May 24 (Bloomberg) -- Outgoing U.S. Defense Secretary Robert Gates said the Pentagon may have to cut pay, benefits and the size of the armed forces to reduce costs while protecting weapons programs such as Lockheed Martin Corp.’s F-35 fighter jet.
President Barack Obama’s goal of paring $400 billion over the next 12 years from the defense budget won’t be accomplished by piecemeal trimming or efficiency savings, Gates said in a speech at the American Enterprise Institute, a policy group in Washington. Meeting the goal will require “real cuts” and “real choices,” he said.
“To reduce the resources and the size of the U.S. military, people need to make conscious choices about what the implications are for the security of the country,” said Gates, who plans to retire next month once the Senate likely confirms his successor, Central Intelligence Agency Director Leon Panetta.
“To shirk this discussion of risks and consequences and the hard decisions that must follow, I would regard as managerial cowardice,” said Gates, 67, who first entered government service in 1966.
Boeing Co.’s new Air Force refueling tanker and Lockheed Martin’s F-35 Joint Strike Fighter are among the programs that must be retained, Gates said. Other priorities include building more Navy ships and replacing its ballistic missile submarine fleet, he said.
$400 Billion Review
Speaking at AEI, a group that he said generally backs increases in defense spending, Gates sought to lay the groundwork for cuts beyond the $78 billion he proposed in January, as Obama aims to lower the U.S. budget deficit. The Pentagon last week began a review of priorities, strategy and risks to meet the target of holding national security spending $400 billion below current projections, to a level just below inflation.
“There is going to be a considerable amount of pressure on the Pentagon’s budget beyond what we’ve seen already,” Christopher Preble, director of foreign policy studies at the Cato Institute in Washington, told the AEI audience after Gates’s address. “The question is how do you balance roles and missions and rethink roles and missions in a way that does not result in a hollowing out of the force.”
The deficit itself might become a national security risk if not reduced, Gates said. “What’s being proposed by the President is nothing close to the dramatic cuts of the past,” he said.
Gates questioned the results of what he said was a near-doubling of spending on new weapons after the Sept. 11, 2001, terror attacks. The more than $700 billion in additional spending over the past 10 years “resulted in relatively modest gains in actual military capability.”
While defense spending isn’t the cause of the nation’s fiscal woes, the Pentagon can’t be spared in addressing them, Gates said.
“As a matter of simple arithmetic and political reality, the Department of Defense must at least be part of the solution,” he said.
Gates reiterated his push for targeted cuts rather than “taking a percentage off the top of everything.” He cited his efforts in the past two years, canceling more than 30 programs that otherwise would have cost $300 billion and plowing the savings into higher priorities such as a bomber for the Air Force and a ground-combat vehicle for the Army.
The most questionable weapons programs no longer exist, he said, making today’s cuts harder.
The Pentagon review will consider spending areas that politicians have avoided, Gates said, including pay, retirement benefits, health care and the size of the armed forces.
“The overarching goal will be to preserve a U.S. military capable of meeting crucial national security priorities even if fiscal pressure requires reductions,” he said.
Gates recalled that he went to Congress during both of his first two years in office seeking a slight increase in fees under the military’s Tricare health plan “and got my head lopped off. So the third year, I didn’t try.”
He’s trying again this year.
Gates also called for a more flexible retirement system to retain military and civilian personnel with critical skills. The current system provides full retirement benefits to those who have served for 20 years or more, giving them “every incentive to leave,” even if the military needs them.
About 70 percent of the military force doesn’t stay for retirement. “Somebody who serves for 10 years leaves with nothing,” Gates said. “That doesn’t make any sense. That’s not fair.”
Administrative costs offer potential savings, Gates said, while calling his search for such cuts in the past year “disappointing.” They amounted to less than $1 billion from organizations that account for $64 billion in annual spending, he said.
Gates called them “an amalgam of fiefdoms without centralized mechanisms to allocate resources, track expenditures and measure results.”
“There are still too many headquarters, offices and agencies employing too many high-ranking personnel and contractors consuming too many resources relative to real military missions and measurable results,” Gates said.
Analysts, including Michael O’Hanlon, director of research at the Brookings Institution in Washington, said they’re skeptical Congress will follow Gates into controversial terrain, at least before the 2012 general election.
“We have a fundamental conflict going on in the Congress between deficit hawks and defense hawks that seems almost irreconcilable,” said Danielle Pletka, vice president of foreign and defense policy studies at AEI.
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