House Armed Services Committee

Department of Defense Plans for Sequestration: The Sequestration Transparency Act of 2012 Report
and the Way Forward

September 20, 2012

Witnesses:

The Honorable Robert Hale, Under Secretary of Defense (Comptroller)

GEN Lloyd Austin, III, USA, Vice Chief of Staff of the Army

ADM Mark Ferguson, USN, Vice Chief of Naval Operations

Gen Larry Spencer, USAF, Vice Chief of Staff of the Air Force

Gen Joseph Dunford, USMC, Assistant Commandant of the Marine Corps

In Attendance:

Howard “Buck” McKeon, Chairman (CA-25)

Roscoe Bartlett (MD-06)

Joe Wilson (SC-02)

Doug Lamborn (CO-05)

Rob Wittman (VA-01)

Duncan Hunter (CA-52)

Mike Coffman (CO-06)

Todd Platts (PA-19)

Chris Gibson (NY-20)

Vicky Hartzler (MO-04)

Bobby Schilling (IL-17)

Jon Runyan (NJ—030)

Austin Scott (GA-08)

Steven Palazzo (MS-04)

Allen West (FL-22)

Martha Roby (AL-02)

Mo Brooks (AL-05)

Todd Young (IN-09)

Adam Smith, Ranking Member (WA-09)

Silvestre Reyes (TX-16)

Mike McIntyre (NC-07)

Robert Andrews (NJ-01)

Susan Davis (CA-53)

Joe Courtney (CT-02)

Niki Tsongas (MA-05)

Bill Owens (NY-23)

Mark Critz (PA-12)

Colleen Hanabusa (HI-01)

Ron Barber (AZ-08)

Summary

On Thursday, September 20th, the House Armed Services Committee held a hearing on the effects of
sequestration as a result of the Budget Control Act. The hearing was called in response to the report
released by the Office of Management and Budget on Friday, September 14 th on how cuts will be made
to affected account. Many members did not ask the witnesses questions but used their time to state
their thoughts on the issue. Several made statements that they were going to vote against adjourning
because the House had so many pressing matters. Occasionally there was heated partisan discussion
among the members over various budget plans. The witnesses stated that if sequestration took effect,
the military would not be able meet the national security strategy and that a new strategy would have
to be crafted. General Dunford stated that the cuts would leave the military unable to meet a major
contingency operation. Long term personnel would have to be reduced and procurement would be cut
and maintenance delayed. Civilians would not be exempt from the FY 2013 budget cuts required. The
witnesses stated that they would prioritize funding for forward deployed troops but that that would
come at the cost of funding for forces stationed at home.

Opening Statements

Chairman McKeon
 1. The report on sequestration that was issued by the Office of Management and Budget (OMB)
which was required by the Sequestration Transparency Act was late and paid only “lip service”
after having over a year to plan
a. The military was ordered to not plan
2. We are living in a very complex time
3. While planning cannot prevent sequestration, a lack of planning can make a bad situation worse

Ranking Member Smith

1. The point of the Budget Control Act was to be bad

2. The Executive Branch has said which programs will be exempted and what percentage of non-
exempt programs will be cut
a. Inaccurate to say that there has been no planning
3. The only way to stop sequestration is to pass a comprehensive plan to reduce the deficit
4. We know roughly what will be cut and by how much

Secretary Hale

1. Sequestration would be devastating

2. Our testimony gives insight into higher level planning
3. Sequestration is inflexible
4. $54 billion will be cut
a. $52.3 billion cut from DoD
i. 9.4%
5. Will protect warfighting capability
a. Will see a reduction in OCO funds
i. Reduced training
ii. Unpaid furloughs
b. In most cases will have to reduce purchase of weapons and delay shipbuilding and
procurement
6. Longer term
a. Substantial reduction in units and personnel
i. Reduced combat forces
ii. Would have to create a new strategy

GEN Austin

1. The Army is already operating under cuts from the Budget Control Act that were not part of the
sequester
a. Sequestration would impose even greater cuts especially to OCO funding

ADM Ferguson

1. Sequestration will reduce Navy funding by nearly $12 billion in FY ‘13

 a. Will impose cuts on the second half of the fiscal year in three broad categories
i. Fleet operations and maintenance
ii. Procurement
iii. Force structure
2. Immediate impact will be to our operations and maintenance account by over $4 billion
a. Account funds fleet operations, maintenance, civilian personnel and training, spare
parts, and directly impacts readiness
b. Translates to reduced flying hours for airmen, fewer underway days, less training, and
less maintenance
c. Will affect the defense industrial base and the expected service life of our platforms
3. Will prioritize forward deployed forces
a. Non-deployed forces will see a disproportionate cut
i. May be forced to reduce base support
4. At this time it is too early to be able to tell the exact impact on any given family of programs as
each program has unique features
a. Also a change in one program may have cascading effects on investments and other
programs
i. Could result in delays and procurement reductions
5. Navy will be unable to execute the national defense strategy if potential reductions beyond ‘FY
13 budget take effect

Gen Spencer

1. DoD proposed a minimal force necessary to execute requirements

a. That proposal was before sequestration
b. Further cuts will affect equipment and training

Gen Dunford

1. Will suffer a significant reduction in readiness, be unable to properly carry out the national
defense strategy
2. Because of the size of the cuts, we will not be able to maintain balance across capabilities
3. Concerned that we will lose trust in our all volunteer force

Questions and Answers

McKeon

1. The Deficit Reduction Act was passed

a. Almost $1 trillion cuts
i. Almost ½ coming from defense
1. Military said that “we can do that”
2. The strategy was changed
b. Second part will have a supercommittee to find cuts in mandatory spending
 i. If we cut all discretionary spending there would still be a half trillion dollar
deficit
1. Defense spending is not the problem
2. Need to look at cuts to mandatory spending
2. There are two impacts
a. Cut on defense
b. Impact on economy
i. Sequestration will result in another recession
3. Cuts to training will cost lives
a. Counter IED operations take a lot of training
4. FY ’13 starts October 1
a. Sequestration takes effect January 2nd
b. CR keep government afloat until March
i. The chairman considers the military to be shut down on January 2 nd due to
sequester on top of CR
5. Is ammunition a line item?
a. Sec Hale: ammunition is a line item within the procurement account
i. If procurement is cut at the line item level then yes ammunition will be cut
ii. Would have to see where exactly ammo is funded in OCO budget
iii. OCO and the base budget are authorized and appropriated separately
1. When executed they merge
a. Would have some authority to move money within the account
i. Not easy though- would have to make disproportionate
cuts to base budget.
ii. Would work to protect warfighting operations

Smith

1. How someone can listed to the vice service chiefs and say that they are not planning is
ridiculous

Bartlett

1. Every 6 or 7 hours another $1 billion is added to the debt

2. Defense is only one fifth of spending
a. If we’re going to cut let’s be fair
3. Mr. Secretary, should Congress not prevent sequestration, are you prepared to recommend an
implementation procedure to cause the least harm to the military? A change in the law?
a. Sec Hale: yes but in the abstract we don’t know what that law would be
4. If Congress allows sequestration to take effect will you have a plan so that there is the least
amount of damage possible?
a. Sec Hale: yes, we will report and implement to do the least damage
i. It won’t be able to help that much
Reyes

1. We don’t like the details even though we created them

2. It is up to us (Congress) to find the solution to avoid sequestration

Wilson

1. 58% of Marine Corps budget for personnel?

2. How will the Marine Corps handle sequestration?
a. Gen Dunford: the proportion of personnel funding in the Marine Corps is a higher
percentage of the service’s budget than the other services (58% is correct)
i. Cost per marine is not higher
ii. Would have to focus cuts on a smaller portion of the budget due to personnel
being exempt in FY ‘13
iii. Will see biggest impact on units that are at home station.
1. Already at a degraded state of readiness
a. Cuts will make it worse
iv. Will have to delay programs and do more with less
3. USAF might have to cancel contract for KC-46 refueling tankers and renegotiate for fewer
aircraft. What per unit cost increase might this cause?
a. Gen Spencer: we have a firm fixed-price contract
i. We would have to open up the contract, revise payment schedule which could
cause a number of changes
1. As we go down the thousands of line items there could be all these
changes that would need to be made with all of them

Andrews

1. Wishes that the House would show the same degree of interest in stopping sequestration on the
House floor that has been shown in the Armed Services Committee
a. Plans to vote “no” to adjourn on Friday, September 21
2. Any citizen that serves this country deserves free healthcare for life
3. Retiring healthcare costs are eating up a larger and larger portion of the defense budget
a. If we are serious about avoiding the sequester but also reducing the deficit we will need
to talk about military retirement contributions for a fair and equitable system
b. Would a change in retirement system for veterans harm retention and recruitment?
i. All: any change would cause concern but would have to look at specific details
of the plan

Scott

1. The world is a more dangerous place

2. The House has passed 5 bills to avoid sequestration
a. It is time for the Senate to pass a bill
 b. What would POTUS sign?
i. Sec Hale: POTUS made 2 proposals- the budget recommendation and a plan to
avoid sequestration
1. Scott: that bill did not receive a single vote
2. Smith: that budget was not POTUS’ plan
3. Scott: POTUS needs to “lead, follow, or get the hell out of the way”

Courtney

1. Disapproves of the House leaving to campaign when there are pressing issues
a. Plans on voting against adjourning- hopes the motion will fail
2. USCG would also get cuts!
3. Lindsey Graham has been working on a plan to avoid sequestration
a. Glad to see someone in the Senate at least trying to work on avoiding sequestration

McKeon

1. The Senate has not passed a bill to send to conference

a. The Senate would have more credibility if they passed a bill

Smith

1. The problem is that the Senate needs 60 votes so it has to be bipartisan from the start

McKeon

1. the bill that was passed in the House was passed under reconciliation so the Senate only needed
51 votes
a. Note: It takes a majority vote (51 votes if all Senators are present) for the Senate to
pass a bill; however if that bill is filibustered it takes a supermajority (60 votes) to break
the filibuster. Reconciliation is a procedure in the Senate under which one budgetary bill
per year may not be subject to a filibuster and therefore will not need the 60 votes to
break a filibuster. Also a vote to break the filibuster does not necessarily mean that the
Senator will vote for the bill. Due to the split Senate, any important, partisan bill is most
likely to be threatened with a filibuster.

West

1. When will personnel reductions happen?

a. GEN Austin: 61 thousand soldiers in Afghanistan
i. Personnel accounts in FY ’13 are protect
ii. Over time may have to reduce forces by 60-80 thousand
b. Gen Dunford: we have a very deliberate plan until 2016
i. It would be impossible to maintain 182 thousand marines
ii. Once we have the top line we will building the best force possible
 iii. 182 thousand is the minimum to be able to react to a major contingency
operation
1. If it falls below that mark we will not be able to react to a major
contingency operation
2. Where will you have to accept risk?
a. GEN Austin: will continue to support deployed soldiers
i. Eroding capability to at home forces
b. Gen Dunford: don’t see any way to maintain modernization profile and would not be
able to sustain investment in infrastructure

Davis

1. At the beginning of the opening statements, Sec Hale said that we need a balanced approach. Is
there anything that has been said that would suggest that the approach shouldn’t be balanced?
a. Sec Hale: the Administration supports an approach with cuts and revenue
2. Impact of personnel accounts on readiness?
a. ADM Ferguson: we would want to sustain family services because they are very
important to readiness but we have to prioritize our forward deployed forces
b. Gen Spencer: as we look to what we want to protect we have to realize that it will
squeeze other accounts
c. Gen Dunford: need to look comprehensively at readiness
3. Will cuts to TRICARE and the resulting effects push doctors away from accepting TRICARE?
a. Sec Hale: TRICARE would receive reductions
i. Would potentially be faced with not being able to pay TRICARE bills
ii. Can’t say what the doctors would do

Brooks

1. Govt has been reckless with spending for years

2. The debt is the primary threat to security
a. Spending has increased by 40% in the past 6 years
3. Sequestration was POTUS’ idea
4. Hopes POTUS will submit a detailed bill to avoid sequestration

Critz

1. Will the military operate as normal until sequestration hits?

a. Sec Hale: we don’t want to sequester ourselves
i. We know it’s there but won’t make cuts until we have to
2. Are you making a FY ’14 budget with regards to sequestration?
a. Sec Hale: the work on FY ’14 assumes that sequestration will not happen

Young
 1. “hidden tax?” What are additional costs/cuts due to contract cuts and reductions?
a. Sec Hale: would not expect that contracts signed before January 1, 2013 to be drastically
affected
i. Don’t see large cancellation
ii. Need to find a way to avoid severance charges because we can’t afford them
2. There seems to be no contingency planning
3. What changes to strategy would be needed?
a. There was no time left for witnesses to answer

Hanabusa

1. In all prior hearings there theme is the same: “don’t plan for sequestration”
2. Is that the situation?
a. Sec Hale: we are planning FY ’14 budget
i. Will be ready to implement sequestration
3. The administration cannot exempt any programs except for personnel.

Shilling

1. How would you deal with cost overruns with contracts signed before January 1?
a. Sec Hale: funding signed before January 1 are exempt but should the program require
additional funds (cost overruns) those new funds would be subject to sequestration

Barber

1. How is sequestration affecting morale?

a. Sec Hale: civilians are not exempt from FY ’13 cuts
b. ADM Ferguson: service members are looking to us to resolve this and give them
certainty
c. Gen Spencer: there is growing concern especially with civilian employees

Coffman

1. Will be voting against adjourning

2. Believes that the military can take additional cuts but not to procurement
a. Against forward basing/doesn’t like allies freeloading on US military spending
b. Doesn’t want the US to be involved in nation building
3. How does sequestration affect USMC in the Middle East?
a. Gen Dunford: will make every effort to protect forward deployed marines and soldiers
4. What would be the permanent damage to the Marine Corps?
a. Gen Dunford: hard to predict the long term implications
i. Will have short term degradation

Wittman (acting chair)

1. Will vote against adjourning
2. What are the estimates on the effects of sequestration on operations, maintenance, and
deployments of carriers?
a. ADM Ferguson: we will need additional funding to finish RCOH for the Roosevelt and to
start the RCOH for the Abraham Lincoln.
i. Will have to defer maintenance
1. 2 carriers currently in the Middle East
ii. Will have to rush to maintain aircraft, airmen and flight crews for these
important operations especially after operations in Afghanistan
1. This rush will create a deficit afterwards due to lack of funding
iii. The force will be smaller and would be less available
1. Already seeing longer deployments
a. 8 month deployments
b. 9 month deployments for BMD capable ships
3. Asia-Pacific Strategy
b. ADM Ferguson: the Asia-Pacific Strategy could not be implemented under sequestration
due to inability to surge
4. USMC posture in Asia-Pacific theater
c. Gen Dunford: expect to be able to continue forward deployed operations
i. However home deployed forces will be hit and they are our surge capability
ii.