GENERAL ROBERT CONE: All right. We have the distinct honor of having the secretary of defense visit us today here at Fort Eustis.
And I know we've got some great Coast Guardsmen and some great soldiers in the room and again, it -- it's really a privilege to have him here today.
So, without any further ado, I'll introduce the secretary of defense, Chuck Hagel.
SECRETARY OF DEFENSE CHUCK HAGEL: General, thank you -- thanks.
Thank you. Please be seated.
Good afternoon. Thank you for giving me some time today. I appreciate it very much. General Cone gave me a visa to come to your base today.
I promised him I wouldn't spend a lot of time here and embarrass him in any way, but I want to thank General Cone, his leader, sergeant major and all the leaders of this institution for the job that they do.
What you do -- I want to thank you; thank your families for their sacrifices. We understand those sacrifices and we appreciate them.
I bring you greetings from President Obama, who asked me to say hello and to thank you, as well.
I'm on my way to Brussels for a NATO ministerial conference. We'll talk about a number of things, like we always do in those two-day conferences.
But one of the things that will be probably right at the front end of the agenda will be Afghanistan.
President Obama spoke to President Karzai today about our future there, and that conversation revolved around the elections in Afghanistan -- as you know, they have an election coming up here, just a couple of -- a couple of months -- to assure President Karzai and the people of Afghanistan that the United States will continue to support in any way we can.
It is the decision of the people of Afghanistan, as it should be, who they elect as their next leader.
And then they talked about what the possibilities are for a post-2014 presence in Afghanistan. But that really depends, as you all know -- and the president's been very clear about this -- on whether we have a bilateral security agreement signed by the Afghani government to assure our rights of our troops and other important elements that are required anytime America has troops in another country.
It also involves NATO troops and ISAF troops -- other countries who would have a -- a continued mission in Afghanistan post-2014. So, if -- if you want to pursue that in any way here in a couple of minutes on some questions, I'd be glad to respond.
I wanted to stop here on the way over to Brussels, as I have just come from Langley, and spent some time there with our airmen, talking a little bit about their view of the world and what they think.
But I wanted to stop to, as I said, to thank you for what you're doing; but also, talk to you a little bit about an announcement I made yesterday regarding our budget that we'll present to the Congress next week.
It's the president's fiscal year 2015 budget and it's a significant budget for us -- for the Department of Defense, because it is the first budget that we will present to the Congress in 13 years that's not a budget based on a war footing.
We have, as you all know and many of you have served in those two wars -- Iraq and Afghanistan -- it's the first budget in 13 years that'll be presented where we'd -- we are not planning to continue to be part of a war as we unwind our combat mission and that part of our 13-year engagement in Afghanistan.
So, that's where we start. I say that because it is significant for many reasons.
And in many ways, it was a big part of the decisions that the chiefs, starting with the chairman of the Joint Chiefs of Staff, General Dempsey, and the chiefs and secretaries, combatant commanders, senior enlisted and other leaders of this enterprise came together -- worked together in the last few months to come up with a budget that we think assures the United States of America of its security and safety and our interests in the world.
It's a budget that we believe the president can count on to have the options available to him, as commander in chief, if any of those options would be required.
This is a budget with significant restraints. As you know, we've been, the last couple of years, under pretty significant fiscal restraints, starting last year in March -- in fact, almost a year ago this week, when sequester kicked in.
And our Defense Department had to deal with a $37 billion abrupt cut last year -- and that's on top of the $487 billion over a 10-year period that has been thread through in -- throughout our budget starting two years ago and it'll go another eight years.
We're going to take another $31 billion cut this year, even with the Bipartisan Budget Act that was agreed to in December; $45 billion cut again next year. And sequestration comes back in 2016 unless the Congress does something about it -- and that'll mean a $52 billion cut. In the next few years, we'll be in that range.
So, I give you that as some sense of what we're dealing with and the framework of these kinds of fiscal constraints, which are not insignificant.
Our mission, as you all know, is -- it's your lives -- is the security of this country. And the budget that we'll present, we believe, as I've said, addresses that mission -- that responsibility we have.
But I wanted to talk about a couple of specific things because everything in that budget affects you. It affects your families, it affects your future, it affects everything you have sacrifices for and continue to do in your -- in your service and in your lives.
I particularly wanted to come out and listen to you, as I do often around the country when I get out to different bases all over the United States. It's important for me to get a clear understanding from you -- what you think; what's right, what's wrong.
But in this case, I wanted to, where I could, at least reach out and have an opportunity to address you all face-to-face as your secretary of defense to explain a couple of things as to why we made some of the decisions that we made.
We'll have an opportunity for questions. So, let me get into a couple of specific things.
First, what -- what really framed up and drove this budget, aside from the reality of -- of the budget restraints -- the budget restraints didn't drive the budget. We have a strategy. That strategic guidance was presented to our country -- to the Defense Department -- by President Obama a couple of years ago.
So, that was the strategic focus of our budget, as it's been -- to comply with those -- those specific points of strategy incorporate in the president's strategic guidance. And we've been able to do that.
The president, nor I, nor any of the leaders of this institution would submit to Congress a budget that doesn't fulfill that strategic guidance. But within that reality, our -- our -- as I have noted, fiscal constraints -- if they're not changed over the next few years, then we'll severely risk some of -- of that strategic guidance.
We've focused on the balance of forces. You all know, because this is an integrated enterprise, we all work together -- each service. So, you can't adjust things in the Army or the Marines, Navy, Air Force without affecting all the other services.
So, it had to be fair. It had to be balanced. It had to, as we always start, with people. The people are -- are the soul; they're the heart. They make an institution work.
Without quality people and the continued commitment of quality people and the reliance on that commitment of quality people, you don't have much, regardless of how much technology you have.
So, a focus on taking care of your people was at the top of the list as we balanced, as we prioritized, as we tried to sort through how we're going to do this; readiness, capability.
I, as secretary of defense, couldn't recommend to the president any option, nor would any president make a decision to send anyone to war if there was any doubt that our men and women were not ready. We would fail you; we would fail our country. I can't do that -- I won't do that.
What does that mean? That means training; that means leadership; that means technological edge, better equipment than anyone else has -- all the things that make this the greatest military on Earth, starting with the people.
But you need some other things, too. And we're not going to allow that to erode. So, the readiness and capability was also a priority as to how we constructed this budget.
So, those were the guiding principles that we focused on. And we spent a lot of time on this. Each budget is different; but also, each budget is different not because each budget's different, but because the world shifts -- it changes.
Our world today is far different than it was five years ago; it's far more complicated, far more integrated; in many ways, far more dangerous; certainly more unpredictable. And you focus on any part of the world and I think it's pretty clear.
We have to be prepared to deal with that kind of a world. We have to be prepared to deal with things 10 years ago we weren't focused on -- didn't need to be focused on; cyber being probably the paramount issue here -- that challenge.
We have to reset, adjust, adapt. Any time the history of any nation, certainly this nation -- when you come out of a war -- we've come out of two wars; two of the longest -- this one being the longest we've ever been in; 13 years of non-stop war -- you're going to reset your force, and have to.
There -- whether there was fiscal constraint or not, because the posturing of your assets, your force structure -- how do you use those forces? What kind of technology are you going to need to deal with these new emerging threats around the world? So, that's, in itself, not new; but we factor all of that in.
Now, let me focus on a couple of things very quickly, and then we'll go to questions -- because these are issues that really affect you directly as -- as individuals, as family members.
Pay, compensation, retirement -- let's start with retirement. We have made no recommendations in this budget on any kind of shifts or changes on retirement.
We feel that we should wait until the Retirement Commission that was impaneled and directed by the Congress comes back with its study. Over the next few months, they'll come back to the Congress -- to us, and we'll take a look; we'll take a look at it.
But we're also committed to this: We're not going to change retirement benefits that we committed -- this country committed to you when you came into the -- the service.
Pay, compensation -- pay; there's been some misunderstanding, I think, and miscommunication by some, that somehow, we're cutting pay. That's not what we're recommending. We're recommending that we slow the rate of growth of pay increases.
There will be pay raises. We're recommending that by a small percentage of 1 percentage -- half a percent, maybe -- that we slow that rate of increases. So, there'll be pay increases.
On compensation -- benefits, packages, housing allowances -- you all get a hundred percent allowance on subsidies of your housing today.
I asked General Abrams and a number of our leaders at the Pentagon -- when they came into the service, what was it? There were variations of 18 to 20 percent out of pocket costs; even in the late 1990s, it was still in that range.
We've been able to move that forward to now you don't pay -- pay anything. There's -- there's no out-of-pocket cost.
What we're proposing, and we think is fair -- that over a period of years, that we ask individuals to eventually pay up to 5 percent out of their pocket for those subsidies.
Commissaries -- we're not closing any commissaries. In fact, we're exempting commissaries that are in remote areas that don't have any options -- Target, Wal-Mart, other options or overseas commissaries. What we are proposing is that we take the subsidies away from the commissaries.
They're still going to have to pay no rent, no taxes; and they're still going to present a -- a tremendous opportunity for men and women; good deals on everything across the board -- same kind of arrangement, in many ways, as our exchanges now have. This would be phased in over a period of -- of years.
Those are some of the areas that I know are of great concern to you, and the last being Tricare -- your health care.
What we're proposing there is a very slight, modest increase in the copays for family members and for working-age retirees over a five-year period.
Average on retirees today is somewhere in the area of -- of 8 percent out-of-pocket. What we're proposing, over a number of years -- that that would go to 11 percent out-of-pocket.
It wouldn't change active duty members. It wouldn't change your preferred -- preferred providers or you lose any rights. It wouldn't change the quality.
It consolidates three different Tricare system into one. We think that's smart; we think it's not just efficient -- effective, where we can save a lot of money to put back into the system for you, for better quality. It just makes -- it just makes sense.
Now family members, retirees pay a certain copay for doctors' visits and so on. We're asking a slight increase in that over the next few -- few years.
So, those are the general parameters of some of the specific areas of the pay and compensation.
We came at this -- and by the way, every decision that we -- we agreed to and made that will be incorporated in the budget that I present, and General Dempsey presents along with me, to the Senate and House Armed Services Committee next week was agreed to by all the senior enlisted leaders of every service, all the chiefs of each service, the secretaries of each service and our leaders in the services.
So, I say that because I want you to know that I -- I, right from the beginning, brought in all of our members of our armed forces -- the senior representatives, whether they were senior enlisted or senior officers -- into helping us craft this budget and makes these -- some of these tough choices and prioritize some of these decisions.
This wasn't done unilaterally or arbitrarily and it wasn't done in -- in any kind of a room off to the side. It was done with the -- the complete involve and advice and counsel, and ultimately, the support of our senior military leaders.
That's the way we went into it. That's what we'll continue to do. I believe as secretary of defense, that's an obligation I have to listen to everybody.
And then we have to make some tough choices. We had to make some tough choices -- there's no getting around that. We had to prioritize like we've never had to prioritize probably in most of your careers.
The last 13 years of budgets, except for the last two, have been pretty significant budgets, as they should have been. It was a priority. We had two wars going on. We needed to support our men and women in every way.
I was in the United States Senate at the time; it was the right thing to do, whether it was an increase in any component of what I just addressed, it was the right thing to do.
At the same time, even though the world is changing -- different dynamics as I have just noted and you know -- still, the focus must stay on the quality people. Retainment, recruitment, training -- we cannot allow a so-called hollow force or too many members just to have too many members -- just say that we've got so many members, so isn't that good. That's not fair to the members who stay in.
We can bring down our force structure in a responsible, glide path way, if we have the time to do it and the resources. And again, that's not new. After every war the United States has done that.
What's most important is how we do it and the process we use and the repositioning and the resetting of our posture and our force structure to deal with the new threats that we're dealing across the globe.
So this is going to be done if it's done responsibly, if it's done the right way.
We will make those cases to the Congress. The Congress has to be a partner in this. But it will impose more risks to our country, our force structure if we're not given some longer term relief from sequestration.
This is about as direct and honest as I can be. What I'm telling you is what I'm going to tell the Congress. I owe that to you. I owe it to tell you that face-to-face and to come out and say that. So you know what I'm thinking; you know what our leaders are thinking.
Let me in there. We can go on for hours about the budget and every aspect of it and what's going on in the world. But I really want to hear from you. So let me stop there and we'll open it up to questions, General, and however way you want to do it.
Q: Sir, my question basically, what happens with all the cutbacks that's going to happen to veterans and their benefits and their packages after they get out, for the disabled veterans?
SEC. HAGEL: Why are there cuts to disabled veterans?
Q: No; with all the cutbacks, the Army's drawing down, the budget's being cut. What's going to happen -- everything has to be cut eventually, with everything being cut. So what's going to happen with the veteran packages and things of that nature for like disabled veterans?
Or is there not going to be any cuts there?
SEC. HAGEL: Well, first, as you know, some of this resides in the Department of Veterans Affairs which we partner with, as you know. I do a lot of work; our two departments do work all the time.
We've got DOD people over at V.A. all the time, helping. I've assigned a number of DOD professionals over there that are onsite at their headquarters in Washington as well as other places in the country.
So we are connected and we do work with them. We do have some responsibility to assist them as we transfer -- you all transfer out to make sure your records are transferred right, computerized, all the rest.
Their benefits and their packages, most of that resides, veterans, with the Veterans Affairs Department. I don't know of any cuts to disabled veterans or the veterans who have left service because of any kind of a disability. That's a priority; that continues to be a priority in the president's budget.
Everything we're doing on our side, DOD, everything the V.A. will continue to do, I don't speak for the V.A. But I'm not aware of any cuts. So I think we protect those. We must protect those.
And some of the exemptions that I'm talking about, for example in any care -- any kind of TRICARE increase on copays, our disabled would be exempt from that, families of members who died in war. I mean there are certain exemptions.
So as far as I know, we're protecting that universe of men and women who have suffered as a consequence of their service to this country.
Does that help you?
Q: Yes, sir. Thank you.
SEC. HAGEL: Thank you.
Q: Sir, I'm (INAUDIBLE). My question is would the proposed budget -- how does the Department of Defense plan on retaining quality soldiers to continue the reputation as the premier, all-volunteer military?
You can engage quality like you said by having the best technology and the best training. But sometimes quality, you can't teach that. You can't train that like the Army values integrity. You can't train integrity. That's taught long before you join the military. So that was my question.
How does the Department of Defense...
SEC. HAGEL: Well, that's -- thank you, Sgt. And it's a good question and it's an important question. And as I said and you noted, that we put that right at the top of the list of prioritizing when we started going through the balance of our resources and what can't we afford to cut?
We cannot afford to cut into that part of the Defense Department budget. Quality people will always be required in any institution. You can't do it any other way. So how do we retain, to your point, quality people? How do we recruit quality people?
And it is, as you say, an all-volunteer service. We have to depend on their recruitment.
Well, you do that in many ways. And I don't have to tell any of you in this room, each of you have a story to tell as to why did you join. Why did you decide to make this a big part of your lives? Many of you, it's all of your professional careers or at least 20 years of it.
Why did you do that? Well, I'd doubt if -- and I listen to you when I ask that question; I doubt if it's for the pay or the compensation and the benefits and even the glory. You all, first of all, have committed to do this on your own, volunteering for something more important than that.
That said, pay, compensation, taking care of your families is a huge factor here. We're not unaware of that. It needs to be a huge factor. You need to not only do what you think is right for yourselves as to why you do this.
But you're doing something for your country. You're doing something for other people. It is as noble a profession as there is in the world, what you do.
I get all that. But there's more to it. So what we try to do is assure that we can still give packages of benefits and pay that's certainly competitive with private sector at any level of your skill sets, at any level of what you do.
We've done that pretty well. Matter of fact, I think the numbers show in the last, certainly since 2000-2001, the average across-the-board is about a 40 percent increase over private sector skill bases compared to our skill bases here, when you add everything up.
That's pretty competitive and we -- can we continue to keep it at 40 percent higher than the private sector? I don't know; we're trying. But there was a time when we were behind. There's no question about it.
But I think we've been able to catch up over the last few years. We don't want to lose that edge aside from the reasons you do this to begin with.
So this is something that's on our minds constantly. It's on every leader's mind in this building in Washington, all over the world. It's on the president's mind. It's on my mind. How do we continue to retain and recruit the best people that we can get?
And it will always be a priority; I don't think any Secretary of Defense or any president would feel any different, no matter who it is. And I know the senior enlisted and our commanding generals feel strongly about that, that you take care of your people.
Q: Sir, with all the cutbacks, with us going to a pre-World War II size Army, if another war were to kick off, we would be letting in people who are not capable of holding their duties, just like we did with post-9/11. We filled the whole military with people.
Wouldn't this put us back to our current position and along with its problems that we have?
SEC. HAGEL: Well, it's a good question. Let me address that by making a couple observations. I think it's really a bogus comparison to compare the Army of pre-World War II in the United States versus the Army today.
And I think it has nothing to do with the quality of the individual in the sense, are you better people today than the people in the United States Army in 1939 and 1940? I'll leave that to others to sort out. I don't know; I was born in 1946, so I wasn't there.
I think we've always had good people in this country. I don't think there's ever been a time in our forces as good, as quality individuals as there is today. But to try to compare what the Army looked like or the force structure in the United States of America in 1939 and 1940, to today, is there's no comparison.
What do I mean by that? Look at the capability difference what per person you are trained to do, what you're equipped to do, how you're led, the equipment that you have, the modernization, the technology versus what our Army looked like in 1939 and 1940. I mean, there's no comparison.
So what does that mean? Well, for one thing, it certainly means I'm not sure it takes you the same amount of people today to do what they did in 1939. Many other parts of that comparison I don't think could stand any true test of anything.
Second, the reality is when you go back and you look at the last 13 years of our -- of our force structure, and the numbers and at the -- at the high points, as you all know, because many of you were there in Iraq and Afghanistan.
At different points, we had 160,000 people in those countries in -- at one time. You can't afford -- no one can -- nor can you -- can you put into any day-to-day responsible work when you're pulling down out of two wars, what are you going to do with all those people?
You going to train them? I mean, I suppose we could just have a lot of people and just keep training them and training them and training them, thinking that, well, maybe another Iraq or Afghanistan will come.
World's unpredictable. I get that. Have to be prepared. I get that.
But you also have to use some common sense, too. Do you really want to carry that kind of an inventory and overhead? This gets us into too many excess bases we have and too many infrastructures that we don't need that we need to close, and we'll be asking the Congress for authority to do that.
So you have to be smart about this. It's not fair to you because what that means, that's less training for you; that's less compensation, less money, less everything for you because it then becomes numbers. It all becomes capacity.
Now would you rather have more soldiers than less? Of course you would. Of course you would.
But it's also the reality that we don't have an unlimited bin of resources here that we can't continue to keep everybody trained and compensated and to the earlier point, how do you continue to retain good people and attract good people and recruit good people by just having big numbers?
This is what's referred to often as the hollow force. You have a lot of people and you can even compensate them, but at some point you're going to have to invest big dollars in the technological edge that we have had since World War II over any adversary. And we still have that today.
We never, ever must let that erode and that's tough. I know. I know. And people say, well, why don't you just have one less carrier or a few more less jets and a few more less ships?
Well, it's -- that's certainly an option. But if we go back into a combat situation sometime, and we may, we have prepared for that, in the end, I said earlier, it's -- it is an integrated force.
We need the best support system for you people in the Army on the ground. You've had to carry the bulk of the load for these two -- these last two wars.
But you've also had to rely on a lot of support from other services to do the kind of job you're doing. We've got some Coast Guardsmen here and so on.
So when you have -- when you total it all up, you've got to balance all of this. And what's it mean to protect you, to do all the things that we need to do?
So I know that's a lot longer answer than you wanted. But it -- but I think what I just said was part of the answer. And we want to assure that the people we have -- and we can bring this down. We can do it on a responsible way, a glide path that makes sense.
Where we run into trouble, where we have had trouble the last two years, where we're going to continue to have trouble, unless some of this -- some of these fiscal restraints are taken off of us, we're having to make abrupt cuts.
I had to furlough people last year, not as many as originally thought when I first got to be Secretary of Defense. But anytime you furlough anybody for one day, that's too much. It impacts everything. The government closed for 16 days. You don't think that has an effect on people, on confidence, on your jobs, so on?
So you know, those are realities that we've got to work our way through, manage our way through. That wasn't your fault and my fault. But that's where it is.
So your question's a very good question and important question. And we factor all of those dimensions into budget recommendations.
And thank you.
Thank you again for your service. (Applause.)