President Barack Obama gave the following remarks in Washington, DC

President Obama. Good morning, everybody. The United States of America is the greatest force for freedom and security that the world has ever known. And in no small measure, that's because we've built the best-trained, best-led, best-equipped military in history—and as Commander-in-Chief, I'm going to keep it that way.

Indeed, all of us on this stage—every single one of us—have a profound responsibility to every soldier, sailor, airman, Marine and Coast Guardsman who puts their life on the line for America. We owe them a strategy with well-defined goals; to only send them into harm's way when it's absolutely necessary; to give them the equipment and the support that they need to get the job done; and to care for them and their families when they come home. That is our solemn obligation.

And over the past three years, that's what we've done. We've continued to make historic investments in our military—our troops and their capabilities, our military families and our veterans. And thanks to their extraordinary service, we've ended our war in Iraq. We've decimated al Qaeda's leadership. We've delivered justice to Osama bin Laden, and we've put that terrorist network on the path to defeat. We've made important progress in Afghanistan, and we've begun to transition so Afghans can assume more responsibility for their own security. We joined allies and partners to protect the Libyan people as they ended the regime of Muammar Qaddafi.

Now we're turning the page on a decade of war. Three years ago, we had some 180,000 troops in Iraq and Afghanistan. Today, we've cut that number in half. And as the transition in Afghanistan continues, more of our troops will continue to come home. More broadly, around the globe we've strengthened alliances, forged new partnerships, and served as a force for universal rights and human dignity.

In short, we've succeeded in defending our nation, taking the fight to our enemies, reducing the number of Americans in harm's way, and we've restored America's global leadership. That makes us safer and it makes us stronger. And that's an achievement that every American— especially those Americans who are proud to wear the uniform of the United States Armed Forces—should take great pride in.

This success has brought our nation, once more, to a moment of transition. Even as our troops continue to fight in Afghanistan, the tide of war is receding. Even as our forces prevail in today's missions, we have the opportunity—and the responsibility—to look ahead to the force that we are going to need in the future.

At the same time, we have to renew our economic strength here at home, which is the foundation of our strength around the world. And that includes putting our fiscal house in order. To that end, the Budget Control Act passed by Congress last year—with the support of Republicans and Democrats alike—mandates reductions in federal spending, including defense spending. I've insisted that we do that responsibly. The security of our nation and the lives of our men and women in uniform depend on it.

That's why I called for this comprehensive defense review—to clarify our strategic interests in a fast-changing world, and to guide our defense priorities and spending over the coming decade—because the size and the structure of our military and defense budgets have to be driven by a strategy, not the other way around. Moreover, we have to remember the lessons of history. We can't afford to repeat the mistakes that have been made in the past— after World War II, after Vietnam-when our military was left ill prepared for the future. As Commander in Chief, I will not let that happen again. Not on my watch.

We need a start—we need a smart, strategic set of priorities. The new guidance that the Defense Department is releasing today does just that. I want to thank Secretary Panetta and General Dempsey for their extraordinary leadership during this process. I want to thank the service secretaries and chiefs, the combatant commanders and so many defense leaders—military and civilian, active, Guard and reserve—for their contributions. Many of us met repeatedly— asking tough questions, challenging our own assumptions and making hard choices. And we've come together today around an approach that will keep our nation safe and our military the finest that the world have ever known.

This review also benefits from the contributions of leaders from across my national security team—from the departments of State, Homeland Security and Veterans Affairs, as well as the intelligence community. And this is critical, because meeting the challenges of our time cannot be the work of our military alone—or the United States alone. It requires all elements of our national power, working together in concert with our allies and our partners.

So I'm going to let Leon and Marty go into the details. But I just want to say that this effort reflects the guidance that I personally gave throughout this process. Yes, the tide of war is receding. But the question that this strategy answers is what kind of military will we need long after the wars of the last decade are over. And today, we're fortunate to be moving forward from a position of strength.

As I made clear in Australia, we will be strengthening our presence in the Asia Pacific, and budget reductions will not come at the expense of that critical region. We're going to continue investing in our critical partnerships and alliances, including NATO, which has demonstrated time and again—most recently in Libya—that it's a force multiplier. We will stay vigilant, especially in the Middle East.

As we look beyond the wars in Iraq and Afghanistan—and the end of long-term nation-building with large military footprints—we'll be able to ensure our security with smaller conventional ground forces. We'll continue to get rid of outdated Cold War-era systems so that we can invest in the capabilities that we need for the future, including intelligence, surveillance and reconnaissance, counterterrorism, countering weapons of mass destruction and the ability to operate in environments where adversaries try to deny us access.

So, yes, our military will be leaner, but the world must know the United States is going to maintain our military superiority with armed forces that are agile, flexible and ready for the full range of contingencies and threats.

We're also going to keep faith with those who serve, by making sure our troops have the equipment and capabilities they need to succeed, and by prioritizing efforts that focus on wounded warriors, mental health and the well-being of our military families. And as our newest veterans rejoin civilian life, we'll keep working to give our veterans the care, the benefits and job opportunities that they deserve and that they have earned.

Finally, although today is about our defense strategy, I want to close with a word about the defense budget that will flow from this strategy. The details will be announced in the coming weeks. Some will no doubt say that the spending reductions are too big; others will say that they're too small. It will be easy to take issue with a particular change in a particular program. But I'd encourage all of us to remember what President Eisenhower once said—that “each proposal must be weighed in the light of a broader consideration: the need to maintain balance in and among national programs.” After a decade of war, and as we rebuild the source of our strength-at home and abroad—it's time to restore that balance.

I think it's important for all Americans to remember, over the past 10 years, since 9/11, our defense budget grew at an extraordinary pace. Over the next 10 years, the growth in the defense budget will slow, but the fact of the matter is this: It will still grow, because we have global responsibilities that demand our leadership. In fact, the defense budget will still be larger than it was toward the end of the Bush administration. And I firmly believe, and I think the American people understand, that we can keep our military strong and our nation secure with a defense budget that continues to be larger than roughly the next 10 countries combined.

So again, I want to thank Secretary Panetta, Chairman Dempsey, all the defense leaders who are on this stage, and some who are absent, for their leadership and their partnership throughout this process. Our men and women in uniform give their very best to America every single day, and in return they deserve the very best from America. And I thank all of you for the commitment to the goal that we all share: keeping America strong and secure in the 2^1st century, and keeping our Armed Forces the very best in the world.

And with that, I will turn this discussion over to Leon and to Marty, who can explain more and take your questions.

So thank you very much. I understand this is the first time a President has done this. It's a pretty nice room.

Thank you guys.

Secretary Leon Panetta gave the following remarks at the Pentagon

Secretary Panetta. I'd like to begin by thanking President Obama for coming here this morning, and for his vision, guidance and leadership as this Department went through the intensive review we undertook to develop the new strategic guidance we are releasing today.

This guidance recognizes that this country is at a strategic turning point after a decade of war and large increases in defense spending. As the President mentioned, the U.S. military's mission in Iraq has now ended, continued progress in Afghanistan is enabling a transition to Afghan security responsibility, the NATO effort in Libya has concluded with the fall of Qaddafi, targeted counterterrorism efforts have significantly weakened al Qaeda and decimated its leadership, and now as these events are occurring, the Congress has mandated that we achieve significant defense savings.

But even as our large-scale military campaigns recede, the United States still faces a complex and growing array of security challenges across the globe, challenges that call for a reshaping of America's defense priorities, focusing on the continuing threat of violent extremism, proliferation of lethal weapons and materials, the destabilizing behavior of Iran and North Korea, the rise of new powers across Asia, and the dramatic changes in the Middle East.

All of this comes at a time when America confronts a serious deficit and debt problem which is itself a national security risk that is squeezing both the defense and domestic budgets. Even facing these considerable pressures, including the requirement of the Budget Control Act to reduce defense spending by $487 billion over 10 years, I do not believe that we must choose between national security and fiscal responsibility. The Department of Defense will play its part in helping the nation put its fiscal house in order.

But the President has made clear, and I have made clear, that the savings we have been mandated to achieve must be driven by strategy and rigorous analysis, not by the numbers alone.

Consequently, over the past few months, we have conducted an intensive review to guide defense priorities and spending over the coming decade, in light of strategic guidance from the President and the recommendations of this Department's senior military and civilian leadership. This process has enabled us to assess risk, set priorities, and make hard choices. Let me be clear, this Department would need to make a strategic shift regardless of the nation's fiscal situation. That is the reality of the world we live in.

As difficult as it may be to achieve the mandated defense savings, this has also given us in the Department of Defense the opportunity to reshape our defense strategy and force structure to more effectively meet the challenges of the future, deter aggression, shape the security environment and decisively prevail in any conflict.

From the beginning, I set out to ensure that this strategy review was inclusive. Chairman Dempsey and I met frequently with Departmental leaders, including my Under Secretaries, the Service Chiefs, Service Secretaries, Combatant Commanders and senior enlisted advisors. We've discussed this strategy and its implications with the President, with members of Congress, and with outside experts.

Four overarching principles have guided our deliberations:

First, we must maintain the world's finest military, one that supports and sustains the unique global leadership role of the United States;

Second, we must avoid hollowing out the force—a smaller, ready, and well-equipped military is preferable to a larger, ill-prepared force that has been arbitrarily cut across-the-board;

Third, savings must be achieved in a balanced manner with everything on the table, including politically sensitive areas that will likely provoke opposition from parts of Congress, industry, and advocacy groups;

Fourth, we must preserve the quality of our All-Volunteer Force and not break faith with our men and women in uniform or their families.

With these principles in mind, I will focus on some of the significant strategic choices and shifts that are being made. But first, let me be clear that the U.S. military will remain capable across the spectrum. We will continue to conduct a complex set of missions ranging from countering terrorism and weapons of mass destruction to maintaining a safe, secure and effective nuclear deterrent. We will be fully prepared to protect our interests, defend our homeland and support civil authorities.

Our goal is to achieve this U.S. force for the future with the following significant changes:

First, the U.S. joint force will be smaller and leaner, but its great strength will be that it is more agile, flexible, ready to deploy, innovative and technologically advanced.

Second, as we move towards this new joint force, we are also rebalancing our global posture and presence, emphasizing the Pacific and the Middle East—these are the areas where we see the greatest challenges for the future. The U.S. military will increase its institutional weight and focus on enhanced presence, power projection, and deterrence in Asia-Pacific. This region is growing in importance to the future of the United States economy and our national security. This means, for instance, improving capabilities that maintain our military's technological edge and freedom of action.

At the same time, the United States will place a premium on maintaining our military presence and capabilities in the broader Middle East. The United States and our partners must remain capable of deterring and defeating aggression while supporting political progress and reform.

Third, the United States will continue to strengthen its key alliances, build partnerships and develop innovative ways to sustain U.S. presence elsewhere in the world.

The long history of close political and military cooperation with our European allies and partners will be critical to addressing the challenges of the 21^st century. We will invest in the shared capabilities and responsibilities of NATO, our most effective military alliance. The U.S. military's force posture in Europe will of necessity continue to adapt and evolve to meet new challenges and opportunities, particularly in light of the security needs of the continent relative to emerging strategic priorities elsewhere. We are committed to sustaining a presence that will meet Article 5 commitments, deter aggression, and the U.S. military will work closely with our allies to allow for the kinds of coalition operations NATO has undertaken in Libya and Afghanistan.

In Latin America, Africa and elsewhere in the world, we will use innovative methods to sustain U.S. presence, maintaining key military-to-military relations and pursuing new security partnerships as needed. Whenever possible, we will develop low-cost and small-footprint approaches to achieve our security objectives, emphasizing rotational deployments and exercises, and other innovative approaches that maintain presence.

Fourth, as we shift the size and composition of our ground, air, and naval forces, we must be capable of successfully confronting and defeating any aggressor and respond to the changing nature of warfare.

Our strategy review concluded that the United States must have the capability to fight in several conflicts at the same time. We are not confronting the threats of the past. We are confronting the threats of the 21^st century and that demands greater flexibility to shift and deploy forces to fight and defeat any enemy anywhere. How we defeat that enemy may vary across conflicts. But make no mistake—we will have the capability to confront and defeat more than one adversary at a time.

As a global force, our military will never be doing only one thing—it will be responsible for a range of missions and activities across the globe of varying scope, duration, and strategic priority. This will place a premium on flexible and adaptable forces that can respond quickly and effectively to a variety of contingencies and potential adversaries.

In addition to these forces, the United States will emphasize building the capacity of partners and allies to more effectively defend their own territory and interests through better use of diplomacy, development and security force assistance.

In accordance with this construct and with the end of U.S. military commitments in Iraq, and the drawdown already underway in Afghanistan, the Army and Marine Corps will no longer need to be sized to support the large scale, long-term stability operations that dominated military priorities and force generation over the past decade.

Lastly, as we reduce the overall defense budget, we will protect our investments in special operations forces, new technologies like ISR and unmanned systems, space and cyberspace capabilities and our capacity to quickly mobilize. These investments will help the military retain and continue to refine and institutionalize the expertise and capabilities that have been gained at such great cost over the last decade.

Most importantly, we will structure and pace the reductions in the nation's ground forces in such a way that they can surge, regenerate, and mobilize capabilities needed for any contingency. Building in reversibility and the ability to quickly mobilize will be key. That means reexamining the mix of elements in the active and reserve components, maintaining a strong National Guard and Reserve, retaining a healthy cadre of experienced NCOs and midgrade officers, and preserving the health and viability of the nation's defense industrial base.

This strategic guidance is a first step in this Department's goal to build the Joint Force of 2020, a force sized and shaped differently than the military of the Cold War, the post-Cold War force of the 1990s, or the force built over the past decade to engage in large-scale ground wars.

This strategy and vision will guide the more specific budget decisions that will be finalized and announced in the coming weeks as part of the President's budget. In some cases we will be reducing capabilities no longer of top priority. In other cases we will invest in new capabilities to maintain a decisive military edge against a growing array of threats.

There is no question that we have to make some tradeoffs, and that we will be taking on some level of additional but acceptable risk in the budget plan we release next month. These were not easy choices.

We will continue aggressive efforts to weed out waste and reduce overhead, reform business practices, and consolidate duplicative operations. But budget reductions of this magnitude will inevitably impact the size and capabilities of our military. And as I've said before, true national security cannot be achieved through a strong military alone—it requires strong diplomatic, development, and intelligence efforts and, above all, it requires a strong economy, fiscal discipline and effective government.

The capability, readiness and agility of the force will not be sustained if Congress fails to do its duty and the military is forced to accept far deeper cuts, in particular the arbitrary, across-the-board cuts currently scheduled to take effect in January of 2013 through the mechanism of sequester. That would force us to shed missions, commitments, and capabilities necessary to protect core U.S. national security interests, resulting in a demoralized and hollow force.

And finally, I'd also like to address our men and women in uniform, and the civilian employees who support them, whom I know have been watching the budget debates here in Washington with concern about what it means for them and their families. You have done everything the country has asked you to do, and more.

You have put your lives on the line, and fought to make our country safer and stronger. I believe this strategic guidance honors your sacrifices and strengthens the country by building a force equipped for the future. I have no higher responsibility than fighting to protect you and your families, just as you have fought and bled to protect our country.

There is no doubt that the fiscal situation this country faces is difficult, and in many ways we are at a crisis point. But I believe that in every crisis, there is opportunity. Out of this crisis, we have the opportunity to end the old ways of doing business and build a modern force for the 21^st century that can win today's wars and successfully confront any enemy, and respond to any challenge of the future. Our responsibility is to protect the nation's security and keep America safe. With this joint force, I am confident we can effectively defend the United States of America.

Thank you.

Under Secretary Maria Otero gave the following remarks in Washington, DC

Secretary Hillary Clinton gave the following remarks in Washington, DC

Deputy Assistant Secretary Mark Sobel gave the following remarks in Brussels, Belgium

Deputy Assistant Secretary Sobel. Thank you for this opportunity to offer a U.S. perspective on international and Trans-Atlantic financial regulatory developments.

It is easy to open a newspaper and read that the international financial regulatory agenda is bogged down and excessively complex, involves extra-territorial reach and reflects large divergences among key players.

Today, I would like to offer a more sanguine perspective.

Undoubtedly, doing things right may cause delays and complexity is unavoidable. We clearly can do better. But there is greater unity of purpose, internationally and between the United States and Europe, than is often assumed.

The global financial crisis brought to light fundamental weaknesses in the resilience and integrity of markets, as well as regulatory and supervisory lapses.

The response was swift and forceful— and necessarily so. At U.S. urging, the G-7 commissioned the then Financial Stability Forum to undertake a comprehensive study of what went wrong and what was needed to restore market resilience. A comprehensive agenda was put forth, which was adopted by the G-20 at the Washington Summit, and then elaborated at subsequent G-20 gatherings, from the London and Pittsburgh Summits in 2009 to the Cannes Summit last November.

In short, a strategy for reform has been put in place, along with a key role for the Financial Stability Board (FSB) in facilitating timely results-oriented execution.

To a significant degree, this strategy is now transitioning from design to implementation. This year in the G-20, the United States is emphasizing progress on implementation in three key priorities— capital, resolution, and OTC derivatives.

Capital: If there is one central lesson from the crisis, it is that financial institutions were woefully undercapitalized and unable to withstand significant stresses, let alone of the magnitude seen during the crisis. Basel 2.5, in raising trading book and securitization charges, and Basel 3, in raising the quality and quantity of capital, are tackling this fundamental weakness. So too are the higher loss absorbency requirements for globally systemic international banks.

But differences in measurement of capital adequacy ratios across borders also posed a challenge to resilience and a level playing field. This too is being tackled. Common definitions of capital were agreed as part of Basel III, and importantly, the Basel Committee is now working to ensure more consistent measurement of risk-weighted assets across jurisdictions. On liquidity and leverage ratios, progress is also being advanced.

All of these steps are internationally agreed. While there are important debates, for example about liquidity run-off ratios and measurement of capital deductions, these are more in the realm of the technical. To be sure, these technical issues are important. Still, it is hard to find significant distance between the United States and EU on the big picture. Clearly, it is the U.S. view that Basel III commitments should be faithfully implemented.

And lastly, capital is already being strengthened. In the United States, 93 of the top 100 domestically owned U.S. bank holding companies have tier 1 common equity at or in excess of 8% of RWA.

Resolution: Strengthening cross-border resolution regimes is a difficult issue given diverse national bankruptcy laws and the unrealism of a global bankruptcy regime. Yet, the G-20 has endorsed “Key Attributes of Effective Resolution Regimes for Financial Institutions”, setting forth the elements that all countries should include in their regimes to resolve financial firms without severe systemic consequences and taxpayer loss, while maintaining vital functions.

The fruits of this labor are already evident—cross border crisis management groups for the largest firms have been established, cross border cooperation agreements will be put in place, and recovery and resolution plans are being developed. Much of this work will be completed by the end of the year.

Under Dodd-Frank, the United States now has the authority to resolve all financial institutions whose failure could have serious systemic effects. And Europe is working toward similar ends with its crisis management framework.

Derivatives: The Pittsburgh Summit shined a spotlight on the opacity of derivatives markets, providing for exchange trading of all standardized OTC derivative contracts, clearing through central counterparties, and reporting to trade repositories by end-2012.

Here too, the record on international cooperation is good. Dodd Frank creates a framework of oversight, protections and disclosure for OTC derivatives markets, consistent with the G-20 framework. The CFTC and SEC are well into their rule-making process. In Europe, regulations are moving forward on market infrastructure and financial instruments.

Of course, derivatives regulation is a complex terrain where the devil is in the detail. Yet, the United States and EU have closely cooperated in crafting their frameworks, and the similarities in details are striking—whether it is central clearing, multi-dealer electronic trading platforms, capital, or timely reporting to trade repositories.

This cooperation is not happenstance. It is an outgrowth of the strong work over many years between the U.S. and EU that laid a foundation for welcome and intensive dialogue between the CFTC and SEC and DG Markt and European Securities and Markets Authority.

Importantly, the U.S. and EU are also backing global work on margins on uncleared trades. And the United States and EU are also working together on developing a legal entity identifier system for financial contracts, a new global standard which will help us understand and monitor systemic risk.

Going forward, we still face a daunting agenda on derivatives—avoiding geographic mandates; doing our utmost to meet G-20 timetables; and reaching out to others around the world to ensure alignment.

While I have focused on capital, resolution, and derivatives, there are many other aspects of the agenda where cooperation is being advanced—taking forward work on shadow banking; accounting convergence; non-cooperative jurisdictions; and reining in imprudent compensation structures.

Under Dodd-Frank, the United States created the Federal Insurance Office (FIO) to coordinate federal policy on international insurance issues and represent the United States internationally. The FIO and EU met a few weeks ago and agreed upon a work plan, to be completed this year, on areas for which insurance regulatory reform may be appropriate. We hope this work will be helpful in addressing issues that have arisen between the U.S. and EU, for example reinsurance collateral and Solvency 2, and in dispelling uncertainty that has concerned the international insurance community.

Eight years ago, I spoke at a conference in Brussels and underscored that the U.S. and EU needed to work together pragmatically, focusing on achieving our common objectives for financial reform. In subsequent years, we did precisely that and good progress was made on what we called “outcomes-based equivalence.”

Our cooperation continues unabated. But increasingly, given the breadth of reforms to address the crisis, cross-border or third country implications of our financial reforms are understandably on the front burner. We all want to protect the safety and soundness of our markets; we want others to meet high standards; we want a level playing field; and we want the benefits of global finance. This is very complicated, and an area where strengthened cooperation is needed internationally.

How then do we shape cross-border regulatory cooperation? How can a cross border transaction or flow take place without being subject to conflicting, over- or under-lapping rules? Mirroring the complexity of the task, a dizzying lexicon of approaches grows daily—harmonization, reciprocity, national treatment, registration, convergence, equivalence, strict equivalence, effective equivalence, consistency, mutual recognition, substituted compliance, home/host, and the list goes on.

Rather than enter the realm of dictionaries and semantics, we should re-affirm and abide by the consensus behind the principles that guide our work:

Major financial centers should rededicate themselves to seeking convergence and consistency on standards and principles where activities extend markedly beyond the water's edge. They should also rededicate themselves to a level playing field and non-discriminatory treatment.

These centers should reaffirm that a multiplicity of standards in any one market is undesirable and would diminish transparency and facilitate gaps.

National regulators, working together via international standard setting bodies, should agree upon high quality standards, and in turn commit themselves to faithfully promulgate these standards at home.

Given that each country has its own laws and history, major centers should not focus on whether identical frameworks are being created, but instead on whether their frameworks achieve similar high-quality objectives and outcomes.

Finally, through supervisory cooperation, countries should strive for consistent application and enforcement of their frameworks.

These are guiding principles behind the G-20 Leader's push for financial regulatory reform. Each Summit has progressively built upon these principles. I believe that such principles, if rigorously followed in major centers, could facilitate a more resilient global financial system, cross-border financial market activity and a race to the top. They could guard against a complex array of different approaches, while providing greater confidence that safety and soundness are being achieved. It is important that each G-20 member not lose sight of the bigger picture.

In conclusion, the international regulatory reform agenda is moving forward. It has the firm backing of the G-20, the FSB, and of course the United States and EU. While differences of views exist, these tend to involve more technical aspects of our frameworks. And while these technical details warrant full attention, our differences should not detract from the very real commitment by G-20 members to iron differences out, to the standards and principles that shape our frameworks, and to the reform approaches we are pursuing across a wide array of markets and institutions in order to strengthen global financial stability. That said, strengthened cooperation is needed on the cross-border implications of our national rule-making. Nonetheless, what is being accomplished represents a fundamental break with the past and it is being done with a unity of purpose and hard work by the official sector. I believe the system is stronger today and will continue to strengthen in the future as a result of our efforts.

Secretary Leon Panetta gave the following remarks before the Senate Armed Services Committee

Secretary Panetta. The FY13 budget request for the Department of Defense was the product of an intensive strategy review conducted by the senior military and civilian leaders of the Department with the advice and guidance of President Obama. The total request represents a $614 billion investment in national defense—including a $525.4 billion request for the Department's base budget, and $88.5 billion in spending to support our troops in combat.

The reasons for this review are clear: first, the United States is at a strategic turning point after a decade of war and substantial growth in defense budgets. Second, with the nation confronting very large debt and deficits, Congress passed the Budget Control Act of 2011, imposing limits that led to a reduction in the defense budget of $487 billion over the next decade.

Deficit reduction is a critical national security priority in and of itself. We at the Department decided that this crisis presented us with the opportunity to establish a new strategy for the force of the future, and that strategy has guided us in making the budget choices contained in the President's budget. We are at an important turning point that would have required us to make a strategic shift under any circumstances. The U.S. military's mission in Iraq has ended. We still have a tough fight on our hands in Afghanistan, but over the past year we have begun a transition to Afghan-led responsibility for security– and we are on track to complete that transition by the end of 2014, in accordance with our Lisbon commitments. Last year, the NATO effort in Libya also concluded with the fall of Qadhafi. And successful counterterrorism efforts have significantly weakened al-Qaeda and decimated its leadership.

But despite what we have been able to achieve, unlike past drawdowns when threats have receded, the United States still faces a complex array of security challenges across the globe: We are still a nation at war in Afghanistan; we still face threats from terrorism; there is dangerous proliferation of lethal weapons and materials; the behavior of Iran and North Korea threaten global stability; there is continuing turmoil and unrest in the Middle East; rising powers in Asia are testing international relationships; and there are growing concerns about cyber intrusions and attacks. Our challenge is to meet these threats and at the same time, meet our responsibility to fiscal discipline. This is not an easy task.

To build the force we need for the future, we developed new strategic guidance that consists of these five key elements:

First, the military will be smaller and leaner, but it will be agile, flexible, ready and technologically advanced.

Second, we will rebalance our global posture and presence to emphasize Asia-Pacific and the Middle East.

Third, we will build innovative partnerships and strengthen key alliances and partnerships elsewhere in the world.

Fourth, we will ensure that we can quickly confront and defeat aggression from any adversary—anytime, anywhere.

Fifth, we will protect and prioritize key investments in technology and new capabilities, as well as our capacity to grow, adapt and mobilize as needed.

Strategy to FY13 Budget

We developed this new strategic guidance before any final budget decisions were made to ensure that the budget choices reflected the new defense strategy.

While shaping this strategy, we did not want to repeat the mistakes of the past. Our goals were: to maintain the strongest military in the world, to not “hollow out” the force, to take a balanced approach to budget cuts, to put everything on the table, and to not break faith with troops and their families. Throughout the review we made sure this was an inclusive process, and General Dempsey and I worked closely with the leadership of the Services and Combatant Commanders, and consulted regularly with members of Congress.

As a result of these efforts, the Department is strongly united behind the recommendations we are presenting today. Consistent with Title I of the Budget Control Act, this budget reflects $259 billion in savings over the next five years and $487 billion over the next ten years compared to the budget plan submitted to Congress last year. Under the five year budget plan, the base budget will rise from $525 billion in FY13 to $567 billion in FY17. When reduced war-related funding requirements are included, we expect total U.S. defense spending to drop by more than 20 percent over the next few years from its peak in 2010, after accounting for inflation.

This is a balanced and complete package that follows the key elements of the strategy and adheres to the guidelines we established. The savings come from three broad areas:

First, efficiencies—we redoubled efforts to make more disciplined use of taxpayer dollars, yielding about one quarter of the target savings;

Second, force structure and procurement adjustments—we made strategy-driven changes in force structure and procurement programs, achieving roughly half of the savings;

Finally, compensation—we made modest but important adjustments in personnel costs to achieve some necessary cost savings in this area, which represents one third of the budget but accounted for a little more than 10 percent of the total reduction.

Changes in economic assumptions and other shifts account for the remainder of the $259 billion in savings. Let me walk through these three areas, beginning with our efforts to discipline our use of defense dollars.

The strategy review recognized that a smaller, ready and agile force is preferable to a larger force that is poorly trained and ill-equipped. Therefore, we put a premium on retaining those capabilities that provide the most flexibility across a range of missions. We also emphasized readiness. For fiscal 2013, the Department is requesting $209 billion in the base budget for Operation and Maintenance, the budget category that funds training and equipment maintenance among other aspects of operations.

The costs of Overseas Contingency Operations (OCO) are funded separately from the base budget in a stand-alone FY13 request of $88.5 billion. That funding level represents a decrease of $26.6 billion from the FY12 enacted level.

This year's OCO request, which ensures that deployed troops have all the financial resources they need to conduct their challenging missions, primarily supports operations in Afghanistan but also requests relatively small sums for the Office of Security Cooperation in Iraq (OSC-I) and the repair or replacement of equipment redeploying from Iraq.

Our FY13 OCO request includes funding for added personnel pay and subsistence for deployed forces; communications; mobilizing Reserve Component units; transportation; supplies; deployment and redeployment of all combat and support forces; force sustainment; and sustainment and replenishment of war reserve stocks.

For FY13 we request $5.7 billion in funding for the Afghan National Security forces (ANSF). It is critically important that we maintain sufficient financial support to ANSF so that they can ultimately assume full security responsibility across Afghanistan.

Much tough fighting lies ahead in Afghanistan, but the gradually improving situation permits the remainder of the U.S. surge force to redeploy by the end of September 2012, leaving 68,000 U.S. troops in Afghanistan at that time. The FY13 OCO request assumes a continued level of about 68,000 troops in Afghanistan. While future changes in troop levels may be implemented during FY13, those decisions will be based on advice from field commanders about conditions on the ground.

In Iraq, OCO funding supports continued security assistance and cooperation with Iraqi Security Forces through the OSC-I in the areas of common interest, including counterterrorism, counter-proliferation, maritime security, and air defense. This funding is critical for the U.S. to strengthen its long-term partnership with Iraq. Additionally, to ensure that U.S. forces redeployed from Iraq are ready and equipped for future operations, this funding replenishes equipment and stocks for these forces.

Secretary Hillary Clinton gave the following remarks in Washington, DC

USAID Administrator Rajiv Shah gave the following remarks at the White House

Dr. Shah. I am very pleased to have this opportunity to meet with you-to gain the benefit of your collective experiences in counter trafficking and share the focus behind our new policy.

Although we don't have precise numbers, as many as 27 million men, women and children may be essentially enslaved in sex or labor exploitation—more than double the population of New York, Los Angeles and Chicago combined.

We know that human trafficking thrives in the shadows of poverty and conflict-and affects men, women and children in every country in the world. It is fundamentally linked to development challenges we face every day—from limited education and employment opportunities to the tenuous rule of law.

We know that trafficking is a highly lucrative business, grossing an estimated $32 billion a year and perpetuating a vicious cycle.

And we know that with the right research, tools and approaches, we can effectively combat it.

Under the strong leadership of President Obama and Secretary Clinton, we are fundamentally transforming our work-pursuing more effective, efficient and results-oriented approaches in counter-trafficking.

Because we have lacked basic survey data about victims in trafficking or program effectiveness, going forward every USAID mission in a high-risk county will conduct baseline surveys and develop clear metrics to accurately assess our work. And we will use this information to focus on efforts where they are needed most-in countries like the DRC, Haiti and Afghanistan.

Because rapid technological advances— like the widespread use of mobile phones and online social networks-are providing new opportunities for traffickers, we are now prioritizing investments in technology—like mapping platforms and phone apps—that can help locate vulnerable individuals.

In Moscow, we're working with a local organization to pilot a new phone app that provides users with a map of the nearest shelters, hospitals and police stations. It also includes a panic button that sends an alert to pre-loaded emergency contacts.

Because we know that even developed countries don't always have standardized internal systems to address trafficking, we are helping 10 countries in Eastern Europe establish the world's first uniform online database for tracking and assisting victims. Operating in more than a dozen languages, it safeguards victim identities and connects them to critical services, like emergency care and legal aid, so that victims-especially children—who find themselves in danger far from home don't fall through the cracks. And since this net is more effective the broader it gets, we're working to expand it into neighboring countries like Hungary and Turkey.

Because we know that, as an Agency, we need to make sure that our actions and those of our partners reflect our principles, we have adopted a Code of Conduct to ensure our personnel, contractors and grantees abide by the highest ethical standards.

Let me share a brief story about the impact that these efforts can have. For three years, a Cambodian boy and his three friends had been essentially enslaved on a Thai fishing boat. Just a few weeks ago, their boat docked at a port in Thailand—and the young man happened to catch sight of a MTV documentary about trafficking.

The video flashed a free hotline number in both Thai and Cambodian—so the men could read it. They called the number on the screen, and immigration authorities responded immediately, helping free the men and repatriate them back to Cambodia. This happy ending was as a result of a program we helped establish over a decade ago called MTV-EXIT.

Through a partnership that leveraged over $100 million from our initial investment of $8 million, MTV-EXIT reaches 300 million households worldwide and 650,000 every year young people at concerts to raise awareness.

But our most effective partnerships are not just with the private sector players.

For decades, faith-based communities have demonstrated an extraordinary commitment to protect victims and fight trafficking. Tomorrow, I am going to visit Bethel University outside of Minneapolis—a member of the Christian College Consortium. There 15 students chose to spend their winter holiday in Cambodia, learning about the risk of child trafficking and what they could do to help.

Whether it is Shared Hope International conducting assessments in Arizona, Washington and Virginia to better understand the scope of trafficking in the U.S., or Catholic Relief Services working to scale up counter-trafficking efforts in the aftermath of emergencies like the 2004 tsunami and the Haiti earthquake, the leadership of faith-based organizations in counter-trafficking represents the very best of America.

But despite these efforts, there is no doubt that more work must be done.

Today's conversation and this policy are important steps in establishing more analytical, effective approaches to combat trafficking. These efforts are not only critical to saving lives and ensuring freedom, they are critical to our own global security and prosperity.

When you fight forced labor, you empower legitimate trade over illicit businesses, energizing the global economy. When you rehabilitate former child soldiers, you're breaking a cycle of violence that devastates societies and destabilized regions. And in times of crises, when you can ensure that even the most vulnerable individuals are safe, you advance the values that unite us as a people: compassion, equality and a belief in the dignity of every individual.

Thank you.

Secretary Timothy Geithner gave the following remarks at the G-20 Finance Ministers meeting in Mexico City

Secretary Geithner. The risks to the global economy have diminished since the G-20 last met in Cannes, but we still face significant economic challenges. The U.S. economy is gradually getting stronger. Europe has acted to significantly reduce the risk of a catastrophic financial crisis. And even with weakness in European growth, we are seeing encouraging signs of resilience in many emerging economies.

The discussion of ministers and governors this weekend focused primarily on three key issues: Europe and the global economic outlook; Iran and oil markets; and financial reform.

Our colleagues in Europe gave us an update on their plans going forward to address the European financial crisis. We are encouraged by the progress that they have made over the last few months. A durable solution requires both a sustained period of economic reform and a substantial financial firewall to support those reforms. European policy makers recognize the magnitude of the challenges ahead and will be reviewing additional steps in the weeks ahead.

The G-20 is committed to making sure that the IMF has the resources it needs to help its members deal with the risks from Europe. There is broad agreement that the IMF cannot substitute for the absence of a stronger European firewall and that the IMF cannot move forward without more clarity on Europe's own plans.

Beyond Europe, the steps many emerging economies took last summer and fall have helped support global growth. While the right mix of policies will differ across countries, policy generally should be directed at reinforcing economic expansion.

Reorienting the economies of countries with large external surpluses toward domestic demand and greater exchange rate flexibility remain critical to a sustainable global recovery. Since China resumed exchange-rate reform in June of 2010, the renminbi has appreciated by around 12 percent against the dollar after taking into account China's higher level of inflation. That's welcome progress, and we believe it is in China's interest and in the interest of the global economy for their exchange rate to continue to appreciate.

Other emerging economies in Asia with external surpluses also need to increase their exchange rate flexibility and adopt policies that support domestic sources of growth.

On Iran and oil, I had a series of encouraging conversations with countries planning to significantly reduce imports from Iran. We are seeing very effective cooperation from our partners on the financial front to help ensure that their banks cease transactions with the Central Bank of Iran and that Iranian banks find it harder than ever to facilitate Iran's illicit nuclear activities or to help Iran evade sanctions.

We are working together to help ensure there are alternative sources of oil from major producers to help offset reductions in exports from Iran, and here too, I am encouraged.

We reviewed the global effort to strengthen safeguards against future risks in the financial system. We have made important progress on tougher capital standards. We're seeing broad convergence on strategies for oversight and transparency in derivatives markets. There is very extensive consultation between the Federal Reserve, the FDIC, and their counterparts in other countries about how to manage crises and deal with the possible failure of large financial institutions.

This is an important year for financial reform in the United States, where we expect to have the major foundations of our reform in place by the end of 2012. Of course, it's very important to us that we have a level playing field internationally. As we and others go forward in implementing our financial reforms we will be mindful of cross boarder impacts and committed to managing them carefully.

Let me conclude with a few points on the U.S. economy.

The U.S. economy is gradually getting stronger. Despite substantial headwinds, our economy has grown at an average annual rate of 2 1/2 percent over the last two and a half years. And we have seen encouraging signs of strength in recent indicators.

This recovery has been supported by a shift toward a more balanced pattern of growth in the United States, with stronger growth in private investment and exports. Productivity is up. Private savings is substantially higher than it was before the crisis, and our fiscal deficits are now falling. The U.S. current account deficit is now around 3 percent of GDP—down from a peak of around 6 percent before the crisis. The financial sector is much stronger.

Even with this progress, however, the damage inflicted by the crisis will still take some time to repair. Unemployment, while falling, is still very high. And the housing market remains weak.

Our focus now is on reforms that will help create a stronger foundation for future growth and broaden economic opportunity. Our strategy is to combine investments and reforms in education, innovation, and infrastructure with tax reforms and savings to restore long-term fiscal sustainability.

Thank you to our gracious hosts, President Calderon, Minister Meade and Governor Carstens and their teams, for hosting us this weekend.

USAID Administrator Rajiv Shah gave the following remarks in Washington, DC

Dr. Shah. I am very pleased to welcome you today for the launch of USAID's new Center of Excellence on Democracy, Human Rights and Governance. It is designed to become a core evidence-based resource in the field, and strengthen our own culture of data, research and evaluation within USAID.

This Center represents our Agency-wide focus on measuring performance to determine what really works. Instead of driving our programming based the conclusions of a handful of experts, we will conduct ongoing, in-depth oral histories, impact evaluations and country assessments to understand where and how we can be most effective.

Over the next three years, we plan to perform over two-dozen high-quality DRG evaluations. This means conducting the Agency's first evaluations on the impact of DRG programming on local governance, human trafficking and gender; and-for the first time-using public opinion surveys in a systematic way to capture base-line data, identify control and treatment, and establish measurable indicators.

Instead of playing it safe in a field that demands constant innovation, we're going to reward calculated risks and creative approaches—whether that's a mapping platform designed to combat trafficking or procurement reforms that make it easier for us to partner with local civil society organizations. And instead of continuing an ineffective program, we'll bring it to an end-and publicly share our experiences so we can all learn.

In short, we hope our Center will do for the field of rights and governance exactly what the MIT Poverty Action lab has done for poverty reduction.

In just a brief time, the Center has already gotten off to a promising start— from launching the new Counter-Trafficking in Persons policy last week at the White House to designing a brand new Grand Challenge for Development in Open Government Partnership and atrocity prevention.

This is just the beginning of our efforts to integrate our democracy programming with our core development work. Because as President Obama and Secretary Clinton have made clear-if we wish to advance growth and progress, we have to support both democratic and economic empowerment.

As the Arab Spring—and the ongoing protests in Syria so powerfully reminded us, economic prosperity and democratic freedom must go hand-in-hand.

But the reality is-in a tough budget environment—we need to work even harder to ensure that DRG programming isn't squeezed out by major Presidential initiatives or Congressional priorities.

That is why we announced nearly a year ago that we would create a new track of funding within our Presidential initiatives to support smart investments in DRG. Because strong institutions and democratic rights not only ease the work of global health and food security-they are essential to its long-term success. This second track empowers the Center to work effectively across each of our development priorities.

And to ensure that the money we're investing in governments doesn't undermine the aspirations or rights of citizens, we are adapting our financial risk assessment to further include DRG considerations. Now, for the first time, DRG experts will sit on every risk assessment team to determine whether our assistance empowers a government at the expense of its people.

At the same time, we will continue our core funding and program support for democracy, rights and governance. Support that enabled us to bring over 60 organizations together in Tunisia to form the nation's first civil society network; and to deploy five Local Capacity Development Teams to Egypt—reaching over 1,000 small organizations in the months following the revolution. Over the summer, we made 52 grants—and nearly half of them went to organizations partnering with us for the very first time.

Development practitioners—myself included—sometimes fall victim to defining human welfare solely in terms of GDP, hunger or mortality. But we know that progress is defined not solely by the quantifiable, but also by our ability to nurture dignity and advance human potential.

Around the world every day, our staff is fulfilling this mission with commitment and ingenuity—helping to empower marginalized communities and expand democratic space.

An FSO in Kenya, Catie Lott is leading the effort to create an integrated, Mission-wide strategy in support of Kenya's effort to shape a new political system through devolution. Thanks to Catie's leadership, the Mission's offices in health, education, resource management and climate change have all committed to working together on a new devolution program.

An FSN, Otto Saaki designs and manages all our direct grants to Zimbabwean human rights organizations—a very difficult job under very difficult circumstances. He is also the leading force behind our human rights defenders program, which trains and supports activists under threat.

And in Bangkok, Michael Bak leads our partnership with MTV—EXIT, an innovation counter-trafficking program that uses documentaries and music videos to reach 300 million households worldwide.

With the Center's Launch today—and a robust new emphasis on evidence-based learning—we can help advance these efforts, ensuring they are more effective, cost-efficient and results-oriented than ever before.

Thank you.

Secretary Hillary Clinton gave the following testimony before the House Appropriations Subcommittee on State, Foreign Operations, and Related Programs

Secretary Hillary Clinton gave the following remarks in Washington, DC