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Remarks by Acting Deputy Secretary Fox at the Army War College, Carlisle Barracks, Pennsylvania

Presenter: Acting Deputy Secretary of Defense Christine H. Fox
April 07, 2014

DEPUTY SECRETARY OF DEFENSE CHRISTINE H. FOX: Well, good morning. It's a great pleasure to be with all of you today.

Before I launch into my remarks, I really have to start by expressing and my sorrow and sadness for the tragic shootings at Fort Hood last Thursday. It was a sad day for our nation, it was a sad day for our defense community, and especially for the families of those who were killed and wounded. I know many of you here have served at Fort Hood in the past. Several have friends and colleagues who are stationed there now.

On behalf of Secretary Hagel and the entire leadership of the department, our thoughts and prayers are with those affected by this tragedy, especially our Army and Fort Hood community.

Unfortunately, this isn't the first time we've dealt with an incident like this. We're still in the process of piecing together what happened and I don't want to speculate on the motivations at this time. This much we know, we will determine what happened and we will do everything we can to prevent it from happening again, incorporating lessons from the previous tragedies and all the while supporting the victims and their families.

Given these tragic events, in some ways it feels odd to talk about strategy and budgets. But we in DOD exist to support our nation's strategic needs and it is budgets that allow us to do this, while also taking care of our people. So, in some ways, the recent events at Fort Hood provide a poignant backdrop for our discussion today.

For our discussion today, I specifically wanted to come and speak with you, the future leaders of our department and our Army, as I prepare to depart the Department of Defense. Serving as deputy secretary has been a tremendous honor and through that experience and my past work with the Defense Department, and particularly serving in OSD, I see that we are in a period of profound change and challenge. And you are the leaders who will navigate that change and challenge in the future and find the opportunities that also exist there.

So, for those reasons, I wanted to speak with the War Colleges as my last set of speeches, and again, I am greatly honored to be with you today.

I would also like to say thank you -- thank you to our soldiers who have made tremendous sacrifices over the last 13 years. You know, it feels like our nation forgets that we're still at war. I'm sure you feel that way. And I want you to know that your secretary of defense and I have not forgotten and we are very grateful for what you have done and continue to do.

But today, I do want to talk about the future -- the future environment that you are entering. And there are tremendous opportunities for Army to contribute in securing the gains in Afghanistan, keeping the peace in Korea, engaging in Africa, or delivering humanitarian relief to countless nations. I think the demands and opportunities of the future will be endless, and so will the challenges. And today, I hope to talk about both with you.

But let me begin with a little context. As all of you here know, Secretary Hagel recently announced the recommendations and proposals that are contained in our president's budget '15 submission. Now, there is something for everyone to hate in that package and they do. And the secretary and me and all of the service secretaries and service chiefs are defending it through hearings and speeches and office calls on the Hill.

But I believe that that budget is based on strategic imperatives and that recognizes a time of continued transition and uncertainty for the U.S. military in terms of its roles, its missions, and the available resources. The last decade has been dominated by protracted land wars in Iraq and Afghanistan, and no one knows that better than this audience. But now, our focus has to move to preparing to counter a variety of security threats and embracing opportunities on all points of the compass.

Recognizing that America was at this historic inflection point two years ago, President Obama issued strategic guidance to the department. These priorities, as reinforced in the recent 2014 Quadrennial Defense Review, reflect our strategy of protecting the American homeland, building security globally by projecting U.S. influence and deterring aggression, and remaining prepared to win decisively against an adversary should deterrence fail.

Now, since they weighed very heavily in our recent budget choices, it's worth revisiting the specific tenets of the strategic guidance. And I'm going to list them for you now: shifting operational focus and forces to the Asia Pacific, while sustaining commitments to key allies in the Middle East and elsewhere; being prepared to defeat a major adversary in one part of the world, while denying victory to an opportunistic adversary elsewhere; reducing the force planning requirement to conduct large, prolonged counter-insurgency and stability operations; aggressively pursuing terrorist networks and countering weapons proliferation that threatens the homeland; enhancing capabilities in cyberspace and missile defense; maintaining a smaller but credible nuclear deterrent; continuing military presence and pursuing security cooperation in multiple regions to include Europe, Africa and South America.

Okay, I have to take a breath.

That is not a small list. And the only place where the strategy allows us to take risk at all is in our ability to conduct large, prolonged stabilization operations. So, the world has gotten no less dangerous, no less turbulent, or in need of American leadership.

And unlike previous drawdowns, there is no obvious peace dividend, as there has been in the past such as at the end of the Cold War. At the same time, there is a strong possibility under current law, most notably the return of sequestration in fiscal year 2016, that resources for national defense may not reach the levels envisioned to fully support the president's strategy.

Since it appeared that leadership's stern warnings about sequestration fell on deaf ears in the Congress last year, Secretary Hagel had no choice but to prepare the department for an era when defense budgets could be significantly lower than expected, wanted, or needed.

The secretary feels strongly that we must deal with the world as we find it, as it is, not as we'd like it to be, either beyond our borders or within the Beltway. Now, that said, president's budget '15 would provide $115 billion more over the next five years than sequester-level funding. The president and the secretary could not send a budget to the Hill that did not support their strategic needs. And the sequester-level budget does not provide a force large enough, ready enough, or modern enough to meet those needs.

We believe that in president's budget '15, we have submitted a realistic proposal that reflects strategic imperatives, as well as the resources the department might reasonably expect to receive. But it will require strong leadership and cooperation in the Congress to achieve it.

This budget plan and the associated proposals provide a sustainable path towards shaping a balanced force: a force able to protect the nation and fulfill the president's defense strategy, albeit with some additional risk.

Now, by "balanced," we mean a force that is sized to be ready and modern, within the resources we might reasonably expect to receive. And to achieve a balanced force, there was no choice but to reduce the size of our force, starting yesterday.

Now, shrinking the future military contains real risks. There's no doubt about it, as a smaller force, no matter how ready, no matter how technologically advanced, that smaller force can go fewer places and do fewer things, especially when confronted by multiple contingencies or a scenario in which mass is required.

But attempting to retain a larger force in the face of potential sequester-level cuts would create a decade-long readiness and modernization holiday on top of the program cancellations and delays that we've already had to make.

While the odds of a major conflict against another technologically advanced military power are relatively low, the consequences of being unprepared for such a contingency could be catastrophic. This budget submission is guided by history and rigorous analysis.

Past major drawdowns -- World War II, Korea, Vietnam, and the Cold War -- all kept more force structure in the military than could be adequately trained, maintained, and equipped given the defense budget at that time. This forced the department at those times in history to disproportionately cut into accounts that fund readiness and modernization, creating a hollow force. This is why Secretary Hagel chose to reduce capacity, the quantity of forces available, in order to ensure those forces would be properly trained and clearly superior in arms and equipment.

But the decision to be ready and to maintain our technological edge over potential adversaries at the expense of size was a decision based not only on the stark lessons of history, but also on rigorous analysis. We've done a number of in-depth studies over the past three years to prepare the department for smaller budgets. I've been involved in most of those studies.

Frankly, the writing was on the wall. As the wars ended, so would the sizable funds we had become accustomed to during the war years. To determine the size of the forces needed, we used two critically important inputs: existing operational plans that included the requirement to defend the homeland; and the global force management allocation plan, the GFMAP, that provided an estimate of steady-state requirements for our forces to support the day-to-day needs of our combatant commanders.

Now, this analysis showed that for the active Army a force sized to 440,000 to 450,000 was adequate to meet these demands, when accompanied by a Reserve force of 195,000 and a Guard of 335,000. Together, this force of 980,000 soldiers would meet the priorities specified in our strategy as laid out in the QDR.

Okay, so what does this mean for Army? Well, it means that after years of working very hard to grow the Army, we now need to turn around and shrink it. Army has borne the burden of battle in Iraq and Afghanistan, and it's a bitter pill to be rewarded in this way. No one appreciates what the Army has done more than Secretary Hagel, himself an Army veteran. And we are not insensitive to the difficulty of this message, but we have no choice but to get smaller for all of the services, as I've just said.

So this brings me to the challenges and opportunities for each of you as we go forward into this new challenging and complex world.

First, before we turn our backs on the recent past, indeed, still the present in Afghanistan, we must figure out a way to institutionalize the lessons from these past 13 years. You have learned so much about insurgency operations. You are the absolute best on COIN, better than ever envisioned.

Look at what you have accomplished. What a shame to lose all of what you have learned. It's really nothing short of amazing. And everybody in this room knows that this will happen again sometime. We don't know when, but it's guaranteed. So we must capture what you understand so well for those who will follow you. And it will be a huge challenge, because all of the pressure on you going forward will be to just do that, go forward.

The desire of the nation is to go away from these wars. And you and your people will be pulled toward the future as we should be, as you should be, but as you go forward, we cannot forget what you have fought so hard to learn.

So, you must find some way to resist those pressures. And even as we embrace that future, you must capture the lessons of the recent past, lessons that have been learned at great costs for you, for our nation and all of our people.

Next, though, we do need to go forward. And I sometimes feel resistance to getting smaller from the Army. While understandable, resisting the force drawdown just pulls the entire Army down. It focuses on getting smaller, rather than on going forward. The Army cannot turn into a large garrison force waiting for the next land war. There is just too much to do in the world, and we need clever ideas of how to be everywhere, do everything with fewer forces across the entire joint force.

The Army's regionally aligned forces is a great concept that fits perfectly into our strategy. There are many other ideas like that out there. How can we expand these concepts? How can we shape them differently? How should we shape them differently for different regions?

Are there different brigade structures that would better suit security forces distance missions? What's the right mix of senior and junior officers for these missions? How do lift and other capabilities need to be adjusted? All of these are questions that you have the opportunity to answer as you lead the force into this future.

Now, another challenge is that we know there may come a time when we would face a significant capable adversary on the ground. Now, what new capabilities, technological capabilities, as well as operational concepts, do we need for the future of large ground wars? How do technological advancements change ground combat in the future and what are the most promising of those technologies? And if you fielded them, how would they change your concepts of operation?

While we won't have the money to procure large numbers of new systems for a while, even at the president's budget level, we will have the money to develop those ideas and now is the time.

Finally, we also know that there is risk in our strategy -- risks that we will, once again, become engaged in a long, protracted ground conflict. It could be 20 years from now or it could be 10 or it could be 30. It could be during your time in service, your time in leadership positions. But let there be no doubt, history does tell us that it will happen.

And so our challenge, your challenge, is to plan now to regrow the army, even as you bring it down and how to reshape the army to support that growth in the future. We must determine what we need to retain in the smaller force to allow you to get to a larger force quickly, if necessary, when needed in the future.

These cycles seem inevitable and we struggle every time. They were envisioned by our Founding Fathers. We raise armies. We bring them down when war subsides, but we know it will come back. How do we prepare for this reality now responsibly? Most importantly, going forward, I challenge each of you to lead the Army toward a vibrant future, a future full of challenge and promise for your fellow soldiers.

It is ground forces that most signify political will. History shows us this over and over. You have the challenge and opportunity to build a more capable, modern and engaged Army, a strong Army. That's your charge, as well as your responsibility. The strength of our nation is our Army and the strength of our Army is our soldiers. And that's what makes all of you Army strong.

Thank you again for hosting me today and I very much look forward to answering your questions. (Applause.)


Q: Yes, ma'am. Thanks for coming this morning. You've addressed the issues of structure versus readiness, but not rising pay, compensation and medical costs. How long can we continue to delay budgetary reforms in these areas? And what is DOD doing to prepare the ground with relevant stakeholders for these future budget battles? Thank you.

DEP. SEC. FOX: Welcome, so you asked a terrific question and a very important one. We cannot sustain the growth in compensation going forward while we maintain a ready and capable force across all of the services. I think that one of the nicest ways I've heard this described is that we need to restore the balance in quality of life and quality of service. Quality of life, I think hopefully, you all feel is pretty good. Pay, benefits, compensation, support, housing, all of that, medical care, pretty good.

But when you go to your unit, when you go get to your equipment, when you go to train, you find you can't train, don't have the money, have to skip rotations, parts aren't there. We feel that eroding in the quality of service. And all of you, of course, come into the service to operate, to train, prepare, go places and make a difference. So we have to get that balance right.

I do think that the service leadership in conjunction with the department leadership have put together in this budget proposal a very responsible and thoughtful and not extreme compensation package that does slow the growth without -- in my view, hopefully, your view -- hurting the force in terms of compensation because, frankly, you deserve every dime that we can afford to give you, but we have to get that in balance.

So what have we done to prepare the battlefield? Well, we're working hard. Everybody is talking about it.

I had the opportunity to do a hearing with the vice chairman on compensation in front of the SASC. I think we made the points and were able to talk about why we needed this quality-of-life versus quality-of-service point, and the pressure that the budget has put on us and how we need to get this in balance.

The only other thing I can offer to you this morning is I did feel, during that hearing, and I continue to feel, and I think the service chiefs are feeling there's a little bit of a tone change on the Hill, where they understand and appreciate that we can't get these, you know, keep absorbing these budget cuts and keep all the compensation going up at the same pace that it's been going up over the last 10 years.

We don't want to take compensation away, but we do need to slow the growth, and that -- that realization seems to be getting into the dialog on the Hill, so I think we will get some of the things that we have proposed this year. I don't think we'll get them all. I think we have to keep trying.

But the package that the service chiefs have put together, that's the package. We're not going to keep cutting away and cutting away and cutting away. The chairman is very strong about this -- no drip, drip, drip. We've -- we've got a package. We may not get it all, so the parts we don't get this year, we will probably resubmit next year, but it'll be the same package. We're not going to change that story on you year to year to year. So, hopefully that helps.


Q: Good morning ma'am. Thanks for spending your time with us today.

And I'm Colonel (Abetta Litsoly ?) from Italy.

To me, the credibility of an instrument is based on the effective use of this instrument. Do you think that the willingness to avoid a large land force's commitments is going to negatively affect the credibility of U.S. land power?

And to me, today in Crimea, paradoxically, Russia is using land power to protect sea power. Thanks.

DEP. SEC. FOX: So, I think that this just goes to the point that I tried to make in my remarks that it is ground forces, land power, that's -- that most signifies political will, and no one is not -- no one in the leadership of the Defense Department is losing sight of that with regard to Russia and Crimea.

And there's also no question that the Army is going to play -- the U.S. Army is going to play a big role hopefully with our NATO partners in Europe on pushing back on that and signaling our support for all of our allies, our NATO allies, and together signify this importance.

So, while the Army is getting smaller, there is not any thought that we wouldn't use it. In fact, we need to use it. The Army needs to be global. The Army needs to be ready for that very reason. The size of the Army that we're proposing, not necessarily that sequestration supports, but that the president is proposing, is still adequate for us to have Army deployed globally and -- and absolutely need it to be so. So, you're making a great point and we agree completely.

Other questions. Yes?

Q: Ma'am, thank you very much for a wonderful talk.

(Bagila Chai ?) from Pakistan.

Historically, U.S. has reduced its forces at the end of every war, but after having achieved the desired end-state, maybe we'll talk of Second World War or end of Cold War, desired end-state was achieved.

But if we see now, if they're building environments there will be something different. Insurgents, they are expanding their bases all around the globe. This is with regards to insurgency and the counter-insurgency. It will talk of the (inaudible) or the rivalry with China. They're spending more on the defense -- the defense budget, and U.S. is reducing its defense budget.

So how we are going to cope with the challenge of the future once we see the insurgency part of it and then the conventional part of it? Your comments, please. Thank you.


Well so, again, I think that you're recognizing the fact that there isn't even the talk this time around of a peace dividend. In the past, we thought there would be one. We brought the force down, and whoops, we didn't find one. This time, I think we aren't even looking at a peace dividend. Nobody even suggests such a thing.

This is why, really, in large part, the president and the secretary have proposed a budget to the Hill that is higher than the sequester levels. At the sequester levels, we're just very concerned that the force will get too small to deal with all the crisis that you -- that you point to.

We are proposing a force that is sized to -- to meet those requirements. Now, there is some additional risk in the force that we're proposing relative to where we are today, or where we had proposed to be last year in president's budget '14, and we're aware of that.

What I think we feel in the Defense Department is that it's not that the forces that we're planning for should we get appropriated president's budget '15, which is still a question, but if we can support that level of force. We can do it, but it also doesn't have a lot of margin of error. I think that the risk and the unease that people feel in the department is, yes, it will work, but it's tight. And we'll have to see what happens in the world.

But as of now, it looks as though the forces that we would have could deal with the crises and the concerns that we have in the world, still be present, still be influential, still deal with the rise of insurgency and we'll have to see what the future brings for us.

So, other questions? Yes?

Q: Ma'am, thank you for being with us today. I am Colonel (Russing ?) from Hungary.

I would like to ask you -- (inaudible) -- been an option to change your service-based structure and -- (inaudible) -- if you are reducing capability? And just -- (inaudible) -- over-lift capability among services -- (inaudible) -- to reduce the number -- (inaudible) -- flying -- (inaudible) -- and the numbers of the ships -- (inaudible).

DEP. SEC. FOX: So, if I understand you right, you're asking sort of a service roles and missions question? Can we -- can we be more efficient in the way we structure our force?

Q: No, my question is you have a historical base service structures and the -- (inaudible) -- structures -- (inaudible) -- structures. Is it an option or has been an option -- (inaudible) -- to change -- (inaudible) -- instead of reducing capability? I know the service culture can eat strategy every day for lunch, but is it -- (Laughter.)

DEP. SEC. FOX: Is that right?

Q: -- but I just asking -- (inaudible) -- question an option or not?

DEP. SEC. FOX: So, we did not consider that in these budget drawdowns. And there are those who think that we should have. So, I have to say that my -- my personal many, many years of analysis comes to play in my answer to you here. I can't speak for everybody's view of why we didn't put that on the table this time.

But as I have had the privilege of doing analysis of operations and working closely with each of the services over a very long time, what I have learned is that each of the components of a service exist for very important reasons. And when we bring those forces together in a joint force, we can be very, very effective -- you can be very, very effective when they come together in the right way.

Now, we have to work very hard to bring them together in the right way. And I do think that joint operations and the joint force constructs have been very effective in recent years. And I think all of the operations of the last 13 years have demonstrated that very, very well.

But -- but the aviation component of the Army has a very unique role within the Army that when you try to pull that out and make it just a joint capability, you lose something. You lose something about the culture and the way that the service operations. And so you need some service-specific aspect of things, even though it sounds like everybody has the same thing.

They don't. They have it in a different way. But when you bring it together in a joint force, as long as you can move across the services, you get the great efficiencies that I think you're talking about. So for those reasons, we decided not to break that apart this time. Who knows what the future will bring. I mean, if we can't convince the Congress, if we can't keep the budgets from continuing to go down, I don't know what future leaders will have to look at.

And that's the kind of question that I think this is the right group to pose. How could be do that differently and better? And what might we lose if we did it. At the moment, we did not feel that we needed to do something that extreme and that the risks of doing it would be very great. So we chose not to.

Other questions? Yes?

Q: Good morning. Lieutenant Colonel (Nicole Johnson ?), U.S. Army Reserve.

You briefly mentioned the composition that we'll have between our force mix. And I'd like your thoughts on the continuation of the Reserve forces as an operational reserve and some of the tradeoffs we may have to make to do that.

DEP. SEC. FOX: So, we have -- we have really gotten tremendous benefit and capability from the Reserve and the Guard that have been deployed so effectively over the last 13 years. And I think one thing that everybody in the department is aligned on is that we cannot and do not want to go back to the strategic reserve model, pre-September 11th, that puts everything that the Reserve and Guard forces, more back and in that strategic camp. We want to maintain some of this operational capability that we have.

So that is a real pull. And everybody is agreed, that is the desire, going forward.

Against that, though, to be honest with you, I have to point out that there is -- there's a cost. So, every time that we take a Reserve component, activate it and deploy it, if there is an Active component that is available to do the same thing, we add operating costs to the cost of operating the force.

But some of those costs are worth it, obviously. And so the question, going forward -- and we don't have this fully cooked yet. This is going to be something we're going to have to figure out going forward. And again, it's one of those challenges and opportunities for this room, but how exactly, what is that tradeoff between a little more expense operationally to keep the Reserve more operational in mindset, versus the cost that it takes to deploy them? How does that balance against other readiness and operating concerns for the Army overall?

So that's a trade that we're working through. You're going to work through. But it's clearly in the mind of everybody. All the leadership wants to preserve an operational capability there.

There's another question? Yes?

Q: Good morning, ma'am.

As you look into the future and begin doing future budgeting, particularly like F.Y. '16, can you talk us through some of the options as to where that starts? You know, as the department looks at it, do you start at '15 level, are you going to start at sequestration-level? And just the impacts on that planning cycle.

DEP. SEC. FOX: Sure.

So last year, the department spent most of its time studying the sequestration-level budget. The department looked and spent all of its leadership program review time reviewing every decision that the services made for how they would bring their force down at the sequestration level.

And in fact, the work that was done, and it was a lot of hard work that the services really, really plowed through, all that work has been documented in detailed financial tables that we are submitting to the Hill this week as the addendum to our official budget submission. This is what sequester looks like.

So it's kind of, "Okay, Congress, you don't like the president's budget '15? Well, look at this one. You're going to love it." Because they still have to act to de-trigger sequester, as you all know, in F.Y. '16.

So we are showing them in great and glorious detail all the things that we would have to do. And it balances at those levels. And so, they're going to have deal with that.

And frankly, the detail that the services have put together and the department has put together to send to the Congress, I think all of us feel a little bit of a change in tone on the Hill, a recognition that we really have cut too far. So a recognition is step one, very important, of course. Now we need to get to step two, which is actually de-triggering sequestration.

So for '16, we won't know that when we have to submit the budget, so what are we going to do? So we've done an awful lot of work at the -- looking at the force levels required for the strategy, as I tried to touch on in my remarks. We are very convinced in the department, and the president is convinced, we can't go below the forces that we are offering in president's budget '15.

So I don't see a future where we won't try to submit the next step of president's budget '15. But the services are still bruised and still not healed from the experience of being sequestered. And they don't want to go through that again without a strong plan.

So we will also likely update the plans for execution at the sequester level for '16. And I know all the services are actually looking even beyond. But from a department level, we're -- we believe that the budget that the secretary and the president put forward to the Congress is the right one. It's as low as we can go and still do the strategy. And, of course, even that has some additional risk.

So that's where we're going to go, and then be prepared to execute at the sequester level, if necessary. Tough set of choices, frankly.

There's another question here. Yes?

Q: Good morning. I'm General (Ben James ?) from Australia.

One of the points you mentioned in your speech was the shift in focus and priorities and resources to the Asia Pacific, to do with the rebalance or the -- or the pivot. At the same time though, we hear in presidential speeches that foreign policy priorities are going to lie in places like Syria, the Middle East peace process, managing these -- these challenges with Iran.

We see the U.S. having difficulties following the right representation at key regional multinational forums and we see some real problems getting traction with the TPP and those -- those things as well.

So my question is: Are these budget issues that you've covered in your presentation this morning, do they mean that the -- the rebalance is on the back burner? Or is the U.S. still -- (inaudible) -- about the rebalance to the Pacific?

DEP. SEC. FOX: So, the rebalance is definitely not on the back burner, but you also point out the -- the reality that we can't just be in one region of the world, thus another reason why we're submitting above the sequestration levels. We need enough forces to do all of these things and deal with all of these challenges globally.

But the Asia-Pacific rebalance is still very, very real, and we are doing quite a lot of things to try to make it obvious and apparent to our allies in the Asia-Pacific region, and one of those things is the fact that Secretary Hagel is there right now. He hosted the ASEAN conference, as you know, in Hawaii, then went to Japan. Now he's in China.

In Japan, he announced that we're going to put two more ballistic missile defense ships forward-stationed in Japan. We're actually going to have 60 percent of the Navy fleet oriented towards the Asia Pacific. The Marines, as you know, are going to work and operate in partnership with Australia out of Australia, and the Army is actually also doing more deployments and -- and more partnership opportunities in the Asia Pacific, and then of course the Army's incredibly important presence in the Korean peninsula.

And frankly, an awful lot of the force that's been there, all the services have operated and rotated out of the Asia-Pacific AOR to Afghanistan and Iraq before that. They'll be there more, so the region should feel more presence.

So the combination of force deployments, joint and international, bilateral, trilateral, multilateral exercises and senior leadership engagement -- the president, the secretary, secretary of state -- I think should signify that we're very serious about the Asia-Pacific rebalance.

But an unfortunate word that has been associated with that strategy is "pivot." That was a word that was ladled -- labeled on it, and was not our word, and so "pivot" means shift from one part to another. We just can't do that in today's world, as many of you have already acknowledged, so rebalance is the right way to think about it.

Very important region. Need to increase our emphasis and focus. Very serious about doing that.

Other questions? Yes?

Q: Hello. Colonel (Diedre Tahan ?), Seminar 12.

My question is not so much at what we're going to downsize, but the rate at which we are downsizing, and my concern on the rate at which we're downsizing is twofold. The first is taking care of America's sons and daughters that have given so much over the last 12 years and making sure that they have the resources to transition properly out of the service, especially in today's job economy, which is not so good.

And so, if you want to try to prevent a problem for the V.A., having a -- a transition plan that's effective for these folks is important, especially since some of them are being told while they're in Afghanistan that when they come back, they're going to be separated.

And my second problem that I'd love your feedback on is from an organizational perspective. Right now, about 4 percent of the Army is medically nondeployable, and they're in the process of -- of being chaptered. Another 5 percent are temporarily not able to deploy. So, if you put that together, that's about 13 brigades worth of folks that are currently -- that we can't touch. That -- that amount becomes much greater as we continue to downsize.

And the likelihood that they're going to quickly move out is going to be even a further drain on our readiness, so I love your input on both an individual perspective, what we're doing to make sure we -- we transition properly; and organizationally, how we ensure that those people aren't a drain on our -- our ability to be ready to deploy.

DEP. SEC. FOX: Really tough issues that you're -- you're raising. So, again, I -- my own view is, and I'm -- I'm close to it, so I'm sure I'm not unbiased, but -- but my own view is that we have worked very hard in this drawdown to learn the lessons of history. And as I'm sure you're aware, in the past drawdowns, there have been times when we have just done it, right? We'd just chop.

And then, it -- it takes so long, and so many more resources for the services affected, primarily the Army, to rebuild the capability, get the balance right, get the senior and junior and all the right skills and everything in the right places. So this time -- and it's inhumane.

So this time, the one thing that we told the president we wanted to do when we did the original strategic guidance was bring all the forces, particularly the Army, down in a humane way, but also a responsible way that allows the Army to stay ready and capable as it comes down, and as I've tried to say in my remarks, and also builds within it the opportunity to regrow, because everybody recognizes that we don't have the perfect crystal ball for the future and it could be required.

So the desire is to come down on a pace that allows the Army to stay healthy, that's humane to our people, that keeps the balance right and keeps it ready as it comes down. That's the goal and that's the plan that the -- frankly, the service chiefs and the service leadership has worked very carefully.

That does hint in contrast to the recognition that if the resources come out overnight, like sequester, you instantly have a force that's much larger than you can afford to keep ready. And that will last until the force gets down to a size that can be supported in a balanced way at that level of resources.

So there is a worry that if we're too slow, we're going to get sequestered. It's going to be sudden, the resources are dropping, the whole force then is going to be in a very unhealthy place. So it's a tough call.

I think that my view, for what it's worth, is that General Odierno and the Army leadership have worked this so hard and they have a swift, but responsible ramp coming down. That doesn't mean that it isn't a bitter pill for somebody deployed in Afghanistan to learn that they won't have a place when they come home. And I don't know what to say about that. I think it's clearly a very bitter pill and a very bitter message.

But looking at the Army as an institution, unless we start coming down now, it's just going to be too big to be capable and effective and the Army you want it to be.

So on that transition force into the V.A. system and then working through all of that, that has been a problem for a very long time. And all I can say there is that the Department of Defense side has put people over on the V.A. side and we are trying very hard to augment them, speed the processing and also streamline our procedure such that everything doesn't go through two evaluations and two everything to get it down.

It has -- the rate has come down. It is going faster, but it's not ideal and it's not where we need to be. And all I can say on that is we just keep pushing it, we do. Every day, I have a weekly meeting with the undersecretary for personnel and readiness. This is always on the list. It's not enough to talk about it. I get that. We need to make the change.

Unfortunately, a lot of this is not in our control. We need to work interagency on this. But everyone is seized with the issue, including the president, who asked for updates on this very issue. So it's not a very satisfying answer, and I get that. All I can say is we just need to keep working it and pushing as hard as we can.

Yes, sir?

Q: Good morning, ma'am, -- (inaudible). Thank you for your remarks today. My question is towards your quality of care.

You briefly touched on that. And my question is what's the strategy of the Department of Defense to reduce the health care costs, the TRICARE contract, which is around $55 billion. So that my question is what's the strategy for the Department of Defense around health care costs?

DEP. SEC. FOX: So we have proposed a different way forward on TRICARE, where we would blend all of the different TRICARE options into going forward one TRICARE proposal. By doing that, we believe that we would have a lot more efficiencies and have estimated the savings. And I don't remember the estimate off the top of my head, but it's in the billions. At my level, I'm always interested in things with a "b," right, because that's where they're taking us down, things with b's.

And the TRICARE proposals that we have put forward to gain more efficiencies, but still support our force, include this consolidation of all the TRICARE plans into one plan going forward, as well as -- and that'll have some modest impacts on the copays and some need to have some enrollment fees that haven't been there in the past. But they are very, very minor.

And I know that it's -- it's not appropriate, frankly, to compare what the uniformed service pays relative to the outside civilian world, but it's the only kind of benchmark that I have and it's just way less. It's an order of magnitude less than what they pay on the civilian side. So it feels like an appropriate and reasonable thing to ask to get these costs down, since health care, as you know, has been eating the department's lunch for a very long time.

In the good news category, in this budget cycle, health care -- growing health care costs was not a big problem for us. It actually had leveled off and gone down a little bit. So -- so there is some good news in health care nationwide, but that's bleeding into the services. So, that's a good thing. But we do need the Congress to support the proposals we've made to keep it that way going forward.

Anything else?

Q: Ma'am?


Q: Colonel (Carl Rydell ?).

You referenced the readiness holiday as part of your introductory remarks, as something that the risk that would be accepted by the department if we return to the 2016 sequester funding levels. Can you speak to the informational aspect of the department speaking to Congress, you know, beyond passing the spread sheets, of why readiness is -- what -- what the nation should accept in its land forces? And why a procurement or a military construction holiday wouldn't actually be a better way of communicating with Congress, since readiness is a concept that the civilian sector really is not familiar with?

DEP. SEC. FOX: Boy, isn't it the truth. Readiness -- they don't -- it's -- I've been trying, actually, as I've made some speeches and done some public talking events to -- to explain what readiness is in a way people can understand it.

And the way I kind of came up with, and I don't -- I don't know that it's been great, but the audiences I've tried it on seem to go, "Oh, yeah, I get it," is, you know, if you were a parent and you had a teenager and it was winter and that teenager wanted to drive from Washington, D.C. to Ohio. You surely wouldn't let them take out without making sure they know how to drive; that they know how to drive in the snow; that their car had a good spare; that it had been tuned up.

I mean, all of those things are just, you know, in a parent's mind, that's just normal. You wouldn't let your teenager do that. Yet, people can't understand that we have a whole force of people that may not have spare parts and may not get the adequate training for what they're going to. And then they kind of get it. And I would encourage all of you to think of other examples like that that speak in plain English ways, rather than use the term "readiness" that we all throw around. We know what it means, but nobody else does.

I do think that the Congress, again, has started echoing back to us concerns about readiness, concerns about training. Some of the things that we were forced to do the year we were sequestered and even last year has made an impression on them and they're hearing it from their states as they go home. So there is a growing recognition that, no, we have cut training, we have cut support.

But we also need to talk about procurement and we also need to talk about particularly maintaining our technological edge. And we are doing that as well. For example, the undersecretary for acquisition has been up on the Hill giving a brief of how our adversaries or potential adversaries, rather, are advancing and the money that they're putting into it and how they're leaping ahead in terms of technological advancements, and the challenge for us going forward relative to our budgets, and how our development money is under pressure.

We are trying to protect S&T and research and development money in this budget so that in the future, we would have the opportunity to again procure things that have moved forward even if we don't have the procurement dollars now. But how to do that is a challenge.

So, I think we need -- I don't think we should give up on communicating how important readiness is. We need to talk about it differently, but keep the pressure on. And then also, though, you're right. We need to talk about technological edge, procurement, development and the industrial base is very helpful in that regard. They're up there making those messages as well.


Q: Ma'am, (Bill Lord ?) from the faculty.

If we look at OGSI for about $26 billion in '15, $115 billion in four out-years, that bill would be paid with a very small percentage of mandatory spending. Do you see any appetite in the Congress or the administration to address that issue?

DEP. SEC. FOX: I think that the administration has been willing to address that issue in a balanced way looking forward, and actually has a proposal on the president's website that -- that talks about exactly that.

But whether or not that can reach consensus on the Hill I think is a big, big question. And it's a big worry, because you're right, these are small bills relative to the potential savings there, and they -- they don't solve the big deficit problem going forward.

The Defense Department, and I know you know this, but just have to do it because we've lived it. I mean we took -- we took $487 billion out of the budget after the first implementation of the -- of the Budget Control Act. That was -- before that, actually, before that even happened, Secretary Gates dealt with a reduction in the budget going into that, and then after that, president's budget '14, the president took another $115 billion out of the budget going forward. So -- so you have this compounding, compounding, compounding.

And now, this year, we've taken down more again. And then sequester, we'd go to a trillion dollars total, which is a lot of money. And so we're taking it out of the military. And then there's the other parts of the government, too, that they're taking it out of, and they're not dealing with the real problem, the real thing that's driving the deficit.

And I think that everyone is frustrated with that. I think the Congress is frustrated with that. All of the congressmen I've talked to are frustrated, but they still have to come to a common frame where they can agree and de-trigger it.

As I tried to say earlier, I think there is an increasing recognition that they've gone too far for the Defense Department and they need to do something. And you know, recognition of the problem is the first step in solving the problem. So there's a little good news there, but I'd really be a lot happier and I'd sleep better when they actually start talking about solving the problem.

And so we need to keep the pressure on everybody so that -- that they do that.

Okay, sir?

Q: Ma'am, I'll give you your final question.

(Tony Cucullo ?), Seminar 49.

You've worked for -- this is completely off-budget analysis, et cetera. You've worked for a couple different secretaries of defense. You've been in countless meetings, briefings, discussions with officers and civilians, rising senior leaders, who have had to make a case, argue. I've been to the back of the room on several program budget reviews where the joint leadership was making the case for a budget issue.

Just tell the class, they're only a couple weeks from graduation: Don't get cocky, though. Would you tell the class traits, skills, and abilities of the most effective leaders at that level -- the level at which you operate, that you've seen? Thank you.

FOX: So, the thing to recognize about the most senior leaders in the department is that they spend their entire day -- now, I live this dream as the deputy secretary, trust me, the secretary lives it even more, with people poking at them to make the decision they want them to make -- make my decision, make my decision, make my decision.

And what the senior leadership needs is an understanding of their decision space. They need to understand why, from whatever angle you are coming from, let's suppose it's an Army program, why it's important for you to have what you want through the Army program.

But if you give it to the secretary and the deputy secretary in a balanced way that recognizes "what I want" may not be possible, "this is what I need, this is how I've thought about it," here's the decision space the Army leadership thinks that we have in a balanced way. Boy, I tell you, it's not a negotiation then. You know, I feel immediately, the secretary looks for this all the time. I spend a ton of time with him.

If somebody is coming in advocating something and it's just inflexible about it, the voice is lost almost instantly because it's recognized, it's a sales pitch. He gets them all day long from everybody. So do I. So if you come in, though, with a balanced, "Hey I've looked at this problem, I get it, it's hard out there, this is why I need it, this is what we've looked at, these are the other options we considered, they're substandard to this one in this way, but recognize we may not be able to do what I want, but here is why what I want is what I want."

Balanced, thoughtful, rigorous -- it makes all the difference. And you can detect it like that. And so I really encourage you to take advantage of your time here. What a great place to be to think about how to put together those kinds of balanced, rigorous arguments and present them in clear English to people like -- like me, like the Congress, like the public, and like the secretary of defense.

Because at that level, they're dealing with so many things so fast they don't have time to study-up on all of the Army terminology or to study-up on all of the options, but they will hear a sales pitch like that. And what they need from you is a member of the team bringing a challenge to the leadership for decisions that you have in a balanced way thought through.

If you could do that, I think you will be successful every time. That's my thought.

What a great privilege to be with all of you today. I wish you nothing but the very best going forward. I know that you'll be tremendously successful. So, thank you for what you do. (Applause.)

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