Mr. Chairman, Congressman Smith, distinguished members of the committee, it really is an honor for me to have the opportunity to appear before you for the first time as secretary of defense. I'd also like to join you in recognizing General Dempsey. Marty Dempsey is a brilliant soldier, and he's someone who is a proven leader on the battlefield and off the battlefield. And I'm delighted to have him alongside of me in his new capacity as chairman of the Joint Chiefs.
On behalf of the men and women of the Department of Defense, I want to thank the members of this committee for your support and for your determination to join me in every way possible to try to ensure that these men and women succeed in their mission of protecting America…
As a former member of the House for 16 years, I really do believe that Congress must be a full partner in our efforts to protect the country. And for that reason and in that spirit, I've had the opportunity to consult with many of you and will continue to consult with you as we face the challenges that the Department of Defense must confront in the days ahead. These are difficult times, and I really do need your full guidance, your full counsel and your full support.
I'd like to thank you for convening these series of hearings -- this is an important effort that the committee has engaged in, looking at the future of national defense and the U.S. military 10 years after 9/11 -- and for giving me the opportunity to be here today to add my perspective to that discussion.
We've been at war for 10 years, putting a heavy burden on our men and women in uniform to defend our nation and to defend our interests. More than 6,200 have given their lives, and more than 46,000 have been wounded during these wars that we've engaged in since 9/11…These conflicts have wrought untold stresses and strains on our service members and, obviously, on their families as well. But despite it all, we really have built the finest, most experienced, most battle-hardened all-volunteer force in our nation's history. Our forces have become more lethal and more capable of conducting effective counterterrorism and counterinsurgency operations. New or enhanced capabilities, including the growth of special operations forces, unmanned aerial systems, counter-IED technologies and the extraordinary fusion that I've personally witnessed between the military and intelligence operations have provided the key tools that we need in order to succeed on the battlefields of the 21st century.
And make no mistake: We are succeeding. Ten years after 9/11 we have significantly rolled back al-Qaida and al-Qaida's militant allies. We have undermined their ability to exercise command and control and to do the kind of planning that was involved in the attack on 9/11.
We are closer than ever to achieving our strategic objectives in Afghanistan and Iraq, and we continue to be a bulwark for democracy in confronting countries like Iran and North Korea and others that would constitute a threat to our security.
Bottom line here is that these conflicts that we've been through -- that while we are moving in the right direction, the fact remains that we are at a turning point, a turning point not only with regard to the challenges we face but a turning point with regard to the military as a whole.
As the current mission in Iraq comes to an end, as we continue to transition security responsibility in Afghanistan and as we near the goal of disrupting, dismantling and ultimately defeating al-Qaida, the department is also facing a new fiscal reality here at home. As part of the debt ceiling agreement reached in August, the department must find more than $450 billion in savings over the next decade.
Our challenge is taking a force that has been involved in a decade of war and ensuring that as we build the military for the future, we are able to defend this country for the next decade at a time of fiscal austerity. We need to build a force that can confront a growing array of threats in the 21st century. As I pointed out to some members the other day, one of the differences is that as we came out of past wars, we essentially were able to enjoy a peace dividend at a time of relative peace. Now, as we confront the fiscal challenges that this nation faces, we're doing it at a time when we are continuing to confront a series of very real threats in the world to our national security.
We continue to confront the threat of terrorism. Regardless of what we've been able to achieve -- and we have achieved a great deal -- there remain real threats out there, not only in Pakistan but Somalia and Yemen, North Africa and other places -- those terrorists who continue to plan attacks in this country.
We continue to have to deal with nuclear proliferation in the world. We continue to have to confront rising powers in the world. We continue to have to confront cyberattacks and the increasing number of those attacks that threaten us every day.
And yet as we confront those threats, we have to meet our fiscal responsibilities. That will require setting a very clear set of strategic priorities and making some very tough decisions.
Working closely with the service chiefs, the service secretaries and the combatant commanders, I intend to make these decisions based on the following guidelines.
First, we have and we must maintain the finest and best military in the world, a force capable of deterring conflict, a force capable of projecting power and a force capable of winning wars.
Second, we absolutely have to avoid a hollow force and maintain a military that even if smaller will be ready, agile and deployable.
As I said, after every major conflict -- World War I, World War II, Korea, Vietnam, the fall of the Soviet Union -- what happened was that we ultimately hollowed out the force, largely by doing deep, across-the-board cuts that impacted on equipment, impacted on training, impacted on capability.
Whatever we do in confronting the challenges we face now on the fiscal side, we must not make that mistake and we will not make that mistake of hollowing out the force.
Third, it demands a balanced approach, and we have to look at all areas of the budget for potential savings, from efficiencies that trim duplication and bureaucratic overhead to improving competition and management and operating in investment programs, procurement programs; tightening personnel costs that have increased by almost 80 percent over the last few years; and re-evaluating our modernization efforts.
All of that needs to be considered. All of that needs to be on the table if we're going to do a responsible job here that addresses the areas where we can find savings without hollowing out the force.
And finally and most importantly, we cannot break faith with our men and women in uniform. The all-volunteer force is central to a strong military and central to our nation's future. We have a -- we have a lot of very effective weapons at the Pentagon and at Department of Defense, a lot of very sophisticated technology. But very frankly, we could not be the finest defense system in the world without the men and women who serve in uniform. They're the ones that have made us strong, and they're the ones that put their lives on the line every day in order to protect this country. We have got to maintain our faith with those that have deployed time and time and time again. And that's something I intend to do.
If we follow these four principles, I am confident that we can meet our national security responsibilities and do our part to help this country get its fiscal house in order. To achieve the required budget savings, the department also must work even harder to overhaul the way it does business. And an essential part of this effort will be improving the quality of financial information and moving towards auditable financial statements.
Today DOD is one of only two major agencies that has never had a clean audit opinion on its financial statements. That is inexcusable, and it must change. The department has made significant progress toward meeting the congressional deadline for audit-ready financial statements by 2017, with a focus on first improving the categories of information that are most relevant to managing the budget.
But we need to do better, and we will. Today I am announcing that I've directed the department to cut in half the time it will take to achieve audit readiness for the Statement of Budgetary Resources so that by 2014 we will have the ability to conduct a full-budget audit. This focused approach prioritizes the information we use in managing the department and will give our financial managers the key tools they need to track spending, identify waste and improve the way the Pentagon does business as soon as possible. I've directed the DOD comptroller to revise the current plan within 60 days to meet these new goals and still achieve the requirement of overall audit readiness by 2017. We owe it to the taxpayers to be transparent and accountable for how we spend their dollars. And under this plan, we will move closer to fulfilling that responsibility.
The department is changing the way it does business and taking on a significant share of our country's efforts to achieve fiscal discipline. We will do so, but we will do so while building the agile, deployable force we need to confront the wide range of threats that we face.
But I want to close by cautioning strongly against further cuts to defense and, for that matter, to other discretionary accounts, particularly with the mechanism that has been built into the debt ceiling agreement called sequester. It is a blind, mindless formula that makes cuts across the board, hampers our ability to align resources with strategy and risks hollowing out the force.
I understand this formula. When I was in the Congress, serving on the Budget Committee, I served on the conference that developed the so-called Graham-Rudman approach to dealing with these kinds of cuts. But even then, every time the cuts were to take place, the Congress basically postponed it because it was mindless, because it was across the board. It was designed as a gun to be put to the head of the Congress so that it would do the right thing.
And I guess what I'm urging the committee -- the supercommittee to do is do the right thing, come up with the decisions that should be made, frankly, on the two-thirds of the budget that is still yet to be considered for deficit reduction. They're working with the one-third of the budget in discretionary spending, and it's taking a trillion- dollar hit, and defense is going to have to pay up almost half of that.
If you're going to be responsible in dealing with the deficit, you have got to consider the mandatory programs and you've got to consider, obviously, revenue spending that's part of that as well.
I truly believe that we do not have to make a choice between fiscal security and national security. But to do that, to do that will require that we have to make some very tough choices. And I have to be frank with you: They are choices that could have some impact on the constituencies that you care most about.
As a member of Congress, I've been through this. I represented an area that had significant military installations -- Fort Ord and a number of other installations. During the period following the reductions after the fall of the Soviet Union, during the BRAC process, I lost Fort Ord. Fort Ord was taken down. That represented 25 percent of my local economy. So I know what it means to go through this process.
We have to do this right. And we can do it right and we can do it responsibly, but to do that, I need your support to do everything possible to prevent further damaging cuts and to help us implement a coherent, strategy-driven program and budget that we will identify in the months ahead as critical to preserving the best military in the world.
This is tough, it is challenging, but I also view this as an opportunity to create a military for the future that will meet the threats that we have to confront.
I pledge to continue to work with you closely as we confront these challenges, and I thank you once again for all of your tireless efforts to build a stronger military for our country that can protect our people in the future.