SECRETARY OF DEFENSE LEON E. PANETTA: (JOINED IN PROGRESS) here in the middle of nowhere to say merry Christmas, guys.
I really wanted to -- to come out and wish all of you happiest holidays. I know you're all a long way from home, and I deeply appreciate the sacrifice that all of you are making by virtue of being here, being away from home, serving your country.
I couldn't be prouder of all of the men and women in uniform that serve this nation. You represent our greatest strength. At the Defense Department, we've got, as all of you know, a lot of great planes, a lot of great ships, a lot of great technology, but none of that would be worth a damn without the men and women in uniform that serve this country.
And that's the reason I've come out for this trip, is to basically say to all of you how grateful we are for your service to the country. Our democracy is based on men and women who are willing to give something back to the country. I'm a great believer in public service. I think public service is the essence of what democracy is all about, people who are willing to give something back to the country.
As some of you know, I'm the son of Italian immigrants. And my parents, like millions of others, came to this country, traveled thousands of miles -- no money, no language ability, no skills -- but came here because of the opportunity that this country offered. And I used to ask my dad, why would you travel all of that distance to come to the United States, leaving -- coming from a poor area in Italy but leaving the comfort of family. And he said the reason was, "Because your mother and I believed that we could give our children a better life."
And I think that's the American dream, is to give our children a better life, a more secure life. And the way we do that is by giving something back to the country. It's important -- it's important for our future. It's important for the security of our families and for their children to be willing to serve this nation, to be willing to come to a place like this at a very difficult time, at a challenging time, and be willing to serve the United States of America.
And as I said, on behalf of -- of behalf of a very grateful nation, I want to thank all of you for your willingness to do this. And because of your sacrifice, because of your willingness to serve, I think that one day soon, all of you will have the chance to be with your families when these holiday seasons come around.
We're at a turning point. You know, we've been in war for 10 1/2 years, almost 11 years, since 9/11. It's the longest period of warfare in the history -- continuous period of warfare in the history of this country. And we're now seeing a turning point: brought the war in Iraq to an end. In Afghanistan, where I'll go next, get a chance to look at the campaign plan that General Allen put in place to ultimately draw down in Afghanistan by the end of 2014.
We're doing well there. We've made significant progress there. There's a lot more to be done. We're still at war. But the fact is we're making good progress. And, ultimately, we hope that we'll be able to draw down in Afghanistan as well.
We experienced, working with NATO, a campaign that took place in Libya that brought Gadhafi down. And when it comes to terrorism, the very reason that we're engaged in war is because of 9/11. But this country has waged a continuing effort to go at the leadership of al-Qaeda. And we have significantly weakened their leadership. We've taken down their key leaders -- taken down bin Laden, taken down a number of their top leadership. And we continue to do that, even as I speak.
And the fact is, as a result of that, we have made it very difficult for them to have the command-and-control and capability to put together a 9/11-type attack on the United States. We have made the American people safer as a result of that effort to go after terrorism.
So we've had good success in these last 10-plus years because of the sacrifice and the service of men and women like you, and our military and our intelligence agencies throughout our government. And as a result of that, now we're, you know, we're -- we're in the process of facing not only a turning point after 10 1/2 years of war, but we're facing now, obviously, budget constrictions with regards to defense budgets. We were handed a number from the Congress in the Budget Control Act to reduce the defense budget by $487 billion over 10 years.
As a result of that -- you know, I looked at the leadership of the Pentagon and I said, "The one thing I don't want to do is just simply cut across the board and weaken our force. So how do we do this? How do we do this in an effective way that protects the military power of the United States?"
My basic guidance at that time was basically this: number one, we are going to maintain the United States as the strongest military power in the world. Number two, we can't hollow out this force. We are not just going to simply cut across the board and weaken everything in our military. We'll look at every area of the military budget and determine where savings can be achieved, but we'll do it in a responsible way.
And lastly, we have to keep faith with the men and women who serve our country, who've been deployed time and time and time again. We're going to stand by the promises that we made to the men and women who serve this country. So that's the basic guidance.
Based on that, working with the service chiefs, working with our military leaders, our civilian leaders at the Pentagon, we developed a new defense strategy for this country. Basic elements of that strategy are the following: number one, we know we're going to be smaller and leaner. That's just a reality coming out of 10 1/2 years of war. But we have to be agile. We have to be flexible. We have to be quickly deployable. We've got to be able to move fast, and we've got to be on the cutting edge of technology.
Secondly, we've got to be able to have force projection in the world where we confront the biggest problems. So we will maintain a strong force projection in to the Asia-Pacific region and we'll maintain strong force projection in the Middle East.
Why? Because that's where we continue to confront problems -- problems in Asia-Pacific from countries like North Korea; challenges from rising powers in the Asia-Pacific region; challenges here in the Middle East, from Iran, from the turmoil that we're confronting in the Middle East.
So we are going to maintain strong force projection in both of those areas, and we're doing that now with you and with many others like you across the world.
Thirdly, we're going to maintain a presence elsewhere: in Latin America and Africa, in Europe. And what we'll do is rotational presence. We'll have people that will go in, help train, exercise with other countries, develop their capabilities, build new alliances, build new partnerships in order to provide security in other parts of the world as well. It is a dramatic, new capability to be able to go there on a rotational basis and do it in a way that allows these countries to develop their capabilities as well.
Fourthly, we've got to be able, as always, to defeat more than one enemy at a time.
If we face a war in Korea and at the same time at the Straits of Hormuz close, we've got to be able to confront an enemy on two fronts, confront them and, more importantly, defeat them. And we have that capability -- not just because of -- of our troops, not just because of those who are fighting on the ground, but because of our Air Force, because of our Navy, and because of our other capabilities.
And lastly, we have to invest; this can't just be about cutting. We've got to invest in space. We've got to invest in cyber. We've got to invest in unmanned systems. We've got to invest in new technologies. We've got to invest in special forces. We have to invest in the ability to mobilize quickly if we have to. All of those areas have to be invested in if we are to protect the strongest military power in the world.
That's our strategy. Those are our elements. And you are critical to the ability to put that strategy in place.
Every time we've come out of war in the past, we've always had a reduced threat -- coming out of World War II, coming out of Korea, coming out of Vietnam, coming out of the Cold War. Problem today is, even as we draw down after these many years of war, we still confront real threats in today's world.
We're still at war in Afghanistan. We still have to confront terrorism, not just in the FATA [Federally Administered Tribal Areas], but in Somalia and Yemen and Mali and other places. We have to confront regimes like North Korea and Iran. We have to confront turmoil in the Middle East, what's going on in Syria and elsewhere.
We have to deal with the whole area of cyber war. We're dealing now in a whole new arena of cyber warfare, where our country is attacked every day on the Internet through cyber technology. That's an area that represents, I believe, the future -- the future kind of Pearl Harbor, in which a cyber attack can cripple our country, take down our power grid system, take down our financial system, take down our -- our government systems. We've got to be prepared to deal with that kind of threat.
So area after area after area, the United States confronts threats in the world of the 21st century, and we have to be strong enough to be able to confront those threats -- and we will be.
Biggest challenge we have now, frankly -- I don't worry about the men and women in uniform. I don't worry about our defense systems. I don't worry about our technology. I don't worry about our capability to take on any enemy, anywhere, any way.
What I worry about is whether or not in the Congress of the United States there's a sufficient leadership that will come together to make the decisions that have to be made so that we don't wind up having defense cut even deeper as a result of this crazy sequester or going off the fiscal cliff.
If I've got men and women in uniform that are willing to put their lives on the line, to risk their lives every day in order to protect this country, then surely we ought to be able to have the leadership in Washington that ought to make the tough decisions that need to be made in order to protect our security as well -- our fiscal security and our national security.
So, hopefully, in these next few weeks as we go through this effort in Washington, leadership will come together and make the decisions that have to be made.
The biggest strength we have in our country are you, and that's why I'm here, and that's why I want to say thank you to all of you.
It's a tough time, this time of year to be away from home. But I want you to know that you are in the -- in the thoughts and the prayers and the hearts of all of our citizens back home. It is because of you that America is safer. It's because of you that we can protect that American dream that brought my parents to this country: to give our children a better and more secure life in the future. That's what you do.
God bless you, and God bless America.
Okay, I'm happy to take some questions if you got any -- as long as you got the secretary of defense.
Q: (Off mic)
SEC. PANETTA: Yeah. The -- the question was, how does this fiscal cliff affect the Department of Defense.
Well, you know, there's a number of scenarios at play here. The first -- first concern we have and the most important concern is the sequester. Sequester was this -- this crazy tool that they developed as part of the Budget Control Act that basically said that what the Congress had to do was to come up with about another trillion dollars in savings, and if they didn't do it they would put this gun to their head called sequester and they would slash everything across-the-board in this mindless approach to -- to the budget.
In that mindless approach called sequester, the Defense Department on top of -- of $500 billion in cuts that we've already put in place for the future would add another $500 billion on top of that. And that would do significant harm to our ability to provide a strong defense for the country. And, I've said that; I say it again that it would be reckless for the Congress to allow that to happen. But that would be one of -- that's one of the things we're hoping to avoid.
The larger issue is -- deals with the, you know, the -- the deficit -- the larger deficit that confronts this country. That is a concern. I've dealt with deficits when I was in the Congress. When I was in the Congress, frankly, Republicans and Democrats were willing to come together to make the tough decisions that had to be made in order to control the deficit.
I was involved in three budget summits. In the Reagan administration, we sat down with Republicans and Democrats and came up with a plan to reduce the deficit. In the Bush administration -- first Bush administration, we went out to Andrews Air Force Base and spent two months out there sitting down, negotiating, and we came up with an agreement to reduce the deficit.
In the Clinton administration, when I was head of OMB, we came up with a plan to reduce the deficit. As a result of putting those plans in place, we achieved a balanced budget for this country.
And now we're back facing trillion dollars-plus in deficits and our country is in deep debt again. To confront that, you've got to make decisions, you got to put everything on the table and be willing to deal with every area, whether it's revenues, whether it's entitlements, whether it's spending. In general, I -- that's the name of the game, and that's what Congress is struggling with right now, to be able to make those kinds of decisions.
The problem is, if they fail to do that, deficits and debt in general will rob the country of resources. So it's not just, you know, facing a cut of $500 billion across-the-board in sequester. If they don't deal with the long term deficit in this country, we will be robbed of resources in the future.
I don't care what your priority is -- education, health care, being able to develop infrastructure, defense of the United States -- this country needs to have resources to invest in the future.
So it's for all of those reasons.
The leadership of this country has the responsibility to respond to this kind of crisis.
I think -- you know, we did it in the past. You got to suck it up and make the tough decisions. That's why we elect people, is to make those kinds of decisions -- and, hopefully, that's what they'll do.
Q: (Off mic). Sir, I'm Master Sergeant (inaudible) from the communications squadron.
Looking at the long-term plan, I understand that -- my understanding is that the drawdown in Afghanistan is not a completely -- is not completely pulling out. So can we expect that five, 10 years from now our children will still be serving in that region of the world to maintain -- maintain stability?
SEC. PANETTA: Question is, you know, for the long term with regards to Afghanistan.
The plan right now that we're -- you know, that we have in place is that we will continue to transition in Afghanistan to Afghan security and control. We have now implemented what are called three tranches. Seventy-five percent of the population in Afghanistan now is under Afghan security and control.
The key, frankly, has been developing the capability of the Afghan army and police to be able to provide security. And the army's doing a much better job. They're involved in almost 85 percent of the operations there -- that they are guiding. They're involved in some large-scale operations on the ground. They're involved in special forces operations. So in every one of those areas, they're doing a better job of providing security.
Next year in 2013, we're going to implement two more tranches. By that time almost 100 percent of the population will be under Afghan security and control. We'll -- we'll begin then to draw down. We've got 68,000 troops in Afghanistan. If you combine it with ISAF troops, it's close to 100,000. They'll begin to be a drawdown that will take us toward the end of 2014.
At that time, the agreement is that we'll have an enduring presence that will continue in Afghanistan. The size of that enduring presence is something that the president is going to be considering over these next few weeks to determine exactly what that will be. But I would assume that that enduring presence, whatever the size that is, will be there for a longer period of time.
So we'll -- you know, we'll continue to be there, but obviously the major responsibility will rest with the Afghans to maintain security and control in that country.
Back? Go ahead.
Q: Yes, sir. I thank you for your presence and your motivating words. It's very good to see you here.
My question is, can DOD and Congress assure the military personnel, especially the enlisted personnel, that no further sacrifice of their financial welfare be -- will be taken? In effect, meaning that can you -- can DOD, you, Congress assure us that --
SEC. PANETTA: I got it.
Q: -- our pay --
SEC. PANETTA: I got it.
Q: -- will be (inaudible) --
SEC. PANETTA: (Laughter.) I got it.
Look, I mean the -- the one thing, as I said, that was -- was really an important part of the guidance was that we cannot break faith with men and women who serve in the military and that we -- we have to absolutely maintain the benefits that were promised to you.
So when it comes to retirement, when it comes to family benefits, when it comes to the assistance we provide wounded warriors, when it comes to, you know, the pay that we're providing you that we've got to stick with the commitments that have been made.
Now, having said that, you know, let me be honest with you, in order -- for the future, in order to be able to do the kind of balanced approach that we've got to do in order to reduce the budget, I've got to look at every area of the defense budget. The first area is just getting better efficiencies. I've got a department, you know, three million people. It's a big bureaucracy. There are places that I've got to look in order to achieve better efficiencies, and we can do that, and -- and try to, you know, to cut through some of the -- the red tape, some of the duplication that's involved in a big department like mine.
Secondly, I've got to look at force structure. So we're going to gradually -- you know, with regard to the Army, they'll be a gradual reduction in the Army. We'll still maintain an Army that'll be bigger than when we got into 9/11, about 490,000 troops. We'll still maintain a healthy Marine force, as well. But there will be some reductions in force structure, as well, over these next five to 10 years.
Thirdly, in the area of procurement and weaponization, there are places where we can achieve better savings in the way we procure things. We've had cost overruns. Every time we build something everybody wants to throw in their particular idea, and the result is not only is the cost of these weapons systems exploding, but we never get 'em on time. So we just need to do better in the way we do procurement.
The fourth area is compensation. Compensation's an area that's grown by 80 percent. Right now, the bill, the health care bill at the Department of Defense is $50 billion -- $50 billion. I've got to find a way to control those costs in the future. And that's -- that's an area that we're looking at. We've made some recommendations to the Congress with regard to, for example, TRICARE to try to increase some fees in order to pay for TRICARE.
With regard to retirement, what we've asked the Congress to do is to develop a commission that would look at future changes in retirement. Would not affect anybody's retirement who's presently on active duty, but look to the future to see whether or not we can -- we can look at some reforms that can try to save us some money in the future.
So let me just make the point. You're on active duty now, men and women who are serving right now. Our goal is to maintain the benefits that we provide for you.
But in the future, for those that serve in the future, there may very well be some savings that we may go after with those that serve in the future, particularly in areas like retirement. Okay.
Q: Sir, my question is, given the cutbacks coming up, possibly, with or without sequestration, how do you feel (inaudible) going to affect our size as far as our (inaudible) in the coming future and how are we going to -- how do we plan on circumventing that?
SEC. PANETTA: (Off mic)
Q: Yes, sir.
SEC. PANETTA: You know, look, when -- when we're facing the size deficits that we're facing and size debt we're facing, I -- you know, clearly defense has to play its role like -- like every other area, and we're doing that.
As I've said, we've -- we've put in place $487 billion in savings over the next 10 years. That's the biggest -- that's the biggest cut in defense that we've seen in the time that certainly I've been involved in the Congress over these last 40 years.
So it's a big number. We've put it in place. We're getting savings from every area, and we're doing it in a responsible way.
I believe that in exercising our responsibility to achieve savings but tying it to a strategy as to where we want to go with defense, we can do this in a responsible way.
I mean, look, right now even as we're reducing the defense budget, I've got a significant presence in the Pacific that we have with Korea and with the ships that we have in that arena. I've got Marines that are located in Okinawa that are deploying to Australia and elsewhere.
In the Middle East, I've got 50,000 troops that are in the Middle East, combined with a large number of ships in this area, as well, to deal with the threats that we're facing in the Middle East.
So the United States has the strongest military power in the world and we will remain the strongest military power in the world. That doesn't mean that we're -- we're not smart enough to achieve savings, as well. There are areas we can achieve savings. There are areas where we can, you know, be responsible to the taxpayer and be able to spend money in a way that gets us the best bang for the buck. So I'm not worried about that.
I got enough forces to move. We are agile. We are flexible. We are deployable. I -- you know, anytime I face a crisis right now I turn to my military leaders and say, "Goddamnit, let's go," and they go. And that's -- that's exactly what I'm interested in. The president of the United States says to me, you know, "I need you to do this," I can get it done.
But let me also be clear, that if Congress is reckless and doesn't deal with the challenges facing us right now and we suddenly have this massive cut that takes place through this sequester, it can seriously impact my ability to get that job done. So the biggest concern I have right now is not -- you know, not the number of savings I'm putting into place as a result of our strategy. What I worry about is being blindsided by a huge cut because they don't have the strength or the courage or the guts to do what they have to do. That's what I worry about.
SEC. PANETTA: Yes?
Q: (Off mic)
SEC. PANETTA: Question was, as we draw down in Afghanistan, how many of those positions would be replaced by contractors? And, you know, is that going to achieve savings for us? Basically, right? Is that the right question? Is that -- did I state -- (inaudible) -- okay.
The way it works is that obviously wherever we deploy forces, there -- you know, there are contractors that provide support to our forces. I guess you have contractors here that probably provide some support systems here as well for our troops.
And as we reduce the force structure, we have to, just by the very nature of reducing support, we'll have to cut back on the number of contractors in a comparable way as well.
What -- what will -- you know, what occurs with regards to other areas -- for example, the State Department has dependence on contractors, other agencies have dependence on contracts. As the military draws down in terms of providing security, they may find themselves, you know, turning to contractors for security in those areas.
U.S. military, as we draw down our force structure, we'll draw down our contractors as well.
Q: Sir? Sir?
SEC. PANETTA: One more question.
Q: Hello, sir. (Inaudible). My question is, how are the needs in regards to cyber warfare and cyber terrorism being addressed or improved?
SEC. PANETTA: How is the what?
Q: The needs in regards to cyber terrorism and cyber warfare being addressed or improved?
SEC. PANETTA: Yeah, this is -- you know, it's an area that I've tried to draw greater attention to. Because part of the -- you know, part of the problem is this, that we're living in a world, in a whole new cyber world. All of you, obviously, are a hell of a lot more aware of the Internet and the capabilities of the Internet and all of the new technologies that we have.
And I think, you know, people have come to, you know, to kind of assume that there isn't any kind of threat associated with that. But -- and look, it's -- a lot of this is complicated. A lot of this -- you know, a lot of people don't quite understand what's going on.
But the reality is that today, as I speak, the technology for cyber warfare, where you can deploy tools into a system that can literally take down that system is a reality. We have that capability; other countries have that capability as well.
So every day -- every day there are literally hundreds of thousands of attacks that are taking place. Now, a lot of this is exploitive. They basically go into systems. They try to get information. They try to see what's going on -- not only government systems, but private sector systems, Silicon Valley systems. They're going in trying to exploit information.
What we have to do is ensure that we can defend against those kinds of attacks and, if necessary, be able to go back at those that would attempt to come at us.
Now, we -- you know, we have a very capable -- in the military, we have a very capable agency called the NSA, which is on the cutting edge of this kind of technology. And I feel very confident about our ability to defend against those attacks when it comes to the Defense Department. I feel less confident about the ability of other agencies, government agencies and the private sector, to be able to deal with those kinds of attacks.
So one of the things we're trying to do is to build better cooperation so that the private sector will share information with us when they are subject to attack. You know, we've seen the -- you know, for example, Iran, we believe, has come -- you know, has been -- has become much more aggressive in terms of the types of cyber attacks that are going after, you know, areas. Aramco Oil was taken down by a -- by a cyber attack. We've seen other industries that have been impacted by this kind of attack.
So the -- the challenge is, how do we defend the country against that? To do that, we need to get legislation passed in the Congress that will give us the capability to be able to share information, protect the private sector from suits, and be able to develop the kind of defense we need for the future.
Unfortunately, the Congress, again, did not pass that legislation. That's unfortunate. And as a result, it makes us more vulnerable to the future. We are going to have to be able to get that kind of legislation passed. We're going to have to get smarter about trying to protect the country against those kinds of attacks.
The war of the future is going to involve cyber war. That's a reality. We will do that; others will do that. But the United States has to be smart enough and strong enough to be able to know when that's happening, to defend against it, and to be able to be aggressive if we, in turn, have to get ahead of this game in any kind of future conflict.
I'm confident we can do that, because we've got a lot of bright people, a lot of smart people that are giving us that technological edge. But in order to do that we need the cooperation not just of the military, but we need the cooperation of the private sector and industry. And we need the cooperation of other governmental agencies to ensure that we protect America from that kind of potential Pearl Harbor that I talked about.
We can do it, but we're going to have to think a lot differently about how we approach protecting our country in the future. We can do it.
Listen, I want to again thank all of you. What I'd like to do is give coins to each of you. The coins aren't worth a hell of a lot of money, but they might be able to get you a drink someplace if you want.
Okay, guys? Thank you very much.