Thank you Rich.
I would like to thank the Center for American Progress for having me over this morning. It is great to see so many of friends and colleagues whose wise counsel has supported me over the past 32 months. Let me also recognize a close friend and one of my predecessors in this office, Rudy Deleon. Rudy knows better than anyone else in the room what it is like to be Deputy Secretary.
Today, I would like to focus on the central challenge we face in defense planning: how to manage a slowdown in defense spending responsibly without endangering our security. Let me start by saying it would certainly be desirable to defer this challenge until a later date when the transition in Iraq is complete and we are closer to handing off the combat mission in Afghanistan. But the deficit crisis does not allow us that luxury. We need to begin putting our fiscal house in order now.
This is itself a matter of national security. Our security begins with a strong economy. Our ability to exert global influence will be threatened if we do not reduce the deficit and keep federal debt within sustainable bounds. No great power can project military force in a sustained manner without the underpinnings of a sound economy. Our economy is truly the wellspring of our military might. And it is reeling from an overall imbalance between revenues and expenditures and the expenses of a decade of conflict. With deficits approaching 10 percent of the economy, strong measures are now required to ensure its long-term health.
Achieving this will require painful cuts in all aspects of federal spending. Everything must be on the table: revenues, entitlements, domestic discretionary spending, and defense spending. Although reducing the defense budget cannot alone solve our deficit problem, it must be part of the solution. It would be hard to justify excluding the 20 percent of government spending that goes toward defense.
As we enter this period of reductions in defense spending, it is helpful to look to history. We are entering the fifth major period of defense reductions since World War II. The first three came at the end of wars—World War II, Korea, and Vietnam. The fourth began in the mid-1980s, when we faced a situation most analogous to today, with large deficits leading Congress to impose spending caps. The end of the Cold War then accelerated this fourth drawdown. What these rounds of reductions have in common is that they caused a disproportionate loss of military capability. And the atrophy of military power in each case had consequences for the nation.
What happened to Task Force Smith in 1950 in the Battle of Osan will forever embody the human cost wrought by mismanaging defense. Teenagers fresh from basic training, led by officers who lacked combat experience from World War II, found themselves facing a numerically superior North Korean force. With only 120 rounds of ammunition each, two days of C-rations, and six anti-tank shells, our forces were unable to stop the North Korean advance. The result was a debacle that led to the loss of many young Americans. The broken retreat that day stands among the darkest episodes in our nation’s military history.
The Army that went into Korea was underprepared, undermanned, underfunded. Just five years after defeating the Axis powers, we deployed troops with faulty mortar ammo, worn down machine guns, and outdated bazookas. One officer said it was “sad, almost criminal, that such under strength, ill-equipped, and poorly trained units were committed.”
The lesson for us is that the drawdown after World War Two went too far, too fast. The precipitous reductions were borne out in battlefield failure on the Korean peninsula.
There was a similar although less disastrous degradation of military capability after Vietnam, especially in the ground forces. The Army was left with little of its underpinnings intact: morale was sapped; equipment was broken; recruitment was in shambles. Fortunately, we were not tested by large scale conflict. But hints of what might have happened can be found in the aborted mission to rescue Iranian hostages in 1980. The daring special forces assault ended in a fireball at Desert Base One. The lack of joint training, equipment modernization, and capability development doomed the mission.
We did better during the drawdown in the 1990s, but even then there were problems. A drop in modernization budgets forced a procurement holiday. That’s Pentagon speak for we stopped buying things. Readiness also declined. Our forces remained strong in spite of these deficits -- witness their performance in Afghanistan and Iraq. But we face long term recapitalization challenges today in areas such as rotary and fixed wing aviation that stem from the decisions of the 1990s.
In short, we are zero for four in successfully managing defense drawdowns. Each time we reduced the defense budget, we created holes in our military capabilities that had to be bought back at great cost. When we are lucky, that cost was only in dollars. When we are not, the cost is in the lives of our troops.
Our experience from prior drawdowns can help guide us through the one we are in today. Let me draw four general lessons.
The first lesson is to make hard decisions early. Things are not going to get better. Budgets are going to go down and costs are going to go up. If we cannot afford it now, we will certainly not be able to afford it in the future. Keeping programs alive on the hope that there will be more funds in the future is dangerous behavior. Lower priority programs that are eventually cancelled or truncated divert precious resources from higher priority needs. The net result is wasted spending and less capability. It is better to have a smaller but ready force, and fewer but healthy programs.
The second lesson from prior drawdowns is that it is impossible to generate the needed savings just through efficiencies. We can make our institutions more efficient. But we cannot save $50 billion per year through efficiencies alone. We have to prioritize. We have to eliminate missions and programs that, while valuable, are not valuable enough to sustain in this budget environment. The "nice to haves” must go.
The third lesson is that reductions must be done in a balanced way. Reductions focused on a single area, like operational accounts, deprive the force of needed training and maintenance. Reductions that single out investment accounts, which are easy to target, stop the process of technology refresh so essential to our battlefield edge. What we need to do is balance reductions across force structure, operating, and investment accounts. We do not want a force that is the same size as it is today but does everything less well.
The final lesson from prior drawdowns is not to cut too much, too fast, especially from core mission areas. Rebuilding capabilities five, ten, or fifteen years later comes with a cost multiplier. It sometimes comes in lives, as it did in Korea. And it comes in the robustness of our industrial base, which lets go of skilled workers and long-established business units in each major budget gyration. We live in a world where thousands of firms and suppliers—some big, others small—help provide our military its battlefield edge. These firms, their suppliers, and their suppliers’ suppliers, are each links in a chain that, if broken, can have outsized consequences on our ability to project military power.
So how should we apply these lessons to our defense program today?
The budget reductions we have been asked to achieve are north of $450 billion dollars over ten years. Accommodating these reductions will force difficult choices in force structure, modernization, and personnel. We can do this by bringing overall force levels down as we draw down in Afghanistan. We can reduce our presence in some parts of the world while maintaining or expanding it in others. And we can leverage technology to make a smaller force more effective and agile than the force we have today. We will have to modify our strategy and prioritize our key missions. But I believe that if we act judiciously, we can accommodate these reductions without introducing unacceptable levels of risk to the nation’s security.
If, however, the Congressional Super Committee fails, and we are forced into a sequester, the impacts on our armed forces could be catastrophic. Sequester would more than double the reductions to over a trillion dollars in the next decade. The scale of these cuts would dramatically shrink and undercut our armed forces. Sequestration would give us the smallest Army and Marine Corps in decades, the smallest Air Force in history, and the smallest Navy since McKinley was President. And the mindless process of sequester would force us to make equal cuts to every program, regardless of impact or priority.
The debate is not whether sequestration would wound our military. It is about whether sequestration is equivalent to shooting ourselves in the foot or the head. We must avoid it at all costs.
We need to reduce spending but it must be done in a careful, considered fashion. We should bring troops levels down in an orderly manner that allows us to configure our forces to confront emerging threats. We should avoid across the board reductions that compel retrenchments in every theater. We should trim modernizations but preserve increases in key areas, such as cyber security and long range strike. We should reduce the civilian workforce but avoid furloughs. And we should make sensible, fair adjustments to military pay and benefit that avoid breaking faith with the military families who have not broken faith with us.
Let me conclude with a comment on the budget process.
In my view, the central danger is that the politics of the budget process has blinded too many participants to the fiscal realities we face. Solving our nation’s fiscal problems is going to mean increasing revenues, decreasing expenditures, and tackling entitlement reform. We need to pay more attention to math and less to ideology. Revenues are the lowest percentage of the economy they have been since 1950. Entitlements are the highest they have ever been. You will not succeed at reducing the deficit if your starting position is to take revenue increases and entitlement reform off the table. You cannot solve the deficit problem by cutting discretionary spending alone. The fiscal stool has three legs—entitlements, revenues, and discretionary spending.
If you believe as I do, that the present fiscal imbalance poses a threat to our national security, then anyone who is not willing to adjust all three legs of the stool is putting our nation at risk. If Republicans and Democrats do not come together to tackle revenues and entitlements, then we will see further and disproportionate cuts to discretionary spending. There will be no other account to draw from but the public funds that run government departments. And this is the outcome I fear most of all.
I have served as the Pentagon’s director of program analysis, as its comptroller, and now, for two and a half years, as its Deputy Secretary. I have learned one thing above all else: serial and disproportionate reductions to discretionary spending have disastrous effects. You cannot plan a defense program and build a strategy around a moving target. Yet delaying a resolution of our fiscal woes will force us to do just this, resulting in the slow-motion cashiering of public institutions, including the military.
Let me close by saying that serving as Deputy Secretary of Defense has been the greatest privilege of my life.
Each day in this job, I have stood in awe of the young men and women who strap on body armor and go out on patrol, not knowing whether they will return. Each day, I have been humbled by the quiet determination of our military families and especially our wounded warriors, who have sacrificed so much. Each day, I have admired the dedication of our civil servants, who a decade after 9/11, return every morning to a building that was once brutally attacked.
I would like to thank the President for giving me the chance to serve. And I would like to thank the troops, and their families, for their trust. I hope my leadership has met their expectation.