Welcome to brookings. As you know, i had the privilege and honor of welcoming back to brookings chairman mack thornberry, from the 13th district of texas to discuss matters of defense policy, budget and many other subjects under the sun. He is the chairman of the Armed Service committee. A texan who goes back to ranting in the 13th district as far back as 1881, probably wondering what he was doing on a rainy washington dealing with the federal budget when he couldve been back home in the texas springtime but we are grateful for your service. We are both grateful for being here today. Its a momentous time in American Foreign policy and defense policy and we will get quickly to matters of the Defense Budget, defense spending and where the entire debate may go with tomorrows release of the president s budget and congress gearing up in its normal hearing steering on the subject. Just to get us energized on a good monday morning if you could please join me in welcoming the chairman to brookings commack. [applause] before we get to the budget, could you summarize your acquisition reform bill . You had a couple headlines and one additional aspect to my question might be that i remember last year when you are here and elsewhere talking about your efforts with senator mccain and last years acquisition reform, a lot of what you emphasized was, if it saves money, thats nice but most important thing is to get technology to the war fighter quickly and efficiently. I know that remains your driving concern. I was also struck that you are trying to help the taxpayer with reforms and efficiencies that make save money. Looking at contractors, looking hard at various kinds of requirements, logistic matters and how we purchase regular supplies, i wonder if you could explain the latest reform proposals in the context of how you think about acquisition reform. Sure. Maybe ill start abroad with a bit of context as you alluded. I think, as far as commerce is monthly when it comes to National Defense these days, we essentially have two mac. One is to help rebuild the military and second, reform to help the military be more agile and innovated. The budget, larger, deals with the rebuild. What you spend money on and et cetera. On the agility side, we face a world with the widest array of complex challenges, we have ever faced. And a world where technology moves and adversaries can direct, investments, capabilities at a much faster pace than they ever have before. All of that requires us to be more agile and thats the reason acquisition reform is so important. As you point out, it is about hitting the best our country can provide into the hands of the war fighter in a timely way. We owe them that. A lot of what weve done in the past two years has focused on the big acquisition programs, planes, carriers and all of that. This years bills focuses, as you mentioned, more on that day to day source of things. So, probably the thing that will resonate the easiest with folks is one of the reforms we propose is to allow dod to buy things are commercially online, like on amazon Business Division and several other competitors like that. You have two choices that you can go off the gsa schedule which cost more and which Many Companies have decided they are not going to participate in because of the requirements. You can go to that contracting process which takes forever and you have to do the beds and all that sort of stuff. None of which is the definition of agility. So, one of the things is to allow dod folks to go by commercially, offtheshelf items, online on these online portals. We also try to update the audit, the way that companies are audited on the costs they incur. This one basically starts bringing in privatesector Audit Companies to do some of this job, its happening in other agencies, it ought to be able to happen in the dod. Two more, right quick. 70 of the lifecycle cost of programs are unsustainable. Not at the beginning, its on everything that it takes to keep it operating over its lifetime yet, we dont Pay Attention to that. We buy the cheapest thing that we will get the job done at the beginning, one of the changes is to require you can serve the same cost from the getgo. Then the other one, as you mentioned, Service Contracts of all the things that dod contracts four, 53 of it is services. Attend not weapons and agreements. Yet, if you ask dod, what are you spending the money on . And lots of other logical questions, they cannot answer it. This year bill we will try to get our arms around the Service Contracting that dod does with an eye towards making it yes, more efficient but also more agile. There are other things but those are some. Excellent. We want to come back to this topic and as you know, will have a conversation for a bit longer and then go to your questions but let me move on, if i could, to the Defense Budget. I think we have slides up that are showing some of what youve presented and proposed. Even if they dont come up, for whatever reason, let me summarize what i understand to be the state of play with your proposal. As we all know, President Trump has proposed a quote unquote 54 billiondollar increase in the Defense Budget for 2018. That is measured against the sea frustration level but lets say president obamas level was a more reasonable benchmark, as were slideshows, its only about a 20 billion increase which is real money but only, you know, the of the Defense Budget overall. What you are now suggesting is that President Trumps proposal is not enough and you want to add roughly another 37 billion to what he suggested and i wondered if you could, partly because our technology is failing here, but layout a little bit about the major components of that additional 37 billion would be and then maybe we can talk a little bit about each of them. Sure. Again, a little bit of context. Last year, as House Republicans were putting together an agenda to run on, the speaker asked our committee to look at what we think needs to be spent on defense. What would it take to repair the damage that has been done from eight years of crs, five years of the budget control act, high operational tempo, all of these things that have accumulated so his charge to us, okay, lets figure out what it would take, President Trump is elected and he starts talking about a specific size navy et cetera. So, what we did was to say how much money would accomplish the goals that President Trump has set forward but could be responsibly spent, we believe, in fiscal year 2018. Thats where we end up at 640 billion. I think, the budget the administration will propose is roughly 3 more than what president obama had suggested for this year. Its roughly a 5 increase over current year funding so, i think it is fair to say basically the obama approach with a little bit more but not much. What the difference . We tried to lay that out and this shows some broad categori categories, air dominance for example, is ten. Dot billion dollars over what president obama suggested. That is a broad labels. Its not just more airplanes, includes the maintenance and operations, the training that is required for us to go against high and adversaries like russia and china which we have not done so much of in recent years. Thats the reason you see these categories. Some of it are bringing our Ground Forces up to date and some of it is Ballistic Missile defense. If i were to look at this today, looking at whats happening with north korea, im not sure we put enough into missiledefense both increasing the number of interceptors and current systems. Are we willing to forgo with a different level of budget. I think we have to be concrete about it. The men and women on the front lines will have their life affected by what were not fixing by the new capability were not getting or whatever choice were making. We need to make a more concrete. And thats usually how this debate evolves. This is the base of budget and does not include war costs. Were talking about the base budget for the department of it defense and then the department of energy. The 640 billion you would recommend what have additional 60 billion in overseas contingency. Is that a ballpark . I think all of the s estimate is 65 billion and operating and we can get into more discussion about that. This is under budget categories the account which includes the nsa and department of energy and some other things. Its not all straggly pentagon. This is not trying to change the longstanding practice of putting base cost in the oak oh account. In other words theres some people have been trying to say we been trying to take some of those were cost in overseas contingency budget many of which are based budget related to put them back in the base. You dont have enough money to do that,. It does not accomplish that goal. I think thats a worthwhile conversation to have. What concerns me is if there is just transfers into the base budget and people call it a defense increase, it will not be accurate. It will not tell you the facts that you have not increased anything overall you just change the label on the money. Its worthwhile conversation to have mainly because putting base rate requirements makes it very difficult to plan and means that the money is not spent as efficiently as it could be. And we bank come very contingent upon that. That proposal youre offering is designed to fun things that we know we can actually do reasonably well and reasonably short order. Is this also consistent with the candidate trump vision of roughly a 350 ship maybe now and to increase the size of the old and also getting back to is that the vision behind this . Yes. I just want to be clear that you cannot accomplish these goals in a budget or two. It takes time. The general has told us her example that it takes ten years and 10 million to grow a fighter pilot. Therefores today was roughly 1500 pilots short. You cannot snap your fingers and then open the Training Pipeline up big enough to fix those problems. This takes time. One other point on that, earlier this year we had the vice chiefs who testified about the state of our military. One of the points that general wilson, vice chief of the air force made is that air force pilots today are receiving fewer training hours in the cockpit than they did during the whole military of the 1970s. That was my reaction. I went back and looked, we all know about the military of the 70s. Nobody would suggest that we have equivalent problems with people and so forth. But, there are a remarkable number of parallels between the damage done today and the damage done then. What did it take to get out of that . The last year jimmy carters administration was a 15 increase in defense funding. President rankin comes in has a 17 . And then an 18 , and then the next year 13 . And then three more years of 10 . That is what it took to overcome the neglect and damage done in the 1970s to our military. That sort of context helps us with the siphon duration of what sort of repair work is needed for the problems we have created. By the way, i have noticed in recent weeks for example aviation week and Space Technology article there was more data about which aircraft have which Mission Capable rates. Do we need to get more that date into the public . I know theres a tension between classification concerns and not wanting to tipoff adversaries and also tried to be specific about the defense needs. How should we handle that . Ive been pushing for more openness. Frankly, i have had some debate about the leadership of the pentagon about this. They are concerned about telling our theres too much about what our problems are. My focus be more politically than theirs is to get the Political Support we need to have the rebuilding like they did in the 80s, we are going to have to be more explicit about it. I will say, when you have things that happened last month, you had a fair number pilots go on strike because they believe the aircraft they were being asked of lies not safe. It does help wake people up little bit. We have had a number of classified briefings with my committee. I think the more people know about the facts, the more urgent fixing this problem becomes. Let me look at one more example about readiness problems which is, army brigade combat teams. For the last two or three budgets the army has been saying it wants to send roughly one third of their combat teams per year to the Training Center to do the full three week long exercises that are the combination. While think that if we have been trying to find that for two or three years and are doing one third of the brigades per year, we would be starting to catch up. Apparently we are not. The army is still talking today in the same kind of dire tones that was two or three years ago about the state of readiness, the lack of proper full unit training and exercising. What is going on . Is it because of the continuing resolution and other problems that impede the army from carrying out plans even if the lines of getting close to the amount of money requested. Cindspending 600 billion a yeas not chump change. Why cant they catch up . I think youre right for part of it. We have not been spending money efficiently. Certainly for units to rotate through the national Training Center you have to plan. Part of the reason i believe the readiness problems are deeper than most of us have realized is just like we are cannibalizing parts of a plans to keep other planes flying, and parts of a ships, we are cannibalizing army units in order to make those that we are sending on deployments full. So you talk to the commanders about this, part of their challenges they never have their full units. They have people coming and going all of the time. If they have a chance to go to the national Training Center, they come back and a bunch of the people are taken away and plugged into other units. So they have lost the benefit. General millie says what he is looking for to increase the number of people in the army is not to increase the course structure is to plug the holes so that you can keep units together. And keep units training together is what is required to go against more sophisticated adversaries. There is a number of other examples where our people are so good when he send them off on a mission they will accomplish that mission. If you look at the cost, the damage that is done to accomplish that Mission Weather mechanics working virtually aroundtheclock or cannibalization, that is part of the reason im convinced the damage is deeper than we understand. Warmer part of the readiness debate should be thinking of how we do deployments differently in some cases . Not that it will solve anything by itself without more money. Were going to pull in now, we still have a brigade in korea and is generally unaccompanied and rotated, its a strain on the army. We start considering some of these deployments to be permanent. I think so. We have asked for a study just on cost of permanent presence in Eastern Europe versus a rotation. That is just dollars. What we are talking about is the human toll on families and elsewhere. I think we ought to look at those options. Part of the reasons we ought to look at them is to show our commitment to allies in various parts of the world. Part of it is strain on the force and then we need to evaluate. I dont know what the cost data will show. Im not convinced it is tremendously cheaper to rotate a bunch of units through rather than have a permanent presence. It strikes me that 340 billion plus were cost is a lot of money in one sense but still only about 3. 5 of gdp. Is that about right . I think thats in the ballpark. Way below 4 still. One of the most revealing charts one can see is percentage of gdp overtime that we have spent on defense. What you see is the reagan bump but then it has been plummeting. My last question and then will open things up. Of course, this is the inevitable question because everything sounds a reasonable were talking about in defense only term but then how do we pay for it . Were seen discussion about President Trump wants to cut the state department and foreign assistant accounts and leave aside domestic issues that will be controversy. People are saying that it is doa on capitol hill because of some of these cuts. Im not suggesting you want to get into this and every detail today but i do wonder if there are certain principles you would at least counsel us to bear in mind as we think about how to pay for these needed increases. I was a principle number one is the first job of government is to fund at to fun defend the country. So the first part of taxpayer dollars ought to go to that. Then Everything Else is secondary. That is where i start. Focusing more the budget, we have to keep in contact the two thirds of the federal budget are entitlement or mandatory spending programs. Now for defense we are at 14. 7 of the federal budget. Needless to say, we are not going to fix our budget problems by cutting or even curtailing the 14 while ignoring the 66 plus that is mandatory. I think we have an opportunity, i realize this will sound pollyanna, there are some big issues people are looking it. For example more state flexibility in medicaid. If are coming from texas is different from new hampshire. There are opportunity there. Tax reform is in play. The big moving pieces are being discussed. That gives us an opportunity to put a Little Common sense into this discussion. What happened . I dont know. Will politics trump Everything Else . I dont know. We have an opportunity if we can get people of goodwill on both sides to sit down and look at these big moving pieces. We can put defense and Everything Else on a better track. Excellent. I have one question for later which is going to be about thinking more about longerterm innovation. As you point out, some of the current debate is emphasizing the nearterm readiness. Well get some of the questions and now.