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Hagel warns of defense cuts, hints at major reforms

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In his first major budget speech, Defense Secretary Chuck Hagel warned against steep defense spending cuts but seemed to be preparing the Pentagon for a period of major downsizing.

During a speech Wednesday at to a National Defense University audience at Fort McNair in the District, Mr. Hagel said that automatic, across-the-board spending cuts that require the Defense Department to trim $500 billion from its budget over the next decade would erode military readiness.

But he added: "It is already clear to me that any serious effort to reform and reshape our defense enterprise must confront the principal drivers of growth in the department's base budget — namely acquisitions, personnel costs and overhead."

Mr. Hagel said he recognizes the "great stresses" that troops and their families have been under for nearly 12 years of war and the contributions that civilian employees make, but fiscal realities demand "another hard look at personnel."

The biggest, long-term fiscal challenge is not a shrinking budget but the "spiraling costs" in sustaining infrastructure, personnel benefits and aging weapons that crowd out spending on procurement, operations and readiness, he said.

The defense secretary said officials will have to review the size and jobs of the civilian and military workforce with regard to their pay, benefits and health care.

Mr. Hagel was short on specifics but expressed concerns about a modernization strategy that still depends on systems "vastly more expensive and technologically risky than what was promised or budgeted for," and called for a more efficient acquisition system that rewards cost-effectiveness and efficiency.

He also spoke about the Pentagon's review of the White House's defense strategic guidance, which was first reported by The Washington Times.

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

Mr. Hagel said priorities would include "leader development, training, mobility and logistics, special operations forces, cyber, space, and research and development."

Todd Harrison, a defense budget analyst and fellow at the Center for Strategic and Budgetary Assessments, said the Hagel speech represents a turning point for the Pentagon because the secretary acknowledged that further cuts in defense spending are likely, if not inevitable, and that the Defense Department should begin preparing for them.

"I think this speech frames the questions the department needs to answer, but it stops well short of providing answers," Mr. Harrison said. "The major changes he needs to push through are things like another round of base closures, reform of the military compensation system, and reductions in the size of the military and civilian workforce."

Rep. Howard P. "Buck" McKeon, California Republican and chairman of the House Armed Services Committee, said his panel would "do what it can to prevent the Pentagon from making ill-considered, short-term cuts at the expense of long-term strategic need."

"Secretary Hagel, like many of his predecessors, has laid out a bold agenda for reform," Mr. McKeon said. "As encouraging as many of the secretary's remarks are, the fact that he is being driven to consider dramatic reform not because of strategic threats but because of an irrational budgetary environment remains troubling."

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