Hagel Vows to Trim Military Benefits and Modernize Strategy

In his first policy speech, Defense Secretary Chuck Hagel on Wednesday previewed the Pentagon’s coming review of management in an era of budget constraints, vowing to work with Congress to trim expensive military health benefits and proposing to transfer some resources from Defense to the State Department.

Addressing hundreds of mid-career officers and civilian employees as well as military students from 66 foreign countries at the National Defense University, Hagel cited a need to be “steely-eyed and clear-headed in our analysis,” but embraced an “opportunity to reshape strategy for the 21st century.” Promising that “everything will be on the table,” the former Republican senator from Nebraska said “the change will involve not just tweaking but chipping away” at such major drivers of expenses as acquisition, personnel costs and overhead.

Describing today’s world “as combustible and complex,” with threats from nonstate actors and new cyberwarfare techniques, Hagel said the United States must retain “a principled realism” that is “true to our values,” using American power “judiciously.” The political and cultural components of policy, he added, “don’t lend themselves to being resolved through conventional military strength.”

In deciding future missions to take on, Hagel said, a plan would have to satisfy three questions: “Does this help protect national security? Is it in America’s strategic interests, which includes political, economic, and moral dimensions? And is it worthy of the sacrifice of our men and women in uniform, and their families?”

Though the U.S. military today is “more deployable, expeditionary, flexible, lethal and professional,” it is also “older and enormously more expensive,” he said.

Hence the new strategic choices and management review, being led by Deputy Defense Secretary Ashton Carter working with Joint Chiefs of Staff Chairman Martin Dempsey and presidential guidance, will “develop a process for choices and options” in the event of either a deficit reduction deal or continued sequester, Hagel said. The sequester “has already had a damaging impact on the readiness of the force,” with the hiring freeze and travel curbs, and “furloughs will affect morale,” Hagel said. “The industrial base is not spared the damage. But I’m determined to get the department ahead of it,” he said. “We’re all in this together and will come out of it together.”

Hagel said he would not assume that the deep cuts from sequestration will go away, but called on Congress to give his department more time to design a new strategy “that could limit the impact on readiness while still making a contribution to deficit reduction.”

Addressing weapons system, Hagel said, “The military’s modernization strategy still depends on systems that are vastly more expensive and technologically risky than what was promised or budgeted for.” Though he did not specifically mention the military’s Tricare health insurance program, the secretary warned that spending on compensation and benefits in the future “will crowd out spending on procurement acquisition and readiness if current trends not reversed.” He quoted retired Chief of Naval Operations Adm. Gary Roughead’s warning that the Defense Department could evolve into a “transfer agency,” transforming its mission from “protecting the nation to providing benefits and aging equipment.” He acknowledged a need to overcome “deep political and institutional obstacles to reforms, but he told a questioner he did not expect cuts in health benefits this year.

The Pentagon will take “another hard look at personnel, military and civilian,” he said. “How many do we need, how should we compensate? What is the right mix and balance between officers and enlisted people?” He vowed to “scrutinize the org chart” to a degree not done since the Cold War, characterizing the 1980s Goldwater-Nichols Pentagon leadership reforms as achieving “jointness” atop a system of processes that stayed intact. “There was no effort to peel back the world’s largest back office,” Hagel said, referring to the Office of the Defense Secretary, intelligence offices, contractor support and health benefits operations. “We need to take a hard look at requirements, how DoD is structured and incentivized.”

The U.S. national security establishment, Hagel said, has “proved capable of adapting to lean years,” as it did between World War I and II. “Our goal is to learn from the miscalculations of past drawdowns,” he said. “But America doesn’t have the luxury of retrenching. A world in which America is not leading is not a world I’d wish my children to inherit.”

Asked why the Pentagon is planning furloughs if civilian employees are as important as Hagel says, the secretary replied, “I wish I didn’t have to answer that question, but the reality is we have a $41 billion shortfall, so we have to protect the accounts that focus on readiness. We have tried to be fair and minimize pain,” he added. “I know it’s not a good answer.”

Another questioner commended Hagel for recently agreeing to take a pay cut himself.

Asked about the military’s role in defending the homeland working with such agencies such as the State and Homeland Security departments, Hagel said his predecessor Robert Gates “often spoke like a Secretary of State, saying why not rebalance resources to State,” since missions are connected and “you can’t overload the circuits” at the Pentagon. “This may be the most important dimension of where we leaders have to go in government,” Hagel told the mid-carreer students. “Your generation has an opportunity to reshape the world.”