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tv   Defense Department Fiscal Year 2017 Budget Briefing  CSPAN  February 10, 2016 2:49am-4:06am EST

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this year. >> in light of that, then, what is in this? what are some of the key details whether it's cancer research, oil price increases, cybersecurity funding? >> there's -- on the overview of it, basically it's about a $4.1 trillion in spending, about $3.6 trillion in revenue for about a $500 billion deficit in t2017. he over ten years the accumulated deficits are $6 trillion. basically what obama did was he raised about $3 trillion worth of revenues but then also increased spending by $1 trillion over those ten years. within 2017, he includes a lot of new monies for transportation, that is funded by that $10 per barrel oil fee. he also includes some expansion of the earned income tax credit for childless workers. that's something the omb officials said today they hope to maybe possibly try and work
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with republicans on. and there's also some increased money for things like cancer research and clean energy. the cancer part is of course associated with vice president biden's moonshot initiative and that is one of the other things that the omb, office of management and budget within the white house has said they hope they can work with republicans on. just to give an idea here, this is usually they try to target initiatives like these like rifle shots. these are arguably even tinier than rifle shots in terms of trying to find common ground between this white house and this republican congress. >> well, then let's turn to war funding and something we have heard of in the past budgets, the overseas contingency operations budget. you have tweeted about this. the white house budget keeps $73.7 billion in the oco for fiscal 2017. house gop leaders may want more
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to gain defense department hawk votes. would need the white house to sign. what's going on here? >> well, right now, house leadership wants to put together their own budget resolution. that's sort of the way to set the stage for the later appropriations process. but they are having some pushback from members in their own caucus who resent the overall spending levels that were negotiated in last fall's budget deal so one possibility and it happened last year is they may try to increase defense funding to help buy votes for lack of a better term from members concerned about defense spending at the expense of losing votes among those concerned about overall spending levels. one way to do that would be to try and include a higher oco number but today's number from the white house shows that they have no interest at least so far in a higher oco number to pay for overseas military operations and thus, kind of in that sense,
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house gop leaders may be on their own when they try to increase oco if they do try to do so later in the year. >> just briefly, i want to touch on sort of the response, house speaker paul ryan immediately writing that the budget proposal is a progressive manual and he's also called for regular order in terms of when we get down the road here to the appropriations bills in the house and senate. what's the likelihood of those bills being taken up individually, not as an omnibus? >> well, historically, there's two things to keep in mind here. the last time that that was done in terms of individual bills being passed individually in time for the fiscal year, september 30th end, was 1994. the last time a republican congress agreed on a budget resolution in an election year was 2000 back when john kasich was still the house budgets chairman. so history sort of -- >> coming full circle.
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>> yes. history sort of prevails against at least as a tide against these things happening. >> well, jonathan, thanks so much for joining us. we will keep tabs on this and follow you on twitter. pouchy. that's live at 1:15 p.m. eastern also on c-span 3. >> president obama unveiled his $4.1 trillion budget proposal for 2017, included in that budget a proposal of $582.7
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billion for defense spending. deputy defense secretary robert work and other pentagon officials outlined the details in the budget. this is about an hour and 15 minutes. good afternoon, everybody. thanks for joining us as we roll out the fy-2017 defense budget. the defense budget request totals $523.9 billion in discretionary funding for our base budget and $58.8 billion in overseas contingency operations for a total of $582.7 billion. that sustains the president's national security and defense strategies. and they conform -- the figures conform to the budget levels found in the bipartisan budget agreement. now, when building this program that informs the budget that we're going to talk to you about
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today, secretary carter first asked the department to take the long view. and the way he did it is say how is the next 25 years going to differ from the last? how is it likely to be different? now, of course the future is inherently unknowable, but we concluded that five evolving strategic challenges would most likely drive the focus of our planning, programming and budgeting processes. the first two challenges were considered to be the most significant shift in the future security environment and that is to return to an era of great power competition. today we are faced by a resurgent russia and rising china. both are nuclear powers. both are fielding advanced capabilities at a rapid rate. both are permanent members of the u.n. security council and both take issue with some aspects of the principled international order that has preserved stability and enabled the peaceful pursuit of prosperity for decades. both are becoming more aggressive along their
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peripheries. russia on its western borders, and china and its near seas, as a consequence even as we continue to cooperate on issues of mutual interest to both countries, we concluded the department must be prepared for a period of increased competition over the next 25 years. now, the third strategic challenges are more unpredictable and dangerous north korea. north korea as you know is already a nuclear armed regional power. and it is now pursuing advanced ballistic missile capabilities that already threaten our allies and the broader stability of the asia pacific region. indeed it is committed to developing long range nuclear armed missiles such as the kno8 which could pose a direct threat to the continental united states if it is successively designed and fielded. that is a new thing. moreover, another new thing is that the new leader, kim jong-un, has demonstrated a propensity for provocation. which lends itself to
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miscalculation. and is very, very in our view destabilizing and risky. and north korea of course continues to station large conventional forces along the demilitarized zone threatening our ally the republic of korea. and for these reasons we must continue to retain forces on the peninsula that can fight tonight if called upon to counter north korean aggression. the fourth strategic challenge involves countering and deterring iran's malign influence throughout the middle east. iran seeks to become the dominant regional power. and in support of its goal it is pursuing a wide range of destabilizing activities throughout the region, threatening our allies and partners, particularly israel. while we hope that iran will moderate its malign activities over time, we concluded we must be prepared to counter them as well as any moves that that country takes to violate the recent agreement to curtail its pursuit of nuclear weapons.
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now, the fifth challenge is our sustained global campaign against terrorist networks. with the near term emphasis on degrading and defeating isil and sustained effort to train afghan forces to defeat the remnants of al qaeda and counter the spread of isil in south asia. now, from our perspective the campaign against global terrorist networks will be an enduring condition for much of the next 25 years. and we have to be prepared to monitor it constantly, respond to and treat it when necessary. now, i want to make clear that this list does not reflect a prioritization of strategic threats. should miscalculation occur or deterrence fail, the department of defense has to be able to provide the president with options to respond to possible unexpected contingencies involving any of the four aforementioned state powers as well as those associated with
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the one enduring condition, our global fight against terrorism. and so we therefore sought to develop a portfolio with the capacities, capabilities and readiness to address all five of these strategic challenges with some degree of risk. and that's important to note. the present budget allows us to execute our national military and defense strategies. however given the current level of funding we simply cannot reduce every risk associated with every strategic challenge. we therefore developed a program that addresses all five. and the secretary said if we cannot reduce risks and all of the challenges, we have to prioritize. so he told us to do three things. first, we should prioritize strengthening our conventional deterrent against the most advanced potential adversaries. when doing so he didn't expect us to match advanced adversary capabilities either numerically or symmetrically.
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he instead told us to offset their strengths using new technological operational and organizational constructs to achieve a lasting advantage and to strengthen deterrence. now, like previous offset strategies the advanced capabilities we are developing for our advanced competitors are directly applicable against lesser states. and also strengthens deterrent in that regard. second, with respect to the services the secretary asked us to focus far more on shape than size. he asked us to try to achieve the best balance of capacity, what we call size or force structure, modernization, or capability, and readiness within the existing budget level. seek that balance. and in terms of readiness he expected us to focus on reconstituting full spectrum readiness. and he charged us to place heavy emphasis on innovation along four broad lines of effort. one, ensure we retain the advantage we enjoy in our human capital.
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our people are the best and most powerful competitive advantage that we have across all five challenges. and the force of the future aims to keep it that way. secondly, update our plans and operational concepts. the secretary and the chairman are pushing the department to look at each of these challenges in terms of transregional, multidomain, multifunctional answers. don't just look at it regionally, look at it by exploiting our global posture. third, he asked us to seek game changing technologies and make more discreet technological bets that exploit our advantages as well as adversary weaknesses. and finally, he asked us to pursue widespread institution reform. he wants us to become a lean and agile 21st century organization. and just as importantly we want to free up additional resources to devote to other programmatic
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needs and buy down any residual risk that remains in the program. i'd like to pass it over to the vice chairman of the joint chiefs of staff, general paul selva. and then will be happy to take some of your questions. >> thank you, mr. secretary. good afternoon everyone. let me start by expressing my deepest appreciation to this team of professionals who are the men and women who worked the long hours to develop this year's defense budget submission. no easy task even in the best of times. this year we face the unenviable task of finding ways to address expanding and complex challenges to our national security interests despite the enduring strain of constrained resources. the result of this collaboration is what the chairman, the service chiefs and i believe is the best possible balance of capacity, capability and readiness investments based upon the resources available. make no mistake, today's strategic security environment
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is more unpredictable than i have seen in my 35 years of service. our dedicated soldiers, sailors, airmen and marines have been battling terrorism around the globe for nearly 15 years. the pervasive threat posed by violent extremist organizations has been and remains an immediate threat. yet focused on this protracted fight in combination with the burdens of sequestration and budget uncertainty has come at a heavy cost, degrading readiness, delaying modernization and decreasing our overall capacity. and as you're well aware the rest of the world has not remained stagnant during this time. concerns posed by increasingly aggressive state actors with mounting military capabilities also demand our attention. as deputy secretary work just highlighted, we face growing challenges from russia and china which are asserting their power at the expense of regional security. north korea's pursuit of nuclear weapons and ballistic missile technologies which continues to
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plague the korean peninsula and its neighbors and iran's malign activities which promulgate its role as the world's chief exporter of terrorism and instability. this budget works to invest in capabilities needed to meet these growing challenges while to the best extent possible preserving force structure and advancing readiness. for the army it supports the ongoing transition back to high end combat and full spectrum capabilities. it invests in the navy's lethality improvements in surface capability, tactical aircraft and investments in advanced undersea capabilities. it maintains the marine corps' preeminent role as the nation's most capable expeditionary response force. and for the air force fwhujt invests in high end capabilities across the range of domains that we expect our air force to respond in while attempting to improve readiness through training for the high end fight. in closing, this proposal
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reflects the hard choices we've made in the context of today's security environment and economic constraints. and it does not leave much room for needed flexibility. we're in the process of engaging congressional leaders and their staffs to address their questions and concerns with this budget. i look forward to continuing to work to eventually get an approved budget which addresses the military readiness concerns of today and provides for the investment and flexibility which allows us to continue to address our national security interests into the future. thank you again for being here today. we look forward to taking your questions. >> for either one of you or both if possible, i just wanted to ask a couple questions on the oco accounts. first, can you talk about the thinking behind the new $200 million that's aimed at countering threats in north africa, west africa and that region, and what you expect to buy with that money.
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and then for the afghanistan amount, about what troop levels will that support in afghanistan for the coming fiscal year. and then maybe just an overall the increase in oco funding, what do you expect to buy with the extra from the $5 billion to the new $7.5 billion, what are you hoping that buys? >> well, let me just give a little overview on oco and then i'll turn it over to general selva. the question for $58.8 billion, let me emphasize that was built from the bottom up. we said what do we need to do to do what we need to accomplish in afghanistan? the president as you know made a decision to keep 9,800 troops through some time this year, probably through the fighting season and then down to 5,500 at the end of the year. this budget fully funds that. it fully funds all of the operations that are going on in both iraq and syria. and it asks for iran -- iraq train and equip as well as syria train and equip.
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so this oco budget provides us everything we need, we believe, right now to execute our global operations. that left over about $5 billion to cover base needs. and we didn't have a specific -- i'd have to defer to mike on the specific $5 billion. but generally $5 billion was able to address base needs. >> the only thing i would add to that is to reemphasize the fact that in the oco budget as submitted we have funded all of our anticipated operational costs both in south asia as well as across the north and west africa portions of our transregional fight against terrorism and the violent extremist organizations. that has all been fully covered. each of the services as you get their briefs later today will likely be able to cover the detail of their requests inside of that budget. but we've covered all the anticipated expenses in that endeavor. >> what about this $200 million
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for some of the african areas? what is the thinking behind that? what is the threat you're trying to address? can you expand on that a little bit? >> i'll expand briefly. if you think of the threats that exist across all africa, al shabaab in the east, boko haram in the west, the newly formed isil province in libya, the monies that we've put into the budget to address those threats in africa are to be able to work with indigenous forces as well as partner forces to get at those three particular threats. and others that might emerge. >> it goes back -- let me just follow up. this goes back to what the secretary and chairman are saying. we have to approach this as a transregional problem. we have to approach the problem all the way from the western coast of africa all the way to afghanistan. and potentially in southeast asia. so none of these problems we look at just as a central command problem. we look at it what do we need transregionally to address these threats.
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and the things that we are anticipating doing in northern africa would be in the broader support of our global campaign against terrorism. tony. >> question to you and then to the general. this is the last obama administration budget. you've been discussing within the building the looming wave the next administration faces in terms of nuclear modernization and air force issues after 2021. how serious is that and what are some of the options? general selva, since august during the republican debates, there's been a constant drumbeat of claims that the american military has been gutted. i didn't want to ask mr. work this. how do you address someone watching hearing it's been gutted and you're talking about degraded overall capability, reduced modernization. can you put this in context in terms of the condition of the
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military today versus the hyperbolic word gutted? >> let me talk about the bow wave and turn it, tony, and talk about the fiscal risk that we see going forward. the primary problem we're faced with is we like the budget deal. we applaud congress being able to provide us with two years of stability. but in 2018, we are planning on going up again significantly above the sequestration level caps. if you take all the money of '18 and '21, that's $100 billion we are counting on we don't know for certain we are going to get. the second thing is the future of oco. how will oco be done in the future? that's another big uncertainty. we have money that is in oco that should be in base. it just happened over the last 14 years of war and we have to address that.
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and then as you said, starting in '21, between '21 and '35 about $18 billion a year to reconstitute and recapitalize our strategic nuclear deterrent. if that comes out of the conventional forces, that will be very, very, very problematic for us. so, rather than talk about the bow wave, there is future fiscal risk that the country, congress and future administrations and this administration must come to grips with because as soon as we have a better understanding of that, we'll know for sure that our defense strategy is on the right track. >> i won't be argumentative but i will take umbrage with the notion that our military has been gutted. i stand here today a person that's worn this uniform for 25 years. no time have i been more confident saying we have the most powerful military on the face of the planet. do we have challenges? of course we do. when you are faced with a global set of threats, you have to make choices on where you focus your energy.
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and so as i stated we focused our energy on this violent extremist terrorist thread for the better part of 15 years. that consumes the readiness of the force to do the other tasks we are given as part of our mission. recovering that readiness is a challenge that each of the services will face but i would say we're far from gutted. that you have in your joint force today the most powerful army on the planet, the most flexible and determined air force on the planet, the most capable navy on the planet and a marine corps no one can match. i would argue that's far from gutted. i don't engage in politics. this is the reality of the men and women that serve in our army, our air force, our navy and our marine corps. they're the best the world has to offer and we'll keep them that way. >> we have time for one more. gordon? >> two quick questions. can you kind of expand a little bit on the lcs cut? we have seen a lot of that but if you could expand on your
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thinking. also, update us on the growth to 90 caps of isr and if you see that's delayed, accelerated in what in this budget addresses that growth? >> thank you, gordon. first question. lcs is a perfect example of what the secretary meant by focusing on shape rather than size. the requirement for the u.s. navy is a battle force of 308 ships. in that 308 ships, there's a requirement for 88 large surface combatants like a class cruiser or a guided missile destroyer and there was a requirement for 52 lcss. for a total of 140 surface combatants. if you take a look at last year's plan, the navy was going to build up to 321 ships and then come down. and we asked ourselves, what can't we buy? because we are going from 308 to 321. we said, well, we can't buy lot of capability.
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and so, it was a very -- this is not an indictment against the lcs. if we didn't like the ship, we would stop buying it. but those 12 ships would take us from 321 to 309 ships. and it allowed us to put more money into torpedoes, p-8s and tactical aviation, so it was more about achieving that balance between size, readiness and modernization. we think the navy is much stronger because of this decision. and, the plan we will get to 300 ships in fy-'19. we'll get to 308 ships in fy-21 which is the requirement and say above 300 ships through fy '30. this was the type of challenges and the trades that the vice chairman was talking about where you look at it and say, would i rather have the 12 extra ships or would i rather have all the
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capability that that allows us to buy? and we made a decision to go for capability. on the isr caps, we are building the 90 low-end permissive isr caps like reapers and predators. 60 will be healthy isr caps in the air force which means they'll have ten pilots per line, per orbit. and that is a sustainable force structure. the army is going to add 16 caps in what we call the gift map, the global force allocation management plan and they will have 16 orbits. then we're going to buy ten government-owned contractor operated orbits which will be our bumper i mean, our shock absorber. that gets us to 86. four orbits are supporting our soft forces today. that's how we get to 90. we won't get to 90 until the
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latter part but we're on track. there's no slowdown. that plan is fully funded. and we hope that congress will support us in that goal. general selva, did you have anything? >> nothing to add. you got it all. >> thank you again. we are -- >> lcs, i have to push you on this one. why did you add one more lcs for two when in september the secretary said you will get one in '17? can you square that? >> the secretary is flexible and the navy came back in and said, hey, in terms of competition, it would help us if both of the yards had a ship in '17. both could compete and then do the down select. it was just -- it doesn't change the 40. we are going to 40 ships. it was just a slight change in the profile. and it was allowing us to make sure that the down select to the frigate, the frigate was a way to do it. so again, on all of these things, these were hard choices. choices between size, modernization and readiness. and each of the services are
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going to explain to you this afternoon the choices they had to make and the choices we approved to achieve what general selva said is we think is the best balance. thank you very much. and thank you for being here this afternoon. >> thank you all. >> two minutes we'll get started with undersecretary mccord and the general. we'll get more detail of what the deputy secretary was talking about. give me just one minute. >> oh, it's magic. the deputy secretary's a very tall guy. >> ready to go? is this the height -- is it all right or -- i can bring it up a little bit. >> i want to find the happy medium, sir. >> all right if i have water?
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>> of course. >> does this need to be -- >> it's on at all times. >> they can pick it up from there, sir. again, this is undersecretary of defense comptroller mike mccord and on the left, the g-8, for the joint staff general anthony iarti. mr. mccord, when you're ready. >> thank you, mark. good afternoon. first of all, i want to say the deputy and the vice chairman have done a great job leading the internal effort which stretches over many months, seems like forever sometimes. since this is the last time i'll likely be doing this, i went to recognize the hard work that goes on all across this building in the department by so many people across in the services and the combatant commands and osd and obm to get the budget done. i especially want to take a second to recognize the enormous contribution of two people, my colleague jamie moyn who leads a great team over there.
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you know, it wasn't -- i'll get to the second one in a second i guess. it wasn't until early november as you know we got a budget deal that told us what top line we'd get for the work we've been doing starting back in late spring and we were far along in the process in building this budget and really had to scramble the last six weeks or so to cut $17 billion. i'll explain that number. in the last six weeks and probably the last ten days of the process we knew what congress has done in the '16 budgets in the omnibus appropriations bill so a lot of information came late. my staff in particular worked through the holidays to wrap this up and get a quality product. and i want to close my introductory comments by thanking my staff who did the work from november on. we were missing and are still missing the top career budget official in the department. he's been out for illness for an extended period of time. we hope to get him back. meantime, mary has done enormous work to do his job as well as
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her own and i want to thank her for that. if i could go to the first slide. the deputy kind of covered first of all sort of three things here. one, there's the facts. just the numbers. when's in the base. what's in the oco. what's in the total budget. the deputy touched on that. you can read that i hope. second, he talked at some degree of specificity of the guidance to us and the idea that you have to fight and win across a range of challenges. and that's really i think the important place to start is what problems are we trying to solve, what problems does the secretary want us to solve. for anyone who's listening who didn't read the secretary's remarks from a week ago, i would encourage people to go to the website and start with his speech on the 2nd for what he's trying to do and a little more meat on the bones on the five challenges which is what this budget is then trying to address and then finally again the deputy touched on this. sort of a word on the future as we hand it off to the next administration doing the '18 and '19 budget and so on.
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the sequester issue is still hanging around like a bad cold. it needs to be taken care of. our plans have been consistent and we'll talk about that across several years. but our plans aren't going to work if we can't get the sequester problem solved and get back up to the level of resources that we need to keep this progress going. we think we're making progress in this budget. i'm going to skim past the next slide which shows you the history of the base budget and the oco budget layered on top of it since 9/11. ve have done a slide like this before. i because i want to move to the next slide after that and drill down just a little bit on the three-year period that we have just been through or are about to start. so what's important about the budget situation, budget deal? a couple things. from '16 to '17, the two bars on the right we have about $2.5 million more this year than last year and that was very flat from year to year in the base budget an was exactly flat in the oco budget for those two years so
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we're only about $2.5 billion. what i would call kitchen table math. what did you have this year as compared to what did you have last year. and if you do the math, the pay raises that we have in the budget basically consume about that amount of money. so, taking that aside we really had just a flat amount of money once we got done with the compensation part to work with. so that really speaks to the deputy's point about this being more about the shape of the budget than its size because the size isn't growing but if you look back to the year before, one of the reasons that the secretary will say and said he was grateful for the budget deal is that it jumped us up a good $20 billion, $25 billion where we were stuck in a rut and certainly much rather be in the 520 neighborhood and that's what the deal did for us and a better place, a better jumping off
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point for getting the next jump up in the future. so again, when the secretary talks about being grateful for the deal i think he's speaking primarily in terms of it was compromise. he was calling all year for compromise. make a decision. get something done. when he says grateful, not that he had to get everything he wanted to think it's a good deal and progress. so we got some stability, which was important for the troops, for our own planners, industry partners and in that sense the deal both a in that sense the deal is both a step up to closer to where we think we need to be and also again near term certainty and probably the best that we were going to expect under the circumstances. if i could get the next slide, i just want to take you back a second to where we were a year ago at this time. we were coming off the second year of the murray/ryan deal and not knowing what was going to happen and we were seeking you might remember in last year's budget a huge jump after three years of being stuck down in the mid 490s for the base budget we were seeking to go up about $35 billion. very large increase.
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that's what we were trying to accomplish last year. now i'll flip to this year's picture of where we are now. so the budget deal came in. raised the caps for obviously for '16 and '17 in the bipartisan budget agreement from last november. didn't give us everything we wanted but jumped us up a good bit of the way. so what we need -- you know, this year our top line is no drama there because it was set by the deal the president signed last november. we are looking ahead a little bit to the future. we need to jump up again. just as we did from the '13, '14, '15 level and we need to make another jump in '18. if you look at two more things i just want to point out about this chart. this i think has been the most consistent administration that i have ever seen in my 30-something years in terms of the outyear profile, if you look at the '15 budget on that chart, the '16 budget, the '17 budget, in purple, blue and green on
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this chart, very similar top lines. what you used to see all the time, every five-year plan is slanted down lower and lower than the previous five-year plan. we have stuck through our position pretty well. the size of force we think we need, the resources we think we need. this chart also speaks to the point the deputy was making dabt $10 billion, the caps in law have four more years in force if nothing changes from fy-'18 to '21. the difference between out position of those three lines and the red line about $100 billion. $25 billion a year or so per year over the next four years is what's at stake for us between the resources that we think we need and what we're going to get if a law is not changed. okay. if i could get the next slide, so i'm going to pivot for a second to the top line picture to the secretary's priorities. again, the deputy talked about this. i don't think we need to say too
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much more here. the thing that strikes me about what the secretary wants us to be doing is just the breadth i think of what we need to be addressing. our military, as the vice chairman said, is the best in the world, and probably nobody else would contemplate us being excellent in all the things the secretary wants us to be excellent at. it's to fight and win today and far into the future. you think about the five challenges the deputy enumerated. they span europe, middle east, asia. so the world's geography, time from now into the future and domains, the typical air, sea, land, as well as space and now cyberspace. so just the breadth of what we're attempting to be excellent at i think is something really only our military could do. now, if i could go to the next slide, i'm going to do something i wouldn't normally do in a budget brief which is to talk about when's not in the budget. this is of some interest to
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folks, and we will have two slides on this. looking at the base budget, which is the predominant part of the budget and of course the predominant part of the budget agreement. the caps reduced about $22 billion below what we had planned for this year. now, a couple slides ago, i was talking about what i call the kitchen table math, how much money last year and this year. this is different math. this is what did we plan for in those lines i showed you consistent year after year after year after year of what did we say we needed in fy-'17, compared to that budget plan cut us $22 billion. as we have discussed a little bit, when the deputy was up here, the budget agreement for the first time had a specific number in there for so-called oco or wartime spending. when we built all of our requirements, as we did from the ground up, as we always do in the oco budget, we came out to about $5 billion less than that.
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we had $5 billion of basically of relief which was as i think everybody who covers this knows directly intended by the budget agreement so that's not a surprise to anyone i hope. that brought down $5 billion of that $22 billion so that leaves us with about $15.8 billion, $17 billion. over on the right hand side of this chart, the first two things we did, of course, applied the economic savings either assumption that is given to us by omb to the whole government the large part of the economic assumptions of that nature and one or two we develop ourselves and largely administration wide. everybody knows that we live if in an era of low inflation and everybody can look at the pump to see what's happened to fuel prices and so as a consumer of fuel, a consumer of goods and services, we benefit from those things, too. that saved us $5 billion compared to the pricing previously so that helped us a great deal. the first two thingless here,
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being able to move some expenses to the oco budget as laid out in the agreement and to take advantage of the favorable economic assumptions solved about $10 billion of that problem for us. now that still leaves us, you know, an $11 billion problem or so, which is about 2% of our top line let's say. we have some efficiencies which we'll talk about later which will grow over time in the first year that are in the half billion dollar range, and so that kind of smallish red bar there. and then the program changes to cut things out of our plan is the other -- the bulk of the $11 billion. so, i'll flip -- well, we can flip to the next slide now. so what did we -- what's in that green bar of $11 billion? again, let me just take a second to talk about when's not in there and you don't see on this chart. we didn't cut compensation. there's no net reduction to the compensation portfolio even as we look for $17 billion to save.
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so that portfolio as well funded as before. i'm not going to say there wasn't one change to anything in the department but generally the force structure plan we had before is a force structure plan we have now. we did look at modernization. modernization took the brunt of the reduction. i would say not in a stupid way. we didn't term nate programs. we didn't break multi-years. neither on the people side did we issue riff notices, things like that. we didn't do the things to involve flailing around and breaking things. we were careful and thoughtful in how we approached this. but students of defense reductions -- i think everyone would be familiar with this that's studied this over time. especially when you have kind of a short-term, in this case, a two-year budget deal that tells you, you have less money and you don't know what the future holds and doesn't make sense to change
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the force structure, riff people. so we went to the modernization account, which tends to be the most volatile and that's where we had to take some risk. both -- so you will see, for example, 24 less black hawks. five less for the air force, fewer b-22s. the aircraft procurement accounts in total, $4 billion less, less money for shipbuilding. these are not maybe things that we love to do, certainly, but as we talked about protecting readiness recovery, that people are the most important asset and with the kind of trying to make a rapid change in force structure of a two-year deal, this is where we had to go. also, we took risk in installation which is already lower than any of us would like it to be. we had to take further risk there. we can talk more about this later perhaps, but modernization is where we had to take the brunt in terms of getting the number down in six-week period of time between when the budget deal hit and when we had to be
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done. okay. now let me talk about when's in the budget. which will kind of constitute the rest of our talk here. the force structure levels as i said are what we have been planning for some years. should not be any surprises in there to experienced observers like yourself. consistency has really been a hallmark i think of this administration in terms of resource levels, things like that. i will -- we'll talk a little bit later about the force of the future, as well. the force structure which is on the next slide, again, the numbers look pretty familiar to everyone. the new start force levels on the nuclear side. the deputy's talked about the ship count level. one at lake and heath in the oco budget, same as last year. and we're still -- that's the marks on the wall i think everybody knows, 980,000-person army total of which 450,000 in the active. that's the mark on the wall we're moving toward.
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so we're dropping, as we had planned and said next year to 450 to reach the kind of objective level. the marine corps stablizing out at 182. again, there shouldn't be much of any surprise here, both to folks in here and to the troops around the country and around the world. same thing on the next slide. the end strength number. i think this is important to have out here for the troops to see. again, people should recognize the numbers. there's virtually no change in the reserve force side. three changes of which do not exceed 1,000 people. on the active side, the only really major change of last year is the army dropping 10,000 and that has been planned for some time. the next slide i'm going to try and just briefly touch on some of the major programs in the budget. joint strike fighter. again, this is one where we would have loved to have more
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airplanes. this is fewer than we were funded last year and we had planned but, again, this is something that, you know, taking $17 billion out in 6 weeks is a challenge, and so you have to look at some of the large programs like this where the money is. others were -- other programs, especially due to their contractual situation, like the tanker, of course, were protected and the multi-years on the submarines and ddgs. that also of course plays into the services thinking and our thinking of where do you have multiyears, where do you not. unlv, five launches. if you can't see the quantities there in this year of which three would be completed. the ddgs are all flight ships. again, the submarines and ddgs have both in the multiyear category. the deputy talked on the next slide about innovation and i'm not going to dwell on that. there are a couple of things on there that were started last year, some started this year and this really --
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innovation agenda which the deputy can talk about at good deal more expertise than myself really spans the gamut of smaller, nimbler efforts, to large programs or larger efforts that could have significant war fighting impacts. secretary mentioned one last year. the arsenal plane. there's a variety of projects here, classified and unclassified that we're pursuing. at this point i'd like to turn it over to the general to talk about the readiness and the people side of the budget for a few minutes. >> good afternoon. want to say readiness is a critical part of our efforts and in this budget. this budget funds service efforts to address readiness from the standpoint of both ensuring that units are prepared for the missions that they will encounter today as well as the
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demands of the future and ensuring that the joint force is ready to accomplish missions as they come out in the future and that is the recovery if you will of joint force full spectrum readiness. and its reorientation. the joint force has been engaged in combat operations over the past ten years or more. in one form of conflict. and now we must shift focus to the full spectrum that your outline implied as part of the five challenges that were talked about earlier. resources are programmed for this to occur. however, resources are not the dominant factor in readiness recovery. it's different in every service. and it's also impacted by mission demands and operatal tempo that may be occurring at any time as occurred today. so resources are not the dominant factor in readiness
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recovery. force capacity, up tempo, maintenance throughput all add to this challenge of recovering readiness. the services will talk in more specificity later about this. as we look at generating this type of readiness in the services and in the joint force we are really talking in the early portion of the next decade. before we see having regenerated in the force the tul spectrum capability that we need. and we remain dependent on overseas contingency operation funding for current operational demands and future reset requirements. next chart. just highlight here a few of the -- again, the services will talk later. each of the services have their plans to regenerate full spectrum readiness. in the case of the army it's
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about training individual and at the collective levels, ensuring that combat training centers, units go through combat training centers. we funded 27 rotations in 2017. this allows the army to achieve full spectrum readiness, to get leaders and soldiers into the environment to have a full spectrum capability. the navy's focus is in level loading or loading maintenance requirements to support con sis tint and maintainable maritime force. the marine corps will continue to focus on crisis response and expeditionary-type capabilities to maintain both the air and ground components to ensure they're ready for missions and the air force will balance between flying hours and weapon systems sustainment. to continue full spectrum readiness gains. the air force is intensely involved in the operations that
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are occurring today in our missions abroad and time will be needed to regain combat readiness. and finally socom will maintain funding for deployments and sufficient search capacity for plans and contingencies and looks to the 2020 time frame to regain its full spectrum readiness. if i could go, i have one concluding chart from my portion here regarding the all-volunteer force. the first thing i'd like to point out is that as the chairman views this, it's about comprehensive and wholistic view of compensation for our force. and the health of the force is viewed wholistically. our service members train, do they have the proper equipment? are we ready to take on the tasks that we're assigned? i second general selva's and others here today the notion that we have the best military in the world. it's resilient and dead katded.
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but it's also running pretty hard. the 2017 request for a 1.6% pay raise for our service members within -- top line constraints reflects the unique demands and recognizes the unique demands and sacrifices of our service members. it buys down that gap between -- between where we want to be and where we are so the increase in that pay is the largest one over the last four-year period and it's an important part of what we did as we looked at -- and the chairman and secretary assessed this portion of the budget. you'll also see modest modifications for the blended retirement system. and i'll just talk very briefly here. first, to increase the force shaping ability of the services to provide great flexibility and
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continuation pay of that portion of the law that was passed to create blended retirement. and to start matching contributions later to incentivize retention. next, we want to obviously ensure nearly equivalent lifetime benefit here and increase the defined contribution matching rate. and allow it to occur until the end of service. as opposed to a particular point in time and a service member's career. finally, we'll propose that the department will propose modernization and improvements in the military health care system. to increase value or simplicity, greater choice and better access is concerned. increase the skills and proficiency of military health care providers to provide them with opportunities to treat the beneficiaries for the benefit of the entire joint force. and to have their skills honed on a day-to-day basis. and then finally, have a balanced approach to fiscal sustainability as part of this package.
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that will be included as a legislative proposal. so with that i'll pass it back to mr. mccord. >> thank you. almost done. so the next slide beyond kind of the traditional parts of compensation, i think the secretary has really put a lot of effort as i think you're all aware into what he calls force of the future. and the point of -- there's a couple of things. first of of all, in november he gave a speech what he called permability and making it easier to serve their country in uniform or civilian, for a career or a shorter period of time, a few years and those of us having been here a couple of years, the hiring process is just one of the things that could be improved. the second aspect, the second release of force of the future was done just about a little
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over a week ago, late january, and it had to do with the family portion, the child care hours expansion with fertility benefits, mother's rooms being installed and also paternity and maternity leave so building on everything the general was just talking about, secretary's very, very cognizant of the fact we're competing for talent in the private sector of this country and wants us to make sure we are and remain a top tier, top tier employer. i think you could argue we already are. you look across the span of the retirement benefits, education benefits, the health care system, we already are a good employer but the secretary knows that we are competing for talent and people, especially trying to raise a family, the child care and maternity, paternity things to maybe move the needle and
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continue to attract and retain the best people so i think it really speaks to the idea that compensation and quality of life for you and your family which is, of course, as the saying goes you recruit the member, you retain the family, is beyond just the paycheck and i think that's really to me the heart of what force of the future is about. not the particular cost of the benefits, modest in the scope of the budget for the new packages and really more of a mind-set to be competitive for talent just like technologically. next i want to just talk a little bit about some of the reform proposals that are in this budget and some of which have been in the past budgets. i'm on this chart, i kind of bend them into two categories, those where the proposal is same or substantially the same as what we have proposed before and not yet accepted by the congress. the navy's cruiser modernization plan.
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and also, the brac, base realignment and closure proposal. the year proposed is now 2019. it's physically impossible given the restrictions on the activities to have one in 2017 based on where we are now. we have other proposals that you've seen before from us that we modified in some way. the air force a-10 is one that word has gotten out beforehand. the general was just describing the tri-care proposal which is similar financially to last year's but is a different proposal than last year's and we have dr. woodson here today if we need to go into that in more detail, and we have plenty of material by the way posted on the web today with pages of information about the tri-care proposal, specific prices, co-pays, things like that. we have an overview book that's been published today. third thing then is commissary proposal.
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this year's proposal is a different proposal. a more modest proposal for financially that only tries to get savings out of the business end, does not touch the benefits. that's different in an important way. i think from the troops' perspective to last year. so, again, probably the most well-known reform agenda proposals. things where we believe that given the continued pressure on the budget, hard choices need to be made. the budget deal, good as it was for us to give us stability, at the end of the day, reduced resources from last year's plan and the case as compelling for the need for reform as before. we didn't get more money from the budget deal and so we have to make some hard choices. the next slide is maybe somewhat lower visibility but just indicative of the breadth of things we're trying to do across the department from acquisition reform to the mandate both imposed on ourselves and imposed on us by congress.
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the audit effort. something that we -- a new review that the dcmo will lead to look at the service contracts to make sure they're still needed. sexual assault prevention efforts. goldwater nichols review act and the last one a little bit. everybody is probably recalls the, you know, massive breach of personal information of people last year. the so-called opm hack. there's a proposal in this budget which involves d.o.d. and not limited to d.o.d. to the system that we're going to move to, we propose to move to in this budget, a new entity under opm involved, responsible for investigations. not a mission of opm mixed in with their own missions. it's a specified mission of a new entity inside opm to do the investigations sort of like agency responsibility resides with the government-wide agency to the investigation. the information produced by that investigation would then under
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our proposal be responsibility of d.o.d. to protect that information behind our secure systems so we would become a service provider if you will. the information, the i.t. side of the process for the entire government. a new entity for the entire government including us for doing the investigating. that proposal will come in a different part of the budget. our budget funds are part of that proposal. last thing i want to talk about before we take questions is the budget, which the deputy talked about a little bit. we have continuing afghanistan effort in response to the question that was asked before. the average troop strength is about 9,700 for '16. dropped to about 6,200 in '17. it's the average number of --
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throughout the year. the average strength in the iraq/syria inherent resolve effort is roughly constant between the two years. so the increase in funding is more driven by the pace of operating tempo than it is by having more personnel involved. there was a question about the africa part. we are trying to give them a little more help to have robust resources to deal with a fluid situation that spans is up a large swath of geography from al shabab to bocko haram. probably the biggest increase in here is the european reassurance initiative. something we've had good success. this more than triples what we got last year.
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and pretty much quadruples what we asked for last year in this effort. the biggest increase in this area is to start prepositioning equipment in europe to enable faster response and to provide greater deterrence. basically a doubling of sort of the up tempo. to have our units training, exercising with our european partners. we're going to move to a so-called heal to toe basis where we're over there constantly on the ground exercising. that's a doubling of the operating budget part from what we had last year. on top of that, we had a prepositioning aspect. just to touch on what the deputy i hope made clear. everything on this page that we have in the categories. what it's the iraq/syria operations, afghanistan operations. the european reassurance initiative. we built the numbers based on what we thought was -- based on requirements, what we felt was needed, what was executable.
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not constrained at all by the budget deal. and then at the bottom you see kind of what was left to use up the rest of the head room that was made available to us by virtue of the wording and the budget agreement. so just to hit the last slide. basically as the deputy said, what we're all about here is trying to within a flat amount of money from last year to this year. again, predicated on future being the higher level of resources. to free up money for higher priorities. so with that, happy to take questions and, mark, are you going to handle that? >> 15, 20 minutes.
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both gentlemen have appointme appointments. so with that in mind, sidney. >> there is a path to recovery. i see things like, you know, rebuilding of army corps readiness plateaued. once we get to certain conditions of 2020, then 8 to 10 years to get to readiness. certainly very long -- ofrp will not get back to three carriers deployed and three surge apparently ever will be two and three. it seems like this is a very long back road to readiness. because of lack of funding or too much demand. >> a dollar today does not
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necessarily, although it certainly is required. it's necessary but not sufficient to achieve this full spectrum readiness you're referring to. the calculation includes time and availability for units. some of the deployments our units have in fact contribute to readiness but some do not. to accomplish the tasks we're assigned and to meet the mission requirements in the context of the environment in which our units are operating. it does not necessarily lend itself to the full spectrum readiness that the enabling units have to have. it's a function of time. it's a function of having the adequate resources. having units that have available to go through this and have the opportunity to go to the combat
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training centers to participate in the high end training environments and exercises to achieve those. and, sidney, it's going to take time. before we start to see regeneration rates exceeding where we need them to be. it's not linear. it's certainly not as fast as we'd like it to be. we'll continue to work that hard with the resources that we've allocated to it. >> can you tell us how much in savings there are in the personnel reform, the tricare and the other things, how much money is being saved through those reforms? >> we can provide that. my recollection, it's just under $1 billion.
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we'll get that for you. >> reforms offset the benefits that are being added on? >> yes, within the compensation proposal. within the compensation portfolio, we didn't really move any money in in or out of that. there are things where we're making things more generous and then there's the tricare, where there are some savings that we think we need to do. or try to move it more towards where it should be. >> yes, ma'am. >> thank you. the house armed services committee, they've been saying that in this budget you're robbing the base budget to fund oco neshtives. i see that, you know, in your slide, where you show $11 billion in program cuts, is the thinking that maybe if they increase by $11 billion you would be able to get all that stuff back?
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>> these numbers were well known to everyone i think. we funded the base budget to what congress agreed to. >> i understand, but that's what they've been saying, you know, in the public, to the media. that's why i was wondering what your reaction to that accusation was. >> i would say that, you know, if you look at the history of the last five, six years, the president is the person who's had the highest number out there. we've mailed the case i think this secretary and previous secretary. have been saying we think we have a good case for the level of resource we've asked for.
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is the only budget where congress has actually funded what we asked for. we've had cuts ranging from $20 billion to $30 billion some years. so i think we've been making the case for higher re, sources and congress as a whole hasn't agreed to give them to us. the budget deal was not everything we wanted. but we're kind of -- used to having cuts. we still review this as progre s progress. i think we've done nothing more, nothing less than comply with the budget deal. i don't think we have played any games. tried to get rid of oco, that was the marching orders now. a lot has happened, both with the budget caps and threats. how is the department looking in the long term?
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it seems it had been done on a yearly basis every year to re-evaluate. are you taking more of a long term approach these days at looking at it? is that making it kind of aden dem du addendum to the base budget? >> tighten up the rules, i think the predictability of oko and i would say we did a good job at that. to submit one or two supplements to building a good faith estimate of what the wars were going to cost. i think we've had as a result pretty decent predictability. there were some reasons why that worked well in irks where we had ongoing conflicts. it's a little harder when things are changing a lot to do it that
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way. in the last couple of years, there's been an effort, especially from o & b. an effort we worked with them on to try to find a way to get oco costs down and get everything back into the base budget. we haven't made a lot of progress on that. i would say the budget deal went exactly the opposite direction from that. probably they'll take a fresh look at oco. the budget deal in my view gave us no guidance about what's going to happen the day after the budget deal expires. we're back to sequester level down here. department's proposed resource level we think we need is up here. no information about what people think of that. the oco arrangement in this budget deal was unprecedented.
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is that a precedent? it's hard for me to tell. or is this a one-time thing that will not be repeated. we have tried to work with o & b to put more predictability into oco. hasn't really made a lot of progress. think the battlefield's fairly confused right now i'd have to say in terms of what's the future of is there going to be an oco budget in the future that looks like it does now. >> this is maybe your last appearance up here. on audit issues, that's the gift that keeps on giving up there. can you give a reality check on the eamericaning results? my understanding is they haven't been so great. what is the significant of sending an armored brigade, continued presence over to europe, versus an infantry brigade? what's the message, what's the equipment? what's the symbolism there in
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term also of the u.s. what we're sending over there? >> on the audit, we've had the big effort this year has been the three military. two of those have gotten their reviews back from their auditors. i don't know if they've been all published or not. the third one is coming less than' month now for the navy. we are looking at disclaimers for the first two which was not a surprise. so i think on the face you could say it's not progress. my predecessor used to say you really have to get into the game. you have to call in the independent evaluators to really tell you what you're doing right and what you're doing wrong. so we have spent a lot of time over this administration as well as previous ones. what i would call practicing and
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preparing. which i think is all necessary first step. but at some point you only really learn by getting in and -- very much like in the military realm i sort of think of it the same way. opposition forces are out there. then you really learn what you're doing right what you're doing wrong. i'm not discouraged, the fact we have disclaimers on these efforts. there's still a lot of hard work ahead of us. but i think that we still are moving in the right direction. there are problems. the thing that can be frustrating on the audit effort is if you can imagine sort of working on your car. you get working on one thing and then you find something else you have to fix. as you get into it, you can really find that there's a lot that -- a lot to get your arms around it. the more you open it up and work on it. but that's how we're going to
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get it done is just keep at it. we think that and knowledgeable outside observers think we have the right plan and we are making progress. i think we are doing the right things and moving in the right direction. whether we're going to get there on schedule is the big open question. >> the european reassurance initiative for this budget, $3.4 billion, really two main areas. one is increased presence which will include the united states army armored brigade being on a rotational basis and essentially being as mr. mccord described heel to toe with no break in the availability. the second main part is the prepositioning of army
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equipment. including another army brigade in a prepositioned state in europe. the significance of an armored brigade is important because the units that are -- united states army units there as part of the joint force at this time we don't have armored brigade stationed in europe. previously there were two heavy brigades removed from europe as part of the army's drawdown. this is an important enhancement to the ability of the commanders, the combatant commander and the joint forces commanders, army commanders, to conduct combined arms maneuver and have the right capabilities on the ground, trained and ready units to conduct or the tests. >> have you changed the overall
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by what is the reduction, percentage reduction over? will this impact the unit cost in the near term or the long term and how much is this giving us in savings and where exactly is the money going? >> there's a number of questions there. i think we'll have to get that to you over the course of the day. i was going to say for the record but i don't think that's the proper term here. the one detail i will give you, within the 63 in this budget, there's 43 a models for the air force, 16 for the marine corps and four for the navy. the biggest reduction i would say in this -- compared to our previous plan. that's kind of how i was talking, compared to previous plan, is definitely on the air force side. unit cost increase is not projected to be noticeable. but


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