A Conversation with Senator Dan Coats

Thursday, January 24, 2013

Dan Coats, member of the Senate Appropriations Committee, discusses how U.S. foreign policy objectives are affected by the federal budget and ongoing debt concerns.

CHARLES LANE: (In progress) -- presiding. After I did the last one of these, I said it would be a cold day in Washington before I would ever -- (laughter) -- I'd ever preside again, and so here we are. Pat yourselves on the back for turning out in this weather, but I think the strong turnout is a tribute both to yourselves and to the guest we have today and the importance of the topic we'll be discussing.

Just a few points of business that I have to go through before we start: You have to completely turn off, not just put on vibrate, all those doodads like cellphones and BlackBerrys. Otherwise it'll interfere with the sound system, and you wouldn't want to miss a word I'm going to say.

If you would like to use an electronic device, say, like an iPad or something like that, there is -- you can do that outside. There's a space -- I guess the folks outside the doors will direct you. There's an overflow room where you can see a live feed of the meeting, so you don't have to worry about that if you want to use one of those devices.

And in contrast to some of our other meetings in the past, this one is on the record, so don't blurt something out that you don't really mean or you can't defend later on, because it can be used against you.

With that, let's welcome our guest, Senator Dan Coats, who doesn't need much of an introduction. He's a -- obviously somebody you all know, certainly not just because of his role in the Senate on the Appropriations Committee and his involvement with issues of foreign aid there, but also in his previous incarnation as U.S. ambassador to Germany during the first half of the last decade, in which there were a few interesting matters like Iraq and so forth.

Senator Coats obviously is very interested in trans-Atlantic relations as a result of that experience and other experiences that he's had, and his concerns have led him to want to discuss the matter we're going to discuss today, which is the interrelationship between the budgetary pressures and other pressures facing the United States and its role in the world. So Senator, thanks a lot for coming out this morning.

SENATOR DAN COATS (R-IN): Yeah, thank you, Charles.

LANE: I know it's not easy for you to get here in the snow either.

I guess I'd like to just begin by, in a kind of a general way, asking you, what is the concern? What's worrying you about the possible interaction between limited resources here, pressure to cut the budget and what that might do in terms of limiting U.S. role abroad?

COATS: Well, the consequences of, I think, both a diminishing pool of resources available and all the fiscal pressures that are on the Congress now in terms of the decisions they make on how to allocate funds and the prospects of the future not looking all that good combined with, I think, a -- less and less engagement, knowledge of and participation in -- by members of Congress in global affairs, whether it is national security, military-related or whether it's foreign policy, aid-related or diplomacy and our presence throughout the world.

You know, if you look back to say, Congress 20, 25 years ago, it was essentially made up of people who had a relationship to World War II and its aftermath in terms of U.S. global engagement, the Marshall Plan and the rebuilding of Japan and America's presence, and the relationship also -- I mean, and the lessons and the threat posed by the Cold War. And those were very defining major umbrella issues that produced great statesmen, Henry Jackson and others, on a bipartisan -- you know, politics ends at water's edge; America's presence and engagement around the world; two superpowers; the umbrella that kind was held over the world and stifled the kind of regional and local factions and tensions that erupted after the end of the Cold War. That all had a significant impact on the American people and commitment, I think, and support for the commitment for the U.S. to be a global -- globally engaged, the superpower. It was the present -- it was the possibility of a five-alarm fire, and everybody's in to try to keep that from getting out of control.

With the fall of the wall and the aftermath of that, there was a defining event, and that was the -- Iraq's incursion into Kuwait. We saw the global presence put together by Jim Baker and George H.W. Bush, and the success of that and the engagement the world's nations.

But subsequent to that, we have seen a completely different scene, and that is what I would describe as the two-alarmers or the three-alarmers, and we've got about a dozen fires popping up here in different parts of the world. And all of a sudden come -- you have people who don't have that previous -- a lot of people in Congress who don't have that previous reference or who basically have come to the conclusion the world has changed and we really can't afford nor do we have the public support for global engagement.

And so when you go back home and talk to people back home and they say, you know, why do we give so much foreign aid, when it literally is like saying, you know, you need to diet and lose a lot of weight, and you say, well, I'm going to go get a haircut, and that'll solve the problem -- the amount of foreign aid that -- and the amount of foreign presence now is shrinking to the point where it's relatively insignificant compared to the whole.

But yet the will to support that going forward and to even step out and say, well, we ought to be more engaged here, or we could do more here, or these are the -- these are the functions that are working -- it's hard to get public support for that, it's hard to get congressional support for that.

So I think the issue here -- it's a long way of getting to the point -- and that is that what are the consequences of a diminished public support -- diminishing public support, I think pretty well-articulated by the president, both in his campaign and post-campaign announcements. It's -- the signals are pretty clear: We're not going to be everywhere. We're not going to get into everything. In fact, we're going to retract (sic), and the support of the American people basically saying, why are we there? Why do we need to keep doing this?

So whether it is maintaining forces or presence in Germany to be a staging point for all that's happening in the Middle East; whether it's engaging in Syria or not engaging in Syria; whether it's leading from behind on Libya; the Pacific pivot, you know, it's a -- it's more like a head fake; how do we begin to have the resources to address those potential rising threats in the future -- all of that, I think, you know, is something that needs to be carefully looked at and talked through. And we need to be realistic about the fact that the United States is not going to be engaged on a global basis, given this current fiscal situation and given the current political will of the American people.

LANE: Well, obviously there's an interaction between the resources that we have available and the political will we have. I mean, obviously, if we had infinite political will, we'd find the resources, I suppose, or maybe vice-versa.

You -- in some of the speeches you've made recently -- I've been going over them -- you talk a lot about NATO and the fact that the experience in Afghanistan is not over yet but hasn't been a terrifically happy one for NATO, and that that might sort of lead to a process in which we just don't have the will anymore, the intention, to stay in NATO on the same scale that we've been before, particularly given the perception that our partners are not pulling their weight.

How do you think we are going to be able to keep NATO going? What would it take, in your view, to sustain NATO and keep it relevant, given our budgetary restrictions?

COATS: Oh, I think an intervening that poses a threat. We saw a little resurgence of NATO in the Libya situation, where clearly the United States was not going to take the lead, was going to supply reconnaissance, intelligence, surveillance, but -- and a little bit of backup, but it was either NATO getting together and going forward or not. That was a -- you know, the threat of a destabilized Libya, the immigration consequences of that for Southern Europe, the history with European presence there, that was a precipitating event. But I think it's going to take something similar to that.

One issue that I think potentially could be that is the whole situation with Iran and the pursuit of nuclear weapons, and the fact that Europe would be easily within the gun sights of -- and there would be significant consequences for those nations closest to the Middle East with a nuclear-armed Iran.

LANE: Well, that's a little bit on the security side. You alluded to the development side and the -- of course, when, I think, the general public talks about foreign aid, they kind of lump everything together, but I think when you're talking about the de minimis quantity of the budget that's devoted to aid, that's what you have in mind, is the development assistance. That is always going to be a vulnerable part of the budget.


LANE: I seem to recall Joe Biden saying during the '08 campaign, the only program we'll cut, I think he said, was foreign aid.

Tell us your view about how we can kind of put that one on a sustainable basis politically. How can you persuade the public that it's being used efficiently? What are the things that are working and what are the things that are not?

COATS: Well, I think the key word here is "efficiently." We have to demonstrate that the money that is -- the taxpayer money that is being sent overseas for foreign aid is, number one, in our strategic national interest. And we have to articulate what that interest is. Secondly, I think we have to go beyond just sending the money so it gets deposited in whoever leads that country Swiss bank account, that we have to demonstrate that that money is being effectively used to address certain things.

I give George W. Bush significant credit for the Millennial Challenge Corporation program, for PEPFAR, treatment of AIDS in Africa, because they have set a set of standards: that these are our values, these are our standards; if you are able to enforce -- implement and enforce those standards, we will provide you that support. And there are some very good success stories there.

This is a difficult climate with which to go back home and tell people this is something that works, and it is in our national interest. We do have a -- we ought to have a moral commitment on some of the tragic things that are happening from the standpoint of nutrition and disease and so forth. But as we see what's happening now in Africa, particularly the Islamic Maghreb and the threats there, the changes that are taking place, Africa suddenly has become a place where we have more interest.

I notice General Wald is here. Chuck was deputy secretary -- SecDef in -- got my acronyms mixed up -- he was deputy to Jim Jones and spent a lot of time looking at Africa from the standpoint of his position in Europe, kind of foreshadowing what was to come and pleading, I think, for engagement and presence in dealing with what was happening there. And now we're seeing some of the consequences of all that -- all that playing out.

And so we've got to make the case to the American people, we've got to show that what we're -- that we're effectively spending their money for the right reasons. It is in our national interest, and there's an underlying, I think, moral commitment to address some of these major nutritional disease-related problems that in doing so, America's presence is seen as a positive, not as a negative.

LANE: You know, there's a whole other issue that's arising now because of the sort of backlash against the United States and U.S. installations in countries like Pakistan and Egypt, which are heavy -- large recipients of assistance from the United States. Of course, I think probably a majority of that is military. But there is a very powerful sentiment in this country that those people don't like us, they take our money and then they burn our flag, and let's just cut them. And obviously, there have been resolutions introduced and so forth. Talk a little bit about how you respond or you think the country ought to respond to that very powerful sentiment.

COATS: Well, I think the common thread here is the presence of al-Qaida and its affiliates and the threat that poses to the world from the standpoint of stability and peaceful transition of governments, and we're reminded of that almost every day. And it's a crescent that sweeps across the middle of the world, starting in Indonesia and coming all the way across now northern Africa and now moving down to the -- to the sub-Saharan parts of Africa.

This is a threat that has enormous implications. We've seen that ignoring that threat, as we did in Afghanistan pre-9/11, leads to some dire consequences potentially for Americans. It is true the American public is war-weary, but nevertheless, we're reminded every day on CNN and other networks and journalists from The Washington Post and other --

LANE: Think the post mentions (from time ?) --

COATS: -- I want to get that mentioned in there -- that we're living in a different kind of world. It's hard to define where this threat is because it pops up everywhere. It's like Whac-A-Mole; you know, you whack Iraq, and you think you get that settled, and all of sudden you're back in Afghanistan, and you do that, and all of the sudden we're -- have the Arab Spring, and then we're in Libya and Algeria and things are happening that pose real threats, particularly at a time when the possibility of the combination of a weapon of mass destruction and terrorism can result in an attack on American presence, whether it's there or whether it's here.

That is a threat that we -- a grave threat that -- we have to keep reminding the American people that we're only one attack away from a terrorist attack using weapon of mass destruction to potentially the total destruction of a major large -- major U.S. city. We don't want to have to re-engage our thinking and presence and how we use our security forces and diplomacy to address these kinds of things in a post -- another post-9/11 scenario.

LANE: Well, the --

COATS: And so doing it -- doing it now ahead of time, I mean, addressing it now without just thinking, well, not going to be able to do that unless there's another defining event, could have horrible consequences.

LANE: Just sort of follow up on that, I guess part of what you're saying is that there may be a sense that when we send a lot of money to a country, we should be entitled to, in effect, loyalty or, you know, control and maybe even some kind of client-like status. It sounds to me like --

COATS: It would be nice if they said thank you, and --

LANE: Yeah. Yeah. But I guess what you're saying is, in a way, the money we send, to be very blunt, to a place like Pakistan or Egypt is the price of remaining a player there, the price of being in the game in those countries.

COATS: I think the mistake, though, is not holding those countries accountable to how that money is utilized and making it transparent back to the American people and the Congress that it's being effectively monitored and it's effectively used and it meets preconditioned standards before we send that money. We've got to make that case to the American people, or they're not going to continue to support it.

LANE: Well, the sort of specter of corruption and so forth has kind of always hung over foreign aid. I think what's -- we've been saying this in different ways. What's new now is the -- again, the public's sense that we are being asked to cut back here, right? We're being told that our entitlements and so forth need to be trimmed. And a phrase you often hear -- the president uses it, but I've heard Republicans use it in politics, is we need to start nation-building at home. I'm casually informed that that polls extremely well, that line. You're not only a foreign policy thinker but a politician. What, politically, is the effective counter to that?

COATS: Well, one, I think we have to acknowledge that, yes, we have a lot of nation-building to do here at home. And that needs to be the priority. And that reality, I think, is going to affect the kind of resources that we're going to have available to do the kind of global engagement, global diplomacy that we've seen in the past. I think we're going to -- we are severely resource-constrained and politically constrained, and we're going to have to prioritize and really make the case for whatever expenditures go out relative to military presence and spending or State and diplomacy and foreign aid spending. So that is the reality that we have to deal with, and we're going to have to -- I believe we'll -- we will be forced to have to make some hard choices in that regard.

Secondly, I would just simply say, as I say to virtually every interest group that comes into my office and say, you know, we -- we know -- (chuckles) -- here's the line: We know that resources are tight, we know we have to cut back, but our program's different than everybody else's. (Laughter.) And that's universal.

And rather than argue with them, I simply say, look, I'm not here to argue as to whether your program deserves priority over the last group's that was in here's program. So whether it's bridges and roads or whether it's medical research or whether it's education or any of a number of other things that fall in the discretionary category, including defense spending, I simply say, unless -- we have to come to the realization that unless we can address our mandatory spending, which is running away with the budget and ever shrinking Congress' ability to make decisions about how we use discretionary spending -- unless we can get control of that, everybody is going to fall short of what they want.

So I'm not debating as to whether more money should go into medical research versus building bridges or sewers or infrastructure or whatever. I'm just simply saying all of that is being squeezed, and therefore I'm asking you to support your senator or senators or representatives in giving them the backbone and the courage to stand up and say, we have to address this, or everybody loses. And I think that is the message of the day.

And now, we had an election over that issue. We're having a debate in Congress every day over that issue. To this point, the president has not indicated, post-election, that he's all that enthused about addressing the mandatory spending issue. And we can't get there until he does because without his leadership and no matter what Congress cobbles together in this regard, it's not going to go forward.

And so that, to me, is the challenge of the day, and that a very significant play on our national security, on our ability to fund our military so that it can engage where we need it to engage. We can't solve everything through drones. That has major implications on our diplomacy, foreign aid in particular, because it's way down the priority list of American -- of spending.

And so that is the over-arching issue. And I say absent and intervening event like we had in 9/11, which all of a sudden that priority became number one and everybody rallied around -- but trust me, we don't want that to be the reason that -- the impetus for changing our policy. We want to do everything we can possibly do to try to keep that intervening event from happening that causes us to reorient our thinking in that regard.

LANE: Senator, listening to you, I got the idea for a new lobby. I'm going to get all the groups that depend on the discretionary budget together and have them form one giant lobby to gang up on Medicare. (Laughter.) And then that way, they can save the money for their own things.

COATS: Well, this coalition of the discretionary -- (laughter) -- and then, you know, marches down to the Capitol --

LANE: Absolutely.

COATS: -- with tens of thousands of people saying, wait a minute, I mean, you're eating our lunch -- (inaudible) --

LANE: Right after this meeting, I'm going to go out and start talking to some people. (Laughter.)

COATS: You could put together a pretty good --

LANE: (Inaudible.)

COATS: I can just see the -- I could see the mailers going out, and send $10, and you too can join the --

LANE: I'll give a thousand dollars to your campaign.

COATS: Yeah. (Chuckles.)

LANE: Just to -- just to wrap this up before we go to questions, give us a little preview -- obviously, we're right in the middle of a huge debate about this. It's going to get even huger, I guess, the next couple months. Give us your best sense of how these accounts that we're discussing are going to fare in the next two to three months.

COATS: (Sighs.) Not well. The sequester is looming. You saw the House yesterday took the tactical position of taking the debt limit off the table for three months or so. But the focus now will be on the sequester. And those that have been saying ever since the Budget Control Act that we never can let this happen, particularly on the -- on the defense side, are going to see enormous pressure to let it happen, because everything else has failed. We have not been able to come up with a grand bargain. And there's nothing in play right now that it looks like the White House will accept on a grand bargain. And given that, the sequester and the continuing resolution, the budget that would -- comes due in March -- those two are going to have some draconian spending attached to it, in my opinion. And it just -- it just -- it makes the situation we're in more difficult than it already is.

LANE: Thanks for your comments.

And now's the time to -- gentleman is -- with the camera is waving at me. I just want to know if I'm doing the right thing here.

QUESTIONER: Hi. My name is Anchiwan Apti (ph). And I'm with VOA TV Ashna. That is Afghanistan service. My service -- my question is, to the senator, how do you think the budget cuts may affect Afghanistan, the effort in Afghanistan, both in military terms and in developmentally terms, going ahead to 2014?

COATS: Well, we've already seen decisions made relative to our presence in post -- our presence in Afghanistan going forward. And I certainly am not -- I don't serve currently in the Foreign Relations Committee, and I'm certainly not as up to speed probably as even the people in this room relative to the assessment of what that might mean.

But we get conflicting reports relative to how successful this current government in Afghanistan can be without the significant American presence. We see that it's difficult enough in Iraq. There was a small contingent there pretty much inside the perimeter. We continue to see a lot of factions fighting. And Afghanistan looks to me as -- about a 10-fold magnitude of what potentially could happen with the U.S. reduction in presence. I've always said Afghanistan is really not just about Afghanistan, it's about Pakistan and its nukes and the instability there. And so -- but the picture that's being painted here is of significantly less presence of U.S. involvement in that region, with all the consequences that can come from that.

LANE: I should have said --

QUESTIONER: One follow-up.

LANE: I'm sorry, we're going to try and spread it around here. Everybody -- I should have said that when you do ask your question, ask them for the mic and stand and identify yourself and keep your question short. If we have time, we'll get back to you, OK?

Yes, sir, right here. Please identify yourself.

QUESTIONER: One of the things that --

LANE: Please identify -- sorry, please identify --

QUESTIONER: Jack Janes from the American Institute for Contemporary German Studies.

LANE: Thanks, Jack.

QUESTIONER: I want to ask you about Europe and I want to ask you about whether or not you think there is enough support coming from Europe to deal with those issues we just talked about. Germany, as you well know, and Britain have been going in and want to go out with us in Afghanistan. The French are in Mali. There's been some criticism about us holding back. You just mentioned constraints.

Is it not the case that we have to not only respect that if we can get it, Europe can be helpful in areas that we would like to not necessarily have a large footprint in? And secondly, can you expect that? You know Europe as well as I do, and I think the question mark is, do you expect that that's something that we can see more of in the future as we face our own constraints at home?

COATS: I think the constraints, Jack, in Europe are even greater than ours, and the public will to engage in that is even less than ours. That's why a lot of questions are being raised here by members of Congress basically saying why are we still in Germany, why are there 40-some-thousand troops there; we have all this infrastructure, and so forth and so on; can't we bring those home? And, you know, how much do they step up when we really need them? They don't. They're still looking for the Europe umbrella over NATO as well as the Europe -- I mean as well as -- excuse me -- the U.S. umbrella over NATO and the U.S. spigot of money into NATO.

And I think there are some defining moments coming for Europe relative to the future of NATO and relative to the trans-Atlantic relationship in dealing with this whole range of issues going on across the, you know, south of Europe. That's going to have a direct effect on them. And so there's the day of reckoning coming on that.

I wish I could be more optimistic about it, but we all see what the fiscal constraints are in the austerity that's being imposed. And they're going to literally have to come to the point where they have some tough decisions to make because the U.S. just simply is not going to be there at the level and the presence and the protection that they're used to and have relied on in the past.

LANE: Mr. McFarlane.

QUESTIONER: Bud McFarlane, has-been.

COATS: Ah, Bud, your legacy lives on. Nice to see you.

QUESTIONER: Thank you, Senator, for coming and for more than 30 years of service to our country.

You're on the Energy and Natural Resources Committee also. We are continuing to send almost $400 billion a year overseas to buy oil. And your colleague Senator Lugar for a long time has told us that the only way to beat a cartel is through competition, and he has sponsored what's called an open fuel standard, but to basically make a competitive market to move automobiles, trucks; whether it's electricity or methanol or ethanol or whatever, to have a market so that, like Brazil, when you drive up to the pump, you have a choice and the price goes down.

What do you think? Do you think that's a good idea? And with your colleague gone now, a huge loss to our country, would you be supportive of a competitive way to break the OPEC cartel?

COATS: Well, I think the technology developments in fracturing has become that competitive instrument that is causing that to happen. I mean, we had the great fortune of this technology, the breakthrough that is going to put us in a completely different position that we've been in the past.

And so I don't think we need to -- we've seen the effort to try to determine and develop alternative competitive sources of energy. The problem is, they can't -- they can't be competitive, and they particularly now can't be competitive because of the new discoveries of oil and gas through shale -- in shale that -- and through fracturing that now is a game -- total game changer and is going to put us in a position where we're going to be a country in the world where perhaps the lowest -- most competitive and lowest price for energy of anyone.

Just talking about Germany, they put themselves in a terrible position. Former Chancellor Schroeder made -- cut a deal at the end of his service there as chancellor ®MD+BO¯®MD+BO¯®MDNM¯®MDNM¯®MDNM¯®MD+BO¯®MD+BO¯®MD+BO¯®MD+BO¯®MDNM¯®MD+BO¯®MDNM¯with the Russians for -- and locked in a 20-year supply of gas from Russia at a price that's about four times the price of what it is on the world market now. At the same time the Germans have taken the position of shutting down all their nuclear plants. Huge subsidies for wind and solar; the problem is that sun doesn't shine very much in Germany, as Chuck Wald knows, and the wind doesn't blow in a lot of places, and it's highly subsidized and not competitive.

And so I think there's been a game changer here that is exciting for the future of America. If we can get our fiscal act together, I think we have some very, very bright years ahead of us in terms returning to economic world leadership, and this breakthrough in technology is just amazing.

LANE: Other question? Right here.

COATS: A former wonderful staffer who left and went on to do great things, Frank Finelli.

QUESTIONER: Thank you very much, Senator. Frank Finelli, with the Carlyle Group.

Senator, I'm wondering if you could discuss a little bit from your perspective of the Appropriations Committee -- obviously, people -- committees will figure out how to pass bills and put a number out there, but impacting the policy is going to be far more intricate and difficult to do. As defense expenditures come down significantly, whether or not the foreign policy and those types of appropriations for the State Department increase or change much, the load on diplomacy is going to increase significantly. How do you see the congressional committees collaborating more effectively and working with the administration to really not only set those budget figures but to help influence the evolution of policy?

COATS: Well, Frank, the first -- the first challenge is to let the committee be the committee. And while I serve in the Appropriations Committee, it's all for naught if we don't have regular order in terms of -- which starts with the budget, which now, apparently, we're told, we're going to get finally in the Senate this year one way or another -- and then starts with a regular process of the committees working through the process -- given whatever cap is on our ability to spend, it forces us -- which is what I think we should have been doing all along -- it forces us to make decisions as to: What are the essential functions of government that need to be funded, and how do we find the resources to fund those? How do we separate that from the like to do but can't afford to do right now? And how do we separate those from the, you know, these no longer are viable, they haven't proven their worth, shouldn't we transfer money from here up to the essential? It's a triage process that doesn't take -- has not taken place in the past, but I think the budget constraints now are forcing us to make those kind of decisions. And that is because the pie is shrinking on discretionary and growing on a mandatory, and without that change, this is what we're going to have to do.

And that's going to have a direct effect on policy. It's going to have a direct effect on how many ships we can build, how many places we can build, where we want to be locating our troops. We talk about the specific pivot. As I said, it's more of a head fake. You know, we're going to put 600 Marines on a six-month rotational basis in Darwin, North -- Australia, and they're going to be, therefore, looking north to China, Indonesia, all of the Pacific at 600 Marines -- that's a shift? How are we going to put -- how many carriers can we put in the Pacific if we're cutting down on the numbers that we're going to build and have -- everything that's happening in the Middle -- et cetera?

On and on and on it goes. So we're going to have to make some tough decisions on priorities. But as I -- want to go back. The toughest decision that hasn't been made and must be made or we're all looking at austerity and doing much, much less than we need to be doing as the world's leading nation and that is getting control of our runaway mandatory spending that is just leaving all of us in an austerity position that I think the long run really hurts America.

LANE: Right here.

QUESTIONER: Allan Went (sp). Senator, you served as ambassador to Germany. Could you comment on Germany's role in the world today? Arguably, given their -- (clears throat) -- excuse me -- financial and economic strength, couldn't they be doing a lot more, even in the military sphere? The second world war is 70 years behind us now. Could you give us your view on Germany's role today?

COATS: I could. You know, there's the -- there's somewhat of a myth out there about this German economic machine. Compared to rest of Europe, it looks terrific. When you look at the GDP growth, 0.4 percent, barely -- if they get to 1 percent, they call a holiday and celebrate.

LANE (?): That's why they only get to 1 percent. (Laughter.)

COATS: (Chuckles.) Well --

LANE (?): They're always having holidays.

COATS: We did enjoy the holidays over there. (Laughter.) It's really a wonderful place to serve, because you can sit out in the cafe and drink coffee and talk. The Germans love to talk. And we were talking earlier about whatever problem there is, let's have some dialogue about that, no action, but dialogue. (Laughter.)

And so Germany isn't in the position that it projects itself to be. And I think it has a reputation of obviously producing magnificent machines and cars, and when the Germans do it, they do it right. But with some failing economies or weak economies, you know, they're heavily dependent on exports, heavily dependent on the car industry. And as David knows, that can go up and down.

And so two things. I don't think they have the political will to engage much outside their borders. And two, I don't think they have the financial resources to do as much as we think they should do and maybe even some of their policy people think they should do relative to their -- to their national security -- I mean, their strength, their military strength. It's always -- we're just not in a position to do that now, and there's been a heavy reliance on U.S. presence. As that diminishes, they're going to have some tough decisions to make, as are other nations.

LANE: Yes, ma'am, right there.

QUESTIONER: Good morning. Barbara Matthews with BCM International Regulatory Analytics.

I've got a question about the 21st century writ large. You have described a -- what sounds like you consider to be an inevitable retrenchment if not a potential return to some isolationism in the United States, whether for political reasons or budgetary constraint purposes. That is a very different position than America as the guarantor of --

COATS: Yes it is.

QUESTIONER: -- security and liberty globally. Europe may not have the financial resources to take up the baton. Could you describe what you think the risks are to the United States in not serving as the leading nation physically, militarily, particularly in the context of so much optimism being placed on soft power, trade relationships, new trade agreements and economic power as the postmodern way of guaranteeing security?

COATS: Well, I think the consequences are potentially very significant. America has always been looked to since the end of World War II as a nation that paves the way. It's much like we used to look at California as the future for the other 49 states. They're always the lead. Look at today. We look at California and say it's a basket case. So I think a lot of the world is basically looking at America today and basically saying, they're not the power they once were; they don't have the will or the commitment to be that or the -- or the resources to be that. And they read the tea leaves just -- you know, more carefully, I think, than the American public does when they look at the remarks of the president that he's made relative to our national security and engagement in the future. They look at the Congress, they look at our fiscal situation and they basically say America's not what it once was.

And what happens, the consequences are it frees up people to do things that are not in our best interest. They don't have the constraint of the threat of American presence and American influence and American even engagement to restrain them.

And so I think, you know, we are severely under-resourced in the Islamic Maghreb area of Africa, trying to make up for it with, you know, a P-3 with intelligence and reconnaissance and surveillance collection and some drones if we can get them there. And yet there's this growing presence of radical Muslim extremism -- Islamic extremism now growing in that part of the world.

And so I think the consequences are very great, which is why -- I don't want to beat a dead drum here, but I keep going back to, without a dynamic, growing economy, we're not going to have the resources to be that nation that the world could look to as sort of the overseer of tensions and a nation that you can turn to to help resolve some of those -- some of those tensions.

We haven't talked about Iran yet, but Iran's continued movement toward possession of nuclear capability, weapons capability, is a game changer for the whole Middle East, could start a proliferation of -- could start a proliferation of other nations pursuing that. I cannot foresee how Saudi Arabia, Turkey, maybe even Egypt can simply say we're going to just let Iran be that nuclear power and the leverage that they would gain from all that. And yet right now that's taken a second -- you know, that used to be the high-profile issue, THE threat. You don't read much about it anymore, but the clock is ticking over there in Tehran toward nuclear capability. Some verbiage over here about more sanctions and diplomacy and so forth, but no response -- no response the other way, from the leaders in Iran.

LANE: Another question? Yes, sir, in the back.

QUESTIONER: Senator, Steve Cheney with the American Security Project. I'm pleased to hear you talk about weapons of mass destruction, but I'd like to hear your thoughts about our weapons of mass destruction. Under New START, the cap's at 1,550, with thousands more in reserve. Is there not an opportunity here for us to look at the triad, look at significant reductions, perhaps look again at New START, and not build a new submarine, not build a new bomber, and save a ton of money?

COATS: Well, that will be part of of the debate, but at some point we have to decide, you know, what -- at what level do we need to be -- from a national security and military standpoint to be -- to be viable and to protect the American people and to be seen as someone with a capability to do that.

I think the larger question is -- that we need to focus on rather than reduction is what's happening around the world, what's happening in North Korea and what's happening in Iran, and what kind of access are some of these terrorist groups going to have to WMD capabilities? That's the greater threat. I do give Senator Lugar and Senator Nunn great credit for being part of reducing that -- you know, destroying some of those older weapons and so forth and so on, but the real challenge before us is those nations who are totally ignoring the nonproliferation treaty and, you know, doing everything they can to move toward that capacity.

LANE: Senator, if I could just exercise a privilege and kind of follow up, part of what he's, you know, kind of getting at is that we need to sort of prioritize -- within the national security budget, within the defense budget, we need to make priorities, whether his or someone else's.

COATS (?): (Agreed ?).

LANE: The sequester, though, is -- seems to be sort of this broad, across-the board --

COATS: Right.

LANE: -- cut to all the programs. Could you just give us, in -- as specifically as you deem appropriate, I guess, a sense of what that is going to do to the defense budget?

COATS: Oh, it's going to -- it's going to undermine it dramatically. You've seen what Leon Panetta has said. You've seen the dire warnings coming out in terms of hollowing out our military. Across the board doesn't have anything to do with priorities. It gets totally away from that triage I was talking about. What are the essential things that we need? What are the essential functions?

And this just simply -- but this is the consequence of our inability to set up -- to support and set up a system whereby we can make those priorities. And it is sort of the worst possible last thing we can do to enforce some kind of spending discipline. I did not vote for the Budget Control Act because of the sequester, because I thought it was absolutely the wrong way to go forward in terms of that.

But now we're -- every other option has been rejected by this administration, even bipartisan efforts. I give Mark Warner great credit for trying to pull together his caucus in the Senate, working with the Gang of Six, Saxby Chambliss and others. At one point 38 of us, 19 Democrats and 19 Republican senators, sent a letter to the president saying, Mr. President, we will support a grand bargain; even though each of us wouldn't -- you know, want more of this or less in that, we will support this if you will take the lead, and we will give you the cover you need politically -- that was the underlying message here -- by making this a bipartisan effort. And it was totally rejected by the White House.

And so we're at the point where we have no other option in front of us, as a forcing mechanism, to address a problem that's going to bankrupt this country and take down everything if we don't -- if we don't move forward with it.

LANE: Yes, sir.

QUESTIONER: My name is Peter Bombush (ph). I'm a retired lawyer in Washington, good friend of senators. And thank you for coming. The question is you're knowledgeable about Europe and, obviously, the United States. Those two areas seem to have very different views about current policy of the Israeli government, and there seems to be a lot of stress in that tripartite relationship. Can you comment about that?

COATS: Well, I can. It's one of the issues I had to deal with when I was in Germany. And by the way, in the audience is Terry Snell, who was my deputy chief of mission -- he was deputy chief for Nick Burns in Greece and then head of the Europe desk, and good friend of several of us here and someone who now works on my staff, knows a lot more about all these questions than I do. Wish he was up here instead of me.

But Peter (sp), that's a really good question. And I don't know the -- the relationship between Merkel and George W. Bush was very solid.

You know, my mind drifted there for just a minute. The essence of your question was the Israelis --

QUESTIONER: (Off mic.)

COATS: Yeah, of course. Of course. And I'm sorry. Time for a refill on my coffee. (Laughter.) The -- many, many, many discussions with the Germans, relative to their position, relative to our position and the Israeli issue. Public sentiment in Germany as a whole, I think, is strongly for a reconciliation with the Palestinians. Yet overlying all of that is the residual of the Holocaust.

And I think I can say this. I had this private -- a private discussion with the foreign minister on this topic. And there was a -- and it had to do with Iran and the threat -- nuclear threat to Israel and position that -- the position Germany was taking relative to that. And I was questioning what -- where they might be should there be a real threat or attack on Israel. And he said, well, of course, he said, you know that that's not what we would -- the public would want us to do. But, he said, given the Holocaust, we have no choice to be there in support of Israel. We cannot stand by and let another Holocaust take place.

So that -- those decades of remorse and guilt over the Holocaust still dictates policy relative to support for Israel, even though the public now decades on says, now, why do we need to do that again? And do we want to get mixed up in that? So that's a -- kind of a unique dynamic that exists in that regard.

But it's a -- it's somewhat of a tenuous relationship. I spent a lot of time with the Israeli ambassador to Germany, who spent a lot of time with the Germans relative to German policy toward Israel in a whole number of ways. So I think anything short of a direct threat or attack on Israel, the consensus there is, we wish we could get this resolved, and we wish Israel would be much more flexible relative to the West Bank and relative to the Palestinians.

LANE: I think we have time for one more. And -- actually, I'll let it be two more because I promised you would follow. Go ahead.

COATS: Yeah.

LANE: This is going to be a friendly question, I suspect.

QUESTIONER: Tom Davis, with General Dynamics corporation. Thanks for being here this morning, Senator. You've mentioned a couple of times, I think, in a favorable way, the desire to get a return to a regular order in terms of budget processes. Norm Ornstein and Tom Mann have put out a couple of books, and I guess if I was going to summarize the two of them, I'd say that they're arguing as political scientists that we've kind of wound up in this country with a parliamentary political structure without a parliamentary governmental structure.

COATS: (Chuckles.)

QUESTIONER: A lot of comments going back and forth about the need for rule changes, restoration of things that go beyond regular order in a lot of ways. Do you see the possibility that Congress at some point is going to take a close look at itself and how its own rules are structured so that we don't have a lot of gridlock we've been seeing over the last few years?

COATS: Well, the Senate's doing that right now, and I'm anxious to get back because it'll be probably decided today in terms of what rule changes, if any, will be attempted to be imposed by Harry Reid on the minority. We've had hours and hours and hours of discussion about all of this. Republicans, obviously in the minority now, are desperately trying to preserve the rights that traditionally the minority has had relative to procedure. The challenge is to try to find that balance which will allow us to get to some semblance of regular order, which we're basically saying.

Now, when I first came to the Senate, George Mitchell was majority leader. And I would -- came from the House. So I would say, what's the difference between the House and the Senate? He said, well, in the House, you have a Rules Committee, and you're lucky if your caucus gets one amendment and 30 minutes to talk about it before you vote on it, and that's it. (I ?) said, and the great thing about the Senate is that any senator can offer any amendment to any bill at any time, and that's a wonderful privilege, particularly for the minority, which I was in at the time.

When the Republicans had the majority and could have imposed rule changes to stifle that, even though it would have been to their great benefit to do so, every single Republican voted against making those rule changes, saying reserving the privileges of the minority is not only constitutional, but it is the way this should function.

And does it result in dysfunction? Yes. Does it result in the all kinds of delay? Yes. Can it ultimately be worked through if you do regular order? Yes. That's why we have these vote-a-ramas. Offer your amendment. If it passes, it'll be attached to the bill, be dealt with in conference. If it doesn't, you had your shot at it. And it prevents -- regular order prevents that process of saying, we're not going to go forward, and it prevents the majority leader from simply, quote, filling this tree, which is -- nobody understands, including senators, but prohibiting the minority from having those rights.

And so we're going to decide, basically, how we go forward with that today, and there'll be an answer on that. But the goal ought to be -- from both sides is to make the process work so that ultimately, a decision can be made, yea or nay, on whatever is being proposed, and everybody will have their yea or their nay out their for their public to support or to disagree with. And this hiding behind procedure so you don't have to take a tough vote -- the Senate has to understand that, you know, as a senator, you're going to have to take tough votes. That's why you got six years of political protection, so that you can make those tough votes. And that's what it's all about.

So we feel very strongly about this. And I don't know how it's all going to come out. Even late yesterday Mitch McConnell and Harry Reid were still in negotiations over this. Harry could force this on the Senate by a majority vote in the Senate of two-thirds, as we've always had 67 to change the rules. But if he does, I think Democrats will rue the day when they impose this because they will find out -- as so many have never been in the minority since 2006 election sweeps by the Democrats, will find out that they've just turned this thing into the House, and its leaders can jam through and parties can jam through anything they want.

LANE: Well, speaking of forcing, the clock is forcing us to finish. I'm afraid -- I'm afraid we're going to have to call it quits. But Senator, it's been an illuminating conversation. I'm sure we could go on much longer.

COATS: We could. And I --

LANE: But thank you very much. And --

COATS: Appreciate the good questions. Appreciate -- (inaudible). (Applause.)

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