U.S. ARMY GEN. VIA SAYS SPENDING CUTS CUMULATIVE IMPACT AFFECTS READINESS

FROM:  U.S. DEPARTMENT OF DEFENSE 

Sequestration Chips Away at Readiness, General Says

By Army Sgt. 1st Class Tyrone C. Marshall Jr.

DoD News, Defense Media Activity

WASHINGTON, July 23, 2014 – The effects of sequestration spending cuts may seem overstated, but their cumulative impact affects the military’s readiness and its ability to respond to future contingencies, the commander of U.S. Army Materiel Command said here today.

Army Gen. Dennis L. Via discussed how the budgeting mechanism influences decisions and affects national defense for the Army and Defense Department at large during a meeting with the Defense Writers Group.

“Sometimes, there can be an impression that it’s overstated and [a question of] what the impact of sequestration will be,” Via said. But as the military emerges from 13 years of war and has to reset its equipment while downsizing force levels, the question of impact is a cumulative effect over time, he added.
“The impact is to our readiness and ability to be able to respond to future contingencies,” Via said.

Via said some “plus-ups” of funding in fiscal years 2014 and 2015 have mitigated some of the effects, but he noted that sequestration returns in fiscal 2016 at a time when the Army is trying to reset the force.

“We have to implement all of those cuts and have to reduce the force to, potentially, [420,000 soldiers],” he said. “That has significant risk to the nation.”
Looking around the world today, Via said, no one can say where the next contingency will be.

“But we know there’ll be another contingency,” he added.

And depending on what the future brings, the general said, the Army must be prepared “to conduct forces to meet the requirements -- whatever that level of force is.”

While that isn’t his decision, Via said, when the decision has been made to commit forces, “we have to make sure that they’re ready and prepared to go and accomplish their mission.

“They have to have the equipment, so we have to reset and get it back in their hands,” he continued. “We have to have the materiel available to surge if an event goes beyond what we think would be an initial [push].”

It’s also necessary to ensure that forces are postured to be expeditionary-capable, the general said, despite becoming more home-station-based, and to have power-projection platforms to push forces forward.

And with sequestration and the general budget uncertainty, readiness “continues to have us go up and down,” Via said.

“In readiness you have to maintain … what we call a band of excellence. You have to remain and operate in that band so that when you’re called upon … you can do so in a matter of days,” he said.

“The longer sequestration impacts and your readiness declines, it’s just like your car when you sit it out and you don’t drive it for a few months,” the general said. Using that idle vehicle as a metaphor for readiness, he explained how the lack of readiness can be felt.

“For three months, you can start it up and probably be OK,” Via said. “If you let it sit for nine months, all of a sudden the seals go, the tires, other challenges happen, and before you know it, you have an automobile you can’t drive.

“And that’s what happens to readiness when we’re talking about aviation [and] other platforms,” he continued. “Sequestration has what I call a constant chipping away at readiness. At some point, you get down to a point where it’s no longer affordable, and you have ‘have’ and ‘have-not’ units.”

When called upon to deploy, the general said, the “have-not” units cannot deploy, and if they do, they are not prepared.

“We don’t ever want to be in a position where we’re sending America’s sons and daughters into harm’s way not ready to accomplish their mission,” Via said.
“So I think when our chief of staff of the Army and secretary of the Army talk about that if we get down to a certain level -- that [420,000],” he explained, “you’ve got to understand that’s not 420,000 [soldiers] ready to support operations.”

A large portion of that, Via said -- 70,000 to 80,000 soldiers who are recruiters or otherwise serve in what he called a “generating force” -- as well as many tens of thousands in the recruiting pipeline and in training, take a big bite out of the 420,000-soldier Army.

“Before you know it, you’re down to 200,000 [soldiers]. … Are they going to be ready to meet for contingency?” he asked.

Looking at the number of contingencies happening around the world today and where soldiers are forward-stationed, Via noted the Army provides about 40 percent of the enabling capabilities of every combatant command.

“What do I mean by that?” he asked. “Communications networks, port opening, theater opening, airfield opening, theater intelligence, medical, pre-positioned stocks, logistics and support and contracting -- the Army does that,” Via said.
So with decisions forced by sequestration and having to “reduce, reduce and reduce,” the general said, then the culminating effects on the force, over time, become apparent.

“That’s where I worry about sequestration,” Via said. “At the end of the day, the Army’s primary mission is to prevent conflict, shape the operational environment, and if committed, win decisively.” That’s true whether it’s in a kinetic fight or during humanitarian assistance disaster relief efforts, he added.

“We want to be able to respond, because that’s the reputation … and security of the country,” Via said. “So when we look at that, sequestration impacts significantly our ability to prevent conflict.”

Conflict is prevented, he said, by having ready forces and equipment around the world that can respond very, very quickly.

“Sequestration, over time, will continue to cut at that readiness,” Via said. “The concern is … over a period of time, it’ll be that car we’re talking about that you just left for a period of time. You think it’s OK until you go out to start it and it doesn’t start. Where are you then? That’s where we don’t want to be.”

PRESIDENT'S WEEKLY ADDRESS FOR APRIL 5, 2014

FROM:  THE WHITE HOUSE

Weekly Address: The President’s Budget Ensures Opportunity for All Hard-Working Americans

WASHINGTON, DC — In this week’s address, the President highlighted the important differences between the budget he’s put forward – built on opportunity for all – and the budget House Republicans are advocating for, which stacks the deck against the middle class. While the President is focused on building lasting economic security and ensuring that hard-working Americans have the opportunity to get ahead, Republicans are advancing the same old top-down approach of cutting taxes for the wealthiest Americans and slashing important investments in education, infrastructure, and research and development.

The audio of the address and video of the address will be available online atwww.whitehouse.gov at 6:00 a.m. ET, Saturday, April 5, 2014.

Remarks of President Barack Obama
Weekly Address
The White House
April 5, 2014

Hi, everybody. 

Today, our economy is growing and our businesses are consistently generating new jobs.  But decades-long trends still threaten the middle class.  While those at the top are doing better than ever, too many Americans are working harder than ever, but feel like they can’t get ahead.

That’s why the budget I sent Congress earlier this year is built on the idea of opportunity for all.  It will grow the middle class and shrink the deficits we’ve already cut in half since I took office.

It’s an opportunity agenda with four goals. Number one is creating more good jobs that pay good wages. Number two is training more Americans with the skills to fill those jobs. Number three is guaranteeing every child access to a great education.  And number four is making work pay – with wages you can live on, savings you can retire on, and health care that’s there for you when you need it. 

This week, the Republicans in Congress put forward a very different budget.  And it does just the opposite: it shrinks opportunity and makes it harder for Americans who work hard to get ahead. 

The Republican budget begins by handing out massive tax cuts to households making more than $1 million a year.  Then, to keep from blowing a hole in the deficit, they’d have to raise taxes on middle-class families with kids.  Next, their budget forces deep cuts to investments that help our economy create jobs, like education and scientific research. 

Now, they won’t tell you where these cuts will fall.  But compared to my budget, if they cut everything evenly, then within a few years, about 170,000 kids will be cut from early education programs.  About 200,000 new mothers and kids will be cut off from programs to help them get healthy food.  Schools across the country will lose funding that supports 21,000 special education teachers.  And if they want to make smaller cuts to one of these areas, that means larger cuts in others. 

Unsurprisingly, the Republican budget also tries to repeal the Affordable Care Act – even though that would take away health coverage from the more than seven million Americans who’ve done the responsible thing and signed up to buy health insurance.  And for good measure, their budget guts the rules we put in place to protect the middle class from another financial crisis like the one we’ve had to fight so hard to recover from.

Policies that benefit a fortunate few while making it harder for working Americans to succeed are not what we need right now.  Our economy doesn’t grow best from the top-down; it grows best from the middle-out.  That’s what my opportunity agenda does – and it’s what I’ll keep fighting for.  Thanks.  And have a great weekend.

TESTIMONY OF CFTC ACTING CHAIRMAN WETJEN REGARDING BUDGET AND OVERSIGHT

FROM:  COMMODITY FUTURES TRADING COMMISSION 
Testimony of Acting Chairman Mark P. Wetjen Before the U.S. House Appropriations Subcommittee on Agriculture, Rural Development, Food And Drug Administration, and Related Agencies

March 6, 2014

Good morning, Chairman Aderholt, Ranking Member Farr and members of the Subcommittee. Thank you for inviting me to today’s hearing on the FY 2015 President’s Budget request for the Commodity Futures Trading Commission (“Commission” or “CFTC”).

Under the Commodity Exchange Act, the Commission has oversight responsibilities for the derivatives markets. These markets, which have been in existence for centuries, have taken on particular importance to the U.S. economy in recent decades and as a consequence have become enormously vast, measuring hundreds of trillions of dollars in notional value. They are critical to the effective functioning of the U.S. and global economies.

At their core, the derivatives markets exist to help farmers, producers, small businesses, manufacturers and lenders focus on what they do best: providing goods and services and allocating capital to reduce risk and meet main street demand. Well-regulated derivatives markets facilitate job creation and the growth of the economy by providing a means for managing and assuming prices risks and broadly disseminating, and discovering, pricing information.

Stated more simply, through the derivatives marketplace, a farmer can lock in a price for his crop; a small business can lock in an interest rate that would otherwise fluctuate, perhaps raising its costs; a global manufacturer can lock in a currency value, allowing it to better plan and grow its global business; and a lender can manage its assets and balance sheet to ensure it can continue lending, fueling the economy in the process.

Essentially, these complex markets facilitate the assumption and distribution of risk throughout the financial system, and for that reason alone, it is critical that these markets are subject to appropriate governmental oversight.

Mr. Chairman, Ranking Member, and Committee members, I do not intend the testimony that follows to sound alarmist, or to overstate the case for additional resources, but I do want to be sure that Congress, and this committee in particular, have a clear picture of the potential risks posed by the continued state of funding for the agency. When not overseen properly, irregularities in these markets, or failures of firms intermediating in them, can severely and negatively impact the economy as a whole and cause dramatic losses for individual participants. The stakes, therefore, are high.

The CFTC’s Responsibilities have Grown Substantially in Recent Years

The unfortunate reality is that, at current funding levels, the Commission is unable to adequately fulfill the mission given to it by Congress: to prevent disruptions to market integrity, protect customer assets, monitor and reduce the build-up of systemic risk, and ensure to the greatest extent possible that the derivatives markets are free of fraud and manipulation.

Recent increases in the agency’s funding have been essential and appreciated. They have not, however, kept pace with the growth of the Commission’s responsibilities, including those given to it under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).

Various statistics have been used to measure this increase in responsibilities. One often-cited measure is the increase in the gross notional size of the marketplace now under the Commission’s oversight. Other measures, though, are equally and perhaps more illustrative.

For instance, the trading volume of CFTC-regulated futures and options contracts was 3,060 million contracts in 2010 and rose to 3,477 million in 2013. Similarly, the volume of interest rate swap trading activity by the 15 largest dealers averaged 249,564 swap events each in 2010, and by 2012, averaged 332,484 each (according to International Swaps and Derivatives Association (“ISDA”) data). Those transactions, moreover, can be executed in significantly more trading venues, and types of trading venues, both here and abroad. In addition, the complexity of the markets, its products and sophistication of the market tools, such as high frequency trading techniques, has increased greatly over the years.

The notional value of derivatives centrally cleared by clearinghouses was $124 trillion in 2010 (according to ISDA data), and is now approximately $223 trillion (according to CFTC data from swap data repositories (“SDRs”)). That is nearly a 100 percent increase. The expanded use of clearinghouses is significant in this context because, among other things, it means that the Commission must ensure through appropriate oversight that these entities continue to properly manage the various types of risks that are incident to a market structure dependent on central clearing. A clearinghouse’s failure to follow international guidelines and the Commission’s regulations, now more than ever, could have significant economic consequences.

The amount of customer funds held by clearinghouses and futures commission merchants (“FCMs”) was $177 billion in 2010 and is now over $225 billion, another substantial increase. These are customer funds in the form of cash and securities deposited at firms to be used for margin payments made by the end-users of the markets, like farmers, to support their trading activities. Again, Commission rules are designed to ensure customer funds are safely kept by these market intermediaries, and a failure to provide the proper level of oversight increases the risk of certain practices by firms, including perhaps operational risks or fraud. In fact, recent events in the FCM community have led to the temporary or permanent loss of more than a billion dollars of customer funds.

The total number of registrants and registered entities overseen directly by the Commission, depending on the measure, has increased by at least 40 percent in the last four years. This includes 99 swap dealers, two major swap participants (“MSPs”), FCMs, clearinghouses, trading venues and SDRs.

In addition, the CFTC oversees more than 4,000 advisers and operators of managed funds, some of which have significant outward exposures in and across financial markets. It is conceivable that the failure of some of these funds could have spill-over effects on the financial system. In all cases, investors in these funds are entitled to know their money is being appropriately held and invested.

The Commission also directly or indirectly supervises another approximately 64,000 registrants, mostly associated persons that solicit or accept customer orders or participate in certain managed funds, or that invest customer funds through discretionary accounts. Although it leverages the resources of the self-regulatory organizations (“SROs”), the Commission itself must oversee these registrants in certain areas and provide guidance and interpretations to the SROs with a total staff of only 644 employees currently onboard, less than 10 percent of the number of registrants under its purview.

By almost any measure, in fact, the portfolio of entities that the Commission is charged with overseeing has expanded in size and risk dramatically over the last half decade. The intermediaries in the derivatives markets are by and large well-run firms that perform important services in the markets and for their customers. But as a collective whole, these firms can potentially pose risks, even significant risks, to the financial system and the individuals operating within it. Those relying upon these firms deserve assurances that such firms are supervised by an agency capable of meaningful oversight.

The FY15 Request Prioritizes Examinations, Technology and Market Integrity, and Enforcement

The FY 2014 appropriation of $215 million was a modest budgetary increase for the Commission, lifting the agency’s appropriations above the sequestration level of $195 million that has posed significant challenges for the agency’s orderly operation. As directed by Congress, the agency has submitted to Congress a FY 2014 Spend Plan outlining the agency’s allocation of current resources, which reflects an increased emphasis on examinations and technology-related staff.

The President’s FY 2015 budget request also reflects these priorities and highlights both the importance of the Commission’s mission and the potential effects of continuing to operate under difficult budgetary constraints.

The request is a significant step towards the longer-term funding level that is necessary to fully and responsibly fulfill the agency’s core mission: protecting the safety and integrity of the derivatives markets. It recognizes the immediate need for an appropriation of $280 million and approximately 920 staff years (“FTEs”) for the agency, an increase of $65 million and 253 FTEs over the FY 2014 levels, heavily weighted towards examinations, surveillance, and technology functions.

In this regard, the request balances the need for more technological tools to monitor the markets, detect fraud and manipulation, and identify risk and compliance issues, with the need for staff with the requisite expertise to analyze the data collected through technology and determine how to use the results of that analysis to fulfill the Commission’s mission as the regulator of the derivatives markets. Both are essential to carrying out the agency’s mandate. Technology, after all, is an important means for the agency to effectively carry out critical oversight work; it is not an end in itself.

In light of technological developments in the markets today, the agency has committed to an increased focus on technology and is requesting a 17 percent increase in technology funding, or approximately $7 million, over FY 2014 solely for IT investments. The Commission’s FY 2014 Congressional Spending Plan already reflects that priority. The agency, in fact, reprogrammed $7.9 million from salaries and expenses to enhance technology investments.

In my remaining testimony, I will review three of the primary mission priorities for FY 2015.

Examinations

The President’s request would provide $38 million and 158 FTEs for examinations, which also covers the compliance activities of the Commission. As compared to FY 2014, this request is an increase of $15 million and 63 FTEs.

I noted earlier that the Commission has seen substantial growth in, among other things, trading volumes, customer monies held by intermediaries in the derivatives markets, and margin and risk held by clearinghouses. Examinations and legal compliance oversight are perhaps the best deterrents to fraud and improper or insufficient risk management and, as such, remain essential to compliance with the Commission’s customer protection and risk management rules.

The Commission has a direct examinations program for clearinghouses and designated contract markets, and it will soon directly examine swap execution facilities (“SEFs”) and SDRs. However, the agency does not at this time have the resources to place full-time staff on site at these registered entities, even systemically-important clearing organizations, unlike a number of other financial regulators that have on-the-ground staff at the significant firms they oversee. The Divisions of Market Oversight and Clearing and Risk collectively have 47 total examinations positions in FY 2014 to monitor, review, and report on some of the most complex financial markets and operations in the world.

The Commission today also performs only high-level, limited-scope reviews of the nearly 100 FCMs and 99 swap dealers holding over $225 billion in customer funds. In fact, the Commission has a staff of only 35 examiners to review these firms and analyze, among other things, over 1,200 financial filings each year. This staff level is less than the number the Commission had in 2010, yet the number of firms requiring its attention has almost doubled. Additionally, although it has begun legal compliance oversight of swap dealers and MSPs, the Commission has been able to allocate only 14 FTEs for this purpose. This number is insufficient to perform the necessary level of oversight of the newly registered swap dealer entities.

In FY2014, the Commission overall will have a mere 103 staff positions dedicated to examinations of the thousands of different registrants that should be subject to thorough oversight and examinations. The reality is that the agency has fallen far short of performance goals for its examinations activities, and it will continue to do so in the absence of additional funding from Congress. For example, as detailed in the Annual Performance Review for FY 2013, the Commission failed to meet performance targets for system safeguard examinations and for conducting direct examinations of FCM and non-FCM intermediaries. The President’s budget request appropriately calls on Congress to bolster the examinations function at the agency, and it would protect the public, and money deposited by customers, by enhancing the examinations program staff by more than 66 percent in FY 2015.

Moreover, if Congress fully funds the President’s request, the Commission can move toward annual reviews of all significant clearinghouses and trading platforms and perform more effective monitoring of market participants and intermediaries. Partially funding the request will mean accepting a certain amount of operational risk in the derivatives markets as the Commission is forced to forego more in-depth financial, operational and risk reviews of the firms within its jurisdiction and as such be reactive and not proactive to firm or industry risk issues.

Technology and Market Integrity

The FY 2015 request also supports a substantial increase in technology investments relative to FY 2014, roughly a 17 percent increase to supplement the more than 62 percent overall increase in data acquisition, analytics, and surveillance staff to make use of these investments. The $50 million investment in technology will provide millions of dollars of new and sophisticated analytical systems that will assist the Commission in its efforts to ensure market integrity.

The President’s FY 2015 budget request supports, in addition, 103 data-analytics and surveillance-related positions in the Division of Market Oversight alone, an increase of more than 98 percent over the FY 2014 staffing levels. Market surveillance is a core Commission mission, and it is an area that depends heavily on technology. As trading across the world has moved almost entirely to electronic systems, the Commission must make the technology investments required to collect and make sense of market data and handle the unprecedented volumes of transaction-level data provided by financial markets.

Effective market surveillance, though, equally depends on the Commission’s ability to hire and retain experienced market professionals who can analyze extremely complex and voluminous data from multiple trading markets and develop sophisticated analytics and models to respond to and identify trading activity that warrants investigation. The FY 2015 investment in high-performance hardware and software therefore must be paired with investments in personnel that can employ technology investments effectively.

In addition to the agency’s direct oversight responsibilities, the CFTC continues to prioritize the data and technology infrastructure needs across the Commission. The President’s FY 2015 Budget requests significant increases in both dollars and staff dedicated to these needs. Data, and the ability to analyze and report data, are more important than ever in the derivatives markets, and in the CFTC’s ability to oversee these markets. The CFTC must aggregate various types of data from multiple industry sources and across the futures and swaps markets. The increasing complexity and volume of this incoming data, moreover, requires significantly more powerful hardware, such as massively parallel processing systems to support analytics. Moving forward, the Commission will continue to improve information technology and management capabilities in the areas of data management to support analytics, statistical processing, and market research.

Enforcement

The President’s FY 2015 request would provide $62 million and 200 FTEs for enforcement, an increase of $16 million and 51 FTEs over FY 2014.

In its role as a law enforcement agency, the Commission’s enforcement arm protects market participants and other members of the public from fraud, manipulation and other abusive practices in the futures, options, cash and swaps markets, and prosecutes those who engage in such conduct. In FY 2013, the Commission filed 82 enforcement actions, bringing the total over the past three fiscal years to 283, and obtained orders in FY 2013 imposing more than $1.7 billion in sanctions.

The cases the agency pursues range from sophisticated manipulative and disruptive trading schemes in markets the Commission regulates, including financial instruments, oil, gas, precious metals and agricultural products, to quick strike actions against Ponzi schemes that victimize investors. The agency also is engaged in complex litigations related to issues of financial market integrity and customer protection. By way of example, in FY 2013, the CFTC filed and settled charges against three financial institutions for engaging in manipulation, attempted manipulation and false reporting of LIBOR and other benchmark interest rates.

Such investigations continue to be a significant and important part of the Division of Enforcement’s docket. Preventing manipulation is critical to the Commission’s mission to help protect taxpayers and the markets, but manipulation investigations, in particular, strain resources and time. And once a case is filed, the priority must shift to the litigation. In addition to drawing time and resources at the Commission, litigation requires additional resources, such as the retention of costly expert witnesses.

In 2002, when the Commission was responsible for the futures and options markets alone, the Division of Enforcement had approximately 154 people. Today, the CFTC also has anti-fraud and anti-manipulation authority over the vast swaps market, and it oversees a host of new market participants. In addition, the agency is also now responsible for pursuing cases under our enhanced Dodd-Frank authority that prohibits the reckless use of manipulative or deceptive schemes. Notwithstanding these additional responsibilities, there are currently only 149 members of the enforcement staff. The President’s budget request brings this number to 200, and more cops on the beat means the public is better assured that the rules of the road are being followed.

In addition to the need for additional enforcement staff and resources, the CFTC also believes technology investments will make our enforcement staff more efficient. For instance, the FY 2015 request would support developing and enhancing forensic analysis capabilities to assist in the development of analytical evidence for enforcement cases.

A full increase for enforcement means that the agency can pursue more investigations and better protect the public and the markets. A less than full increase means that the CFTC will continue to face difficult choices. It is not clear that we could maintain the current volume and types of cases, as well as ensure timely responses to market events.

Other FY 2015 Priorities: International Policy Coordination & Economic and Legal Analysis

The President’s FY 2015 request would provide $4.2 million and 15 FTEs that would be dedicated to international policy, a decrease of $41,000 and no increase in FTE over FY 2014. This allocation should not be misconstrued to mean that international coordination is not a priority for the Commission.

The global nature of the swaps and futures markets makes it imperative that the United States consult and coordinate with international authorities. For example, the Commission recently announced significant progress towards harmonizing a regulatory framework for CFTC-regulated SEFs and EU-regulated multilateral trading facilities (“MTFs”). The Commission is working internationally to promote robust and consistent standards, to avoid or minimize potentially conflicting or duplicative requirements, and to engage in cooperative supervision, wherever possible.

Over the past two years, the CFTC, Securities and Exchange Commission, European Commission, European Securities and Markets Authority, and market regulators from around the globe have been meeting regularly to discuss and resolve issues with the goal of harmonizing financial reform. The Commission also participates in numerous international working groups regarding derivatives. The Commission’s international efforts directly support global consistency in the oversight of the derivatives markets. In addition, the Commission anticipates a significant need for ongoing international policy coordination related to both market participants and infrastructure in the swaps markets. The Commission also anticipates a need for ongoing international work and coordination in the development of data and reporting standards under Dodd-Frank rules. Dodd-Frank further provided a framework for foreign trading platforms to seek registration as a foreign board of trade, and 24 applications have been submitted.

A full increase for international policy means the Commission will be able to increase our coordination efforts with financial regulators and market participants from around the globe. A less than full increase means we will be less able to engage in cooperative work with our international counterparts, respond to requests, and provide staffing for various standard-setting projects.

In addition, for FY 2015, the President’s budget would support $24 million and 92 FTEs to invest in robust economic analysis teams and Commission-wide legal analysis. Compared to the FY 2014 Spending Plan, this request is an increase of $4 million and 18 FTEs. Both of these teams support all of the Commission’s divisions.

The CFTC’s economists analyze innovations in trading technology, developments in trading instruments and market structure, and interactions among various market participants in the futures and swaps markets. Economics staff with particular expertise and experience provides leverage to dedicated staff in other divisions to anticipate and address significant regulatory, surveillance, clearing, and enforcement challenges. Economic analysis plays an integral role in the development, implementation, and review of financial regulations to ensure that the regulations are economically sound and subjected to a careful consideration of potential costs and benefits. Economic analysis also is critical to the public transparency initiatives of the Commission, such as the Weekly Swaps Report. Moving into FY 2015, the CFTC’s economists will be working to integrate large quantities of swaps market data with data from designated contract markets and SEFs and large swaps and futures position data held by the Commission to provide a more comprehensive view of the derivatives markets.

The legal analysis team provides interpretations of Commission statutory and regulatory authority and, where appropriate, provides exemptive, interpretive, and no-action letters to CFTC registrants and market participants. In FY 2013, the Commission experienced a significant increase in the number and complexity of requests from market participants for written interpretations and no-action letters, and this trend is expected to increase into FY 2015.

A full increase for the economics and legal analysis mission means the Commission will be able to support each of the CFTC’s divisions with economic and legal analysis. Funding short of this full increase or flat funding means an increasingly strained ability to integrate and analyze vast amounts of data the Commission is receiving on the derivatives markets, thus impacting our ability to detect problems that could be detrimental to the economy. Flat funding also means the Commission’s legal analysis team will continue to be constrained in supporting front-line examinations, adding to the delays in responding to market participants and processing applications, and hampering the team’s ability to support enforcement efforts.

Conclusion

Effective oversight of the futures and swaps markets requires additional resources for the Commission. This means investing in both personnel and information technology. We need staff to analyze the vast amounts of data we are receiving on the swaps and futures markets. We need staff to regularly examine firms, clearinghouses and trading platforms. We need staff to bring enforcement actions against perpetrators of fraud and manipulation. The agency’s ability to appropriately oversee the marketplace hinges on securing additional resources.

Thank you again for inviting me today, and I look forward to your questions.

DEFENSE SECRETARY HAGEL DISCUSSED AFFECTS OF BUDGET

FROM:  U.S. DEFENSE DEPARTMENT 
Hagel Outlines Budget Reducing Troop Strength, Force Structure
By Nick Simeone
American Forces Press Service

WASHINGTON, Feb. 24, 2014 – Defense Secretary Chuck Hagel has proposed cuts in military spending that include further reductions in troop strength and force structure in every military service in the coming year as part of an effort to prioritize U.S. strategic interests in the face of reduced resources after more than a decade of war.

At a Pentagon news conference today detailing President Barack Obama’s proposed Pentagon budget for fiscal year 2015, Hagel called the reductions -- including shrinking the Army to its smallest size since before World War II and eliminating an entire fleet of Air Force fighter planes -- “difficult choices” that will change defense institutions for years to come, but designed to leave the military capable of fulfilling U.S. defense strategy and defending the homeland against strategic threats.

Under a Pentagon budget that will shrink by more than $75 billion over the next two years -- with deeper cuts expected if sequestration returns in fiscal year 2016 -- Hagel and other senior defense and military officials acknowledged that some of the budget choices will create additional risks in certain areas.

Some of that risk, Hagel said, is associated with a sharp drawdown in the size of the Army, which the proposed budget calls for reducing to as low as 440,000 active duty soldiers from the current size of 520,000, while ensuring the force remains well trained and equipped.

The cuts assume the United States no longer becomes involved in large, prolonged stability operations overseas on the scale of Iraq and Afghanistan. “An Army of this size is larger than required to meet the demands of our defense strategy,” Hagel said. “It is also larger than we can afford to modernize and keep ready.” But he said the smaller force still would be capable of decisively defeating aggression in one major war “while also defending the homeland and supporting air and naval forces engaged in another theater against an adversary.”

The budget request calls for special operations forces to grow by nearly 4,000 personnel, bringing the total to 69,700, a reflection of the asymmetrical threats the nation is likely to face in the future, Hagel said.

The restructuring and downsizing are in line with a two-year budget agreement that the president and Congress worked out in December, which limits defense spending to $496 billion. But Hagel warned today that if the budget for fiscal year 2016 returns to the steep, automatic spending cuts imposed by sequestration, “we would be gambling that our military will not be required to respond to multiple major contingencies at the same time.”

Asked to define that increased risk, a senior Defense Department official expressed it simply. “If the force is smaller, there’s less margin for error,” the official said. “Let’s face it -- things are pretty uncertain out there.”

The proposed budget also envisions a 5-percent reduction in the Army National Guard and Army Reserve. “While it is true that reserve units are less expensive when they are not mobilized, our analysis shows that a reserve unit is roughly the same cost as an active duty unit when mobilized and deployed,” Hagel said.
In addition, the Army Guard’s Apache attack helicopters would be transferred to the active force, while Black Hawk helicopters would be transferred to the National Guard, part of a broader realignment of Army aviation designed to modernize the fleet and increase capability.

Within the Air Force, the defense budget calls for saving $3.5 billion by retiring the A-10 fleet and replacing it with the F-35 by the early 2020s.

“The A-10 is a 40-year old, single-purpose airplane originally designed to kill enemy tanks on a Cold War battlefield,” Hagel said. “It cannot survive or operate effectively where there are more advanced aircraft or air defenses.” In addition, the service also will retire the 50 year-old U-2 surveillance plane in favor of the unmanned Global Hawk.

Hagel warned that much deeper cuts in Air Force structure and modernization will be necessary if sequestration is not avoided in 2016.
Among other proposals in the budget request:

-- The Army will cancel the Ground Combat Vehicle program;

-- The Navy would be able to maintain 11 carrier strike groups, but any steep future cuts could require mothballing the aircraft carrier USS George Washington;

-- Half of the Navy’s cruiser fleet, 11 ships, will be placed in reduced operating status while they are modernized and given a longer lifespan;

-- The Navy will continue buying two destroyers and attack submarines per year;
-- The Marine Corps will draw down from about 190,000 to 182,000, but would have to shrink further if sequestration returns;

-- An additional 900 Marines will be devoted to securing U.S. embassies;
and
-- The Defense Department is asking Congress for another round of base closings and realignments in 2017.

Hagel said most of the recommendations in the budget were accepted by senior military officers. Addressing reporters alongside him, Army Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, said the spending plan reflects a balancing of the military while ensuring it remains the world’s finest.

“It reflects in real terms how we’re reducing our cost and making sure the force is in the right balance,” Dempsey said.

Dempsey and Hagel will testify on the budget before Congress next week. Lawmakers will have the final say on spending decisions.

“This is the first time in 13 years we will be presenting a budget to Congress that is not a war footing budget,” Hagel noted.

CONGRESSMAN CAMP COMMENTS ON BUDGET VOTE

FROM:  CONGRESSMAN DAVE CAMP, CHAIRMAN OF HOUSE WAYS AND MEANS COMMITTEE 

On December 12, the House of Representatives passed, with a bipartisan vote, H.J.Res. 59, the two-year budget compromise negotiated by House Budget Chairman Paul Ryan (R-WI) and Senate Budget Chairwoman Patty Murray (D-WA).  H.J.Res.59 reduces the deficit by approximately $23 billion without raising taxes.    

Following the vote Camp said, “Today, I joined in a bipartisan vote for a two year budget that reduces the deficit and includes reductions in mandatory spending without raising taxes.  This will give Congress the opportunity to work on serious solutions, like tax reform, to strengthen the economy so job creators can grow, hire and increase wages and address our long-term debt crisis.”

PRESIDENT OBAMA EXPRESSES DISAPPOINTMENT WITH CONGRESS

FROM:  U.S. DEFENSE DEPARTMENT 

Obama Lauds DOD Workforce, Encourages Budget Resolution

By Army Sgt. 1st Class Tyrone C. Marshall Jr.
American Forces Press Service

WASHINGTON, Oct. 1, 2013 - President Barack Obama thanked the Defense Department workforce today in a video message and expressed his disappointment in Congress' failure to approve a budget, resulting in a government shutdown.

"As president, and as your commander-in-chief, I've worked to make sure you have the strategy, the resources and the support you need to complete the missions our nation asks of you," he said.

"And every time you've met your responsibilities and performed with extraordinary professionalism, skill and courage," Obama said.

Unfortunately, the president said, Congress has not fulfilled its responsibility and failed to pass a budget.

"As a result, much of our government must now shut down until Congress funds it again," Obama said.

Obama noted Defense Secretary Chuck Hagel, Army Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, and other commanders would provide more information on how the shutdown will affect the DOD civilians and their families.

"Today, I want to speak directly to you about how what happens next," he said. "Those of you in uniform will remain in your normal duty status. The threats to our national security have not changed, and we need you to be ready for any contingency."

"Ongoing military operations, like our efforts in Afghanistan, will continue," Obama said. "If you're serving in harm's way, we're going to make sure you have what you need to succeed in your missions."

The president said Congress has passed, and he would sign into law, legislation ensuring those personnel receive their paychecks on time.

"We'll continue to work to address any impact this shut down has on you and your families," Obama said.

"To all our DOD civilians, I know the days ahead could mean more uncertainty, including possible

furloughs," he said. "And I know this comes on top of the furloughs that many of you already endured this summer."

Obama said DOD civilians and their families deserved "better than the dysfunction we're seeing in Congress."

"Your talents and dedication help keep our military the best in the world," he said. "That's why I'll keep working to get Congress to re-open our government and get you back to work as soon as possible."

Obama said the shutdown is occurring against the background of broader changes with the war in Iraq over and the war in Afghanistan slated to end next year.

"After more than a decade of unprecedented operations, we're moving off a war footing," he said. "Yes, our military will be leaner, and as a nation, we face difficult budget choices going forward."

"But here's what I want you to know. I'm going to keep fighting to get rid of those across-the-board budget cuts the sequester which are hurting our military and our economy."

We need a responsible approach, Obama said, that deals with our fiscal challenges and keeps our military and our economy strong.

"I'm going to make sure you stay the greatest military in the world bar none," he added. "That's what I'm fighting for. That's what you and your families deserve."

The president thanked the Defense Department for their commitment to protecting the nation.

"On behalf of the American people, thank you for your service which keeps us free," Obama said. "And thank you for your sacrifice which keeps our nation and our military the greatest force for freedom that the world has ever known."

PRESIDENT OBAMA'S STATEMENT MONDAY ON THE GOVERNMENT SHUTDOWN

FROM:  THE WHITE HOUSE PRESIDENT OBAMA 
James S. Brady Press Briefing Room

5:00 P.M. EDT

THE PRESIDENT:  Good afternoon, everybody.  Of all the responsibilities the Constitution endows to Congress, two should be fairly simple:  pass a budget, and pay America’s bills.

But if the United States Congress does not fulfill its responsibility to pass a budget today, much of the United States government will be forced to shut down tomorrow.  And I want to be very clear about what that shutdown would mean -- what will remain open and what will not.

With regard to operations that will continue:  If you’re on Social Security, you will keep receiving your checks.  If you’re on Medicare, your doctor will still see you.  Everyone’s mail will still be delivered.  And government operations related to national security or public safety will go on.  Our troops will continue to serve with skill, honor, and courage.  Air traffic controllers, prison guards, those who are with border control -- our Border Patrol will remain on their posts, but their paychecks will be delayed until the government reopens.  NASA will shut down almost entirely, but Mission Control will remain open to support the astronauts serving on the Space Station.

I also want to be very clear about what would change.  Office buildings would close.  Paychecks would be delayed.  Vital services that seniors and veterans, women and children, businesses and our economy depend on would be hamstrung.  Business owners would see delays in raising capital, seeking infrastructure permits, or rebuilding after Hurricane Sandy.  Veterans who’ve sacrificed for their country will find their support centers unstaffed.  Tourists will find every one of America’s national parks and monuments, from Yosemite to the Smithsonian to the Statue of Liberty, immediately closed.  And of course, the communities and small businesses that rely on these national treasures for their livelihoods will be out of customers and out of luck.

And in keeping with the broad ramifications of a shutdown, I think it’s important that everybody understand the federal government is America’s largest employer.  More than 2 million civilian workers and 1.4 million active-duty military serve in all 50 states and all around the world.  In the event of a government shutdown, hundreds of thousands of these dedicated public servants who stay on the job will do so without pay -- and several hundred thousand more will be immediately and indefinitely furloughed without pay.

What, of course, will not be furloughed are the bills that they have to pay -- their mortgages, their tuition payments, their car notes.  These Americans are our neighbors.  Their kids go to our schools.  They worship where we do.  They serve their country with pride.  They are the customers of every business in this country.  And they would be hurt greatly, and as a consequence, all of us will be hurt greatly, should Congress choose to shut the people’s government down.

So a shutdown will have a very real economic impact on real people, right away.  Past shutdowns have disrupted the economy significantly.  This one would, too.  It would throw a wrench into the gears of our economy at a time when those gears have gained some traction.

Five years ago right now, our economy was in meltdown.  Today, our businesses have created 7.5 million new jobs over the past three and a half years.  The housing market is healing and our deficits are falling fast.  The idea of putting the American people’s hard-earned progress at risk is the height of irresponsibility.

And it doesn’t have to happen.  Let me repeat this:  It does not have to happen.  All of this is entirely preventable if the House chooses to do what the Senate has already done -- and that’s the simple act of funding our government without making extraneous and controversial demands in the process, the same way other Congresses have for more than 200 years.

Unfortunately, right now House Republicans continue to tie funding of the government to ideological demands like limiting a woman’s access to contraception, or delaying the Affordable Care Act, all to save face after making some impossible promises to the extreme right wing of their party.

So let me be clear about this.  An important part of the Affordable Care Act takes effect tomorrow no matter what Congress decides to do today.  The Affordable Care Act is moving forward. That funding is already in place.  You can’t shut it down.  This is a law that passed both houses of Congress; a law that bears my signature; a law that the Supreme Court upheld as constitutional; a law that voters chose not to repeal last November; a law that is already providing benefits to millions of Americans in the form of young people staying on their parents’ plan until they’re 26, seniors getting cheaper prescription drugs, making sure that insurance companies aren't imposing lifetime limits when you already have health insurance, providing rebates for consumers when insurance companies are spending too much money on overhead instead of health care.  Those things are already happening.

Starting tomorrow, tens of millions of Americans will be able to visit HealthCare.gov to shop for affordable health care coverage.  So Americans who’ve lived for years in some cases with the fear that one illness could send them into bankruptcy, Americans who’ve been priced out of the market just because they’ve been sick once, they’ll finally be able to afford coverage -- quality coverage -- many of them for the first time in their lives.

Some of them may be sick as we speak.  And this is their best opportunity to get some security and some relief.  Tens of thousands of Americans die every single year because they don’t have access to affordable health care.  Despite this, Republicans have said that if we lock these Americans out of affordable health care for one more year -- if we sacrifice the health care of millions of Americans -- then they’ll fund the government for a couple more months.  Does anybody truly believe that we won’t have this fight again in a couple more months?  Even at Christmas?

So here’s the bottom line:  I’m always willing to work with anyone of either party to make sure the Affordable Care Act works better, to make sure our government works better.  I’m always willing to work with anyone to grow our economy faster, or to create new jobs faster, to get our fiscal house in order for the long run.  I’ve demonstrated this time and time again, oftentimes to the consternation of my own party.

But one faction of one party, in one house of Congress, in one branch of government doesn’t get to shut down the entire government just to refight the results of an election.

Keeping the people’s government open is not a concession to me.  Keeping vital services running and hundreds of thousands of Americans on the job is not something you “give” to the other side.  It’s our basic responsibility.  It’s something that we’re doing for our military, and our businesses, and our economy, and all the hardworking people out there -- the person working for the Agricultural Department out in some rural community who’s out there helping some farmers make sure that they’re making some modest profit for all the hard work they’re putting in.  They’re the person working for HUD who’s helping somebody buy a house for the first time.  They’re somebody in a VA office who’s counseling one of our vets who’s got PTSD.

That’s who we’re here to serve.  That’s why we’re supposed to be carrying out these responsibilities.  It’s why we should be avoiding these kinds of constant brinksmanship.  It’s something that we do in the ordinary process of this extraordinary system of government that we have.  You don’t get to extract a ransom for doing your job; for doing what you’re supposed to be doing anyway; or just because there’s a law there that you don’t like.

The American people sent us here to govern.  They sent us here to make sure that we’re doing everything we can to make their lives a little bit better -- to create new jobs, to restore economic security, to rebuild the prospects of upward mobility.  That’s what they expect.

And they understand that there are differences between the parties and we’re going to be having some tough fights around those differences.  And I respect the fact that the other party is not supposed to agree with me 100 percent of the time, just like I don’t agree with them.  But they do also expect that we don’t bring the entire government to a halt or the entire economy to a halt just because of those differences.

That’s what they deserve.  They’ve worked too hard, for too long to recover from previous crises just to have folks here in Washington manufacture yet another one that they have to dig themselves out of.

So Congress needs to keep our government open, needs to pay our bills on time, and never, ever threaten the full faith and credit of the United States of America.

And time is running out.  My hope and expectation is that in the eleventh hour, once again, that Congress will choose to do the right thing and that the House of Representatives, in particular, will choose the right thing.

Thank you very much.

                    END              5:12 P.M. EDT

DOD PREPARES FOR GOVERNMENT SHUTDOWN

FROM:  U.S. DEFENSE DEPARTMENT 
Memo Prepares DOD Employees for Government Shutdown
By Jim Garamone
American Forces Press Service

WASHINGTON, Sept. 23, 2013 - Although Defense Department officials believe a government shutdown can be avoided when the new fiscal year begins Oct. 1, they want DOD employees to be prepared for the possibility, Defense Secretary Ash Carter said in a memo issued to the workforce today.

The fiscal year ends Sept. 30, and Congress has not passed a budget. If Congress does not approve a budget or pass a continuing resolution, the portions of the government funded via appropriated funds will be forced to close.

"The department remains hopeful that a government shutdown will be averted," Carter wrote in the memo. "The administration strongly believes that a lapse in funding should not occur and is working with Congress to find a solution."

Congress still can prevent a lapse in appropriations, but "prudent management requires that we be prepared for all contingencies, including the possibility that a lapse could occur at the end of the month," the deputy secretary wrote.

The absence of funding would mean a number of government activities would cease. "While military personnel would continue in a normal duty status, a large number of our civilian employees would be temporarily furloughed," Carter said. "To prepare for this possibility, we are updating our contingency plans for executing an orderly shutdown of activities that would be affected by a lapse in appropriations."

President Barack Obama and Defense Secretary Chuck Hagel understand the hardships such a shutdown could cause civilian employees, the deputy secretary wrote.

"The administration strongly believes that a lapse in funding should not occur and is working with Congress to find a solution," Pentagon Press Secretary George Little told reporters today. "The secretary has made it clear that budget uncertainty is not helpful for us in executing our budget efficiently, and a shutdown would be the worst type of uncertainty. A shutdown would put severe hardships on an already stressed workforce, and is totally unnecessary."

Carter vowed to provide more information as it becomes available. T

DVIDS - Video - SECDEF Hagel at Fort Bragg

DVIDS - Video - SECDEF Hagel at Fort Bragg

TOP DEFENSE LEADERS TELL SENATE BUDGET COMMITTEE UNCERTAINTY NEEDS TO END

FROM: U.S. DEPARTMENT OF DEFENSE
Hagel, Dempsey to Senate: Budget Uncertainty Can't Last
By Karen Parrish
American Forces Press Service

WASHINGTON, June 12, 2013 - The Pentagon is maintaining a fiscal balancing act that must eventually teeter into a potentially dangerous loss of combat power if Congress doesn't act to stabilize defense budgets, department leaders told the Senate Budget Committee today.


Defense Secretary Chuck Hagel and Army Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, each named fiscal uncertainty as the greatest enemy to effective military planning. In the face of steep short-term cuts, they explained, long-term military readiness priorities take the biggest hits.

"When you're talking about ... abrupt cuts without slowing the growth, then what you're really, bottom line, saying is that you're going to cut your combat power," Hagel said. "And in the end, combat power and the readiness and everything that fits into that is ... the one core asset that you must preserve and continually enhance for the future, whether it's cyber or anything else."

Hagel noted that lacking certainty "from month to month, year to year, as to what our possibilities are for contracts for acquisitions, for technology, for research, the technological advantage that we have in the air and the superiority we have at sea, the training, the readiness, all of these are affected."

Dempsey told senators the pace of defense spending decreases largely drives how drastic they will be.

"We've had deeper cuts. But [sequestration] is by far the steepest," the chairman said. "And when the cut is steep, we limit the places we can go to get the money, frankly, because a lot of this money is unavailable in the short term."

DOD is and has been reforming in many ways to cut costs and add efficiency, Dempsey said, but short-term crises soak up time and energy. "We can make long-term institutional reform, but you can't sweep it up in the near term," he said. "That's the problem we're having."

Dempsey and Hagel both urged senators to set clear and flexible spending limits for the department.

"Time and flexibility are absolutely key here," Hagel said. "If we've got the flexibility and the time to bring [spending] down, we can do that. That's manageable. And there are a lot of things that we should be doing, we can be doing, to be more efficient and still protect the interests of this country and still be the most effective fighting force."

Hagel noted he is now studying the strategic choices in management review that Dempsey led across the department. He will be discussing the review with Congress, he said, because it will guide the fiscal year 2015 budget request going into 2014.

Dempsey said the review made some factors more clear.

"This review ... allows us to see the impact of not only the president's fiscal year '14 submission, but also the Senate's plan and then full sequestration, and it does pose a series of choices which become pretty difficult," the chairman said.

Adding the $487 billion reduction in defense spending by the Budget Control Act and the $500 billion in sequester cuts, on top of previous DOD efficiency initiatives, Dempsey noted, "comes out to about $1.2 trillion," which he said "leaves a mark on the United States armed forces."

"We haven't decided that it would make our current strategy unfeasible," he added, "but it would put it at great risk and could make it unfeasible."

Hagel said the service chiefs tell him they can match force structure with the strategic guidance, and preserve and enhance U.S. security interests around the world, given clarity on what resources they will have.

"I cannot give them that," the secretary said. "And when I can't give them that, then we have to continually go back and adjust and adapt. ... Furloughs for people are a good example of that."

The 11-day unpaid leave most defense civilians will take between July 8 and Sept. 30 is triage, Hagel said. "It's the worst way to have to respond to anything," he added. "But it was a necessity, and we all came to the same conclusion."

Furloughs are only part of the cloud of uncertainty that envelops service members and the defense enterprise, Hagel told senators.

"It's very unfair to these people," he said of furloughed civilian employees. "It's unfair to this country to ... be put in that kind of a situation and then still ask these people to make the contributions they are and the sacrifices they are for this country."

DEPUTY DEFENSE SECRETARY SAYS U.S. MILITARY AND INDUSTRIAL INTERESTS ARE ALIGNED

Deputy Defense Secretary Ash Carter delivers remarks after being honored with the Dwight D. Eisenhower Award and Medal by the National Defense Industrial Association at the Ritz-Carlton hotel in McLean, Va., May 3, 2013. The annual award recognizes leadership and strategic impact at the highest levels of national security. DOD photo by Glenn Fawcett

FROM: U.S. DEPARTMENT OF DEFENSE
Carter: Defense Industry Interests Align With Those of DOD
By Claudette Roulo
American Forces Press Service

WASHINGTON, May 6, 2013 - The long-term interests of the defense industry and the Defense Department are aligned, Deputy Defense Secretary Ash Carter said during a May 3 awards ceremony in McLean, Va.

At the ceremony, Carter received the Eisenhower Award from the National Defense Industrial Association. The award recognizes leadership and strategic impact at the highest levels of national security, according to an NDIA news release.

The success of the U.S. defense industry is in the nation's interest, Carter told the audience.

Though President Dwight D. Eisenhower's farewell address in 1961 warned of the dangers of an outsized military-industrial complex, Carter said, the warning has been removed from its context. As a former Army general and supreme commander of the Allied forces in Europe, Eisenhower clearly understood the vital role played by the defense industry in securing the nation, the deputy secretary noted.

"The larger point of his farewell address was that the interests of the country are served when leaders take the long view," he continued. Only by properly aligning ends with means in accordance with national interests, rather than special interests, can national leaders achieve the balance Eisenhower sought, Carter said.

Eisenhower advocated "balance between the private and the public economy, balance between cost and hoped-for advantages, balance between the clearly necessary and the comfortably desirable, balance between our essential requirements as a nation and the duties imposed by the nation upon the individual [and] balance between the actions of the moment and the national welfare of the future," Carter said, quoting from the president's farewell address.

"He went on to say, 'Maintaining balance involves the element of time, as we peer into society's future. We -- you and I, and our government -- must avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow,'" he said.

The Defense Department is taking the long view, Carter said, understanding that it is operating at the convergence of two great historical trends. The first -- a time of unprecedented strategic change -- led President Barack Obama to make clear in the new defense strategy that "we're turning a strategic corner," the deputy secretary said. The second -- historic levels of financial turbulence -- will require the department to absorb reductions in defense spending in the interest of the nation's overall fiscal health, he said.

The country is moving from an era dominated by two wars toward a future defined by disparate challenges and opportunities, Carter said.

"We know what many of these challenges are -- continued turmoil in the Middle East, the persistent threat of terrorism, enduring threats like weapons of mass destruction and a range of new threats like cyber," the deputy secretary said.

With the challenges come great opportunities, he said. Among them, Carter noted, is shifting the Defense Department's great intellectual and physical weight from Iraq and Afghanistan to the Asia-Pacific region, "where America's future ... will lie, and where America will continue and must continue to play a seven-decade-old pivotal, stabilizing role.

"As we draw down from the wars in Iraq and Afghanistan, our force needs to make a very difficult transition," Carter continued, "from a large, rotational counterinsurgency-based force, to a leaner, more agile, more flexible and ready force for the future."

There was nothing wrong with the force the nation built for the wars in Iraq and Afghanistan, Carter told the audienced. "It was the right force for the period," he added, noting that the Afghanistan conflict is not over. "We can't ever forget that that still remains job one, but we're going into a different period," he said.

The department's rebalance to the Asia-Pacific region is predominately a political and economic concept, not a military one, the deputy secretary said. But, the Defense Department's role is to enable the continuation of the region's 60 years of peace and prosperity, he said, often by simply leading by example. "We believe that our strong security presence in the Asia-Pacific has provided a critical foundation for our principles to take root," Carter said.

"Our partners in the region welcome our leadership and the values that underlie them," he added, "and therefore, I believe that our rebalance will be welcomed and reciprocated."

The rebalance isn't aimed at any one country, or group of countries, in the region, Carter noted. "It's good for us, and it's good for everyone in the region, and it includes everyone in the region."

If managed properly, the department's budget reductions and the nation's strategic shift can reinforce one another, he said.

"That is the task before us in the Department of Defense," the deputy secretary said. "We know, that in making this strategic transition, we only deserve the amount of money we need, and not the amount we've gotten used to. That's why, well before the current budget turmoil, we made reductions to the department's budget by $487 billion over the coming decade."

Other cuts were made earlier under former Defense Secretary Robert M. Gates to eliminate unneeded or underperforming programs, Carter said. Additionally, overseas contingency operations funds are decreasing now that the military has left Iraq and is drawing down from Afghanistan, he said.

"Taken together, these reductions compare in pace and magnitude to historical cycles in defense spending the nation has experienced ... after Vietnam and after the Cold War,"the deputy secretary said. "We need to continue our relentless effort to make every defense dollar count."

The department is committed to this effort, he added, noting that "everything will be on the table" during an ongoing review of strategic choices and management. The results of the review will be delivered to Defense Secretary Chuck Hagel in the coming weeks, Carter said.

"The choices that the secretary and the president make in response to these points in the following months will then inform our [fiscal year 2015] budget submission, as well as our [fiscal 2014] execution decisions," he added. "Ideally, we will have all three elements -- stability, time and flexibility -- with which to make critical budget decisions, but we must anticipate a wide range of possible contingencies."

Tough choices will be necessary in the years to come, Carter acknowledged, -- and will have significant impact on the United States, particularly if deep spending cuts required by the budget sequester remain in force.

"These tough choices, by necessity, must favor national interests over parochial priorities," he said. "What we cannot afford, as President Eisenhower said, is a debate in which people are in favor of sequester, but just not in their own back yard.

"Fiscal 'NIMBY-ism' is exactly the wrong policy prescription for what ails us," the deputy secretary said.

CHAIRMAN OF HOUSE WAYS AND MEANS COMMITTEE CAMP'S STATEMENT ON PRESIDENT'S BUDGET

FROM: CONGRESSMAN DAVE CAMP'S WEBSITE
Camp Statement on the President’s Budget
Wednesday, April 10, 2013
Washington, DC – Today, Ways and Means Chairman Dave Camp (R-MI) made the following statement in response to the President’s FY2014 Budget.

"Our country faces great challenges, and meeting those challenges requires that we work together. I welcome the President’s inclusion of reforms to Medicare and Social Security. With more than 10,000 Baby Boomers becoming eligible for benefits each day, it is critical that the White House and Congress work together to protect and preserve these programs for current and future beneficiaries. That is why the Committee will convene a series of hearings beginning next week to examine reforms supported by the President as well as other bipartisan solutions to help our nation’s seniors.

"I also welcome the President stepping forward on tax reform. However, as our economy continues to struggle and millions of Americans have given up looking for work altogether, the President’s plan doesn’t truly fix our broken tax code. In fact, while looking to help corporate America, the President’s plan does not address how complex, costly and unfair the tax code is for American families and small businesses. If the President is willing to do tax reform for Wall Street, then he should be willing to do tax reform for Main Street. Instead, the President chose to raise taxes again to fuel even more Washington spending. Tax reform should not be about making people pay more; it should be about strengthening our economy.

"I am most disappointed that the President’s budget never balances. Independent economists have shown that when we clean up the tax code and get spending back under control, we can strengthen the economy and create up to 1 million jobs in the first year alone. Those are the kinds of solutions we should focus on and work together to achieve. The American people deserve real results."

PENTAGON OFFICIAL SAYS BUDGET CUTS LIMIT RESEARCH AND DEVELOPMENT



Credit:  U.S. Air Force. Launch Of GPS Satellite.

FROM: U.S. DEPARTMENT OF DEFENSE
Budget Reductions Limit Science, Tech Development, Official Says

By Army Sgt. 1st Class Tyrone C. Marshall Jr.
American Forces Press Service

WASHINGTON, April 18, 2013 - The Defense Department's research and engineering department faces the same challenges the rest of the department does due to limitations caused by sequestration spending cuts, a senior Pentagon official said today.

Alan R. Shaffer, acting assistant secretary of defense for research and engineering, was joined by Arati Prabhakar, director of the Defense Advanced Research Projects Agency, before the Senate Armed Services Committee's subcommittee on emerging threats and capabilities to talk about their part of the fiscal year 2014 defense budget request.

Shaffer said he represents scientists and engineers from DOD, a group that "conceives, develops and matures systems" early in the acquisition process.

"They work with multiple partners to provide the unmatched operational advantage employed by our services' men and women," he said. "As we wind down in Afghanistan, the national security and budget environments are changing."

The president's fiscal 2014 budget request for science and technology is $12 billion -- a nominal increase from fiscal 2013's $11.9 billion, Shaffer said, noting that it isn't possible to discuss the budget without addressing the impact of sequestration, "which takes 9 percent from every single program" in research, development, testing and evaluation.

"This reduction will delay or terminate some efforts," he said. "We will reduce awards. For instance, we will reduce university grants by $200 million this year alone."

Potentially, he added, the number of new SMART Scholarships —an acronym that stands for science, mathematics and research for transformation -- could go down to zero, and sequestration cuts will cause other limitations for research and engineering departments.

"Because of the way the sequester was implemented, we will be very limited in hiring new scientists this year, and the [next] several years," he said.

Each of these actions, Shaffer said, will have a negative long-term impact on the department and to national security.

"The president and secretary of defense depend upon us to make key contributions to the defense of our nation," he said. "[Science and technology] should do three things for national security."

Shaffer said science and technology should mitigate current and emerging threats and that the budget should build affordability and affordably enable current and future weapons systems to operate.

Also necessary, he said, is developing "technology surprise" to prevent potential adversaries from threatening the United States.

"In summary, the department's research and engineering program is faced with the same challenges as the rest of the DOD and the nation," he said, "but our people are performing."

Prabhakar focused on DARPA's goals in her testimony.

"[Our] objective is a new generation of technology for national security, and to realize this new set of military capabilities and systems is going to take a lot of organizations and people," she said.

"But DARPA's role in that is to make the pivotal early investments that change what's possible," she added. "[This] really lets us take big steps forward in our capabilities for the future."

The director said DARPA is investing in a host of areas to include building a future where war fighters can have cyber as a tactical tool that's fully integrated into the kinetic fight.

"And we're building a new generation of electronic warfare that leapfrogs what others around the world are able to do with widely, globally available semiconductor technology," she said.

"It means we're investing in new technologies for position, navigation and timing, so that our people and our platforms are not critically reliant as they are today on GPS," Prabhakar said.

The director also noted DARPA is investing in a new generation of space and robotics, advanced weapon systems, new platforms, and a new "foundational" infrastructure of emerging technologies in different areas of software and electronics, and material science.

The aim, Prabhakar said, is to create real and powerful options for future commanders and leaders against whatever threats the nation faces in the years ahead.

"And that work is the driver behind all of our programs," she said. "It's the reason that the people at DARPA run to work every morning with their hair on fire. They know that they're part of a mission that really does matter for our future security as a country.

AIR FORCE 2014 BUDGET AND SPACE

 

An artist's depiction of the Space Based Space Surveillance satellite. The Joint Space Operations Center uses data collected from SBSS to track orbiting objects in geostationary and low earth orbit, providng space situational awareness to U.S. miliitary and commercial space users. Members of the 1st and 7th Space Operations Squadron command and control the satellite. Credit: U.S. Air Force Space Command.

FROM: U.S. AIR FORCE
AF leaders highlight space program successes, address FY14 budget

4/18/2013 - WASHINGTON (AFNS) -- Space today is in as good a position as it's been in a very long time, said Richard McKinney, the deputy under secretary of the Air Force for space.

McKinney, along with Dr. Jamie Morin, the acting under secretary of the Air Force, and Brig. Gen. Robert McMurry, the director of space programs for the office of the assistant secretary of the Air Force for acquisition, briefed members of the media on the Air Force's fiscal 2014 Space Budget April 15 in the Pentagon here.

"We're in production," McKinney said. "We've got missile warning in production, we've got Advanced Extremely High Frequency, or AEHF, (satellites) in production, and Wideband Global SATCOM is in production. On launch -- we have 10 years of 100 percent successful flights. We have more capability today than we have ever had."

The Air Force has requested approximately $6.5 billion for its space investment portfolio in FY 2014. The top five programs include: the Evolved Expendable Launch Vehicle, Space Based Infrared System early warning satellites, Global Positioning System III navigation satellites, AEHF military communications satellites, and space situational awareness systems.

The fiscal 2014 request is slightly higher than the fiscal 2013 request of $6.3 billion for its space investment portfolio, but does not reflect the cuts that would take place under sequestration. It does, however, reflect the Air Force's ongoing commitment to providing enhanced space capabilities to the joint team.

"We continue to offer the nation these space capabilities which are a tremendous force multiplier," Morin said. "Relying on space, whether it's reliable communications or precision navigation or warning of what others might be doing in space or warning of missile launches, all of that enables the other parts of the joint team to function very effectively and provides those force multipliers we're relying on."

And being a force multiplier is something that is all the more essential as budgets are under stress, Morin said.

"We've been working hard to take costs out of the space programs. We've had some real successes," he said, highlighting the fact that sequestration would undermine these achievements. "If we pull the rug out from under that through continued budgetary uncertainty or ill-conceived cuts, then we're going to do a disservice to the taxpayer who is just now beginning to benefit from this effort to squeeze costs down."

Morin also highlighted several space programs that the Air Force successfully found ways to stretch dollars and provide stability.

"The Advanced Extremely High Frequency communication satellite -- we are now predicting more than $1 billion in savings based on the contract work that has been done on that," he said. "On the Space Based Infrared System, we've already projected over $500 million in savings."

The Air Force has also moved to a "block buy," of launch systems, purchasing a number of items at a time, allowing for lower per-unit prices -- with a path to enable competition for certified new entrants, which will allow for significant savings.

McMurry also spoke about the successes that have been achieved through the Joint Space Operations Center Mission System, or JMS.

"We've brought the initial operational capability in three years, and pulled $500 million out of the program while still meeting operational requirements," McMurry said, describing a joint effort that involved moving to a commercially procured software approach.

The service has also seen success through partnerships with allies, enabling a cost-share where all parties can share the capability of the satellite.

"In both the AEHF and WGS communication satellite programs, you've seen us ink agreements with allies, in some cases multiple allies," Morin said. "This is win, win, win on so many different levels. It's promoting interoperability with key partners. It's driving down costs to the U.S. taxpayer, and it's building more capacity in these constellations."

In light of these successes and efforts to drive costs down, Morin emphasized the fact that programs still remain vulnerable. However the service will continue to strive for stability in the space program to ensure it can provide those capabilities the joint team relies on.

"The Air Force's capabilities in space are going to continue to be touchstones for the whole joint team, the whole of government and for the private sector," Morin said. "We're committed to enabling the joint force, providing the force multipliers that make the joint force stronger. And we're committed to doing so in a way that's respectful of the taxpayers' dollar."

(Courtesy of Secretary of the Air Force Public Affairs)