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Well, good morning, everyone.

First, I'd like to thank the U.S. Naval Institute (USNI) and AFCEA, along with all the corporate sponsors here today and who are not here, and everyone else behind the back scenes who makes this wonderful conference so successful every year.

[Vice] Adm. [Pete] Daly, [Lt.] Gen. [Robert] Shea, it looks like you've hit another home run this year, and the theme, "Lower Budgets and Higher Demands."  How do we strike the right balance?  That's exactly the right question we need to be asking ourselves every single day.

So it's a real pleasure to be here as part of an impressive lineup of speakers over the next three days.  Now, to be honest, it's a pleasure to be anywhere except for the Pentagon, but Southern California is really high on my list, especially since I'll be going to Minot, N.D. to visit our nuclear warriors tomorrow where it's minus-8 degrees.  (Laughter.)

In fact, every time I get out of the Pentagon, I'm reminded of a show that I watched a month or two ago.  It was called "Eaten Alive."  Anybody see this movie -- or this show?

For some reason, this guy gets in his head that he wants to be eaten by a python.  Now, you can't make this up.  (Laughter.)  So he studied, and he studied, and he said, "Pythons exert 90 pounds per square inch (PSI) of pressure on their prey before they -- as they crush them before they eat them."  So he had a special body suit made that could withstand 90 PSI.  He had a camera on his head so when he gets swallowed by the python, he'd be able to watch it.

And he actually did it.  They went out and found, like, this 30-foot python, and they cover him with pig's blood so he looks like an animal, and sure enough, the python wraps him up and starts slowly crushing him.  And you can hear him going -- (CHOKING SOUNDS) -- you know.  It wasn't really a good idea.

And finally in the very end, the python tried -- opened his mouth -- I guess it was a "he" -- but opened its mouth and started to swallow him, but at that point, he tapped out.  His arm was kind of twisted behind, and he said, "Get me out of here."

And I said, "This is a story about political appointees in the Pentagon."  (Laughter.)  No matter how well you prepare, you just get sucked into the vortex, and everyday, the pressures from all sides are just unbelievable.  So anytime you can get out and be pulled out of the mouth of the python, it's a good day.  (Laughter.)

Now, this morning, I want to talk to you all about the department's Fiscal Year (FY) 2016 defense budget request, the strategic decisions that went into the request and how we're trying to strike that balance between lower budgets and higher demands.

I'll be talking a few numbers this morning but not too many.  It's just too damn early for that.  But without further ado, let me just start with the bottom line up front.  I think most of you have heard this before.

The president's budget request totals about $534 billion in Fiscal Year 2016.  It also includes $51 billion in the Overseas Contingency Operation, or OCO, request.  For the first time in a while, we submitted both together.

This is a total of $585 billion of our taxpayers' hard-earned money.

Now, these numbers are about $36 billion above the FY '16 sequestration caps, which remain in effect at this point, and about $38 billion, or 7.6 percent, higher than the enacted FY 2015 budget levels.

Now, these figures are right in line with those that we submitted last year, and they reflect what I would argue strongly to be a strategy-driven, resource-informed budget that begins -- just starts to begin to restore the capacity and capabilities needed to meet future challenges by reversing long-term modernization.

Now, let me just provide you with a little background.  Each year, as most -- most of you know, the services prepare their program objective memorandum (POM), what they think that they should be doing in their defense program over the next five years or the future-year defense program (FYDP).

They're submitted.  This year, they were submitted late.  They didn't come in until September.

So that point, you start what is called a fall review, and you start to review all of the service input and start to make judgments about where you ought to be shifting money in a resource constrained environment.

Now, this process occurs literally in a windowless room in the bowels of the Pentagon, and that's where the sausage is made.  Literally hours and hours are spent where all the senior leaders of the departments -- generally the vice chiefs of the services, the undersecretaries, all of the different staff members and the COCOMs, the combatant commanders -- they call in inaudible)  most of the time.

And we deliberate the future defense program and try to make trades.  And that's where we make our strategic priorities and hash out where we'll invest our money.

Now, before doing so, this year, we had to answer a very important question.  We were operating under a strategy that was outlined last year in March 2014 in the Quadrennial Defense Review (QDR).  It was actually published in March 2014.

But three surprises occurred right on the heels of its publication.  So we had to ask ourselves, do these geopolitical surprises or events cause the strategy to no longer be valid?

First, beginning in February 2014, actually before we published the QDR, Russia destabilized, illegally occupied and then attempted to annex Crimea.  Moscow then backed separatist activity in eastern Ukraine, violating international law and Ukraine's sovereignty and territorial integrity.

Now, these actions suggested unless we could convince Moscow to change its course, that we and our NATO allies were going to be entering into a period of prolonged, heightened tension with Russia.

The second surprise came in June, as the Islamic State in Iraq and the Levant, ISIL, launched an offensive out of northeast Syria into Iraq.  That surprised us only insofar as the collapse of the Iraqi forces.  The threat to our people and our interests, along most important with the formation of a partner, a new, more inclusive Iraqi government that we could work with, prompted our leadership, President Obama, and our senior military and our allies and partners to forge a counter-ISIL coalition and use force in Iraq and Syria to confront that threat.

Then the third came in August.  The CDC projected that unless something dramatic happened, there were going to be $1.4 million people in Western Africa infected with the Ebola virus.  In response, President Obama spearheaded an international effort to confront this national security threat posed by Ebola and its potential spread.  And luckily, it seems as though our intervention has really paid dividends.

So there we were.  We're in September.  We had just gotten the services -- (inaudible).  These three events had just happened, boom, boom, boom.

They came on top of an already volatile security environment, including the transition of our mission in Afghanistan from combat operations to resolute -- to train, advise, and assist the Afghan people as they take on their own security.  Ongoing negotiations over Iran's nuclear program, China's provocative activities in the East and South China Seas, and global cyber attacks, which culminated, as you know, in November and December, the hack of -- the threat of Sony's Networks.

Now, what was readily apparent to all is we have the finest partners and allies that any nation can ask for.  But when we were asking them to help in Afghanistan, to help in Ebola, to help in Iraq and Syria, it quickly became evident that the capabilities and capacities of our allies were tapped out.

And so like it or not, the United States would remain the global security first responder.  And that even as we continue to devote considerable resources to deterring aggression and assuring our allies and partners through forward engagement in multiple theaters.  In fact, we have 211,000 military personnel right now serving in 136 countries around the world.

And while the overall demand for ground combat forces is coming down as we end our combat mission in Afghanistan, demand for deployable ground combat headquarters, missile defense, ISR, intelligence, surveillance, and reconnaissance.  Naval, aerospace forces, remains quite high.  The OPTEMPO, operational tempo and PERSTEMPO – the personnel tempo, the amount of time our servicemen and women stay away from home, is still high.

But after some debate, when answering whether these aforementioned surprises, along with our continued global engagement, fundamentally shifted the underlying assumptions that underpinned our 2014 strategy, we concluded that the strategy was not yet broken.

The answer was very much -- it just wasn't apparent yet.  We had the time to sift through to see what would play out in Iraq and Syria, what would play out in Europe, what would play out in West Africa?

So, like I said, in the end we concluded that our strategy remains sound.  And we think the priorities identified in the QDR remain intact. 

And those five are: number one, rebalance to the Asia-Pacific region.  That will continue. 

Number two, maintaining a strong commitment to security and stability in Europe and the Middle East. 

Number three, sustaining a global counter-terrorism campaign.

Number four, strengthening key alliances and partnerships.

And number five, prioritizing key modernization efforts.

We recognize that the assumptions that underpin each of these five priorities would have to continually be reviewed, especially with regard to what has happened in Europe and the Middle East.  And that's what we will do as we go into the POM-17, the program -- I mean, the President's Budget '17, which, you know, God help me, we're starting right now.

Now, we reached the same conclusion on our strategy's force planning construct.  That tells us how big of a joint force you need to implement the strategy.  Now, this construct calls for a smaller, leaner, technologically advanced joint force, able in peacetime to do three things: defend our homeland, carry out global counter-terrorist operations in multiple theaters, and deter aggression and assure allies, through forward presence and engagement in multiple theaters.

If deterrence fails at any given time, the joint force had to be large enough to defeat a regional adversary in what we call the large-scale multi-phase joint campaign, while at the same time imposing costs or denying the objectives of another aggressor in another region.  The so-called "win, deny."

Now, we concluded that the force we submitted last year in President’s Budget (PB) 2015, remained broadly sufficient to need, with one key exception, and that was in ISR, intelligence, surveillance, and reconnaissance assets.

We made a bet last year that as we pulled out of Afghanistan, we'd be able to start drawing down some of the permissive airborne ISR, but with the uptick in violence in Iraq and Syria, essentially what happened is those extra caps or sorties just shifted right into Iraq and Syria.

So as a result, when you study the PB16, the PB16 force structure, you'll find it to be very consistent with PB15.  We continue to believe we can execute the strategy, even with all of the things that are going on in the world with manageable levels of risk.  But without question, there are elevated levels of risk in pockets throughout the force.

You know, there's elevated risk in missile defense.  There's elevated risk in ISR.  Et cetera.

And some then will continue to closely scrutinize whether our strategy, force structure, and global allocation of forces is in keeping with this unbelievably complex and volatile world that we find ourselves with -- find ourselves in, and that we're keeping pace with the demands that are being levied upon our servicemen and women in the forces that they participate in.

But let me just tell you this: with a high degree of fiscal uncertainty, I told you that we are above the sequestration level caps in our submission.  In fact, if you total up the total amount of money between FY '16 and FY '20, and compare it to the sequestration caps that are currently the law of the land, our submission is about $150 billion higher than sequestration.

Now, with the threat of sequestration over our heads, there is no way that any responsible leader would recommend that we would increase force structure right now.  It would just cause more problems than it would solve.  So, that's why we have to use the force we have very dynamically across the world.  And it's why we are requesting $585 billion for both budget and OCO funding, because we believe that is what we need to execute the strategy at manageable levels of risk.

But let me make clear to everybody in here and everyone who's watching, even though we're about $150 billion above the sequestration caps in our request, maintaining the balance between personnel, readiness, and modernization is extremely challenging.

That's why we believe firmly that any reduction in funding below the president's budget level or any broad denial of the request that we have put into our budget to Congress is really going to cause some problems and would make the overall risks to the current strategy that we have, which we believe is the right one for this point in time in our country's history, would become unmanageable.

And let me explain why we think that's the case.

First, as you all know here, we're coming out of 13 years of war.  It's caused an enormous strain on the servicemen and women who have volunteered to serve their nation as well as the equipment, which they operate.

We have long planned to take a two- to three-year reset after winding down combat operations in Afghanistan.  In sports term, we have been saying for many years that we would -- we would need a couple rebuilding years to replace war-torn equipment, to take down the pressure on our service men and women, and to train our troops for different types of operations which they may face in the future.

So, as this last year has shown us, we just cannot be ready for one thing.  We can't be a counterinsurgency force.  We can't be a high-end multiphase campaign force.  We have to be able to do all those things.  And it takes time to do so.

So because of the high operational tempo that I just described to you, we're not doing a reset, we're doing a running reset.  We're trying to reset in stride.  We're building this airplane while it's flying. 

And this makes it even more challenging because the sequestration hit that hit us in F.Y. 2013 really was a punch in the gut.  And that really had a deleterious impact on readiness across the board. 

And, as a result, readiness remains at troubling levels.  Our forward-deployed forces, let me make sure everybody understands that, our forward-deployed forces are locked, cocked and ready to go.  They're ready to answer the call.  They have the proper training.  They have the proper equipment.  And they would be able to operate in almost any environment that you can conceive of.

But the surge force, the heavy-duty Sunday punch, that is necessary or that you throw when necessary, that's not as ready as it's been in the past.  There's no question about it.  And this is something that troubles us very much.

Now, it's important to note that it's not gonna -- we just can't dump money at this problem.  This is a problem now as much of time as it is of money.

So what we're doing is we adjusted the end-strength ramps of both the Army and the Marine Corps.  They're coming down slightly shallower than planned last year, and that's to allow less personnel turbulence in the combat units.  That will help near-term readiness.

We added money to home station training, so that the forces that are home would be able to get to the ranges and get the training they needed.

And we invested in our range infrastructure, which is very, very important for us to maintain highly ready forces.

We also added funding to reduce the maintenance backlog.  Each of the services' O&M accounts, operations maintenance or readiness accounts, increased by nearly 10 percent over last year.  But we concluded that you can't put too much more money at this problem, because as you go towards full-spectrum combat readiness, it takes time. 

These gains are very fragile.  For example, the Army says that to be fully full-spectrum, combat-ready, they would like each of their brigade combat teams to go to the national training center and do two rotations.  By that time, all of your junior leaders, junior officers, mid-level officers, senior officers, have worked together, understand the problem, can work together and be very effective.

Well, we're maxed out.  We can only sent 19 BCTs per year to the national training center.  So you're not going to -- money is not going to help that.  It will take some time.

Meanwhile, the Army (sic) and the Air Force, their demand is extremely high, especially in the Central Command area of responsibility and the Pacific Command area of responsibility.  Those two demand signals remain very high.  So the aerospace and naval forces are out and about, and they're not spending enough time at home station to get all of the training done before deploying.

So even if -- even if -- Congress gets rid of sequestration, and gives us the full president's budget level, it's going to take until 2020 for the Army, Marines and Navy to get back to full-spectrum combat readiness, and it's going to take the Air Force until 2023.

Now, when you hear that, you say, holy crap.  Wow.  This is bad.  What do we do?

But I'd like you to think back to Vietnam, another very long war, which was really -- had a big impact on our forces.  And I would argue, after the ground forces came out of Vietnam in 1970 and after our aerospace and Navy forces essentially stopped combat operations in 1972, it probably took until 1985, 1986, 1987, for us to regain full-spectrum combat readiness.

Now, I grant that at that point, we were shifting from a draft service to an all-volunteer service, which made the transition a little longer.  But I would say that we need to just stick at it.  Readiness is something you just keep at it.

Now, the second challenge is because personnel and operations and maintenance costs increase faster than rate of inflation.  The department needs to see one percent to thee percent real growth per year to maintain balance between personnel, readiness and modernization.

But we have been at flat budget levels for three years now.  FY '13, FY '14 and FY '15 we've essentially had the same amount, $496 billion a year.

So to free up resources, we've tried to become more efficient in disciplined use of our defense resources.  And we think we've been very good at doing that.

The department has gone through four rounds of efficiency initiatives, which sought to shift defense spending what we call tail to tooth, combat power.

But these savings often come over time.  And they really do not keep up with the increased spending in both operations and maintenance (O&M) and personnel costs.   So we're constantly struggling to keep up with that. 

Moreover, Congress has denied us several of our requests to be more efficient or to do -- to shift money into higher priority programs. 

They denied the Air Force their ability to completely divest themselves of the A-10.  They denied the Navy's ability to put 11 cruisers in deferred modernization, so that we would be able to keep 11 cruisers in the fleet into the 2040s.  They denied the Army's aviation restructure initiative. 

And, even though we've reduced our force, and we continue to reduce our force, Congress continues to reject our repeated requests for a Base Realignment and Closure, or BRAC, round.

Now, we project, conservatively, that that would save us about $2 billion a year recurring.  Yes, it's gonna cost money up front.  But $2 billion recurring is $10 billion across the five-year defense plan.  That's a lot of modernization, I will tell you.  In this environment, it is real money.

Maintaining outdated and duplicative systems and unwanted infrastructure drains scarce resources that should go elsewhere into the program.  It is wasteful.  It's strategically unsound.  And it ultimately endangers the readiness of our men and women in uniform.

The third challenge is that we've become very clear is we believe and we have concluded, without question, that the tremendous margin of technological superiority that the United States has typically enjoyed since end of World War II is eroding, and it is eroding at what we consider to be an accelerated pace. 

We think this is a major challenge, facing not only our department, but America as a whole, because, ultimately, America's leadership in the world depends on the military's ability to project joint power across transoceanic distances. 

And if technological overmatch starts to -- to put into question our ability to do that, then it could affect not only our allies, by undermining the assurance we give our allies that we'll be there when needed, and it may undermine deterrence.

We're seeing levels of new weapons developments that we haven't seen since the mid-'80s, near the peak of the Soviet Cold War defense spending.  Russia is modernizing its forces right now, and they were once in a very steep decline.

In Eastern Europe, it's combining conventional military pressure with asymmetric economic and other intimidation means, a Russian model of proxy war. 

From 2011 to 2016, we estimate that China's defense budget increased by 500 percent.  Their military is rapidly fielding new weapons and systems.  It is astonishing to see the number of programs that they are -- they are developing at a single point.  It's really eye-watering.

Iran has built up an array of asymmetric capabilities, including mines and missile-fire small boats and ballistic missiles, advanced anti-ship missiles with advanced seekers.

North Korea's conventional military power is imposing because of its size, but that worries us less than its growing arsenal of nuclear weapons and road-mobile ballistic missiles that put our allies and forces in the region at risk, as well as, potentially, the United States.

So, these -- all of these things are starting to erode our ability to project power across transoceanic distances.  And as I said, that is a problem that we do not want to continue -- to see continue.

So 2016, if you look at where we start to put the money, you'll see that we're starting to try to reverse the years of underinvestment in new weapons and capabilities, and we're putting them right into the areas in the 2014 QDR.  If you read the QDR, you'll see exactly where our money is going.

We're making much-needed investments in our nuclear enterprise.  As I said, I got to Minot tomorrow to talk with the nuclear warriors there, to visit our nuclear missile force and our bomber force.  They're a critical part, both, of our triad, and I want to see if the investments we're making are having the difference in their mission and their lives.

Because of the proliferation of guided munitions and other advanced technologies that threaten our ability to project power, we're spending more on what we refer to as counter A2/AD, counter Anti-Access/Area Denial weapons.

We put more money into missile defense: new sensors, communications and advanced munitions.

Our space constellation is under more threat now than it has been at any time.  We rely on our space constellation in ways that are hard to explain to the average American, and the asymmetric advantage that it has long provided us.  Our constellation is now under threat, so we've increased money for both space resiliency and space control capabilities.

And I don't need to tell you, we've put money into more cyber capabilities and to our network and systems defense, and into our other capabilities, so we're increasing spending overall in cyber.

Trying to tackle this erosion of technical superiority was exactly what Secretary Hagel had in mind when he announced the Defense Innovation Initiative in November.  It's a department-wide effort to identify a third offset strategy, and I'll explain that in just a second, or perhaps more accurately, offset strategies, in order to sustain and advance our military technical edge into the 21st century.

Now, we had two offset strategies prior.  The United States has had two offset strategies.  The Cold War strategies really focused on the central front and the confrontation we had with the Soviet Union after World War II.  In the 1950s and 1960s, the offset strategy was based on our superiority in tactical and strategic nuclear weapons.

By the 1970s, when the Soviets had achieved parity in both of these areas, we went after a second offset strategy, which looked at guided munitions, stealth, and surveillance, which allowed us to project the same destructive effects with conventional weapons that heretofore we could only use tactical nuclear weapons.

We will also seek to identify new concepts of operations, just like we did in the Cold War, with air-land battle and the maritime strategy. 

Now, doing this is going to be really difficult, again, for three big reasons.  First, we no longer face a single implacable foe like we did in the Soviet Union -- with the Soviet Union.  It was a pretty stable competition and it was a one -- I mean a two-sided affair.  We had intelligence, they had intelligence.  We were trying to see what was going on.  We had a pretty good measure of our potential adversary. 

And it was a relatively easy competition.  Not easy in the sense that it was any less dangerous or any less difficult, but easy in the sense that we had only one adversary we really had to concentrate on.

Now, we have to consider advanced states like Russia and China.  We have to consider regional states like Iran and North Korea.  We have to consider non-state actors with advanced capabilities.  This makes it far more difficult, and that's why I say it's probably more accurate to say we will have a third offset strategies, because we may have to have different ones for each of the three.

Second, we find ourselves in a very different competitive environment.

In the 1950s and 1960s, we were spending a lot of money on missiles, on nuclear weapons, the early computer age.  In the ''60s and '70s, we started putting money into space.  It was all generally government driven. 

But today, commercial adaptation and commercial innovation is really the thing that is causing all of us to scratch our heads and say "where are we headed?"

Robotics, autonomous operating guidance and control systems, new ways of visualization, biotechnology, miniaturization, advanced computing, big data, additive manufacturing like 3D printing, all of those advances are being pushed primarily in the commercial sector.

So, the department must devise a means of working closely with the commercial sector and to make sure that we are taking care and we're exploiting all of the advances that they are doing.

And that's essentially what -- a big part of Frank Kendall, our undersecretary of defense for acquisition, technology, and logistics, is doing in his Better Buying Power 3.0.

Third, technology diffusion is likely to impact the durability of the advantage.  Our first offset strategy, which we started in the 1940s, lasted until 1975.  Our second offset strategy extended from about 1975 to now.  We are talking decades. 

Now, with the pace of change and with commercial technology changing so often, the third offset strategies will have a far more challenging temporal component in the competition.

So therefore, we think in terms now of the first FYDP, five year defense plan.  Five years out, what can we do with the stuff that we have differently, to have a new advantage, or what capabilities can we pull in very, very quickly?

Then, we take a look at the second and third FYDPs, the next 10 years, and we are now trying to develop those systems, like railguns and high energy lasers that hopefully we'll be able to field in that decade.

And finally, we look at the fourth FYDP and beyond, and what are the science and technology investments we need to make today to make that happen?

So, you'll see in the FY '16 budget some really potentially game-changing technologies that we think can more quickly get to the force.  And you'll see more long-range research efforts.  For example, we're investing more in unmanned underwater vehicles, high speed strike weapons, railguns, and high energy lasers. 

Frank has announced a new aerospace innovation initiative which seeks to develop a wide range of advanced aeronautical capabilities to maintain air dominance throughout the next couple decades.

But I want to make sure that everybody understands, I hear this all the time, "this is just another technology-driven thing."  No, it's not.  It really is about what can we do in terms of operational concepts and what can we do differently to provide us with an advantage.  I think this is very much like the '20s and '30s.  At that point, there were all sorts of different technological advances in mechanization, radio, sensors like radar and sonar, airplanes.  We were building literally production batches of airplanes of 10 or 15 and they would be obsolete before the next production batch was going.

It wasn't so much the technology.  It was the competitors who could say "let me pull all of these things together to make an operational concept like blitzkrieg or carrier-based operations or anti-submarine warfare," they were the ones who were able to really have an advantage.

So a big part of the third offset strategies is to find new, innovative ways to employ promising technologies.

So, I'll give you an example.  This has been talked about on the blogs.  My good friend Bryan McGrath wrote a very good blog of using the Block IV Tomahawk in an anti-ship role.  It's a missile that's proven.  It is an awesome missile.  It has enormous capabilities.  But just a few weeks ago, the USS Kidd, one of our guided missile destroyers, launched a Tomahawk missile that changed course mid-flight and struck a moving ship after being queued by an aircraft. 

Now, this is potentially game-changing capability for not a lot of cost.  It's a 1,000 mile anti-ship cruise missile.  It can be used from practically our entire surface and submarine fleet.

What happens if we take another step and just make an advanced seeker on the Tomahawk rather than building a new missile?  We believe if we make decisions like that, that we will be able to outturn potential adversaries and maintain our technological superiority.

[Vice Adm.] Tom Rowden talks about having distributed lethality in the fleet, and this is exactly the way we can go about doing it.  So, that's just one example of the way we're using existing weapons in new ways, and it's only one.  Some of which, we're going to tell you about, and some of which, we won't.

Part of the offset strategy, everyone constantly says, "why didn't you tell us your strategy?"  Well, if you're a strategist, you say, "you dummy, you never tell your potential adversary what your strategy is."  You want to make sure that they guess all the time.

So, some of the time, some of the things we're doing in our budget will not be readily apparent, but let me tell you, the things that we are doing are going to greatly complicate any adversary's attempts to fight against U.S. forces.

Now, I know a lot of people are asking about UCLASS, the Unmanned Carrier-Launched Aerial Surveillance and Strike System.  We decided this year we were almost ready to launch the RFP, but we decided we need to take a pause because we want to consider the UCLASS as part of the joint family of unmanned surveillance strike systems and make sure that we're going after the right capabilities.

So in addition to looking at new capabilities -- capabilities we already have and using them differently, we're going to make sure in this environment that when we do go after a new platform, it's the platform that we need from a joint perspective.

So all of this stuff is done with one thing in mind, to provide our troops with a decisive competitive advantage.  Ultimately, it's not winning on the future battlefield if it's not about winning on the future battlefield, I, as deputy secretary of defense, don't want to waste a moment's time on it.

Our job is very simple.  We have a mission.  And that mission is to organize, train, and equip a joint force that is built and ready for war and operated forward to preserve the peace.  Everything else that we do, if it's not focused on that mission, it's a damn waste of time.

So every day, when I get up, I ask myself how can we make the future lives of our servicemen and women better by providing them the tools that they're going to need to prevail in war.

So let me conclude by saying and echoing what the service chief said just a couple weeks ago before Congress.  Returning to sequestration level would be a disaster in my view.  It just doesn't make sense.  Everyone you talk to says it doesn't make sense.  But then they say "but we can't figure out how to detrigger it."

Well, that's what you're elected for, all right?

Go figure it out.  Put some pizzas.

Hey, we do this in the Pentagon all the time.  Lock yourself in a room, feed you pizzas for six weeks.  I guarantee you, at some point, you'll say uncle and come out with an answer.  (Laughter.)

But sequestration is a blunder that allows our fiscal problems, not our security needs to determine our strategy.  If you want a budget-driven strategy, if you want a budget-driven strategy, and I hear this all the time, you've got a budget-driven strategy, I would say "no, we don't."  We have a strategy-driven, resource-informed budget.  But if you want a budget-driven strategy, go to sequestration.

The budget we are submitting supports the national defense strategy.  We think the national defense strategy is the right one for our nation.  We would not submit a budget that would nullify it.  The senior leadership of the department is in total agreement with President Obama that sequestration must be overturned. 

In the coming months, we will provide updated details on whatever Congress needs, what we need to do.  But we want to work closely with them to get rid of this very destructive and very non-strategic way forward.

As I said, I've talked a lot about technology today.  But the thing that is the secret weapon of the United States military are its men and women.  Its men and women in uniform, its men and women in the civilian workforce, and the contractors that support us, and the millions of Americans, well maybe not millions anymore, but a whole bunch of Americans are our defense industrial base.

Together, the innovation that lies within these people's minds and their abilities is just eye-watering.  That's why political appointees go back into the Pentagon.  Because no matter where they work, I guarantee you, when they come back into the Pentagon, they are surrounded by people that are just so remarkable that it makes their lives better.

I'd like to say to everyone, I did this at the Navy Birthday Ball, this is a warfighting force.  That's why we exist.  And in the spirit of Navy Lt. Cmdr. Ernest Evans who was the commanding officer of the USS destroyer Johnson, told his crew on his change of command ceremony, on the fan-tail of his ship, "this is a fighting ship.  And I intend to take her in harm's way.  And anyone who doesn't want to go along had better get off right now."

Now, those weren't hollow words for him, I guarantee you.  At the Battle of Samar, he turned his little ship to do battle with Japanese heavy cruisers and battleships.  And although he lost his ship and his life, and many of the crew that willingly followed him, he helped save four escort carriers in his task force for further action.  He earned a posthumous Medal of Honor.

I guarantee you, we have a lot of Ernest Evans in this force.  And that is why any adversary of the United States should always think twice about crossing swords with us.

I want to thank everybody in here for what you do for your nation.  There are people who are retirees, there are people who are on active duty.  There are contractors.  There's government civilians, there's our defense industrial base.  Together, we can get through this time of declining budgets and increased demands, if we work together and keep our mind on the men and women who serve us every day.

Thank you.