Pentagon Warns of Tough Trade-offs

WASHINGTON (Reuters) -

Defense Secretary Chuck Hagel on Wednesday outlined the stark choices facing the Pentagon if it keeps cutting $100 billion in spending annually over the next decade, including shrinking the size of the military, curbing pay and benefits, and reducing weapons programs.

Hagel, unveiling the results of his four-month Strategic Choices and Management Review, said the Pentagon would cut overhead by almost $40 billion more over the next decade, and was looking at $50 billion in savings from compensation.

He said the review also pointed to possible reductions of up to 70,000 troops from the U.S. Army’s active force, and up to 65,000 from Army reserves, given the drawdown in Afghanistan and the end of the war in Iraq.

But he said the department could come nowhere near achieving the budget cuts required by law — $500 billion over the next decade on top of $487 billion in cuts already begun — by just eliminating inefficiencies and waste.

Reaching the total Pentagon budget cuts required under the process known as sequestration would require tough trade-offs between the size of the military and weapons programs, Hagel said, warning that choosing size over capabilities would trigger a “decade-long modernization holiday.”

Hagel did not identify any specific weapons programs to be cut, but vowed to protect certain programs, including the Lockheed Martin Corp F-35 Joint Strike Fighter, a new bomber and submarine cruise-missile upgrades, if the military chose to preserve high-end capabilities over size.

Hagel said decisions on how to balance the two stark options would be made in coming months. He said the final decision would be up to President Barack Obama.

“Before this review, like many Americans, I wondered why a 10 percent budget cut was in fact so destructive,” Hagel said in prepared remarks. “This analysis showed in the starkest terms how a 10 percent defense spending reduction causes in reality a much higher reduction in military readiness and capability.”

The Pentagon is struggling to cope with nearly $100 billion in cuts to projected spending that were passed in 2011 as part of the Budget Control Act to reduce the federal government’s huge deficits.

The law required $487 billion in cuts to projected defense spending over a decade. It required an additional $500 billion in across-the-board cuts over the same time frame unless Congress and the White House could agree an other ways to reduce deficit spending.