I will comment this speech next week in Shaa Allah in Arabic language:

General, thank you.  I am very proud to be here.  I am proud to be among all of you who give so much every day and will continue to contribute to our country and making a better world. And I thank you for that service.

For a fancy general, to give such an overstated introduction to a retired Army Sergeant is something that I rarely get.  But I am very appreciative of the generous introduction and to you, General, and all of your staff and colleagues here.  Thank you for what you continue to do for our country in this important institution, an institution, I think, as important for our country and the development not only of our leaders, but the leaders of other nations who are represented here today.

I think it is one of the wisest investments our country has made and will continue to make in developing our leaders, helping other nations develop their leaders, based not just on military doctrine, but on the principles and values of mutual respect and dignity and the rule of law.  And this facility, this institution, has done that very effectively for many, many years, so I thank you all.

Generations of our military leaders have come to this institution here at Fort McNair to receive training and education they needed to succeed not just in combat, but in their daily lives.  The responsibilities you all will take on will be immense.  Every day you will face decisions with real implications for the safety and welfare of our troops and the security of our nation.

As you move onward and upward in your careers, I would urge you to always keep three questions in mind before making a decision:    

• Does this help protect national security?
• Is this in America’s strategic interests, which includes the political, economic, and moral dimensions of our interests and our responsibilities?
• Is this worthy of the service and sacrifice of our men and women in uniform, and their families?

These questions speak to the Department of Defense’s most basic responsibilities – defending the nation, advancing America’s strategic interests, and keeping faith with its quiet heroes. 

How we fulfill these enduring responsibilities at a time of unprecedented shifts in the world order, new global challenges, and deep global fiscal uncertainty is the subject of my remarks today. 

I want to focus on challenges, choices and opportunities:

• the challenges posed by a changing strategic landscape and new budget constraints;
• the choices we have in responding to these challenges, and;
• the opportunities that exist to fundamentally reshape the defense enterprise to better reflect 21^st century realities.

NDU is an appropriate venue for this discussion because the success of these efforts ultimately rests on the abilities and judgments of our military and civilian leaders.  Those here today.

As President Dwight Eisenhower said during a visit to these grounds more than fifty years ago, “the wise and prudent administration of the vast resources required by defense calls for extraordinary skill in meshing the military, political, economic, and social machinery of our modern life…so that the greatest effective use is made of resources with a minimum of waste and misapplication.”

As a former Army Officer who graduated from this campus shortly before the onset of the Great Depression, Eisenhower knew of what he spoke.

The security landscape of 2013 is of a far different character than the world of 1960, or even the world of a few years ago.  But Eisenhower’s words still ring true today.  The United States is emerging from more than a decade of war in Iraq and Afghanistan, but the threat of violent extremism persists and continues to emanate from weak states and ungoverned spaces in the Middle East and North Africa.  

There also stands an array of other security challenges of varying vintage and degrees of risk to the United States:  the proliferation of dangerous weapons and materials, the increased availability of advanced military technologies in the hands of state and non-state actors, the risk of regional conflicts that could draw in the United States, the debilitating and dangerous curse of human despair and poverty, as well as the uncertain implications of environmental degradation.

Cyberattacks – which barely registered as a threat a decade ago – have grown into a defining security challenge, with potential adversaries seeking the ability to strike at America’s security, energy, economic and critical infrastructure with the benefit of anonymity and distance. 

The world today is combustible and complex, and America’s responsibilities are as enormous as they are humbling.  These challenges to our security and prosperity demand America’s continued global leadership and engagement, and they require a principled realism that is true to our values.

The United States military remains an essential tool of American power, but one that must be used judiciously, with a keen appreciation of its limits.  Most of the pressing security challenges today have important political, economic, and cultural components, and do not necessarily lend themselves to being resolved by conventional military strength.  Indeed, the most destructive and horrific attack ever on the United States came not from fleets of ships, bombers, and armored divisions, but from 19 fanatical men wielding box cutters and one-way plane tickets.

So our military must continue to adapt in order to remain effective and relevant in the face of threats markedly different than those that shaped our defense institutions during the Cold War.  

Since 9/11, the military has grown more deployable, more expeditionary, more flexible, more lethal, and more professional.  It has also grown significantly older – as measured by the age of major platforms – and enormously more expensive in just about every area. 

Today America’s defense institutions are emerging, and in some cases recovering, from more than a decade of sustained conflict while confronting new strategic challenges – and doing so with significantly less resources than the Department has had in the past.

As this audience knows, this process of change and realignment is already well underway.  It began under Secretary Gates, who recognized that what he called the post-9/11 “gusher” of defense spending was coming to an end.  Under his leadership, the Department worked to reduce overhead costs within the military services, and canceled or curtailed a number of major modernization programs that were performing poorly or poorly suited to real-world demands.

The realignment continued under Secretary Panetta, who worked closely with the President and the Joint Chiefs of Staff to craft new defense strategic guidance and a defense budget which reduced the Department’s planned spending by $487 billion over ten years.  Even while reshaping the force to become smaller and leaner, this budget made important investments in the new strategy – including rebalancing our defense posture to the Asia-Pacific and prioritizing critical capabilities such as cyber, special operations, and unmanned systems.

So the Department of Defense has been preparing for this inevitable downturn in defense budgets, and has taken significant steps to reduce spending and adapt to the new strategic environment.  

Nevertheless, a combination of fiscal pressures and a gridlocked political process has led to far more abrupt and deeper reductions than were planned for or expected.  Now DoD is grappling with the serious and immediate challenge of sequester – which is forcing us to take as much as a $41 billion cut in this current fiscal year, and if it continues, will reduce projected defense spending by another $500 billion over the next decade.

The sequester cut, because it falls heavily on operations and modernization accounts, is already having a disruptive and potentially damaging impact on the readiness of the force. 

The Department has already made many cuts, including cuts to official travel and facilities maintenance.  We have imposed hiring freezes and halted many important but non-essential activities.  However, we will have to do more.  Across-the-board reductions of the size we are looking at will demand that we furlough civilian personnel, which could affect morale and may impact productivity.  Cuts will fall heavily on maintenance and training, which further erodes the readiness of the force and will be costly to regain in the future.  As the Service Chiefs have said, we are consuming our readiness.  Meanwhile, our investment accounts and the defense industrial base are not spared damage as we take indiscriminate cuts across these areas of the budget too.

These are the challenges that face us right now, and I am determined to help the Department get out ahead of them.  General Dempsey has said that we need to “lead through” this crisis.  I have told our senior leadership – the Joint Chiefs, the Service Secretaries, and the Undersecretaries of Defense – we are in this together, and we will come out of it together.  

The task ahead for the Department is to prepare for the future, but not in a way that neglects, or is oblivious to, the realities of the present.  We are therefore undertaking a process to develop choices, options and priorities to deal with further reductions in the defense budget that could result from a comprehensive deficit reduction deal or the persistence of sequester level cuts – all anchored by the President’s strategic guidance. 

My goal in directing this Strategic Choices and Management Review – which is being led by Deputy Secretary Carter, who is working with General Dempsey – is to ensure that we are realistically confronting both our strategic and fiscal challenges.  It is not to assume or tacitly accept that deep cuts – such as those imposed by sequester – will endure, or that these cuts can be accommodated without a significant reduction in military capabilities.  At the same time, we cannot simply wish or hope our way to carrying out a responsible national security strategy and its implementation.  The Department must understand the challenges and uncertainties, plan for the risks, and, yes, recognize the opportunities inherent in budget constraints and more efficient and effective restructuring. 

This exercise is also about matching missions with resources – looking at ends, ways, and means.  This effort will by necessity consider big choices that could lead to fundamental change and a further prioritization of the use of our resources.  Change that involves not just tweaking or chipping away at existing structures and practices but where necessary fashioning entirely new ones that are better suited to 21^st century realities and challenges.  All of this with the goal of ensuring that we can better execute the strategic guidance set out by the President.

In order for this effort to succeed, we need to be steely-eyed and clear-headed in our analysis, and explore the full range of options for implementing our national security strategy.  We need to challenge all past assumptions, and we need to put everything on the table.

For example, it is already clear to me that any serious effort to reform and reshape our defense enterprise must confront the principal drivers of growth in the Department’s base budget – namely acquisitions, personnel costs, and overhead. 

In many respects, the biggest long-term fiscal challenge facing the Department is not the flat or declining top-line budget, it is the growing imbalance in where that money is being spent internally.  Left unchecked, spiraling costs to sustain existing structures and institutions, provide benefits to personnel, and develop replacements for aging weapons platforms will eventually crowd out spending on procurement, operations and readiness – the budget categories that enable the military to be and stay prepared. 

If these trends are not reversed, former Chief of Naval Operations Admiral Gary Roughead warned, DoD could transform from “an agency protecting the nation to an agency administering benefit programs, capable of buying only limited quantities of irrelevant and overpriced equipment.”

Thanks to the efforts of my predecessors and other DoD leaders, we have made strides in addressing some of this internal “crowding out” in the budget.  Much more hard work, difficult decisions and strategic prioritizing remains to be done.  Deep political and institutional obstacles to these necessary reforms will need to be engaged and overcome. 

I’m concerned that despite pruning many major procurement programs over the past four years, the military’s modernization strategy still depends on systems that are vastly more expensive and technologically risky than what was promised or budgeted for.  We need to continually move forward with designing an acquisition system that responds more efficiently, effectively and quickly to the needs of troops and commanders in the field.  One that rewards cost-effectiveness and efficiency, so that our programs do not continue to take longer, cost more, and deliver less than initially planned and promised.

With full recognition for the great stresses that our troops and their families have been under and been under for nearly twelve years of war, and for the essential contributions civilian employees make to the Department’s mission, fiscal realities demand another hard look at personnel – how many people we have both military and civilian, how many we need, what these people do, and how we compensate them for their work, service, and loyalty with pay, benefits and health care.  This will involve asking tough questions.

Tough questions such as:

• What is the right mix of civilian and military personnel across the Department and its various components?  
• Within the force, what is the right balance between officers and enlisted? 
• Without necessarily accepting the oft-stated claim that there are more than 300,000 service members performing civilian and commercial functions, what is the appropriate distribution of troops performing combat, support and administrative duties? 

There will likewise have to be close scrutiny of DoD’s organizational chart and command structures, most of which date back to the early years of the Cold War.  The last major defense re-organization, Goldwater-Nichols, was drafted at the height of the Reagan defense buildup and focused on improving jointness and establishing clear operational chains of command.  Cost and efficiency were not major considerations. 

Goldwater-Nichols succeeded in its purpose by strengthening the Joint Staff and the Combatant Commands, but it went about doing this by layering joint organizations and processes atop service organizations and atop processes.  The elevation of the former did not automatically lead to the diminution of the latter. 

Today the operational forces of the military – measured in battalions, ships, and aircraft wings – have shrunk dramatically since the Cold War era.  Yet the three and four star command and support structures sitting atop these smaller fighting forces have stayed intact, with minor exceptions, and in some cases they are actually increasing in size and rank. 

More broadly, despite good efforts and intentions, it is still not clear that every option has been exercised or considered to pare back the world’s largest back-office.  Prior efficiency campaigns yielded substantial savings from the services, and some from the DoD-elements known as the “Fourth Estate,” which consists, as you all know, of the Office of the Secretary of Defense, the Joint Staff, the Combatant Commands and the defense agencies and field activities – the Missile Defense Agency as well as those that provide health care, intelligence, and contracting support. 

We need to relook at funding for these activities, which won’t be easy.  With respect to the fourth estate, former Secretary of Defense Gates compared the process of looking for savings to “going on an Easter Egg hunt” – an image for this time of year.   Secretary Panetta was more blunt – he called the Pentagon quote a “big damned bureaucracy.”  It doesn’t sound like Panetta at all!  Wherever you are, Leon, know that we are quoting you.

The military is not, and should never be, run like a corporation.  But that does not mean we don’t have a good deal to learn from what the private sector has achieved over the past 20 to 30 years, in which reducing layers of upper and middle management not only reduces costs and micromanagement, it also leads to more agile and effective organizations and more empowered junior leaders.

In light of all these trends, we need to examine whether DoD is structured and incentivized to ask for more and do more, and that entails taking a hard look at requirements – how they are generated, and where they are generated from. 

It could turn out that making dramatic changes in each of these areas could prove unwise, untenable, or politically impossible.  Yet we have no choice but to take a very close look and see how we can do all of this better.

In order to address acquisition, personnel, and overhead costs in smart ways that have not been done before we need time, flexibility, and the support and partnership of Congress.  We also need long-term budget certainty.

One of the biggest problems that sequester has brought is that it is requiring immediate, deep and steep cuts.  This means that the Department will by necessity have to look at large cuts to operations and modernization to find savings that can be quickly realized. 

The kinds of reforms the Department needs in other areas would take some time to implement, and take longer for significant savings to accrue.  If we get time and flexibility to implement savings, we could limit the impact of spending reductions on force structure and modernization while still making a significant contribution to deficit reduction.  

By contrast, the cuts required by sequester afford neither time nor flexibility.  These quick and dramatic cuts would almost certainly require reductions in what have long been considered core military capabilities and changes in the traditional roles and missions among the uniformed services.

Regardless, we will need to take a critical look at our military capabilities and ensure that our force structure and modernization plans are directly and truly aligned with the President’s strategy.  That includes taking a new look at how we define and measure readiness and risk, and factor both into military requirements.  It also includes balancing the competing demands of capacity and capability – how much of any given platform we need, and how much capability it needs to have to fulfill real-world missions.

The size and shape of the force needs to be constantly re-assessed, to include the balance between active and reserve, the mix of conventional and unconventional capabilities, general purpose and special operations units, and the appropriate balance between forward stationed, rotationally deployed, and home-based forces.  We also need to re-assess how much we can depend on our allies and partners, what can we anticipate from them in capabilities and capacity, and factor these calculations into both our short and long-term planning. 

A thorough examination of the way our military is organized and operates will also highlight our inherent strengths.  Our strategic planning must emphasize these strengths, which include leader development, training, mobility and logistics, special operations forces, cyber, space, and research and development. 

Another core strength we have is that the United States military has always proved capable of adapting to new realities, even when resources were relatively scarce. 

Consider that in the lean interwar years between World War I and World War II during the Great Depression, a group of farsighted officers – with virtually no funding or prospect of promotion – and you remember in your history how long General Eisenhower was a lieutenant colonel, a good example of what we're talking about.  They conceived important new platforms and operating concepts for armored warfare, amphibious assault, aircraft carriers, submarines, and long-range bombers – all of which proved decisive in the Second World War. 

After the Korean War, President Eisenhower’s “new look” defense strategy controlled the growth of defense spending – then exceeding 10 percent of GDP – while investing in the kind of strategic and long-range capabilities that were critical during the Cold War and are still employed in various forms today. 

As the military grappled with incredible challenges to morale and readiness after Vietnam it also made the transition to an all-volunteer force and protected key investments in technologies like stealth, precision weapons, and platforms like the F-16 and Abrams tank. 

Even during the 1990s procurement holiday, we invested in satellite guidance and networking systems, as well as remotely piloted aircraft that have been game-changers during the last decade of war. 

The goal of the senior leadership of this Department today is to learn from the miscalculations and mistakes of the past drawdowns, and make the right decisions that will sustain our military strength, advance our strategic interests, and protect our nation well into the future. 

Let me now conclude with some comments on America and its role in the world. 

During this period of budget turmoil, and after a financial crisis and a decade where our country has grown weary of war and skeptical of foreign engagements, questions arise about the merits of America’s global leadership. 

America does not have the luxury of retrenchment – we have too many global interests at stake, including our security, our prosperity, and our future.  If we refuse to lead, something, someone will fill the vacuum.  The next great power may not use its power as responsibly or judiciously as America has used its power over the decades since World War II.  We have made mistakes and miscalculations with our great power.  But as history has advanced, America has helped make a better world for all people with its power.  A world where America does not lead is not the world I wish my children to inherit.

More than a century ago on this campus, while laying the cornerstone on the building which now bears his name, President Theodore Roosevelt declared that the United States had “by the mere trend of events, been forced into a position of world power.”  He went on to say that America “cannot bear these responsibilities aright unless its voice is potent for peace and justice…with the assured self-confidence of the just man armed.” 

What distinguishes America is not our power, for the world has known great power.  It is America's purpose and our commitment to making a better life for all people.  We are a wise, thoughtful and steady nation, worthy of our power, generous of spirit, and humble in our purpose.  That is the America we will defend together, with the purpose and self-confidence of the “just man armed.”

Thank you, and I would be happy to take your questions

Source :

Defense.gov Speech.htm chuck hagel.htm

http://www.defense.gov/Speeches/Speech.aspx?SpeechID=1764.