Hagel: No budget cuts off-limits

Defense Secretary Chuck Hagel on Wednesday said no budget cuts will be off-limits as the Pentagon looks to tighten its belt.

“We need to challenge all past assumptions, and we need to put everything on the table,” Hagel said in his first major policy address, according to prepared remarks.

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Speaking at National Defense University at Fort McNair, Hagel defended his review of the military’s strategy, which he ordered shortly after taking over at the Pentagon.

He said the military must look at change “that involves not just tweaking or chipping away at existing structures and practices but, where necessary, fashioning entirely new ones that are better suited to 21st century realities and challenges.”

Hagel said the biggest fiscal challenges facing the Pentagon are not declining or flat-lined budgets, but the “growing imbalance” of how money is spent internally.

“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,” he said.

Hagel’s speech comes one month after across-the-board sequestration cuts took effect, occurring just two days after he was sworn in as defense secretary.

With no budget deal on the horizon between the White House and Congress, how Hagel and the military tackle sequestration has the potential to be a major part of his legacy at the Pentagon.

The military already issued a new strategic guidance in 2012, after the Pentagon’s budgets over the next decade were reduced by $487 billion under the Budget Control Act.

With sequestration, $41 billion will be cut in 2013 and $500 billion could be reduced in the next decade, which senior military leaders have said would require the Pentagon to change its new strategy and scale back ambitions.

Hagel said Wednesday that the department’s new strategic review should come with options — so the military can be prepared if there is a budget deal to reverse sequester or if the cuts do persist for years.

“We cannot simply wish or hope our way to carrying out a responsible national security strategy and its implementation,” he said. “The Department must understand the challenges and uncertainties, plan for the risks and, yes, recognize the opportunities inherent in budget constraints and more efficient and effective restructuring.”

Hagel talked about streamlining the military’s command structures, paring back the “world’s largest back-office” and examining the number of active-duty service members. He touched on the need for a more cost-effective acquisitions process and avoiding the major cost overruns that have plagued weapons programs like the F-35.

But he also emphasized that the military is not a business.

"The military is not, and should never be, run like a corporation," Hagel said. "But that does not mean we don’t have a good deal to learn from what the private sector has achieved over the past 20 to 30 years."

The moves Hagel discussed Wednesday are among the most common cited by budget cutters who say that the Pentagon can achieve the level of cost savings required under sequestration.

Hagel did not get into many specifics in his address, saying that he did not want to prejudge the strategic review that’s currently under way.

“It could turn out that making dramatic changes in each of these areas could prove unwise, untenable or politically impossible,” Hagel said. “Yet we have no choice but to take a very close look and see how we can do all of this better.”

Hagel’s first chance to lay out specifics will come next week, when the Pentagon unveils its 2014 budget request.

Pentagon officials have said the budget won’t include the $50 billion reduction in 2014 that would be required if sequester is not changed. The budget is expected, however, to include long-term cost savers including base closures and increases in healthcare fees — both of which were roundly rejected by Congress during the 2013 budget process.

Hagel also made a pitch Wednesday for more “flexibility” to deal with sequestration, something military officials had been hesitant to request back before the cuts went into effect.

“If we get time and flexibility to implement savings, we could limit the impact of spending reductions on force structure and modernization while still making a significant contribution to deficit reduction,” Hagel said.

“By contrast, the cuts required by sequester afford neither time nor flexibility. These quick and dramatic cuts would almost certainly require reductions in what have long been considered core military capabilities and changes in the traditional roles and missions among the uniformed services,” he added.