We have a pretty good way of looking at the relationship between supply and demand. On the supply side you can capture this in a diagram. What it would look like under this budget and what it would look like under sequester. It is not a pretty story when you compare that to the requirements around the globe. I am talking about real requirements for presence and crisis response. It is starting to get ready pretty dicey, that that is why we are saying manageable risk. Im told you have 7. 9 billion for investment, reset and readiness which sounds a lot like putting money on procurement and operations make in its, do you have a criteria in mind when you decide what you will get from that account . Some people think that is pure padding. We would be the first to say that over the course of a decade or so that we havent overseas Contingency Operation funding, too much has crept into that account. We are determined to fix that. It will take time, we cannot do it overnight. It would represent a bill almost as big as the sequester bill. We will be putting together a plan to do that and we hope to have it teased out of their of their of there starting in the budget and completing in 20. But it remains to be seen how we will do that but we would agree that we will get oko spent one what it was intended. Their intent is to try to move what these and during base costs that have crept into oko over 13 years of war, act into the base object. Back into the base budget. We can only do it if these sequestration caps are lifted. Otherwise if you took 20 million or 30 billion dollars of enduring costs and try to put it into the budget without a topline increase, as the vicechairman said, that is a 20 billion per year cut in essence. So we are working with the white house and first we have to find out if sequestration caps are lifted and then we will unveil our plan. The people who can answer your detailed questions are mike mccord the undersecretary of defense and mark ramsey and the ja. I would like to turn it over to them. Thank you for being here this afternoon. We look forward to answering your questions of the next several weeks and months as we try to find the right balance and capabilities capacity. Thanks, everybody. More on the president s 2016 budget request with defense under secretary and chief Financial Officer mike mccord and Lieutenant General mark ramsey. They spoke to reporters for a little less than an hour. Ladies and gentlemen, undersecretary of defense mr. Mike mccord and Lieutenant General mark ramsey. They will read for about 20 minutes and then take your questions after that. Thank you. Good afternoon. I have to begin by sending out greetings to the people of my wifes hometown of punxsutawney, and thank them for letting us share groundhog day with them. In that spirit, i am going to predict at least six more weeks of budget season. Possibly more. Second, i just want to say to seahawks fans, sorry for your loss, but at least it was an interesting game for once. So, general ramsay and i are here to address an equally compelling topic, the department of Defense Budget request for f. Y. 2016. I understand that the press release has been posted, that a number of documents have been posted on our website that are available to you and to others to read that will have more details than we have time or i have capability to address in the session that we have here today. But let me start off by saying that i think theres a couple of themes that strike me about our budget request and the process we went through this year. First is consistency. I think you heard, touched on a little bit, we have the same strategy that was back in 2012. The same endstates that we have the same ends that we have been seeking for a couple years are still the goals of this plan and this budget. For example, 304 ships in the navy, 50,000 active duty. The same end points that we had are still with us. We also have basically the same the same budget profile. Those of you who follow, and i know not everybody focuses on the out year of a budget as as much as people do inside the building. But if you looked at last years plan, of where we said we would be in 2016, we are basically at that same place. We also have the same profile really, writ large, over the next five years, as we had been projecting last year. We also have many of the same proposals reforms that we believe are needed to the program, through the budget, whether it is compensation, base closure. There is a lot of similarity consistency of the things that we have been saying we need to get to, things we needed to do where we wanted to go that are still the same in this budget. Second, i think that there is a real theme of balance in our deliberations with military and civilian leadership and with the final project of trying to address todays needs as well as tomorrows needs such as modernization for future challenges. And then finally, i will say that i think that probably what will be a big theme this year as people discuss this budget on capitol hill and other places will be the increase that was alluded to in a question already over the level we have had the last three years, why is that necessary . I think that is our challenge to explain that, of course and make the case for that. I think we have a good story on that and well get to that in just a minute. The budget that were asking for is taking us back to a level that we had earlier in the first several years of this we had a trough since then that was imposed by the budget control act. With the sequester including the mechanical sequester hitting us in 2013 as well as the flattened spending imposed by the ray ryan deal. Mr. Deputy said that was not the worst outcome we couldve had and it did give us some stability, but it was never the Department Decision to be down at that level for extended time. I think this budget is consistent with where we have been all along. We have a trough, as the deputy alluded to driven by reductions that we have to dig out of. If i could get the next slide. The strategy is the same strategy described in 2012 in the qtr cutie qdr. Following mathematics chart will show you over time our budget request. The base budget on the bottom and the war funding on the top. Youve heard the numbers on your charts so i will not take time to read them out. I want to take a little time with the next chart showing of the funding lines over the next couple of years. The line on the top the f. Y. 13 , budget was the budget that we submitted and developed after the budget control act was agreed to. This is a number you have probably heard many times out of this department. The 487 billion from f. Y. 12f. Y. 21. That is represented by that top line. Had the Super Committee not failed to reach an agreement, thats where we would have been. Thats where we think we should have been. The following year, we submitted a budget that was a little bit less over the next 10 years. That is the blue line. The f. Y. 14 budget line. That was submitted right about the time or shortly before the sequester happened. Then in the in the ensuing spring and fall, when secretary hagel got here, he directed strategic choice and management review refered to by the acronym skimmer, which is in the chart and we explored a broad range all the way down to sequester levels, focused on an area that is sketched out in gray on this chart, which was the level that we thought we could sustain the strategy fully or getting down to where we thought we would not be able to do it without major changes, a level that was referred to that range is described in gray. The sequester took us below that range. The twoyear budget deal, the bipartisan deal kept us flat at that level. The threeyear trough was pretty far below where we thought it should be. It takes us pretty much to the that range. You can see within our fiveyear plan following this, continuing along at the end of that range the lower end of that range. So again, we have been fairly consistent the skimmer was almost two years ago now that we sketched out a range. We are bringing a budget that takes us up to the range that we said then and believe now is the range we need to be in. And taking us back to a level of funding that we had several years ago, not to some extravagant level that is unprecedented in our history. I think again that we have a profile that is both defensible and consistent with what we have been saying. The next slide just gives you again some of the basic facts about where the money is by military department and by the major areas of expenditure this the budget, our operating costs and investment costs. Basically what youll see on this chart if you look at the increase from last year to this year, what is it that youre getting as the budget increases . About 40 of it is on the operating side and about 60 is on the investing in the future side. The personnel costs go up only slightly. It should be noted that the size of the force decreases somewhat. It speaks to the point that we are trying control the growth of compensation costs. Were not cutting competition. Even when the size of the force is stable or slightly declining our personnel costs are still rising although again most of the investment that were trying to put into readiness and also investing in the future. The next slide describes some of the resource tradeoffs and some of the constraints that we have. The deputy has alluded in a couple of forums to some of the issues that happened last year just in the time from when we submitted a budget a year ago today, russian aggression in eastern europe. The rise of isil. The ebola nation the department was sent help out on. We know they expect us to have a ready capable Flexible Force to respond to unforeseen events like that. Our troops do everything we ask of them, but we have to we feel we have to have a higher i think the deputy has alluded to the planning that went on really assumed that we would have some ability as we saw implemented the president s policy to draw down the forces in afghanistan, that those forces would be able to come home. The pace of world operations has hampered that. That is one of the channels described on this chart that require us we believe to step up our game and make it a challenge for us to try and do what we have been doing at the funding levels we have been at if you want us to continue the have that quality force in the future. As i said, in any introduction briefly, the force structure the size of the military that is we believe we need to support is roughly the same as what we have been saying in terms of end strength and the size of the Nuclear Triad and major operational units like the number of ships, Tactical Fighter wings. There shouldnt be any surprises to those of you who follow these issues closely. We have slowed some of the ramps on end strength to allow people more last years budget i know had some confusion about the army. I can address that later but we have straightened that out in this years budget request. We also have some of the same proposals to the extent to some of which were agreed in whole. Some in part. Some were not agreed to at all last year. This is a mixed bag. This is just trying to mention a few. Aviation restructure and the air force probably got the most headlines of anything last year. Base closure is an issue i think everyone knows. Ill be happy to speak to that. Some were agreed to. Some were agreed to this part. Some were not agreed to at all. This probably doesnt do justice to the complexity of all of these issues, just to list some of the topics on a slide. Again, to the things that were not agreed, the department believes the proposals were the correct and necessary proposals. There are also things where we have moderated based on real world changes, in particular the demand for i. S. R. Continues high, once we started deploying to iraq and syria. We have moderated the phaseout of the u2 from last year. There by three years. There are changes but many of the things we think were the right proposals and were sticking with them. The next slide lists some of the major modernization programs that i know you probably have had a chance to quickly look at these. Im not going again read you these numbers. I would say that the just to pick out one, last year when our budget was down we said we just cant afford to do this. At the higher level that we are requesting now we feel we can afford to maintain 11 carriers but that is contingent on being up at this higher level. If we had to come down, im confident our position would be that we could not afford to stay up at 11 carriers if we had to persist at the 496 billion level going forward. That is an example of something that we makes a difference and there will be many examples that i think will need to be discussed throughout the year, what is it that you can afford to do at this higher level. Were proposing it is not affordable at the level that we have been at. These are not of course all of the notable items. Were going to be followed today i believe by the army, navy, air force. The Missile Defense agency. Just to take an example of something that is not on the slide, there is probably a story on some of the vehicle modernizations. Something that doesnt get as much attention. Some of these programs have a Pretty Healthy increase over last years level. Many more things that you can delve into as we go through all of the parts of the departments rollout today. In addition, i think the deputy alluded to the fact that we had a good back and forth inside the administration over the fall of some issues that were important to all of us. Many of you are quite familiar with it, which is not necessarily only about money. I would say there are over 100 recommendations of that review and only 20 of them involve money. This is an example. Ill touch on this a little later, things that are priorities of the secretary, priorities of the department are not necessarily the biggest budget things in all cases. Space is something that is significant funding as well. There is a significant new concern going forward. This is about the future years as well. We have space and i think power projection are areas when we talk about modernization and addressing the future, looking at eroding technological superiority. These are primarily the type of areas we are talking about where we are investing and we can talk about some of the particular munitions. Some of these areas are classified and we cant talk about them in detail but there are also some things that we can talk about. Something that is important to the deputy. I think he has already spoken about this. I dont know that i could really do this justice compared to the justice who is leading our efforts here. We have tried to give you a flavor on this slide. Are not only about money but ways of thinking how to approach the problem. Where he is trying to move the department forward. Some of the particular programs listed here, probably youre familiar with the rail gun effort. Undersecretary kendall also feels very strong about it which i believe he testified on to some extent last week in front of the house. When we get to readiness, im going to ask general ramsay to talk about the near term side of what i described as near term readiness and longer term readiness. Good afternoon. I want to lay out as i go through these two slides i want to point out that the first bullet is really a look in the Rearview Mirror of the last couple of years about how we survived the bipartisan legend act and with the service has done to get back to a full Spectrum Readiness posture. We have spent an awful lot of time in the readiness area in the last three budget cycles. What has become obvious over those three years is readiness is a very difficult, a very complex area to understand because it has a lot of moving parts. Will we have been able to do is we put as much resources as we can in two readiness to get the full spectrum recovery. All of the services operations, tempo, being what it is today, and no other strategic surprises in the world on track for 2020. Taking a nearterm risk. They are more on track for 2023. The events of the last year cause us to relook at this. We had some surprises out there. Every single year in the world there are events that unfold area unfold. Forces have the time to reset have to have the time to reset on full Spectrum Readiness after 13 years of counterinsurgency. They need two rotations through the National Training center to achieve that level of readiness. That alone takes money and takes time. There are some other air forces that have not come home as we have thought because they have been ordered to do other things in the world. The isr we thought was going to come out of afghanistan is going to that region of the world. We are moving things around and responding to what the nation calls upon us to do. Our primarily garrisoned back home station, they are trying to get their rotation rates set. The challenge for the department and navy and for the marine corps and navy force themselves are too big challenges. One of those is being able to reset their aviation arm, especially older model fa 18s. The devil backlog is a longstanding issue. It has been built up with 13 years of continuous combat as well as the whole redundancy quest ration for 23 for 2013. The navy has a backlog of ships to get back to the shipyards. We are working through the models as well. Just touching briefly on special operations command, they are balance they are balancing. They have largely been untouched by readiness. They are resetting their force from being largely afghanistan to being that global counterterrorism force. That is going to take time to reset them as well. I have two slides to briefly touch upon for compensation. This is another area the department has spent a great deal of time on. There are Guiding Principles that we used. Retirement for military compensation and largely follow the same principles. This budget submission this not reflect the commission recommendations. They use Department Data to make sure their recommendations use the correct starting set. And we are now embarked upon looking at those recommendations. Our submission does not include those recommendations. If you recall the president s budget had a package of paying compensation recommendations that we felt were necessary. It will help us balance the capability force and the readiness force. The dollars we save and compensation this year and last year went back to the services to help balance out readiness and capability. I want you to recall in the qdro report from last year, there are three pages that detail the capacity of the force. We have to go back and look at how the force is compensated because the military per