquisition programs have experienced hundreds of billions in cost overruns in recent years; the Government Accountability Office (GAO) recently estimated cost growth of these weapons systems 

totaling $300 billion. GAO has identified a number of persistent high-risk management areas at the Department that need improving. There are also seemingly endless stories of abusive contracting practices. The most recent example is one uncovered by a government report showing that Boeing overcharged DoD for a number 

of spare parts it was providing. One spare part was marked up 177,000 percent 

above its cost. 

Last Friday, Leon Panetta was sworn in as Secretary of Defense, someone who 

is well-prepared to deal with our fiscal challenges because of his vast security and 

budget experience. He released a message on Friday saying that a choice between 

fiscal discipline and a strong national defense is a false choice. I believe he is correct. We can make both the tough decisions to put spending at the Pentagon on a 

more affordable path and still maintain a military that is second to none. 

Chairman Ryan, thank you for holding this hearing on the security budget. The 

defense budget alone makes up approximately one fifth of the entire Federal budget 

and more than half of all discretionary spending. It is important that we exercise 

as much oversight as we can over such a large piece of the budget. 

Again, I thank our witnesses for coming today and I look forward to hearing their 

testimony. 

Chairman RYAN. Thank you. Thank you, Mr. Van Hollen. We 

will begin with our testimony. I asked our witnesses if they could 

keep it to five minutes and then they will be able expand on all 

of their points in the Q and A. We will start with Mr. Mosher, and 

Senator Talent, then Dr. Adams. Mr. Mosher the floor is yours, and 

put the mic right up to your faces. 

STATEMENTS OF DAVID E. MOSHER, ASSISTANT DIRECTOR, 

NATIONAL SECURITY, CBO; JIM TALENT, DISTINGUISHED 

FELLOW, THE HERITAGE FOUNDATION; AND GORDON 

ADAMS, DISTINGUISHED FELLOW, THE STIMSON CENTER 

STATEMENT OF DAVID E. MOSHER, ASSISTANT DIRECTOR, 

NATIONAL SECURITY, CBO 

Mr. MOSHER. Thank you Mr. Chairman. Thank you Congressman 

Van Hollen. Members of the Committee, I appreciate the opportunity to appear before you today to discuss CBO’s recent analysis 

of the long term implications of DOD’s budget request. DOD’s plans 

are outlined in the Future Years Defense Program, or FYDP, for 

2012-2016 period and in documents it is published on its long-term 

procurement plans. Because decisions made in the near-term can 

have long-term consequences for the defense budget, CBO projected 

the costs of DOD’s plans for its base budget, that is, DOD’s budget 

without war costs, from 2012 through 2030. CBO has projected 

what it would cost to execute those plans using cost factors that 
7 

are consistent with DOD’s recent experience. CBO’s detailed analysis was released last week and can be found on our website, but 

I want to emphasize that our analysis is intended to highlight the 

cost of executing the current plan. It is not an analysis of affordability or the requirements for defense; nor is it a prediction of likely actions taken by lawmakers. 

CBO’s analysis yielded the following conclusions. DOD anticipates that the base budget will grow about six percent in real 

terms over the next five years from $536 billion in 2011 to $569 

billion in 2016 in order to execute its plans. I am using 2012 dollars in my presentation today. CBO on the other hand projects that 

that funding would have to grow about 11 percent in real terms 

over that same period or almost double what DOD estimates. 

In 2030, CBO projects that DOD would need a budget of $642 

billion to execute its current plans, an increase of 20 percent in 

real terms over what you guys appropriated in 2011. The primary 

cause of growth through 2030 would be the rising costs for operation and maintenance plus those for military personnel. In particular, CBO projects that there will be significant increases in the 

cost for military health care, military and civilian compensation, 

and various other Operation and Maintenance activities. If you 

could put Slide 1 up please. 

As you can see from the top line in Slide 1, that is projected on 

the screen, it is Figure 3 in the prepared statement. The O and M 

line, which is that top line, grows rapidly over the FYDP and beyond. In fact it is the largest growing, the fastest growing of all 

those—a total of 42 percent growth from 2011 to 2030. The military 

personnel account, which is the next line down from the top, provides pay and most benefits to our soldiers, grows at about 26 percent over that same period. 

CBO projects that together those two lines would consume about 

71 percent of the budget in 2030, up from 63 percent of the budget 

today if DOD does not change the size of its force structure beyond 

2016. In other words, the same force will continue to cost more and 

more every year. The growth in those two accounts represents the 

largest budget challenge to DOD in future years, particularly if defense budgets are cut below 2012 levels. I just want to point out, 

by contrast the procurement account would grow rapidly through 

2019 but then start to fall thereafter. Growth in the Operations 

and Maintenance account is driven in part by rapid growth in the 

military health system. More than nine million active duty, reserve, and retired military personnel and their families are eligible 

for this benefit. CBO projects that the cost for the military health 

system will nearly double in real terms from 2011 to 2030. By far 

the fastest growing major component in DOD’s budget. 

Compared to levels in 2000, costs will quadruple by 2030. If you 

could show the next slide please. The figure on the screen, which 

is Figure 4 in my prepared statement, illustrates the growth in 

CBO’s projection. Rapid growth would occur in all categories of 

costs in the military health system except the cost of military personnel, which is that bottom category, which will grow much more 

slowly. The growth rates for military health systems have been significantly higher than the rates in the national health care costs 

over the past five years, and CBO projects those differences will 
8 

persist. For example, DOD spending per user, for purchased and 

direct care, grew at three times the national rate from 2006 to 

2010. 

An important contributor to that increase are the accrual payments for TRICARE for Life, a benefit that Congress added in 

2002. You can see the top category in the figure there in light blue. 

TRICARE for Life wraps around Medicare, significantly reducing 

out-of-pocket costs for beneficiaries who are eligible for both programs. They are generally military retirees and their spouses after 

reaching age 65. This leaves DOD with few tools to control these 

beneficiaries’ utilization of services. It also has the effect of increasing Medicare spending, as well. Once again, I want to thank you 

for the opportunity to appear before you and discuss our analysis, 

and I look forward to your questions. 

[The prepared statement of David E. Mosher may be accessed at 

the following Internet address:] 

http://cbo.gov/ftpdocs/121xx/doc12162/07-07-FYDP_Testimony.pdf 

Mr. GARRETT [presiding]. I thank the gentleman, Congressman. 

STATEMENT OF JIM TALENT, DISTINGUISHED FELLOW, 

THE HERITAGE FOUNDATION 

Mr. TALENT. Thank you Mr. Chairman. I remember the frequency with which I would read full statements when I was on 

your side of the table. So I am going to recap what I have to say 

and then make one observation, and then I would be happy to accept your questions and respond to them. In recapping my statement, let me give a little bit of a historical overview. I think that 

is the best way to do it. I came to the House in 1993, which coincided with the beginning of the post-Cold War policies and the 

Peace Dividend that the government took at the time. The force 

structure many of you know this, was cut by approximately 40 percent across all three services. Procurement was at the time cut by 

even more than the force structure was cut. They took a procurement holiday. As I pointed out in my statement, there was one year 

when they did not buy a fighter aircraft for the Air Force; the reason for that was the assumption that we would not have to put 

boots on the ground in the future, the assumption that for at least 

10 years there would be no existential threat to the United States. 

These assumptions, by the way, continued through, mostly, 

through the 1990’s, and the assumption that by modernizing the 

platforms and modernizing the force it would make each service 

member less vulnerable and more lethal and more capable so that 

we would be able to accept a smaller force and fewer platforms. 

Then modernization was cut in the 1990s. At the same time, as 

Bob Gates has pointed out, we found out that history had not 

ended; it had just thawed out with a vengeance and deployments 

went up. Every president in the post-war era has sustained the 

commitments made by his predecessor and added to them, and that 

includes this president, who has sustained his predecessor’s commitment, increased what we did in Afghanistan, and has now announced a responsibility to protect. And I do not intend to be critical of that; it just shows how busy our forces have been protecting 

American interests around the world. 
9 

Then 9/11 occurred, spending on defense did go up but it was 

largely eaten up by costs that were generated by the decisions in 

the previous decade. Operation and Maintenance has gone up because when you increase deployments and you cut the number of 

platforms and you do not modernize, maintenance goes up because 

you are trying to keep legacy inventory and operation. Compensation has gone up. I think that was justified, but it was also necessary because when you put this kind of stress on a volunteer 

force you have to pay people more. 

Well, the upshot is that chickens are now coming home to roost. 

We have kicked the modernization can down the road as far as we 

can and now we have a force which is losing crucial capabilities. 

The Navy is the smallest it has been since 1916. The Air Force is 

the smallest and the oldest it has been since the inception of the 

service. The Army’s missed several generations of modernization. 

The Army is not ready outside of the forces that are committed into 

combat. The tip of the spear is sharp, but they get that way by 

cannibalizing the rest of the spear. So if the balloon goes up some 

place else we are going to send in troops that do not have enough 

training and do not have the equipment, even the legacy equipment 

that they need, and that is why the panel which you all created 

which was consisted of people appointed by the leaders of Congress 

and the administration, the Perry-Hadley Panel, and I mention 

this extensively in my remark, concluded that a train wreck is coming in the area of force capability because we have to modernize 

the force. Now we have a modernization crisis and we have to increase the size of the Navy. 

That, in sum, is my remarks. I do want to add one observation; 

I know that the budget times are difficult. It is an unusually difficult time and maybe unusually difficult to do what could have 

been done any time in the last 15 years to put in the funds that 

are needed to modernize and recapitalize the force and increase the 

size of the Navy, but at least recognize that there is a problem. Do 

not, because you cannot solve it right now, try and pretend that 

there is no problem. There is a problem. If you recognize that there 

is a problem it gives a sense of urgency to doing the things that 

you can do. 

I mention in my written statement, for example, it would be a 

very good thing if we could increase foreign military sales because 

the defense industrial base is very fragile now. Well, we can carry, 

we can support that industrial base and carry some of these programs if we have more sales, but it is very difficult because we 

have an archaic system of approving these things and it takes a 

long time. You guys have probably studied it. Well if you accept the 

fact that there is a problem and we need to do something about it, 

you will approach that kind of a reform with a much greater sense 

of urgency. 

CBO talks about the need to reduce the costs of military retiree 

health care. I would agree with that and I think it is possible to 

do that without threatening the quality of that health care. We 

need to meet with the retirement community and their leaders, and 

we need to work something out. There is an urgency in doing that 

if you recognize that we are losing capabilities: air superiority, 

amphib capabilities, the ability of the Army to move quickly and 
10 

move efficiently and effectively when it needs to. There is a bunch 

of things that you can do. 

The other thing is if you recognize that there is a problem you 

can be opportunistic when the time comes. I have written in other 

forms about the stimulus bill. It was a decision to stimulate the 

economy by spending about $800 billion. I did not agree with it as 

a matter of fiscal policy but when I heard the government was 

going to do it, I thought, well now here is an opportunity to address 

some of these needs. For about a third of that money set aside judiciously over five to 10 years, combined with the procurement reforms that we need, we have could have taken care of this problem. 

Even if procurement and modernization had gotten the same percentage of that money that the DOD gets in any given fiscal year, 

we could have done a lot. We could have kept the F-22 line open; 

we needed to keep that line open as a hedge against the fact that 

the Russians and the Chinese are still building fifth generation airto-air superiority fighters. We could have bought F-18s as a hedge 

against the fact that you may not buy out the F-35 requirement. 

We could have gone to production of a higher rate production of 

Virginia Class submarine earlier. We could have had the money 

available to reset the Army after these conflicts, and there would 

have been money left over. And I think had this body been conscious as a body, had we made the decision to recognize and confront the fact that there was a problem, there is a very good chance 

that that money would have been there. It would have been spent 

in American industries, high paying American jobs, which was the 

logic behind the bill. But instead there was no money spent on 

modernization or procurement, and I think that is because we did 

not confront the problem. 

I think there would have been a greater sense of urgency last 

year about passing a defense appropriations bill. I am not going to 

comment on that greatly but you all know, the failure to pass the 

bill and funding it through CRs did damage to the way the department operates, and that was not even a money issue. And I think 

there would be a greater sense of urgency now, at least, to try and 

do what Secretary Gates has said for several years needs to be 

done, which is to pass budgets that have modest real increases in 

the defense budget, along with the savings that we are trying to 

get, so that we can at least stop the bleeding until the budget situation is resolved and we have more funds to address the modernization crisis. 

I will conclude by saying what I said in the statement. Yes, there 

is a price to strength. There is an upfront cost to it. There is a price 

to weakness too, and we have been living with it. The reason that 

Operation and Maintenance budget is going up the way it is going 

up is they have to take care of legacy equipment that is breaking 

down. Some of it has mission capable rates of 50 percent. So you 

are shoveling money in without getting the value because we have 

not recognized the problem and we have not committed ourselves 

to a solution. 

I understand the situation that you are in. You have a very difficult job in the best of times, and these times it is extremely difficult, at least confront the problem, and at least approach with a 

sense of urgency the things that we can do. Thank you. 
11 

[The prepared statement of Jim Talent follows:] 

PREPARED STATEMENT OF HON. JIM TALENT, DISTINGUISHED FELLOW, THE HERITAGE

FOUNDATION, FORMER U.S. SENATOR FROM THE STATE OF MISSOURI

Mr. Chairman, I am former Senator Jim Talent, from Missouri. I served in the 

United States Senate from 2002-2007 and I was privileged to be a member of the 

House from 1993-2001. During my years of service, I was a member of the Armed 

Services Committees in both bodies. I am currently a Distinguished Fellow at The 

Heritage Foundation focusing on defense and national security, though the views I 

will express today are my own. 

I want you to know that I greatly value the work of this Committee and I honor 

and appreciate the work of every Member here. In the best of times you must make 

difficult choices; in these times your choices are particularly unpalatable. 

You have asked me to testify regarding ‘‘Budgeting for America’s National Security.’’ I will focus my remarks on the condition of America’s military today and its 

likely condition in the future given current trends. 

Mr. Chairman, when I was on your side of the table, I always appreciated witnesses who stated their views plainly and with candor, because finding a solution 

requires first and foremost being willing to recognize the extent of the problem. In 

that spirit I will give you my conclusion about the state of America’s military. Despite the dedicated efforts of our servicemen and women—who are among the finest 

who ever served any country—America’s military strength is declining, both absolutely and relative to the dangers which confront us. The rate of decline is growing, 

and will soon reach a point—if the point has not been reached already—where our 

military leaders will not be able to honestly guarantee America’s security within an 

acceptable margin of risk. 

Allow me to briefly survey some history to explain how the current state of affairs 

came about. 

After the Berlin Wall fell and the Cold War ended, many in Washington believed 

that the United States had entered an indefinite period of peace. Because of that, 

the government took too large of a ‘‘peace dividend’’ out of the defense budget. The 

size of the military was cut by approximately 40-50 per cent across all the services. 

Then in the mid-1990s, the government took what was called a ‘‘procurement holiday.’’ It reduced modernization budgets, and reduced the rate at which it bought 

ships, planes, helicopters, tanks, and other inventory, far more than the size of the 

force was cut. There was one year, for example, when the United States did not purchase a single tactical fighter jet for the Air Force. 

Yet as it turned out, the end of the Soviet threat did not bring global peace. To 

paraphrase Secretary Bob Gates, history had not ended; it had only been frozen, and 

in the post-Cold War years it thawed out with a vengeance. All the regional, religious and ethnic rivalries that had been suppressed beneath the Soviet/American 

competition came to the surface, and the United States used its military to manage 

the resulting conflicts. In the last twenty years, and beginning well before the 9/ 

11 terrorist attacks, the American military has deployed at a far greater rate than 

was ever the case during the Cold War. America has fought four major regional conflicts—in Bosnia, Kuwait, Iraq, and Afghanistan. It is beginning a fifth conflict now, 

in Libya; at this point, no one knows what the extent or duration of that mission 

will be. In addition, the military has engaged in a wide variety of other missions— 

from fighting the drug war, interventions in places like Somalia, stopping piracy, 

and delivering humanitarian aid—most of which would have been unthinkable during the Cold War. 

It’s the age old lesson our government never seems to learn. Ignoring the potential for conflict does not make the conflict go away. Failing to prepare for a mission 

does not make the mission less necessary or less likely. In fact, there are some conflicts that are more likely precisely to the extent that we do not prepare for them, 

because the purpose of military capability is not just to win wars but to deter them. 

Mr. Chairman, this highlights a benefit of military preparedness that your Committee cannot score in dollars but which is nevertheless very real: the savings from 

missions that do not happen because military power deters conflict from occurring. 

An excellent example is America’s presence in the Northwest Pacific. During the 

first half of the 20th century, there were three wars in that region involving Russia, 

China, Japan, and Korea. During the last half of the 20th century, there were no 

wars. That’s at least in part because after the Korean conflict, America created and 

sustained equilibrium in the region that has prevented conflict and promoted peaceful development. That equilibrium has proven beneficial to the United States and 

to the world. That is also why the four American Presidents in the post-Cold War 

era have continued America’s presence in Korea. If our footprint there were to be 
12 

eliminated, decreased stability could end up costing far more than the burden of 

maintaining America’s presence in the first place. 

Here is another relevant example. In the 1990s, the active duty Army was cut 

from 18 to 10 divisions, on the assumption that America would not need to commit 

large numbers of troops on the ground for long periods of time. That assumption 

was driven at least in part by the desire to save money rather than by sound national security planning. As it turned out, two different Administrations decided— 

in each case with strong support from the Congress—that there was a need for large 

numbers of boots on the ground in Iraq and Afghanistan. Yet because the Army had 

become so small, its rotational base was inadequate, which is why the Reserves 

have been constantly mobilized and so many of our troops have had to do four or 

five tours of combat duty in the Mid-East. There is at least a substantial chance 

that if the Army had been bigger, America could have surged troops in Iraq and 

Afghanistan at the same time, and shortened one or both of the missions. If so, the 

savings would have dwarfed any savings that were achieved by the original cuts— 

not to mention the lives that would have been saved, the reduced stress on our servicemen and women, and the increased confidence at home and abroad that would 

have resulted from a more effective operation. 

Here is another point. I’m sure you are all aware that the cost of pay and benefits 

for the military is continuing to increase substantially. Now, our servicemen and 

women deserve every dollar they get. But there is no question that because the force 

was too small to support the increased operational tempo of the last twenty years, 

extra money had to be spent for pay, bonuses and benefits in order to protect recruitment and retention. 

Mr. Chairman, my point is this. There is unquestionably a cost to sustaining military strength, and the Budget Committee must take that cost into account. But 

there is also a price to be paid for weakness; it can be very substantial and if the 

Committee is going to budget honestly you must take that into account as well. 

The upshot is that in the last two decades, the combination of increased deployment, reduced force structure, and underfunded procurement and modernization has 

caused a decline in America’s military capability. In the late 1970s, America’s military ‘‘hollowed.’’ Now it is stressing and rusting; inventories are aging and increasingly out of date technologically. The Navy has fewer ships than at any time since 

1916. The Air Force inventory is smaller and older than at any time since the service came into being in 1947. The Army has missed several generations of modernization, and many of its soldiers are on their fourth or fifth tour of duty in Iraq or 

Afghanistan. The Reserves have been on constant mobilization and are under stress; 

many vital programs, such as missile defense, have been cut; the space architecture 

is old and needs to be replaced; and in the past two years, no fewer than 50 modernization programs have been ended. 

In fact, there are very few major modernization programs that are still actively 

underway at the Pentagon. As a result, each of the services has pressing needs that 

are largely unmet: 

• The Air Force must replace the fighter inventory, develop new cargo and tanker 

assets, build a new bomber, and increase long-range strike capability. 

• The Navy must increase the number of submarines, sustain the number of aircraft carriers, develop a new cruiser, replace the aviation inventory on the carrier 

decks, buy more destroyers, and buy out the requirement of new littoral combat vessels. 

• The Army must, at minimum, sustain the number of troops at current levels 

as well as modernize and replace its inventory of fighting vehicles, and procure a 

next-generation attack helicopter—all supported by a more robust and secure battlefield network. 

• The Marines must restore their amphibious landing capability and acquire both 

Harrier and A-10 replacements, while allotting sufficient funds to fix and replace 

equipment worn out from a decade of war. 

These programs are not luxuries, but needs. Without them, the United States will 

lose basic capabilities that everyone has come to take for granted. For example, if 

current shipbuilding rates continue, the number of American naval vessels will continue to decline and the United States will no longer have a global Navy. The Marines have already lost considerable amphibious capability and are losing more, 

which means the Marines will no longer be able to storm the beaches. They have 

already lost a considerable portion of their amphibious capability. Because of Russian and Chinese advances in fighter capability, and the end of the F-22 production 

line, America’s traditional air superiority is eroding. According to Lieutenant General David Deptula, recently departed Deputy Chief of Staff for Intelligence in the 

U.S. Air Force, ‘‘For the first time, our claim to air supremacy is in jeopardy * * * 

The dominance we’ve enjoyed in the aerial domain is no longer ours for the taking.’’ 
13 

I said before that American strength is declining not only in absolute terms but 

relative to the risks we are confronting. Time does not permit me to survey all the 

risks confronting the United States, but I will offer two observations: about the conflict against terrorism and the implications of China’s growing power. 

First, for the purposes of this testimony, it’s not necessary to speculate on the current status of the war against terrorism. What we do know is this. Whether the 

President’s drawdown of our troop surge in Afghanistan works or not, and whatever 

else happens there, America is going to maintain a substantial presence in country 

for an indefinite period of time. Our troops may well remain in Iraq in some capacity or other, and the military is certainly going to continue conducting counter terrorism operations around the world on an ongoing basis. Moreover, it is at least possible and perhaps probable that America’s military will have to get more involved 

in places like Yemen, if not in counterinsurgency than in enhanced counterterrorism 

activities. 

The important thing for your Committee to consider is that whatever the exact 

nature of American operations against Al Qaeda and its affiliates, that mission will 

be substantial, and it is being executed by a force the size of which was determined 

in the 1990s before terrorism was considered a major threat. In other words, force 

structure was never adjusted upwards in response to the attacks of 9-11; the conflict 

against terrorism is a mission that was added to the burdens of a military that was 

structured without that mission in view. 

Second, Chinese power is surging at a pace that no one anticipated when the current force was established. China need not become an enemy, and its increasing 

power should not be viewed as inherently hostile. The Chinese are simply recovering 

from a long period of unusual weakness and beginning to assert themselves as a 

major power. But the rise of Chinese power has implications for the United States 

that no Administration can ignore, especially considering the form it is taking. 

There is no doubt whatsoever that China is deliberately assembling naval, missile, 

and air assets for the purpose of acquiring the ability to deny the United States access to strategically vital parts of the Western Pacific. Whether and under what circumstances they might use that capability is an open question, as is the question 

of China’s intentions regarding the assertion of its power globally. But whatever 

combination of engagement, diplomacy, and deterrence President Obama or future 

Presidents might use in response to Chinese ambitions, the foundation of any successful policy will be confidence in America’s commitment and leadership, and that 

will be determined in substantial part by the presence and capabilities of America’s 

naval and air power in the Pacific—power which is currently in a state of decline. 

Mr. Chairman, I haven’t said anything to this point that was not said, in much 

fuller form and with complete documentation, by the commission that Congress created last year specifically for the purpose of reviewing the condition of America’s 

military and recommending steps for the future. I refer to the Independent Panel 

which examined the Quadrennial Defense Review produced by the Pentagon in the 

spring of 2010. The Independent Panel was chaired by former Secretary of Defense 

William Perry and former National Security Adviser Stephen Hadley. It was thoroughly bipartisan, consisting of twenty members appointed by the Obama Administration and the Republican and Democratic leaders of the two Houses of Congress. 

The Panel considered the likely risks facing the United States and examined the 

adequacy of the military to respond to those challenges. To that end, the Panel 

interviewed scores of top officials and examined all the relevant material, including 

classified documents. I heartily recommend the report to the Committee and will 

summarize for you today some of the key conclusions that are relevant to this hearing. Direct quotes from the report are italicized and page numbers are provided for 

reference. 

The Perry-Hadley Panel unanimously concluded: 

The United States has for most of the last century pursued four enduring national 

security interests. Those objectives include defense of the American homeland, assured access to sea, air, space, and cyberspace, preservation of a favorable balance 

of power across Eurasia that prevents authoritarian domination of that region, and 

providing for the global ‘‘common good’’ through such actions as humanitarian aid, 

development assistance, and disaster relief. (page vii) 

Five key global trends face the nation as it seeks to sustain its role as leader of 

an international system that protects the interests outlined above. Those trends include the Radical Islamist extremism and the threat of terrorism, the rise of new 

global great powers in Asia, continued struggle for power in the Persian Gulf and 

the greater Middle East, an accelerating global competition for resources, and persistent problems from failed and failing states. (page vii) 

These trends are likely to place an increased demand on American ‘‘hard power.’’ 

(page vii) 
14 

‘‘There is increased operational tempo for a force that is much smaller than it was 

during the years of the Cold War. In addition, the age of major military systems 

has increased within all the services, and that age has been magnified by wear and 

tear through intensified use.’’ (page 53) 

[The report] suggests an Army and Marine Corps of the same size as today, but 

suggests the Navy expand substantially * * * Air Force end strength * * * may be 

at about the right level (page 58) 

‘‘We have long been living off the capital accumulated during the equipment investment of 30 years ago. The useful life of that equipment is running out, and, as 

a result, of the inventory is old and in need of recapitalization. Because military 

power is a function of quantity as well as quality, numbers do matter. As the force 

modernizes, we will need to replace inventory on at least a one-for-one basis, with 

an upward adjustment in the number of naval vessels and certain air and space assets.’’ (page 55) 

The Department must fix its acquisitions process to regain credibility * * * [producing] real savings, which should be captured and applied to the modernization effort. However, those savings will be insufficient for comprehensive modernization. 

‘‘Meeting the crucial requirements of modernization will require a substantial and 

immediate additional investment that is sustained through the long term.’’ (page 61) 

Finally, the Panel issued two warnings that are worth quoting in full as the conclusion to this portion of my remarks. 

‘‘The issues raised in this Report are sufficiently serious that we believe an explicit warning is appropriate. The aging of the inventories and equipment used by 

the services, the decline in the size of the Navy, escalating personnel entitlements, 

overhead and procurement costs, and the growing stress on the force means that 

a train wreck is coming in the areas of personnel, acquisition and force structure.’’ 

(page v) 

‘‘There is a choice our planners do not have. As the last 20 years have shown, 

America does not have the choice of abandoning a leadership role in support of its 

national interests. Those interests are vital to the security of the United States. 

Failure to anticipate and manage the conflicts that threaten those interests—to 

thoughtfully exploit the options we have set forth in support of a purposeful global 

strategy—will not make those conflicts go away or make America’s interests any 

less important. It will simply lead to an increasingly unstable and unfriendly global 

climate and, eventually, to conflicts America cannot ignore, which we must prosecute with limited choices under unfavorable circumstances—and with stakes that 

are higher than anyone would like.’’ (pages 28-29) 

NEXT STEPS

Mr. Chairman, I am going to recommend a series of steps that can be taken, on 

a bi-partisan basis and even in this extraordinary budget climate, to address the 

problem that I have raised in these remarks and that the Perry-Hadley Panel covered so thoroughly in its Report. Before I do that, I want to put the issue in context. 

If the government were in anything approaching a typical budget year, this would 

not be that difficult a problem. The first step would be for the Department of Defense to work vigorously to reduce the cost of major new procurement programs. The 

Pentagon simply cannot continue taking up to 20 years to design and build major 

new military platforms that end up costing billions more than was originally estimated. The pace of technological change and the needs of modern warfare make procurement reform vital, even apart from the budgetary issues created by the current 

ineffective system. 

Procurement reform would produce substantial savings that could be put towards 

the recapitalization called for in the Perry-Hadley Report. I comment more on procurement reform below. Except for the unusually difficult budget situation, the next 

step would be to do what the Perry-Hadley Panel explicitly recommended: increase 

the procurement and modernization budgets by an additional amount sufficient to 

recapitalize military inventories over the next five to ten years. The sum necessary 

would be substantial but fully affordable in the short term, and as I have already 

said, failing to spend the necessary dollars only increases costs in the long term. 

In fact, the shortfall is as large as it is today because in the past—when there was 

no budget crisis—the government did not spend the smaller sums that would have 

prevented the problem from ever occurring. It always costs more to catch up than 

it does to keep from falling behind. 

To emphasize precisely that point, The Heritage Foundation advocated for years 

that the government adopt as a guideline funding the military force structure at a 

level equal to four percent of America’s GDP. Heritage believed that over time, and 

assuming normal economic growth, a figure equal to that percentage was approxi-
15 

mately what was needed to recapitalize and sustain the force. Beyond that, however, Heritage wanted to emphasize that no matter what fiscal policy Congress 

adopts, and regardless of your views regarding other budgetary needs, America can 

afford to defend itself. The government may choose to spend less than one out of 

every 25 dollars defending the country, but it certainly can spend at least that 

much. As the Committee is aware, the government has often spent much more than 

4% of GDP on the military in the past, at times when the economy was much smaller and less prosperous than it was until the recent economic crisis. 

Again, to put the budgetary issue in context, two years ago, the government spent 

close to 800 billion dollars in an extraordinary attempt to stimulate the economy. 

None of that money was spent on recapitalizing the military. It’s not my purpose 

to comment on the stimulus bill as a matter of fiscal policy, though my views on 

that subject are easily available to anyone who wants them. But had perhaps a 

third of that money been reserved for and spent judiciously on military modernization over the next decade (and assuming the necessary procurement reforms had 

also been implemented) Congress would by that decision alone have met the vital 

needs which the Perry-Hadley Panel thoroughly documented. And the money would 

have been spent on high skilled, high paying American jobs in American industry, 

which was supposedly the point of the stimulus bill. 

That was a missed opportunity. Congress should not miss such an opportunity 

again. If I were on the Committee, and regardless of whether I was a Republican 

or Democrat, I would vote to recommend the necessary funding to begin implementing the recommendations of the Perry-Hadley Panel—even given the current 

budgetary climate. The problem which the Panel report documented must be addressed, and the sooner Congress addresses it, the less it will cost in the long run. 

Moreover, funding military modernization is fully consistent with finding a solution to the budget crisis. I do not pretend to be as expert on budget issues as Members of this Committee. But it does not take an expert to see that the core of the 

problem is a structural mismatch between the revenue dedicated to the entitlement 

programs and the growing cost of those programs. One way or another, Congress 

is going to have to resolve that issue. If it does, then a thoughtful plan to recapitalize the military over the next decade will be fully affordable. If it doesn’t, then 

denying our servicemen and women the tools they need to defend us will not prevent the bankruptcy of the government. In fact, it will make the budget situation 

worse, if—as is entirely possible—America’s growing military weakness causes conflict that could have been prevented, increases instability that inhibits economic 

growth, or allows a disaster to be inflicted on the homeland or the American economy. 

In short, Mr. Chairman, this government is where it is not because of budgetary 

necessity but because of choices that were voluntarily made over the last 20 years. 

Making the wrong choices over time has multiplied problems and narrowed the 

number of solutions that are available. Making the right choices, on the other hand, 

will gradually reduce the challenges we face and create more palatable options for 

the future. The right choice is to meet the government’s most basic responsibility 

and fund the military at the level that gives the greatest chance for peace and security in the future. 

The current budget climate may make that decision politically or practically impossible in the short term. Here are some other steps I recommend for the Committee: 

1. STOP THE BLEEDING IN THE SHORT TERM

Stop cutting the President’s budget for defense, and—until the general budget crisis is resolved—make every effort to meet Secretary Gates’ goal of a small real annual increase in the defense budget. I understand that in this budgetary climate, 

every aspect of the federal budget is ‘‘on the table.’’ There undoubtedly are efficiencies that can be found in defense spending. When savings are achieved, however, they should be invested in the procurement and modernization budgets. Every 

dollar that is used effectively now in those budgets is money that will not have to 

be found later. 

Also, Congress should pass a timely defense appropriations bill every year. Last 

year, Congress failed to pass a FY 2011 defense bill and instead funded the Pentagon through Continuing Resolutions that lasted well into this calendar year. 

Apart from the resulting cuts in the President’s budget, which was already too low, 

the operational restrictions in the Continuing Resolutions caused significant disruptions in the Pentagon’s contracting process for ongoing programs. That caused unnecessary and significant challenges for the Department and defense contracting 

community from which they have not yet recovered. 
16 

Third, on a forward going basis, Congress should make every effort to set and 

keep stable funding projections for ongoing programs. Of necessity, Congress appropriates on a yearly basis, while the Pentagon’s major modernization programs last 

for a number of years. Without firm funding projections for the out years which 

Congress commits to keeping, it is impossible for the Department to plan and spend 

the money it is given efficiently. But with such a commitment, it would be possible 

to procure more platforms in an economical way, through multi-year programs and 

other plans to buy larger numbers of platforms according to set commitments over 

time. 

2. PROCUREMENT REFORM IS NECESSARY BOTH TO SAVE MONEY AND

FOR THE REASONS I HAVE OUTLINED ABOVE

But the Committee should be aware that every Secretary of Defense in the last 

15 years has dedicated himself to procurement reform. Congress has passed several 

bills on the subject, and yet the system is at best no better and by most estimations 

has gotten worse. 

A quote from former Secretary of the Navy John Lehman illustrates the problem: 

‘‘There were about 1,000 people in the Bureau of Ships during World War II * * * 

And they were the ones that mainly ran the shipbuilding program—not micromanaged the contractors, but developed and did the systems integration and oversaw 

the program. Through World War II, they built on average about a thousand ships 

per year. That’s one ship per person. 

Now in my day (in the 1980s), there were 4,000 people in the Bureau of Ships, 

and we averaged 28 ships per year. 

Today we’re averaging about 6 to 7 ships per year, and there are 25,000 people 

in the equivalent of the Bureau of Ships. That’s a whole Pentagon load of people 

in the Bureau of Ships. Now they’re scattered all over the country in different offices 

and functions, but the numbers are—you can get into lots of quibbles about it—but 

the numbers increased from 1,000 to 4,000 to 25,000 as the numbers of ships declined precipitously. 

And so what’s the answer? Reform? We have a new budget that will add 20,000 

additional civil servants to oversee the already-bloated layers of bureaucracy that 

are there today.’’ 

The Perry-Hadley Report contains a brief but important chapter on procurement 

reform which I strongly recommend to the Committee. The Panel noted that the 

most basic problem was ‘‘fragmentation of authority and accountability for performance.’’ In other words, the processes of procurement have been made so complicated—often in an effort to avoid mistakes or ensure oversight—that there is no 

single manager or small group of managers who have the authority to make decisions or feel accountable for the progress of programs. Someone must be clearly in 

charge of every procurement program, and must clearly have the authority that goes 

with that responsibility. 

Second, the Panel noted that the Department must insist on no more than a 5 

to 7 year delivery window for new programs. That means, among other things, accepting that a platform as initially delivered may have only incrementally improved 

capabilities which can be further improved through evolutionary upgrades over time 

after the platform has been deployed. Successful programs in the past have often 

gone through several upgrades over decades. Such a process is better suited to the 

rapid pace of technological change, and is much easier to manage in an efficient 

way, than trying to achieve every possible desired improvement before initial delivery. 

To put it another way, we have to focus on getting more hulls in the water, more 

planes in the sky, and more trucks and fighting vehicles on the ground. We have 

to increase numbers quickly even if it means increasing capabilities more incrementally. 

There are a number of other cogent suggestions in the Report. But the upshot is 

that a well trained line management force, with clear authority and responsibility, 

that insists on short timelines with reasonable deliverables, is the key to procurement reform. What is not needed are huge numbers of new regulations or new managers with complicated chains of command. If that is the manner in which ‘‘reforms’’ 

are instituted, they will increase rather than reduce costs. 

It should be noted that one of the reasons program costs have gone up is the decline in the defense industrial base. The private sector has not been unaware that 

since the end of the Cold War, the government has not placed a high value on procurement and modernization funding. That has caused investment to shift away 

from defense industries and remaining firms to consolidate. This is not 1961 anymore; there really is no more ‘‘military industrial complex’’ or if it exists, it’s a lot 
17 

smaller than it used to be. A decade ago, there were six major aircraft producers 

in the United States. Now there are two. Forty years ago there were eleven major 

naval shipyards. Now there are four. For the first time in almost a century, America 

has no manned military or civilian aircraft in design. 

Fewer competitors generally means less competition, which puts upward pressure 

on prices. Moreover, it means that the remaining industrial base is less flexible and 

more fragile. Before Congress ends programs like the F-22 and shuts down major 

production lines, it should remember that those lines cannot be reconstituted without enormous cost and without taking a lot more time than it would have taken 

in the past. So where there is any doubt about whether further procurement of an 

existing platform may be required, every effort should be taken to keep the production line going. And in general Congress should consider how to protect the remaining defense industrial base, perhaps with small investments in crucial capabilities 

even where the money is not available to fund a major program. In this respect, 

I applaud the HASC for its efforts to keep open the Abrams tank line and the Bradley fighting vehicle line. Given the significant possibility that Army modernization 

programs will not be funded, keeping those lines open at least helps ensure that 

the industrial base stays intact, that new if not modern platforms will be available, 

and that evolutionary upgrades can be considered at some point. 

3. CONGRESS CAN STRENGTHEN THE INDUSTRIAL BASE

BY PROMOTING FOREIGN MILITARY SALES

Easing restrictions on sales of select platforms to allies and partners will achieve 

more efficient production rates and offset costs born by the American taxpayer as 

well as help protect the industrial base. One problem is archaic International Trade 

in Arms Regulations which are time confusing and confusing. They should and can 

be reformed without sacrificing real national security concerns. In fact, by reauthorizing and reforming the old Export Administration Act, Congress can strengthen 

protections against exports to state sponsors of terror while applying less stringent 

standards to more generic kinds of exports to friendly countries. Also, more can be 

done bilaterally to encourage defense trade cooperation. As a first step in this process, the Senate was correct to approve two treaties that exempted the United Kingdom and Australia—two reliable allies—from various restrictions. 

Finally, with regard to personnel costs. Much has been written about how Congress has increased benefits to servicemembers, active duty and retired, in the last 

ten years, causing personnel costs to grow. That policy was, in general, necessary 

and right—though it was a mistake not to increase the topline to pay for the extra 

compensation—because it allowed the volunteer force to mature and play its part 

in carrying out American foreign policy. 

After World War II, the logic of historical events pushed America to the forefront 

of world affairs. American leaders established a baseline goal of protecting the 

homeland and limiting the spread of totalitarian domination without precipitating 

a third World War. There have been many mistakes in judgments, operational failures, and periods of insensitivity and excess since that goal was established. But 

the baseline strategy has been a success, and because of that the United States and 

the world has experienced a tremendous growth in freedom, prosperity, and—relative to the first half of the 20th century—peace. Moreover, America achieved its 

goals while at the same time consistently reducing the percentage of its national 

wealth that was devoted to the nation’s defense. 

There are a number of tools our government has used to accomplish that strategy. 

I am an advocate for the tools of ‘‘smart power,’’ as properly defined: diplomacy, 

international coalitions, engagement, the growth of economic and democratic institutions, and effective communication about America’s values and intentions. But the 

underpinning of all those tools is America’s military capability, and the underpinning of that is the dedication and competence of the men and women who have defended us over the last 60 years. 

Those men and women have made the volunteer military an unqualified success. 

They have accomplished every mission we have given them. They deserve to be well 

compensated. Moreover, the sacrifices they and their families make, and the depth 

and diversity of their skills, has become so great that to keep them in the service 

we must compensate them at a level commensurate or greater than what they could 

earn in the private sector. 

So in my view, and without commenting on every specific benefit decision, the increase in pay and benefits of the last ten years was justified and necessary. But 

there are three areas where I believe the compensation structure should be reformed. 
18 

First, too much of the compensation package is concentrated in the post retirement years. I do not begrudge our retired servicemembers their pay and benefits, 

but because the retirement benefits have become so generous, the government has 

made it financially prohibitive for many servicemembers to continue in the military 

once they are eligible to retire after 20 years of service. That pressure has become 

a burden on retention. We need these highly skilled servicemembers to stay longer 

in the military, and we need a compensation system that allows them to continue 

their service without feeling like they are doing a financial disservice to themselves 

and their families. 

Second, the cost of health care is becoming a problem, particularly for retired 

servicemembers. I voted for TriCare for life when I was in the Congress, and I believe it was right thing to do. But it ought to be possible to work with the retiree 

community to lower the cost of that care without sacrificing quality or putting an 

unfair burden on retirees. 

Third, Congress must understand that the cost of military compensation comes directly out of the same pool of dollars that pays for everything else on which our 

servicemen and women depend. It is politically popular to increase benefits, and as 

I said the increases were justified by the contributions of our military. But increasing compensation is irresponsible and self defeating when it means sacrificing the 

training or tools that servicemembers need to accomplish their missions at low risk 

and with minimal loss of life. In future, benefits should not be introduced or increased unless Congress is also willing to increase the top line defense budget 

enough to pay for it. 

CONCLUSION

Mr. Chairman, I want in conclusion to thank you and the Committee again for 

inviting me to testify. The condition of America’s military is a cause for grave concern. I know that your options to deal with the issue are not as robust as they would 

have been even a few years ago. The key at this point is to confront the problem 

rather than trying to avoid it, carefully consider the options that are realistically 

available in the short term, and then choose the right alternatives within the universe of what is possible. The good news is that making the right decisions now will 

expand the range of palatable alternatives in the future; the inherent resiliency of 

the volunteer force and the people who constitute it may make it possible to recover 

our strength sooner than might reasonably be expected. 

Mr. GARRETT. I thank the gentleman. Dr. Adams. 

STATEMENT OF GORDON ADAMS, DISTINGUISHED FELLOW, 

THE STIMSON CENTER 

Mr. ADAMS. Thank you very much Mr. Chairman, Ranking Member Van Hollen, for whom I am also a constituent. It is a pleasure 

to be here. Thank you very much for asking me to testify today and 

talk about this issue. It is incredibly important work that you are 

doing and I want to try to offer a perspective, perhaps slightly different from either one that you have just heard, about how we 

might go about doing that work. 

When I worked at the Office of Management Budget, which I did 

for five years in the 1990s; one of my bosses, who I think lurks behind that portrait over there in that corner, I am not quite sure 

because I am at a angle to it, would have been Congressman Panetta, who was the Chair of this Committee at the time is now the 

Secretary of Defense. We struggled very hard with this issue of the 

relationship between defense and the rest of the federal fisc and 

the US economy, and in the process of doing that struggle in large 

part because we were constrained by the budget rules that were 

laid down and the Budget Enforcement Act of 1990, spent a great 

deal of time negotiating between the Office of Management and 

Budget, and the Budget Committee; the Chairs, the Ranking Members, and the Members of the Budget Committee. So I am very conscious of the important role that you play. As we head into what 

Chairman Mullen called our most significant national security 
19 

issue, which is dealing with our deficits and our debt, your role is 

going to become ever more important. I appreciate it and I understand it. 

Let me reassert then as my first point to summarize my testimony that our deficit, our debt, and the economy are our most important national security issues. I agree not only with Chairman 

Mullen but with the Simpson-Bowles Commission, with the RivlinDomenici Commission, and national security is part of that issue. 

All spending contributes to deficits. All spending contributes to the 

borrowing we have to do to fund the deficits. All revenue changes 

contribute to deficits, and to the borrowing that has to be done to 

make up and fund those deficits, and that includes national defense. It always has and it always will. 

The Congressional Budget Office and further work on their data 

by the Center on Budget and Policy Priorities show that over the 

past 10 years, and stretching out over the next 10 years, the deficits and the accumulated debt the United States has have stemmed 

largely from three things: the tax cuts of 2001 and the reduction 

of revenue, the increase in defense spending, and the combination 

of revenue and spending increases that happened as a result of the 

recession. A much smaller proportion of the deficits and the accumulated debt is attributable to the one time TARP Bill, and to the 

stimulus package of 2009. 

So defense is part of the problem. All federal spending, all federal revenues are part of the problem, and that is why for you everything has to be on the table. 

Defense, point number two, is always resource constrained. We 

speak as if we lived in a universe where defense and resources are 

unlinked. One of the major weaknesses of the panel in my judgment that Senator Talent served on was that it dealt with the 

world as if there were no resource constraints on any part of the 

federal budget, especially defense. But as Bernard Brodie, prominent strategic analyst, said many years ago in 1959, ‘‘Strategy 

wears a dollar sign.’’ Resources and strategy are always linked; 

they will always be linked. 

In doubling the defense budget over the past 10 years, as Admiral Mullen said and Congressman Van Hollen referred to that, ‘‘We 

have lost our ability to make the hard choices and do the tradeoffs.’’ Well the piper who is playing the piping tune now that we 

have to pay is making those tough choices and doing the trade-offs 

that have not been done for the past decade. 

Third point, we are in a build-down. The build-down is already 

underway in defense. It is the fourth defense build-down that we 

have done since the end of the Korean War. This is not a new experience in American national security history. We have built down 

each time we have ended major involvement in a conflict, Korea, 

Vietnam, the Cold War, and now Afghanistan, and Iraq. This builddown is driven by the end of those conflicts and by an increasing 

concern about our deficits and our debt. 

We managed a build-down in 1990s. That build-down actually 

began under the George H.W. Bush Administration. The first 

500,000 people who came out of the military force structure were 

taken out by Secretary of Defense Dick Cheney, and Chairman of 

the Joint Chiefs of Staff Colin Powell. We managed that build- 
20 

down through the 1990s, and frankly despite some of the issues 

raised by Senator Talent, it was in fact the best managed builddown we have had in American history and left behind a dominant 

global military force; one that took out Saddam Hussein like a 

speed bump in 2003. So it is possible to manage a build-down. We 

have done it before, we can do it again. 

Fifth point, in my judgment the $400 billion over 12 years the 

Administration put on the table is best the Defense Department is 

likely to do; it is a minimal. As I say in the testimony, we can 

achieve $400 billion in savings in defense over the next 12 years 

providing the Defense Department with growth at the rate of inflation over that same 12 years as against the current defense projected baseline. 

The commissions that have been mentioned before in introductory remarks, and we did the staffing on defense for the RivlinDomenici Panel, have proposed more significant reductions, $500 

billion to $1 trillion, which at $1 trillion comes to something like 

15 percent of the projected resources over the next 10 years. It is 

possible to do a build-down. We agree that if you reach numbers 

of those magnitudes it is very important, as you suggested in your 

introductory remarks, to link it to strategy. And so in the testimony and in work we did for Rivlin-Domenici and published in Foreign Affairs in January of this year, we have talked about what 

some of those priorities may be, and I hope we get a chance to discuss them more in the context of this hearing. Terrorism obviously 

won, and we can talk about how one approaches that. It is not predominantly a military issue. Cyber protection is one, also not predominantly a military issue. Large steel conventional combat, we 

judge to be relatively unlikely, not likely. The rise of China is an 

issue of serious discussion and serious consideration, but not manifestly a threat against which we need to throw a significant growth 

in defense resources. And most important perhaps in our view, the 

counterinsurgency mission, the dealing with fragile states using 

the military instrument, expanding the force to cope with that kind 

of a problem, we would be drawing the wrong lessons from Afghanistan and Iraq not the right lessons, and I am prepared to talk to 

that proposition. 

So we suggest in the testimony options that involve shrinking 

the American military force, dealing judiciously with our procurement vectors in the future, the Army fortunately has spent a good 

deal of money through supplementals over the past three or four 

years to help get ahead of the ball on its own reset problem and 

to deal seriously with the problem of defense infrastructure. When 

we have more than 500,000 American combat forces, or I should 

say uniformed forces, which are not in combat and do not deploy 

according to the Defense Business Board, we have a serious problem of tooth-to-tail; and that tail needs to be dealt with in a serious 

way. 

Final point, and I will close with this, it is important to point out 

that even if you took all of these steps the United States retains 

today and would retain 10 years out a globally dominant military. 

We sometimes lose this point in talking about problems that the 

military has. We have the only military in the world capable of flying anywhere in the globe. We have the only military in the world 
21 

1 Bernard Brodie. Strategy in the Missile Age. (Princeton: Princeton University Press, 1959). 

p. 358. 2Stimson project work is publicly available at (http://www.stimson.org/programs/budgetingfor-foreign-affairs-and-defense/) and blog (http://thewillandthewallet.org/). See also Gordon 

Adams and Cindy Williams. Buying National Security: How America Plans and Pays for its 

Global Role and Safety at Home. (New York: Routledge, 2010). 

capable of sailing anywhere in the world. We have the only military in the world capable of deploying ground forces anywhere in 

the world. We have the only military with global intelligence, communications, transportation, and logistics. The only military, no 

other country in the world even comes close. Ten years out in a 

well managed build-down we would have exactly the same thing. 

Thank you very much. 

[The prepared statement of Gordon Adams follows:] 

PREPARED STATEMENT OF DR. GORDON ADAMS, PROFESSOR OF INTERNATIONAL RELATIONS, SCHOOL OF INTERNATIONAL SERVICE, AMERICAN UNIVERSITY, AND DISTINGUISHED FELLOW, PROJECT ON BUDGETING FOR FOREIGN AFFAIRS AND DEFENSE, 

STIMSON CENTER

Chairman Ryan, Ranking Member Van Hollen, and Members of the Committee, 

thank you for the invitation to appear today on the critical and timely subject of 

our national security budget. 

As you search for avenues to deal with our continuing fiscal crisis, it is important 

to keep in mind that a solution can only be found if everything is on the table, including national security spending. The underlying theme of my testimony today is 

that our defense budget is not only part of our fiscal dilemma; it can and should 

be part of the solution as well. We are at a critical juncture in defense planning 

and budgeting at which international conditions make it possible and timely to 

rethink how we use our military as part of our toolkit for international engagement. 

The Defense Department has not faced strategic or budgetary discipline for more 

than a decade. Our military budget has more than doubled in the past decade, consuming 55% of our entire discretionary costs. Last year it reaching a level in constant dollars unprecedented since the end of World War II. And the missions we 

have asked the military to perform have grown virtually without end. 

Such discipline is now both possible and necessary. In the long term, strategy and 

resources—human and fiscal—have always been linked. As Bernard Brodie, one of 

America’s great strategic thinkers, put it more than fifty years ago: ‘‘Strategy wears 

a dollar sign.’’ 1

A disciplined approach to both will produce budgetary savings and ensure that 

our military capabilities and global leadership remain powerful and well focused on 

core missions. This means making choices linked to a realistic assessment of risks, 

defining missions better connected to a more coherent strategy, and doing so within 

constrained resources. 

My testimony draws on work we have done at the Stimson Center’s project on 

budgeting for foreign affairs and defense, including consulting with the Bipartisan 

Policy Center’s Rivlin-Domenici Debt Panel, as well as my more than thirty years 

experience in policy research and government service in the area of national security planning and budgeting.2 It is based on several key principles: 

• Our central national security crisis today is our looming federal debt and annual deficits. All ingredients of national spending and revenues must be on the table 

for our deficits to be brought under control and our debt to be stabilized. A budgetary solution is achievable only if it is balanced, with every element of federal 

spending and revenues playing a part. 

• A defense ‘‘build down’’ is already under way. Defense budgets are primed to 

decline, as they generally do at the end of combat deployments and with changes 

in the international environment, and will do so gradually over the next decade. In 

my judgment, the starting point for budgetary discipline is the FY2011 appropriation for the base defense budget—$529 billion. The slope of this build down will be 

gradual, implemented over a number of years, and it should be linked to a coherent 

set of strategic, mission, and program choices. 

• Much deeper reductions than those proposed by the administration are possible, 

likely, and can be executed with little or no risk to American national security if 

properly planned. The twelve-year, $400 billion reduction that President Obama announced in April is a very small step in that direction; it could be accomplished 
22 

3Gordon Adams and Matthew Leatherman. ‘‘A Leaner and Meaner Defense: How to Cut the 

Pentagon’s Budget while Improving Its Performance,’’ Foreign Affairs (Jan/Feb 2011). 4 Admiral Mike Mullen. Chairman of the Joint Chiefs of Staff, Detroit Marriott at the Renaissance Center, Detroit, Michigan. 26 August 2010. 5Kathy A. Ruffing and James R. Horney. ‘‘Economic Downturn and Bush Policies Continue 

to Drive Large Projected Deficit,’’ Center on Budget and Policy Priorities, 20 May 2011. At 

http://www.cbpp.org/files/5-10-11bud.pdf. 

while continuing to provide growth with inflation to the defense budget. Deeper cuts 

are possible and likely. The Simpson-Bowles Fiscal Commission, the Bipartisan Policy Center’s Rivlin-Domenici Panel, and the Sustainable Defense Task Force have 

all endorsed reductions between $500 billion and a trillion dollars over the next ten 

years. Even those can be accomplished successfully, representing something like 6- 

13% of the currently projected defense resources. 

• The key to a successful build down will be linking strategic and mission discipline to this need for fiscal discipline. This means setting mission priorities for the 

military. In a Foreign Affairs article earlier this year, we recommended focusing on 

combating Al Qaeda’s organization and cybersecurity as the most critical missions 

and divesting from counter-insurgency and nation-building.3

• The strategic, mission, and fiscal discipline I recommend creates little risk for 

our national security. Indeed, priority-setting might enhance both our security and 

our global leadership. Even with such reductions, the US military would continue 

to be decades ahead of any other military in capacity and technology, with the only 

capacity to fly, sail, and deploy ground force on a global basis and the only global 

capability for communications, logistics, transportation, and intelligence on the planet. 

UNDERSTANDING THE TREND: DEFENSE BUDGETS IN CONTEXT

It is not my intent here to analyze the risks that unprecedented US debt and continuous high deficits pose for the US economy and our global role. But it is important to underline that our economic strength is as critical or more for our future 

security as the level of our defense spending. As Admiral Mike Mullen, Chairman 

of the Joint Chiefs of Staff, put it, ‘‘the single-biggest threat to our national security 

is our debt.’’ 4

Today’s fiscal problems require perspective. Many attribute our crisis to continuing growth in particular parts of the federal budget, especially mandatory entitlements, and there is no doubt that entitlement spending has grown at a great 

pace, driven largely by health care costs (which have had their own impact on defense health care costs). Yet it is an overstatement to say that entitlements alone 

are responsible for our recent deficits. A recent analysis by the Center on Budget 

and Policy Priorities shows that the deficits of the past decade, as well as those forecast for the next ten years, are primarily the result of the 2001 tax cuts, rapid 

growth in defense spending, and declining revenues resulting from the economic recession.5

Assigning blame for our federal debt and deficit crisis is less important, though, 

than understanding that defense budget reductions will play a role in getting it 

under control. It will not be the first time defense savings have been found, or that 

they have played such a role. In fact, this build down follows three previous ones: 

the end of the Korean and Vietnam wars, and the Cold War. As OMB Associate Director for National Security and International Affairs from 1993-97, I had direct experience of the last such build down, and it is both instructive and reassuring. The 

pace was modest, the cuts were real, and the forces that remained were capable. 
23 

6Scott Gebicke and Samuel Magid. ‘‘Lessons from around the world: Benchmarking performance in defense,’’ McKinsey, Spring 2010. Exhibit 3. 7 Arnold Punaro. ‘‘Reducing Overhead and Improving Business Operations,’’ Defense Business 

Board, 22 July 2010. Slide 30. 

The chart above tracks this build down. The median annual reduction was 2.54%, 

real but gradual, the margin by which this Congress reduced the FY2011 appropriation for the Department of Homeland Security (2%). Reductions at this pace should 

not lead to sharp changes in strategy. Near-term savings opportunities could include 

streamlining our ‘‘tooth-to-tail’’ ratio which, at eighty-four support and administrative troops for every sixteen combat personnel, is the highest among industrial powers.6 Another option would be to consolidate headquarters infrastructure, especially 

combatant commands, which according to the Defense Business Board have now 

grown to ten organizations with 98,000 military and civilian staff and a total budget 

in FY2010 of $16.5 billion.7 And, even more immediately, Congress could collect the $100 billion from Secretary Gates’ recent efficiency scrub, all of which was left with 

the military services to re-spend. 

Budget reductions paced gradually over several years would provide fiscal discipline and an important contribution to deficit reduction. Over time, such a build 

down would produce real change in the defense budget. The 2.5% annual reductions 

shrank the Pentagon’s budget by 36% in FY1998 relative to FY1985, or $206 billion 

in constant dollar savings that year alone. Change at this pace allows time to 

rethink strategy and mission. Over the thirteen years in the last build down, the 

Pentagon reduced active-duty troops from 2.2 million to 1.47 million, defense civilian employment from 1.11 million to 747,000, and procurement spending by twothirds. The force that emerged was able to help bring peace to the Balkans in the 

1990s, topple the Taliban in 2001, and overrun the Iraqi military in 2003. 

This build down was managed by Presidents Reagan, George H.W. Bush, and 

Clinton working in a bipartisan manner with seven Congresses. Much of it was accomplished under the leadership of Secretary of Defense Dick Cheney and Joint 

Chiefs Chairman Colin Powell. To some extent, this bipartisan process is again 

under way; the FY2011 base (i.e., non-war) Pentagon appropriations of $528.9 billion effectively froze the FY2010 amount, marking a shift away from endless growth 

and creating a starting point for a sustained process of budgetary discipline. 

TARGETS FOR BUDGET DISCIPLINE AND STEPS ALONG THE WAY

Congress needs to continue this process. Cuts mean a lower funding level than 

the previous year, not a slow-down in projected budget growth. A lower level of 

budget growth does not contribute to deficit reduction; it only slows the pace at 

which defense is deficit-funded. As long as defense budgets grow, the discipline the 

Pentagon needs is not being provided. 

Secretary Robert Gates claimed that he had cut the defense budget but he only 

slowed its growth. Some of what he ‘‘cut’’ was overstated. Most prominently, he 

claimed that his FY2010 weapons system terminations cut $330 billion from future 
24 

8See http://republicans.appropriations.house.gov/—files/41211SummaryFinalFY2011CR.pdf. 

Congress was able to grow the defense appropriation while also freezing the Pentagon’s base 

budget, referred to earlier, because of savings from the military construction appropriation resulting from the wind-down of the 2005 BRAC process. 9 Robert Hale. ‘‘FY2012 Budget Briefing,’’ 14 February 2011. http://www.defense.gov/transcripts/transcript.aspx?transcriptid=4770. For the history of TRICARE cost sharing, see ‘‘Report 

of the Tenth Quadrennial Review of Military Compensation: Volume II,’’ Department of Defense, 

July 2008. p. 46. 

spending. Those savings were gross, however, not net. They included terminating 

the F-22 and the C-17, though neither was in DOD’s long-term budget plans. And 

Gates routinely did not net out the investment in follow-on programs to replace the 

ones he terminated, including Army combat vehicles and Marine Corps amphibious 

landing vehicles. The Gates defense budgets continued to grow—2.9% in FY2010, 

despite the terminations—and were planned to push even higher over the FYDP. Congress also has conflated defense growth with budget-wide cuts. The $20 billion 

cut in the administration’s FY2011 base defense budget request was, nonetheless, 

‘‘approximately $5 billion above last year’’ for defense.8

Congress should use ‘‘current services’’ as its baseline, starting with the FY2011 

base defense appropriation. The experience in the Reagan-Bush-Clinton period 

showed it is possible to manage a gradual budget reduction pace, and the FY2012 

request should be the first one to sustain such discipline. The administration’s $553 

billion base budget request is already overtaken by events. Were it appropriated, as 

the House Armed Services Committee authorized, it would represent $24 billion 

(5%) in growth over FY2011. This is unrealistic. Even the President acknowledged 

it on April 14, seeking a minimum of $400 billion in reductions from his own projections over the next 12 years and using the FY2011 appropriation as the baseline. 

Similarly, the House Appropriations Committee reduced the FY2012 request by $8.9 

billion, but that still leaves a 3% increase and makes no contribution to deficit reduction. 

The President’s proposed $400 billion in reductions from the plan should be treated as a ‘‘ceiling’’ for defense, the most the Department might expect to receive. The 

Defense Department could provide those savings and more from current budget projections and still maintain budget growth at the rate of inflation. This level of build 

down does not require a change in strategy, despite the ‘‘strategic review’’ Secretary 

Gates began (see table below). 

Indeed, deeper, real cuts are clearly both possible and responsible. The President’s 

Simpson-Bowles debt panel, the Bipartisan Policy Center’s Domenici-Rivlin Debt 

Panel, and the Sustainable Defense Task Force sponsored by Representatives Barney Frank (D-MA) and Ron Paul (R-TX) all proposed more substantial reductions 

ranging between $500 billion and $1 trillion over ten years. Most interestingly, 

working different paths, although with some consultation, these panels found common priorities for defense discipline: the size of the force, hardware investment decisions, personnel policies, and management efficiency (see chart on page 8). 

Some of these recommendations are already subject to congressional action. This 

is an important, if minimal, step. The cost of the military health care program has 

more than doubled since FY2001, from $24 billion to $52.5 billion, and the Pentagon 

projects it to continue growing at disproportionate annual rates of 3% to 5% through 

2016. Working-age military retirees and their dependents were expected to pay approximately 27% of program costs when TRICARE was established in 1995 but have 

not seen any cost increase since then. Medical inflation and policy changes thus narrowed their cost sharing to approximately 11%. The fee increase being considered 

would increase costs for single members by $2.50 a month, from $230 to $260 per 

year, and for members with families by $5 a month, from $460 to $520 a year. The 

Defense Department would save $340 million next year if the fee is increased, and 

indexing that fee to Medicare inflation would accelerate savings in later years.9

Congress also appears ready to support the Pentagon’s request to terminate two 

programs targeted by the independent defense savings panels, the Marines’ Expeditionary Fighting Vehicle (EFV) and the Army’s Medium Extended Air Defense System (MEADS). Both programs needed such budgetary discipline. The Government 

Accountability Office reported that EFV costs per unit grew by 170% since 2000, to 
25 

10 ‘‘Assessment of Selected Weapons Programs,’’ Government Accountability Office, 29 March 

2011. http://www.gao.gov/new.items/d11233sp.pdf. 11Gordon Adams and Matthew Leatherman. ‘‘A Leaner and Meaner Defense: How to Cut the 

Pentagon’s Budget while Improving Its Performance,’’ Foreign Affairs (Jan/Feb 2011). 

$24 million, and that the vehicle’s design and schedule were in doubt.10 Meanwhile, 

no amphibious landing of the sort that would justify EFV has been executed under 

combat circumstances since the Korean War’s 1950 Battle of Inchon. MEADS, also 

on the block, duplicates the ongoing PAC-3 update to theater missile defenses and 

has long been a low priority for the Army. 

Consensus among these panels can provide further guidance for the Congress. Additional savings could come from slowing and terminating parts of the F-35 Joint 

Strike Fighter program and from reducing end strength as we withdraw from Iraq 

and Afghanistan. 

LINKING FISCAL AND STRATEGIC DISCIPLINE

Returning defense budgets to the peacetime levels more typical of the past 40 

years, as proposed by the fiscal panels, raises the more fundamental question of 

strategy. Budgets discipline strategy and strategic (and mission) choices can discipline budgets. Such discipline has been noticeably absent over the past ten years. 

The Domenici-Rivlin panel moved in this direction and it is also the focus of our 

article, based on the panel’s work, in the January/February 2011 edition of Foreign 

Affairs.11 In contrast to the Quadrennial Defense Review of 2010 and, very likely, 

the current strategic review, this approach would set meaningful priorities among 

military missions, calculate acceptable levels of risk, and tailor the force within 

budget constraints. Priority would go to military missions that are probable, consequential, achievable and appropriate. 

In our judgment, the United States has never been as secure as it is today. Despite the rhetoric about an increasingly dangerous world, the US faces no existential 

threat and substantial choice about the international commitments it makes. Confronting Al Qaeda’s central network is an important priority. Defending against 

cyber attack also is significant, though the US needs to be cautious that it does not 

stimulate an even greater threat though our own offensive investments and to ensure that we work with the international community to control the challenge we 
26 

face. The quality, rather than the quantity, of our defense investment against these 

two challenges is what matters. As the bin Laden mission demonstrated, special operators are the most effective capability to deal with the terrorist threat, combined 

with international action, financial tools, and law enforcement. A large ground force 

is not the right instrument. 

Large-scale conventional combat, a capability that deters adversaries, and some 

level of sea lane patrol to provide presence are next-level priorities. But, again, the 

end of the Cold War has brought unprecedented levels of security to the US. Large 

scale conventional war is less likely and the US is gradually slimming its nuclear 

deterrent to reflect the much lower level of nuclear threat it now faces. Neither of 

these missions justifies continued growth in defense spending. 

Still, as Secretary Gates pointed out in May 2008, military services with lesser 

roles in current wars chronically plan around ‘‘Next-War-Itis,’’ a fixation on potential future conflicts that would feature them more prominently and thus inflate 

their budgets well beyond demand. China is the scenario on which this planning focuses, especially for the Air Force, Navy, and advocates of programs that are aimed 

at ensuring US ‘‘access’’ to the Pacific theater. 

There is no doubt that China is a rising power and is making substantial investments in its defense capabilities, but some perspective is needed here. China’s military investment is, according to the most informed sources, one-seventh of ours. Chinese capabilities at sea and in the air are minimal compared to those of the US and 

will take decades to catch up, a goal reachable only if the US stops investing in defense. Moreover, there is little indication that China seeks a military confrontation 

with the US and no grounds at all for viewing the relationship as one driven by 

fundamental ideological hostility. We must be careful to avoid the contradiction of 

viewing China as a country with intentions but no capability for confrontation while 

considering ourselves as a power with capabilities but no intention for confrontation. 

There is ample room here for a long-term strategy that maintains our military 

power and presence in the Pacific region, avoids an arms race, and engages China 

on the diplomatic, economic, and financial levels. Indeed, the Chinese may be looking for the US to get its fiscal house in order, which is in the interests of both powers. The prospect of a major conventional confrontation elsewhere is minimal. North 

Korea’s military is numerically impressive but would be confronted by a substantially different South Korean military than that which existed in 1950. The US role 

in such a confrontation would be significantly lower, limited to sea and air power. 

Pacific strategy more broadly can and should be one of nuclear deterrence, air support, and naval presence. The prospect of a long-term conventional conflict with Iran 

is also low. Iran’s vast size, to say nothing of the public hostility to any US presence, makes anything more than air strikes or Special Forces operations unlikely. 

And for all the rhetoric and concern about Pakistan, the likelihood of a major US 

ground presence in that country is near zero for the same reason. 

It is hard to find another case where a sizeable US conventional ground presence 

is likely any time in the near future. It is appropriate to hedge against a conventional ground conflict or the use of naval and air power, but a smaller US force and 

budget would be ample to cope with this risk. Today the US already has the most 

dominant global conventional capability on the planet, providing a significant hedge 

against such challenges, and we would continue to have such a capability even 

should the budget go down as it did in the 1990s. 

The most cited danger is also the most recent addition to US military missions: 

fragile states, insurgencies, nation-building, and post-conflict reconstruction. Here 

we are at substantial risk of learning the ‘‘wrong’’ lessons from Iraq and Afghanistan. The US was not dealing with state fragility in either country. We consciously 

pursued a strategy of regime change using conventional combat forces in both cases. 

Once the occupying power, we faced an insurgency our invasion helped stimulate. 

The internal capacity to govern and provide for balanced development disappeared 

partly because we ‘‘disappeared’’ it. 

Basing future policy on this model is a dangerous but lesser-known case of the 

‘‘Next-War-Itis’’ Secretary Gates warned about. It is far from clear that the US military is or will be in demand for large-scale invasion, regime removal, occupation, 

nation-building, or fighting insurgents. These missions have had their day, our success has been less than stunning, and, thus, they deserve a low priority. Future conflict resolution, conflict prevention, and support for governance and development are 

civilian missions for the US, in concert with international partners, not the future 

of the US military. 

Reviewing defense missions in this way would lead to tough, strategy-driven 

choices on personnel and investment—the areas that the Pentagon most seeks to 

protect from budgetary scrutiny. US ground forces have grown by 92,000 soldiers 
27 

12 Arnold Punaro. ‘‘Reducing Overhead and Improving Business Operations,’’ Defense Business 

Board briefing, 22 July 2010. Slide 23. 13 Admiral Mike Mullen. Chairman of the Joint Chiefs of Staff, Pentagon, Arlington, Virginia. 

6 January 2011. 

and Marines since 2007, in large part linked to the rotation requirements of long 

counterinsurgency and nation-building campaigns in Iraq and Afghanistan. Our proposed priorities could reverse that growth. If the likelihood of conventional confrontation is as we see it, our Asian and especially European allies are sufficiently 

secure to permit a drawdown of the 80,000 US forces permanently stationed overseas. And if the tasks facing US military forces are less than we have given them 

over the past ten years, the defense infrastructure could shrink as well, eliminating 

another 100,000 uniformed positions from the half-million service members that the 

Pentagon classifies as working in overhead positions and not deployed.12 Taken together, these end strength reductions could be phased in over five years, providing 

significant savings but retaining a globally operational military capability. 

Mission prioritization can also inform investment choices. Our current air dominance suggests that continuing current fighter-jet programs rather than building a 

new F-35 may be adequate. Slowing the rate at which we buy new Virginia-class 

attack submarines also may be sufficient given our global dominance, and lowering 

our current investment in missile defenses may be better tailored to the real missile 

threat. Ultimately, the defense savings proposed by the independent debt panels 

would lead to this kind of strategic rethink. Yet these panels would also retain a 

dominant global military force, and their savings are achievable through modest, incremental steps over a period of years, long enough to accommodate discussion and 

implementation of a changed strategy. 

ENDURING SECURITY OF THE UNITED STATES

All of these strategy and mission thoughts are, for now, suggestive. We are currently working, with the support of the Peter G. Peterson Foundation, on a more 

detailed review of military mission priorities and the forces and costs associated 

with resetting them. Making choices in this way would do what the 2010 Quadrennial Defense Review failed to do and what the ongoing strategy review is unlikely 

to do: constrain the defense budget to a strategy that prioritizes missions, deliberately manages risk, and accepts the resource discipline reality advised so long ago 

by Bernard Brodie. 

A broad approach to strategic and fiscal discipline in defense helps provide a 

sound footing for federal finances and the economy while also improving our security. It is possible while retaining the most superior global military capability history has ever seen. The United States would continue to be the only country able 

to patrol the world’s oceans, deploy hundreds of thousands of ground forces to any 

point on the globe, and dominate the global airspace with superior combat fighters, 

long-range bombers, and unmanned aircraft. At roughly 60,000, US special operations forces alone would be larger than the militaries of more than half the world’s 

countries. More broadly, the United States’ entire post-reform active duty force 

would exceed the forces of any other country except for China and India. Supporting 

this overwhelming force, the US would retain the world’s only global military transportation, communications, logistics, and intelligence capabilities. And, even with a 

trillion-dollar reduction over ten years, an unsurpassed defense budget would enable 

this force. For perspective, our FY2009 military research and development spending 

alone exceeded China’s entire defense budget. 

Admiral Mullen has underlined the importance of returning this budgetary discipline to the Defense Department. As he acknowledged in a budget press briefing 

on January 6th of this year, ‘‘the defense budget has basically doubled in the last 

decade. And my own experience here is in that doubling, we’ve lost our ability to 

prioritize, to make hard decisions, to do tough analysis, to make trades.’’ 13 He is 

precisely right. 

Congress and the administration now have the opportunity to improve our national security at a reduced cost, while ensuring a balanced package of deficit reduction. The experience of the Reagan-Bush-Clinton exercise shows how meaningful 

that modest defense budget reduction, implemented gradually, can be. When the 

next generation of policymakers looks back on the era of restraint under way today, 

they will see that matching fiscal and strategic discipline led to a bipartisan defense 

program that responsibly and soberly saved as much as a trillion dollars from the 

coming decade of defense spending while ensuring that the US continues to play a 

leading role on the world stage. 
28 

Mr. GARRETT. And I thank the gentlemen, and I thank the panel. 

I yield to myself for the first five minutes for questions. So, I will 

begin where the Chairman left off, one of his closing comments 

that I think is very apropos, it says, ‘‘Our budget debates must 

never lose sight of the solemn obligation in Congress to provide our 

troops fighting overseas with the resources they need to successfully complete their mission and our commitment to them upon 

their return.’’ And I think that is really what it is all about, why 

we are here right now. And I would say, as well, in making sure 

that last line, ‘‘Our commitment to them,’’ to make sure that they 

are to have their safe return and that may necessitate making sure 

that they have the resources, the training, and the equipment necessary so that they actually do come back safely. 

The first point, I just recently had the opportunity to look at 

some of the so-called top secret memos and what have you with regard to Libya. I will not reveal what I have learned there but in 

the public releases on those that we received from the White House 

about a week or so ago with regard to Libya, the administration 

estimated that the cost of military operations over there through 

September 30, so a month or so from now, will total approximately 

$1.1 billion. And I am wondering whether you all have analyzed 

the basis for the administration’s estimates in that regard and if 

so, how do you make that analysis? 

Mr. MOSHER. We have not independently looked at that number. 

Those numbers are still rolling through and we have not done a 

separate analysis of that. 

Mr. GARRETT. Do you do a pre-analysis of that? Have you done 

any look at this that we can say, turn to you folks who we always 

turn to about these things. 

Mr. MOSHER. No, we have been keeping track of it and we would 

be happy to take a look at it for you but we do not have anything 

to share with you today a CBO analysis of those numbers. 

Mr. GARRETT. Okay. And last question on this then, so going forward should we anticipate something from you or do we need a 

specific request. 

Mr. MOSHER. If you ask us to take a look at it, we would be 

happy to do so. 

Mr. GARRETT. Okay. Very good. To some of the comments that 

Dr. Adams raised, but I guess it goes to the whole panel, and 

maybe goes to a Congressman as well to begin with. So the Defense 

Department is said to be consistently over budget over the years, 

both in equipment procurement and in acquisitions. I understand 

in fact of the 92 major defense acquisitions, 75 percent are over 

budget, and 20 percent of the programs are over budget by more 

than 50 percent. I wonder well first of all, whether the Congressman would like to speak about that issue and then also, back to 

CBO again whether you have done any analysis or maybe Dr. 

Adams has done analysis, as to why is that the case. And I have 

been here for eight years trying to get some explanation from DOD 

on some of these things. To the entire panel. 

Mr. TALENT. Sure well, you know I will comment on it Mr. Chairman. Yeah we need procurement reform. I go into some depth anyway in the statement and so does the Perry-Hadley Panel and I 

think there are savings that can be achieved from that. I said be-
29 

fore there was a price to weakness, well, you know one of the 

issues when you are underfunding Procurement and Modernization 

over time, and particularly when you underfund it and then you 

are inconsistent with it as well, you contribute, when I say you by 

the way I mean the government, you are contributing to the driving up of costs. 

One thing for example, normally the costs of programs go down 

as you buy them out, as you buy them in volume. Okay? Well, yes 

the DDG-1000 Destroyer’s going to cost a lot more per copy if you 

buy only one or two, as opposed to the 32 that you originally decided to buy. The reason why these programs and the numbers are 

cut back over time is because we do not have the money to go out 

and buy the requirements. So yes, the per copy cost goes up. 

The defense industrial base is capable of seeing the direction this 

government is going in, and when we are not funding these budgets adequately, they do not put a lot of money into the defense industrial base. We do not really have a military industrial complex 

anymore. If we do we have a much smaller one than we used to. 

We only have two aircraft, at least prime aircraft manufacturers, 

any more; all of that has slimmed down. Well the smaller a defense 

industrial base that is undercapitalized has less competition and is 

less capable of producing these systems and these platforms at an 

efficient price. 

Now there are a lot of things internal to the department; and I 

mean in my statement what I said was, I think in an effort to bring 

down costs, and this is not a new thing by the way, every secretary 

that I served under wanted to bring down procurement costs, and 

Congress passed several pieces of legislation to do that. Typically 

what is resulted is increase in processes, you know the number of 

people involved in supervising these programs and the number of 

desks that decisions have to go through. And as we pointed out on 

the panel what that does is it reduces accountability and responsibility within a chain of line management. So, the answer is, if you 

are going to have more process or the same amount of process, 

make certain that there are people designated to be in charge of 

the particular programs, that they have the authority, and that 

they are held accountable for what they produce. Another very important thing, is to reduce the design bill cycle which you know 

now can be upwards of 20 years, reduce it down to five to seven 

years maximum and just say, look we are going to get the capability that we can get by producing these platforms in five to seven 

years. We are going to get them in the field. We are going to get 

hulls in the water. We are going to get aircraft in the sky. We are 

going to get tanks and track vehicles on the ground, and then we 

will have evolutionary upgrades over time. But part of the difficulty has been the funding line. 

Mr. GARRETT. I understand. 

Mr. ADAMS. Let me comment on that Mr. Chairman. Years ago 

a very wise person in the defense procurement world, Norm Augustine, defined something called Augustine’s Law; and Augustine’s 

Law basically pointed on a trajectory given the increase in unit 

costs of hardware programs that would lead us by 2054, which now 

does not look that far away, where we would have essentially one 

airplane in the air capability of the United States military. The Air 
30 

Force would get it three days a week, and the Navy would get it 

three days a week, and the Marine Corp would get it one day a 

week, and, of course, they would work. And he was right. Augustine ended up being the Chief Executive Officer for the Martin 

Marietta Corporation and a very distinguished defense events industrial based spokesperson. 

The problem in procurement is it goes way past this Administration and way back in history as Senator Talent has said, and one 

of the very effective pieces I think that the Perry-Hadley Report 

does talk about is procurement. The problem is it is very difficult 

to fix. And it is very difficult to fix because the incentive structure 

is wrong. The incentive structure both in the services and in the 

industry is backwards from an incentives structure that would lead 

to the kind of efficiencies you would want in procurement. For the 

services, getting a program into the budget is the top priority. If 

you get the program into the budget and get a Program Element 

9 for it and begin the program, you then worry later about the fact 

that it is going to cost you more than you originally projected, but 

it looks cheaper at the start and that is a way to get it into the 

budget. So the incentive is to get it into the planning process. For 

the industry, the incentive is to get the contract. So if you put the 

program in at a very cheap rate at an R&D level you hope to make 

up that benefit in the procurement of the program when the dollars 

grow. 

So the incentive for the services is backwards, the incentive for 

the industry is backward, and the end result is we end up with 

what I call the ‘‘Adams Law of Defense Procurement’’ which is almost everything we buy costs us twice as much, takes twice as 

long, and gives us about half the performance that it should, and 

it starts with the incentive structure. It is very hard to change 

those incentives even with powerhouse administration at the Pentagon, even within the Pentagon the incentives structure is to get 

it in the budget first. So it is an enormously difficult problem. Only 

one Secretary of Defense, or Deputy Secretary, that I know of has 

begun to even get a handle on it, and that is Dave Packard, who 

was Deputy Secretary back in the 1970s. And Dave Packard, who 

came from Hewlett Packard, therefore had a lot of private sector 

management experience, managed to start to get his arms around 

the procurement process, and then of course like all senior officials 

left office. 

So I have watched this cycle of reforming procurement go on for 

probably 40 years now, and there is not a new idea in the barrel 

and nobody yet has figured out how to get the right incentive structure. 

Mr. MOSHER. We have not done independent analysis of this, but 

there is a very rich literature going back many years as both the 

other witnesses have suggested that suggests that it is 20 to 30 

percent cost growth in weapon systems; it is not an iron law that 

obviously many factors that happen; it is not a lot of physics but 

you have incentives and there are just many things that happen. 

DOD tends to buy weapon systems that are at the cutting edge of 

technology, which is always a perilous place to try to predict what 

costs are going to be, and although there are incentives that they 

talk about, well-meaning people can come up with estimates that 
31 

turn out to be low when you try to deal with the reality of putting 

systems together. So there are a lot of reasons why costs of weapon 

systems grow and as I said, the history is long that is 20 to 30 percent on average for weapon systems cost growth. 

Mr. TALENT. There are examples of programs that they have 

done right or that they have fixed midstream. I mean C-17 is an 

example. When Bill Perry took office, C-17 was a very troubled program and he fixed it, and he did it through the kinds of procedures 

that we recommended. He took personal control of it. He took 

charge. He had the authority. He had the responsibility. He was 

accountable and he brought the plane in under budget and on time. 

The F-18, the ENF, is an example of a really outstanding program. 

That was an evolutionary upgrade which points to the direction 

that I think we need to go in. 

Again, we have to accept responsibility with the rest of the government because when we have funding that is not up to the task, 

they feel they have to cram a lot of technology into the platforms 

they are given. I am concerned about this cargo tankard they are 

going to try because they need cargo and they need tankards, so 

they are going to try and build a cargo tankard. Well I hope they 

can do it, but if there are problems with it, maybe because they are 

trying to put two functions into one plane. So I think there is responsibility in a lot of different areas. 

Mr. GARRETT. I appreciate that, and just as I said, sitting here 

for eight years there is just a mountain of frustration of trying to 

ever be able to look to CBO or look to the DOD when they come 

here to testify to say, is what we really should be anticipating and 

not in this year’s budget but out of the 10 year budget. I guess the 

commonality here is nothing is going to change any time soon. Gentleman. 

Mr. VAN HOLLEN. Thank you Mr. Chairman. Let me thank all 

of you for your testimony this morning. Senator Talent, let me 

begin with you because I was a little bit struck that in your testimony nowhere do you mention the very important connection between the strength of the U.S. economy and the strength of our 

military. I assume you do not dispute the idea that the strength 

of our military flows in large part because of our strong economy. 

Is that correct? 

Mr. TALENT. Yeah, I mean our economic wealth and prosperity 

has been many times in history a key aspect of our military 

strength. It goes the other way too. 

Mr. VAN HOLLEN. Absolutely, and do you agree with what the 

Chairman of the Joint Chiefs of Staff, Admiral Mullen, said that 

our debt is currently the largest threat to our national security? Do 

you agree with that assessment? 

Mr. TALENT. I think there are three, and I would not want to 

choose. I think the vital importance of getting back to sustained 

economic growth and job growth is hugely important, and I sense 

within the free market and the private sector that the government 

wants that to happen and it wants to encourage that to happen. 

I think the issue with the debt is hugely important. Now, you guys 

are the experts, but to me the core of that problem is the structural, and I am going to try and state this as neutrally as possibly, 

a structural mismatch between the revenue that is dedicated to the 
32 

entitlement programs and the cost of the entitlement programs. 

And the rest of the budget, yes it is a factor, but a minor factor. 

And then the third thing would be these national security challenges. So I would say it is one of three. 

Mr. VAN HOLLEN. Right. So I take it that you clearly disagree 

with the conclusions of the two bipartisan commissions with respect to defense spending and the importance of trying to address 

that issue as part of an overall strategy to strengthen our economy. 

Do you disagree—— 

Mr. TALENT. Those are budget-driven analyses. 

Mr. VAN HOLLEN. I will get to that in a minute, but if you could 

just indicate whether or not you agree with what Admiral Mullen 

said, which, and I quote, ‘‘With the increasing defense budget, 

which is almost double, it has not forced us to make the hard 

trades. It has not forced us to prioritize. It has not forced us to do 

the analysis.’’ Simple question, do you agree with that statement 

by the Chairman of the Joint Chiefs of Staff? 

Mr. TALENT. No, I agree with his statements a few years ago 

when he suggested we needed to spend four percent of the GDP or 

we are not going to have a capable military. If I can explain. I do 

not see how he can say hard choices have not been made when the 

service which he used to be the Chief of Staff is headed down to 

210 to 240 ships, a level which nobody believes will allow us to be 

a global Navy. I mean, if that is not a hard choice that is being 

made. He is retired ships, he and his successor chiefs, have retired 

ships because the cost of maintenance was too high, and so the 

numbers of them is going down. That is a pretty hard choice. 

Mr. VAN HOLLEN. I think, Senator, what he is doing is strategy 

in the grand sense with respect to the situation we face with the 

deficit and the debt. You mention in your written testimony the rising power of China. Nowhere do you mention the fact that China 

is the largest holder, foreign holder, of our debt, and the influence 

that foreign entities can gain over the United States through the 

holdings of those debts. 

I mean, that is not raised there. Now, I could not agree with you 

more that the defense budget should be driven by strategy, not by 

budget, and Dr. Adams mentioned that. I think there is agreement 

on that. As you well know, you will find across the political spectrum, very different views as to what needs to be done to make 

sure that the United States remains number one. From the Cato 

Institute on the more libertarian side, to other think tanks on the 

left and everywhere in between. But I certainly do not dispute the 

basic premise that defense is our number one obligation and it 

needs to be built off a strategy. The question is what strategy, and 

there I have to ask you, a number of times you have mentioned 

sort of pegging defense spending to GDP. My question to you is, is 

not that just doing it by the math? Well you are, are you not? I 

mean you are picking an artificial number. That is not driven by 

strategy, is it? 

Mr. TALENT. Well, I am actually glad you asked it because it 

gives me an opportunity to make a point. It is our belief, at Heritage and when we advocated at Four Percent for Freedom, that that 

was approximately what we needed. That percentage would 

produce what we needed in order to provide for the capabilities of 
33 

the DOD according to a strategic-based analysis, because it would 

have freed up about another $40 to $50 billion a year that we could 

have put into modernization and procurement. The reason though 

that we phrased it in terms of a percentage of the GDP was to 

make an overall point, which I think is a point that maybe we can 

all agree on, and we ought to stop and think about this because it 

is so easy on the Budget Committee to think of any expenditure of 

government as kind of an enemy that you want to reduce and as 

too big. 

Let’s go back and look at this strategically for just a second. At 

the end of World War II the leaders of the United States on a bipartisan basis changed strategically their approach to the world. 

They had been playing a secondary role outside of the western 

hemisphere. That was a tradition in American foreign policy. Well 

they recognized it had not been a success, that policy, in the first 

half of the twentieth century. We had two world wars and then we 

were entering a nuclear age, an age of asymmetric weapons, when 

another world war would just simply be intolerable, and so what 

they decided to do was to engage, to be more proactive, to manage 

risk and conflict instead of letting it get out of control with a view 

towards achieving three things, three baseline things: preventing 

the spread of totalitarian domination, protecting the American 

homeland, and doing that without a third world war. Now here is 

my point. 

Mr. VAN HOLLEN. No. Look I am very familiar with that history, 

really I am, and my point was a pretty simple one. That I agreed 

with your assessment that military strategy should be based on 

strategy, not budgets, and that there is an inconsistency with that 

in picking an artificial GDP number. Now if what you are saying 

is, you have looked at the strategy and your conclusion is that, forevermore into the future, four percent is what is needed. There 

seems to be a little inconsistency there. 

Mr. TALENT. Not forevermore, just for the foreseeable future. 

Mr. VAN HOLLEN. Dr. Adams, if you could just expand on your 

testimony regarding the approach of the Quadrennial Defense Review and how you can do exactly what I think everybody in this 

room would like to do, which is make sure that we do have a military strategy that is based on making sure we protect our vital interests, but that we do it recognizing that the economy and the 

debt is also an important part of our overall strategy. And to talk 

about one without considering any of the other is to take a very 

narrow view about the power of the United States and how we 

project power and interest. 

Mr. ADAMS. Yeah, I would be happy to address that. The reality 

historically for the United States or any country in the world has 

always been that their resources and their strategy are linked. And 

that resources issue is not just budgetary resources, it is human resources, it is economic resources, it is the industrial capacity of the 

country, the productive capacity of the country, the trading capacity of the country. All of those issues are part of what any decent 

strategist would call grand strategy. It is not just about military 

capability, and we have had a tendency to focus just on military 

capability as what defines American leadership in the world. It is 
34 

an important element; it is not the only element, and it is largely 

a supporting element to a broader sense of strategy. 

We also have a deficit in this country of thinking about strategy 

in the broader sense. So that when produce strategic documents, 

they tend to be documents that come from the Department of Defense, which has typically and rightly a concern about the military 

capabilities of the United States, but it comes the dominant strategic thinker for the government of the United States. Stepping 

back and looking at our capacities as a country. Stepping back and 

looking at the global situation we face, looking at our mixture of 

tools in the tool kit; civilian tools, military tools, trading tools, investment tools, all the elements that go into state craft and grand 

strategy is where the focus really should be. 

The major problem that I had with the Quadrennial Defense Review and, arguably, with the Perry-Hadley Report as well, was that 

it took too narrow a view of what strategy is, and it did so saying 

we must simply cover every single potential danger, risk, threat, 

challenge, or difficulty that the United States may face in the 

world and build a military capability to deal with it. The major 

weakness of the Quadrennial Defense Review mirrored in the 

Perry-Hadley Panel, was to say all missions must be fulfilled, all 

missions are equal, all missions must have reduced risk to zero. No 

country in the world has ever been able to do that. No country in 

the world will ever be able to do that. 

So every country measures its risks and challenges, evaluates 

what risks it is prepared to accept, weighs its defense commitments 

in the context of its broader domestic internal economy, its capacity 

to produce, its involvement in the global economy, the stability of 

its currency, its trading relationships. That is grand strategy. We 

have not done that and we have tended to be biased in terms of 

the military instrument here. 

Our view in doing work that we did for the Rivlin-Domenici 

Panel was to say, is there within a resource-constrained world, because it always is and always will be, a way of providing a scaling 

of the challenges that America may face on the military side that 

allows us to build capable military forces that retain the global superiority that we have today? This was in other words a strategy, 

not a numbers-driven exercise. Frankly in my judgment a share of 

GDP as a way of measuring defenses is a totally numbers-driven 

exercise; it is math, not strategy. So we tried to tailor it to what 

do you do in the world? What is the appropriate role for the United 

States? How likely and unlikely, and what capabilities do we need 

for dealing with nuclear challenges? How likely and unlikely, and 

what capabilities do we need to deal with potential risks of conventional war and conventional deterrence? How likely and what resources do we need to deal with terrorism? What do we need in 

terms of capacity to steam the world seas? What do we need to 

handle insurgencies in fragile states and how important are all of 

those missions in terms of our overall security for the United 

States? How much of them are really military responsibilities or 

the responsibilities of some other capacity in the US government? 

Which I certainly encourage this Committee to take a good look at. 

And therefore, what is an appropriate level of expenditure and an 
35 

appropriate level of forces that we would need to handle those challenges? 

And as I say without exhausting you with the details on it at this 

point, what we came to was a conclusion that we would retain a 

globally dominant military capability with 15 percent fewer resources over the next 10 years than currently projected in the Department of Defense budget, that retains the capacity to steam the 

oceans, that retains the capacity to deploy forces, that would be a 

smaller conventional force but more at the point of the spear than 

in the infrastructure because that is how you would have to rebalance that capability, and you can accomplish America’s national security purposes for 15 percent fewer resources than currently projected. It is both math and strategy. And these Budget Committee 

members have to deal with both of those things, math and strategy. Math is important, strategy wears a dollar sign. 

Mr. FLORES. I am going to try to get in two questions quickly if 

I can. Mr. Mosher can you recap for us, you pointed out the rapidly 

increasing price of health care on our military. Can you go through 

those metrics again quickly? And maybe we can get that slide back 

up as well. 

Mr. MOSHER. Sure. Certainly, Mr. Flores. I, see if we could, it 

would be the second slide. It is actually also Figure 4 in the prepared statement in front of you. You can see that the growth is 

going to from 2011 to 2030, roughly double in the military health 

system costs. That is what we have here. And the point I made before was if you would look at the year 2000 to the 2011 we have 

seen a doubling since then. 

Now a number of those, you know, a lot of that growth if you 

look at the bottom three lines which is the military personnel involved in the providing medical service and research, et cetera, and 

then the direct care which is what is provided in the military treatment facilities, and then purchased care and contracts which is the 

services that DOD purchases through contracts with private sector 

providers. Those three lines have been with us for a long time, and 

what started to happen after 2000, there were a number of benefits 

that were added, the big one is the TRICARE for life accrual payments and that is a big wedge there; but you also see that the direct care and the purchase care lines, the dark blue and the medium blue line, those start to grow significantly. And it is the 

growth that we see in the DOD experience focusing on the last six 

years because that is when a number of policies that were taken, 

and new policies have sort of taken place, and so if we do it much 

earlier it is hard to do the measure. But that growth has been 

much higher, as I say, and in some cases three times higher than 

the national growth rates per user. 

There is been another factor in those numbers and that is that 

you have seen an increase in the number of dependents and retirees who have come into the system, under 65 retirees. And so 

whereas in 2000, I believe the numbers were about 75 percent of 

those who are eligible among family members, dependents and retirees, that number’s gone up to 85 percent. So you have more people joining the system. 

Mr. FLORES. I think you are making the picture pretty clear, in 

other words we are creating obligations for people who have moved 
36 

out of the military and are not serving and are becoming an increasing part of our defense cost. My question would move more to 

somebody who is been on the frontline of this, and that would be 

for Senator Talent. What are your suggestions as far as what 

changes you would propose to try to mitigate the explosion of costs 

in this particular part of our defense budget? 

Mr. TALENT. Well, if you are talking about military health care, 

I think it is really important to meet and talk with a community 

of retired folks and talk about how you can provide the services 

that we are providing at lesser costs. And generally I believe that 

is to try and make it a program where you are expanding their 

choices and therefore creating greater competitions so that they 

will hold down costs. I think that is the way. Now what I said in 

my statement was that I think the increase in compensation is 

fully justified by the performance of these individuals, because they 

have preserved the peace, they have protected our interests, and 

they have done it with a declining share of the federal budget and 

a declining share of the GDP. This is the point I was making, rather than thinking of defense spending as a failure, we should think 

of what we have achieved at a small percentage of the GDP that 

has been declining basically over time. 

Mr. FLORES. I agree with you. I think many people have done a 

lot for very little. 

Mr. TALENT. No question. 

Mr. FLORES. I want to move on to another quick question. 

Mr. TALENT. The way it is structured now, we have to great an 

incentive for them to leave the service too early and then we lose 

the benefit of their experience in training. 

Mr. FLORES. One other question, you talked about the C-17 experience and what Bill Perry was able to do and I have another experience and that has to do with USS Missouri, which was built by 

General Dynamics, it came in under budget, delivered nine months 

early. It seems like those were more the exception than the rule, 

when it comes to defense procurement. How do we inculcate those 

experiences into defense procurement more broadly? 

Mr. TALENT. Now that is a really good question. I personally 

think it is going to be easier to do; it will be easier to do in the 

aircraft side, because you are producing higher volumes of platforms, and because if you just think of an aircraft production line 

as opposed to a ship building production line, you are not moving 

as heavy or as big of stuff. I would encourage you, if you have not 

done it and you have an opportunity to visit both lines, and you 

will see; and that is why I think there are more successful experiments on the aircraft side. There are more contractors who have 

done really good lean manufacturing techniques, and really perfected it and gotten us platforms at low per copy cost. 

I think ship building is going to be a bigger challenge, but if on 

the government side it can say look this is the kind of funding we 

are going to provide. It is a reasonable funding in terms of the kind 

of ships that we expect. We are going to have to do a lot more in 

terms of ship building if we want to protect the size of the Navy. 

And then set targets for them and hold them accountable, and supervise them with small groups of empowered people within the 

DOD, and avoid what both my colleagues here have been talking 
37 

about, requirements creep. You cannot do everything with every 

platform. So get hulls in the water. And I think you can make it 

better over time but there is no substitute for senior people taking 

responsibility and being accountable for the outcome. 

There is a quote from John Lehman in my statement which is 

very interesting because John points out in World War II we had 

1,000 people in the ship building bureau. We produced 1,000 ships 

a year. When he was Secretary of the Navy I think we had 2,500 

people and we were producing like 20 ships a year, something like 

that. Now we have got 4,000 people, we are producing six ships a 

year. And it is not because it is not good people, it is the confused 

authority and accountability. 

Mr. FLORES. Thank you. 

Mr. GARRETT. Thank the gentleman. Thank the panel. Ms. 

Schwartz. 

Ms. SCHWARTZ. Well I really appreciate some of the conversation 

we are having and I think it is incredibly important one to have. 

So thank you to the ranking member for asking for this hearing 

and for us being very attentive to I think what are really two 

issues. One is that certainly on this side of the aisle, but I think 

all of us agree very strongly that we are first and foremost committed to a strong defense to be prepared for any future, current 

or future concerns and threats to our nation and that is our number one priority as members of Congress and as a nation to be safe 

and secure. 

Secondly, we are very concerned about the debt and in reducing 

the deficit, and are well aware of the fact that the Department of 

Defense is a good chunk of our budget, and I think you have talked 

about how much it is. It is 60 percent of our discretionary budget. 

We spend a lot of time on this committee and in other committees 

focusing on 12 percent of our budget which is the non-defense, nonsecurity discretionary budget, and yet every external expert, and 

many of us I think both Republican and Democrat on this committee, feel very strongly that everything has to be on the table. 

We took a vote in this committee while we were doing the budget 

and there was strong support, bipartisan support, for including Department of Defense in our call for greater efficiency, greater accountability in the use of public dollars, and in helping us to be 

able to reduce our deficit. 

And in fact, ignoring the Department of Defense budget and taking it out of this process, which as I understand it we often have 

done. You could have anything you want, no accountability for the 

way they spend the money and it has really hurt us and it will 

hurt us in the future if we ignore the Department of Defense. 

So to me it seems, and maybe this is unfair, but just completely 

unacceptable to not have the Department of Defense be a part of 

helping reduce the deficit. And what we are talking about is some 

of the things that Mr. Mosher you have talked about and Dr. 

Adams talked about, which is demanding greater efficiency in what 

they do and simply in procurement. Not simple, but in overhead. 

Do we need this many administrators? I mean do we need in the 

rank, in the Department of Defense how many supervisors do we 

need? How many senior officials do we need to be watching the 

store that actually still cannot tell us how many subcontractors 
38 

they have? How many contractors they have? What they really 

spend on procurement. Can they not reduce their cost by one percent, two percent, three percent, four percent? Mr. Talent talked 

about wanting to shift that money into other ways of doing things. 

I think there is been some discussion about wanting to modernized 

our forces and modernize our purchasing of equipment. I think 

many of us agree with that. But my real question, two areas really 

simply is, we talked about some of it and asked Mr. Mosher, but 

about the efficiencies. Simply how can it not be possible to get 

greater efficiencies out of this large of a system, these many dollars, to demand that? And my second question, that may be for either Mr. Mosher or Dr. Adams to address very briefly the issue of 

health care costs. We have been very hesitant to go this direction 

because of our commitment to providing quality health care for our 

active military, but in fact we are calling on the entire health care 

system, certainly under Medicare and Medicaid, and maybe the private system too, to do greater efficiencies and to improve quality 

and coordination, and reduce costs in that way. Can we not do that 

in a system we actually have more control over, if anything, which 

is the military one? So, in one minute or less if you would just comment on those two areas that would be very helpful. Mr. Mosher. 

Mr. MOSHER. Just very briefly, we did not analyze efficiency in 

our piece, and we have not looked at it carefully, but obviously 

there are always places to get efficiencies, but I would be hesitant 

to speak about the magnitude that you could get from them. 

As to health care, you know I think I have shown the growth and 

one of the points that I wanted to make when Mr. Flores was asking a question was one of the reasons you have seen such growth, 

well there have been two-fold, is that the military health care system, as other health plans that become more expensive, the military system for those who have a choice has seen a cheaper and 

cheaper option over time. So you have seen much more of people 

moving into the system, and just to give you an example, for retirees for example, that is the under 65 retirees, according to DOD’s 

numbers, their out-of-pocket expenses are about $900 a year for a 

family in that system. So let’s say you pay your premium and then 

you are out-of-pocket as your co-pays. Co-pays have not really been 

adjusted since the early 1990s. And if you compare that to someone 

who has health care in the private sector, their out-of-pocket expenses are roughly $5,500 a year. So it is $900 versus $5,500; it 

is a factor of what you know six. That would be one way if you are 

trying to get the cost of the system under control, we would look 

at that sort of thing. CBO has done this annual volume every year 

that looks at options for reducing the budget and we have several 

options in there that look at health care as things you might do to 

try to control the cost of health care in DOD’s system. 

Ms. SCHWARTZ. I believe we are out of time. I do not know 

whether we would admit Dr. Adams to make a comment about the 

efficiencies would be great. 

Mr. ADAMS. Just two points Congresswoman. The efficiency question is usually subsumed in the phrase ‘‘waste, fraud and abuse.’’ 

There is not a line item in the Defense Department budget to call 

waste, fraud and abuse. It is in fact, an extraordinarily large infrastructure. Everything the US government does, anywhere that it 
39 

does it, is done in the Department of Defense in miniature. Every 

function is performed in the Defense Department and we have created an unbelievably large infrastructure to do it. The infrastructure the Pentagon estimates is 42 percent of the budget. There are 

340,000 people doing what are essentially commercial functions. 

There are 560,000 uniformed forces who never deploy because they 

are involved in managing the infrastructure. We have probably the 

worst ‘‘tooth-to-tail’’ ratio in terms of combat forces at the point of 

the spear and infrastructure behind it of almost all the industrialized militaries in the world, according to McKinsey. It is a huge, 

huge problem. 

CBO, I think, in the report that Dave Mosher referred to, rightly 

targets infrastructure or rightly targets O&M as an area of concern 

because that is where most of this is buried. It is somewhere buried in the civilian payroll in O&M, which is 40 percent of O&M. 

It is buried in the functions that they are doing and it is very hard 

to get your arms around it and so I encourage CBO to do more 

arm-getting-around in this subject because it will help us to decipher exactly what is going on here. But the rate of growth in O&M 

is about one-and-a-half to two-and-a-half percent per year whether 

you like it or not, and the only way that it comes down, and I think 

this is important to note, is the way budgets come down is they 

come down, which sounds just like a tautology, but the reality is 

when you set a lower budget level, it induces a level of efficiency. 

Usually efficiency does not happen bottom-up because people are 

used to doing business that way. When at the top the services say 

you will have less for base operating expenses, be more efficient, 

people find ways, and we did find this in the 1990s. One of the 

healthy effects of the build-down of the 1990s was that it in lowering the defense top line, choices had to be made. And the choices 

can be very efficient when they come from the top down so budget 

constraint and budget discipline is an important element in inducing efficiency and operations and lowering the infrastructure cost. 

Ms. SCHWARTZ. Changing the culture. Thank you very much and 

thank you Mr. Chairman for your indulgence. 

Mr. GARRETT. Thank you. The gentleman from South Carolina. 

Mr. MULVANEY. Thank you Mr. Chairman. That actually ties in 

to the question I was going to ask. Let’s stay on this topic of the 

infrastructure and the efficiency because coming out of the private 

sector one of the first things I would try and do if I wanted to get 

my arms around any particular situation is try and get as much 

data as I could about it and in my world that might imply an audit 

and you heard the Ranking Member, and I think correctly so, identify the Department of Defense as either one of or the only major 

agency that has never been able to audit itself or have an audit 

performed on it. I think I have heard even that the Defense Department claims it is beyond an audit. That it is not able to be audited. 

And I guess my question to you gentlemen is should we tolerate 

that? And if the answer is no, because I think the answer should 

be no, how do we fix it? How do we at least start the process of 

fixing what we seem to recognize here as a problem without getting 

the information? How do we audit the Department of Defense? And 

I will throw that open to anybody. 
40 

Mr. MOSHER. Well, we are not auditors so I would not presume 

to tell you how you should audit them. We account the budget but 

we are not auditors. That would be GAO with probably the auditors. I mean I will say that on the O&M question that Mrs. 

Schwartz raised, one of the challenges is getting good data on 

O&M, and that Gordon raised. It is very difficult to get good data 

on Operations and Maintenance spending. 

Mr. MULVANEY. Why? 

Mr. MOSHER. While we get the data that DOD provides to us. So 

I am not saying that it is impossible to get good data, I am saying 

that the data that we receive, that we the Congress receive on Operations and Maintenance is relatively limited and it makes it difficult to dig into the very complicated things that go on in the 

O&M account. One of the problems that we have and we have a 

study that we have released in, I believe, January where we looked 

at some of these issues but we had difficulty doing it in large part 

because once supplemental money is appropriated for the wars and 

when you start looking at what DOD has now actually spent on 

O&M, those moneys are comingled. So it is very difficult to separate what war effort money would be. That is the very legitimate 

things that you need to be doing to fund our soldiers and airmen 

and sailors overseas fighting wars to what DOD needs to do in its 

day-to-day, in its base budget: activities it gets to get those forces 

ready, to train the forces, to develop weapons, and it is very difficult to separate those moneys once they have been commingled 

because DOD does not track it that way. 

We have some recommendations where we talk about some ways 

to do it but it is not about auditing, that is we did not take it that 

far. What we did is we looked at where additional money, additional information would help the Congress in trying to understand 

that O&M account. And just so you know, we are also doing a 

study at the request of the House Armed Services Committee 

where we are looking at how DOD models the requirements and 

how it comes up with its budget for Operations and Maintenance, 

operational readiness specifically. And so we have gone to all the 

services and we are in the process of doing that and should have 

something on that in the fall. 

Mr. TALENT. I think the Department absolutely ought to be 

tasked to improve its auditing performance. Now I will just tell 

you, the O&M budget is not going to go down as long as we have 

an inventory that is this old because they have to spend the money 

to maintain it. I am sure that we can reduce some of the combat 

support, combat service support personnel. You do not have to have 

the guy in uniform taking the tickets at the movie theatre but then 

you are going to have to hire somebody privately to do it. Congress 

is going to have to authorize privatization by the way too. 

Mr. MULVANEY. Let me press you on this point because I think 

you and I generally philosophically would agree on a lot of things. 

As a conservative, how can I in good conscience even contemplate 

this four percent for freedom concept? How can I even contemplate 

plussing up any defense spending until I solve each and every one 

of the issues that Mr. Mosher just addressed? How can I in good 

conscience go to the tax payers and say listen I want to spend more 
41 

money on defense when I do not have any clue how the money that 

we are spending now is being spent? 

Mr. TALENT. Because there is a tremendous connection. In the 

first place, we ought to get the savings and that is what the PerryHadley Commission said, that is what Heritage says, that is what 

I say, and then you are going to have to devote it to recapitalizing 

the inventory and modernizing the accounts. If you do not, you are 

going to generate huge extra costs that are going to swallow anything that you have saved. And that is been the history of the last 

15 years. We predicted in the 1990s that the O&M accounts would 

go up precisely because of this; and while there is a connection between the economy and military preparedness, there is also a connection between military preparedness and the economy. If we are 

weak and are perceived as being weak around the world it increases the level of instability and risk which decreases economic 

growth. I gave an example in my testimony. The United States 

maintaining stability in the Northwest Pacific around the Korean 

Peninsula has prevented a war there for the last 60 years. How 

good has that been for the economy? And the increasing instability 

last year in the Western Pacific as China started throwing their 

weight around, was not good for economic growth. It caused a lot 

of issues among our allies. That is a hugely important part of the 

world. So you have to recognize the connections but yes, let’s get 

the savings. What we are saying is realistically, there is a no way 

that Secretary Gates is talking about $15 billion a year he hopes 

he can get. They have been trying to get this for 15 or 20 years. 

I would love to get that. It is not going to be enough to do everything we need to do. We do not even have a new bomber program 

plan and we are flying 50-year-old bombers. Remember, decisions 

you are making now are going to affect what this force structure 

is 10 or 15 or 20 years from now. Our guys are going to be flying 

70-year-old bombers and that is not consistent with the United 

States protecting its security. 

Mr. MULVANEY. Mr. Adams I apologize I am out of time. I leave 

it to the discretion of the Chairman, but thank you gentlemen. 

Mr. ADAMS. Over to the Chair whether he wants me to answer 

or not. Briefly put, we believe that this begins with mission discipline and one of the things that is striking about the conversation 

so far is that there is not been much discussion about mission discipline in the Department of Defense. We recommended with the 

Rivlin-Domenici Panel that we take 100,000 people out of the active duty force structure solely in infrastructure positions. Now, for 

those who then say well then you are going to have to hire contractors, you are going to get some civilian to do it because you are taking out of the combat force, no, it is linked to mission discipline. 

If we tell the military here are the things that are important, here 

are the priorities, here is the thing you are going to do, you are in 

fact going to need less infrastructure to do it, but my bottom line 

here is you start the process of eliciting the data you want by imposing budgetary discipline in the areas where you want that budgetary discipline imposed and O&M is one of the key areas to impose that discipline. So some of this has to happen through leadership, top-down decision, and mission discipline that says you are 

going to require less infrastructure to perform these missions. 
42 

Mr. GARRETT. Gentleman from New York. 

Mr. TONKO. Thank you Mr. Chair. Gentlemen, thank you for 

joining us. Senator Talent, have you been employed by or served 

as a partner in the Fleishman-Hillard or Mercury Communications? 

Mr. TALENT. I was with Fleishman-Hillard and then there was 

a corporate reorganization and it became Mercury, which is the sister company in the Omnicom umbrella. 

Mr. TONKO. Because I have a release from Fleishman-Hillard 

that says the firm’s area of focus is the defense and aerospace industry and by the firm’s own description and I quote, ‘‘We leverage 

our long-standing relationships with industry influences.’’ And I assume with something like defense, those influences include us 

members of Congress, so the firm’s stated aim here is to help defense industry firms and I quote, ‘‘Win new programs and keep existing projects.’’ So, Senator, is it as serving as an independent arbiter on the QDR Review Panel, is it fair to say that either through 

your work with Fleishman-Hillard or with Mercury in the past that 

your job was to advance defense as an industry? 

Mr. TALENT. No, not in that- We have defense clients. I offer 

strategic advice from time to time. I do not lobby. My views on this 

subject date back to 1993. Everything that I have said and done 

here is consistent with what I said and did entirely in my career 

including when I was in public life. So this is not something that 

I have come to lately when I took this position. Anybody who 

knows me knows that through three different administrations, Republican, Democrat, I have been consistently concerned about 

underfunding the military and I have criticized on a bipartisan 

basis, policies that I thought contributed to that. 

Mr. TONKO. And it would be fair to state, I believe, though that 

their efforts here are to advance new programs and keep existing 

projects that firm up investment in defense. With the acquisition 

of weapons systems having been the area of inefficiency and cost 

growth at the Pentagon, I would like to focus on in recent years 

that this area has been particularly egregious. The GAO recently 

estimated that acquisition costs for the Pentagon’s major defense 

programs grew by some $300 billion or 25 percent above initial estimates. The GAO cited two main reasons for that growth. First, 

that DOD’s processes for funding programs create, and I quote, ‘‘An 

unhealthy competition for funds that encourages sponsors of weapon system programs to pursue overly ambitious capabilities and to 

underestimate those costs.’’ So we have a systemic problem that encourages private contractors to feed us technology of debatable utility for an unrealistic price. 

The second reason GAO cited for that phenomenal growth rate 

in acquisition costs is that the Pentagon’s process for acquiring 

weapon systems allows, and again I quote, ‘‘Acquisition programs 

to proceed through key decision points without sufficiently reliable 

information on funding, schedule, and technology upon which to 

make sound decisions.’’ So, I would ask the panel, do you agree 

with that assessment or do you think that recent reforms to DOD’s 

acquisition system adequately address these causes? Mr. Mosher. 

Mr. MOSHER. We have not looked at that, nor is that an area 

that we tend to examine, but Mr. Garrett you did ask a question 
43 

earlier and I was remiss in saying that in our estimates in this 

work that we did, and the estimates we always do, we try use those 

cost growth figures to estimate what costs will be, and so we try 

to capture historical cost growth in the systems that we estimate 

but we have not done independent analysis of the causes of these 

sorts of things. 

Mr. TALENT. I would say yes and no. Yes there is a problem with 

enacting either on the basis of not enough information. I would say 

though it is more a question of there are too many people trying 

to get the information and nobody’s accountable. And no, they have 

not done enough to deal with it. On the issue of infrastructure and 

particularly personnel, as personnel costs have grown the chiefs in 

particular have made every effort to reduce the number of personnel in their services because they want to get the platforms, 

they do not want to pay for the people. In particular, the Air Force 

and the Navy, I think reduced too far which is why we now have 

a process for example where we have to cross deck sailors; sailors 

come in from one task force, or steaming in from one helicopter to 

go on another task force that is going out. They have had an incentive to try and reduce personnel and where they could do it, they 

have done it because they have been trying to protect other parts 

of the budget. 

Mr. TONKO. Thank you. Dr. Adams. 

Mr. ADAMS. The last part of the question is the one that I wanted 

to address, are the current forms likely to get a handle on the problem that you have described? And the honest answer is it is too 

early to tell. My analysis of those proposals is probably they are 

too weak to have such an impact. I see nothing in the data so far. 

GAO provides the most compelling data that we have on cost 

growth. Nothing in the present data suggests that the overall judgment that I have about the ability to control procurement costs has 

been fixed by any of the current procurement reforms. It is really 

tilting at a windmill because the incentive structure is wrong. 

Mr. TONKO. Thank you. 

Mr. GARRETT. Mr. Ribble. 

Mr. RIBBLE. Thank you for your testimony today and Senator 

Talent this is a little surreal for me. Back in 1995, when you were 

Chairman of the Small Business Committee of the House side, I 

was sitting on that side giving testimony while you were at the 

chair. I would like to ask the same question to you and to Dr. 

Adams. One of the things that intrigues me is it seems a little bit 

like we are continuing to defend our country as if we are in the 

very close post-World War II era. We have tens of thousands, hundreds of thousands of troops stationed in safe harbor nations like 

Germany and Japan, and other places around the globe. Are those 

numbers appropriate given the speed in which we can move people 

about the globe and equipment? 

Mr. TALENT. Well, the basis, first of all with regard to base closure. We did a number of rounds of domestic base closure. I voted 

for all of them and I am not sure you guys would know, I mean, 

have they actually determined that we saved any money? I do not 

know that we have because we have to invest upfront costs in closing a base. And the bases are there to help us get in and out of 

places. We could not have done what we have done in Iraq and Af-
44 

ghanistan without the bases, in Kuwait and Qatar. If we did not 

have the troops, or the bases, in Germany we would not have a 

place to evacuate the wounded. It is pathways in and out. So if you 

do not do that and I think we should be constantly looking at infrastructure, but understand that we are still going to have the ability 

to get in and out. 

Mr. RIBBLE. Yeah, and I am not really looking at infrastructure 

per say, I am looking at troop count. 

Mr. TALENT. They have tried to reduce, in fact, have in Europe 

and in Korea, they have reduced footprints. I mean, again these 

are not people who have tried to have more personnel. This is why 

I simply dispute the idea they have not made hard choices. They 

have made a number of hard choices. I can submit you a huge list 

of them, I do not have time I guess to talk about it because they 

have been under increasing budgetary pressure. So you have to 

maintain the bases, or you have to substitute something for them. 

You can operate off the naval vessels, then you need a bigger Navy, 

or you need more cargo lift. Well you cannot shut down the C-17 

line because you got to get the people and the power from here to 

there one way or another. So, it is not my sense that you are going 

to get a lot out of the foreign bases or reducing those footprints. 

It may be possible, and if you can, you should. I would love to tell 

you there is some silver bullet that you can get out of the rest of 

the budget, but the budget’s O&M is going up. The budget’s personnel, he just said that is going up, its overseas contingencies; 

maybe that will go down. Remember even if the draw-down in Afghanistan is successful and I certainly hope it is, we are going to 

go back to 60,000 to 70,000 troops, which is almost twice as many 

as we had when the President took over. And I am not saying he 

is wrong, in doing that. The idea we are not going to do counterinsurgency, I mean I do not know how you can draw that conclusion given what we have done the last 20 years. That leaves procurement and modernization basically. So if you pressure them, it 

is got to come out of procurement and modernization, which is 

where it is come out of. 

One other point I want to make about the overall budget picture. 

Everything should be on the table. Defense has been a declining 

portion, both of the GDP and the federal budget, which is why I 

said in this statement, if you resolve the broader issues between 

the mismatch between revenue and entitlement programs, there is 

going to be enough money to pay for defense. If you do not, not 

funding these basic requirements, is not going to keep the government from going bankrupt. I think that is just a statement of fact. 

Mr. RIBBLE. Dr. Adams. 

Mr. ADAMS. Yeah, a couple of points to make. First off, in the 

work that we did for the Rivlin-Domenici Panel, we explicitly come 

to the question that you asked in the narrowest sense. That is to 

say there are areas where the United States has forward deployed 

forces where one can, I think, safely say those forces could be reduced, not eliminated but reduced. And Europe is the biggest one 

of them right now, at about somewhere between 80,000 and 

100,000 depending on how you count Naval forces and you probably 

could bring that down to 20,000 or 30,000 where you would be operating the health infrastructures at Ramstein and places where 
45 

you need capacity because you are doing deployments elsewhere 

and not have the combat for forward deployed combat forces that 

you have there today. And in fact, the Defense Department’s considering bringing a brigade combat team out of Europe, we would 

say two brigade combat teams could safely come out of Europe. 

The deployment in Asia, we also think could come down in terms 

of the ground forces, specifically. It is not a large presence but we 

would not bring it down as heavily as we would in Europe because 

the security situation is less certain in the Asian theatre than it 

is in the European theatre, but in ground forces terms we are unlikely to be using those ground forces in areas where we think they 

are deployed forward to be used, largely Korea. We are certainly 

not going to a ground war with China. So there is opportunity 

there. The reality in budgetary terms is, of course, is that you do 

not save any resources unless you bring down the size of the force 

structure to match. So if you actually bring forces down and a trip 

to force structures so you match the numbers that you have 

brought back, it may not be the same people, but it may come from 

somewhere else. You can easily do that. 

Let me address one other question that was raised or implied by 

your question, and that is this question of counterinsurgency. I 

want to come back to that because it is maybe the first time in this 

discussion so far that we have really addressed a strategic or military mission-related issue. And I think there is a very important 

argument that we put on the table here that we have not in fact 

been conducting major counterinsurgency operations for the last 20 

years. We have been conducting them for the last 10 years in countries we did not invade because of insurgencies. We invaded those 

countries because we had a regime change prospect in mind. Explicitly that was policy. Remove Saddam Hussein, remove the 

Taliban. We inherited an insurgency in part stimulated by the capability they would put in there to remove a force in a country that 

did not have a fragile government. The reality is we are not going 

to fight insurgents around the world. We are going to choose where 

we fight. We are going to choose where we deploy forces. There are 

areas with major battles raging today we would not dream of deploying American military, Democratic Republic of Congo comes to 

mind for example. That we will not engage in counterinsurgency 

warfare on a global basis because no sensible president is going to 

decide that it is America’s military mission to fight whatever an insurgent is, wherever he or she is, somewhere around the world. 

So it strikes us at least, and this is part of our strategic analysis 

for Rivlin-Domenici, that the counterinsurgency, nation-building, 

global policing role with ground forces in a lot of countries doing 

something called counterinsurgency is a very unlikely future mission for the American military. It is if you will the wrong lesson 

of Iraq and Afghanistan. We are unlikely to do 250,000 person deployments in a counterinsurgency mode somewhere else in the 

world. 

Mr. RIBBLE. Thank you. I yield back. 

Mr. GARRETT. Mr. Yarmuth. 

Mr. YARMUTH. Thank you Mr. Chairman. Senator Talent I just 

want to follow up on the line of questioning that Mr. Tonko had 

started. This really is not about credibility but I am just confused 
46 

about something because as you said, the views you expressed 

today have been long held views and this is somewhat of a chicken 

and egg situation but it goes to also kind of the revolving door that 

we have these days. I assume that one reason you are retained by 

the people who pay you is because you were, you held these views. 

Mr. TALENT. No. The reason I was retained, not because of any 

specific view in any particular area of public policy, but because of 

a perception that I understood how the Congress operated and 

could give good strategic advice to clients who cared about that and 

very little of what I have done over the years has been related to 

defense. It is mostly in other areas, health care regulation, that 

sort of thing. 

Mr. YARMUTH. Well, and you tried to make a distinction. I just 

asked you to explain because to me it is a distinction without a difference. The fact that you are not lobbying but you are being paid 

for it. 

Mr. TALENT. No I was just explaining what I do. And I felt the 

question went to what I do. 

Mr. YARMUTH. Okay, fine. Thank you very much. Again, your 

views are your views and I accept that. 

Mr. TALENT. It really has gone back 20 years. And it is really, 

whatever else I have done, this has been very bipartisan to what 

I have said and I believe very strongly that the views that I hold 

are necessary to a successful foreign policy no matter what point 

of view you are coming from. I wrote an article in 2009, at great 

length about this, advising that these needs be taken care of in 

order to make the incoming president’s foreign policy successful, 

and I bet that he wishes right now that he had increased in capabilities when he had that stimulus bill in front of him. 

Mr. YARMUTH. Well, that is water under the bridge unfortunately. Following up a little bit on the foreign presence that we 

have, and I know this differs from country to country, but I address 

this to you Mr. Mosher first. To what extent do foreign countries 

subsidize our presence there and is it a significant factor or not? 

And is that an opportunity perhaps to write the budget a little bit? 

Mr. MOSHER. You know, this has obviously been a very difficult 

political issue for a long time. There was long debates about burden 

sharing within NATO, and in Japan, and you know there is also 

this problem that you are not asking, nor do you want to ask foreign governments to pay for our forces themselves. That would not 

be right. So it tends to boil down to infrastructure and you know 

paying for bases and paying for those. And there are varying degrees of support in different countries, and I said Japan and NATO 

being the most advanced, that is the most well-developed. You 

know, that ends up being a political decision that a president and 

a congress and another country has to make about supporting that 

arrangement, and you know every country is different. Yes, there 

are potentially some savings if you were to do it, but it is not going 

to solve our budget deficit problem. 

Mr. YARMUTH. Dr. Adams, you mentioned earlier in your prepared testimony that you would like to have the opportunity to discuss some other recommendations that the Quadrennial Commission had come up with ways we might do things. I will give you 

remainder of my time to talk about a few of those, if you want. 
47 

Mr. ADAMS. Well, let me come back for a moment to this question 

of mission because I think a strategy driven conversation is in 

order at this point in our history. The major critique that I had of 

the Quadrennial Defense Review that we had and one of the major 

critiques that we had of the Perry-Hadley Commission was the real 

failure in both cases to say some threats are more likely than others. Some missions are more likely than others, and some elements 

of risk are more acceptable than others. Any good strategist will 

tell you that that calculated against resources is exactly what a 

strategist does. He says, what are we likely to do, what are we less 

likely to do, what is not likely to happen, how much do we really 

need to hedge? We have precious little guidance from either of 

those exercises to do that because both of them were consciously 

developed independently of any sense of limitations on resources. 

The consequence is really weighing, for example, what the likelihood of the use of combat forces is going to be in Europe, and what 

would one can then reduce the force in Europe as a result has not 

been done. 

The real weighing of the likelihood of a major ground warfare in 

Asia, has not been weighed. It will not happen against China, it 

would be mad to go into a ground war in China. It might happen 

in Korea, but the Korean capability that exists in South Korea is 

vastly different than what it was that we faced in 1950 when the 

North Koreans came across the 38th Parallel. Where you are going 

to face conventional forces? Where are we going to deploy 250,000 

in a conventional mode? And if you start weighing the cases and 

saying, is it Iran? Unlikely. Is it Pakistan? 160 angry Pakistanis 

coming at our military force is not a prospect I think anybody 

would lightly weigh. You begin to run out of cases. You begin to 

run out of scenarios for major combat deployments of American 

forces, and that does not mean you reduce American combat capabilities to zero. That is not what we are talking about. It is an appropriate hedge to then rethink how much you need in the ground 

force, how much of it is active duty, how much of it is reserve, how 

much you exercise it, where you exercise it, and how you are likely 

to use it. And you do a similar analysis in any mission area that 

you think is important to American national security. What is the 

global steaming tempo of the United States Navy? What need it be? 

What should it be? 

We have managed to retain global naval superiority for the last 

60 or 70 years, even with a shrinking Navy. In large part because 

no other country is as crazy as we are to develop as large a Navy 

as we have. So we have the globally dominant Navy, even at its 

current size. There is no other Navy that comes close, and no Navy 

within reach within decades. No country that even looks like it has 

the intentions of going to that length. So if your mission area is 

global presence at sea, we have and still have and would have in 

the future global presence at sea. 

I have already mentioned my own views with respect to counterinsurgency nation-building exercises in the military. We are structuring, exercising, forming, training our military today in pursuit 

of DOD Directive 3000.05 and the 24 Doctrine from the United 

States Army as if we were going to pursue major large-scale insurgency operations on a global basis. If we look at the global scenario, 
48 

we do not see that as a likely exercise of American military forces, 

nay if anything it is not likely to be well received given the experiences that we have had in Iraq and Afghanistan. 

So you set priorities among missions. We think dealing with terrorists organizations, particularly the global Al-Qaeda network is a 

key priority. Does it demand a large ground force? No. We specifically tailor our forces and we use largely Special Forces for that 

threat to deal with the kinetic edge of what is a broad problem of 

law enforcement, finances, and military operations, and governance 

stability in other countries, and so on through the chart. In other 

words in each area a hardnosed analysis that says, what is the 

threat, what is the issue, what is the real risk, what are the tools 

we use, and how do we calculate that risk? It leads you to a strategist answer which is some risks are more acceptable than others, 

and it leads us to the conclusion that on almost all areas that I can 

think of, 10 years out and a trillion dollars less than the more than 

$6.5 trillion currently projected, we still have a globally dominant 

military in every threat area I can imagine. 

Mr. TALENT. Mr. Chairman, this is the third or fourth time that 

my good friend and colleague on this panel has criticized PerryHadley. Nobody is asked me for a response to that. Am I going to 

have an opportunity? I feel Bill Perry and Steve Hadley would be 

very upset if I do not say something. 

Mr. LANKFORD [presiding]. Let me do this. Senator Talent, I do 

concur on that one. I am going to put us back on schedule with a 

five minute clock on it just for all those future that are coming up 

behind because we are bumping up against noon in a hurry, and 

I know several schedules are against that. I have the first series 

of questions at this point, and I will defer to you to begin my time 

and we will honor with the five minute time limit. 

Mr. TALENT. And I will try and do it quickly. Look, we did a strategic analysis. The whole first chapter was about a grand strategy 

because you do define what you need in terms of defense, in terms 

of what your foreign policy objectives are. So we set forth what we 

thought the enduring national interest and objectives of the United 

States were based on the strategic habits on a bipartisan basis of 

the presidents of the last four years, identified the five threats, and 

decided what force structure would be necessary to meet them. We 

knew we were resource constrained. The force structure we recommended specifically says, look it would be nice to increase the 

size of the Army and the Marines, but that is not the top priority. 

The top priority is increasing the size of the Navy and recapitalizing the whole force. This is specific understanding that resources 

are not unlimited. 

Now, Mr. Adams, with his usual eloquence and civility talks 

about the strategic analysis they have done instead of math. Later 

on you heard him, though, and what he said described what strategic analysis really is. Which is basically, look, tell them what 

their budget ceiling is, subject them to some pain, and force them 

to make some hard choices. In other words, it is a budget-driven 

type process. Now he talked about risks that are extremely unlikely. What you are seeing with that analysis is two things that 

happen all the time. One, an assumption, and we’re not talking 

about it very much, is just assuming risks away. You are going to 
49 

say we are not going to have to do counter-insurrection again, put 

a large number of troops on the ground. Exactly what they said in 

the 1990s. They cut the force then, we had to put them on the 

ground, and it created a huge number of costs. 

The other is the assumption that you know more than you know 

throughout the planning horizon. We are talking about planning 

10, 20 years down the road. The world is an unstable place. So yes, 

you have to be resource constrained, but you have to understand 

what you do not know and as Secretary Rumsfeld said one time, 

‘‘What the unknown unknowns are, as well.’’ And I thank you for 

giving me the opportunity. 

Mr. LANKFORD. No, I understand. A well equipped military personnel as far as a well trained becomes a large part of our edge 

worldwide and has been in many of our conflicts. 

Mr. TALENT. We tend to get hit where we are not prepared. 

Mr. LANKFORD. Yeah, I understand. That is part of the frustration that weapons procurement systems, that where we tend to see 

large cost overruns at times. There is also a balance of experimenting we know with a new drug being formed. Sometimes they 

go down a long way and it ends up being a dead end and it does 

not work and they lose a lot of money in the process. It is just very 

painful when we do that in the public eye with the modernization 

system. We also have a frustration right now with the number of 

times that Guard and Reserve members are headed back a third 

or fourth tour, the way we have cut back on active duty and now 

we are very dependent on a very protracted that we did not expect 

10 years ago that now we are deeply into and we have people that 

have private lives as well as public service in that, and that are 

being asked to serve again and again and again in these different 

tours. 

Let me come back to a couple of questions on this in the two minutes that I have. How do we create some incentives for efficiency? 

We have talked about it several times. Whether it be in modernizing weapons and procurement systems, give me a one-two of the 

low hanging fruit of how we create an incentive for efficiencies in 

some of these systems. Type of contract, way the contract is overseen, the frequency of contracts, whatever it may be. Anyone can 

jump in but they need to be brief. 

Mr. TALENT. Look, I think that the people response over the top 

and they have their weapons programs that they like, and you 

have to exercise control because like the Air Force always wants 

fighters. Does not mean that you do not need fighters, but I think 

they have an incentive. I mean they want the cost overruns because it undermines the credibility of the program, and means they 

can buy fewer platforms and have fewer programs. But I think 

what they are failing to do, and I have said this several times, I 

do not think anybody here is really disagreeing with this either, 

they are failing to establish clear chains of command empowering 

people in line management, and then giving them the responsibility 

and the authority to keep these programs on budget and on time. 

The other thing is they are trying to get too much capability in 

many cases with platforms. Instead of settling for something incremental and getting it out into the field. 
50 

Mr. LANKFORD. Dr. Adams. Can I ask you a quick question as 

well? You referred earlier to a private versus commercial that you 

are saying that there are some folks that are military uniformed 

that should be more commercial, I think was the term that you 

used on that. Can you expand on that some? 

Mr. ADAMS. They are performing essentially commercial functions, that is to say, they are doing things that you would do in the 

private sector in the economy rather than things that you would 

do in the Department of Defense. The answer to that is not necessarily, however to convert 100,000 people to private sector entrepreneurs because as I said earlier, it is mission related. You can 

shrink the entire infrastructure, and that would be one place to 

target in shrinking the entire industry. 

Mr. LANKFORD. You are saying take that task, not say, 10 people 

did it, the military needs to be 10 people over here, but that task 

needs to be pushed over and they would bid it out for a cheaper 

amount. 

Mr. ADAMS. Exactly. It is not necessarily, the argument is not 

necessarily one for privatization. It is some of those functions when 

you have shrunk the mission set and focused on the risks is you 

may not require a lot of those functions to be performed. 

Mr. LANKFORD. Okay. Thank you very much. Mr. Ryan. You are 

recognized for five minutes. 

Mr. RYAN OF OHIO. Thank you Mr. Chairman. So Mr. Talent, 

Senator. I was interested in what you were saying, the military 

equals stability which equals economic growth, and for example, up 

in the North Korea region. One of the issues I know I have, and 

I think a lot of people on this Committee have, and I think a lot 

of people in the country have, is they see us spending hundreds 

and hundreds of billions of dollars in the military, and compared 

to 30 or 40 years ago, and industrial towns like the one I come 

from in Youngstown, Ohio, and throughout the industrial Midwest, 

we seem to be seeing less and less of that money being spent and 

driven back into the economy of the United States. 

Mr. TALENT. Right. 

Mr. RYAN OF OHIO. And not only, as I think Mr. Mulvaney said 

about auditing, it seems like you are even saying that $10 to $15 

billion a year would be great if we could get to that number in savings. 

So I have two issues, one is we are spending a lot of this military 

money in the Northwest Pacific area as you stated and now we are 

going to sign trade agreements with South Korea. We have huge 

globalization, which has put thousands of Americans out of work, 

and yet those people are still paying taxes to fund the military, to 

have the economic stability, so that we can have a global economy, 

although it is kept their wages stagnant for 30 years. So there is 

a level of frustration in the country when we are spending all of 

this money and we are not seeing it driven back into the manufacturing defense industrial base in the United States of America. So 

four percent of the GDP is a big number, but many of us here advocate for increases in transportation for example, where we are at 

one maybe two percent of the GDP, when China and India are at 

nine or 10 or 11 percent of their GDP. And back in the day, we 

were at eight, nine percent of our GDP. So we need to figure out 
51 

how we are going to one, get this money driven back in the United 

States because we are also advocating for transportation and that 

puts our building trades right back to work. How do we go about 

doing that? How do we figure out how we start bringing some of 

this economic stability to benefit average people in Youngstown, 

Ohio? 

Mr. TALENT. I agree. I was a huge advocate for infrastructure, 

by the way, when I was on your side of the table. And I think when 

you have a debt problem, you have to do two things. You have to 

decide where you do not want to spend, and you have to decide 

where you do continue to need to spend in order to support the 

economy so that you can get out of the debt situation. 

Mr. RYAN OF OHIO. You believe investments should be made? 

Mr. TALENT. Yeah, exactly. I think, part of the problem here is 

that when you have hugely increased deployments, which we have 

had the last 20 years, you have a reduced force in terms of number 

of personnel. You are not buying the platforms, the equipment, you 

know the ship’s planes that they need, and you are not modernizing. You get huge amounts of stress which costs money. This is 

basically the reason that the Operation and Maintenance budget 

has gone up and then that has deprived procurement and modernization of the funding that it needs. And I think we are all in 

agreement that that is a problem, we have different opinions about 

how it happened and what we should do about it. 

One of the things I used to say all the time when I was in your 

position and people would ask me, what do we do for manufacturing and manufacturing jobs? I said, well one consensus thing I 

think it could be a robust defense manufacturing base. 

Mr. RYAN OF OHIO. Yeah, we all agree with that, but that is not 

the case. These companies take a lot of their work offshore. They 

are spending a lot of money in other countries. The Berry Amendment has got a loophole so big you can you know drive an Abrams 

tank through it, and you know, it is just this problem that we have 

been having. I know the nine years I have been here, I have been 

trying to deal with it, and it is going to be very difficult for anybody to advocate for four percent of the GDP being spent on the 

defense industrial base when we know that money is not going into 

RTI Titanium in Niles, Ohio. It is going to a Russian company for 

example. And these examples are you know everywhere, so you 

know I think we have got to clear that up. 

And the second point I would just like to make and have you give 

a brief comment on it because we only have 30 seconds. It seems 

to me the people making the money in the United States, the big 

corporations who benefit from this military investment and stabilization, I believe should be helping us pay for these investments. 

And I do not think it is a big sacrifice to say go back to the Clinton 

Era levels for the top one percent who will benefit from this military investment, who will benefit from the economic stability, and 

who will benefit from the global trade. Quickly if you can. 

Mr. TALENT. Look, I am here to talk about defense issues; I have 

my opinion about other fiscal policies. Heritage has written a lot 

about the tax situation. I would say to you, I will take the Heritage 

and the panel hat off and just say as Jim Talent, I mean my concern about the tax situation is that what we all want is more tax 
52 

revenue but that does not necessarily mean higher tax rates. And 

there is a link between the rate of taxation, and the actual economic growth. I mean, I know there is an awful lot of research, I’m 

going into dangerous waters here because I am certainly not an expert, that shows no matter what you do with the tax system you 

get what about 18.5 percent of the GDP in revenue to the government. So if you increase taxes, the danger is you do not get higher 

revenue, and you do get fewer jobs. 

Mr. RYAN OF OHIO. I would just say it seems like there is a 

major service being provided here for multinational corporations 

that take advantage of these sea lanes and the protection of the 

United States Navy and the stability that is provided in Asia. That 

is a service that the government’s providing, and I believe it is not 

you know inappropriate for us to ask them to help us continue this 

policy. 

Mr. TALENT. Well, we can agree that everybody ought to pay 

their fare share. Thank you. 

Mr. RYAN OF OHIO. Then we are in agreement. 

Mr. LANKFORD. Thank you. Mr. Young recognized for five minutes. 

Mr. YOUNG. First, thank you to all our panelists and the fascinating discussion here and as a member of not just the Budget 

Committee but the Armed Services Committee let me share with 

you the perspective of a freshman member of Congress. Within 

days of being sworn in, you can imagine we are asked to make all 

manner of different platform sort of decisions. Expeditionary fighting vehicle, fund or defund. If you are going to fund, do you decrease the funding? 

Next decision, you know, two engines or one engine for this aircraft platform? Next decision, there is no strategic context to so 

many of these decisions articulated by the Administration. This is 

not meant to be partisan. These challenges go back a number of 

years, a number of administrations. We have to find some way out 

of this. Now, both Senator Talent and Dr. Adams to your credit, I 

think did discuss the strategic implications of investing more or investing less in our military. I wish our Administration could articulate the same sorts of things and I would like perhaps a discussion 

for another day to get into some of the mission discipline concerns 

or perhaps we need less discipline. I think there are probably intelligent and intelligible arguments that say, no we are not committed 

enough in certain areas, we need to invest further. I am frankly 

open to both arguments, but they need to be made, and the Administration is just not doing it. 

Now, there is a $400 billion defense savings initiative that our 

current President has launched, and Dr. Adams, I saw you quoted 

recently, perhaps out of context, we know how that happens around 

here, but quote, ‘‘This review is going too fast to mean something,’’ 

is what the press indicated you had said. And I share those concerns that perhaps it is going too fast to very critically look at what 

our grand strategy should be as a country. What our role should 

be in the world. That, of course, should drive what missions we are 

asking our military to perform, then prioritize each of those respective missions. That, in turn, should drive our force structure, our 

R&D decisions. Along the way let’s cut out the waste and ineffi-
53 

ciency, there are certainly opportunities to do so and I am open to 

that. The question is this, how absent choosing some dollar figure 

$400 billion of cuts to enforce some discipline on our bureaucracy. 

Absent that, how can we get the Pentagon, the Administration to 

articulate what our role should be in the world and all the other 

things that fall beneath? Do we need to scrap the QDR and replace 

it with something else? Do we need to just improve the QDR or are 

we left with this very uncomfortable situation where we are asking 

managers of our military, of our Pentagon, to manage down to a 

dollar figure? Something I am entirely comfortable doing, frankly, 

in the USDA, but less comfortable doing in DOD. I will give Dr. 

Adams about two minutes to answer that, followed by Senator Talent. 

Mr. ADAMS. Happy to take a crack at it. It is a very big, and I 

think very important question. We, over the past 30 or 40 years, 

and particularly over the past 20, have basically allowed administration after administration, whether it is Democrat or Republican, 

to get away with having the Department of Defense be the primary 

strategic planner for the United States government when it comes 

to our international engagement. It is quite stunning when you 

think about it. Until this past year there has not been a strategic 

planning document of any kind from the Department of State to 

the Agency of International Development, and while there is been 

a national security strategy from the White House, it has followed, 

most of the time, the Defense Department’s strategic planning document, not preceded it. So, we have allowed it to happen, and just 

as a bracket I want to say it so that Senator Talent does not think 

I disagree with him on everything, I think while I disagreed with 

the content, the strategic planning document that the Bush White 

House did, the first one they did, was a masterpiece of strategic 

thinking. It was actually quite good. I disagreed with its thrust, 

but they actually prioritized what they thought was important and 

de-prioritized what they thought was less important. 

Mr. TALENT. Which Bush White House? 

Mr. ADAMS. The Bush White House. The second Bush White 

House. 

The other part as I said in my earlier remarks, I am not sure 

whether you were here yet or not, Congressman, was that resources and strategy are always related. So strategy wears a dollar 

sign as Bernard Brodie said, it is always resource-constrained, so 

you plan with that knowledge in mind. You do not plan with it absent from your mind. You know, therefore, that you can never reduce risk everywhere all the time to zero. You have to prioritize 

your risks and capabilities. 

Mr. YOUNG. Mr. Chairman if I can have 30 seconds to allow Senator Talent to respond. 

Mr. TALENT. Look, I agree very much with what you are saying. 

I think this is something Gordon and I agree on. The lack of strategic clarity, I wrote a huge article on this, the lack of direction 

from the highest level of civilian authority since the Cold War 

ended through now, almost four presidents, is extremely frustrating. What we had doing the Perry-Hadley Commission is to 

look at what they had actually done from administration to administration and deduce from that the strategic, what we call the stra-
54 

tegic habits of the United States, and to deduce from that the interests and objectives that we needed to defend. 

Mr. YOUNG. I guess the counterpoint would be, should those habits change, and I look forward to that robust dialogue. 

Mr. TALENT. I do not think DOD is hungering to do deployments 

out there. That has never been. They really want the deployments 

reduced. It is, and I agree with him also, with Gordon also, it is 

been a default thing because we have not planned, and we have not 

had clarity. We have sent troops in because we do not prepare anything else, so look I agree very much with that comment and I 

think a hearing on that would be great. 

Mr. YOUNG. Great, thank you. 

Mr. LANKFORD. Recognize Ms. Kaptur for five minutes. 

Ms. KAPTUR. Thank you Mr. Chairman, gentlemen welcome and 

I want to associate myself with Mr. Amash’s remarks. There are 

discussions going on inside DOD right now about, well, in terms of 

threat levels, what is the role of the Marine Corps in the 21st Century? I think that a hearing on their perceptions of the threat and 

then following suit on systems makes a great deal of sense because 

often systems seem to lead us rather than a connection to the 

threat level. 

I also want to associate myself with Mr. Ryan’s remarks in terms 

of outsourcing with the F-35 and the amount we are going to expend on that. I just returned from Italy, visiting some of our bases 

there, and the amount of outsourcing that is going to go on in that 

is incredible. 

And so those of us who represent states where DOD is closing 

facilities, whether it is the dual sourcing on engines for the F-35, 

or whether it is the expeditionary fighting vehicle, Ohio is hit very 

hard by that. So, I am very much for production in this country 

and also very concerned about what I have learned in my career 

on contractors and the amount that that is costing us and getting 

a straight answer out of DOD on how much more we are spending 

because of this growing reliance on contractors as opposed to insourcing. I hope in your research you will focus on some of that because I think each of you is really providing the country with a 

great service. 

I just wanted to say I heard a number yesterday that if we reduced unemployment to seven percent, we would cut our deficit in 

half. That is an astounding number and I want to focus my remaining short time on those in the military who are returning to us who 

have no jobs. It is a staggering figure. The post-9/11 veterans, according to data from May of this year, shows the unemployment 

rate was 12.1 percent, for younger male veterans aged 18 to 24, 

26.9 percent and they are coming back to places like I represent 

where the unemployment rate has been way over the national average. 

The suicide rate corresponds to what is happening there, with 

what they are facing with the foreclosure rate and so forth in our 

parts of the country are truly very difficult. 

And so my question to you really has to do with, we are wasting 

an enormous amount of human capital in these returning veterans. 

And how would we better position these returning vets in readjustment to capture their talents and to get them reemployed? In the 
55 

work that you are doing, especially where they are coming back in 

the economically distressed areas, how can we leverage the skills 

of our returning service members to improve outcomes for them 

who have served us, and to gain useful assets for our country and 

providing a better outcome across the board? It seems DOD drops 

them and the VA does not really completely pick them up. What 

do we do in order to reduce this unemployment level and focus on 

this large pool of 232,000 veterans, a quarter of a million veterans 

just since post-9/11, that are out there unemployed? 

Mr. ADAMS. Let me take a first crack at that Congressman. It is 

a very important question. The issue for me has always come down 

to push versus pull. There are obviously government programs that 

we can do that help people try to adjust, transfer skills, move into 

employment and so on. That is a push side. My sense, though, is 

that the history of base closures, which is a proxy here for what 

I am about to say, is that the demonstrated evidence from base closures is the most successful transition for communities and institutions and businesses and people who work in communities when a 

base closes, is the health of the local economy. The best thing that 

we can do, in my judgment, to get people like that employed and 

use their skills is if we focus on restoring the health of the American economy because that is going to create the context in which 

employers want to hire them, have money that they can hire them 

with, they are going to provide them with opportunities. So you 

need both a push and a pull approach. 

Ms. KAPTUR. I hear what you are saying, but it is not working 

fast enough. 

Mr. ADAMS. Right, I understand that. 

Ms. KAPTUR. Right, and it is a real problem. 

Mr. ADAMS. Understood. 

Ms. KAPTUR. In communities across this country. 

Mr. TALENT. A concrete suggestion. DOD is, I assume they are 

doing because they are supposed to do when Veterans leave, an examination of their baseline medical condition. They are supposed 

to do that when they come in and then also when they leave, almost an exit type of thing. Now, that is an opportunity, and I 

would think you might be able to do this at very little cost, to sort 

of expand that to talk to them about their employment profile, 

their ambitions, their skills, et cetera, so that you get that. I do not 

think DOD should continue, so then you need to hand that off either to VA or Labor, and you have got a good profile there and 

some guidance for that individual, and some opportunity. So you 

may want to ask what DOD is doing when people leave. What they 

ask, what kind of suggestions they make to them, because they 

have got them at that point. 

Ms. KAPTUR. Well if I use their medical exam as any indicator 

of how we should deal with unemployment and reemployment of 

these Vets, I would not want to trust DOD on it. 

Mr. TALENT. Yeah, I worked on that issue with Senator Clinton; 

it has is been like four years, so I am not aware but they are supposed to be doing that better, but you asked, and that was the only 

concrete suggestion I had. 

Mr. KAPTUR. Right, I know that my time is up but I just wanted 

to say I hope I have sensitized you to this issue. It is a serious, 
56 

serious problem, and I can also say Mr. Chairman, in closing that 

for instance if they try to go to community colleges to use their GI 

benefits, there are many of them they cannot concentrate in normal 

classes. This subset of our society, this is the new America. They 

are coming home to us and they are out there. They are alone 

many times. They do not group like the World War II vets. They 

are in our homeless shelters. They are in our food lines. This is not 

the way to treat America’s returning vets. Some group of intelligent people has to help us keep a focus on this subset of our population. Thank you. 

Mr. LANKFORD. Thank you. Dr. Adams I know that you have an 

appointment that is coming up soon. You feel free to be able to step 

out when you need to. We had asked you to be able to stay through 

noon and obviously it is ten after at this, point. 

Mr. ADAMS. Right. I am going to have to leave shortly, thank 

you. 

Mr. LANKFORD. If you need to be able to slip out, feel free to be 

able to do that. We are glad to be able to have you and your time. 

I recognize Mr. McClintock for five minutes. 

Mr. MCCLINTOCK. Thank you. I am afraid I had to miss the last 

hour so if you have already covered this just tell me so and we will 

move on. I agree with Ronald Reagan that Defense is not a budget 

issue. You spend what you need to spend in order to defend your 

country. If you fail to do that you end up without a country, but 

that does not mean that you spend more than you need to spend. 

So if I could ask Mr. Talent and Mr. Adams just in a minute’s overview, what do we need that we do not have and what do we not 

need that we do have? 

Mr. ADAMS. I have offered at some sense I think in the hearing 

so far of what I think we do not need and can probably do without 

and safely build down to, given the fact that as I said earlier, 10 

years out and 15 percent fewer resources we will still have the 

world’s dominant military. Now there are a lot of specific inside 

that about that I would recommend some things up and some 

things down, but I think that is dominant. It is interesting though 

that you do cite President Reagan because President Reagan did 

have that view, and when Gramm-Rudman-Hollings passed, he 

learned that indeed Defense is in part a resource issue. That resources do constrain our defenses, and the history that we had of 

1985 to 1998 was that our defense resources, along with most federal spending, went down as part of the Gramm-Rudman-Hollings 

and then Budget Enforcement Act Deficit Reduction exercise. 

Mr. MCCLINTOCK. Mr. Adams, actually I agreed with your earlier 

analysis which is you do not set a budget number and then figure 

out what you can buy with it, you figure out what you need and 

then adjust your budget number to meet those needs. 

Mr. ADAMS. Well I think you actually do both, it is interactive. 

Strategy wears a dollar sign as I said earlier. 

Mr. MCCLINTOCK. Mr. Talent any thoughts? 

Mr. TALENT. Well, look, on a very practical level. What I have 

recommended is we have increase the size of the Navy. It is about 

285 now, it is headed down because there is a 30 year average life 

of the ships, and we are buying six or seven a year, and you can 

figure out that means we are going down. 
57 

Now the Perry-Hadley Panel recommended the Bottom-up Review force structure, this came out in 1993, I think it was 340 

ships or so, and to increase ship building and try and get us up 

to there. That was the force structure. It Les Aspin’s force structure, that the government thought we needed in the 1990s. This 

was before the global war against terrorism or whatever it is you 

want to call it. 

So I think increasing the size of the Navy and then recapitalizing 

the equipment in the rest of the force because it is impossible to 

have an Armed Services where people are flying or driving and trying to maintain and keep in place you know inventories that are 

30, 40, 50, 60, 70 years old, and that is what is driving up your 

O&M costs. So I would just say this, you mentioned Reagan, an investment, getting that done as quickly as possible is going to save 

you money, and not doing it is going to cost you more money, and 

that is the history really of the last 50 years. 

Mr. MCCLINTOCK. Let me ask you a couple questions been bothering me about you know what we are paying for that we probably 

do not need, and one of them that screams out is why we are paying to defend Europe from the Soviet Union 20 years after the Soviet Union seized to exist? 

Mr. TALENT. We should not be, it is my view, we should not be 

maintaining commitments abroad primarily to serve somebody else. 

This should be designed to protect America’s vital interest. Now, 

the Perry-Hadley Commission recognized four enduring national 

interests we need to defend. One is defense of the homeland, which 

is increasingly a challenge in an age of asymmetric weapons. Second is freedom of the commons, you know the air, the sea, the 

space, all directly related to our economy and our quality of life. 

Preservation of an acceptable, non-totalitarian balance of power in 

the Eurasian space, and if you look at where we have been involved in the last really 60 years, but in the last 20 years, I mean 

look at it; it is from Korea, the Western Pacific, Southern Asia, et 

cetera because of a sense if that spins out of control somehow it 

is going to affect the American security negatively. And then a 

fourth was, the provision of a kind of humanitarian sort of goods 

to people, at least participating in a delivery system. 

Mr. MCCLINTOCK. Is that not Europe’s responsibility with respect 

to Europe and its area of influence and interest? 

Mr. TALENT. Look, I do not believe, personally, I think we can 

discuss what the European Allies ought to be doing that they are 

not doing. And this question came up, how do we get the Allies to 

take more of a burden; yes it would be great. But the precondition 

to that is a belief that the United States is going to remain committed. Because if we do not remain committed and we are not 

showing leadership, they are much less likely to step up than they 

are to try and come to a deal with the Russians, who invaded Georgia two years ago. 

Mr. MCCLINTOCK. I cannot get to this final question but I would 

appreciate your directing me where I can get more information on 

it, and that is a subject that you brought up, procurement. How is 

it that we end up ordering new weapon systems without setting 

aside the dollars necessary, not only to meet our needs but also to 
58 

assure that we can obtain these copies at an affordable per copy 

price? 

Mr. TALENT. Yeah, because as all of us I think agree, the procurement system is in many respects screwed up. And I would, on 

this subject certainly, I would advise to the members of the Committee that they take the time to read the chapter in here. I do not 

think the chapter on procurement reform is one that anybody 

would disagree with on a philosophical point of view, and I thought 

it was very powerful, and I really did not have any hand in it. It 

was the people on the panel who had done this, I mean really 

savvy type veteran of the system, and it sure makes a lot of sense 

to me and that is one of the things, I think, we are all in agreement, we need to do and do as quickly as possible. 

Mr. LANKFORD. Thank you. Gentlelady from Florida is recognized 

for five minutes. 

Ms. WASSERMAN SCHULTZ. Thank you Mr. Chairman. We have 

heard in this committee over the last number of months, many of 

our Republican colleagues espoused the need to slash discretionary 

spending, and Medicare as we know it and direct some pretty painful cuts. Knowing that 60 percent of our discretionary budget goes 

to the Defense Department, if we couch Defense as a sacred cow 

that is untouchable, then everything is a sacred cow because Senator Talent you have criticized the president for proposing for $400 

billion in defense cuts, and I think you said at the time, that defense spending is not the cause of our deficits and those cuts would 

not make a large difference in reducing the deficit. 

Mr. TALENT. I think I said it was fantasy to propose that. 

Ms. WASSERMAN SCHULTZ. Okay. So that is even stronger. 

Mr. TALENT. Right. If I did not say that, I said it in the first 

draft and then took it out later. 

Ms. WASSERMAN SCHULTZ. You are underscoring what I am suggesting that you said, rather than running from it. The defense 

budget makes up one-fifth of the entire federal budget, and I mean 

we have got bipartisan consensus that we are going to have to put 

sacred cows on the table in order to make a dent in the deficit. By 

your logic, would you argue that non-defense discretionary spending should also be excluded from a deficit reduction because that 

is even less, that is even more of a drop in the bucket and further, 

let me finish my question please. 

Mr. TALENT. Oh, I am sorry. 

Ms. WASSERMAN SCHULTZ. By the same logic, conversely would 

you argue that more revenues should be part of the solution because that is an area in which we can, if significance, in terms of 

the impact on deficit reduction is your marker, it would seem to me 

that you should be for putting revenue on the table and for making 

sure that we can address this effort in a significant way. And 

against things that are not significant, like slashing indiscriminately non-discretionary, discretionary non-defense revenue, which 

like you said is a drop in the bucket. 

Mr. TALENT. All right. I thank you, and I am sorry to interrupt, 

and by the way, before the hearing closes I want to apologize to 

Mr. Van Hollen because I insisted on giving him more answer than 

he gave me question on a couple of points. 
59 

Ms. WASSERMAN SCHULTZ. Your apology is cutting into my five 

minutes, so if you would. 

Mr. TALENT. I keep forgetting how disciplined you are. On defense, my concern here is that if you underfund basic capabilities 

that are needed to deal with risks that are not going to go away, 

you end up causing a whole lot more in expenditures than you 

save. I think a classic example, is when the government cut the 

size of the Army in 1990s in the belief, which I think was a budget 

driven belief, that we would not have to put large numbers of 

troops on the ground, it meant that we could not prosecute the Afghanistan and IraqMs. WASSERMAN SCHULTZ. So let me just ask you, so your point 

was not that we should not touch defense, we just should not indiscriminately touch it. 

Mr. TALENT. Right, and we should put the savings back into 

things that we do need. 

Ms. WASSERMAN SCHULTZ. So the criticism of the President’s 

$400 billion in proposed cuts is not general criticism? Was it specific to what he was proposing to cut? 

Mr. TALENT. Well, he did not say what he was proposing. I am 

prefer the President’s approach of the last several years because a 

part of this, to be frank, is the President arguing with himself, because his own Administration proposed, at least modest real increases in the defense budget until that speech. And he has not 

been specific about what he wants to do. I have no problem with 

finding savings but I do not want to cut the top line. Find the savings, and then put into the things that we need to put it in to. 

Ms. WASSERMAN SCHULTZ. But you would retreat from your 

statement, that we should not touch defense because it just does 

not cause the deficit; it is not a significant impact on the deficit 

and so therefore it should be untouchable. 

Mr. TALENT. With respect, I never said defense was untouchable. 

I said the savings that we can achieve in defense we should put 

back into things that we need more within the department’s budget. 

Ms. WASSERMAN SCHULTZ. That is not what I have you on the 

record as saying, from what I understand. But let me just ask Mr. 

Mosher a question. We are spending nearly $50 billion a year on 

military retirement benefits, and if we look, direct your attention 

to that chart up there, there have been a lot of defense analysts 

secluding the conclusions of the Quadrennial Review of Military 

Compensation, who criticized the current system as not being fair 

or efficient. You can only collect military retirement benefits, unless you are disabled, after serving 20 years. That means that most 

of the individuals deployed to Iraq and Afghanistan, including 

many in my district, who are not going to get any retirement benefits, because as you can see they really only were serving for four, 

five, six years. So, to me that does not seem fair, especially given 

that members of Congress, Congressional staff, law enforcement officers, firefighters, can accrue pension benefits after five years. We 

accrue them after six. So is the current retirement system for military fair and efficient, and if not, how could we make it better? 

Mr. MOSHER. I cannot speak to fairness and efficiency. We have 

not analyzed that in any detailed way. What I can say is that there 
60 

have been numerous proposals over the decades to try to change 

the military retirement system, and there are defenders on both 

sides. You know, there are advantages as you point out, what that 

is called cliff-vesting, you do not get anything until you reach 20 

years except for some disability cases. So you cliff-vest, and that 

creates an incentive for people to leave afterwards. Right? Sooner 

than you might want them otherwise, and for folks particularly in 

those first 10 years of service, it tends not to entice them to stick 

around for that pension. You know, once they get beyond ten years, 

then people tend to stick around because they are a little older, a 

pension means more, and it is closer to them. 

Ms. WASSERMAN SCHULTZ. It is worth it to them. 

Mr. MOSHER. It becomes worth it to them, but that is the way 

the system is designed and there are pros and cons to it and what 

you say is absolutely true, people who do not serve the 20 years 

do not get the money and a lot of people enlist and then leave. I 

mean it is often it is a choice on their part. They do not want the 

military life. You could do something that would be like a TSP system which would be sort of a hybrid, a small defined benefit program infers and then a contributory program. You could do something that would be like the old CSRS system, which was that federal system where you had a defined benefit only, you did not have 

to worry about the state of the market at the time. Or you could 

have something that is much more like a 401k, that many people 

have in the private sector; but all those have advantages and disadvantages and I guess the right people to talk about this would 

be the folks at DOD who could talk about. You know there is a 

force management issue as well. There is an equity issue, clearly. 

If I am the managers of personnel in DOD, how is it that I ensure 

that I get the force structure that I want that has the capabilities 

that I want, that has the pyramid structure that I want, because 

you know as you move up in rank there are fewer and fewer people 

at those ranks. And it is a very complicated discussion, but yes, 

clearly there are people who have argued that it needs to be 

changed, and there are people who have argued that you know it 

has some advantages. 

Ms. WASSERMAN SCHULTZ. Right the point and the concern is 

that there is quite a bit of sacrifice without really anything to show 

for it at the end. 

Mr. MOSHER. In terms of a pension, you are absolutely correct. 

Ms. WASSERMAN SCHULTZ. Yeah. Thank you. I yield back. 

Mr. LANKFORD. Thank you Mr. Van Hollen, just a quick question. 

Mr. VAN HOLLEN. Thank you Mr. Chairman, about three minutes 

ago the Chairman turned to me and said to me do I have any closing statements, I said no and that was until Senator Talent mentioned that the President’s $400 billion in proposed defense spending cuts was quote, ‘‘a fantasy.’’ I would just point out that if that 

is your standard, I would ask you to look at the members of the 

President’s Bipartisan Fiscal Commission. The president proposed 

$400 billion over 12 years, which would allow the current defense 

budget to grow at the rate of inflation. The Bipartisan Commission, recommended a $1 trillion in cuts, 

so by the standard that $400 billion over 12 years is fantasy, I am 

assuming that you put such individuals like Senator Coburn, Sen-
61 

ator Crapo, former Senator Craig, Senator Domenici, in the land of 

the totally delusional. We have got to get serious about our budget 

deficit. To say that 20 percent of our budget is a trivial contribution 

to that national effort, I think neglects the very important duties 

that we have. And I will just end by where we started. I agree with 

you that our defense spending has to be driven by strategy. We 

have had that conversation. That is why I think putting an artificial GDP percentage on it is math and not strategy. Part of that 

strategy requires United States to retain the economic power and 

full potential that it has. If we do not deal with this deficit and 

debt as the current Chairman of the Joint Chiefs of Staff has said, 

we will all be in a world of hurt and that will hurt our military, 

and it will hurt the ability of the United States to project its interest, power, and values around the world. And so, I just ask you 

when we throw around phrases like fantasy for $400 billion, put 

that in the context of what bipartisan commissions have recommended. Thank you Mr. Chairman. 

Mr. LANKFORD. Thank you. Mr. Talent did you want to make a 

quick response to that? 

Mr. TALENT. Well, what I think it is fantasy to believe that we 

can cut that much out of the defense budget over the next 10 years 

and protect American security within an acceptable margin of risk. 

That happens to be my view, strongly stated. I understand that the 

members and the people you talked about disagree. I do think that 

the Simpson-Bowles report, as far as it referred to defense spending was budget-driven rather than strategic-driven. Now as far as 

the Administration is concerned, I certainly meant no disrespect. 

I do think this is a situation where the Administration in its first 

two years has been proposing, and I thought this was not everything we needed to do but it was partly, modest real increases in 

the defense budget. And now the president has unveiled this idea 

of cutting the defense budget over the next 10 years. 

So I think that it is an internally inconsistent position, and I 

mean if I were still on the HASK and I would had officials of the 

DOD in front of me, I would say well, if this new position is right 

then does that mean the old one was wrong? And if the old position 

was right, does that mean the new one is wrong? But I appreciate 

what you are saying and I agree with much of it. And now I get 

a chance to apologize personally to you, like I said, giving you more 

answer than you gave me. 

Mr. VAN HOLLEN. No apologies necessary on that front Senator. 

Mr. TALENT. Thank you. 

Mr. VAN HOLLEN. Thank you both for your testimony. Thank you 

Mr. Chairman. 

Mr. LANKFORD. Thank you and we are still waiting on the details 

of what that $400 billion cut is over the next decade, and so that 

is part of the ongoing pursuit of this, as well, is when to recommend it, but it is another one to be able to get the details of 

that. Obviously defense spending is falling dramatically over the 

last 50 years and a percent of the federal budget and what we are 

doing. But it is just a matter of being judicious with that process. 

So and I do appreciate you all coming and being a part of the panel 

today. With that we are adjourned. 

[The prepared statement of Hon. Peter T. King follows:] 
62 

PREPARED STATEMENT OF HON. PETER T. KING, CHAIRMAN, 

COMMITTEE ON HOMELAND SECURITY

I would like to take the opportunity to thank Chairman Ryan for holding this 

hearing regarding the National Security budget. I also thank the Chairman, Ranking Member Van Hollen, and Members of the Committee for considering my statement and including it in the record. 

Homeland Security Secretary Janet Napolitano has warned that our Nation is 

currently at its highest level of a terrorist threat since September 11, 2001. We 

must work to ensure that the Department of Homeland Security is receiving sufficient funding to keep our Nation safe. 

Homeland Security is National Security. When Secretary Napolitano testified before the House Committee on Homeland Security on March 3, 2011, she stated, ‘‘The 

demands on DHS have never been greater and the threats we face pose new challenges that require an innovative and focused response.’’ According to Attorney General Eric Holder, during 2009 and 2010, 126 people were indicted for terrorist attacks, 50 of which were U.S. citizens. This week, on July 5, 2011, the Justice Department issued an indictment against Ahmed Abdulkadir Warsame who is charged 

with providing material support to the terrorist group, al Shabaab. Also this week, 

new threats to aviation security were reported, which should remind all Americans 

how important airport security truly is. 

There are imminent terrorist threats to our Homeland, and this Congress has a 

primary responsibility to the American people to protect the Homeland and ensure 

the proper funding to address any possible security threats. 

In assessing the most important budgeting priorities, we must first look to Federal grant funding for our local and state law enforcement partners in regions of 

the highest security risk. In the budget put forth by this Committee, and the subsequent Fiscal Year 2012 Homeland Security Appropriations bill, grants including the 

Urban Area Security Initiative, the State Homeland Security Grant Program, the 

Transit Security Grant Program, the Port Security Grant Program, and other grant 

programs for emergency communications systems and emergency medical response 

were cut by 50%, from nearly $2 billion to $1 billion. Such cuts jeopardize our security and make our Nation less safe. 

As your Committee rightfully gives great importance to funding our Armed Forces 

fighting terrorism overseas, we must not become complacent at home. As a Representative from New York, my constituents know first-hand the tragedy of a terrorist attack and the heroic work of our first responders. Although we must reduce 

spending and shrink the deficit, we must avoid cuts to these critical grants that 

would severely weaken our Nation’s ability to defend against future plots. 

Budgeting sufficient funding to protect our Homeland will not only protect the 

lives of Americans, but prevent the devastating economic harm that followed the 9/ 

11 terrorist attacks. 

Chairman Ryan, I again commend you for holding this important hearing. I trust 

that you and our colleagues who serve on the Budget Committee will agree that decreasing funding for Homeland Security, as we prepare to reflect on the 10th Anniversary of the 9/11 terrorist attacks, will put our country at risk and is not in the 

best interests of the safety and security of the American people. I look forward to 

working with you to address the challenges ahead. 

[Whereupon, at 12:27 p.m. the Committee was adjourned.] 

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