Transcripts For CSPAN3 Key Capitol Hill Hearings 20150316

Coordination, information sharing, threat information sharing, and information sharing about best practices and best results. Thank you. Yeah thank you. And very quickly we are very open to trying to play a stronger role in trying to assist these conversations across different modes of transportation. I would say that just the first thing weve got to do in each of these modes is get the modes, you know within the modes having the discussion because there will be things unique to automobiles or to rail cars or to aviation that are distinct. But to your point i do think there are crosscutting issues too. And our department intends to play an active role on the crosscutting side of the conversation as well. Id like to thank you for a very interesting and informative session. [ applause ] lets all give the secretary [ applause ] thank you very much. Tonight on the communicators, fcc commissioner minion clyburn on their recent Net Neutrality ruling, municipal broadband and the subsidized phone and broadband program, lifeline. What i am proposing that we do is overhaul the lifeline program, make it concurrent and in sync with the information age, challenge those providers to give more to their consumers. The prices and opportunities have gone down have been more explosive for the rest of us. It should be for our lifeline consumers, get those providers out of the certification business. That has been the number one problem that weve been seeing with not so positive headlines. It is a vulnerability in the system that we need to plug. Tonight at 8 00 eastern, on the communicators, on cspan 2. And a live look at the capitol now. The house today began the week by considering six bills including one to fund trauma care centers. That vote under way right now on cspan 1. On the agenda later this week is a senatepassed resolution disapproving of regulations on Union Election rules. As always you can see the house live on cspan. And the senate you can watch live on cspan 2. The senate today resuming debate on a Human Trafficking bill. The measure has been held up because of a provision that blocks federal funds for abortions. A procedural vote on the bill is expected tomorrow. The outcome for that could have implications on the nomination of Loretta Lynch to be the next attorney general. The senate was expected to begin debate on her nomination this ajority leader Mitch Mcconnell said over the weekend that consideration of miss lynch would only come up after the Senate Moves Forward with the Human Trafficking bill. White house interpret secretary josh earnest was about the delay at todays press briefing with reporters. Heres a portion of the briefing. Good afternoon, everybody. Welcome to the white house on this glorious monday. I dont have anything at the top. So we can go straight to your questions. Darlene, would you like to get us started . Sure. Thank you. I have a couple questions on the report today on the Affordable Care act. 60 million americans signed up since the law good place to start. Well, i thought you were going to start with that. I considered it. But given the late beginning here. Given all the positive numbers in that report, why do you think it is that debate over the Affordable Care act is not settled . I think principally its because weve seen tens of millions if not hundreds of millions of dollars being spent by the president s political opponents to distort the facts about the true impact of the Affordable Care act. This is money plain and simple. And what we have said is that the more that the American People understand the benefits that are associated with this law the more people will approve of it. At least the more the approval of this will show up in polls. But frankly were not concerned about the numbers in the polls. Were concerned about the numbers that demonstrate the impact of this law. And whether its 16 Million People being uninsured people getting access to Health Care Coverage since the law went into effect, thats a pretty good number. The decline in the overall insurance uninsured rate dropping 35 . Thats a pretty good number. The historically low growth in Health Care Costs since the Affordable Care act went into effect. Thats a good number too. So thats what were monitoring. And thats why the president has placed such a premiums among members of his team on the implementation of this law. And were only building momentum, and were certainly pleased by the progress that weve seen so far. But there continues to be a lot of work that needs to get done. And i think probably the best example of that that i can highlight for you is the continued resistance weve seen in some quarters to the expansion of medicaid. There continue to be republicans across the country who are blocking the expansion of medicaid in a way that literally prevents individuals in their states from getting badly needed Health Care Coverage that would be 100 paid for by the federal government. And for the life of me i cant understand why anyone would reach that conclusion but some republicans in this case are quite literally putting their political ambition against the lives of some people in their state. And thats a shame and thats unfortunate. But its consistent with the kind of political opposition that weve seen from republicans to what in many cases is a pretty common sense implementation of the law. The report showed that those states that went ahead and expanded medicaid are doing better in terms of covering uninsured people than those states that havent. Given what you just said about the Medicaid Expansion, do you think the report will somehow encourage some of these other states to go ahead and get on board . I certainly hope so. And thats certainly what the data would show. That there is a positive impact on the health of citizens in these states when medicaid is expanded. There certainly is a positive impact on Health Care Providers in these states because medicare insures that their uncompensated care costs are reduced. These are individuals who dont have access to health care, arent able to pay their medical bills. Automatically those bills are assumed either by the government or by those of us who are paying insurance premiums. But because of medicare expansion you have a role for the federal government to step in and take care of some of those costs and make sure those individuals are Getting Health Care before their conditions get too bad. The other thing were seeing is the cost to states themselves are alleviated by this as well. So whether its health benefits, benefits for the economy or benefits for the bottom lines of these State Governments the impact of Medicaid Expansion is very positive. On another subject we havent heard the white house respond yet to senator mcconnell saying yesterday that Loretta Lynchs nomination may be delayed further. Well, its certainly a disappointment that after 128 days since being nominated to be the next attorney general that Loretta Lynch a professional independent career prosecutor has not yet gotten a vote in the United States senate. Its an unconscionable delay. Miz lynch has submit informed more than eight hours of testimony before the Senate Judiciary committee. She answered more than 600 written questions from senators. To say nothing of the countless other conversations that she has had in more private settings with individual members of the United States senate. She is somebody who has distinguished herself over the course of her career as a tough, fair, independent lawyer. Shes developed strong relations with Law Enforcement because of that reputation. She is somebody who has successfully prosecuted terrorists who targeted the Federal Reserve headquarters in new york as well as the new york city subway system. Shes somebody who has gone after public corruption and has brought charges against Public Officials in both parties. Shes somebody whos secured billions in settlements from some of the Worlds Largest banks, who are accused of fraud. And shes jailed some of new yorks most violent and notorious mobsters and gang members. This is someone with a demonstrated track record of Law Enforcement who is up for the top Law Enforcement job in the country. Theres not a single legitimate question that has been raised about her aptitude for this job. Instead all weve seen is a bunch of political obstruction from republicans that again does not does not speak well of republicans efforts to run the senate in an in effect fashion and certainly not in a way thats in the best interests of the country. Senator mcconnell laid out a timeline yesterday that suggests it could be mid april at the earliest before her nomination goes to the floor. Is that a timeline the white house would be willing to accept . And if not what is the alternative or how do you get her nomination voted on earlier . This is the responsibility of the United States senate, to vote on the president s nominees. And as i mentioned before theres not been a legitimate question thats been raised about her aptitude for the office. So the delay is unconscionable. Its unexplained. And the thing that i will that i think warrants mentioning here is youll recall as i pointed out senator ms. Lynch has been waiting 128 days to get a vote in the senate. The reason that time period has been so long is because the president nominated her back in november for this job. And at that time we saw senator mcconnell himself say that ms. Lynch, a, will receive fair consideration. I think hed be hard pressed to make the case he lived up to that promise. But b, he also said that her nomination should be considered in the course of im sorry, should be considered in the new congress through regular order. So essentially huh senator mcconnell in the position back in november telling the president that he should delay submitting her up to congress until republicans were in the majority. Now, ive gotten asked a number of times since november about whether or not the president trusts senator mcconnell, about whether or not senator mcconnell and other members of the republican leadership, whether their word is good with the president. Senator mcconnell back in november was saying her nomination should be considered in the new congress. But yesterday when senator mcconnell was asked on cnn about whether or not he was going to act quickly to confirm her and to explain the delay he said the nomination hasnt taken that long if you consider when it was actually taken up which was this year. He continued to say the democrat majority back in december had a chance to work on the nomination earlier but decided to delay it until this year. He failed to point out that delay was at his request. And now hes in a position of delaying it even of delaying her nomination even further. Despite the fact, and ill say it again, no legitimate question has been raised about her aptitude for this office. Despite the fact she submitted to more than eight hours of testimony and despite the fact shes answered more than 600 written questions. So there is no question that republicans are playing politics with the nomination of the nations top Law Enforcement official, and it should come to an end. All right . Julia. Thanks. The state department is saying after kerrys comments over the weekend that assad should be included in talks to work out negotiations with syria, that theyre still keeping the same policy policy saying he has to lead. What motivation does assad have to come to the table if he also would have to leave . And what pressure is being used to bring him into such talks . As the state department has said, and i had the opportunity to see some portion of secretary kerrys interview, he was referring to the fact that the assad regime will have to be at the negotiating table with elements of the modern opposition to try to broker an arrangement about the political transition in syria. As far as assads motivation goes, its difficult to understand his motivation. What would cause somebody to drop barrel bombs on innocent civilians . What would cause someone to so disrupt the very fabric of their country that he would allow isil to run roughshod over significant portions of the country that hes supposed to be governing and slaughtering some of the citizens that hes supposed to be serving . So i have a difficult time trying to speak to his motivation. What i can tell you is the United States is going to continue to work actively with the International Community to try to bring about some resolution to the political solution in syria. But what is i think understandably at the top of our priority list is dealing with the threat that is posed by extremists that are capitalizing on the chaos inside syria right now. There is no question that assad is responsible for that chaos. Its a reflection of his failed leadership that we see extremists who are attempting to establish syria as a safe haven to carry out acts of terror around the globe, certainly around that region. And thats why youve seen such a vibrant international response. And ultimately all of this rests at assads feet. And we are optimist thaik as we move forward were going to be able to succeed in working with the International Community to limit this threat, to degrade and ultimately destroy isil as an organization to take out other extremists that may be operating inside syria and you know hopefully that once weve been able to make some progress as it relates to the security situation we can also make progress on the political situation inside syria too. Okay. And on the cyclone that hit many South Pacific islands, we heard from the president on that. Whats his response . Is he going to offer any kind of aid . Let me start by saying that we offer our con donted to the people vanuatu tuvalu, the Solomon Islands and carabas as they cope with the devastating impact of cyclone pam. Our thoughts and prayers are with the victims and their loved ones. In the wake of this cyclone the United States government immediately issued disaster declarations from our u. S. Embassies in the region, and were working closely with our ngo partners in the region on the most effective ways to deliver our relief response. The u. S. A. I. D. Has sent an Assessment Team to vanuatu to coordinate our response. For details on that effort id refer to you u. S. A. I. D. And the department of defense that can provide lojsgistical support in these kind of situations. I want to circle back on the lynch nomination first. Mitch mcconnell said the reason hes holding it up is this Human Trafficking bell. I saw that too. Yeah. Eric was asked about it last week and didnt really weigh in from you guys. So what im wondering is whether you guys have a position on whether the bill should be passed as is. And specifically theres been a lot of controversy over an antiabortion provision in the bill, whether thats something you guys would veto were it to pass the senate. Well, right now it doesnt have the votes to pass the senate. Over the course of last month we spent a lot of time talking about the efforts of Congressional Republicans to pass funding for the department of homeland security. And i observed at the time it was difficult to think of a more common sense measure that should be able to get bipartisan support from the United States congress than funding for the department of homeland security. Well, sure enough a month later i think i found a more common sense that democrats and republicans should be able to get together to support, and that is an effort to concentrate federal resources to stop child sex trafficking. But youve got to hand it to republicans that theyve taken even a measure as common sense as that and turned it into a partisan controversy. That is not a reflection of a flaw in the bill. Its a reflection of inept leadership. That surely democrats and republicans should be in regular order be able to Work Together to advance legislation that would allow us to concentrate our efforts to focus on and crack down on individuals who seek to traffic children. But yet Mitch Mcconnell and republicans in congress have succeeded in turning this into a partisan controversy. And again, i also noted last month that Speaker Boehner and leader mcconnell got together the day after the election and they wrote an oped in the wall street journal. The headline of the oped was now we can get Congress Going. Well, hopefully leader mcconnell can get Congress Going on passing a piece of legislation that would stop child sex trafficking. How are they turning it into a partisan issue . Sn. Hold on. Justin, do you have anything else . Margo . How are they turning it into a partisan controversy . Right now youve got a whole bunch of democrats on the other side of the aisle saying theyre not going to support it because of a provision the republicans have inserted in this widely supported bill. If republicans with are going to be in a situation where they want, to to use their words, get Congress Going surely they should be able to find a way to build bipartisan support for a bill that is going to counteract child sex trafficking. Why isnt that just democrats and republicans having their usual partisan difference over abortion . Well, because you have a situation in which you have the republican majorities setting the tone for what bills are going to come to the floor and what bills are going to be voted on and what bills are going to be passed. So the fact that leader mcconnell cant build bipartisan support for a child sex trafficking bill i think is an indication that his leadership here in the majority is not off to a very strong start. You can find that entire briefing with the White House Press secretary josh earnest online at cspan. Org. Next a consumer issues conference that was hosted by the Consumer Federation of america. The event included keynote remarks from labor secretary tom perez. He talked about job creation and safety in the workplace as well as regulations to protect employees from discriminatory practices. This is 45 minutes. I have a feeling first of all, barb, thank you for your kind introduction. And barbs the real deal. And she has been a stalwart in so many areas including the retirement space. But i want to thank you because you know success in building an america that works for everyone is a joint venture. Youve got to have folks in government like our president who get it and have those values, and then youve got to have folks outside of government like all of you who get it and share our values. And that is how you define success. And then youve got to have people working at a state and local level who get it and he share our values and youve got to have serial activists who are doing the same. Ive had the privilege of working as an elected official in Montgomery County, maryland, which for those of you not from around here is oh, maybe seven or eight stops on the metro red line. Ive had the privilege of working at a state level as the state labor secretary in maryland. And now i have this job. Which is another way of saying the labor secretary gets to hold a job. But we can have another conversation about that. I say all of this because i have a profound appreciation for the role of everyone. If were going to build communities that work for everybody we need to have those serial activists at a local level. One of the proudest things for me when i was in local government is we enhanced and created an office of consumer protection. In Montgomery County. We enhanced our human rights ordinances so we can build protections in our county residence. At a state level we did similar things. We had the nations first living wage law. And things of that nature. Because im a Firm Believer in what i call redundancy in Law Enforcement. We need state laws, federal laws and local laws because laws are only as good as the political will of those whoen force them. And at any given time that will may not necessarily be there at certain government levels. So that redundancy in my mind is a good thing. And the constant is all of you. Thats why when barb invited me i was excited to be here because i want to start by saying thank you. You fight many uphill battles. The deck is the odds are often long. The days are hard. The setbacks feel like many. But you know what . A week ago, last weekend i was in selma. Commemorating the 50th anniversary of bloody sunday. And if theres anything i learned from going there, its that the people who gave their lives in selma, many whose names you noeknow, many whose names we dont, they were Extraordinary People. We have Extraordinary People like john lewis who caused what he called good trouble. Then we had people whose names emilia boynton. You may not have heard of her, but she was the woman in the wheelchair next to the president last weekend. And so many others who are martyrs in that movement. And what that movement was about was ordinary people doing extraordinary things. Ordinary people who had a bold vision of an inclusive america that works for everybody. An america in which we feel the full team. Everybody is treated with dignity. Everybody has an opportunity to punch their ticket to the middle class. Discrimination is a thing of the past. And so i was inspired last weekend to continue to make sure that we put in place that vision of america. And what that vision is about is a movement and then extraordinary individuals. And every issue i work on you need that combination of the movement and extraordinary individuals. And thats no different for any issue that ive been involved in. And you are part of that movement for consumer rights. Because you know, i look at the pillars of vital families and vital communities. And you know the pillars are education Security Health care security, Employment Security housing security physical security, Retirement Security, and thats been really the north star for this president. How do we build an america that works for everyone . How do we solidify those pillars of security . And you know last year the incarceration rate and the crime rate went down in the same year for the first time in 40 years. Because this president took a smart on crime approach. You look at health care security, our uninsurance rates have dropped at their greatest levels in 40 years. As a result of the Affordable Care act. And you know, i got this thing in my office. Its an album cover of Ronald Reagan in the 60s saying medicare will lead to socialized medicine. Actually, if you listen to the album, because i got a little curious, i listened to the album, it says medicare will lead to socialism in america. He was wrong. Medicare led to Retirement Security in america for millions and has become a staple of who in the process of doing that same thing. Thanks to folks in this room. You look at education security. You know, educations the great equalizer. My favorite senator when i was in college was a guy i never met, was a guy named Claiborne Pell. Because without Claiborne Pell i couldnt have gotten through college. And that education is the great equalizer. And we dont need everyone to have a fouryear degree because there are plenty of onramps to the middle class. But under the president s leadership, again were solidifying that pillar of selfsufficiency. And the proof is in the pudding. 60 consecutive months of private sector job growth to the tune of 12 million jobs. You look at the depths of the recession, there were seven job seekers roughly for every job opening. Now there are about 1. 8 or 1. 7. So the odds are better. Businesses are bullish. Insourcing is the in word. Outsourcing is yesterdays word. That jeep plant in ohio that mitt romney said was going to china . Well, ive been to toledo. And guess what . He was partially right. The product that theyre making in that jeep plant is going overseas. But theyve added over 1,000 jobs. Because thats whats happening as we see this manufacturing resurgence in america. You know, you look at the housing issue and we see foreclosures are now down significantly. You see what the president did recently for fha lenders to help them be able to get access to the American Dream. You look at the work were doing to make sure in rich cord dray and his leadership in the Consumer Financial Protection Bureau making sure that consumers have a meaningful voice. Because you know what . The whole consumer space and the mortgage space is a fantastic example of the world of false choices. When we had the wild wild west of 2005 and 2006 in the absence of regulation theres this notion that you know you either have a sound Business Climate for lenders or people go in the tank because regulation, you cant have common sense regulation. And ill tell you having settled the two largest fair lending cases in this nations history, i had a conversation with a very highranking executive who said you know what . In the depths of the wild, wild west in the mid 2000s i was losing my best people to countrywide. Countrywide was the industry bottom feeder. They had no rules. You could go there for two years and retire basically because you made that much money preying on people. So they didnt want to do that because they had ethics. And you know what . There was nobody minding the shop in the bush administration. It was the wild, wild west. And as a result so many people through the corrosive power of fine print and fast talk had the American Dream translated into the american nightmare. Because they said youve got to sign on the dotted line, sign these 58 forms, and little did they know they were signing the fast track to foreclosure. We must always reject false choices. When we have common sense rules in place that doesnt simply help consumers. That helps responsible lenders. And we must always remember that. We live in a world of false choices. We think about policing. And i spent a lot of time in that space. Theres this tendency to say we either have safe communities or respect for the constitution. Thats a false choice. We can do both. And we have done both. It takes time and it takes persistence. And that brings me to the pillar that i want to spent the most time on, the pillar of selfsufficiency, and that is retirement. Because i spend so much time and this president sends so much time building middleclass economics, making sure that people can punch their ticket to the middle class, that they have ladders of opportunity by the way, not escalateors. Theres no free rides. Theyre ladders of opportunity for people willing to work hard. And there are jobs out there. The report we released three days ago. There are 5 million open jobs right now as we speak. 500,000 of which are in i. T. Which pay Something Like 50 more than the average private sector job. Theres a lot of good jobs out there. And as we move forward as a nation i want people and the president wants people to have good jobs that pay a decent wage. We want to have aggressive enforcement of our wage and our laws so people who work hard cant get bilked. We want to make sure we have safe workplaces so that when you go to work in the morning you have a right to know youre going to come home safe and sound at night, whether its from a coal mine, whether its from a police department, whether its from any business that you work at. Those are pillars of middleclass security. And when you reach the end of your worklife all that hardearned money we want to make sure that you have a good retirement. And you know what . Times have changed. Were not in the leave it to beaver world anymore. Ward and june were together. Ward worked 40 years at the office. Ward had a defined benefit plan. And at the end of that career ward got to watch a handshake. And you know what . Ward and june didnt have to think about how am i going to invest my retirement . Because it was a defined benefit plan. You multiply 40 years times the formula, and it may be 1. 5, may be 2, may be some subset thereof. And you got your retirement. Well, leave it to beaver land has been replaced by modern family. Okay . And here we are in the modern family universe of defined contribution plans. Where people reach the end of a working career and now they have to make decisions on how to invest their money. And i have said many times im the youngest of five. Im a lawyer and all four of my siblings are doctors. I promised id never be a plaintiffs personal injury lawyer. Thats one promise they made me make. I have kept that promise. And i mean no disrespect to all my friends who are plaintiffs lawyers, they do an important job. But i did make that promise to my family. And so ive tried to do something noble. And ill let you all decide whether thats the case. But three of the most important types of decisions people make are medical legal and financial. For lawyers and doctors the rules are pretty clear. Youve got to look out for your patient. Youve got to look out for your client. If i got diagnosed with cancer and i go to the doctor, i dont want her telling me, well, this is a suitable treatment for you, tom. Suitability. Yes. I want you to tell me whats the maximum way that i can live . Okay . And thats what they do. If i got arrested for something and im trying to figure out what my best defense is, i dont want my lawyer to tell me well, thats suitable. You can do that. Well, why do we allow this in the financial space . Well the answer is actually there are many many folks who hold themselves up to that High Standard of protecting and looking out for your clients interest. We have a Financial Planner who is a certified Financial Planner. He looks out for us. So for instance i was in the federal government from 1989 to 2001, and then i left federal service and came back a few years later. And we hired him in the early 2000s. And one of his first pieces of advice was keep your money in a thrift savings plan because its a pretty good plan. Now, that didnt get him any money. But he was certainly looking out for our best interests when he said that. And so what weve been doing in the consumer space in the retirement spaces is weve got to figure out whats in the best interests of the client. And you know, one of the people that ive met in the course of this journey on this issue and i think this is one of the most important if not the most important thing we can do in the next two years to help consumers in the retirement space is this rule that we are working on. Because you know what . I meet people like jack vogel. I think hes been in the business i know hes been in the business longer than ive been on the planet because i think he said 64 years hes been in the business. He looks very well by the way. I want his water. And he said something that really kind of simply summarizes this whole enterprise which is you know what . I learned in this business of Financial Advice that when you put your customers first thats good for your customers and its good for business. Its really that simple. And thats what he has done. Thats what our adviser does. Hes a certified Financial Planner. And you know what . Thats what so many people do. I think its important in having this discussion not to paint with an unduly broad brush and never to be unfair to these scores of people who are in this space who do fantastic work. I applaud those efforts. And during the course of our outreach, and im a Firm Believer that when you are doing a rule the most important thing you need to do is to construct the broadest table possible because if you are not a good listener youre not a good regulator. And thats what we have done over the course of my 18 months on the job. We deliberately slowed this process down because we knew how important it was. We knew the value of listening. And we knew we needed to engage a broad array of stakeholders. We knew we needed to talk to the s. E. C. For instance. And we have done that with great regularity and have learned so much from that. And i have Great Respect for Mary Jo White and her team and the dedicated career professionals at the s. E. C. Who have been very helpful and rich cordray and his team who have been very helpful. And industry stakeholders with whom we have met with regularity because they have been very helpful in enabling us to understand the Business Model and to understand how you thread the needle. I think you can thread the needle. I think it is a false choice to suggest that the only way to continue the business of providing Financial Service advice to folks is the status quo. I categorically reject that. And i have heard from some, i dont understand the problem youre seeking to solve. And with all due respect, i cant believe that you dont understand the problem that were seeking to solve. I really dont. And i dont mean that disrespectfully. And fortunately i have heard that less and less in recent months. I heard that at the outset. And i hear that less and less. And that is the good news. And so what are we trying to do . With our proposed rule. Were trying to solve the problems that have afflicted so many people. You know, i think about the toffel family, elaine and merlin. They saved 650,000 throughout their career. And they had that nest egg. They did everything right. And they tried to figure out, you know how to save it, how to invest it. You know, because they were were in the new paradigm. And they go to their local bank. And they get put into a variable annuity. Very complex instrument. The fees were Something Like 26,000 a year. My wife and i, we just bought a car. And we paid 21,000 i think for it. And im thinking to myself, theyre buying a new car every year. A nicer car than we have. By the way, its a ford cmx. Its a very nice car. They could have had a car for 5,000 cheaper. They could have had that. You know that is a lot of money. When i reflect on this, i think about some of the concerns that have been raised. Well what about the small investor . You know, to me the small investors are the people who are in the greatest need of getting advice thats in their best interest because they dont have margin for error. And so when i hear that argument i agree with the notion that small investors deserve advice, and we need to get more advice for small investors. But we need to get advice thats in their best interest. You know folks who are wealthy who get conflicted advice, well, that is unfortunate. And wed like to prevent that. But you know, the consequences for them are less catastrophic than that family that saved 50,000 and is trying to figure out how to spend it. And by the way, that small investor who has 50,000 or 100,000, the vast majority of them need an index fund or something really simple. And thats why Business Models have already emerged that can help them. We want to make sure we provide education because i think education is power. I think an educated consumer is indeed the best customer. And what were going to do in this rule is clarify the line between education and advice. Because thats important. And we heard from the industry. You know, you cant ban commissions. That would put us that would unduly upset our Business Model. And we will not be banning commissions in the proposed rule. And now they did that in the uk. Ill note something thats very interesting. And i went to the uk because i told you you build a big table you listen to folks and you learn from them. I traveled over there because i wanted to learn with my own eyes and ears about the uk experience. And whats really interesting is what has happened in the aftermath of their rule,webbased products people who dont have that milliondollar nest egg but have a nest egg that is far smaller. And so you know, theyre pretty smart people over there. They had a new regulatory environment. And theyve been figuring it out. And innovation has emerged. I think folks around here are pretty smart too. Were no less smart than the brits. And i think we can figure it out too. And so you know the miracle of compound interest is a wonderful miracle. However, the flip side of that, which is not a wonderful miracle, is you know, the tragedy of compound fees and costs can linger like a chronic illness for a retiree. And when youre talking about 26,000 a year for this family do the math. And do the comparison between that and an index fund or some other instrument that was pretty simple. I think we can do this. I think this is one of the most remarkably important things that we can undertake in the remaining 650 days. Ive got 650 days till the weekend. And thats what im going to be working on. Things that make sure that we sustain the pillars of the middle class and make sure that all the things that we have worked on to help people to save. Many people lost so much of their savings in the great recession, theyre getting it back now. And this is one of the most important things we can do to help them. And i know one thing. We cant help them without a movement. Because it brings me back to selma selma. Anything thats important around here, you need a posse to get it done. And i have been so heartened by the folks in industry who have stepped up and said you know what . We can do this. And its right for our customers and its right for our Business Model. I was in Duke Law School recently speaking about what i call the stakeholder model of how we build a Virtuous Cycle in america. Theres too many false choices i only take caver my shareholder, i cant take care of my worker, and i cant take care of my customer. Its either or. That is wrong. I see businesses everywhere that understand that the high road is the smart road. Including people in this space. Who understand you can take care of your shareholders, you can take care of your workers and you can take care of your customers and create that virtual cycle. So thats what were going to do with this rule. But i know there are some who still want the status quo. And we look forward to those conversations. We have done remarkable amounts of outreach to date. And then when the rule comes out were going to begin another formal process of comment. And i look forward to that comment. And i look forward to continuing to have a big table with inclusive participation because thats how you provide and thats how you produce the best possible rule. But i need your help because i need ordinary people to do extraordinary things. And this is rule that is at the heart of protecting consumers. Making sure that retirement with dignity can be achieved, and doing so while recognizing that you know what . Folks who are in this space can make a very decent return and make a very decent living. I am all for that. I think we can have both. I think we can adopt the stakeholder model i discussed and we can put it here. Weve got a lot of work to do. Weve done a lot of work. And i hope that when you go back to your communities you will talk to your stakeholders and among other things ask them have you ever looked and asked the question of your Financial Planner, like what standard does he or she adhere to . Because a lot of folks this is like this is a first cousin of what i saw in the mortgage space. You know folks did not know they were victims. Because they went to someone they thought they trusted. And turned out that the trust may have been misplaced. So i need your help in raising consciousness because we dont know what we dont know. And i saw this in the mortgage space. We had to go out there and say hey, show me your mortgage instrument. Then wed talk to people and say do you know that in eight months your Interest Rate is going to go up 4 . Theyre like hell, no. You know thats what weve got to do here. Theres a lot of consciousness raising that needs to go on. Theres a lot of education that needs to go on. And you all are in the front lines. And the reason i was excited to be here was because i know that we can get this done. I know this is good for america. I know this is good for the Financial Services industry as well. We can thread this needle. We will thread this needle. The president himself has talked about this because he understands that at the heart this rule is about middleclass economics. Retirement security is a pillar of middleclass economics. So i want to thank you for listening, but much more importantly i want to thank you all for being serial activists in your communities across this country, for giving voice to issues that are all too frequently not discussed for empowering communities that all too frequently feel vulnerable and disempowered, and for being those heroic figures who are thinking boldly about an america that works for everyone. An america in which really shared prosperity is what we are about. And shared prosperity throughout the golden years is an article of faith. And so thank you so much. [ applause ] so secretary perez has said hed be willing to stay for a couple of questions. So just one or two. We have microphones here. So [ inaudible question ]. Thank you for hosting us. When we rolled it out the other week. Of course. So this year is the 25th anniversary of the americans with disabilities act. And despite this groundbreaking law thats supposed to protect workers, the Unemployment Rate for people with rate for people with disabilities has remained flat for the full 25 years, and im wondering if you could tell us what your department is doing to encourage people and often because Older Workers have disabilities at the heart of their discrimination problem. The Unemployment Rate of people with disabilities is like 19 and the labor rate of participation is in the low 20s if my memory serves me. And ive spent a lot of time in local and State Government on this. I think the major piece of Unfinished Business of the ada is employment. And we one of the things that we did, and its actually a good parallel to this discussion that i was just having about the conflict of interest rule is a rule we put in place under section 503 of the rehab act which is a rule designed to ensure that employers are taking best efforts to hire people with disabilities we put this in place about a year and a half ago. When we first proposed it there was an outcry from some in the Employer Community who said this is impossible to do. We were asked questions like, do i have to hire a blind person to drive the truck . And im not kidding when i say that. We were sued. We won. And the remarkable thing about it is this one person who shall go unnamed who led the assault against us is now one of our biggest proponents because he looked at his business which is a fortune 500, probably a fortune 100 company and he looked at his numbers and said, our numbers are lousy. And once all the litigation was over and he focused on implementation, we put him in touch with our biggest allies who are other employers who are doing it. And say it can be done. You know all of these issues, if you have the will to do it, you find the way. And regrettably, if you look the will to do it you find the roadblocks. There are so Many Employers like walgreens and lowes and others who have made significant commitments to hiring people with disabilities and were doing our level best to lift those up. Were going to continue those efforts and were making progress and as we highlight the 25th anniversary, im going to be talking a lot about employment, because thats the biggest piece of Unfinished Business. I can do these last three, and then ill have to call it, if thats okay, barb. Yes. I applaud your work to bringing the light to the conflicts in the Financial Services industry. My question concerns what do you do about companies who claim presently that they serve the best interest, that their advisers avoid conflict of interests and things like that but yet theyve never enforced that. Are you aware that many sort of institutions have those rules that they do not enforce and what do you think about the idea of sort of Second Opinions on Financial Advice . Because i see many people who think theyve worked with somebody that they could trust. But that if theyd gone and gotten a Second Opinion theyd get very different advice. So as i applaud the fiduciary goal, im not sure it gets us all the way there. I welcome your thoughts. Well, weve heard from a number of stakeholders who have said that we already we put our customers first, and we will continue to do so. And my response is, well then compliance with this is going to be pretty easy. [ inaudible ] but theyve had a legal obligation endorsable to do so. And so that will be a different pair pair dime. I have a lot of productive conversations with folks, oneonone, who say, we can do this, we can figure this out. When you have such a substantial sub set of the industry who already know does it what i hear from the fiduciaryiesfiduciaries, is we need a level Playing Field. Because they dont know whether the person theyre talking to is under a suitable standard. They think theyre looking out for their best interest. Some are and some arent. I wouldnt want my doctor that i go to today to be looking out for my best interest and my doctor next week to tell me that the treatment is suitable. So that level Playing Field issue is a big part of what were doing. In terms of Second Opinions, one thing i hope is already in place and ive done a lot of work in the mortgage space on this is having internal controls. We do a lot of work to help put in place things like mystery shoppers. Thats often a term of consent decrees that we reach in a mortgage space. What that simply is, you say youre not discriminating in the mortgage space well, test it. See whats happening. And when they do that, you can prevent things that you see emerging from becoming big. And so a big part of this conversation, you know needs to include those sorts of internal controls. Hi, im Alexis Goldstein with other 98. Org and im exciting that youre here today, im exciting about the energy youre bringing to the conflict of interest rule and you mentioned the president is behind it. That sets up expectations that this is going to be a really strong rule. And you mentioned this idea youve seen less pushback from the financial industry. But ive seen reports in the press from moneyed institutions saying things that theyre offended by the tone the white house has taken with its memo. And so my question is that memo, if i recall correctly said that Retirement Savers are losing 17 billion a year due to hidden fees. So im curious, if you stand by the numbers in that report, if you stand by the tone in that report, and if we can expect a strong rule in spite of this industry pushback by these wellmoneyed interests. I want to clarify something in your question about what i said. I have spoke to a number of industry stakeholders who have said this is something we could do, and in some cases this is what we are doing. I dont think theres been less pushback by some of the industry. I dont want to give you a misimpression that suddenly light bulbs have gone off everywhere. Im not confused by that. I appreciate those who have said, i havent seen the rule yet and i want to withhold judgment until then. If i were in those shoes, id do the same thing. So, you know what im not confused about the road ahead. There are some and again i had meetings with folks who said i dont understand the problem. And so, you gotta understand that there are some who stated that and that perhaps bespeaks an effort to move forward with pushback. But again, im you know, when you have the facts on your side and when you have movements on your side and when you, you know, have folks in the industry, this notion that i will go out of business if i have to do this, and ill stop serving people. When i was in Montgomery County maryland, we put in place a rule in the mortgage space to help consumers, and i heard from the bankers saying im going to stop lending in Montgomery County if you put this rule in place. And im thinking to myself, tenth wealthiest county in america, bethesda and theyre not going to be able to get a loan. Im not sure i believe that. And guess what theyre still lending and Montgomery County. Were still the tenth wealthiest county or Something Like that in america. And we were able to thread the needle and i think we can do this here. Theres so many good players in this industry and theyre smart and innovative and i think this rule that were going to put out for comment, will enable us to thread a needle. Yes, sir, last question. Im bob adner during the obama transition, you were my boss. Yes, you do gods work there. This is a personal note and i want to note that there was a great material in the New York Times a couple of weeks ago, making the points that you did about the differential that you pay when you have an index fund versus a brokerage account which was a personal point for me because for years, with my brokerage account, how much am i paying in fees, that he read my incredibly obscure Financial Disclosure form, which told me how much i was paying which is why im no longer with them. But one of the points the article made was over the course of 30 years two investors with roughly the same amount of money, the one with an halftime managed account would reap hundreds of thousands of dollars less than going to an index fund. And the other point most of the studies im aware of say over the long run actively managed accounts tend not to beat the market, at times lucky to stay even with the market. So i wonder if you can tell us if there are any studies about an actively managed account versus the advantages of an index fund. You have taken the words out of my mouth. And certainly in our research, the concern i hear the most frequently is, this is going to hurt small savers. I would respectfully assert that small savers are the people who need to make sure that their advisers are working in their best interest, because small savers dont have any margin for error. And small savers, by and large, are going to do the best in an index fund or some other noload, lowfee kind of fund. So, whenever i hear that argument, and by the way, jack baldwells company is doing okay, i think. And hes not the only one in this space. And you look at the aftermath of the uk and you see that there are now new webbased products that are springing up and you know, i think, i dont want to overstate those, im intrigued by the fact that innovation has really taken off there. And i think were a pretty darn innovative world here in the United States. And so, you know i think, again, it gets back to what i said. If you have the will to do something, you can do it you know. I look at the woman who asked the question about 503, no we are not requiring employers to hire blind drivers. Okay . I can say that with certainty. And i repeat this because im not making this up. These were some of the comments. You know, but now, i go to walgreens and as a result of the leadership of their corporate heads, you. To their Distribution Center in connecticut and i been there 40 of their employees are people with disabilities working side by side making 15 bucks an hour or more, with people who dont have disabilities and thats one of the most effective and productive places bless you [ laughter ] bless all of you. And so they figured it out. Other companies are starting to field it out. I feel like theres a little ground hog dog, i heard this in the mortgage space when we tried to regulate. Blacks and latinos will no longer have access to the American Dream. That was the argument in the mortgage space, and that was wrong. We need to move forward and we can move forward, and the studies are legion. Youve cited a couple but theyre legion about how the products that folks are going to get into that are lowcost highreward products, are exactly what they need. Thats why my guy said stay in the thrift savings plan. I could take it and make money rolling it over, but that wouldnt be in your best interest. Everybody deserves to get the advice that my legal aid, lawyer wife who works with Homeless People and tom perez whos been in Public Service his whole career. So we dont have were not the rock fellers. Okay . Our margin for error is pretty slight. I need you all to help in communities to do this. So set up through your networks folks who can provide Second Opinions for folks. Because whats going to happen is that as people become more and more aware, theyre going to start asking more and more questions. Thats great. Thats what should happen. And you know what the companies that can answer the question in a way that shows im looking out for you, those are the companies that have nothing to worry about. And the companies that have been getting 24,000 or 26,000 a year from a very annuity for someone you know we dont need that. Its like olympic diving. You dont need the two and a half with a twist. The cannonball will do for just about everyone. And so this is doable. So thank you. [ applause ] heres a look at whats coming up tonight here on cspan3. First, a Senate Armed Services hearing on the navys 2016 budget request. Then a look at u. S. Policy toward the arctic with a retired admiral serving as u. S. Special representative for the region. And later, a group of u. S. Mayors discuss transportation policy at a recent conference hosted by the American Public transportation association. Navy secretary ray mabus and other officials within the naval branch were before the Senate Armed Forces committee to test about the navebudget request for 2016. They adviced the impact of sequestration cuts and Mental Health issues for veterans. This is two and a half hours. Good morning. I want to welcome the witnesses. I thank you all for being here this morning. The Committee Meets to receive testimony on the plans and programs of the department of the navy for fiscal year 2016. I want to thank each of our witnesses for their distinguished service to the nation as well as our forces who are serving today. This is admirals last hearing before the committee today, but his last appearance as chief of Naval Operations and id like to thank you, admiral green ert, for your 40 years of distinguished service to our navy and i wish you and darleen all the best in the future. In the last three months, some of americas most strategic thinkers have offered this committee a clear, unified assessment of worldwide threats and u. S. National strategy. As dr. Kissinger testified on january 29 tth, the United States has not faced aid more diverse and complex array of crises since the epped of the second world war. The actual global challenges we face are compounded by the limitations of the budget control act and sequestration, which were a selfinflicted National Security crisis. Indeed, all four of the military Service Chiefs have testified that defense spending and sequestration levels would put american lives at risk. Now more than ever, a strong navy and marine corps are essential to our nations ability to deter adversaries, assure allies and defend our national interests. From our strategy of rebalancing to the asia pacific region, to conducting Ongoing Operations against isil to deterring rogue factors like iran or north korea to many other requirements, the u. S. Navy and marine corps are key pillars to our National Security strategy. Yet by any manager, todays fleet of 275 ships is too small to address critical security challenges. The navys four struct ur assessment requirement is 306 ships. The Bipartisan National Defense Panel called for a fleet of 323 to 346 ships. And our Combatant Commanders say they require 450 ships. But under sequestration the navy has said the fleet could sink to 260 ships. Equally troubling the marine corps continues reducing from 202,000 active duty marines in 2012 to 184,000 today, to 182,000 in 2017. With the demands on our sailors and marines rising, coupled with short falls due to requesteration, our lengthening deployments, cutting training and time at home with families and putting our allvolunteer force under considerable strain. The president s budget request attempts to buy as much readiness as the department can execute for fiscal year 16. And this is yet another reason why we cannot afford a Defense Budget at sequestration levels. The president s budget also includes significant funding requests for major navy and marine corps acquisition programs in the current fiscal environment, its all the more important for this committee to conduct rigorous oversight of these programs to ensure that the department of the navy is making the best use of limited taxpayer dollars. That is exactly what we will do. The combat ship, despite initial cost overruns that more than doubled the cost per ship, the navy appears to have stabilized the cost and yet the Program Still faces challenges to deliver the promised warfighting capability. All three of the lcs Mission Packages still need significant further testing and must overcome Major Technology integration challenges. Regarding the secretary of defenses challenge to upgrade the lcs this committee will continue seeking further information to justify this decision. Without an assessment it is unclear the lcs will need, thus how much more lethal and survivable a ship needs to be. In short the navy must demonstrate what plb the upgraded lcs is trying to solve. We cannot afford to make this mistake again. With the first three carriers, despite cost overrups of more than 2 billion each, this program has not exceeded the cost cap in the last three years. However, the second ford class carrier, the uss john f. Kennedy will delivery in niskal year 2022 less capable and less complete due to the navys twophased delivery approach. This plan would leave up with an incomplete ship should world events demand an additional Aircraft Carriers, or if the uss nimitz encounters unforeseen problems in the final years of its 50year service life. Im also concerned about the navys plan to delay full ship shock trials from the second to the thirdclass carriers. That delay is hard to justify for a new ship that is this complex. This Committee Also has a duty toe shape the future of our navy and marine corps. With three service combatant classes set to retire soon now in the time to lay the analytical ground work to replace those ships. As the navy develops requirements for the next class of amphibious vessel, we must ensure that our warships are capable of supporting the marines in the manner they plan to fight in in the future. We must also carefully examine the future Aircraft Carrier fleet and the carrier air wing, 12 billion or more for one ship is simply too expensive. We must do even more to reduce costs and increase competition within the Aircraft Carrier program. And as challenges to american airpower projection grow we must chart a path to achieve the unmanned strike capability from our Aircraft Carriers. We look forward to the witnesses testimony today and hope they will cover the Broad Spectrum of issues that the department confronts. Thank you very much, mr. Chairman. Let me join you in welcoming all of you to the committee this morning to testify this morning to testify on behalf of the navy and the review of the 2016 budget request. And general mabus joined us last saturday for the ceremony for the uss colorado. Welcome general dunford to his first hearing and i also want to join the chairman in commending the outstanding work of admiral grant as he departs, at least this venue. Thank you very much, sir, for your Outstanding Service to the navy and to the nation. Our witnesses this morning face huge challenges as they strife to balance the need to support Ongoing Operations and sustain readiness with the need to marginalize and keep the technological edge so critical to military success. These challenges have been made particularly difficult by the physical constraints of the budget control act and sequestration. All the military departments have been forced to make painful tradeoffs. Now the threat of sequestration continues to loom. If congress does not act to end it i believe our longterm National Security interests will be threatened. Last year the department of the navy was facing serious readiness problems from defrt maintenance, reduced steaming and flying hours and cancelled training and deployment increased emphasis on readiness in this years budget will address some of the navys most serious readiness problems, but results in a serious shortfall in Modernization Fund to meet future threats. Im interested in your views on this risk because of the short falls. The navy is facing short falls on attack submarines air and missal defense cruisers strike fighters and inventories. Theyve been operating for two years now with fewer than the required 11 Aircraft Carriers. During the next decade, the navy will need to buy a new class of submarines, a very costly venture. Im interesting in hearing how the navy is managing its operational tempo with these short falls. Im almost interested in the witness views on how they will meeting competing demands on the budget once the higher cost of replacement begins. The president s budget called for 184,000 marines down from the wartime high of over 200,000 marines. Im interested to learn how the marine corps will manage mission risk with a force this side, particularly with increased embassy security. The marine corps clearly remains committed to the revitalization to the assault capabilities with a budget request that includes funds for its current family of armored Amphibious Assault vehicles and continued a competitive search for newwheeled combat vehicle. We understand the amphibious combat Vehicle Program would integrate a number of technologies into a new vehicle. The marine corps has described this program as, quote, nondevelopmental. Which raises questions about what nondevelopmental means when youre developing a new system. Im interested in your incitessights on this whole program. All the real amphibious challenge on the amphibious gap has more to do with ships and connectives than air and seaborn assault systems. Navy witnesses have testified about the number of ships required to meet shipping goals. Sometimes lost in that discussion is the fact that changes in the marine corps, ground or air components ripple through the amphibious ship force requirements. I know that the navys planned purchase of the amphibious transport is one effort to address the amphibious shipping shortfall. The Defense Departments guyance issued in january 2012 followed by the 2014 kdr, and this january, our new National Security strategy echo a renewed military orientation on the asiania pacific. Consistent with that strategy the Defense Department has been working to realign forces in south korea and okinawa. With plans for australia, singapore and elsewhere in the region. Im interested in hearing more about these and other aspects of the deployment. Again, there are many questions but i want to conclude by thanking all of you for your Extraordinary Service to the nation, to the navy and to the marine corps. Thank you. Mr. Secretary . Thank you mr. Chairman. Chairman mccain, Ranking Member reed members of this committee thank you for this opportunity to discuss the department of the navy with chief of Naval Operations john green ert, joe dunford, i have the great privilege of representing the sailors and marines who serve our nation around the world the civilians who support them and all of their families. As the chairman and center reed pointed out, this is admiral green erts last posture testimony before this committee. Hes been a steady hand at the helm of the navy through the past four years of International Instability and budget turbulence. Every day his judgment and advice is good counsel its been arn to serve with him and he will leave a lasting legacy. Today our security interests face an increasing array of threats and demands while our budget situation, as you so clearly pointed out, mr. Chairman, grows more challenging. But its clear that the navy and Marine Corps Team offer the best value to advance both our Global Security and our economic interests. Uniquely, the navy and marine corps provide presence around the globe, around the clock. Were the nations first line of defense, ready for anything that may come over the horizon. Presence means that we respond faster, we remain on station longer. We carry everything we need with us and do whatever missions are assigned by our nations leaders without needing anyone elses permission. Weve always known americas success depending on an exceptional navy and marine corps. Article one of our constitution authorized congress to raise an army when needed, but directs you to provide and maintain a navy. From the first six frigates to our growing fleet of today, from tripoli to afghanistan, sailors and marines have proven the founders wisdom. American leaders have understood the vital significance of sea power. We are truly americas away team. We deploy in peace just as much as in war and our role in the last 70 years in securing sea lanes and freedom of commerce has boosted our own and the worlds economy. Nearly half the worlds population lives within a hundred miles of the sea. 90 of all global trade goes by sea and 95 of all voice and data goes under the ocean. The shelves of our stores are stocked with just in time delivery with products from all over the globe and some 38 million american jobs are directly linked to sea borne international trade. For seven decades the navy and marine corps have producted this system. Thats why our National Defense strategy focused onned on the maritime requires investments. For the past few years, the department of the navy has attempted to minimize the impact of an uncertain budget marked by continuing resolution, and the threat of the return of sequestration. This environment has made it much more difficult but even more critical to set priorities and to make some hard choices. The presence of our navy and marine corps unikly delivers on four foundations, people platform, power and partnerships. These are key to the success of our Naval Services ask they remain my top priorities. People, our sailors and marines are well known for their ability to exercise independent judgment and the flexibility to adapt to changing circumstances. We remain committed to providing our sail,ors and marines with the training and support they need to maintain our presence. And we include in this their dedicated families, our injured and our wounded. Weve launched a comprehensive approach to assure the worlds healthiest fittest, most resilient and best educated force, one which truly represents americas diversity. We continue to aggressively combat sexual assault, abuse, ethical failings, similar challenges. And were exploring innovateive means to improve the way we manage the force. In platforms, our people as good as they are, cannot do their jobs without ships. Providing presence, being where were needed when were needed requires those ships. Quantity has a quality all its own. That means we have to have a properly sized and a properly balanced fleet. On september 11th, 2001, the navys bottle force was 316 ships. By 2008, the fleet had declined to 278 ships. Our focus on two ground wars only partly explains that decline. In the five years before i game to this office, navy contracted for only 27 ships. Not enough to stop the slide in the size of the fleet. In my first five years, weve contracted for 70 ships, halting and reversing the decline. By the end of the decade our fleet will once again top 300 ships. Weve accomplished this with a direct and fundamental busy approach based in large part on the legislation which originated in this committee authored by chairman mccain and chairman levin. Things like increasing competition, relying more on fixed price contracts and thanks to this committee, congress has helped multiyear and block buys. But bauth instability and uncertainty erode our ability to grow our fleet, manage our resources and maintain the industrial base. Without a correctly sized and shaped fleet, the navy and marine corps will not be able to meet the demands with the kinds of missions for which we are the best and often the only option. In the face of budgetitary uncertainty, cutting ships is the most damaging and least reversible course of action which is why im committed to preserving shipbuilding to the maximum extent possible. Fueling the ships aircrafts and vehicles of our navy and marine in energy. We believe our National Security interest and the ability of the navy and marine to meet these missions must be increased. Our ability to maintain presence in advanced Global Security will be augmented through partnerships. Cooperations makes us more effective and reduces misunderstandings. Again and again, our naval forces have proven themselves the most immediate, the most capable and the most adaptable option when a crisis develops. Overall, the presence fy 16 budget balances current readiness to execute assigned missions while sustaining a highly capable fleet all within a tough fiscal climate. That climate demands as you pointed out, mr. Chairman, rigorous examination of every dollar we spend and doning our aggressive efforts to cut unnecessary costs in every program and shift resources from tail to tooth. When america is called, the navy and marine corps have always been there. In order to assure to provide what the American People expect we look forward to answering your questions and to working together with this committee and with congress to maintain our great navy and marine corps. Thank you. Thank you mr. Secretary. And the complete statements have been submitted by all three of you will be included in the record. General dunford . Chairman mccain Ranking Member reed and distinguished members, im honored to be here today and to represent your marines. We feel that the best trained and equipped marine corps has ever sent to war. I know this committee and the American People have High Expectations for marines as an expeditionary ready force expecting them to operate forward, engage with part nerds, deter adversaries and respond to crises. And when we fight, you expect us to win. You expect a lot from your marines and you should. This morning, you hold this hearing, over 31,000 marines are engaged doing what youd expect of them. Our role informs how he man train, and equip the force. It also prioritizes the allocation of resources that we receive from congress. Over the last few years, we prioritized the readiness of our deployed forces. These are the forces you can count on for immediate crisis response. These are the forces that spded the recent evacuation of u. S. Citizens in south sudan libya and yemen. These forces currently conducting strikes in syria iraq training the iraqi army and protecting our embassy in baghdad. These are i can assure you theyre well trained, well led and well equipped. But weve had to make tough choices to deal with the effects of two wars, sequestration in 2013 and reduced budgets in 2014 into 2015. In order to maintain a readiness of our four deployed forces we have not sufficiently invest in home station readiness, modernization, infrastructure sustainment, and quality of life programs. As a result, approximately afl half of our nondeployed units, suffering personnel, equipment, and training short falls. This will result in a delayed sfns and or the unnecessary loss of american lives. Over time underinvesting in modernization will result in maintaining older and obsolete equipment at higher costs and degraded capabilities. In many areas, funding levels are forcing us to maintain legacy capabilities instead of innovating for tomorrows threats. It will erode our competitive advantage. We dont want our marines and sailors in an unfair fight. We can meet the requirements with the president s budget, you but there is no margin. Funding levels will exacerbate the challenges we have today and result in a marine corps with fewer active duty battalions and squadrons than would be required for a single contingency. As we saw in the wake of benghazi, the American People expect tous respond to todays crisis today. We can only do that if were properly postured today. In closing, my assessment is that funding below the president s bouth level will require that we develop a new strategy. Thank you once again for the opportunity to appear before you this morning and for your leadership in addressing todays fiscal challenges. I look forward to your questions. Thank you for the opportunity to testify today. Its my honor to serve and represent more than 600,000 active and reserved sailors, our civilians and their families especially the 41,000 sailors who are under way and deployed around the world today. Its my pleasure to testify this morning beside secretary mabus and general dunford. Gentlemen, your team is united in fulfilling their longstanding mandate. To be where it matters when it matters, ready to respond to crises. Now to that point, recent events exemplify the value of forward presence. Last august, the Bush Carrier Strike Group relocated from the arabian sea to the arabian gulf, about 750 miles in less than 30 hours and began flying 30 combat sorties per day. For 54 days, that was the only thing projecting power against isis. The trucks arrived within a week after russia invaded crimea. And we were among the first vessels to support the flight search in the java sea. Weve been where it matters when it matters. As ive testified before the continuing resolution and the see questeration of 2013 degraded our readiness and capabilities and weve not yet recovered. Budget reductions have forced reductions generated maintenance backlogs and have compelled us to extend unit deployments. Since 2013, many of our ships have been on deployment for eight to ten months or longer and that exacts a cost on the resiliency of our people and the service lives of our ships. This degraded readiness has reduced our ability to respond to contingencies. For example, our commanderers require three strike groups and amphibious groups be ready to respond within 30 days to a crisis. Thats our covenant to them. However, today, on average, we have been able to keep one Carrier Strike group and one Amphibious Ready Group in this readiness posture. So were at 1 third of the requirement. Assuming the best case of an ontime, adequate and stable budget and no major contingency we might be able to recover from the accumulated backlogs by 2018 for our Carrier Strike groups and by 2020 for our Amphibious Ready Groups. So thats at least five years after this first round of sequestration. And thats just a glimpse of the damage sequestration would cause if we go back there. Weve been forced to slow modernization. The budget short falls antisubmarine warfare, airtoair warfare and integrated air and missile defense. So we have been compelled to accept significant risks in the execution of two key missions that are specified in the defense strategy. I provide each of you a handout that summarizes where the navy stands with the missions and where we stand in relation to those missions under the two budgets, the president s budget and sequestration. The First Mission at risk is to deter aggression, which means to win a war at sea while deterring another at sea in a different theater. And the Second Mission at risk is to project power despite antiaccess and aerial denial challenges. When i say risks, i mean that some of our platforms, our people, and our systems will arrive late to the fight. They will arrive with insufficient ordinates and be without modern combat systems sensors and networks that are required and will be inadequately prepared to fight. This means more ships and aircraft out of action in battle. More People Killed and less credibility frankly to deter adversaries and to assure allies in the future. Given the circumstances of our submission it represents the minimum funding levels to execute our strategic guidance to bring the navy program, we need to deliver that capability on whatever capacity we can afford. We delayed upgrades in aircraft ships and submarines and took significant reductions in procurement, munitions and infrastructure. So todays world is more complex, more uncertain and more turbulent. Our adversaries are expanding and modernizing their capabilities. We need an adequate, predictable and timely budget to remain an effective navy. I thank the committee for what theyve done for us and look forward to working with the congress to make your our forces and their families are equipped. Thank you. I want to thank the witnesses and these are compelling remarks. Admiral green ert general dunford, do you share admiral green erts concern concerning the effects of sequestration and as admiral green ert pointed out, a significant period of time before we can even recover from the present effects of sequestration . Chairman, i absolutely do. The sequestration of 2013 has impacted current level of readiness. If we go to sequestration well be unable to meet the current strategy and well have to reduce the capacity of marines that have forward deployed. I believe you were asked by another i believe it was senator king. Is this sequestration put the lives of the men and women who are serving in uniform in greater risk . Chairman, ill take that. It absolutely does chairman and in this way. With the readiness challenge at home station my expectation is that when marines are called, well go either late or with short falls in equipment and training that would absolutely put Young Americans lives at risk. Admiral green ert . Absolutely, chairman. A lot of people write about today and todays navy this is about the future navy. Our benchmark is 2020. If we dont modernize, well be lady, we late and wont have what we need. Is it affecting retention of outstanding men and women . It is. The families are angry at the threat of sequestration. We have pilots, a key part of our ability, our reattention is low on pilots, aegis technician and cyber. General dunford, the deployments are longer is that correct . Chairman, the biggest significance is the time between deployments. Most of our fighting squadrons and infantry are deploying for seven months, and theyre home for less than 14 months before they deploy and that continues, almost adinfinitum. So thats another factor on reenlistment . It will be over time. Weve not seen the impact on the ability to recruit and retain high quality forces right now, but it does have an impact on two things. It impacts training across the range of operations and also has an impact on the time marines spend with their families between deployments. Mr. Secretary, weve had conversations about the situations of the cost overruns of the Aircraft Carriers, of the jerald r. Ford and i understand that the followon, 78 and 79 they are or will be around 12 billion each is that correct . The 79 has a congressional cost cap of 11,5 and were under that. And i hope mr. Secretary, given new technology and drones and a lot of other aspects of warfare, including the f35 capabilities, that we will be looking at alternatives as well to the nimitz class or the latest class of Aircraft Carriers. Is that correct . It is senator. I think that as you and i discussed, everything is getting smaller and faster with the possible exception of the military. I guess im not quite clear on why isnt it true that the major cost overruns, due to advances or new technology in launching and electromagnetic aircraft launching system advanced resting gear, dualband radar, and advanced weapons elevators, are those still the greater risks on the cost problem with the gerald r. Ford and the kennedy . Mr. Chairman, youre absolutely correct that those were some of the reasons for the cost overruns. You and i are in pretty violent agreement that the way the ford was built is not the way to build a ship. It was being designed while it was being built. Too much new technology was trying to be forced in ask that technology was not mature. Today the force is 87 complete. The testing on the electromagnetic launch and the advanced arresting gear is where it should be and its moving along, and the risk of any more cost overruns, as you pointed out in your opening statement, weve had stable costs for the last three years or more now. And it goes down every day. There is still some risk in the testing of those brand new systems that weve never used before. General dunford, and admiral green ert, could you give a brief update on the progress of the f35. Chairman in our case, the first squadron will be at initial operating capability this summer. Thats vmfa 121 out in yuma, arizona. I visited the squadron weeks ago, im confident were on path to bring that up to ioc and we have a good number of aircraft laid in across the fiveyear defense plan to bring the f35 into service. Admiral . We had our carrier test this is past summer. It went great. Tail hook was certified. We had no bolters so the avionics for the aircraft itself, the c model thats ours, is good. We have a way to go for the software the 3f software. Right now, were on track for an ioc of 18 or early 19. My concern is that the software is able to integrate all of the Weapons Systems that we have on the current aircraft on our air wings. This aircraft has to fit into our air wing. But so far, so good. We have to keep really close watch on it. Thank you. Senator reed . Well, thank you, mr. Chairman. Let me first say that the chairmans questions regarding sequestration and your responses about the real and dramatic effects on the lives of the men and women who serve are, i think, another strong indication of the need for collective and bipartisan action to end sequestration. Thank you, gentlemen, and thank you, mr. Chairman. Mr. Secretary and admiral green ert, last year in the Defense Authorization bill, we in sect 1022, creating an extra cbased fund which was designed to help you from a department of defense level, to build or replace the ohio class submarine. Can i just ask both of you how do you intend to use this fund . And in general, your plans for the replacement of the ohio. And mr. Secretary, did you want to begin . Well we very much appreciate the establishment of this fund. C and o and i have been talking for some time about when we begin to build the ohio replacement in 2021 if its a pure navy build, it will devastate some part of the navy either our shipbuilding or readiness, or something. Because of the high cost of these and because we dont recapitalize them very often. If you look back in history, there is theres precedent for either making this a national program, because it is the most survivable leg of our deterrence deterrence try yad, or adding funds to Navy Shipbuilding to accommodate it. The 41 for freedom and late 50s, early 60s, and the ohio class in the late 70s through 92, both times Navy Shipbuilding was increased pretty dramatically to accommodate these submarines. But to show you the effects from 76 to 80, navy ship building budget doubled to accommodate the ohio class. Our fleet still declined by 40 because it simply wasnt enough to do both. Admiral green ert . Senator first of all i think its a great start. I think we need to pursue clarity of the congress. And what i mean by that, the legal ram isks for sources of the fundings we can put in there. Is it just other Navy Shipbuilding accounts, is it just other navy appropriations, or do we mean the whole department of defense could contribute to this fund . Which in my view it would be great. Thank you very much. In my view it would be great. And that was the intent, i believe. But the clarification well try to produce for you, sir. General dunford, in my opening remarks, i talked about the fighting Vehicle Program and this has been a interesting and tortured path. The expedition fighting vehicle was canceled. Weve had several different concepts and this has spanned the careers of several commandants. Now were into this new amphibious combat vehicle which is described as nondevelopmental, and i seriously, your comments upon how do you avoid the preceding vehicles which we spent money on but could never deliver . Senator, thanks. Weve been working to replace the 40yearold Amphibious Assault vehicle. And until two years ago, we were trying to reconcile the protection required against todays threat. The cost that we could afford and the shiptoshore capability. It turned out that we couldnt reconcile those three. So a decision was made to break the program into thirds. The third is to address the need for ground tactical vehicles with adequate protection for our marines assure right now. That vehicle would be moved from shiptoshore in a connector. The second phase would be to get our vehicles to at least have the same capabilities as todays vehicle. That is it could selfdeploy to an amphibious vehicle. At at that time, we can reconcile the three variables i talked about or to continue to improve the second phase which is a vehicle with at or greater capability to our current Amphibious Assault vehicle. But the reason why were where we are, we couldnt reconcile the cost, the capability and the protection required against the current threat. So you are focusing first on a vehicle that will have limited forwarding capability to get a short distance in low surf and then fight on land with all the protections weve seen against the ieds and those things and all the lessons weve learned. Thats the first phase. Thats exactly right. We expect our vehicles to operate 90 of the time so this firstphase vehicle is optimized for ground mokz and mobility assure. And the second phase will be a completely different vehicle or youre no, senator, i was out to the Nevada Test Center three weeks ago to look at the current state of the vehicles. And quite frankly i think in most cases although weve asked for a vehicle that just provides adequate ground mobility and not necessarily selfdeploying vehicle, all of the individuals right now that are competitive in the process have a vehicle that actually, i think may get pretty close to the second phase that we require. Thank you very much. And just finally, mr. Secretary, the director of operations has raised concerns about the survivability of the lcs. And also the ones that have been modified to operate as frigates. Have you established survivability requirements for the modified lcs . And have you are those requirements much different than the initial requirements of lcs . The Small Surface forms, weve looked at that and did upgrade the survivability by things like hardening the area around the magazine, around various combat systems. C o has pointed out very accurately in the past the best way to survive is not to get hit. So weve upped the defensive capabilities of that ship. And its also a very fast ship to keep that its important to keep in mind this is a Small Surface combatant. That is the new upgraded ones have been designated a frigate. But they are not theyre not destroyers. Theyre not cruisers. And they have a very different role to they have a very dempbt role to play. The survivability, particularly with the upgrades, meets our fleet requirements. Thank you. Thank you, gentlemen. Thank you, mr. Chairman. Id say to our panel we have good attendance up here so well be talking about a lot of systems. And ill kind of start off on one that i think has changed quite a bit. About a year ago, they were talking ant adding 400 or so for the chase house and that was in the 15, 15 budget. I dont remember. What is the current inventory. If we were going to get how many more would that represent when we said 4,400. Ill have to get you those numbers. Is it like 2,000 thou . We benchmark against the combat requirement. And, again ive got to get you okay. Thats final. But i guess my point is if we were talking about projecting, in last years budget 4,432 more of the jsows over the life of the program, which would have included, at that time because we had in this budget 200 to be bought. And then, all of the sudden at least it was to me, the program was terminated. Now, im just wondering, what has happened that caused that not to be a necessary component as it was considered to be before now . Well, we had to sake some chances. Im not happy at all. We dont have enough munitions. Ive very concerned about it. But the point is we felt were at the boltcombat expenditure. Can we reconstitute the line . We felt we could. So were taking risks. Thats not a good point. Youre adding risk by having to do this. You would prefer not to. Id prefer not to. I have risk in other munitions that are just as bad. Its not a good picture, senator. Yeah, i know thats right. Senator reed talked about the f35 just to e lab rate a little bit more. That would actually be there in replacing the f18s, is that correct . And the ea6bs . And the aviation. It will replace three aircraft all of which are over 20 years old. Yeah, thats right, 23 years old, the f18s and the e6b is 27. So and youve looked at the missions of all of these and youre satisfied that these missions are going to be met with this change and getting rid of the older, but 35 is certainly capable of doing that . Senator its important to point out that this action doesnt just replace the f18, the ea6. It will do everything that those three aircraft will do. Burr, also, in terms of information, it will do a significant amount more for the Marine Ground air task force. Admiral, you talked act the pie lots. We have a pilot shortage. And youve talked to your the airports and the problems that theyre having right now. Your problems are similar to that . They are. What happens is people get deployed, theyre flying all the time. In fact theyre flying so much working up quickly to go on deployment, some of them say i cant even get a will done. Then, when we come back, they shut down. We sit around here and look out on the tarmac. Theres a super hornet and theyd love to be flying but we dont have the funding to provide that. Theyre, like, whats up with this . This is not what we signed up for . Thats the same situation the general talked about. Now, tell me, i remember bringing this up kind of comparing the cost training versus retention. As i understand, the ten years of the Retention Bonus was around 250,000. Thats in the air force. Is that comparable to the navy . Its comparable. And then the training, if you take the f22 capability, its Something Like 17 million. We look at the economics of this thing. Obviously,its far better if we can go through training. Have you thought of any specifically that will help you in that respect . We have. Yes, sir. We use the term we want to optimize what we call is our training plan. Our fleet response training plan. And you hit the nail on the head. Its getting the flying done more consistently throughout. Keep them, if you will, busy, proficient proficient, that they feel a part they have a predictable future of. Instead of a cycling process as they get ready to deploy. And thats the message i get when i talk to those we know theres a lot of competition with the airlines. We know that in the training, that its a supply and demand thing. Senator, excuse me. A consistent budget will really help us be able to do that. Consistency is key. Absolutely. I understand that. And you said general funding below the president s budget will require a new strategy. You answered a couple questions about some of the specifics. What would an overall strategy look like. What were we talking about . Senator what i really meant was on a daytoday basis we wouldnt have the marines that have foredeployed to meet the allies to respond to the crisis part of the strategy. And then we would have fewer forces than required to meet the single major contingency. And so in my mind, that does from a marine corps perspective, drive a need for a new strategy. Yeah, i understand. So its a capacity issue as well as a readiness issue. Okay, my time is expired but if you want to expand on that for the record, please, do. That would be something that we need to be equipped with here. Thank you. Well do that, senator. Thank you. Thank you, mr. Chairman and all of you for your service. Appreciate it very much. Ill take a little different twisz in this. Theres not a person in West Virginia thats not extremely proud of the 34i8 tear that we have and have served with distinction and truly is proud to have the great esz military the world has ever recorded. Whats the greatest threat that the United States of america faces . I thought i was going to hear in his depiction of around the world terror that we were facing. He didnt even hesitate. He said finances of our country is the greatest threat we face. Were at 18 trillion and growing. Were growing another half trillion this year. With that being said, people back home in West Virginia want us to be responsible. They asked the question, they said, you know we hear that our military, our department of defense will spend more than the next seven or eight countries combined. How come we cant do it more efficiently or more effectively. And if money is the problem weve got to make sure that we have the money to do it. But are we using the money wisely . So, through procurement were trying to get audits, find out why everyone has a different platform. Everything seems to be siloed. I think just from the navy of going from 149 to 161, your request. So theyre not going this way. And i know youre saying if sequestering kicks in. Sequestering has a real onus i think, kond sags to it. I appreciate that. I know its hard for you all to make those comments, secretary. But is there ways that we can do it more effectively and e fishtly and what can we do to untie your hands to let you do more with maybe a little more challenging financial, but be able to have the ability to do more with what you have . Senator, first, youre absolutely correct that we, as a military, have to be efficient. Have to be effective. Have to use the taxpayers money very e fishltly. My father was the cheapest human that god ever put on this earth, i think. And i am his son. We had been using the tools that this committee, this congress, has given us. Ill show you a chart. Heres what we have to do to buy anything. You cant read it. I cant, either, from here. Its spa get fee. Its elaborate. You could help us by taking out some of those things. By make us focus on whats important important. And thats the outcome. The navy spends about 40 a year on contracts. And, until a couple of years ago, we could not track that money until we authorized and aproep rated it until we got to the contract. We can today. Were saving, today, 10 a year. So 4 billion a year on contracts. Were going to do better than that. Those are hard things