♪ >> welcome to "defense news." what washingtoneeds to do to stay ahead of a rising china. we talked to one expert, but first, a congressional republican joins us in advance of the obama administration's 2015 budget request. the ryan murray budget deal could cap the budget deal over the next two years, but dod stilill has to cut $70 billion from its budget.

meanwhile, the administration wants the pentagon to retain more people and reverse plans to retire one of its nuclear powered aircraft carriers. it also wants to increase 2016 defense spending by about $36 billion to soften the impact of land cuts. we went to capitol hill last week to talk t to texas republin congressman, the vice chairman of the armed services committee, the front-runner to succeed in the committee chairman if republicans retain the house in elections this year. i asked what he is expecting and wants to see from the administration's upcoming budget request. >> i thi the first thing is we know what the number is, and ththat's very differe than we dealt with for the last few years, so weon't have all the -- drama that we've had. tough choices have to be made, but still, we know what the total of defense spending will be. that helps managers be able to plan. it helps government officials be able to plan, but it also puts a little bit more responsibility

on our sulders to make the when we have a defined amount of money. in some ways, it's a good situation to be in. certainly, it's better than we then on -- better than we have been on before. the question of what comes after -- i think it's not going to come for much. >> there are folks who say they did get a little more money as a result of the budget deal, but a certain amount of cuts are supposed to come through the pipeline. so much so that secretary hagel has said they're goi to be tough choices made in this. our folks ready to see some of the tough h choices the pentagon might be making? >> am not sure. i think you are exactly right. what we ended up with was flat defense budgets.. the challenges we are facing around the world are not flat. they are growing that means some tough choices have to be made. i'm not sure all members of congress recognize that. that will l be part of our challenge as we go through the

committee process and out onto the floor. i think it's going to be clearer to people, and i hope they are ready. they need to understand the consequences of these flat defense budgets. >> over t past several years, congress has authorized more funding than the pentagon has asked for. is congress going to abide by its own spending caps this time? >> yes, and i think that's the big difference. last year, we dinot know how much money would ultimately be spent on defense. this year, we know. it is set. authorizer zen appropriators know what we have the work with, and while that is a more stable and better situation than we have had before, it also puts more pressure on us because then we have to make those choices within that budget. >> for the first time in two yes, speakeraynor has naged to getet through congress a clean debt ceiling increase, which would avert more shutdowns -- speaker boehner has managed to get through congress a creep -- a clean debt ceiling incrcrease. is this rereason to be more

hopeful about having a more productive few years? >> ihink you need to look for hope wherever you can wind it, and maybe this has some hopeful signs, but i think, m more realisticay, the key was the budget agreement. that provides us with some stability. we know how much money we will spend within the discretionary part of the dget for the next twyears, and then t this last action puts the debt limit off for about the same a amount of time. >> which is great with 2014 elelections coming up. >> of course. election-year pressures were clearly part of that. nobody should think that our problems are solved. either the debt the country faces or the problems with defense spending. ey are still ahead of us, but we just have a little reprieve from some of the drama we have .een >> one of the things seetary hagel has said his there are

massive challenges. cuts and tough choices have to be me, but the administration has restarted the practice of restarting the unfunded priorities list, which existed for a long time. there's about $26 billion in programs that are said to be on thatist at this point. is that a good idea or not? >> yeah, i think it is inevitable to some extent that because we are always going to ask -- what was the thing that just missed getting into the president's budget and why did it miss? the congress of either party will never accept a president's budget just as is. we want to make our own evaluations. that tear that just missed the president's budget is a useful tool for us to have. i think it is helpful. i do not know what's going on

with the administration. i think it's possible they want to generate somdemand for more defense spending so they can increase to mystic spending as well. i have heard that spepeculation. whether that is successful in the coming years, we don't know. main thing is to focus on this year''s defense budget and try o make the best choices we can. >> just about everybody is trying to wring efficicy from the system. at the end of the day, $500 billion is anwful lot of money, far less than the pentagon would like in more than it expected it would get from the long-term, but cutting overhead is one way to do that. this is a political year, a and most people have said that there's unlikely to be progress on that. what areome of the things the pentagon -- that you w would lie to see the pentagon start doing right away in order to reduce its overhead, which a lot of folks, yourself included, have criticized as being poerous? >> i do think reducing bureaucracis somethi that not only secretary hagel agrees of people whoer

have recently served in the obama pentagon agreeith, and it needs to happen. that is not going to solve our national deficit, but on the other hand, we have always talked in the military about the tail to tooth ratio. the tale has just gotten and i it adds burdens on the people who are on the tooth. the secretary has made a start on that. i think we could well look at additional authoritis to enable make changes with civilian and military folks, not just that the pentagon, but in the combatant commands as well. >> what sort of authority changes do you think you guys would be willing to grant? >> i don't know what we would be willing to d we've had several people make suggestions of early buyouts for some civilian folks and other ors to help shape the force she the personnel folks when the pentagon. and again, yowant to be fair to people, but on the other

hand, you cannot just keep , but that cost they add to the system. everybody has got to justify their existence and put demands on somebody else or put overrements over here, so time, that buis up and really ways things down. >> the deficit is also shrinking apart because the economy is growing, texas it's going up, d the administration h .layed that piece of it up does that make it easier for people to get more trade space when you're looking a perhaps investing money to ve money? for example, if you are going to do a personnel buyout? > baby. the problem is all the projections show that while the deficit is going down, if we do not make changes in mandatory entitlement programs, the deficit is going to add right back up. this is something of a momentary respite.

of course, growing the economy changes those projections tremendously, so those are the two key factors, but i do think we do have to look at the long-term viability of the overhead in dod and whether that face thehurts us challenges we face. every company around the country has to make some refororms in order to be more agile, to keep up with the way the market changes, and thahat is kind of what dod needs to do as well. changes, and thahat is kind of what [ male announcer ] well. at northrop grumman,

we've always been on the forefront of innovation. when the world called for speed... ♪ ...when the world called for stealth... ♪ ...intelelligence... endurance... affordability... adaptability... and when the world asked fofor the future. staying ahead in a constantly evolving world. that's the value of performance. northrop grumman. contitinuing our conversation with representative mac thornberry, the cehairman of the house on services committee. he's working with the pentagon chief on an effort to reform how the military develops and buys weapons. the goal is to producuce itiatives that can garner support from lawmakekers. i asked what his key tenets for reform and what he wants the effort to accomplish. >> well, what i would like to

see is a more efficient use of taxpayer dollars to get more defense out of the money we spend, but also, a simpler system that gives more authority but also more accountability to the people who are making the decision. the thing i hear more than anything is, "this has been tried before. what makes youhink you will be successful?" i think one element that gives us a chance is the fact that mr. kendall and other folks at the pentagon as well as s people on both sides of the capital and both sides of the aisle agree that we must make this effor by this have you at the house and senate and pentagon together, go through the statutes as well as the regulations to thin out and simplify w what we have. >> do you thihink that a complee engineering is necessary echo some people have said compared to painting a moving train, or do you think you can do this in a line by line way of just

stripping d junng stuff which everybody's knowdge is? it's a very co-linked ecosystem and all of this. >> it is. the rest ofhe story is while we are going along, the tra has to keep moving. there are things that it has to gett to the folks on the front line, so youcannot just stop and retake a couple years to reengineer the whole system. it has still got to produce e as we go. i think that's the reason that while it's tempting to say this is a mess, and we got start fromcratch, what's rely better is to go back and look at these things that accumulate over time -- for good reason -- but then they just never go away. system fromn the being able to be as agile as it isds to be in a world that moving really ickly. >> do you think you have to put sunset provisions in some of these regulations? some of the stuff has been on the books for lital decades and you could argue has been outmoded or superseded by other regulation. >> i think it would be a whole

lot better if we had sunset so that it forced us to look at the laws we pass them the regulations that stem from them. that's solutely one of the ideas we are looking at moving ahead. >> the idea pushing greater authority down to the people who are using it -- or example, program managers and those guys are under an anonymous amount of pressure. how do you handle the oversight people? there are those who say these regulations exist in order to put oversight over the sysm. often, the problem is some new law, some new oversight office comes into play, which often is an overreaction and those built up and constrain the system. it is still important f for us o do oversight as well as others, but i think we can do it in a way without puputting new regulations, new laws that make it impossible for these gs to do what is the best value for

the taxpayer. one of the key parts of our effort will be to make sure we forrstand t the incentives the program managers. what are they rewarded for? what are they punished for? that is really more important than any new law or regulation that is imposed o on them from e top. >> there have been a number of efforts that have proven to be somewhat less than successful. do you think because everyone has buy in on it is why this will be successful? >> i think that helps. second, we do not have any choice. with the constrained budgets and the problems we have third, i think there's a real concerted effort to look ieper to why these past t efforts have not been as successful as they -- as we wanted them to be. causesok at those deeper that are maybe not so apparent, and i think the other key is a lot of this is not in the laws we pass. it is in the way we in congress approach our job. how do we decide whaprograms

to find? at what stage in that ross s do we make that decision? what other questions do we ask? do we just call people who are involved in poorly perfoing programs, or we give attention to people whare doing their job wellll? we do not do that nearly enough. >> both parties agreed that military pay and benefits reform is important. there waa clause which was to cut cost-of-living adjustments. that's in the process of being rescinded. you voted against th. what's the best way to approach almoste, whic everybody recognizes is someing that is a strategic issue that has to be reformed if -- want to have not only at a well comompensated for us but also be able to pay for weapons as well as training, maintenance, etc.? >> just to emphasize the point,

if current trends continue, sometime in the 2030's, 100% of the defense budget will be pay and benefits. we will not be able to buy one uniform or one bullet. i think the best way to do it is to get this commission's report and look at a comprehensively so we are looking at the total range of hay and benefits. it's always prefable to make any changes prospectively. in other words, do not change the rules on the people who are already in the system. the other part of that is it may be that a 20-your pension system is not the best way to recruit and retain people these days. it's not just how to save money but how we do the best job of getting and keeping the kind of people we will have to he to safeguard ththis country in the future. >> let me ask you the future of wartime supplementalals. they havbeen a staple. we are now at $85 billion for this year to o cover the war in afghanistan to do the ramp down as well as cover other global

operations, but a large chunk of that is what most people would argue our base budget. they belong in the budget itself. to o shifthate now into the base budget, and there are folks who s that numbmber could be 5 billion, for exampl that has to move into the base budget. what's the best way to do that? are folks paying enough attention from your standpoint, both up here in the pentagon for what that's going to mean when you ship that kind ofoney out from the supplemental budget into the base budget? >> people are not paying enough attention to it. part of the problem is some programs have moved around between that supplemental and the base budget and back and forth, so it's a little bit confusing. i think we have to ve towards moving those thinginto the base budget, and we have to increase the defense topline in der to do that, but i agree with you there's not really a good understanding of how much we havgrown to depend on th

overseas contingency account. >> up

>> china has been using is gring economy to methodically build a growing military and improve its global clout. overer the last two years, it's been using that military muscle to try to force its neighbors to give up territory y beijing wan, but the problem for america -- china is the leading training

partner, but washington is the security guarantor for the region with the philippines andd japan in particular and could end up in a conflict with china if china attacks either them. beijing has already seized in offshore shoals and once i was administer by japan and vietnam. last week, thehe chief of naval opeperationeassured in case of conflict. welcome to the program. >> thank you. pleasure to be here. >> what are the capabilities,s, litary and other, that china is developing that where you particular? >> let's look particularly at the military capabilities. the most troubling fact is that china is methodically buililding up the power to prevent the united ace from being able to .perate as everyone well k knows, that's

where all our allies are. that is where e our security guarantees are written in law. this is a challenge that we have to meet because if we don't, the miracle could well implode. >> th's part of what h allowed the region to flourish. >> that's right. american primacy has created a national order that has allowed peace and prosperity to develop in the region. if we cannot meet our security obligations, that's a great risk . > there are some people who look at its a containment strategygy on china, but you argue, as do many, that that's actually a bad strategy. what's the right way to manage this rising superpower at a time when we want to preserve our own capabilities as well? >> we have to balanance china. we cannot contain it, and for a simple reason -- uike the relationship we had withth the soviet union, we are deeply intertwined with china economically, so the idea thahat

we could suddenly cut all economic ties with china or compmpel our allies to cut ties with china is simply unthinkable at this pot. you have to come up with an alternative strategy. itas to be some form of geopoliticical balance, and i think that haswo or three key components. the firsis to build up the power of china's neighbors so that they serve and effectt as america's first line of defense. the second is we have trotect our power proction capabilities, our ability to opere in the proximi of the asian coast. if wcannot do that, the security grantees are meaningless. technology, maintaining space. the third elelement would be strengthening ourwn enomic power. very important component of strengthening our economy is building up trading networks, which tie oriend the nations

closer to us. i have argued that we really need to focus on our partners and work towards speci training relationships -- trading relationships with them because trade is a great way to global interaction. >> china is tryi to ef up its capabilities and use all the tools in its toolbox. what are some of the things that washgton can be doing to get into that decision cycle -- the chinese decision cycle, where they begin to see high cost for eachf these sorts of coercive moves that it wants to make? >> i think there are two or three big things we have to do. the first is we have to be present to the region. look att either alternatives of abandonment, nor can we talk, as we sometimes do, rather loosely. we have got to communicate to our r allies that their first ad foremost in our national calculations. that

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