Thank you. I appreciate it, please. You are very gracious. Where I come from when people stand like that they are leaving, so I get a little nervous. And given that amazing show we just saw, it is a little bit of a tough act to follow.

But having said that, it's a great honor to be here today, to join with all of you in this great week long celebration of this magnificent United States Army. It's a pleasure of course to be here with our new Chief, Ray Odierno, Our Vice Chief, Pete Chiarelli, my friend and partner, the Undersecretary of the Army, Joe Westphal, Sergeant Major, so many great leaders of our Army, both in uniform and in civilian ranks. But most importantly it's an honor, it's a privilege to be with you, the members and the leadership of AUSA, who are no question the Army's most passionate advocates and champions. We are all so deeply grateful for what you do for our Soldiers, Active Duty, Guard, and Reserve, our civilian employees and, most importantly, our Army families. So thank you, from the bottom of our hearts, for all of the great sacrifices you make on behalf of this great Army.

There's an old saying that I'm going to play off a little bit: what a difference a year makes. That couldn't be more true for me personally, certainly as it relates to this particular gathering. Last year you may recall I said this was really the first opportunity I had to speak with you as the Army Secretary because at my first appearance in 2009, I'd only been on the job a few weeks and I was still trying to find my way around the E-ring [at the Pentagon]. Now, this is my third meeting, and I've gone from being the newbie to really the old-timer on that E ring, at least on the Army section of it. Since I first spoke with you in 2009, actually since just last year, I've now worked with three different Chiefs of Staff, two Secretaries of Defense, two Deputy Secretaries of Defense, two Chairmen, and two Vice Chairman of the Joint Chiefs. And I have to tell you with all those changes, I would have thought I'd have a better parking space by now, but I understand my place. But I do think I need to caution the new Chief, because as I do the calculations, at this rate I'm going through a Chief of Staff per speech, so you might want to watch your back.

It's a great honor to be here, can't think of any place I'd rather be, but I'm a little confused as to why we're kicking this great Army celebration off on Columbus Day. Frankly I always thought of Columbus Day as more of a Navy holiday. I don't mean it because of that "1492 ocean blue" stuff. But in my mind, Christopher Columbus was the quintessential [Navy] man. After all when he left he didn't know where he was going; when he got there he didn't know where he was; when he came back he really didn't know where he'd been. But before he left he had to have three new ships!

Now I'm willing to bet my dear friend, and he is a good friend, Secretary Ray Mabus, probably wouldn't agree with my assessment. But we've had a good natured service rivalry, and we can do that because we both recognize the partnership our services have enjoyed on so many levels and more importantly, how important those partnerships are to the strength of our nation and our nation's defense. That having been said, go Army, beat Navy!

I knew that would get a line there. In all seriousness, all of the Services, the Army, the Navy, the Air Force, the Marines, the Coast Guard, in fact the Department of Defense writ large, are facing a critically important year. A year that I think will shape the face of our national defense for many years to come. We've often talked as we should about the great stress and strain that a decade of war has placed upon our Soldiers, placed upon their families and that's still true. We're still at war. We work diligently every day to try to make certain they get what they need, to get it when they need it, that we give them all the support they require to build resilience and all the care that's necessary when they come home.

But there is one stress and strain that others have felt that in recent years we haven't so much. We haven't had to give it a whole lot of thought. And that's the stress and strain that a decade of war has had on our federal budget and the American taxpayer. For some time now it seemed as though the Department of Defense and the United States Army has had near limitless resources for whatever we needed. But after ten years of war and a shaky global economy, that's changing. In fact your Army, the Department of Defense, is under understandable and significant pressure to do better. All you have to do is go on TV, go online, turn on a radio, read a newspaper, and you know that each day the President, our Congressional leaders, are struggling with ways to try to deal with this budget crisis, try to stimulate this economy, agree upon a path by which they can reduce the deficit. And some of that effort will inevitably fall upon our doorstep.

In fact, it already has. As Secretary Gates warned just before he left, quote, "the gusher has been turned off, and will stay off for a good period of time." Despite declining Defense budgets, we still have an obligation to preserve the strategic options provided to the President of the United States by maintaining sufficiently modernized forces capable of rapidly deploying decisive combat power. No major conflict has ever been won without boots on the ground. And accordingly our national interest demand that while we set about the task of reshaping this Army for the years ahead, we remain steadfast and continue to support this, the greatest land force the world has ever known.

As Secretary Panetta observed when he was sworn in, quote, we don't have to make a choice of fiscal discipline and national security, end quote. Decisions on defense spending must be made carefully, thoughtfully and strategically. The decisions that we make must preserve our ability to protect our core national interests and most importantly not break faith with the men and women who are fighting for us because we ask them to. To meet current and future threats our military must remain the finest in the world. It must be an agile and deployable full spectrum force that can deter conflict, project power and win wars. Now that's a great challenge, and that challenge will bring about difficult times and difficult decisions. But I would tell you as well it's also an opportunity- an opportunity to shape, to change, to transform the Army, not just to come to terms with the fiscal constraints of today, but to better meet the challenges that we know somewhere, sometime we will face tomorrow. It's a reality that every time we've endeavored to predict the nature of future conflicts, we've often missed the target.

In fact in a speech at West Point, then Secretary Bob Gates said, "When it comes to predicting the future, we're perfect. We've always gotten it wrong." Whether post Korea, the end of WWI, WWII and beyond, budget enforced structured decisions were made in a fashion that over time depleted our forces and strained the quality of life of our Soldiers and our families. Unlike in the past, this time we've seen this downturn coming for some time. And under the leadership of first Secretary Gates and now Secretary Panetta, we've been analyzing the best way in which to meet these challenges and as such I can tell you we are better positioned than in any time in our nation's history to deal with the fiscal realities, and do it in a way that truly makes sense.

All of us have to understand and I think we do, the Army's end strength is going to look different in the near future than it does today. As we draw down in two theatres of war, we think we can handle that challenge, but what's critically important is that no matter what the force ultimately looks like, we have sufficient time to ramp down, to ensure that we do it in a balanced way, that we have what is necessary for training, equipment and resets. But perhaps most importantly as I said, we continue to stand by those troops, who even in the darkest hours of 2006 and 2007, stood by us, never wavered, never abandoned the battlefield. We've been famously instructed that if you don't learn from history, you repeat it. Let's hope all of us have learned from history as we debate and decide the future of land power and the future of our Army.

There is no question that this past decade has placed great strains on all of the Service Branches. There is no question still that each of us has unique needs to rebuild from this decade of conflict and to prepare for the wars ahead. But what truly concerns me as I listen to and read some of the columnists, the analysts, the part time experts, the talking heads, is the suggestion that somehow, some of the services recover at the sacrifice of others. That the United States probably doesn't need a strong and decisive standing Army and the future to them looks more like "Transformers" than "Saving Private Ryan."

History looms before us once again. Great leaders like Douglas MacArthur, and George Marshall weren't warned about cutting too much, too far, too fast, and about the importance of having an Army in place that is ready to answer America's call, anytime, anywhere. Even some not so great leaders, like a little known upstate New York Congressman, saw and warned of the dangers of cutting too far, of hollowing out our Forces and of putting our nation at strategic risk. Just weeks before the attacks of September 11, 82 of my colleagues on the House Armed Services Committee and I wrote to Secretary Rumsfeld warning about using cuts in the Army as the bill payer for other programs. We said, and I quote, "While we support the Secretary's efforts to ensure our military is prepared for future conflicts, reduction in the Army's Force Structure would clearly undermine that goal."

One of my own New York state newspapers was critical of that effort, accusing us of clinging to, and I quote, relics of the old twentieth century force, end quote. They wrote further that with high tech airpower and precision munitions increasingly denominating the modern battlefield, it makes sense to consider reducing the nation's conventional forces.

Then came September 11 and an enemy who didn't quite share that newspaper's editorial views. Now nevertheless I concede their point. There is no question our needs for supremacy in all forms has to be achieved and maintained, and we must develop and utilize all the available technology to establish every means of tactical superiority that's available to us. But I would argue, one need not happen at the expense of the other, and we must ensure we have a balanced approach to meet our nation's future defense needs.

In his work, This Kind of War, TR Fehrenbach wrote a passage that is probably familiar to many if not most of you. He said, "You may fly over land forever, you may bomb it, atomize it, pulverize it, and wipe it clean of life. But if you desire to defend it, protect it and keep it for civilization, you must do this on the ground the way the Roman legions did, by putting your young men into the mud." Fehrenbach's observations are as relevant today as they ever were, because while we shocked, while we awed, at the end of the day, we did the most important thing to gain and ensure victory, we marched. And there is no getting around the fact that it is the Army that has been saddled with much of the burden these past years, providing between fifty to seventy percent of our deployable forces. And while I'm loathe to view our men and women in uniform as mere budgetary statistics, I think it's important to remind people that while the United States Army represents half of our nation's entire force, we consume only about a quarter to 30 percent of the entire defense budget.

The Army, a decisive Army, remains vital to our national security both today and into the future. It's something I've believed from both sides of the Potomac, first as a Congressman and now as a Secretary. But if we're going to do the right thing by this Army, if we are going to maintain a proper set of structure and balance in an era of declining budgets, something's got to give. I know that, I think we all do. And we've been working hard to try to figure out ways to reduce costs, to create greater efficiencies, and to change the way that we in the Army do business.

Last year I told you that I'd found a project, and that project had since given me hope that there are things the Army can do, we must do, to meet the challenges that are currently before us. Over the course of nearly ten years, the operational Army, the war fighters, have changed and changed each and every day as they confronted a very dynamic, a very decentralized, adaptive and make no mistake about it, deadly enemy. And often hour by hour those war fighters have morphed as new threats arose to them and to our national security interests.

But our institutions and processes from personnel to training and development to personnel systems, must be able to adapt just as quickly and just as efficiently. But it is structured today much as it has been for past decades, and I've set out, and we've set out to change that. As you may already know, I've issued a number of directives to begin transforming that Institutional Army, not only, not even primarily to cut costs, but to fundamentally change and reshape the way we do business. Among those efforts are rooting out overlap and redundancies in research and development and reviewing so-called temporary organizations and task forces, to see if they are still needed or even relevant to the challenges that we face today.

I've directed efforts to consolidate and streamline the requirements process, reform installation management, and optimize Army service acquisitions. We're working on sweeping changes in human capital management. A survey we conducted earlier this year found that 65% of active duty general officers rated personnel management as one of the worst performing functions in the Army. As one General noted, "Human capital management is the most important, yet the least agile system."

I said before, you can't have an Air Force without airplanes, you can't have a Navy without ships, and you sure can't have an Army without people. People is what we are about. And here's someone, particularly a general officer, tell us that we're not developing or managing that area, is pretty tough to take.

And I'm not just talking about attracting and retaining and selecting the best available people to be Army professionals, as important as that is. It's how we further develop them once they come in; how we manage human capital; how we continue to build on the investment we have made in our civilians as well as our Soldiers; how we ensure that the opportunities for creativity leadership and advancement that are present on the battlefield today are still present when we bring those great Warriors home, is the path to guaranteeing we are ready for the future.

If we don't do these kinds of things, others will do them for us. Others will do them to us. We will risk being salami-sliced, hollowed out. This is our chance, it is our moment to lead and innovate, to restructure and transform.

Let me just give you one other example of what we can do and what we have done to restructure. The most recent directive I've signed restructures the Army Service Acquisition Program based on findings from a task force that I created a number of months ago. Of the $243B the Army had to spend in total in 2010, $140B of that was spent on contracts. And of that $140B, more than half was spent on services. That translated into about 260,000 actions awarded by 225 different offices, carried out by thousands and thousands of different people. I thought there might be a better way to do that kind of thing, and I think we've found it.

Last week I directed a new government structure that will immediately consolidate about 45% of all service obligations into just six portfolio management centers. Those six are facility support services, medical services, transportation services, electronics and communication, equipment related services, and knowledge based services. This will, I believe firmly, improve oversight and effectiveness, while helping us tailor and apply and monitor the results of better buying practices for improved acquisition, as well as leveraging portfolio demand for better pricing.

These kinds of actions identified by us, structured by us, implemented by us, will help us work in positive ways to deal with the budgets that will be formulated for us by others. We can, we must, and I promise you, we will do better.

As the Army's top civilian, I have one of the greatest honors here this week in this AUSA exposition. Yes, I get to help kick off this week with what amounts really to a primetime address. That's the honor, but there is a challenge as well. The challenge is trying to make all this bureaucracy sound remotely interesting when I know what you really want is some, "hooah." See?

And I have to tell you I have been blessed with my share of "hooah" moments this past year. We marked the tenth anniversary of the attacks on America with somber observations in New York, and in Shanksville, and right here at the Pentagon. And for the first time, we reflected and remembered those losses without the world's most notorious terrorist still at large. We ended a policy that forced young men and women to live a life anathema to Army values, to lie about who they were. We know who they are: they are American Soldiers.

And we marked great feats of personal courage and sacrifice. Not long after last year's convention here concluded, President Obama awarded the Medal of Honor to Staff Sergeant Sal Giunta, First Platoon Battle Company, for his actions during a firefight in Afghanistan's Korengal Valley. SSG Giunta became the first living recipient of the Medal Honor since Vietnam.

A few months later, Sgt First Class Leroy Arthur Petry of the 75th Ranger Regiment, became the second living honoree of these conflicts. Recognized for saving the lives of at least two fellow Rangers; throwing away a live grenade that had been hurled at his comrades; costing him his right hand in the process. Asked at a later time what he might have done differently if he had the chance, without a heartbeat lost he said, "I would have thrown it with my left hand." That's an American Soldier.

We inducted both of these great heroes into our Hall of Heroes, and it was a great privilege for all of us to honor these two men for their service and their valor. In their courage, leadership and humility, they clearly show why the warriors of today are quickly becoming known as our nation's "Next Greatest Generation."

Over the course of this past year, I've seen this Next Greatest Generation at work in service to America, deployed yes, to two very difficult theaters of war, but also across eighty countries spanning the globe. Whether fighting terror in the Philippines or keeping peace in the Sinai, challenging nature on the banks of a flood-gorged Mississippi River, or scouring the terrain of long ago battlefields to bring home a fallen but not forgotten comrade, their missions are complex, their service remarkable, and I'm humbled to be even remotely in their company.

I recognize the great challenge, the great responsibility, we in the Army leadership have to these men and women who wear the uniform of that American Soldier, to their families, to their civilian workforce.

During a recent trip to Afghanistan I had the chance to spend some time with a young Captain and a First Lieutenant, just a little more than a year out of the Military Academy [West Point], who were in charge of operations in a part of the valley. They had led the combat missions, that Captain and that First Lieutenant, that had cleared their part of the valley. Thereafter they engaged with the village elders throughout the region; they attended shuras, negotiating with them, assuring them of the best interests that we had in coming to their part of the world. They worked to equip and train the Afghans, forming up the local Afghan police. They are the very essence of full spectrum operations. The level of responsibility, of adaptability, of authority that we have given these incredibly young leaders is unprecedented. They are doing jobs today that in the not so distant past, ranks of O5 [lieutenant colonel] and O6 [colonel], perhaps even of O7 [brigadier general], would be expected to achieve. Yet we count on them every single day, and they have performed remarkably. (Applause)

How we ensure that the opportunities for creativity, leadership and advancement that have been present on the battlefields of today exist throughout the Army tomorrow -- no matter what deployments look like. That will be the critical challenge for us to ensure that we are ready for tomorrow. And it will make certain that the Army as a whole is prepared and postured for conflicts and unpredictable missions of the future.

Equally important as we continue wrestling with budget realities, the Army and our nation must heed the lessons of history, in deciding our future strength and our future structure. It's the same lesson George Marshall warned about repeatedly, perhaps never so strongly as in a widely publicized address in New York shortly after the Allied victory. "Respect," Marshall said, "is an intangible. But consider what it would have meant to us in tangibles, had we commanded the military respect of Germany, Italy, and Japan, in 1939." Marshall spoke of the Axis nations' surprise, not only our willingness, but our capability to organize, to fight and to win. He pondered that had they anticipated American willingness and American resolve, perhaps the world might never have known WWII.

But respect, he said, "is fleeting, unless we bend our efforts to preserve it." This must be our solemn obligation: to ensure this nation's continued respect, built on the valor and sacrifice and bloodshed of this magnificent volunteer force, the young men and women of the United States Army who committed and re-committed themselves to defending this great nation after the attacks on our shores. We owe it to them to ensure that our nation's strength, our nation's resolve is never again so challenged.

So thank you for your partnership in the path ahead. Thank you for all that you've done in support of these amazing men and women in uniform and their families. God Bless America, and God Bless this incredible Army that keeps it safe.