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Deputy Secretary of Defense Carter Speech to the American Enterprise Institute Washington, DC

Presenter: Deputy Secretary of Defense Ashton B. Carter
May 30, 2012

               Thank you, Tom, for that introduction.  It was almost exactly a year ago today that my former boss, Secretary Gates, spoke to you on the eve of his departure as Secretary of Defense.  In looking back on his tenure as Secretary, he chose to highlight two major themes.   The first was his effort to turn the tide in Iraq and Afghanistan.

             He spoke to you about his laser-like focus on delivering urgent battlefield needs to the warfighter in Iraq and Afghanistan.  When Secretary Gates first hired me in 2009, he told me that the “country’s at war, Ash, but the Pentagon is not.”  My job, he explained, was to help him get the Pentagon onto a war footing, especially in acquisition technology and logistics, the part that I was about to take over.

             And that has been my focus as well as his, first as AT&L and now as Deputy Secretary of Defense. Under his leadership, we set up a fast lane to get urgent requirements onto the battlefield unhindered by the bureaucracy. We needed better persistent ISR, he said, as did General Petraeus, General Mattis, General McChrystal, General Austin, General Allen.  So we worked hard to deliver capabilities like Aerostats with wide-area lenses, and more UAVs, including small UAVs that could be operated by a patrol along their line of march.

             We needed to protect our troops against improvised explosive devices, IEDs, so we rapidly procured and fielded Mine Resistant Armor Protected vehicles, the MRAPs, and ballistic underwear to protect troops, and better detectors of IEDs and the homemade explosives they employ and so on. We needed to get fuel, food and all these capabilities onto the battlefield quickly, and this logistics surge was a huge part of Secretary Gates’ and my focus.

             Since then, thanks to the incredible efforts of the men and women of our armed forces, superb commanders, and leadership of the President and Congress, we were able to end the Iraq War responsibly, al-Qaida’s on the ropes and its leadership is decimated, and we have made significant progress in Afghanistan.

             You know, I have been going to Afghanistan for well over three years now since Secretary Gates and I first had that conversation. And I was there a couple of weeks ago. And I just have to tell you, our troops, our allies, our Afghan partners – they’re performing exceptionally well and doing heroic things to bring security to that country.

             I was in the Helmand Valley several weeks ago, where last summer we took such terrible losses.  This time I walked around Marja market – no body armor.  And I went all the way up to Kajaki Dam, all the way up the Helmand River, which was just a distant dream to me six, eight months ago.

             Over the last 10 years Congress and the Department worked together to get our troops what they needed to operate effectively, and it’s led to results.  I know that people here at AEI provide cutting-edge analysis on the subject of Afghanistan and other pressing national defense issues, for which we thank you.  And we appreciate your work and your continued support of national defense.

             The second theme Secretary Gates raised last year was his strong view that we had to take a strategy-driven approach to reforming, as he put it, the defense budget.  Much has changed since that time.  Congress passed the Budget Control Act, which significantly affects our fiscal reality.  But our commitment to a strategy-driven approach to our budget has remained steadfast.  That commitment began under Secretary Gates and continues today under Secretary Panetta, under the leadership and guidance of President Obama.

             We focused on the force we need to build for the future, and that remains our singular priority.  Today I want to tell you a bit about our strategy and our budget for the future, which we’ve tailored to meet our strategic objectives.

             Before going into the specifics, some general points:  I know Congress has gone through its mark, and on that, I just want to say that every dollar the United States spends on old and unnecessary programs is a dollar we lose from new, necessary strategic investments.  As Secretary Panetta has said, if we had an open bank account, we’d keep all of it, but we don’t have an open bank account.

             So when something is added to our budget that is not needed, we are forced to take out something that matters, from readiness, from force structure, from modernization or from the health of the All-Volunteer Force.  When we’re forced to hold onto older, less capable systems, we cannot buy newer and more capable systems.  So others can pick one item or another that they favor, but we have to balance them all.

             And we have a responsibility to avoid sequester.  I just want to say one word about that awful prospect up front.  People have asked, “Are we planning for sequestration?”  The Secretary of Defense has said no, we’re not.  Maybe later in the summer OMB will have to request that we take a look at it and try to determine what steps could be taken, but I don’t want to mislead you here.

             Planning has a certain rational tone to it.  But Congress, in writing the Budget Control Act, did not design sequester to be rational.  Sequester was supposed to be the trigger, a trigger so irrational that the prospect of it would drive and force the leadership to do what was needed, which is to put together an overall budget package for the nation’s finances that could win wide support.

             Sequester was designed to be irrational.

             And indeed, aspects of sequester defy reason in any reasonable management of the nation’s affairs, including its defense.  As Secretary Panetta has made clear on numerous occasions, a sequester would have devastating effects on our readiness and our workforce, and disrupt thousands of contracts and programs.

             Moreover, under the law, DoD would have limited flexibility in how the cuts would be applied in fiscal year 2013.  So both the size and the nature of sequester would nullify the strategy for the postwar force of the future that we so carefully put together under the President’s guidance a few short months ago.

             Managerially, from my perspective and the chair I sit in now, our military and civilian program managers would face absurdities that result from the arbitrariness with which sequestration would take effect.  And managers throughout the government, not just in defense, but at NASA and DHS and HHS, everywhere, would find it impossible to cope with this kind of irrationality.

             And this applies to managers in the defense industry as well, our partners in providing weapons systems to the force.  We remind you that the quality of the weapons systems produced by our defense industry is second only to the quality of our people in uniform, what makes our military the greatest in the world.

             Irrationality and uncertainty are subjects of concern to the defense industry, and I certainly share industry’s concerns about sequestration.  This is not the way to do defense planning and budgeting.  Instead, we need to take a rational, strategic approach to our budget.  And that’s what we’re doing.

             So let me explain our defense strategy and budget and why we built the budget we did.

              To back up for a moment, this is a time of great consequence for American defense because two forces are coming together at the same time.  The first is obviously the Budget Control Act.  But the deeper, more fundamental force is the force of strategic history.  For a decade our Department has been riveted, of necessity, on two wars of a certain kind in Iraq and Afghanistan.  One has ended; the other has not, but will, thanks to the hard work of our men and women in uniform and our international allies and partners.

            Through these wars over the last 10 years, we developed cutting-edge capabilities in counterinsurgency and counterterrorism. Those were the skills we needed.  We learned to do them exceptionally well, and we will retain those key skills going forward.  But as the wars wind down, we must look up and look beyond to what the nation and this world need next.  We have the opportunity, and really the obligation, to pivot our defense to the new challenges and opportunities that will define our future.

             While we’ve been fighting, the world has not stood still, our friends and enemies have not stood still, and technology has not stood still.  Now we must meet these changes and really, in some places, catch up with them.  To do that, we must let go of the old and familiar and grab hold of the new to build what Chairman Dempsey calls the joint force of 2020, an agile and technologically advanced force of tomorrow.

             And the point I’m making is we would need to make this transition even if we had all the money we wanted.  But of course we don’t have all the money that we want and thereby springs a second great force impinging upon us which is the Budget Control Act. I just want to remind you of the magnitude of the Budget Control Act’s effect and the need we have to make this adjustment in consonance with the force of strategic history.

             To remind you of the facts, the base defense budget is not decreasing over coming years, but neither is it continuing to rise in real terms as it has over the past few years and as we planned for it to do as recently as a year ago. The difference between our plans before the Budget Control Act and the plans imposed upon us under the Budget Control Act is the famous $487 billion over 10 years, about $262 billion over the FYDP, an adjustment of about 9 percent of the total that we planned, which is a very substantial adjustment by any measure.  And to that, you must add the magnitude of the reductions in overseas contingency operations or supplemental spending that correspond to the wind down of the war in Iraq and eventually in Afghanistan.

             So those are the numbers with which we are dealing, and this is the moment in which we find ourselves.  To deal with those two forces, we knew we needed to do several things.

             The first and most important one is to put strategy first and then budget.  The President, the Secretary of Defense, the Chiefs, the Service Secretaries, all the Department leadership, the COCOMs and so forth, spent much of the fall meeting.  We met constantly, again and again and again, building off the work that Secretary Gates had begun the summer before, and culminating in decisions made by the President, to try to scope out what the defense strategy of the United States should be in this new strategic era.  And you saw the strategy we put out, first in early January, and then a little bit later, the budget.  And the reason for that was: the strategy was our guide as we made this large budget adjustment, and the sequence was critical.

             The second rule we observed, and I’ll put it in Secretary Panetta’s terms, which is: everything on the table.  Everything on the table, no sacred cows, including many things that we had not looked at managerially for a long time in the Department, for the simple reason that we hadn’t had to.  So everything on the table.

             The third principle we applied was – and this is important – that we did not proceed by subtraction alone, by taking things away, but by building towards that force that we needed in the future.  The image I always have in my mind, I shared with some of you before, is of an ice sculptor.  You see someone chipping away at a block of ice, and you can either watch the chips fly away or you can watch the shape emerge.  We tried to make sure we were always watching the shape emerge, which is the joint force of 2020 that we’re trying to build towards.

             So that’s what we did, and the result was a strategic package, and it was a balanced package in three parts.  First part was a continued discipline in how taxpayer dollars are spent.  And I won’t say too much about that in this audience.  Many of you heard me speak about this in my previous job.  But we need to continue the relentless pursuit of Better Buying Power for the taxpayer and the warfighter.

             This is necessary for two reasons.  First of all, to the extent we can, we would like to absorb any reductions in the budget through the Budget Control Act without diminishing military capability.  And so one would like to find efficiencies wherever one could, and I’d like to tell you we could find it all in efficiencies.  I can’t tell you that, but we can find quite a bit, and we’re going to. And so it’s necessary on the merits.

             The second thing is that it’s necessary if we’re going to retain the confidence of the taxpayer that their money is being put to good use in defense.  That confidence is essential for us to continue to enjoy the funding from the taxpayer that we really need to defend the nation.  So for both of those reasons, we need to keep at it.

             That’s why we have proposed things like another round of Base Realignment and Closure, BRAC.  And I realize that wasn’t exactly a crowd-pleaser.  People would say to me, how can you do that?  And my answer is, how can I not do that, and how can I not propose the cutting of tail and only the cutting of tooth?  How could I justify not protecting bases?  It makes no sense.

             I couldn’t conceivably justify that position.  So that’s my answer to how could you do it:  How could you not do it?  I realize it’s not popular, but that’s one of those things that we felt – when we said everything was on the table, BRAC’s on the table.

             So our first part was to – better use of the taxpayer’s dollars.  Our second part, again, I won’t go into here, because I think it’s of less interest to this audience, but it’s of essential importance, which is to take some steps to slow the growth in personnel costs in the Department.  So we made some proposals.  They’re measured.  And we think they’re necessary. The view of all of us and of all the Joint Chiefs was that this approach was the right one.  I’d be happy to say more about that in the questions.

             The third part of the budget package is the one I think will be of most interest to this audience, and that is the part that was tuned to the new strategy.  I always say to people – and no insult to any of us in the government, but if you look at the new strategic guidance that we issued in early January, I always say, this is what any one of you would have written down too if you were asked the same question.  It’s not rocket science; it’s pretty straightforward answer to the question:  “Well, after Iraq and Afghanistan, what should we focus on now?”

             But it was important that we write that down and say it and that we guide our budget move accordingly.  I’ll pick just a few of the pieces of strategic guidance, two out of the five or six that were in there.

              The first I’m sure will be very interesting to this audience is what we called the rebalancing toward the Asia-Pacific region.  The logic behind that is very simple. It is this: The Pacific region has enjoyed peace and stability for over 60 years, and in that climate, first Japan, then Korea, and even, yes, now today China have had an environment in which they could develop economically and politically without war or conflict.  That’s not a birthright.  That is something that was guaranteed, reinforced by the pivotal military power of the United States in that region.

             We are going to continue to play a pivotal military role in the East Asia-Pacific region so that we can keep on keeping on with that good thing.  It’s good for us and it’s good for everyone in the region.  That’s what we’re going to do.  And so if you look at what we did managerially in dealing with the consequences of the Budget Control Act, the Pacific posture increased relative to that elsewhere.

             Some specifics:  In the Navy, our Navy is going to remain about the same size and grow somewhat in the out years, but we’re doing a big change-out of newer ships for older ships. But, not only we are protecting our investments in the Navy overall, but – and this is the important point – we are shifting the naval presence to the Pacific. You’ll see that go on over the next several years.

             That’s carriers; it’s destroyers of a couple kinds; it’s attack submarines; it’s the new littoral combat ship, all going into the Pacific theater.

             Let me go to the Air Force. The Air Force: We did decide to make some reductions in Air Force tactical air squadrons by removing some of the older or single-purpose aircraft, that to make room for newer aircraft.  But we made no changes in the TACAIR posture in the Asia-Pacific region, none at all.  In addition to that, we are continuing on, despite the Budget Control Act, with the new stealth bomber, with the KC-46 tanker and with a host of ISR platforms in the Air Force, all going forward despite the budget environment.

             I’ll tell you something about the Marines. How about the Marines in the Asia-Pacific region? There will be a reduction in Marine Corps end strength, reflecting the wind-downs in Iraq and Afghanistan; no reduction in Marine Corps present west of the international date line, none.  And in fact, they’ll be seeing more of the Marines out in East Asia.  And why is that?  Because the Marines aren’t going to be in Afghanistan. They’re going to be at their stations.  We have a new rotational presence in Australia that we’re building. The Marine presence in Guam – definitely going to make that move now. And so Marine Corps presence in the Asia-Pacific region increasing also.

             Finally, we sustained or launched new capabilities specifically for the Asia-Pacific region.

             I mentioned the new bomber, didn’t mention yet the Virginia payload module for the Virginia-class submarines, conventional prompt strike and a host of upgrades in radars, electronic protection, electronic warfare, new munitions of various kinds and on, and on, and on, all not only protected but enhanced going forward.  

              So I wanted to give you some of those particulars because I know that that’s one of the strategic principles that was of most interest to an audience like this.  I’ll take one more and then that’s it.

             The other one really derived from the President himself, who had a very good instinct in this regard.  He kept saying to us:  Make sure that you don’t follow the last-in, first-out rule, that you don’t pull up the things that are most shallowly rooted – namely, your new things – because that’s the easiest thing to do.  I want to see that we are enhancing the capabilities that are going to be part of our future.

             And what are they? Well, cyber, for example, we will spend more on in the future. We need to. We have lots of opportunities there, and we will. Certain aspects of our science and technology base so that we continue to invest in the future and not consume the seed corn of tomorrow. Special operations forces, including counterterrorism, which we’ve gotten very good at over the last 10 years. We need to keep being good at that. Certain of our space initiatives – all our major space initiatives going forward; a host of unmanned aerial systems – Navy, Air Force and Army – all of those things enhanced.

             Of course, when you do that something else is not going to have that opportunity to be enhanced, something that’s older and part of the legacy.

             But that’s what we needed to do, and that’s what we did. So that, in outline, is how and what we did to try to adjust the budget to the strategy.

             Now, in the time since when we released our budget plan and today, Congress went through its mark, and all I want to emphasize is that the package that we submitted is one that was not only strategic, but the thing I want to stress is, it is carefully balanced. We’re building the force we need for the future.  We made decisions within the constraints of the Budget Control Act.  We had to.  And when additions are made to that package in one area, we of necessity have to take something out elsewhere.  It’s the rule of the game.  That’s what it means to be in, once you have a budget, a zero-sum game.  So altering the package could lead to an unbalanced portfolio, for example, a hollowing of the force, and I want to specifically call out a couple of important decisions in that regard.

             First, TRICARE –I mentioned that we did not believe that compensation could be exempt in this climate.  Health care costs consist of about 10 percent of our budget, and we want to give our troops and retirees the very best health care at the lowest price in the country and we do.  But in order to deliver high-quality health care, we need to control spiraling costs.  So we made some modest proposals respecting TRICARE, and we need these savings to balance and maintain investments in the military.

             We need them. We understand it’s a difficult step to take, but we think it’s a fair one and the right one.

             Let me talk about aircraft retirements.  We’re looking to retire some old single-purpose aircraft in favor of newer, multi-role aircraft, like the F-35, the new bomber and the new tanker.  And I mentioned that we had proposed making some of those changes in the tactical air forces.  We need to be able to make those changes. To keep older aircraft on-line would impede the Air Force from becoming the Air Force of the future that we need, and that would be unfortunate.  So as it affects the TACAIR force, the changes that we made we think were well advised, and they allow us to make the transition to the future in the Air Force that we seek.  That’s with respect to TACAIR.

             With respect to lift, all of our modeling shows that we have excess inter-theater strategic lift.  We need to make sure that our lift capabilities are allocated correctly and that excess inter-theater lift is not retained.  Just can’t afford it.  We don’t need it.

             We also have excess intra-theater lift.  Now, this affects the C- 130s, in particular.  And the C-130s have an important use not only to our contingencies of importance to overall national defense, but also in defense support to civil authorities, a very important role in defense support to civil authorities.  So they need to be present in adequate numbers for our contingencies, and they need to be in useful locations within the country to provide appropriate support to civil authorities.

             Where they are is of less concern for national defense, and we’re prepared to be flexible in that regard.  The Secretary has even indicated he was prepared to be somewhat flexible with respect to the numbers of C-130s, even though we have excess.  But overall, we need to be able to retire older single-purpose aircraft and aircraft in excess of need. That what makes room for the new.

             Likewise with the Navy, if we hold onto older ships, it’ll come at the expense of the new, and we don’t want that.  We don’t want to hold onto older ships because we have to pay to modernize them, pay to man them, pay to operate them, and they’re not as capable as a new ship would be.  So our shipbuilding plans call for a somewhat larger – at the end of our 10-year period– but decidedly more capable Navy.  That’s the plan we would like to follow.

             Let me say something about Army and Marine Corps force size also. The Army and the Marine Corps are the two services that are facing the most titanic transitions as the Iraq and Afghanistan wars wind down, because they have been so deeply and wholeheartedly committed to those two conflicts.  They’re trying to make a transition from this necessary focus on counterinsurgency, or COIN, over the last decade to a wider spectrum of capabilities that we need for the future so that they are the dominant ground force, full-spectrum combat capability, best in the world in the future.  That’s what we want.

             So we are not going to size the Army or the Marine Corps for long, protracted stability operations any longer.  We’re not going to retain the large rotation forces that we have needed to constantly rotate brigades in and out of Iraq and Afghanistan.  We’re not going to retain it, not because we’re abandoning COIN; as I said, we’re going to retain that important and hard-won excellence in COIN.  But we don’t need the bulk of the force structure.

             You can’t predict the future.  Obviously no one wants to get into another war like Iraq or Afghanistan any time soon.  But the point isn’t that we’re predicting the future. The point is that we if did, we would mobilize the reserves and rebuild, and we would have, by definition, time to do so if there were another large, long counterinsurgency war that needed to be fought.

             So that is not force structure that needs to be retained in being, and that isn’t what we want or what the Army or the Marine Corps want.  They want to be able to take down that end strength somewhat and make investments in creating the full spectrum force of the future.  That’s what we need to do.  If we’re prohibited from making those reductions in Army and Marine Corps end strength, it frustrates our opportunity to help them make that transition from the decade they’ve been in, to the decades we need them for in the future, and I hope that doesn’t happen.

             In conclusion, we’re in all our Services and in all of our activities in national security embarked on a strategic transition following the wars in Iraq and Afghanistan.  This is just the beginning.  This ship is making a very big turn, and we need to follow through on our plan and keep moving toward the future.

              It’s an important job to do.

             Transition’s going to take some time, but you can see the outlines of where we’re going.  Secretary Panetta, Chairman Dempsey devised it, and President Obama scrubbed it very hard.  And all the members of Congress that I deal with every day, with whom I speak, envision and support exactly the same transition, the same opportunity, and really the same obligation to the warfighter and the taxpayer to pivot our strategic approach. We all see it; we just need to do it.

             As we work out the details, we look forward to working with each and every one of them, and with each and every one of you in this room, on the process every step of the way.  So I thank you for your attention and for the wonderful work that this institution does. ####

 Q and A

            MR. DONNELLY:  This allows me to introduce one program note that I forgot to mention at the beginning and also to put myself at the front of the question queue. So if you’ll indulge me for a second.

             First of all, just to remind everybody, although Secretary Carter will run his own Q-and-A session, there are AEI ground rules that supplant even that. That means wait for the microphone, that means identify yourselves for the purposes of the transcript, and put your compelling statement in the form of a succinct question.

             MR. DONNELLY:  So, I will now give an example of how to do that.

             Mr. Secretary, you describe a process of transition, the ocean liner metaphor you used. Obviously the turn that you’ve embarked on is incomplete.  So I would ask you to both look ahead at the terrain of the future too, but also to cast your mind back to your -- both past job and your past experience in the 1990s.

             Do you foresee a transition that’s necessary within the defense industry that would parallel what you’ve described, and what do you think that would look like?

             MR. CARTER:  I do, and it’s a very important question.  My colleagues in the defense industry are thinking along exactly the same lines, and almost without exception are steering their companies in a similar transition so that they’re continuing to serve our needs in the future in a different way than they have in the last 10 years.

             I said already that the defense industry is second only to our people.  Our defense industry is what makes us a great military power.  Therefore, a technologically advanced, vibrant and financially successful defense industry is in the national interest.  And we want to work towards a defense industry of the future that continues to be as great as the one in the present and the past.

             We, in the main, leave to market forces the adjustments in the defense industry that will necessarily come as technology changes, as missions change, as this transition unfolds, because economic theory says that’s good, and that’s what we want.  We do keep our eye out for things that could be deleterious to our industry in the long run. I’ll give you some examples.

             One would be the kind of short-term financial perspectives impinging upon our industry that came into the housing market, certain aspects of the financial services market.  And so we can’t afford to have that kind of thing happen to our defense industry.

             So we are aligned with the long-term investors in our defense industry in terms of our interests in its long-term health, productivity growth and so forth.

             Second, we’ll be looking, as we make changes, for any parts, any skill sets that are now in the defense industry that, if we allowed them to go away, would be very difficult to  -- or time-consuming or expensive -- to recreate, and which skill sets can’t be found in commercial industry. Those we have an obligation to sustain. And I’ve invited my partners in industry to identify those opportunities for us. That’s an example of something we didn’t do in ‘13, but as we put together the ‘14 budget, we definitely want to look at those holes and, within the reasons of our budget constraint, make those kind of investments.

             So we want to work together with the industry upon which we depend so much so that they make the transition with us and that they’re here to make the greatest military in the world 10, 20 years from now. So I appreciate your question.

             If there’s anybody in industry here in the room, let me just say thank you, and please go back and tell your people thank you for what you do. We don’t take it for granted. We appreciate what you do for national defense.

             Yeah.

             Q:  Amy Butler with Aviation Week. (Off mic) --

             MR. CARTER:  Amy.

             MR. DONNELLY:  Wait. Wait.

             Q:  Sorry. I broke the rules. Pardon me. Amy Butler with Aviation Week.

             Since 9/11, as you talk about this transition, there’s been a lot of money poured into ISR resources, for obvious reason. Can you walk us through what the Pentagon’s plan is for reconciling the ISR forces of the future, given the fact that we’ve fielded so many quick- reaction systems that are maintenance-needy and unique and whatnot?

             And also, at what point, if you haven’t already, will you start shifting funds from the current ISR programs we know of today toward new sensors and/or new platforms maybe that can penetrate and such that we need for the future?

             MR. CARTER:  Both good questions. Let me take the second one first.

             What you’re calling a shift, has begun; actually began a couple years ago. And I’m limited in what we say about our future ISR capabilities, but trust me that we’re investing in the future.

             With respect to the ones -- you’re so right -- that we put together quickly, under the pressure of combat, and which have been so amazingly successful, they do pose a managerial issue for us after the war because they were not essentially designed to last; they don’t necessarily have all the features that we wanted in a force that will be an enduring part of the force.

 So, for the Predator/Reapers -- the MQ-1s and MQ-9s, for example -- the Air Force has had to work through a very complicated process. We do intend to make them an enduring part of the Air Force’s force structure, but we had to figure out where -- how to do that. It wasn’t just the airframes; it’s how to crew them over time, how to train the crews, where to put the crews and so forth. Likewise for the Liberty fleet. Liberty fleet also a very much of a quick reaction-type of fleet. These are the little turbo props with a lot of ISR SIGINT and so forth on them, also essential, and we are going to keep a portion of that fleet.

             There will be things that we built up for the wars in Iraq and Afghanistan that are not worth keeping in the force structure because they’ll be outdated or they’re not suited to more contested air environments.

             Afghanistan is obviously not a contested air environment. You can just fly around and do what you want. And that won’t be the case everywhere in the world. So that’s an example of a big transition in the Air Force.

             And by the way, it has the manned to unmanned transition aspect to it also. So there are a lot of difficult adjustments going on here at the same time.

             Q:  Thank you. Ash, it’s great to see you. Wayne Glass, professor, University of Southern California, here with my students from sunny Southern California. I’m sorry we didn’t bring our weather with us.

             As a veteran of the Undersecretary Acquisition Office in OSD for many years, I hear themes of old problems that still exist as you meet today’s situation. We were concerned in my time in the Pentagon with the notion of cost growth and reductions in programs and stretch-outs. So in managing the challenge of the future, the mantra of the old days was guard the front gate, stabilize your programs as much as you can in order to meet the goals of reducing cost growth and delivering on time.

             We tried to manage the number of major systems through the front gate. We tried to manage the cost growth from systems by controlling Class I ECP change orders, baselining. So that’s my editorial comment.

             My question is, in building your budget, to what extent do you -- are you responsive to these sort of traditional questions in the Pentagon?

             MR. CARTER:  Wayne, we absolutely are. By the way, to your students, I hope you decide to make public policy what your life’s about. It’s nice to get up in the morning and be working on things that are bigger than yourself. We need good people. I hope you take an interest in it.

             It has a very direct effect. I mean I, particularly with my AT&L background, protect well-managed programs. If you have a program that’s not doing well, that’s over-running, that’s behind schedule, that’s not going well, there is a presumption against you in this environment.  And I say that to all our program managers in government and all my colleagues in industry, as well. You need to make it possible for us to continue to have you do what you’re doing for us. And if you’re running up the bill by a few percent every year, we cannot sustain that. So you are presumptively on the block if you’re a poor performer.

             And so, you know, some of our really well-performing programs, we are protecting them, not just their existence, but making sure that they stay at an economically efficient rate of production, whether they be munitions or aircraft and so forth. And I won’t name the stars, but you know -- you know, we have -- we obviously have programs that disappoint us and frustrate us, but we also have programs that perform very well. And they’re, you know, they deserve protection because they’re going to deliver more combat capability per dollar than the ones that are poorly performing.

             And the worst thing you can do is bring back rates of production to the point where they’re economically inefficient. That’s truly mortgaging the future. So management’s an important part of it.

             Yeah. Oh, I’m sorry. Can you wait one second? My distinguished predecessor, Secretary Wolfowitz, I want make sure he gets -- .

             Q:  Thanks. Paul Wolfowitz, AEI. Once upon a time, I had your job, and I should probably, knowing how difficult it is, leave you alone, not harass you. But this is a friendly question, to ask you just to look into the future a little bit.

             It’s famous that when Dick Cheney was being confirmed as Secretary of Defense, the word "Iraq" didn’t appear once in his hearings. I believe -- I’m not sure that it -- with Rumsfeld’s hearings, but you’d certainly have to search very hard to find the word "Afghanistan." So it’s pretty hard to know what’s coming next.

             Having said all of that, I know you’ve thought a lot in both this job and your previous ones about the issue of bioterrorism. And my question is, one, would you rank that as high up in the probabilities? Do you think we’re doing enough about it? And to what extent is it a Defense Department mission, or does it belong with other agencies? Or does it fall in between cracks?

             MR. CARTER:  Terrific question, and you’re reminding me that I actually forgot to say something, which was in my list of protections, which is counter-WMD, of which bio is one. Those also, we wanted to protect.

             With respect to bio, reading into what you said, Paul, but if you’re concerned about the potential of the biosciences to create threats in the future, it is not only with existing pathogens, but I think the real revolution lies farther in the future. But certainly it is a defense problem. It’s going to be a defense problem. They will be used in war. They will be used in terrorism. And anytime anything at that scale emerges, people are going to expect us to play a role.

             We have a substantial investment in that area. At the moment it tries to balance the legacy stuff, that is, naturally occurring pathogens, and looking at the frontier as well, tries to the extent we’re able to -- and you know; you’ve been part of this -- to get our feelers out there in the world so that we’re engaged with the community of researchers in this -- in this field and to the extent possible with those who in the past created stocks of pathogens and so forth or have that know-how, to make sure they don’t get into trouble or that they stay out of trouble and so forth.

            It’s very important.

             And while we’re mentioning the biosciences, there’s another thought that comes to me, if you don’t mind. The biosciences are going to be the revolutionary sciences for the -- in the next generation, even as information -- I know this is trite and everybody says it; it’s actually true. Information technology was for the generation just behind us. And in addition to posing new threats, one thing I wanted to say was it has given us tremendous opportunities as well.

             And we in the Department of Defense -- and Paul, I’m sure you know this well -- have sadly over the last 10 years become pioneers in several fields of health care -- TBI, PTS, prosthetics and so forth. And hard-won as that expertise has been, it’s there, and it’s available for everyone else to use as well. And so if you go to the hospitals and you go the centers of excellence and so forth, be very proud of what we’ve managed to do to take care of our own wounded warriors. But that’s progress that everybody can benefit from.

             Sorry.

             Q:  Colin Clark, AOL Defense. Morning, sir. The Army, especially the institutional Army, has had a very rough time getting their acquisitions done well over the past 12 to 15 years.

             Given the stakes over the next five years -- the reset, replacing the M113s, et cetera, et cetera, how confident are you that the Army has fixed itself and that it will do a good job? And what are you doing to ensure that happens?

             MR. CARTER:  Well, you are right, and I think everybody in the Army and everybody associated with Army acquisition would say that they are disappointed in the performance of the last decade, determined to do better. I know this is true of John McHugh and Ray Odierno and Heidi Shyu and the whole team over there. And that’s actually again -- I’m now out of my previous job -- it was a big priority of mine, and my successor, Frank Kendall, I know will be working especially with the Army to improve their tradecraft in acquisition and also to put forth -- put together their portfolio of investment for the future.

            And this is a big change for the Army. I said before the Army is making the most difficult and largest transition of all the services just because they’ve been really up to here in Iraq and Afghanistan now for 10 years. And so in acquisition and in everything else, how they define their mission, how they train their people, how they organize and so forth -- Odierno and McHugh are, you know, taking a really fundamental look at all of that. And Secretary Panetta and I have wanted to make sure they had the time and the strategic patience from us to make the changes that they need to. And it’ll take some time just because of the magnitude of it, but it’ll be reflected in acquisition as well, and it really needs to be because they missed -- there’s a lost decade there for the Army, and I think it’s widely recognized.

             And it’s sad.

             Q:  Mr. Secretary --

             MR. :  There.

             Q:  Thank you. Jeff Schogol with Air Force Times. There have been some problems with the F-22’s oxygen system recently that necessitated limitations on where it can fly.

             MR. CARTER:  Right.

             Q:  And I want to know, is the DOD confident enough in the aircraft that if another war broke out today, that it could order it into battle?

             MR. CARTER:  I think the answer to that’s clearly yes. That’s the judgment of the Air Force. That was the judgment of the Secretary in allowing the deployments to go forward. We did, however -- and Secretary Panetta did this -- was very concerned about the OBOGS issue, wanted to accelerate the fix for that, wanted to make sure that while they are training for operations, which they would be used for, if need be, that the safety of the pilots and the air crews was taken into account, mostly by making sure -- from several operational things, but importantly, by making sure that there was an airfield near enough that they could get to if they began to experience any of the symptoms associated with this problem.

             So the answer is yes, the aircraft will be used operationally if need be, but also, yes, we are concerned and have been concerned about the OBOGS issue. But I think the secretary’s taken the necessary action to get us on the track to fix that.

             You, right there, with the tie.  The tie. He’s not used to having a tie on.

             Q:  Hi. Yeah. Thank you very much. I’m Mike Verge from the University of Southern California with Professor Glass. And my question entails -- we talked about single-purpose aircraft, and I know this is probably a sensitive topic, but the A-10 recently upgraded to the A-10 Charlie with new avionics. And I realize that three squadrons were recently deactivated a couple months ago.

             Is the A-10 an aircraft that will serve in the near future, in this 2020 force that you’re talking about, or can it be replaced by a suitable replacement aircraft?

             MR. CARTER:  Well, I think the reason why we were able to reduce the number of A-10s is that we can do, unlike 20 years ago, the A-10 job from other aircraft, whereas the A-10 really does that, does it very well, but that’s all it does. And so it’s simply a matter of putting your money where you have the most capability. And that’s what lies behind the decisions of the A-10. That is an example of what I was talking about.

             Q:  Thank you, sir. Can you hear me? All right. I’m Jimmy Chan with Phoenix TV. You just mentioned the U.S.’s plan in sending more carrier and bomber to East Asia -- to Asia-Pacific region. So do you – are you concerned that might irritate China? And also --

             MR. CARTER:  I’m sorry, would you say it -- repeat that?

             Q:  Do you think that my -- do you – are you concerned that might irritate China? And also, the other question is on South China Sea. Under the mutual defense treaty that the U.S. -- with Philippines -- the U.S. should come to the aid of -- if Philippines were under attack, is there any possibility that we will see the U.S. troops appear in South China Sea if that’s the case?

             Thank you.

             MR. CARTER:  Let’s see, with respect to the first, about China, the -- I’d just go back to the point I made earlier, which is that -- the peace and prosperity that all have enjoyed in the East Asia- Pacific region, including China, which is an important economic partner of ours and so forth.

             The question is, what is the environment within which that good thing which we’ve had going for 60 years will continue? One ingredient in that, really a pivotal ingredient, has been the American military presence in East Asia-Pacific. So we want to keep that going. We think that’s good for us, but we think it’s good for everyone in the region, as well.

             And with respect to maritime disputes in the South China Sea, I mean, I think we’ve been pretty clear about our -- our outlook on that. These are things that need to be addressed peacefully, and that’s the position we’ve taken right along. I think that’s the position of principle and practice. And, you know, the secretary of defense, as I left the Pentagon, was talking to Shangri-La, and I know he’ll be asked about the same thing over the next couple of days.

             Q:  Mr. Secretary, one more?

             MR. CARTER:  One more? Sir.

             Q:  Thank you, Mr. Secretary. Raghubir Goyal, Asia Today and India Globe. It’s a great review of the U.S. defense strategy. As secretary leaves for the region, for China and India, today, what do you think he will have as message for India? Because, as you said earlier, China is growing militarily, U.S. budget is going down and China’s military budget is going up, and China is threat in the region, and this may be a special message for India. What do you think that U.S. and India will have a -- do you expect any special signings between India and the secretary during his visit to India, sir?

             Thank you.

             MR. CARTER:  Well, we have so much going on with India now that I’m sure there’ll be a number of things associated with the Secretary’s visit that he’ll be putting in motion or concluding or whatever. We have, I think the number is several tens of exercises with the Indian military. And I think that’s reflective of just the fact that we are destined to draw closer to a country that shares so much in the way of its characteristics and its values. I’ve felt this way for a long time with India. I just met with a group of Indian thinkers about security affairs a couple of weeks ago that were here in Washington and told them the same thing.

            You look around the world, and India is one of those countries that you know is a kindred soul to the United States for the -- for the future. So building that relationship and that common ground is essential. We’ve been at that now for 10 years, and I know that Secretary Wolfowitz played an important role in that. And that’s just been growing and growing and growing, and of course those of us who are enthusiastic about it, as I certainly am and I know Secretary Panetta is and Secretary Clinton is, you know, only want to see it go faster and faster.

              MR. :  We’re good?

             MR. CARTER:  I’m good.

             MR. :  (Inaudible.)

             MR. CARTER:  I think I’m OK.

             One more, the gentleman in the glasses.

             Q:  Thank you, sir. Mike Mount with CNN. You briefly did discuss sequestration. But I wanted to ask -- whether it happens or not, it does seem to be a kind of a possible reality.

             What are the concerns you’re hearing from the defense industry as a whole about sequestration, and what are you talking to them about?

             MR. CARTER:  The same things I mentioned that our managers in the government are. This is something that is, both by its size and its nature -- I use the word "irrational" -- completely irrational from a management point of view. So for those of us who are supposed to keep a complicated program on track -- you have people working; you have a flow in your factory or whatever; you’ve got it all planned out; we’ve agreed between the two of us we’ve got it in a place where we think we’ve got a good thing going, a program that’s delivering the capability we need, that’s economically paced and so forth, and then you -- (claps) -- you know, boom, in you come, and just -- it makes a managerial mess out of all of the things that we’ve tried so carefully to put on a steady footing, our partners in industry and us. That’s why it’s so -- you know, well, I use the word "irrational." That’s what I mean, managerially irrational.

             Next to you. We’ll make this one the last, if you don’t mind. Yes, ma’am.

             Q:  Opad Shimanaves. My question is about biofuels. In both the House and the Senate marks of the National Defense Authorization Act, they essentially would make it impossible for the Department of Defense to buy another gallon of biofuels in fiscal 2013. I wanted to get your response to that. And also, any word on if this would affect plans for a "Great Green Fleet" or any other Department of Defense initiatives?

             MR. CARTER:  Well, obviously we asked for the freedom to do that. And we would prefer to have the freedom to do that. So that’s the simple answer to your question.

             I’ll say something more broadly about energy. We are big consumers of energy in the Department. And we do play a role in the nation’s overall energy strategy. We do things -- anything we do has to be in the interest of defense in the first instance.

             But the three ways that we participate -- that we do useful things for defense that might be useful also for the country’s energy situation at large are, first, we do do some R&D. We don’t try to compete with the Department of Energy there in scope or size, or quality, really, for that matter -- we can’t. But there are certain areas where we have needs that are distinctive to us and where we need innovation and the only way to get that innovation is for us to sponsor it ourselves.

             Secondly, we are frequently able to partner with the Department of Energy and provide installations or ranges or something else for them to try out their own R&D. And that’s fine with us. If we can do that, that’s fine. And then there -- third -- there are areas -- a few areas, and very carefully selected areas, in which we, by following our own need -- defense needs, act as a first adopter of a technology that might later prove of wider use -- might.

             Let me give you an example.

             High-energy density batteries -- everybody’s talked to the troops, knows of the doubt -- death of a thousand ounces and so forth and how they complain about carrying around all this electronics that they carry around now. The hard -- heavy part isn’t the electronics; it’s all the batteries.

            If we could get a high energy density -- higher energy density battery, we would pay a lot for it, more than you would pay to put it in your flashlight. And that would be a perfectly legitimate investment for our troops, and it may be that if we made an investment of that kind over time that technology would mature, the price would come down, and it would become competitive in the commercial marketplace, in which case we would have fostered an innovation of greater use. A good thing -- Defense has done that in many, many fields for many, many decades and absolutely fine. But we start with the first principle -- is that we -- anything we do has to make sense from a Defense point of view. We are the Department of Defense, and that’s how we -- how we justify our investments.

             MR. DONNELLY:  I -- we -- the Secretary of Defense -- (off mic) -- at this time, I’d want to thank you, sir, for --

             MR. CARTER:  Thank you.

             MR. DONNELLY:  -- joining us. I hope -- you feel like you got away without too -- suffering too many casualties. Please come back again.

             MR. CARTER:  No, I -- wonderful group of people and some --

             MR. DONNELLY:  (Inaudible) -- (applause).

             MR. CARTER:  Thank you so much for the opportunity.