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Hagel: Sequester hurts but long-term costs a bigger concern

In his first major policy speech, Defense Secretary Chuck Hagel said Wednesday that the spending reductions, or sequester, required by the 2011 Budget Control Act are forcing him and his subordinates to make the wrong types of cuts even as they’re trying to design a more efficient national security structure.

The sequester cuts are “having a disruptive and potentially damaging impact on the readiness of the force,” he said,  adding, “These quick and dramatic cuts would almost certainly require reductions in what have long been considered core military capabilities.”

Gary Cameron / Reuters

Secretary of Defense Chuck Hagel gives a speech on fiscal defense spending at Ft. McNair in Washington April 3, 2013.

The funds available this fiscal year for defense – other than spending on military personnel – are being cut by about 8 percent. The Budget Control Act allows the president to exempt military pay from the spending cuts and President Barack Obama has done so.

The bigger challenge, Hagel said, is for Pentagon planners to make long-term structural changes and to confront three principal drivers of cost growth: overhead, personnel costs and the acquisition of new weapons systems.

Hagel approvingly quoted former Chief of Naval Operations Admiral Gary Roughead, who has warned that due to rising health care and retirement costs for both uniformed military personnel and civilian Defense Department employees, the Pentagon could be transformed from "an agency protecting the nation to an agency administering benefit programs.”

Hagel added, “We’re not going to be able to sustain the current personnel costs and retirement benefits—there will be no money in the budget for anything else.”

As of the end of 2012, the Defense Department had more than 760,000 civilian employees. Nearly 1.4 million people are serving in uniform.

Hagel expands on the potential harm that sequestration may have on the nation's defense capabilities.

Hagel implied that there are too many admirals and generals. He said, “The operational forces of the military -- measured in battalions, ships, and aircraft wings -- have shrunk dramatically since the Cold War era. Yet the three- and four-star command and support structures sitting atop these smaller fighting forces have stayed intact, with minor exceptions, and in some cases they are actually increasing in size and rank.”

Hagel delivered his speech at the National Defense University at Fort McNair in Washington.

During the question-and-and-answer period that followed his speech, a Defense Department civilian employee complained about the impending furloughs of up to 14 days which Hagel defended as necessary under the circumstances.

“Morale will be affected, but tough decisions are going to have to be made,” he said.

Another civilian Defense Department employee told Hagel he “very much appreciated the gesture” that Hagel made by announcing he’ll take a pay cut to show his solidarity with those being furloughed.

As to weapons purchases, Hagel said that “the military's modernization strategy still depends on systems that are vastly more expensive and technologically risky than what was promised or budgeted for.” Weapons development programs “continue to take longer, cost more, and deliver less than initially planned and promised.”

Recently the Government Accountability Office kept the Pentagon on its annual High Risk List of departments whose books are so mysterious and opaque that it’s at high risk of fraud, waste and mismanagement. The GAO said that the Defense Department “is one of the few federal entities that cannot accurately account for its spending or assets.”