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Reagan National Defense Forum Keynote

Fred [Ryan], thank you very much for a generous introduction. I am not only happy to be out of Washington – but to be in California. And I’m particularly happy about being with a group of people who really understand this business as well as any group of people in America today – from our industrial base to our current leadership in the Defense Department, to our members of Congress, those who have had the responsibility of leading the Defense Department. Two of those distinguished leaders are here.

I’m well aware of your panels today. From some of what I heard, they were engaging, and I know everyone always appreciates that. So this opportunity for me to be here to share some thoughts about the enterprise that I lead along with many of the other leaders from the Department of Defense who are here with you today and you have heard from. We all appreciate this forum.

And I want to also again thank Fred Ryan for his many years of leadership and how he has shepherded the Reagan legacy and assured the continuation of an important library that represents an important leader, that represents an important time and expanding on that. He’s going to a new job, as you all know. I’m not sure it’s legitimate – but it’s a new opportunity, and he’ll do a tremendous job there.

I also want to note my friends Leon Panetta and John McCain, who will be honored tonight, and will have more to talk about regarding what they have done for this country, and why they are being recognized appropriately so tonight. And I’m particularly pleased to be part of that event this evening.

I also want to note the soon departure, escape, voluntarily of Buck McKeon from Congress, and his responsibilities that he has carried out so well as leader of the House Armed Services Committee. And to you, Buck, and to your family: much continued success and happiness. Thank you for your friendship and your partnership in the two years that I have served in this job. They have meant a lot to me. And I know you will be missed by your colleagues. You will be missed by the men and women of the Defense Department that you have spoken up for over a long career.

And to our senior leadership who are here today and have participated in panels, thank you. You have had an opportunity to hear, I think, from most of them. I particularly thank you for the job you’re doing at a difficult time. It’s never easy; I know that. But this is not a one-person job, or two-, or three-person job. This is a job that requires everybody to be part of it. And your leadership, all of you, is as critical as any part of our future and the security of this country. So thank you for what you do. And I appreciate it also – just being back here in this library.

The Department of Defense is undergoing a defining time of transition. After 13 years of war fought by an all-volunteer force, we’re facing a reshaping of our enterprise by a fiscal environment plagued by constant budget uncertainty and a large, continuing decline in resources, and by a historic realignment of interests and influences around the world.

Enduring and emerging powers are challenging the world order that American leadership helped build after World War II. In the Middle East, in North Africa, the order within and between states is being recast in ways that we’ve not seen for almost a century, often leaving dangerous ungoverned spaces in their wake. In West Africa, a virus 1,000 smaller than a human hair has in less than a year infected over 13,000 people, killed 5,000 people, and shook governments and health care systems alike. In Europe, Russia’s invasion of Ukraine represents one of the most blatant acts of state-on-state aggression on that continent since the end of World War II. And in the Asia-Pacific competition between rising powers threatens to undermine the stability that has allowed the region to prosper and thrive.

We are at the beginning, not at the end, of this realignment. And as Henry Kissinger recently put it in his new book, World Order, “only a subtle balance of restraint, force, and legitimacy will help forge a new order” – an order that will be years, and probably decades, in the making. This means that the missions and focus of the Defense Department will continue to be marked and defined by transition.

As these dynamics unfold, the U.S. military is engaging in today’s crises and security challenges around the world – degrading ISIL, helping stop the spread of Ebola, and reinforcing our NATO allies. Few would have predicted these missions a year ago, and as you all know well, uncertainty is the only certainly in an interconnected world of seven billion people.

DoD’s responsibilities are to be prepared to address a broad range of contingencies and unpredictable crises well into the future. That means we must prepare our defense enterprise – prepare our defense enterprise for the challenges of that uncertain future. We face the rise of new technologies, national powers, and non-state actors; sophisticated, deadly and often asymmetric emerging threats, ranging from cyberattacks to transnational criminal networks; as well as persistent, volatile threats we have faced for years.

Our long-term security will depend on whether we can address today’s crises while also planning and preparing for tomorrow’s threats. This requires making disciplined choices and meeting all our nation’s challenges with long-term vision.

That is what the Defense Department is doing today. We are not waiting for change to come. We’re not waiting for that change to come to us. We’re taking the initiative, getting ahead of that change – that change we know is coming – and making the long-term investments we need for the future.

I’d like to take few minutes to discuss two of the most important investments we’re making – and the leadership and the partnership that will be required to sustain them:

First, investing in our nation’s unrivaled capacity for innovation. Many industrial leaders are here today in this audience, and know exactly what is at stake in this challenge. This is important so that in the face of mounting challenges, our military’s capability, technological edge, strategy, and readiness will continue to stay ahead of any potential adversary.

And second, reforming our defense enterprise: to ensure that our military’s foundation is reliable, agile, accountable, and worthy – worthy of the men and women who serve in it. I know in some of the panels today that Secretary James, General Dunford, Admiral Greenert, and others talked about some of these issues, in particular readiness.

Today our military has nearly 400,000 personnel stationed or forward-deployed in nearly 100 countries around the world, from Afghanistan to the Philippines to Guatemala. This continued forward presence has helped anchor America’s global leadership for decades, with its unmatched technological and operation edge.

That superiority has never been guaranteed, and today it is being increasingly challenged. Technologies and weapons that were once the exclusive province of advanced nations have become available to a broad range of militaries and non-state actors, from dangerously provocative North Korea to terrorist organizations like Al Qaeda and Hezbollah – all clear threats to the United States and its allies.

And while we spent over a decade focused on grinding stability operations, countries like Russia and China have been heavily investing in military modernization programs to blunt our military’s technological edge, fielding advanced aircraft, submarines, and both longer range and more accurate missiles. They’re also developing new anti-ship and air-to-air missiles, counter-space, cyber, electronic warfare, undersea, and air attack capabilities.

America must continue to ensure its ability to project power rapidly across oceans and continents by surging aircraft, ships troops and supplies. If this capability is eroded or lost, we will see a world far more dangerous and unstable, far more threatening to America and our citizens here at home than we have seen since World War II.

Without our superiority, the strength and credibility of our alliances will suffer. Our commitment to enforcing long-established international law, rules of the road, and principles could be doubted by both our friends and our adversaries. Questions about our ability to win future wars could undermine our ability to deter them. And our Armed Forces could one day go into battle confronting a range of advanced technologies that limit our freedom of maneuver. This would allow a potential conflict to exact crippling costs and put at risk too many American lives.

America does not believe in sending our troops into a fair fight. Bob Gates, Leon Panetta, all of our predecessors believe that – and were responsible for ensuring that didn’t happen.

But that is a credo we will not be able to honor if we do not take the initiative and address these mounting challenges now. DoD must continue to modernize our nation’s capabilities and sustain its operational and technological edge. And we must do so by making new, long-term investments in innovation.

We’ve accomplished this before. In the 1950s, President Eisenhower successfully offset the Soviet Union’s conventional superiority through his New Look build-up of America’s nuclear deterrent. In the 1970s, Secretary of Defense Harold Brown, working closely with Undersecretary – and future Defense Secretary – Bill Perry, shepherded their own offset strategy, establishing the Long-Range Research and Development Planning Program that helped develop and field revolutionary new systems, such as extended-range precision-guided munitions, stealth aircraft, and new intelligence, surveillance, and reconnaissance platforms.

All these systems drew upon technological developments, such as the micro-processing revolution, that had unfolded over the course of a few decades. The critical innovation was to apply and combine these new systems and technologies with new strategic operational concepts, in ways that enable the American military to avoid matching an adversary “tank-for-tank or soldier-for-soldier.” Because subsequent leaders, including President Reagan, sustained these investments on a bipartisan basis – bipartisan basis, bipartisan basis – these investments helped America build and hold our military edge for decades.

Today I’m announcing a new Defense Innovation Initiative – an initiative that we expect to develop into a game-changing third ‘offset’ strategy.

This new initiative is an ambitious department-wide effort to identify and invest in innovative ways to sustain and advance America’s military dominance for the 21st century. It will put new resources behind innovation, but also account for today’s fiscal realities – by focusing on investments that will sharpen our military edge even as we contend with fewer resources. Continued fiscal pressure will likely limit our military’s ability to respond to long-term challenges by increasing the size of our force or simply outspending potential adversaries on current systems, so to overcome challenges to our military superiority, we must change the way we innovate, operate, and do business.

The new Innovation Initiative will draw on the lessons of previous offset strategies and ensure that America’s power-projection capabilities continue to sustain our competitive advantage over the coming decades. To achieve this, we are pursuing several lines of effort.

Our technology effort will establish a new Long-Range Research and Development Planning Program that will help identify, develop, and field breakthroughs in the most cutting-edge technologies and systems – especially from the fields of robotics, autonomous systems, miniaturization, big data, and advanced manufacturing, including 3D printing. This program will look toward the next decade and beyond.

In the near-term, it will invite some of the brightest minds from inside and outside government to start with a clean sheet of paper, and assess what technologies and systems DoD ought to develop over the next three to five years and beyond.

The Defense Innovation Initiative will explore and develop new operational concepts, including new approaches to warfighting, and how we balance DoD’s investments between platforms and payloads. It will focus on new approaches on war-gaming and professional military education – I know General Dunford talked about training and readiness today, work that has already begun in the area, that our military leaders started, professional military education. And it will focus on our most important asset – our people – by pursuing both time-honored leadership development practices, as well as emerging opportunities to re-imagine how we develop managers and leaders.

I’ve asked secretary – Deputy Secretary of Defense Bob Work to guide the development of this initiative, and he will lead a new Advanced Capability and Deterrent Panel to drive it forward. This panel will integrate DoD’s senior leadership across the entire enterprise: its policies and intelligence communities; the armed services; the Joint Chiefs of Staff; and research, development, and acquisition authorities.

I expect the panel to propose important changes to the way DoD diagnoses and plans for challenges to our military’s competitive edge, and I also expected to break with many of our usual ways of doing business, encouraging fresh thinking that is focused on threats and challenges to our military superiority, not simply adapting what is on the books today.

The panel must also face a new challenge ahead, and that is one of many, but the fiscal [sic] challenge: the fact that many, if not most, of the technologies that we seek to take advantage of today are no longer also in the domain of DoD development pipelines or traditional defense contractors. We all know that DoD no longer has exclusive access to the most cutting-edge technology or the ability to spur or control the development of new technologies the way we once did. So we will actively seek proposals from the private sector, including those firms, and from those firms and academic institutions outside DoD’s traditional orbit.

The Defense Innovation Initiative will shape our programs, plans, and budgets. As the initiative matures over time, I expect its impact on DoD’s budget to scale up in tandem.

Successfully investing in these long-term priorities requires the foundation of a sound, resilient, and accountable defense enterprise…because ensuring the health and vitality of DoD as an institution is critical to our ability to prepare for the future.

As the world in which we operate changes, we must change, too. We must revitalize, renew, and, when necessary, reform. That applies to everything we do, from special operations and airstrikes to health care for troops and their families.

As you all know, the Department of Defense is the world’s largest institution. Some of you here today who once had the responsibility for leading this institution know well how large and complex it is. This institution employs roughly one percent of America’s population. DoD’s property includes more than 560,000 buildings and structures at more than 520 facilities, stretching over 27 million acres of land.

Any institution of this magnitude and complexity – and breadth of mission and responsibilities – is slow to change. But the reality is that change will continue to be forces upon us – on terms not of our choosing – unless we take the initiative ourselves now.

So DoD must continue to engage in wide-ranging and often uphill reform. We will take the controls [sic] and work from there. The uncontrollables we’ll factor in, and we’ll deal with. Management is a key part of all of this. How will it be managed? Who will manage it? We’re pursuing reform not just for the sake of reform, but wise reform that makes the enterprise stronger and better prepared for the future. Everything else – everything else we do depends on it.

Yesterday I announced actions DoD is taking to revamp our nuclear enterprise, including new resources and shakeups in organizations, policy, and culture. It will take years of committed action to fix problems that have accumulated over many, many years. But we will fix them – and ensure that our nation continues to have a safe, secure, ready, and effective nuclear deterrent. As I told airmen at Minot Air Force Base yesterday afternoon, I will personally hold DoD’s leaders accountable to ensure that promises translate into action, and that action translates into real and sustainable improvements.

To further shift the department’s energy, focus, and resources toward supporting our frontline operations, I’ve ordered full reviews of DoD’s business and management systems. The first reviews are underway now, starting with the Office of the Secretary of Defense.

DoD must embrace better business practices, better business practices that are core to any modern enterprise, private or public. This means upgrading our business and information technology systems and processes, striking the right balance between civil service and contractor support, and avoiding duplication of support functions in OSD and the services.

After years of postponement and delay, we are making progress in moving DoD toward greater financial accountability. Much because my predecessors focused on this issue, the Marine Corps became the first service to earn a clean audit earlier this year, and DoD as a whole remains on track to be fully, completely, audit-ready by no later than 2017. That goal could not sound more dull, I know. But as you all know – especially those from the private sector who run big companies – that goal is essential for DoD’s effectiveness, efficiency, and accountability into the future.

To streamline the way the Pentagon does business, DoD is also continuing the large acquisition improvement and reform efforts led by Frank Kendall, who is sitting here in the front row today. As you all know, Frank Kendall is our Undersecretary of Defense for Acquisition, Technology, and Logistics. The aim of his effort is to – in partnership with the Congress – overhaul the legal framework for DoD acquisitions by reducing unnecessary paperwork so that we can focus on key, strategic priorities.

In addition to all of these efforts, we’re also pursuing concrete results and improvements through many other reform initiatives that are essential to the long-term health and readiness of the force. These include improvements to our military health care system, our military justice system, and accounting for our nation’s missing personnel. They also encompass a renewed focus on military ethics and professionalism, systems integration with the Veterans Administration, and eliminating sexual assault in the military.

We’re all committed to ensuring that the Defense Department sustains its focus on all of these efforts. At the same time, we are dealing with crises all over the world, and we’re reforming our processes, because they will ultimately shape – they will ultimately shape our ability to develop any new capabilities, strengthen our partnerships, and honor our enduring commitments to our people and their families. It is their service that makes possible everything we do. We must never lose sight of that.

The Department of Defense has been making the hard choices and mustering the flexibility required by new realities. But to succeed, we need the support and partnership of Congress, especially at a time when demands on our military are surging and our resources are shrinking, and our abilities to manage our institution are being more and more limited.

Since 2011, DoD has been forced to operate on continuing resolutions every year, impairing our ability to plan, invest, and reform. As I reminded Congress earlier this week before Chairman McKeon’s committee, you cannot run any institution on continuing resolutions. It will not work – especially the national security of this country.

We need actual budgets – budgets that give us certainly and predictability – and the flexibility to make the management internal decisions about what’s required to deal with current and future threats for this country. We have also been prevented from undertaking critical cost-savings measures, especially reducing excess basing and facilities.

Despite numerous efforts and almost 10 years since the last round, DoD has been unable to secure another round of base realignment and closure. Today, DoD has 24 percent excess capacity in our basing and facilities – excess capacity that is costing us billions of dollars every year, money that could otherwise be invested in maintaining our military’s edge. We need Congress to help end this excess spending.

We also need Congress to support proposed reform to military pay and compensation. No one who wears our nation’s uniform is overpaid – no one is overpaid for their service. But since 2001, DoD’s pay and benefits for service members has outstripped private sector compensation growth by about 40 percent. For military personnel, DoD has proposed continued but more moderate pay increases; continued but more moderate growth of tax-free housing allowances; and modest increases to insurance co-pays.

But again, we need Congress to act. And the longer we defer the tough choices, the tougher they will be to make down the road and the more brutal the outcome.

Without the ability to make programmatic adjustments like retiring aging aircraft, and without base realignment and closure, the department will face a bill of about $30 billion over Fiscal Years 2016 to 2020. Denying DoD the flexibility to make modest adjustments to military compensation is expected to cost tens of billions of dollars more. Factor in new bills arising from urgent investments – including our new effort to renew our nuclear enterprise, space infrastructure, and technological modernization – and the hole in our budget could grow to more than $70 billion over the 2016-2020 Future Years Defense Program. That is the equivalent of what our Navy – what our Navy will spend to buy all its battle force ships over the next five years. Or more than what the Air Force – more than what our Air Force will spend to buy all of its aircraft over the next five years.

Let me underscore that all of this comes before we address the possibility of a return to sequestration in Fiscal Year 2016. Sequestration is still the law of the land, and it will return unless the law is changed. The continuation of sequestration could impose nearly $1 trillion – $1 trillion in cuts to our defense budget over 10 years. As you all know, we have already begun taking those deep cuts over the last few years. That would devastate our military readiness and threaten our ability to execute our nation’s defense strategy.

Congress has an opportunity this year to help the Defense Department, and all the leaders of DoD and I will work closely with Congress on this issue as we address the realities of what this fiscal pressure is doing to this institution and to our future security.

Ladies and gentlemen, last week we celebrated the 25th anniversary of the fall of the Berlin Wall. Today, we remember a President whose vision and resolve helped inspire ordinary people to seize an extraordinary moment – and tear down that wall.

America and its allies prevailed over determined Soviet adversary by coming together as a nation, for the good of the nation. Over decades and across party lines, we worked together to make long-term, strategic investments, including in innovation and reform of our nation’s military…investments that ultimately helped us face down the Soviet military and force the Soviet regime to fold its hand.

We made tough choices then. And we must make tough choices now. We must navigate through this period of transition and realignment, and we must face up to the realities and challenges that our defense enterprise confronts today…so we will be ready for the challenges of the future. If there was one legacy of Ronald Reagan, it is that legacy.

If we make the right investments in our partnerships around the world, in innovation, and in our defense enterprise, we will continue to keep our nation’s military and our nation’s global leadership on a strong and sustainable path for the 21st century.

As President Reagan once said, our nation is at “a time for choosing” – for Congress, for political parties, for our country…ultimately, the American people – and each of us. We must choose wisely.