Defense Secretary Chuck Hagel said "fundamental change" is needed to reorganize and better prepare the U.S. military for an era of shrinking federal budgets and evolving global threats.
In his first major policy speech, delivered at Fort McNair in Washington a week before the release of the White House's fiscal 2014 budget request, Hagel said a strategic review of the force will scrutinize key areas of defense spending, including weapon acquisitions, personnel and overhead.
"This effort will by necessity consider big choices that could lead to fundamental change and a further prioritization of the use of our resources," he said in prepared remarks. "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 didn't specify what areas of the budget will be most affected, though he said the review will seek to answer "tough questions," such as the proper mix of civilian and military personnel; the right breakdown of officers and enlisted members; and the appropriate distribution of troops in combat, support and administrative duties.
The Defense Department's budget will shrink by almost $500 billion over the next decade under deficit-reduction legislation passed in 2011. It faces another $500 billion in automatic reductions, unless Congress and the White House agree on an alternate spending measure. The first installment of automatic cuts, which began March 1, will slice the defense budget by as much as $41 billion in the remaining half of fiscal 2013, which began Oct. 1.
"Left unchecked, spiraling costs to sustain existing structures and institutions, provide benefits to personnel, and develop replacements for aging weapons platforms will eventually crowd out spending on procurement, operations and readiness – the budget categories that enable the military to be and stay prepared," Hagel said.
The Pentagon, under then-Defense Secretaries Robert Gates and Leon Panetta, has already taken steps to reduce spending while investing in such critical areas as drones, cybersecurity and special forces, Hagel said. A strategic review last year called for shifting emphasis away from the ground wars of the past decade and toward the Asia-Pacific region.
"We will have to do more," he said. "We cannot simply wish or hope our way to carrying out a responsible national security strategy and its implementation."
The Defense Department this year plans to force more than 700,000 civilian personnel to take unpaid leaves of absence, or furloughs, for 14 days this year, down from 22 days previously, in part to shore up money for high-priority accounts such as operations and maintenance.
Hagel, who pledged to dock his own pay by an equal amount, said the action was necessary after lawmakers allowed the automatic cuts to take effect. "I wish we had other options," he said after his speech in a response to a question from an audience member. "We are dealing with a $41 billion shortfall that was not planned for."
In his remarks, Hagel said most security challenges today won't necessarily be solved with conventional military power. Violent extremism continues to rise from weak states and ungoverned areas in the Middle East and North Africa, he said. The military must adapt to stay "relevant" amid threats that are entirely different than those from the Cold War, he said.
"Indeed, the most destructive and horrific attack ever on the United States came not from fleets of ships, bombers, and armored divisions, but from 19 fanatical men wielding box cutters and one-way plane tickets," he said, referring to the Sept. 11, 2001, terrorist attacks.