DEPUTY SECRETARY OF DEFENSE BOB WORK: Good afternoon, everybody. Thanks for joining us as we roll out the FY 2017 defense budget.
The defense budget request totals $523.9 billion in discretionary funding for our base budget; and $58.8 billion in overseas contingency operations (OCO), for a total of $582.7 billion. That sustains the president's national security and defense strategies and they conform -- the figures conform to the budget levels found in the Bipartisan Budget Agreement (BBA).
Now, in building this program that informs the budget that we're going to talk to you about today, Secretary [of Defense] [Ashton] Carter first asked the Department [of Defense] to take the long view. The way he did it is to say, well, how is the next 25 years going to differ from the last? How is it likely to be different?
Now, of course, the future is inherently unknowable, but we concluded that five of all the strategic challenges would most likely drive the focus of our planning, programming and budgeting processes. Now, the first two challenges reflect what we consider to be the most significant shift in the future security environment -- and that is a return to an era of great power competition.
Today, we are faced by a resurgent, revanchist Russia and a rising China. Both are nuclear-armed powers. Both are fielding advanced capabilities at a rapid rate. Both are permanent members of the U.N. Security Council, and both take issue with some aspects of the principled international order that has preserved stability and enabled the peaceful pursuit of prosperity for decades.
Both are becoming more aggressive along their peripheries -- Russia on its western borders abutting NATO, and China in its near seas. As a consequence, even as we continue to cooperate on issues of mutual interest to both countries, we concluded the Department must be prepared for a period of increased competition over the next 25 years.
Now, the third strategic challenge is a more unpredictable and dangerous North Korea. North Korea, as you know, is already a nuclear-armed regional power. And it is now pursuing advanced ballistic missiles capabilities that already threaten our Allies and the broader stability of the Asia-Pacific region.
Indeed, it is committed to developing long-range nuclear armed missiles such as the KN-O8, which could pose a direct threat to the continental United States if it is successfully designed and fielded. That is a new thing.
Moreover, another new thing is that the new leader, Kim Jong Un has demonstrated a propensity for provocation which lends itself to miscalculation and is very, very, in our view, destabilizing and risky. And North Korea, of course, continues to station large conventional forces along the demilitarized zone (DMZ), threatening our ally, the Republic of Korea. And for these reasons, we must continue to retain forces on the [Korean] peninsula that can fight tonight if called upon to counter North Korean aggression.
The fourth strategic challenge involves countering and deterring Iran's malign influence throughout the Middle East. Iran seeks to become the dominant regional power. And in support of its goal, it is pursuing a wide range of destabilizing activities throughout the region, threatening our Allies and partners, particularly Israel.
While we hope that Iran will moderate its malign activities over time, we concluded we must be prepared to counter them, as well as any moves that that country takes to violate the recent agreement to curtail its pursuit of nuclear weapons.
Now, the fifth challenge is our sustained global campaign against terrorist networks, with a near-term emphasis on degrading and defeating ISIL and a sustained effort to train Afghan forces to defeat the remnants of Al Qaida and counter the spread of ISIL in South Asia.
Now, from our perspective, the campaign against global terrorist networks will be an enduring condition for much of the next 25 years and we have to be prepared to monitor it constantly, respond to and treat it when necessary.
Now, I want to make clear that this list does not reflect a prioritization of strategic threats. Should miscalculation occur or deterrence fail, the Department of Defense has to be able to provide the President with options to respond to possible unexpected contingencies involving any of the four aforementioned state powers, as well as those associated with the one enduring condition, our global fight against global -- against terrorism.
And so we therefore sought to develop a portfolio with the capacities, capabilities and readiness to address all five of these strategic challenges with some degree of risk. And that's important to note. The President's Budget allows us to execute our national military and defense strategies.
However, given the current level of funding, we simply cannot reduce every risk associated with every strategic challenge. We therefore developed a program that addresses all five -- and the Secretary [of Defense] said if we cannot reduce risks and all of the challenges, we have to prioritize.
So, he told us to do three things.
First, we should prioritize strengthening our conventional deterrent against the most advanced potential adversaries. When doing so, he didn't expect us to match advanced adversary capabilities, either numerically or symmetrically.
He instead told us to offset their strengths using new technological, operational and organizational constructs to achieve a lasting advantage and to strengthen deterrence.
Now, like previous offset strategies, the advanced capabilities we are developing for our advanced competitors are directly applicable against lesser states, and also strengthens deterrent in that regard.
Second, with respect to the services, the secretary [of defense] asked us to focus far more on shape than size.
He asked us to try to achieve the best balance of capacity (what we call size or force structure), modernization (or capability), and readiness within the existing budget level -- seek that balance. And in terms of readiness, he expected us to focus on reconstituting full spectrum readiness.
And he charged us to place heavy emphasis on innovation along four broad lines of effort.
One, ensure we retain the advantage we enjoy in our human capital. Our people are the best and most powerful competitive advantage that we have across all five challenges. And the Force of the Future aims to keep it that way.
Secondly, update our plans and operational concepts. The secretary [of defense] and the chairman [of the Joint Chiefs of Staff] are pushing the Department [of Defense] to look at each of these challenges in terms of trans-regional, multi-domain, multi-functional answers. Don't just look at it regionally, look at it by exploiting our global posture.
Third, he asked us to seek game changing technologies and make more discreet technological bets that exploit our advantages as well as adversary weaknesses.
And finally, he asked us to pursue widespread institution reform. He wants us to become a lean and agile 21st century organization. And just as importantly, we want to free up additional resources to devote to other programmatic needs and buy down any residual risk that remains in the program.
I'd like to pass it over to the Vice Chairman of the Joint Chiefs of Staff, General Paul Selva, and then will be happy to take some of your questions.
GENERAL PAUL SELVA: Thank you, Mr. Secretary. Good afternoon everyone.
Let me start by expressing my deepest appreciation to this team of professionals, who are the men and women who worked the long hours to develop this year's defense budget submission. No easy task, even in the best of times.
This year, we faced the unenviable task of finding ways to address expanding and complex challenges to our national security interests, despite the enduring strain on constrained resources. The result of this collaboration is what the chairman [of the Joint Chiefs of Staff], the service chiefs and I believe is the best possible balance of capacity, capability and readiness investments based upon the resources available.
Make no mistake, today's strategic security environment is more unpredictable than I have seen in my 35 years of service. Our dedicated soldiers, sailors, airmen and marines have been battling terrorism around the globe for nearly 15 years. The pervasive threat posed by violent extremist organizations has been and remains an immediate threat.
Yet focused on this protracted fight in combination with the burdens of sequestration and budget uncertainty has come at a heavy cost, degrading readiness, delaying modernization and decreasing our overall capacity. And as you're well aware, the rest of the world has not remained stagnant during this time.
Concerns posed by increasingly aggressive state actors with mounting military capabilities also demand our attention. As Deputy Secretary [of Defense] [Bob] Work just highlighted, we face growing challenges from Russia and China, which are asserting their power at the expense of regional security. North Korea's pursuit of nuclear weapons and ballistic missile technologies -- which continues to plague the Korean Peninsula and its neighbors -- and Iran's malign activities, which promulgate its role as the world's chief exporter of terrorism and instability.
This budget works to invest in capabilities needed to meet these growing challenges, while to the best extent possible, preserving force structure and advancing readiness.
For the Army, it supports the ongoing transition back to high-end combat and full-spectrum capabilities.
It invests in the Navy's lethality through improvements in surface capability, tactical aircraft and investments in advanced undersea capabilities. It maintains the Marine Corps' preeminent role as the Nation's most capable expeditionary response force.
And for the Air Force this budget invests in high-end capabilities across the range of domains that we expect our Air Force to respond in, while attempting to improve readiness through training for the high-end fight.
In closing, this proposal reflects the hard choices we've made in the context of today's security environment and economic constraints. And it does not leave much room for needed flexibility.
We are in the process of engaging Congressional leaders and their staffs to address their questions and their concerns with this budget. I look forward to continuing to work to eventually get an approved budget which addresses the military readiness concerns of today, and provides for the investment and flexibility, which allows us to continue to address our national security interests into the future.
Thank you again for being here today. We look forward to taking your questions.
Q: Could -- for either one of you or both if possible, I just wanted to ask a couple questions on the OCO accounts.
First, can you talk about the thinking behind the new $200 million that's aimed at countering threats in North Africa, West Africa, in that region? And what you expect to buy with that money?
And then for the Afghanistan amount, about what troop levels will that support in Afghanistan for the coming fiscal year?
And then maybe just an overall, the increase in OCO funding, what do you expect to buy with the extra -- from the $5 billion to the new $7.5 billion? What are you hoping that buys?
MR. WORK: Well, let me just give a little overview on OCO and then I'll turn it over to General Selva. The request for $58.8 billion, let me just emphasize, that was built from the bottom-up. So we said what do we need to do to do what we need to accomplish in Afghanistan?
The President, as you know, made a decision to keep 9,800 troops through sometime this year, probably through the fighting season and down to 5,500 at the end of the year. This budget fully funds that. It fully funds all of the operations that are going on in both Iraq and Syria. And it asks for Iraq train and equip as well as Syria train and equip.
So, this OCO budget provides us everything we need, we believe, right now to execute our global operations. That left over about $5 billion to cover base needs. And we didn't have a specific -- I'd have to defer to Mike [McCord] on the specific $5 billion. But generally $5 billion was able to address base needs.
GEN. SELVA: The only thing I would add to that, Lita, is to reemphasize the fact that in the OCO budget as submitted we have funded all of our anticipated operational costs, both in South Asia as well as across the North and West Africa portions of our trans-regional fight against terrorism and the violent extremist organizations. That has all been fully covered.
Each of the services, as you get their briefs later today will likely be able to cover the detail of their requests inside of that budget. But we've covered all the anticipated expenses in that endeavor.
Q: So, what about this $200 million for some of the Africa region? What's the thinking behind that? What is the threat you're trying to address? Can you just expand on that a little bit?
GEN. SELVA: I'll expand briefly on that. So if you think of the threats that exist across all of Africa, Al-Shabaab in the east, Boko Haram in the west, the newly formed ISIL province in Libya, the monies that we've put into the budget to address those threats in Africa are to be able to work with indigenous forces as well as partner forces to get at those three particular threats, and others that might emerge.
MR. WORK: It goes back -- let me just follow up. This goes back to what the secretary [of defense] and the chairman [of the Joint Chiefs of Staff] are saying. We have to approach this as a trans-regional problem. We have to approach the problem all the way from the western coast of Africa all the way to Afghanistan, and potentially in Southeast Asia.
So, none of these problems we look at just as a Central Command problem. We look at it, what do we need trans-regionally to address these threats? And the things that we are anticipating doing in northern Africa would be in the broader support of our global campaign against terrorists.
Q: A question to you and then to the general.
This is the last Obama administration budget. You've been discussing within the building the looming bow wave the next administration faces in terms of nuclear modernization and Air Force issues after 2021. How serious is the bow wave that the next administration faces? And what are some of their options?
And General Selva, since August during the Republican debates there's been constant drumbeats of claims that the American military has been gutted. I don't know why I didn't ask Mr. Work this. But how do you address someone who's watching today hearing that it's been gutted?
You're talking about degraded overall capability, reduced modernization. Can you put this in context in terms of the condition of the U.S. military today versus the hyperbolic word "gutted?"
MR. WORK: Well, let me talk about the bow wave. And I'd like to turn it a little bit, Tony, and talk about the fiscal risk that we see going forward.
So the primary problem that we're faced with is we really like the budget deal. We applaud Congress being able to provide us with two years of stability. But in 2018 we are planning on going up again, significantly above the sequestration-level caps. If you take all of the money between 2018 and 2021, that's $100 billion that we are counting on that we don't know for certain that we're going to get.
The second thing is the future of OCO. How will OCO be done in the future? That's another big uncertainty. We have money that is in OCO that should be in base. It just happened over the last 14 years of war. And we have to address that.
And then, as you said, starting in 2021, between 2021 and 2035, it's about $18 billion a year to reconstitute and recapitalize our strategic nuclear deterrent. If that comes out of our conventional forces, that will be very, very, very problematic for us.
So, rather than talk about the bow wave, there is future fiscal risk that the country, Congress and future administrations and this administration must come to grips with. Because as soon as we have a better understanding of that, we'll know for sure that our defense strategy is on the right track.
GEN. SELVA: I won't be argumentative, but I will take umbrage with the notion that our military has been gutted. So I stand here today a person that's worn this uniform for 35 years. At no time in my career have I been more confident than this instant in saying we have the most powerful military on the face of the planet.
Do we have challenges? Of course we do. When you are faced with a global set of threats, you have to make choices on where you focus your energy.
And so as I stated, we focused our energy on this violent extremist terrorist thread of threats for the better part of the last 15 years. That consumes the readiness of our force to do the other tasks that we are given as part of our mission. Recovering that readiness is a challenge that each of the services will face.
But I would say we are far from gutted. That you have in your joint force today the most powerful army on the planet, the most flexible and determined Air Force on the planet, the most capable Navy on the planet, and a Marine Corps no one can match. I would argue that's far from gutted.
I don't engage in politics. This is the reality of the men and women that serve in our Army, our Navy, our Air Force and our Marine Corps. They're the best the world has to offer, and we're going to keep them that way.
MR. WORK: We have time for one more. Gordon?
Q: Two quick questions.
Sir, can you kind of expand a little bit on the littoral combat ship (LCS) cut? You've seen a lot of that, but if you could expand on your thinking.
And also update us on the growth to 90 caps of ISR. And just if you see -- is that being delayed? Is it being accelerated? What in this budget specifically addresses that growth?
MR. WORK: Thank you, Gordon.
First question, LCS is a perfect example of what the secretary [of defense] meant by focusing more on shape rather than size. The requirement for the U.S. Navy is a battle force of 308 ships. In that 308 ships there's a requirement for 88 large surface combatants like a Ticonderoga-class cruiser or an Arleigh Burke guided missile destroyer. And there was a requirement for 52 LCSs for a total of 140 surface combatants.
If you take a look at last year's plan, the Navy was going to build up to 321 ships and then come down. And we asked ourselves, what can't we buy because we're going from 308 to 321? We said, well we can't buy a lot of capability.
And so it was a very -- and this is not an indictment against the LCS. If we didn't like the ship we would stop buying it. But those 12 ships would take us from 321 to 309 ships. And it allowed us to put more money into torpedoes, more money into P-8s, more money into advanced munitions, more money into tactical aviation.
And so it was more about achieving that balance between size, readiness and modernization.
We think the Navy is much stronger because of this decision. And the plan -- we will get to 300 ships in FY 2019. We'll get to 308 ships in FY 2021, which is the requirement. We'll stay above 300 ships through FY 2030.
So, this was the type of challenges and the trades that the vice chairman was talking about, where you look at it and say: "Would I rather have those 12 extra ships? Or would I rather have all the capability that allows us to buy?" And we made a decision to go for capability.
On the ISR caps, we're building a 90 low-end permissive Intelligence, Surveillance and Reconnaissance (ISR) caps, like Reapers and Predators. Sixty will be healthy ISR caps in the Air Force, which means they'll have 10 pilots per line, per orbit. And that is a sustainable -- a sustainable force structure.
The Army is going to add 16 caps in what we call the GFMAP, the global force management allocation plan, and they will actually have 16 orbits. Then we're going to buy 10 government-owned contractor-operated orbits, which will be our bumper -- I mean, our shock absorber. That gets us to 86. And then four orbits are supporting our SOF forces today. That's how we get to 90.
We won't get to 90 until the latter part of the FYDP, but we're on track. There's no slow-down. That plan is fully funded. And we hope that the Congress will support us in that goal.
General Selva, did you have anything?
GEN. SELVA: I have nothing to add. You got it all.
MR. WORK: Thank you again. We're going to --
Q: On LCS, I've got to push you on this one. Why did you add one more LCS for two, when in December the secretary [of defense] said you're only going to get one in '17? Can you square that?
MR. WORK: Sure. The secretary [of defense] is very flexible on these points. And the Navy came back in and said, "Hey, in terms of competition, it would help us if both of the [ship]yards had a ship in '17; both could compete and then we'll do the down-select."
So, it was just, you know, it doesn't change the 40. We're going to 40 ships. It was just a slight change in the profile. And it was allowing us to make sure that the down-select to the frigate -- the frigate was a way to do it.
So again, on all of these things, these were hard choices -- choices between size, modernization, and readiness. And each of the services are going to explain to you this afternoon the choices that they had to make and the choices that we approved to achieve what General Selva said is we think is the best balance.
Thank you very much. And thank you for being here this afternoon.
GEN. SELVA: Thank you all.