Good morning everybody. Welcome. I am president here at csis, and the reason we are kind of rushing is because we only have an hour. We have a wonderful opportunity to listen to these three secretaries. I will be very short. We always start with a safety announcement. I am responsible for your safety today. They have some guys backstage with guns that will take care of that. If we hear anything, followed by instructions, we will take the exits right behind us, go down to the street Near National geographic, and i will take everyone to see the great new show on the evolution of jane goodall. We have never had anything happen, but i want you to be ready. You all know who these people are, so i do not need to introduce them, but you know the but you do need to know the absolutely Critical Role that they play. They are running giant organizations and they have to manage today, tomorrow, and 20 years in the future. It is constantly in their calculus about how they posture and shape these remarkable institutions not just so they can do the job today, but the job in 20 years. Each one of them is working on critical dimensions of that as we speak. So think about this unique role that they play. No people other than the secretary, no other person in the department has this kind of responsibility. We are fortunate to have them here today. We will lead an initial conversation and bring you into it later on through your questions, write them down on your cards, but enjoy the session. Welcome with your warm applause our three secretaries. [applause] thank you, john, and thanks to everyone who is joining us here, both in the audience and online today. I know we have a big online crowd. We have cards in your chairs and the way we are going to do this session, we will have a discussion on stage for two thirds of the time, give you plenty of time to pass up your cards. There will be people that come around. If you have a question, just hold it up. Someone will come by. Most importantly, who will have the best football season, College Football . Wow, no one. [laughter] we are improving already. Two years ago we had a National Defense strategy out. We hear lots of talks from the department and the community, and you have submitted the president s budget, the last budget of this president ial term. I would love to go down the line and hear a little bit from each of you about the pathway your service has taken. From that strategy coming out to today, and how you feel you have developed your service, helped lead your service to contribute to the joint war fight in line with the strategy. Why dont we start with you . Thank you, and to you and john, thanks for having us today. It is always a wonderful opportunity. You give us wonderful advice when we need your help, so i appreciate this opportunity. For us, we have the challenge of managing the current condition. We are 60 of combat requirements worldwide, people to ploy in 140 countries. The Current Conditions make it very difficult. That said, we conducted the most complex reconstruction of the army in over 45 years, created a modern organization, collapsed the stakeholders under one roof, so we have reduced the decisionmaking. We have moved 45 billion against our modernization priorities, so you will see a roughly 5050 mix between investment in new capabilities and legacy platforms. So we are putting our money where our mouth is. We have tried to organize against the problem. The challenge we have faced as the breathtaking demand we face worldwide. We have increased our Deployment Readiness Program as well as our defender series exercise. We take our counterspace unit and send them to the pacific, as well as european theaters. We have increased the rotation of deployments to areas of the world where we have a particular competition in play, if you will, against our competitors. We are trying to strengthen the balance between current demand and the National Defense strategy, and we think we are doing pretty well. Our budget is really targeted to modernize and strengthen our people. So we are going to modernize by divesting to invest, to connect every shooter to every sensor, every sensor to every shooter as well. And we are looking to strengthen the role of our people. Situational awareness is important to a pilot. We pay a lot of attention to right now, the new space force is a big part of what we will be carrying in our budget. It is not a massive part of the budget, but it is a massive park of what the budget is focused on enabling. For us, the underlying principle of everything we are trying to do is to increase the agility of our forces and our people. That is because of increasingly complex security environments. Things are getting far more complicated, far less predictable, and we need to invest in those capabilities and those skills and that Human Capital that can adjust to that. I bucket it into three broad categories, which i call gray matter and gray zones. We need to grow our fleet to 355 ships or more, so we have to determine how we are going to do that. Will it be the same mix that we have been talking about over the last several years, or a new mix that makes more sense . The gray matter piece deals with the people, developing the intellectual agility and our people. We put a lot of money and emphasis on our education, higher study, and are implementing a lot of broad reforms across educational institutions to link them back into the war fighting community so that we can have a learning organization that is constantly iterating the challenges, understanding our competitors and adversaries, and adjusting our structure in how we address that through intellectual development. And gray zones, when people think about gray zones, they think about little green men running around in ukraine. That is not what i am talking about. Im talking about the things that happened behindthescenes at the department of the navy. Our business systems, i. T. Systems. Things people take for granted. When they are taken for granted, they end up being suboptimized. Secretary mccarthy pointed to some of the challenges. You put forward the stern memo and also a new assessment to be done as you just reflected here. Can you talk a little bit, and i will come down the line and give secretary mccarthy a second shot on the same type of question, about the challenges and barrier s in front of you that your most looking at in this coming year to get to where you need to go. Sec. Mccarthy we are facing in our budget several competing pressures. One is a mandate to grow to a larger fleet. Readiness hole we are trying to dig ourselves out of, and the third piece is, we look at the budget projections going forward. It is relatively flat for us. We have to figure out a way we look and see what that future force looks like. We have just done a new future force structure assessment. It is a bit of a different mix than we have been talking about before. We will iterate that to determine what the right path is, but there are some north stars in that structure that say we have to start moving out in certain directions. That is going to challenge our topline considerations. What i told the department is, we need to look internally first, at ourselves, to see where we can find savings within the way we traditionally do things to help fund that before we can ask for anything more from the taxpayer. That is the process we are going through, that is what the stem to stern review is, and it is a staggeringly low number relative to our topline. Our topline is over 200 billion a year. If we can free up 5 , 6 of that, we can move down the path and get to a 355 ship plus navy in the next few years. But we have to do some soulsearching to get to that. What are the risks you finding the most confounding to confront right now, or the challenges right now . Sec. Barrett this will take a toll on all of us. [inaudible] [laughter] [inaudible] sec. Barrett motion activated lights. So we are working especially hard to look for ways of process reform, building faster, better processes. The acquisitions process has been too cumbersome, too slow. We need to find ways of doing that faster. We need to minimize risk, but at the same time we are looking to divest of old equipment, invest in more modern, more capable, more lethal equipment, and with all of that building our space capabilities. That is the transformation of how we have been doing it and moving into new capabilities in a domain that has previously not been perceived as a war fighting threat. The significant risks we will be taking risks that are measured, calculated risks, and building for a longerterm, strong future. Thes you endure arfare of the wher lights, your thoughts . Sec. Mccarthy the comments i had at the beginning, 60 of the requirements, readiness is our number one priority and will be there for as long as i have this job. We would not be able to have the 82nd deployed, literally coming out of new years eve parties and be boots on the ground in the middle east the next day. We are proud of that. To be able to deploy that quickly, locked and loaded in less than 24 hours is amazing. Because of the investment and the leadership, in particular in the execution and training plans. 60 of the Balance Sheet is fixed. We will have to stay that way, because you have to meet those National Objectives every day in forms of deterrence worldwide. When you have 40 or less of a budget to be able to modernize a force, the challenge is striking that balance between the new capabilities and divestiture, and that is tough. You will cut out systems that have existed for decades. With that, you will be able to flesh out the new capabilities over time. You have to deal with components, with congress and industry and others, so that will be a challenge for the army in the future. Am glad you brought up those other stakeholders, congress and other industries. How have those conversations been going in terms of looking ahead to the future and all the services are dealing with areas where there may be very good arguments for divestment where there is strong congressional interest otherwise . I open that up because it is true across the services. How are you approaching those how receptiveand have members been to it . Sec. Barrett sometimes it is a bit of a challenge, because what we need to invest in might not be visible, or tangible. Kathleen not on the production line already. Sec. Barrett it might not be associated with the constituency yet. Things like connectivity. Those things are invisible and harder to identify with. Similarly, space it is ubiquitous but invisible, therefore, a lot of people do not appreciate how engaged each of us are now with space. So the two key investments we will be making that may be a bit out of the past patterns will be space and technology linkages, and those are harder to sell because there are no tires to kick. That is a challenge that will be faced. Sec. Modly the Defense Industry likes predictability and stability, and we understand all that. But all of us are moving into an era where things are going to become less predicable. We have to work with industry to be able to adapt with us as we change. As mentioned, our four rce structure, we look forward to the types of ships we will need 1015 years from now. They do not exist right now, and it takes a long time to develop and research them and make sure they actually work, but we have to get after that right now. Although we may be shifting some capabilities around, there will be tremendous opportunities for industry to participate in that. We cannot do it without them. It is just establishing that dialogue. To some degree, we would all like to move faster. We put a lot of constraints on ourselves in terms of how we can actually do that. It is an absolute mandate for us that we have to figure out how to work with them, and work with them more quickly to iterate as we move forward. Sec. Mccarthy reinforcement, one of the points tom made, and predictability. Of ae in our third year transformation and we have been consistent with our priorities and we have put our money where our mouth is. That is the only way you can get an executive to make a bet, to put that investment in their own dollars, to change the tune on the production line and make it go for a new capability. Robust communication and conviction behind your budget proposals, because the underlying theme here is you have to have the will to Look Congress in the face and say, we when we make something in their district, we do not need it anymore. But it becomes a trust issue that you have to build with the committees first and then the rest of congress. It is that consistency over time. Sec. Modly there is a great example we are all working on together, and that is in the hypersonic space. It is pretty obvious we are investing in this capability. We are doing it together. We are using the technology, but moving it to Production Capacity is a big, big leap. We will have to send some very strong signal to industry that that is the direction we are headed, otherwise if i was in their shoes and controlling other peoples capital, i would want to have a better sense that that is the direction we are headed in. A lot of this technology is really new, so we have to make sure that it works before we jump too far. Secretary esper has hinted or kathleen secretary esper has hinted or implied that there is a desire from dod to be a higher top line at the end of this budget deal, the fy 21 budget is topline is constrained by, so presumably he means going into fy 22 and a second trump administration, or a new administration might want more top line. But the history is not supportive of that. Even in the Reagan Administration, there was a strong effort to constrain defense spending in the second term, and the debates going on right now on the democrat side seem to be indicating stable or less versus more. Let me assume for the moment that plan a is get more top line. My question is, is there a plan b, and are you allowing more allowing or ensuring that your teams are thinking through what those backup approaches might be . Sec. Modly im not moving out with any assumption of an increase in topline. I think that is too presumptuous, and that is one of the reasons why we are doing this review, to see how we can fund this internally. We have a pretty big mandate to grow the fleet by 30 to 40 from where it is today. At some point, those elements of math are not going to match up. We support secretary espers request for that. If one thing is consistent over the last 40 years, the navys percent of overall gdp has gone down consistently, as a percentage of gdp. As has the entire defense budget. The entire budget is being squeezed out by things that are not defenserelated. If you look at statistics, you can see that it is clearly not defense putting pressure on the topline of our overall budget. We need to learn how to work more with the means that we have, be more innovative. In the navy, is a great example, we have concentrated in our fleet a lot more costs on a fewer number of platforms. If you look at the fleet we built under the Reagan Administration to 600 ships, the average cost of that fleet was about 1 billion per ship. Our average cost today in real dollars is about 2 billion a ship. We have to reverse that trend, get lighter, more lightly manned ships as well. Sec. Mccarthy i echo toms sentiment as well, the fiscal environment is tough. The investiture of legacy capabilities, the only way you are going to get there is by increasing your buying power. There are a lot of things we are doing better. We have reduced the obligations by billions of dollars. We are making every dollar count within the Balance Sheet. Improving your buying power can help you mitigate the risk of not getting the fiscal increase that secretary esper laid out at johns hopkins. So a tough environment and again, the challenge the army is facing will be the modernization boundary that is coming with growth and strength. That will be two big verticals in our budget, and it will hit us no later than 2023. Sec. Barrett we do not anticipate a topline growth, although we certainly have ways we could use it. We face two thirds of the Nuclear Triad modernization, and that is coming. We have all of the expenses that would go with increased capability in space. At the same time, we are implementing reforms. The acquisition reform taking not just money but time out of the process to the extent possible, improving efficiencies, cutting time, our Acquisition Team at the century project taking already over 100 years out of acquisitions procedures and targeting 200 years of aggregate time in the acquisition process. Looking at reforms that will help improve efficiencies, but at the same time, the expenses of the technology that we buy, the air and Space Business is an especially Technology Dependent process and that is a growing part of the economy, of defense, and higher expense. Kathleen is there a hope there can be some joint approaches, joint solutions and so on . Are there efficiencies to be had there . Some folks i think would probably get a little jaundiced from past experiences with joint programs. Should we be hopeful . Sec. Barrett absolutely. These things cannot be done just individually, in the individual services. We must be cooperating, and we are. Building connections, connecting each shooter with each sensor, but also Artificial Intelligence. The Artificial Intelligence center. Working on hypersonics. We are all involved in that. The development of technology is very much a joint effort. If we did it individually, we would be finding duplication and inefficiency that we cannot afford. Kathleen on that point, as space voice force stands up your, what is the navys view of space force . Sec. Modly barbara said it well. We are completely dependent on each other. Particularly when you look out at the pacific theater, a lot of water, a lot of space, we have to have awareness on. Our ships cannot have their dependence or interdependence on the space domain. We are working very closely with the air force on that. Kathleen is the same true on the army side, in terms of space . Sec. Mccarthy absolutely. We are the largest consumers of space in the department. It really comes down to the operating concept of how you are going to fight in the future. For us to be able to mitigate a hypersonic threat, you will need a lower orbit satellite architecture, a much wider array, and the ability to queue targets very quickly to mitigate