Transcripts For CSPAN3 Politics Public Policy Today 20150213

What share of the market your company has lost and how you see that a rippling effect throughout the industry . Well i guess going to car gil share gets to be a bit difficult. But if you look at the u. S. Pork industry or the u. S. Beef industry, we certainly have been the largest exporter around the globe. But as we have dealt with issues in the ports like currency and elements the play in the market, weve seen increase particularly in the last year to countries like the eu, chile. And certainly in the last months have seen substantial decline. Do you think that will be permanent. Will we be able to get that market back . I think any time you disappoint a customer it takes time to build trust back. And as i referred to in my testimony, there is a tremendous amount of potential for both beef and pork exports on the global scale. We have a product that the world is look inging for. And values. I certainly believe the Growth Potential remains. But there is no doubt that weve disappointed our Customer Base, primarily in japan, korea and many china over the last couple of months. And that will take some time to rebuild trust. And in disappointing our Customer Base what has been the loss in dollars to port producers and the economy here in this country . Well i dont know that id be the best one i think north American Meat strut estimateinstitute estimated 40 to 50 million per week. We have about fifty containers of chilled pork product in route to japan that our customers are asking can you guarantee us it will arrive in a useful form with shelf life or not. So for me that is about a Million Dollars i have to decide whether im going to put that into a port system. And it either slow down or potentially close closing being a complete loss. So i hope that gives you some perpetrate i. Yes, thank you. Spective. Yes, thank you. With bnsf ms. Farmer im sure you have to look at the possibilities of a shut down and a shut down that would last possibly annex extended period of time. How does that effect the railroad and your planning and what effect does that have on your customers and your thousandes of employees that you have. An example would be this weekend we were notified by the pma that vessel gangs could not be working. So the effect that has on our railroad is that in an average week during this period of the year we would be moving somewhere in the neighborhood of 60 trains off our docks in southern california. That number has been reduced to 30 trains per week. The impact that that has is that we cannot move the freight that wants to move off the west coast. So we will move a limited amount of that freight off the west coast into the interior of the u. S. It will then limit the ability for us to accept freight at our inland hubs. So we will have to turn freight away at the inland hubs that wants to move back to the west coast. In addition i talked about our Capital Expenditures we made. We are now having to store locomotives and equipment that we have added to our fleet to be able to handle the supply chain growth of the country and store that across the railroad because we can no longer continue to send this volume out to the port. When we do it sites on the main line and causes Ripple Effects which impact other customers in addition to our intermodal customers. So the impact really senator fisher is that we cannot move the freight through and we are not using the valuable resources that we have. And that impact when you see the freight migrate from the west coast, what impact does that have on a local community. Absolutely. You know, i think when we look back at history and we know that during 2002. Additional expenditures need to be made somewhere else. There seems to be no doubt among any of our Panel Members that solving this threatened impasse or crisis on the west coast is necessary to americas near term and longer term competitiveness. Is that correct . But moving onto the broader issue. Let me go to the really excellent testimony about our ongoing failure. And it is a kind of slow motion implosion of american competitiveness. The ongoing failure to spend more than 2 of our gdp on Infrastructure Investment. Which is compared to 9 by china, 8 in india 5 in europe. Even in mexico, 4 . And it extends not only to roads and bridges, which are crumb skpblg decaying and decrepit but also to areas of our infrastructure as simple as rail grate crosses. In valhalla new york just days ago we saw the consequences of possibly. We dont know the causes yet. But possibly a rail grade crossing that could have been made safer and could have prevented the deaths and injuries that occurred there. The fact of the matter is that there are more than 2,000 crashes and collisions every year at our rail grade crosses, causing more than 230 deaths. And more than 700 injuries. Not to mention the economic costs of those collisions. Which are very difficult or impossible to calculate. That is just one example of our failure to invest in infrastructure. So let me ask you as to the 2 billion that you recommend as a fund for investment would it make sense to do it through a Public Financing authority or Infrastructure Bank such as has been proposed and advocated by myself, other members of this committee, a very bipartisan proposal that would make available not just 2 billion but very possibly more . I think the concept of a set aside through a public Infrastructure Bank, broader utilization of public and private activity bonds, along with some other finance mechanisms. I think we need to bundle these together. I think anything that costs a lot of money these days is going to take more than one source or resource to make it happen. Back in illinois we dont like to talk about gas tax. But we think in illinois to solve some of the state road and infrastructure problems a gas tax is something we should be looking at. But i do believe that loan guarantees broader use of some of the existing bonding programs tiffia and riff, i think both would help in meeting the demand we have. And i do believe that multiple solutions are going to be necessary. My understanding is that tiffia and riff are both under utilized, in fact billions of dollars have been left on the table in effect as a result of internal problems. Highlighted by the Inspector General very recently. Would you agree . I would agree with that. I think the time it takes to process going through the preapplication and going through that review. The uncertainty quite frankly that comes about when there is long delays in Public Financing tools. All of a sudden the hot project becomes not so hot and they start looking at other infrastructure pieces to accomplish. Expedited review and would go a long way to helping us. New programs is fine but i this i better utilization of existing programs makes sense. And riff is a multibillion opportunity that is lost every day to intermodal transportation. I welcome the emphasis that all of our panel have put on intermodal transportation. As you well expect it is the transportation Growth Opportunity of the future. Thats right. Do any of you have any differences with the points that he has just made . We have vested interest in making sure the supply rain runs efficiently. So we fully support federal focus on fragranteight. We think that is a good thing. Through Infrastructure Bank . We dont necessarily want to drive that decision but we certainly want to be part of the conversation. Thank you. My time has expired. Thank you all. Thank you senator blumenthal. Senator daines. Thank you madam chair. While i get to represent the state of montana. And our number one industry is agriculture. It is about 5 billion just last year. And as yes know in ag, you have to be able to export. And like senator fisher, we dont have a lot of ocean front property in montana. I dont think nebraska does either. And so the supply chain becomes critically important. In fact 80 of montanas wheat is exported. Nearly a billion dollars in 2013. And primarily through the west coast ports. Were very proud of our ranchers and farmers who not only feed america. They feed the world now. I heard concerns certainly about our producers in montana about the backlog we had i think of 3400 cars past due in the region. Could you tell us what the current status of the rail backlog is now in montana . As i have responsibility for intermodal, id be happy to follow up with specific statistics around the backlogs. But what i can tell you is that by any measurement on a year over year basis because of the capital that weve invested because of the milder winter that weve had by any metric that you look at we arefar improved versus last year. We are making significant process by what you have come to expect of us and willdont make progress on those lines. One of the ways products get to the west coast as we discussed is through the use of containers. It can move in hopper cars or containers. And what can i say is that as we limit the inbound flow of containers into the interior of the country it makes it more difficult for me to be able to move that product for export. So that is certainly of concern to us. I can tell you too, last summer our montana ag producers were not so concerned about the rail backlog but the issues going on at the west coast ports. I used to be a supply chain guy myself. Worked for Procter Gamble for 12 years and was in the supply chain. And having appreciation that the chain is only as good as its weakest link. If we cant get the harvest to market we cant realize the Great Potential of our industry. The port of vancouver, the port and the labor dispute that we had going on there that now we see going on in long beach in l. A. It is having a great impact in creating dwindling confidence in our Global Markets t ability for us to deliver. In thinking about our global opportunity as our competitors continue to improve in their products. The differentiator for us longterm to win will be an excellent customer service. The ability to say that when we say the product will be there, it will be there. And when we lose, as senator fisher mentioned, when we lose ability to deliver our customers will look elsewhere to find those same products. In fact i just got a rather haunting email from the president of an Outdoor Products company that manufactures in montana. They have leading Global Market share. In fact they are the only producer of some of these products that are still produced in the United States. The rest are over producing in china. So this u. S. Manufacture, the president of the company emailed me about concerns as we speak about the west coast ports. The unions are putting their interest ahead of their customers customers. And he said if something doesnt happen soon well have no choice but to reduce current hiring plans and potentially lay off some of our current staff. If in your view what, if anything, can be done as we look at these challenges right now with these west coast ports being virtually either slowed down or shut down . Certainly we are not party to the negotiations between the pma and the ilwu. But it is clear to us that there needs to be some speedy resolution of this. The biggest opportunity that i think is in front of us is that it is going to take us several weeks to work off the backlogs that exists. Once some time of resolution comes to bear. We have an opportunity in front of us and that is that Chinese New Year is upon us. And that will give us several weeks of the reduced freight inbound that would allows allow us to catch up. It is very concerning. We need to find a way to resolve this but geernagain were not party to those dpoegss and as such the urgency is really where were focused. Thank you. Thank you senator daines. Senator klobuchar. Thank you very much. Im losing my voice but i want to thank everyone for coming. Especially cargill. A biggest private company in the country. And we have worked extensively with them on those transportation issues. So thank you for being here. Im very glad that we were able to pass the user fee increase from the river act, and i appreciated all the work that people who transport on the river did do get that bill done. As, you know, it was part of the able act. Can you talk please about what the increased revenue will mean for upgrading locks and dams on our nations inland waterway system. My area is in pork exports. I know cargill is very interested in building a strong infrastructure so that we can compete on the global scale. Id be happy to get you written answer from our Corporate Affairs staff so that we can but youre glad that we passed the bill so you can get more infrastructure improvements. I am. Okay. That was supposed to be an easy question. But thats okay. Could you talk about how this works and why it is such a problem if you are able to get things out . As mr. Daines points out we are states not on an ocean. We are on Lake Superior. So the port matters a lot. I was once placed on the ocean subcommittee of this commerce committee. And i remember getting a note when i told them that i was the only senator that didnt have an ocean on ocean subcommittee. And he said well next year just come back and ask for me. In any case can you talk about how inland states depend more on this river traffic. Absolutely. You know the demand for safe wholesome Food Products around the world continues to increase as population increases. And we need very effective, reliable modes of transportation, whether a River Railroad truck or ocean vessel to efficiently move those products to their best value consumer. And our farmer and rancher spiers depend upon us to be able to take those crops and move them efficiently and get the best value so we can in turn pay them a strong value for the hard work that they do raising those crops and those livestock. Thank you. Could you talk about the interrelationship with the ports . And we do have the Lake Superior port, and rail in the intermodal issue. In the last 15, 20 years the number of hours of unscheduled outage in americas locks and dams particularly the mississippi waterway has increased substantially. Has made barge traffic less predictable. And agricultural shippers have been finding alternative routes. And perhaps the easiest way to see this is when you look at the port of new orleans share of u. S. Agricultural exports. It used to be close to 65 about 10 or 15 years ago. And today it is about 45 . It is an impediment for farmers to get product down the river reliably and loaded onto the vessels. And this does create permanent damage. So rather than look at threats of job cuts or of not making investments, there are actual quantitative facts that can be assessed here. Under a Free Trade Agreement there are quotas for the trade of agricultural goods. And if a shipment is displayed beyond a calendar year, then the quota for that year isnt made. The importer on the other side of the trade is normally allowed some small growth rate, say 2 to 3 . But if they dont make their yoet the year before, the 2 to 3 growth rate is applied to a lower base rate. The excess amount is actually filled by other countries that do have reliable systems. Exactly and its going to hurt us competitively internationally. Mr. Greuling. One last question on Public Private part ships. Exports of goods to our neighbors to the north and south and bringing goods in from mexico and canada is really important. Canada is the biggest trading partner we and people dont seem to always realize that. And we are having huge problems at the borders with delays in places Like International falls, minnesota metabothere is an minnesota, there is an issue with a bridge. And ive been working on this. But on the Mexican Border our country has started a lot of Public Private partnerships with building up the infrastructure at the ports of entry. So do you think this is a smart way to go . Because i want to get it rolled out on the northern border as well. We definitely think as the smart way to go. O in our own case were looking at privately built bridges connecting modes of transportation, highway with rail, highway with water ports. Knowing that the users will pay their way their fair share knowing that that money is being invested into that specific infrastructure. We cant afford to build, you know 150 million bridges without some infusion of private equity. That is being used in north africa. Canada. In canada. We have a great example on the ohio river of a toll bridge built with private Equity Funding and one of the Construction Companies actually paid part of the bill. Keep their people employed. So it is a good approach to these. And this project is more about the customs plazas. Right. To try to speed up the back and forth between the countries with the new dawn in north america. Thank you. Thank you. Thank you senator klobuchar. Senator cantwell. Thanks for having this important hearing on movement of freight. When i think of this issue i think so you have many of Washington State and all the products that come through on their way to asia. And we have a short period of time seen Something Like a doubling in the size of the ships over the last five years. So yes we have a lot more capacity. And we obviously have a rising middle class in asia. And they want higher they want more u. S. Products so the question is what are we going to do to meet that demand as it relates to improving our infrastructure . So one of the things thats occurred is the recommendations of the freight mobility board which was chaired by mark downy. And i think ms. Farmer, somebody from the Railroad Association at least participated in that. The question is how do we move forward on those recommendations . And would you support a dedicated Funding Source to freight so that we could raise the importance of why moving this product is so critical to our economy and infrastructure. And that tiger alone just isnt going to get it done. Are you yes. Ms. Farmer ore mr. Greuling. Anybody else. Serm we support anything to make our ports more competitive. We are excited about the working together of seattle and tacoma. So well certainly stand together to work with them. We believe that the tiger grants were a good thing. That we need more funding arnold ingaround those kind of issues. From our perspective, anything we can do to make them more competitive were in favor of as well. Senator, certainly our four points with the coalition, number one is to establish a fully funded dedicated freight program. And and this is not a program that is going to pick winners and losers in the transportation field. This money should be spent on what makes most economic sense in terms of performance for the spire system. And entire system. And we believe setting priorities on the National Scale is one of the mechanisms to do that. And also the establishment of the separate Freight Office within u. S. Dot again to strictly focus onmodally. What do we need to get to get people to understand from an Economic Impact or some of the things your organization has done in studying Economic Development of this. A lot of what we do in the center and through the coalition is education. You may see this brochure that we recently produced through the coalition. And it shows the supply chain from the california to the port of germany and almond butter. And i think that helps but i also think local jurisdictions and state jurisdictions need to understand and look at freight more nationally and think in terms of the interconnectivity and not just what is good for elm street or my river. But look at the whole system and make sure they are aware that what we do interconnects and we really need to make sense of that when it comes to funding. Mr. Bessac . I think more of a comment. You hear lots of numbers talked about. 2 billion for infrastructure. And i go back to the number senator fisher mentioned. You know, if the ports were closed today it would be 2 and a half million per day to the u. S. Economy. And i would submit were very close. Although they are not officially closed i think we are very close to that at this moment. It seems like a very wise investment and expense that u. S. Taxpayers and consumers are paying today daily because we dont have the free flow of goods. You know i think we learned the lesson in washington because were at the tip of the spear. And so that congestion cause sod many problems that we learned if we were going to be competitive and not lose that business that we had to make the improvements. But now we need the improvements made all along the system not just right there. Agreed. But i think we have to prioritize for people to understand that we will actually lose the Economic Impact. It is not the upside. But there is a downside if we dont act as well. And that is that people will go to other ports or buy product from somewhere else because they can get more predictable time frames for delivery. So we really need to make this investment. Thank you madam chair. Thank you senator cantwell. I believe we have some more time. And i know members have more questions. So were going to do a second round. Take a big sigh here. But im interested mr. Bessac and ms. Farmer when we look at the Transportation System and the midwest and some challenges we have with containers. How would you address those challenges . Where we have that lack of containers to move our product . And other members of the panel if you would like to jump in on that as well. Certainly ill go ahead and start, chairman fischer. I think that what you will see is that weve proven in normal times that we have sufficient containers to be able to move the product that wants to move export. In fact last year we moved 236,000 units of grain in a box back to the west coast. We work very closely with the ocean carriers and the trucking companies. And they are able to scale relatively quickly to be able to meet the demands. What bnsf has been very focused on is improving our velocity. As you well know when we look at the speed with which we can turn these assets we can create more capacity for the supply chain and the market. If we invest in our infrastructure. If we have expansion in our infrastructure. So we have a very thoughtful approach to investing so we can get the velocity we need which will generate the capacity for the midwest to be able to have the containers that they need. Anyone else . There is a structural deficiency in that for exports. And our exports tend to be agriculture, large scale capital goods and energy products. And thesis come from places where not a lot of people live. And therefore not a lot of containers arrive full of imports goods. So there is a structural gap that has to be addressed. And from where i sit and what i see in the data i dont think it will be addressed very simply by trying to match or reposition containers. Because every time you have these congestion issues things do get paralyzed. It may be necessary to pursue an at alternative solution such as 53 domestic containers and crossdock operations like we do in the in the imports but in the inverse so question compress these relationships. The demand is there. Empty containers quite frankly are at the premium in certain locations. In our case were receiving grain and dry distillers grain and corn and soybean meal from six different states that are being trucked in trans loaded into the containers and shipped out onto the west coast. When you think of the cost of that transportation just to get to an empty container shows clearly that weve got this very high demand. And really we cant afford to build more ports. We just need to use the existing port as as efficiently as we can. And that applies to both inland and water ports. That is going to be the solution. And tie it all together with highways and railroads. And weve got a winning situation. That ties into what i want to ask dr. Kemmsies with making our ports efficient. What role do you see for automation. Is that going help make it more efficient and competitive . And what success do you see us having in that regard . Well i dont think it is possible to operate the ports with the larger vessels coming without some degree of automation. If not eventually full automation. These ships as i mentioned in testimony earlier, they have to be on the water as much as possible, not sitting at ports. So if you were to look at an 18,000 t. U. Vessel which is the largest size really currently operating. It takes four and a half days if you can do 35 gross moves an hour on a 24 7 basis. To maintain productivity without some form of automation i think is impossible. So it seems we have to move in that direction. If we do that then i do see u. S. Ports being able to maintain an ability to compete with foreign ports, particularly those to our north and to the south. Thank you doctor. Senator blumenthal. Thank you. What is the cause of the shortage of container cars in this country . Ill ask that question to whomever. Or all of you if you want to answer it. Senator i think from our perspective, im not sure there is a net shortage. I think the real issue is where the empty containers are versus where the demand for the containers is. And what accounts for the imbalance . Well a lot of it has do with the system that we have set up. The intermodal system today. We can handle over 3 million containers at our yard. A million and a half coming in and a million and a half going out. Places in down state illinois or minnesota or indiana dont have that kind of inbound capacity. There are they dont have the available containers to ship out. It is a market balance to some degree. Im not sure that is fixable in the shortterm. Building more containers is not necessarily the answer. And i would defer to my rail colleague to maybe respond to that. Ms. Farmer. Senator blumenthal what ill would say is i i dont believe the as net shortage of containers but we need to challenge how the we efficiently get them into the interior of the country. With that with bnsf and the western roads have done is that we have found ways to find the ability to load those containers consolidate grain loading around the interior hubs in the interior of the country. Where there is a surplus of containers naturally made by the goods that come off the west coast. Logistics park kansas city for example. The majority that gets loaded out comes from kansas. As we can draw that closer we then have the empty containers there that then be loaded out. And inition we in addition we have to keep continues to invest so the containers are there. I dont think there is a net shortage. The issue is how we stay competitive through the ports over the railroads into the right places to be able to get those containers into the interior of the country. But the ports are just one key to a multimodal system. Absolutely. Where rail is obviously very important to moving a lot of those containers to the right places so they can be there at the right time. Absolutely. You know, going back to the Infrastructure Investment issue. And mr. Bessac mentioned this figure of 2 billion. This possible loss if this impasse or crisis continues, which would be very, very very unfortunate. But it strikes me as an example of how possibly there are costs to lack of recognizing the importance of investment and smart policy. So what somewhat perplexes me is why the folks who run our transportation transportation, including your railroad and others who are here have not been more vociferous or advocates of specific solutions to these infrastructure problems in the way that maybe will move policy makers makers, including folks are who are sitting on this panel to take some action. In other words weed welcomed welcome you to be more vigorous advocating for the system that causes your system to run and the shareholders have investments . Absolutely. And we agree from the standpoint that we absolutely have to continue to manage our network, invest in Capital Expenditures that make sense going forward. We also want to we have a vested interest in remaining engaged in that conversation. We believe that a National Transportation policy is a good thing with a focus on freight. And so i think that weve been very active relative to those discussions and participation in National Transportation policy planning. Thank you all for being here today. Thank you senator blumenthal. Senator daines. A followup. And thank you madam chair. Senator blumenthal i completely agree we need to continue investing here if we are going to may notintain global competitiveness. We mentioned roadblocks at the west coast. The gateway pacific terminal, i was there last summer. Standing there with a member of the rail union from montana. I was standing there with a tribal member from montana that would benefit from expanded exports. We absolutely looked at it we see the benefits but yet its delay after delay after delay in trying to get this port built and and it sits literally right in between two existing ports. It a zoned properly environmentally sound. And yet there is great concern that how in the world are we ever going to move forward with these endless delays and uncertainty. Im looking for help here. Around what we can do to try to im not suggesting there is the thorough review process. But one that provides some degree of certainty and rnlt reasonability in that process. I would say we certainly agree. We are, working very closely as, you know with the state of montana to put together our export platform. We like you are anxious to have the ability to continue to grow to be table to export. We believe that there needs to be some improvement whether its around permitting reform. Weve talked about that multiple times in the past. We believe that extending the Environmental Review position of map 21 to the railroads would be helpful. And, you know, further extightingextight ing expediting the process. Reducing the time line these things take. But in general i would say we completely agree that we are anxious to export product, continue to grow to improve the competitiveness of the u. S. Supply chain. Both exports and what weve talked about here as well as imports as well. And mr. Kemmsies talked a need of productive and automation. This proposed port would be exactly that. And mr. Greuling what are your thoughts on that . I know you are some what of ans expert on this issue. I think like we suffer from multiple jurisdictionitis with multiple units governing roads and infrastructure. The federal government has the same issue. The number of agencies the projects have to touch. The time it takes to go through the process. The Environmental Review. In fact i would comment that we have actually seen some improvement on that under leadership from congress and the kmings. And we applaud that. It shouldnt take 10 12 years to do an eis statement on a bridge. Clearly that is an ij. Multiple agencies may be working closer together on collaboration. And again we think a national Freight Office could help sort of quarterback that initiative especially for these major important freight projects. Highlighted today in tm testimony is whats happened in these choke points. Allowing more options to reof the issues when they come up. If we only have one way out it is nice to have multiple choices and to make sure we protect our economic transists s interests and continue to compete globally. Thank you. Weve been joined by the chair of the committee, senator thune. Thank you madam chair. Its a very important subject and i a reliable and efficient supply chain is important to our economy. And some of these things are things you cant control. These things are sort of i would say selfimposed problems. Really kind of unforced errors. And if you try to qualify this it is having profound impact on the economy. And i know someoff i in the panel have already testified to that effect. And cargill, 40 million a week. Ive talked with tie sonysons in my state. And beef and pork sitting in freezers near the ports instead of heading to asian markets and while weve got all these large container ships sitting there waiting to export our products. And that effects jobs. Tysons employs 41,000 people. Usda estimate t a million jobs associated. So it has a profound impact on the economy not just on the west coast but all across the country. And workers in south dakota and other places that are dependent upon like i said a reliable supply chain. Outdoor gear, inc. Family owned business in south dakota. They are a wholesaler. Receives 95 of inventory from west coast ports. Has been forced to miss deadlines and pay penalties and pass up important Sales Opportunities including in december which is the holiday peak season. So this is an issue that just really needs our focus. And it is a huge drain on the economy. And i just urge all sides to come to a resolution in this dispute to find a solution as soon as possible. We just cant afford to drag this on and have this kind of have our economy pay this kind of a price. And if we can get this behind us we can start focussing on energy and creativity. And a lot of other longterm infrastructure challenges that zpraetly need our dngs as well. That right i wanted to ask a question. I know i think all of you have attempted to qualify what some of the Economic Impacts of this have been. But the question i would like the oppose is once this is resolved how long will it take to unwind this and to get those Networks Working in an efficient way again and where things are sort of normalized . What are we talking about once we get a hopefully which will be very soon a resolution to this issue. Senator id answer from our side as the exporter i think it is an excellent question. Our best estimate is on chilled shipments, it will take at least a month to get back into a normal flow when we can get those products moving through to the high value markets in japan and korea. At least a month. If you move over to the frozen side, the products that we would send to japan, korea china, mideast, all around the globe. Our best estimate is 34 months before were back to a normal flow, weve moved through the backlog of goods that we have. And that number continues to increase every day. Senator thune from our perspective at the railroad we certainly stand ready to be able to help the backlog. But what i would say is because of the challenges we faced with not being able to move freight we have had to store locomotives and equipments across the network. So there will be some time to get those assets and reposition them to the port and be able to be in position to be able to handle that. But we are anxiously awaiting the ability to do that and we will be ready. We have a unique opportunity as i mentioned earlier before you stepped in in that Chinese New Year is coming and when it hits we will see less vessels that will be headed to the west coast. It would give us an opportunity if there is a speedy negotiation that we could use that time to work off the backlog that exists at the ports. I guess i would just reiterate madam chair, and again thank you for having this hearing that this is not something that is confined to the west coast. This has a Ripple Effect throughout our entire economy. Having an efficient Transportation System is really one of the keys to our advantage, our competitive advantage in the global economy. And so when you see this kind of thing happen and recognize the impacts that it has i would just again encourage all of the parties to create a new sense of urgency and build some intensity behind coming to a resolution. We just cant continue to keep this going on and not expect that it is going to have some very, very dret mental and adverse impacts on a whole range of sectors of our economy and on all the jobs that go with it. Madam chair, thank you. And thank the panel for your great testimony today. Thank you chairman thune. Thank you senator fischer for holding this hearing and you and senator blumenthal for drawing attention to this issue. I know a lot of questions have been asked. Doctor, in your written testimony you mentioned that the underinvestment in the mississippi ports t inland ports, indicates that weve been more importoriented than exportoriented. Would yu just expand for a few minutes on the significance of the inland ports particularly with the panama Canal Development and agriculture opportunities in trade as well as manufacturing. Most of the growth in trade was on the import side. And when we look at the various segments of the Freight Movement industry in the u. S. , the larger products done by rail, highway and at the port level they were focused on being able to handle the imports more efficiently. A lot of the dredging for instance is not really done because we were trying to export more goods. Our goods are very heavy. They require deeper draft vessels. But the motivation, when you read the Economic Analysis or the cost benefit analysis was essentially focused on the import side. And maybe you can look at it from that side to say, well this is an import bias in our investments. But if we look at the projects or where we havent had funding for infrastructure you get the same message. And that is what i meant in the testimony about the mississippi waterway. We have seen a chronic and consistent underfunding. And weve seen a deterioration in the infrastructure there. Well i think from the lockes to the ports themselves and the obviously id be very focused on the Mississippi River because of where i live and where ive grown up and where we are today. But, you know, the inland ports also serve a Geographic Area. Logically twice as big as the coastal ports. Because you serve a Geographic Area both ways and i hope we could begin to focus more on those ports. The other question i had chairman for ms. Farmer i think you all have trying in bnsf for a long time to do a california project, the California California International Gateway permit delays a been a big problem there. Im working on legislation now to try to streamline permitting for railroad projects. Do you want to talk about how the kind of problems you have had trying to serve that market in a better way . Southern California International gateway would be as i mentioned the greenest intermodal facility greenest model facility in the world when built. We have been working for a decade to do this. We faced local opposition. And what i would say is that is indicative of projects we see across our network. We really are in favor of permitting reform. And i know, and i appreciate your leadership in this area. As i spoke to you earlier, we really believe that extending the Environmental Review position of map 21 to the railroads would be a great first temperature. We bereave it is important to shorten the time frames. We are not trying to eliminate the review process, but were asking there be a reasonable time. We need to shorten the time frame that the agencies could look at things concurrently as opposed to sequentially. It is important to add to the projects that will add capacity to this supply chain. May i make a comment on that . The program terminal on the savanna river, and the report that we gave last year if we started the application process it would be 3 wearing before the port would be turnkey operational. We have to justify this on the basis of analysis. So i had the unfortunate position of having to forecast what would go through a port in 13 years. This is how far the process has gotten off kilter. Either of the two of you want to comment on that . What is interesting about this discussion on Freight Movement and the problems we have in this country its all about choke points. A problem at the ports, congestion on the highways. Whether it is at great closing for the rail crossing. An extended period of time to get permitted for a project. Those are all choke points. What is unfortunate about that is america as a distinct and very unique advantage in this Global Marketplace. To think that our Transportation System is one of the primary reasons were being held back both on imports and more importantly on exports is it is really almost criminal. It is a shame. I think there is a lot that we can do better to help with that situation. Thank you, thank you chairman. Thank you senator blount. Any other questions from the senators . With that, i would say this hearing record will remain open for two weeks and during this time senators are asked to submit any questions for the record. The witnesses are requested to submit their written answers to the committee as soon as possible. With that i conclude the hearing. I thank the witnesses for just a great response and hearing the information that you provided us here today. Thank you so much. The hearing is closed. Former military chief talked to the House Armed Services committee. You have asked me to comment on the state of islamic extremism. Today, i have the unhappy task of informing you that according to every metric of significance islamic terrorists have grown over the next year. The territory these groups control, the massive numbers and suffering of refugees and displaced persons in these groups. The amount of women kidnapped and raped. Theyre use of the internet which is very serious. I can draw no other conclusion than to say the threat of islamic extremism has reached an unacceptable level. We must accept and face this reality. This enemy has an engrained and unshakable vision of how the world and society should be ordered. The violent islamist is serious. His ideology justifies the most heinous reasons. This enemy must be opposed, killed destroyed in the extremist form, and it must be defeated where it rears its ugly head. Some counsel patience saying that they can be managed at criminals. I respectfully and strongly disagree. I have been in the theaters of war, iraq, and investigation for many years. I have faced this enemy up close and personal. They may be animated by a mid evil ideology, but they can very smartly message their ideas and intentions and actions via the internet. Theyre increasingly capable of threatening our nation and our allies. It would be inprototo wait before taking action. It would cost in blood and treasure later for what we know must be done now. Our enemies must be stopped. See the full House Armed Services Committee Hearing in our Video Library any time at cspan. Org. The Political Landscape has changed with the 114th new congress. There is 108 william in congress encolliding the first africanamerican republican in the house and the first female veteran in the senate. The congressional chronicle page has lots of useful information about voteing results. This sunday on q and a. Thomas allen harris explores how africanamericans have been portrayed in photographic images from slavery until today. The film is based on the work of debra wilson. But i was also very much aware that there was a kind of other narrative that was going on as well. In which black people were constructed post slavery and before the end of slavery. It was part of the marketing of photographs and memorabilia and stereotypes that now would be considered declassee but now it is the way we may see ourselves or others. That is sunday night on cspans q and a. Now initial at the start of the hearing the Committee Approves president obamas defense secretary nominee ashton carter. The whole senate voted 935. Good morning since quorum is now present i ask the committee to consider the nomination of dr. Ashton b. Carter to be secretary of defense. And if a roll call is requested we would be glad to have a roll call. If not, there is a motion is there anyone that would like a roll call vote . Yeah. Yeah, i dont know if we need it. We dont need it. Mr. Chairman, i would like to be recorded as voting the clerk will call the roll. Mr. Inhofe mr. Sessions ms. Ayotte. Mrs. Fisher. Mr. Cotton. Mr. Sullivan. Mr. Lee. Mr. Graham. Mr. Cruz. Mr. Reid. Mr. Nelson. Mrs. Gillibrand. Mr. Donnelly. Mr. King. Mr. Heinreich. Mr. Chairman . 25 ayes, one no instruction. It will be reported favorably to the floor of the senate and hopefully we can get a vote perhaps even as early as tomorrow. Do you want to keep it open for sullivan to vote . No. Well leave it open for senator sullivan to make his wishes known. For awhile. The Armed Services Committee Meets today to receive testimony on our Nations Defense budget and priorities from the bipartisan National Defense panel. This group of former military leaders, members of congress and pentagon officials that served release a report on our Nations Defense strategy last year. We have with us two distinguish distinguished members with us today. They are among the most respected defense experts on both sides of the aisle. Were grateful for you to appear before us today. Also dr. William perry for his leadership and the panels members and staff for their diligent work. The National Defense panels bipartisan and consensus report is a compelling statement of the dawning strategic realities that america faces in the 21st century. Global security is not self sustaining and as challenges to that order multiply around the world there is no substitute for robust american engagement to ensure its preservation. Although americas many educative tools of global influence including diplomacy and economic engagement, the panel reminds us that all of these are critically intertwined with and dependent upon the perceived, strength presence and commitment of u. S. Armed forces. Through a combination of self inflected woulds and geopolitical trends, americas military strength, quote, under guard books our global leadership, as the report terms it, is eroding. 487 billion in cuts and billions more in sequestration show a serious strategic misstep. It led to dangerous short falls and propertied our allies and adversaries alike to question our commitment and resolve. These cuts are not the product of any strategic assessment of the threats we face at a time of global upheval. Russias aggression threatens europe regional security. Iran and north korea continue the pursuit of Nuclear Weapons. And plotting attacked against the United States and our ally. Structural trends like the defusion of certain advanced military technologies pose new operation challenges to Americas Armed forces. In the security environment of the future the panels report predicts that conflicts are likely to unfold battlefields will be more lethal, forces will be scarce and fleeting. The panel echoed secretary hagel that said in such an era, american dominance in the sea skies, and space can no longer be taken for granted. The panels report recommends the budget control act of immediate repeal and return to at least the funding baseline proposed in secretary gates fiscal year 2012 Defense Budget. That budget was the last time that the department was permit permitted to engage in the standard process of analyzing threats and proposing a resource baseline that would permit it to carry out the military strategy. If we followed the budget path, which he believed was the minimum to keep the country safe the fiscal year 16 budget for the department of defense, excludeing war funding would be 611 billion. That is 77 billion more than the president s fiscal year 16 budget question and 112 billion more. It is worth remembers that secretary gates suggested this level before russias invasion of ukraine. Before the riesz ofse of isis and the further spread of violent extremism. Before clooi in as coercive behavior in the eastern sea became common place. We ask men and women to put their lives at risk around the world while we cut back on their training and equipment to settle domestic scores. The overriding goal of this congress is to return to a strategy driven budget. I look forward to our witnesses testimony today for what that budget should be. Thank you for your service in and out of government. Thank you very much. Over the years and since the initiation of hostilities in 2001, the review like any strategy had to contend with a unpredictable and constantly shifting nature of the world and threats that we face. Military leaders have pointed out that we have seldom predicted with great accuracy when or where the next crisis might occur. But the security and defense analysis planning means that assumptions must be made, objective threat assessment the done and guidance provided to our military that prioritize our National Security interest. Each qdr had to make strategic or resource tradeoffs. The current work of the panel in the 2014 qdr provides a consideration of the departments assessment the Defense Strategy and priorities and identification of the capabilities necessary to imagine our Strategic Risk. In essence, the panel found that the 2014 defense review and Defense Strategy makes a reasonable strategic assessment. The panel echos the qdrs assessment and highlights the challenges of the nations bases. Proliferation in north korea iran insurgencey in iraq. And the qdr has the right capabilities and capacities for the challenges we face today and into the future. The panel notes those capabilities and ka patsties clearly exceed the Budget Resources available and therefore under mines the strategy strategy. It is no surprise that the panels overarching finding and remit is the budget control act and endangers the National Security and calls for its repeal. They also argue for inracing defense spending to 2012 levels. In addition to the risks of sequestration sequestration, i would be interesting to hear the witnesses accessment of other risks to National Security and to their families. Finally i note that after 20 years of qdrs, last years National Defense Organization Act modified the requirements for this periodic defense review now called the Defense Strategy review. These challengenges address our security interests in the near, mid, and far terms. I will be interested to know the witnesses views on these challenges and the relevant National Defense strategy process. Welcome to the witnesses. Secretary floyenoy a opportunity to testify. But hope that our statement will be put in the record. I will make general introduction introductionintroduction comments and then turn is over to michele. As we started our deliberations, the general believed the nation was running what he called accumulateing Strategic Risk. I think all of the members of the panel assented to that judgment at the time president as you pointed out in your Opening Statement mr. Chairman, that was before president putin had invaded crimea and destabilized eastern ukraine. Before the collapse of the Iraq Security forces and the seizure of mozul by isil and their approach to baghdad. I think the panel game more and more convinced that the accumulateing Strategic Risk that the general was describing at our outset was accumulating at a faster and faster pace. As you heard, as a committee from previous witnesses at other hearings secretary schultz, secretary kissinger, the United States faces the most volatile security complex that we have faced as a nation in a very long time, if every. It struck us as a panel that given those growing challenges to stay on the path made no sense. I had the experience of having opinion on the previous independent panel to review the between qdr. In that report looking the report keeping servicemen and women in the field overtime. And the growing health care and other retirement costs that were built into the budget. We predicted that the nation was facing a train wreck on defense and that was before the budget control act passed and before the department had to cope with sequestration. One of the things that i think we were very focused on and i want to draw attention to is the charge that secretary hagel gave us. We discussed future capabilities, and many of the challenges that panel was talking about, the rise of china and their very rapid growth and military power. The long struggle i think that we face with islamic extremism. The rise of potentially new nuclear power, north korea and perhaps iran, these are all challenges that were for the long haul. We have to think now about how we will deal with these challenges 20 years out. That is one of the mandates of the qdr process itself. It is supposed to be a 20 year out look of the Nations Defense needs. Secretary hagel raised the current that is the program of record the program that were going to need 20 years down the road. Are we going to be starting now to produce the weapons that 20 years from now well be needing. Many of us i think, were mindful of the fact that over the last decade we have been essentially eating the seed corn laid down in the carterreagan defense build up in the late 80s. So we need to think of what we can provide for servicemen and women to be called upon in the future. I wanted to mention the specific areas that as a panel we concluded we ought to be looking at down the road for the future. And i hope mr. Chairman and senator reid that do you and the members of the committee will be bearing some of those things in mind as you consider the policeman Budget Review over the next few years. I will just tick them off. Reconnaissance, space signer space, maintenance of superiority. The fact that we will be fighting with other people. Long range strike and electric and directed energy weapons. These are areas that we felt had not been given sufficient attention by the department and need a further look in the future. Why dont i top there and i would be happen to turn it over to michele. Mr. Chairman and senator reid iment to say how pleased and honored i am here to ask the findings of the National Defense panel with you. This hearing could not come at a more critical time. The interNational Security environment is more complex and volatile than we have seen. I emphasize is it only going to get more challenging in the future. It is when u. S. Leadership and containment globally, on which stability and prosperity depend to address the most pressing challenges that you outline. U. S. Leadership could not be at more of a premium right now. It is also a time that requires investment to ensure that we retain a strong and agile military to shape the international environment. To deter and defeat aggression when we must. To reassure allied and partners and to insure that this president and future president s have the options that they need for an increasingly dangerous world. Yet we see a period where Defense Budget cuts and sequestration are under mining their efforts to retain the best and brightest people and to invest in the capabilities that will be necessary to type our tech logical edge. I just want to foot stomp and emphasize four points. First is the number one appeal to this committee and to the congress more broadly. It is to work to repeal the bca and end sequestration. This is imperative. We cannot invest in our technological edge. It puts d. O. D. In a constant state of budget uncertainty that prevents more Strategic Planning for the future. Deaf sis reduction, getting our fiscal house in order is essential, but sequestration is the wrong way to go about it. They recommend restoring defense spending to fy 2012 levels, and funding the president s budget request is at least a first step in that direction. Second, we urge the congress to take immediate steps to restore readiness. The Service Chiefs have testified before this committee for problems. Only half are at acceptable readiness levels. After of the units in the airforce are fully ready for their missions. Navy deployments have been canceled, and only a third is ready to deploy within the required 30 days and the list goes on. These readiness impacts are real. It was recommended that the Congress Make an immediate and special appropriation above and beyond the current budget levels to correct these readiness short falls. Third, the ndp calls for protecting investment in future capabilities that will be critical to maintaining u. S. Freedom of action and our military superiority in the coming decades. The technological edge has been an advantage but it is not a given. In a world where it is proliferating, much of Cutting Edge Technology is commercial and off of the shelve the d. O. D. Has to have a strategy to maintain its edge. I personally applaud the departments efforts like the off set strategy, but we have to have the investment dollars to pursue those initiatives. And ambassador adleman laid out a number of areas where he recommends the ndp be a focus. Also that we need to pursue an aggressive reform agenda within the d. O. D. We can and should reduce the costs of doing business. We applaused the work of the compensation committee. Many of these issues need to be addressed. Some of them need toe be fundamentally reframed. Health care, for example. Rather than debating reducing benefits and increasing copays, we need to work on how do we get\health care. And the need for further acquisition reform. To take down the 20 excess infrastructure that the d. O. D. Is carrying and to right sizing the civilian workforce. Contractor, career, and so forth. So that we can have the workforce that we need for the future. Let me just conclude by saying i think this report lays ut an agenda, a very clear agenda for action that has strong bipartisan and Civil Military support across the panel. Never neverless there is heavy recommendation. I would look to this committee and applaud your leadership in this area, working with your colleagues trying to convince them that the time to act on these recommendations is now. Thank you. Thank both of the witnesses, and i would point out to my colleagues that both witnesses have worked for republican and democratic democrat administrations, holding responsibility in both. There is a total nonpartisanship in your reports and that makes you more credible because of your many years of outstanding and dedicated service. My colleagues i wont take much time except to point out that one of the that were trying to highlight on this committee is, as you just mentioned, mr. Flournoy is on acquisition reform. We cant afford the cost overruns, are canceled and delayed programs. It harms our credibility and it will be one of the highest priorities of this committee to try and address that issue. It has been tried many times in the past. So im not confident of the degree of success. I just have one additional request. Why did you use secretary gates fiscal year 2012 budget levels as a baseline for your recommendations . Mr. Chairman, as i mentioned in the 2010 panel, we spoke to secretary gates about what he believed the department needed he believed he needed 1. 5 to 2 in growth to do is that. I think the 2010 panel believed that was a minimum and that it might be a higher number but when we met as a panel and tried to wrestle with this, and we had a smaller panel this time, we concluded that recuring to secretary gates top line made sense because it was really the last time the department had been trying to define its needs on the basis of something approaching a strategy as opposed to controlling numbers. There was a difference of view for how high the top line ought to go. But i think there was consensus that the gates level that sort of 1. 5 or 2 growth from the fy 11 and fy 12 levels were a minimum unless we could agree on that. Unless we do Something Like you are recommending, the nations security is at risk . I would say so, i think all of the members of the panel believe that. Yes, sir, i think we talked about the force being at substantial risk in the near term if sequestration was not lifted and higher budget levels not restored. Thank you senator reid. Thank you ambassador and madame secretary for your temperature today and the work of your colleagues in this report. You were obviously tasked with focusing on the needs and responsibilities of the department of defense. One of the realities that i think we all recognize is that military forces dont operate alone. And they are part of a spectrum of National Security efforts. If there is not a sufficient state department presence and Capacity Building and local communities, then our military efforts dissipate quickly when we change or shift responsibility. So can i assume that i wont assume but i will just ask that when we talk about repealing the bca, we have to be conscious of the state department, the hoe land security department, and every agency that the government that essentially protects the security of the United States and could go further than that, is that fair . Senator reid i think that is certainly fair. Although we in our panel really were more focused on the department specifically, in the 2010 panel, we had a chapter about the need for a better whole of government effort really very much along the lines that youre discussing. Youre right, just, you know, solving d. O. D. s problem is crucial and i would say an unnecessary condition for almost everything else. But it is not sufficient because we have other instruments of National Power that we dont want to see withering on the vine without adequate funding. I would agree. In just about every operation we conduct and problem we try to solve, there has to be an integrated balance and approach. So i think our intention was to talk about the instruments of National Security more broadly. Let me shift to another topic that you talked about in your report which is increasingly critical and that is cyber operations. Just from afar, looking at some of the recent operations, the russian and cryimea et cetera, it seems it is the first act of any military operation today. The line between a cyber incident and a military operation is getting less and less distinct. Your comments generally about the efforts that we should take with respect to cyber, d. O. D. And others. This touches the whole spectrum. Im at a disadvantage because i have trouble booting up my own computer. Like many people my age, im very reliant on my younger sons to get me out of trouble. But the reality is our military forces rely extensively on cyber and not only increpted systems but on the open net and that is a huge problem for us when were involved in an operation of any kind and i think were all painfully aware of the as a rule ner vulnerabilities that we face. You put your finger on a problem that we have not resolved as a government. D. O. D. Relies on the open internet. It doesnt really have the responsibility for defending it. It has the responsibility for defending dod mill. The whole government has to be involved for d. O. D. I think it is a very important area of emphasis and there are many dimensions to the challenge. One is billing the Human Capital and the expertise that is needed within the government. Figuring out how we will get it organized ourselves given that different agencies have different authorities and areas of expertise. How we will work with the private sector that holds so much Critical Infrastructure, and the framework that deals with questions of liability that would enable the public and private cooperation that needs to be effective in this area. Thank you very much. Thank you. Thank you mr. Chairman. You will be depending on your grandchildrens advice, not just your childrens. You and i talked about this too, but the fact that we have the Oldest Nuclear arsenal in the world. Most of our warheads are 20 and 30 years old. And our Delivery System the b52, maybe 50 years old, and of course the i democracy bms in the nuclear submarines. We have talked about this for a long period of time, and im looking now at the new situation, the new threat out there, along with the panel that talked about this for quite some time kissinger, albricht and schultz. Should more attention be given to this than we have in the past. I noticed when you used the word, you ticked off five areas not given proper attention. This was not one of those areas do you think it should be . Senator if i was a member of the Nuclear Weapons council, and i was very concerned in my ten tenure. There are lots of ways that we maintain the safety and security of the stockpile. As time goes on and particularly not only as the inevitable corrosion and degradation of components, but not being able to get the best and brightest minds in the field, i think it is a matter of inincreaseing concern. We have north korea having tested Nuclear Weapons. Iran is moving very close to being a Nuclear Threshold state. But if there isnt or if iran maintains a near break out capacity, there is a real prospect we may get other states in the region that decide to develop their own nuclear capabilities. In the meantime, you have a growing Nuclear Stockpile in pakistan india, chinas chinese inventory is growing in terms of weapons although it is more slowly. But i do think there is more that needs to be done in this area. Ambassador that gets into what i was going to talk about. Ever since our unclassified intelligence came out in 2007 about when they would have the capabilities being 2015 which is where we are right now and im concerned about the activities of the published reports from many countries, i dont think we can assume that our concern can be strictly with iran. This is my concern that i have had for a long time. Were supposed to be and historically have been the nuclear um brel will. Our umbrella has holds in it. We have Serious Problems and when you look at countries like saudi arabia and others, i would assume theyre going to be involved and they will have another arms race coming up. Does that concern the two of you . I think our Strategic Forces have been an advantage. I dont think we can let that advantage go by the wayside. Extended deterrents of our allies in asia, europe, and in the middle east, has always been a very difficult propproposition. It was a difficult proposition when we had a larger stockpile and a willingness to use those weapons in defense of our allies. That was a very difficult position to convince our people of. It will still be a difficult proposition to convince our people about. It will be much harder to do if were not paying sufficient attention to the stockpile and the modernization of our forces. My time is expired, but i would like to have you for the record submit something talking about the fact that for the 20 years that i was involved in this committee before we had the policy, of being agent to fight two wars, or two major theater conflicts, and that policy seemingly changing now and your analysis of the new pollicy for the world. Thank you mr. Chairman. Senator sullivan, you wish to be recorded as voting aye for ash carter to be secretary of defense . Yes, mr. Chairman. Okay, senator gillibrand. Thank you for your testimony today, it is very instructive and something that this committee is very focused on. I want to continue the conversation in regards to cyberer. The defense review says that Cyber Threats come from a diverse range of countries organizations, and individuals. Some threats seek to under cut the department of defenses near and long term effectiveness by getting long term access to Industry Networks and structure on a routine basis. Further our potential adversaries are probing Critical Infrastructure chemical plants Nuclear Plants stock exchanges, any time of important infrastructure, and our partner countries. It could exacerbate insecurity in the cyber department. What are your feelings for increasing cyber capability and how do we compete to get the brightest minds, engineers, mathematicians, to want to be cyber warriors, enhance our cyber defense. Have you thought about ways to recruit and retain the best and brightest in these fields but also to perhaps develop resources throughout National Guard and other sources . As a panel, senator, we did not go into that level of detail. We noted the importance of this area, the importance of in investing in both defensive and offensive capabilities. We urged the department to move forward with modernization, and improving cooperation with the private sector. I will give you my personal views on your question. I think attracting talent is one of the Biggest Challenges and there are a couple ways to go at it. One is to use different incentives and pay schedules for cyber cyberexperts. Another is to develop contracts and Surge Capacity with the private sector, and third, lev reasonable leveraging the strength of our reserves. There are people out there with the capabilities and they want to help, but they will not leave Silicon Valley full time. So leveraging them on the weekends for annual training being available to be mobileized in a national emergency, i think we need to think creatively. They have pilot programs that theyre experimenting with but the Human Capital potential is probably long. I think, in this context it is a terrific idea to train some of our Wounded Warriors to be cyber warriors. Some would love to get back in the field but because of their injuries they cannot. This is a way to continue the fight and they need a little training. What would you remember our cyber fighters to have not the same basic training. You may be the best behind the commuters but not behind a gun, so you train specifically for their requirements, but that would be a first for the military. My understanding is that one of the pilots using a reserve unit they have exempted people from the pt requirements cutting their hair, come as they are and bring their expertise to the table. In your opening remarks, you mentioned five Technology Areas that you felt we needed to develop more weapons expertise, does your report expand on that or do you just list them . We dont go into great detail about this. We highlight them as areas we think there needs to be more attention and that there has not been sufficient attention. We give them about a paragraph of treatment. I would love for development to the extent you have it. Thank you. Senateoreor sessions . Thank you both for your leadership and wisdom that youre sharing with us. We do have a problem with defense spending that is causing me great concern as a member of the Budget Committee for a couple years. I have been digging into the numbers and i have felt all along that the one area of our budget that needs to be examined with most care for spending more money is the Defense Department. We have to justify that. Defense departments that to tell us what theyre going to spend the money on and how much it is. But we dont have a lot of money. In fact we dont have enough money to run this government. The deficits will continue to rise even though we have had a slowing of the annual deficits. They going to start rising again according to cbo. They project by 2019 interest on the debt will exceed the entire Defense Budget. Ambassador adleman. Do you think that increase in the Defense Department above the bca total should be matched by the same increases of nondefense Discretionary Spending . The panel did not take a position on that, so just as i represented the panel, i want to make sure its clear that what im about to say is my personal opinion and not representing i subpoena my colleague or other members of the panel. I think the issue in defense is absolutely crucial. I think overall federal spending needs to be under better control. I think the biggest problem, though, is frankly not the discretionary, its the nondiscretionary part. The cbo and longrange budget forecasts made that clear for a long time, thats the real driver of the debt. Is your answer yes or no . My answer is that the Defense Budget needs to go up and not that discretionary nondefense spending needs to go up. The president is insisting it does, and his budget increases about 34 billion this year off of the bca level. And the nondefense discretionary by the same. Senator mccain i think it create to suggest that the gates plan if it was enacted in 12 it would be 100 billion more. It would be a trillion dollars, and nondefense if it is matched is another trillion dollars. The United States is four trillion. All of us, you dont have the stress every day that we do about every other agency and department that comes to us and wants more money. Im just saying that is the difficult time were in. Senator may i had one thought on this . I think that sequestration needs to be lifted across the board. So that secretaries are able to manage priorities for the government. But i dont think you can solve the problems on the back of big spending that is where i think we need to focus. The budget control act, beginning in 2017, spending would increase to 2. 5 a year. These are the tough years that were in right now. The Defense Department took a heavy damaging demand to reduce spending so rapidly. I understand how hard they had to work and the difficulties theyre working with right now. But i dont know that we have to have these kind of increases in nondefense discretionary. It shows up the Fastest Growing entitlement, and we all know that, but we can also make a difference with Discretionary Spending. Ambassador adleman you have questioned defense spending with iran and the Nuclear Program they have. It basically allows iran, as he understands it and the public report suggests, could be within months of having a Nuclear Weapon. Our goal has gone from no Nuclear Program in iran to allowing a Nuclear Program that would lay them within months of a Nuclear Weapon causing, he says dr. Kissinger other nations in world and the region like other nations do plan to have Nuclear Weapons. How do you evaluate that . Senator, im a little concerned about the trajectory of these negotiations. When you look at the full sweep of them going back to 2003, 2004 when it began as the eu 3. We started with what was a multilateral negotiation with the objective of preventing iran from developing a nuclear capability. We now are increasingly in a bilateral negotiation between the United States and iran that is aimed as secretary kerry said to increase the sneak out time of a Nuclear Weapon to a year. I dont know what the state of the negotiation is. The press reports are indicates that iran might be able to keep thousands and thousands of centrifuges without taking them down is very concerning to me because i think there is a time limit in the negotiation that was agreed to in the joint plan of action. It will be time limited. Whether it is 20 years, 30 years, or ten years. That time limit runs out, all of the sanctions are gone, iran is treated as a normal nation. In spite of their violations of the npt and then they have an industrial scale enrichment capability which i think leaves them as a threshold nuclear state. Im very concerned with the way that the negotiations have proceeded. Thank you, mr. Chairman, i want to thank both of our witnesses for their testimony before the committee today and your outstanding services. And the success you had in the careers you had with our government. In your Opening Statement, you both discussed the problems that sequestration is causing the department. In your panels review of the 2014 qdr, you noted that additional changes are required to right size this civilian defendant. It continues to grow even half active duty forces had been forces had been shrinking. Additionally the panel will know that by 2012 the number of contractors working for the d. O. D. Had grown to approximately 670,000. At a time when the service has dramatically reduced the number of Service Members in the military, i have a hard time with the growth of staff sizes. I think you mentioned this for many of the staff sizes. For example, just at the Army Headquarters staff grew by 60 to 3,639 in fiscal year 13 from 3,232 just ten years earlier. That doesnt even include the contractors. Because of that i was shocked that perhaps not surprised when the gao recently reported that the d. O. D. Had yet to produce a realistic plan to meet secretary hagels 2013 goal of reducing d. O. D. Headquarters budgets by 20 through fiscal year 19. Cant even come to an agreement on that. Additionally the gao found the d. O. D. Headquarters they interviewed could not determine how many people they actually needed. Couldnt even tell you what they needed and what positions they would have and what they would do. Senators before this committee have heard time and again about the need to fully fund Service Members in the field and were really concerned about that. But when you have a bloat on the other side thats taking away from the Readiness Force youre not utilizing the National Guard. Youre basically not utilizing your reserveists to the point that any sensible person would say ive got people ready, willing and able to do the job, yet im hiring all these high priced contractors and theres no auditing going on, we dont know where we stand we cant get weapons to the front in time. Weve got concerns. Either one of you want to address any of that to whatever specifics, id appreciate it. But its a challenging thing to say. And i think all the senators have touched on this. We need more money, we need more money. We understand that. What are you doing with the money we give you . Why are you throwing money away from the standpoint or the appearance of it spending it on needless stuff . We want to make sure our Readiness Force is ready to do, they have the weapons forces they need to do the job for us. I think this is an important area of focus. Its understandable at one level why the civilian workforce, the krashlth workforce grew over 15 years of war. But now i think it is time to sort of go back to First Principles and try to rightsize that force examining exactly how contractors are being used, looking for efficiency theres and really looking at the civilian organization. There is no overall plan but there are some components that are taking some interesting approaches that may lead the way for others. There are some that are looking at the concept of layering, at reducing the number of layers and optimizing control to take the fat out of organizations. There are others who are looking at streamlining business process and so on and so forth. I think this is an area of focus. One of the things i would highlight for you all, though is that currently the secretary of defense does not have the kind of authorities that his predecessors have used to manage drawdowns in this area. Secretary perry, for example at the end of the cold war. He was given reduction in force authority to rightsize the civilian workforce. He was given meaningful levels of voluntary pays that can be used to incentivize early retirement. The current secretary does not have those authorities and that is very much a constraint. Legislative yes. Its an opportunity for you to give the secretary some addition additional tools to right size the work forsz. Does it bother you the department of defense cant even identify the types of jobs and the people they need for those jobs . Yes. And i think thats something you need to ask of them and we all need to ask of them. Ambassador . Senator manchin, just to make a point to respond to the excellent question you asked but also the earlier question senator sessions posed to you, which is were coming here saying the department of defense needs a lot of money but everybody can driet Horror Stories about different procurements that have gone bad, different problems in the department of defense and you all are stewards of the taxpayers money are right to be asking the department to justify all this. One of the things we do talk about in the report and which my colleague has been very active in for longer than i have is on the entire reform agenda. Theres just been a report by the defense business board about trying to reap even more savings out of the department. I hope the chairman and the rest of you will have the defense business board up and talk about the board and try to push the department. Secretary carter, once hes gone to the floor and been confirmed as well on these things. I know he has them very much on his mind from his previous service. Thank you very much. My time is up. Senator ernst. Thank you, mr. Chair. Thank you, miss florn yoi and ambassador adelman for being here today. I appreciate it very much. Ambassador, i appreciate it when you said we have been eating the seed corn. That comes home for me. But i truly do believe we have been degrading the very source of any future strength and readiness and prosperity that we have. I do agree, miss fluornoy you stated we need to end sequestration. I do believe that. We have to restore readiness and also aggressive reform within the d. O. D. We have to do that. I understand that. But another component beyond looking internally, we have to look externally also. Anytime that the United States is engaging their military forces elsewhere, we do rely on other partners. And i believe we do need tone gauge other partners in whatever region were operating in to the fullest extent that we possibly can. And over the last 12 years military cooperation between the United States and turkey has faltered. I can give specific examples. At critical moments back in 2003 my own unit the 1168th transportation company, the 4th infantry division, and many other units were denied access to turkey as a projection platform into iraq. So thats one example. We couldnt use their turkish ports for Operation Iraqi freedom. And then just a few months ago we saw turkey deny our kurdish allies from heading into syria to break isils siege of kobani. And i believe that led to many deaths for those trying to defend kobani very early on when we were very uncertain whether kobani was going to fall or not. And then turkey has also continuously denied our country the use of an air base, which would be close to use for search and rescue missions for those that might have issues if they fall behind enemy lines. And just recently we saw the wall street journal too that went into further detail how turkey had denied us using their areas for osprey which couldish be used in those search and rescue missions and providing cover for men and women on the ground. So time and time and time again turkey has denied use of their facilities denied use of their grounds. Theyre a nato ally. A nato ally. And theyre very unapologetic when it comes to denying resources we believe is necessary in their region. So what i would like to hear from you is that as were looking at constrained budgets here, lack of resources and of course the reduced readiness we really do need to engage our other partners. Specifically turkey. And in your opinion, what impact has turkeys actions or in this case lack of action, how has that affected other Coalition Partnerships in that region and what can we do to encourage turkey to take on more ownership of the issues in the middle east . Senator ernst much as i would like to turn that question over to my colleague i think as a former u. S. Ambassador to turkey i think id probably need to take it on. First of all, all the things that you cited are painfully part of my past experience and theres no question that turkey under Prime Minister and now president erdogan has become a very problematic and difficult ally. And there are a lot of reasons for that. I think turkey is headed domestically on a very dangerous trajectory of increasing authoritarianism and a lot of degradation of Democratic Practice in turkey which i think contributes to some of this. And i think its going to require a lot of attention from senior u. S. Leadership in the next few years to try to manage that relationship. Because i agree with you, we need partners when we operate overseas. I will say in fairness to the turks a lot of their anger and unhappiness and some of the reason theyve denied us access is because their view of whats going on in syria, with which they share a very long border, is that president assad must go is and that the u. S. Is not doing enough to try and promote the departure of president assad, and its their belief, and i think theres some merit in it that you cant just teak on the problem in syria by only taking on isil because as long as assad is there others generating more recruitment and more support for isil with his assault on the Syrian People use of barrel bombs chlorine et cetera. And i think thats a very large part of the turkish frustration. That has led them to deny us use of insidar lek, deny us use of ceca. I dont think thats an