
SEC. GATES: Good afternoon.As I have written several times, I believe it is very important for the Department of Defense to hold a legitimate debate and address the budget challenges with a strategic approach rather than a math exercise. I applaud the Secretary and the Chairman for leading this process and starting it on the right note. The DoD media? Not so much. These were the only two questions in the press conference that actually discussed this issue, as everyone else was focused on Pakistan.
On April 13th, President Obama announced his framework for tackling our nation's considerable long-term fiscal challenges. As part of that deficit reduction effort, he set a goal of holding the growth in base national security spending below inflation for the next 12 years, which would save about $400 billion, the preponderance of which would come from the Department of Defense. The president also made clear that before making any specific budget decisions, we must first conduct a fundamental review of America's military missions, capabilities and security role around the world.
Today I'm announcing the framework for the comprehensive review that the Department of Defense is launching to inform future decisions about spending on national security.
First, some context. For more than two years, the leadership of this department has been working on reforming the way the Pentagon does business to respond to the difficult fiscal situation facing the nation and to ensure that our military has the capabilities needed to protect our interests in a dangerous and unstable world. This effort began two years ago with an overhaul of the department's approach to military acquisition, curtailing or canceling about 20 troubled weapons programs. It continued last year with a department-wide campaign to generate savings from excessive overhead that was reallocated to the services for reinvestment -- new expenses as well as deficit reduction. The overarching goal of these efforts was to carve out enough budget space to preserve and enhance key military capabilities in the face of declining rates of budget growth.
The new comprehensive review will ensure that future spending decisions are focused on strategy and risks, and are not simply a math and accounting exercise. The overarching goal will be to preserve a U.S. military capable of meeting crucial national security priorities even if fiscal pressure requires reductions in the force's size. In my view, we must reject the traditional approach of applying across-the-board cuts, the simplest and most politically expedient approach both inside this building and outside of it. That kind of an approach preserves overhead and maintains force structure on paper. It results in a hollowing-out of the force from a lack of proper training, maintenance and equipment. We've been there before, in the 1970s and in the 1990s.
This review will be guided by the National Security Strategy, the National Defense Strategy, the National Military Strategy, the Chairman's Risk Assessment, and the Quadrennial Defense Review [QDR] to ensure appropriate focus on strategic policy choices first and corresponding changes in the DoD budget second.
The QDR provides today's basis for sizing the force, focusing its missions and shaping its capabilities. But there is not a strong analytical link between the QDR and the present makeup of our forces. This review will establish that linkage, so that we can see the impact of changing QDR strategy on force structure, missions and capabilities. And only once competing strategy options are identified should the review begin to consider fiscal implications and options.
To do this, the review should develop specific program options that can be categorized in four bins.
The first bin is additional efficiencies, continuing the efforts we launched last year. These changes would reduce DoD costs with minimal impact on military capability. We must be even more aggressive in curtailing bureaucratic excess and overhead before considering fundamental changes in national strategy or force capabilities.
And while I believe the department can identify additional significant efficiencies, they will not result in sufficient savings to meet the president's direction. Therefore, a second bin will involve a serious examination of established policies, programs, processes and mandates that drive the dramatic increase in defense operating costs, to include the way we deliver health care, compensate military personnel, provide retirement benefits, sustain our infrastructure and acquire goods and services.
The third bin will contain options to reduce or eliminate marginal missions and marginal capabilities, specialized and costly programs that are useful in only a limited range of circumstances or contingencies. They represent missions that the department carries out today that, while of value, are not central to our core mission or are of lower priority.
The final bin and the hardest category strategically -- and I would say also intellectually -- will be specific alternative modifications to the QDR strategy that translate into options for reductions in force structure or capability needed to execute the strategy. This latter bin will be informed by all the other activities in this framework.
In the end, this process must be about identifying options for the President and the Congress, where the nation is willing to accept risk in exchange for reduced investment in the Department of Defense. The defense comprehensive review will be jointly led by the director of Cost Assessment and Program Evaluation, the under secretary of defense for Policy and the chairman of the Joint Chiefs of Staff.
Q: Let me ask about the budget rollout that just -- you announced here. Can you give the public a sense of what one or two missions will definitely be reviewed? You know, COIN [counterinsurgency], NEO [noncombatant evacuation operations] operations -- what will be reviewed? Can you give one or two examples, and the resource implications to some of these missions?Everything else asked by the media was related to Osama bin Laden or Pakistan. The media is mostly incapable of covering a strategic debate inside the Pentagon (with a few exceptions), so it is very difficult to expect even the DoD press corps to take this process seriously.
SEC. GATES: Well, let me give you an example of the -- of the hardest bin, the third bin, in terms of the strategic alternatives. We have had the -- it has been our strategy for many years now to be able to fight two regional -- two major regional conflicts simultaneously. If you were to tell yourself the likelihood of having two such fights simultaneously is low and you could therefore plan to fight sequentially, that would have huge implications in terms of the size of force that you need to maintain. But the other side of that is the risk involved if you're wrong. And the other guys always have a vote. So that's the kind of strategy and risk that we want to surface for the president and for the Congress.
You know, I mean, what I am really working against here is what we did in the '70s and in the '90s, which was these across-the-board cuts that hollowed out the force. We have got to avoid that, no matter what happens in this process. But the consequence of avoiding that is everybody -- from the services to the chairman to the secretary of this department -- making tough decisions, and then the president and the Congress making tough decisions, because they have to accept responsibility for risk.
And I want to force that kind of a discussion. If we're going to cut the military, if we're going to reduce the resources and the size of the U.S. military, people need to make conscious choices about what the implications of that are for the security of the country as well as for the operations that we have around the world.
And I just -- that's why I want this review in place, to provide the substance for making those kinds of conscientious decisions where the political leadership of the country, in essence, says: We are prepared to accept this risk in return for reduced investment in defense.
Q: One of the big programs is the F-35. It overlays many of these scenarios, many of the rules and missions of the military. To what extent will this large -- the Pentagon's largest program and its 2,400 airplanes and about $11 billion a year investment over the next decade -- to what extent will that -- will that quantity be reviewed to see whether the program should be scaled back accordingly?
SEC. GATES: Well, first of all, the country needs the F-35. We need a fifth-generation fighter and -- in addition to the F-22. And so we must have that. Obviously, if you're going to change strategies or missions, that has implications for the amount of equipment that you buy. And I would expect that to apply across the board, not just to the F-35.
But everything in terms of looking at these strategic equations, if you will, has to do with the amount of capability that you buy or that you invest in. But I would just make the point -- and here's where this -- where the rubber meets the road on this -- we must buy a new tanker. We must buy a fifth-generation fighter. We must replace the ballistic missile submarines toward the end of this decade. There are -- there are a number of things -- the Army must reset after Afghanistan, and Marine Corps as well, just -- but to a lesser extent.
So the point is, there are some significant new investments that must be made. So how do you pay for that in the context that we're talking about? Those are the kinds of hard choices that I want to surface and have people address, and I -- because, frankly, as I said in my opening statement, both within this building and outside it the easiest thing is to say cut defense by X percent. And I think that would be the most dangerous approach of all.
Q: What does the $400 billion represent --
SEC. GATES: That’s enough (inaudible). (Cross talk and laughter.)
It will be interesting if anyone inside the DoD actually takes this process seriously, particularly as Secretary Gates steps down in just over a month. I do not have much faith.

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