Budget cuts take military "to the edge": Panetta

Reuters News

10/13/2011 1:14:19 PM - Reuters News

By David Alexander

WASHINGTON (Reuters) - Defense Secretary Leon Panetta said on Thursday that cutting $450 billion in security spending over the next decade would take the Pentagon "to the edge" and appealed for U.S. lawmakers to avoid further cuts in national security.

At a hearing interrupted by protesters shouting "war machine" and "you are murdering people," Panetta also announced that he had directed the Defense Department to speed up its efforts to produce budget statements that can be independently audited.

"I have directed the department to cut in half the time it will take to achieve audit readiness for the Statement of Budgetary Resources, so that by 2014 we will have the ability to conduct a full budget audit," Panetta told the House Armed Services Committee.

The Defense Department is one of only two government agencies, along with Homeland Security, that have been unable to produce financial statements that can be independently audited. Congress two years ago ordered the Pentagon to begin producing auditable books by 2017, a goal Panetta said was not quick enough.

"While the department's systems do tell us where we are spending taxpayer funds, we do not yet have the details and controls necessary to pass an audit," he said. "This is inexcusable and must change. In order to achieve fiscal discipline, we need to have the strongest possible financial controls in place."

Panetta's comments come as the Pentagon is working to implement a reduction in national security spending agreed upon between Congress and President Barack Obama in August.

The deal requires $350 billion or $450 billion in cuts over 10 years depending on whether it is compared to the Congressional Budget Office's projections of defense spending or the Pentagon's projections.

Pentagon officials have said the cuts will be difficult but manageable. However, they have expressed concern about a provision that calls for automatic cuts of another $600 billion if a special congressional panel fails to reach a deal to further reduce federal spending.

Some analysts note that Defense Department's budget has nearly doubled over the past decade and say it should be able to manage $1 trillion in spending reductions over a decade without much difficulty.

Panetta, making his first appearance as defense secretary before the House panel, said the $450 billion cut over the next decade "as tough as it is, it's manageable."

"We can do this in a way that protects our force for the future, but it's going to take us to the edge," he said.

"If suddenly on top of that we face additional cuts or if the sequester (automatic cuts) goes into effect and it doubles the number of cuts, then it will truly devastate our national defense," Panetta said. He said President Barack Obama agreed with him that the Defense Department should not be cut further.

(Editing by Jackie Frank)