Defense Secretary Announces Steep Cuts to US Military

Chuck Hagel outlines proposal to close ranks to make the Army the smallest since before WWII.
3:00 | 02/24/14

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Transcript for Defense Secretary Announces Steep Cuts to US Military
Since this special group. Report from ABC. I'm Michelle Franzen a New York with his ABC news digital special report. Closing ranks the smallest US army since before World War II that is the proposal secretary of defense -- -- is set to lay out let's listen. -- -- Work that they have put him. Over the last few months in particular. Suggested this morning for -- we have. Have a budget. That we. And -- -- off its. I want to talk about that today -- Dempsey will. Also that is -- remarks but. I am very grateful. I know President Obama is very grateful to these. We've spent an awful lot of time people they were -- -- services. In putting this this together after he want to note that. The comptroller Bob hey don't. This will be his last budget. And -- we call him back into duty after him. Define an island somewhere. And doesn't return calls. But I am particularly appreciative. Of his wounds to states through this budget. Which it was not an easy task for Bob -- all you all know the kind of service he's given this country. In this department in the years. And to Bob Hill thank you would do all your team. We are grateful. Today I'm announcing key decisions it -- recommended to the president. For the Defense Department fiscal -- 2015 budget and the off. These recommendations will adapt and reshape our defense general price. So that we can continue to protecting this nation's security in an era. Five plus and an uncertain and -- As we enter combat mission in Afghanistan. This will be the first budget to fully reflect the transition DOD is making raptor. Thirteen years' war. The longest conflict in our nation's history. We are repositioning to focus on -- strategic challenges and opportunities that will define our future. New technologies new centers of power. And a world that is growing more volatile. More unpredictable and in some instances more threatening to the United States. The choices ahead we'll define our defense institutions -- to come. Chairman -- and I worked in a pragmatic. And collaborative way to build a balanced force our nation must have for the future. The work closely with chairman. Vice chairman. Service secretaries and service chiefs. Developing -- recommendations in the process that began last summer strategic choices and thank you. They also want to recognize. Today. These seniors listed visitors in each of the services. For their contributions. And their involvement in their leadership and what they continue to do. Every day for our country but in particular there to help -- interest in crafting this budget. Our recommendations were guided by an updated defense strategy that builds on the president's 2012. Defense strategic got. As described in the upcoming quadrennial defense review report. This defense strategy is focused on. Defending the homeland against all strategic threats. Building security globally by projection US influence in deterring aggression. And remain prepared to win decisively. Against any adversary to deterrence fail. To fulfill its strategy DOD will continue to shift its operational focus and forces to -- Asia Pacific. Sustained commitment to key allies and partners in the Middle East and Europe -- maintaining management and other relief. And continue to aggressively pursue global terrorists now. Old news -- to new realities. Very clear. First. The development and proliferation of more advanced military technology used by other -- That means that we are entering an era. Where American dominance and -- in the skies and in space can no longer -- there. Second defense spending is not expected to reach the levels projected. In the five year budget plan submitted by the president last year. Given these realities we must now -- -- innovate and make difficult decisions to ensure that our military remains ready -- -- Maintaining its technological edge overall potential adversaries. However as a consequence of large budget cuts. Our future force will assume additional -- in certain areas. In crafting this package we prioritize DO -- strategic interest. And match them to budget -- This required a series is difficult choices. We chose further reductions in troop strength and force structure and every military service. Active and reserve. In order to sustain our readiness and technological superiority. Can't protect critical capabilities like special operations forces -- solution. We chose to terminate. Or delay some modernization programs. To protect higher priorities in procurement research. And develop. And we chose to slow the growth of military compensation costs in ways that will preserve the quality. We all larger force but also. Free -- critical funds needed for sustaining training readiness and modernization. Before describing our specific recommendations let me address the fiscal realities and assumptions behind our decision me. On March 1 when he thirteen. One year ago this week. Steve an abrupt automatic spending cuts were imposed on DOD and other agencies across the government through the mechanism that sequestration. For DOD these irresponsible cuts amounted to 37 billion dollars last fiscal years. -- cuts came on top of the 487. Billion dollar ten year defense spending reductions required. By the budget controlled -- formula. As sequestration is being imposed. President submitted a fiscal year Tony fourteen budget plan that would have fully repeal those cuts in favor -- balanced deficit reduction. That would have given DOD the resources needed to fully implement the president's January 2012. Defense strategy. And maintain -- ready and modern force. Two months ago rather than boys repealing sequestration. Congress passed -- bipartisan budget that. Which provided DOD was some relief from this fiscal year and for fiscal year -- fifteenth. Bipartisan budget act gives DOD and much needed budget certainty for the next fiscal year. But defense spending remains. Significantly below. What the president requested in its fiscal year 2014 budget request and five year budget. Under the spending limits of the bipartisan budget act. DOD's budget roughly 496. Billion dollars this fiscal year for 31 billion dollars below. What the president requested. The law also limits DOD spending in fiscal year 2015. To 496. Billion dollars. Which is 45 billion dollars less than was projected and president's budget request last year. So audio -- welcomes a measure of relief and stability. -- the budget. Act provides. It still forces us to cut more than 75 billion dollars over this two year period. In addition. 237 billion dollar cut we took last year. And the budget control Irish ten year reductions of two world -- 87 billion dollars. -- question he sequestration level threats. Remain law. Remain the law. For fiscal years -- -- sixteen and beyond. The president will soon submit a budget request it but here's bipartisan budget -- spending limits for fiscal year 2015. But it is clear that under these limits the military will still face significant readiness and modernization challenges next year. To close these gaps the president's budget will include an opportunity growth. Security initiative. This initiative is a detailed proposal that is part of the president's budget submission. It would provide an additional 26 billion dollars for the Defense Department fiscal year when he fifteen. These additional funds would be paid for with a balanced package of spending and tax reforms. And would allow us to increase training. Upgrade aircraft and weapons systems. Can make needed repairs to facilities. The money is specifically for bringing unit readiness and equipment closer to standard after disruptions in large shortfalls for the last few years. -- strong support the president's proposal. The president's budget for fiscal year 2015 will also contain a new five year defense budget. Mapping out defense programs since -- in nineteen. Or five years this plan projects 115. Billion dollars more in spending and sequestration -- The reason we are requesting this increase over sequestration levels. Is because the president and I. Would never recommended budget it compromises our national secure. Continued sequestration cuts would compromise our national -- Dirty both for the short and longer. Sequestration -- requires cuts so deep. So abrupt so quickly that we cannot shrink the size of our military fast enough. The short term. The only way to implement sequestration is -- sharply reduce spending on readiness and modernization. Which would almost certainly. Result in a hollow force. One that is not ready one that is not capable of -- assigned mission. The longer term after trimming the military enough to restore readiness and modernization. Resulting force would be too small -- small but fully execute the president's defense strategy. The president's fiscal year -- fifteen budget offers a more deliberate. And far more responsible approach to protect readiness and modernization. While maintaining a force large enough to fulfill our defense strategy -- -- with some risk we're some missions. This plan balances the need to check your national security with the need to be realistic about future budget. DOD has also completed a detailed plan should -- sequestration mobile cuts return in fiscal year 2016. And beyond. -- -- the current law the reality of reduced resource its and a challenging and changing strategic environment. Requires us to prioritize. And make difficult choices. Some of those choices we must make now. Four other choices. Particularly those involving the ultimate -- armed forces we have built decision points in the budget plan. Who make these decisions when we have more clarity regarding future spending -- Our budget will give us the flexibility to make different decisions. Based on different fiscal -- Before -- recommended any changes military size -- capabilities. We first focused on implementing management reforms and reducing duties overhead and operating cost. Last summer I announced a 20% cut. In DOD's major headquarters operating budgets which is expected to save about five billion dollars and operating costs over the next five years. These efforts began in the office of the secretary defense. And the joint staff. But there will also include service in combatant command headquarters. We are paring back contract spending. Making targeted cuts in civilian personnel. Improving the quality of financial information and taking other steps to become more efficient. In addition to continue to implement the more than 200 billion dollars in overhead cuts DOD is submitted in the last three budget proposal. We -- fully achieve our goals for overhead reductions without cutting unnecessary. And costly infrastructure. For that reason you do last congress for another round of base realignment closure of Tony seventeen. I am mindful that congress is not -- To -- requests. The last two years. But if congress continues to block these questions even as they slash the overall budget. We'll have to consider every tool at our disposal. To further reduce infrastructure. Beer he has already been reducing infrastructure -- we can't in Europe we'll track authority cannot -- We have reduced -- infrastructure by 30% since 2000 and European infrastructure consolidation reviews. This spring or recommend further cuts which view -- -- will -- Reducing overhead will continue to be important. But the potential savings. Will not be by themselves. Enough to meet targets under into the president's budget or sequestration. To make the reductions of the scale requires. We had to carefully examine the military's force for. Our force structure and modernization recommendation -- -- three realities. First. After Iraq and Afghanistan. We are no longer sizing the military to conduct -- and -- stability operations. Second. Must maintain our technological edge over potential adversaries. And fair the military must be ready and capable to respond quickly. All contingencies and decisively defeat any opponent. Should deterrence fail. Accordingly our recommendations favor a smaller and more capable force. Putting a premium -- rapidly deploy -- self sustaining platforms that can defeat more technologically advanced at officers. We also preserve all three legs of the nuclear -- And we'll make important investments to preserve a safe secure reliable and effective and from reports. The forces we prioritize can project power over great distances. And carry out a variety of missions more relevant to the president's defense strategy. Such as homeland defense strategic church building partnership capacity. In defeating a symmetric threats. They're also well suited to the strategies rebalance the Asia Pacific beach to sustaining security commitments Middle East and Europe. And our engagement and other -- Our recommendations seek to protect capabilities. Uniquely suited to the most likely missions of the future. Most notably -- special operations forces used for counter terrorism. And crisis response. Accordingly our special operation forces will grow to 69700. Personnel. -- roughly 66000 today. I mean -- describe key recommendations for each of the military service. But the air force and an emphasis on capability. Full capacity. Meant that we protected its key modernization programs including the new bomber. The strike but joint strike fighter. And a new refueling tanker. We also recommended investing one billion dollars in a promising next generation jet engine technology. Which we expect produced sizable cost students to reduce fuel consumption. And lower made some. There's new funding will also help ensure a robust industrial base. A very strong and important industrial base. Itself a national strategic asset. The findings investments -- force will reduce the number of tactical air squadrons including the entire -- week. Retiring -- a potentially save 3.5 billion dollars over five years and accelerates here forces. Longstanding modernization plan. Which call for replacing. The eight -- with a more capable. 35 -- nearly twenty points. Toward all is a venerable platform. And this was a tough decision. But the -- as a forty year old single purpose airplane originally designed to kill enemy tanks from Cold War battlefield. It cannot survive -- operate effectively. Where there are more advanced aircraft to air defenses. And as we saw on Iraq and Afghanistan. The advent of precision munitions. Means that many more types of aircraft can now provide effective closest support. From B one bombers. To remotely piloted aircraft. And -- aircraft connect skewed more than one mission. The -- tends age is also making it more difficult and costly to maintain. Significant savings are only possible through eliminating the entire week. Because of the fixed costs. Of maintaining support apparatus associated. With that aircraft. Keeping a smaller number of agents would only delay the inevitable while forcing worst trade offs self. In addition the -- and the air force will also retire the fifty year old -- In favor of the young man who walks. This decision was a close call. As DOD had previously recommended. Retaining the U2 over the global hawk because of cost issues. But over the last several years DOD has been able to reduce the global hawks operating cost. What is greater range and endurance. Of global hawk makes a better high altitude reconnaissance platform for the future. The air force will slow the growth in its arsenal of armed unmanned systems that while effective against insurgents and terrorists. Cannot operate in the face of enemy aircraft in modern air defenses. Instead of increasing to a force of 65 around the clock combat air patrols. Predator and reaper aircraft. Air force will grow to 55. Still a significant increase. Given the continued draw down and Afghanistan. This level coverage will be sufficient. The meet our requirements. And we would still be able to -- to an unprecedented. 71 combat air patrols and response. You do continue buying -- more capable sleepers until we haven't all of its fleet. If sequestration level cuts -- -- reimposed in 2016. And -- However the air force would need to make far more significant cuts to force structures and finished. The air force would have to retire -- more aircraft. Including the entire KC ten plane tanker fleet and the global hawk watch porn -- Well a slowdown purchases of the joint strike fighter. Resulting in 24 fewer -- thirty five's purchased through fiscal year 2019. And sustained. Ten fewer predator and reaper 24 hour combat air patrol. The air force would also have to take deep cuts from flying hours. Which would prevent -- return -- adequate readiness levels. Next to name. Under the president's budget plan Katie will launch an aggressive and ambitious effort to reduce acquisitions costs. And maximize resources available to buy and build new ships. This will enable our ship -- to continue to grow over the next five years to support the global demands for naval presence. -- spending levels proposed under the president's budget plan would also enable the navy to maintain eleven carrier strike groups. However. We will have to make a final decision on the future of the George Washington aircraft carrier 12016. -- submission. If sequestration spending levels remain in place in fiscal. Year 2016. She would need to be retired before. Her scheduled nuclear refueling and -- world. That will be the -- were ten. Carrier strike groups. But keeping the George Washington and fleet would cost six billion dollars. So I wouldn't see we would have no other choice than to retire. -- sequestration level cuts the -- post. At the president's budget level. We would pay for the overall. And maintain eleven -- In order to help keep -- -- him -- are ready and modern under the president's plan. Half of the navy's cruiser 3411 ships. Will be laid out. And placed in reduced operating status -- they are modernized. And eventually returned to service of greater capability. And longer -- This approach enables us over the long term sustained modernize our fleet of cruisers. Which -- the most capable ships were controlling the air defense of the carrier strike group. Overall the navy's fleet will be significantly modernize under our plan. Which continues buying two destroyers. And to attack submarines per year as well as one additional -- staging base. We have preserved the fleet modernization programs and provide for increases in ship inventory for the next five years. Regarding the navy's -- -- combat action. I am concerned that the navy is relying too heavily on the -- to achieve its long term goals for -- numbers. Therefore no new contract negotiations between beyond 32 ships. Will go full. What this decision PL CS line will continue beyond our five year budget plan would know and eruptions. PL CS was designed to perform certain missions such as mine sweeping anti submarine warfare. In a relatively permissive environment. But we need to closely examine. For the LCS has -- independent protection. And fire power to operate and survive against a more advanced military adversary. In emerging new technologies. Especially in the Asia Pacific. Here we were to build out the LCS programs 52 ships. As previously planned. It would represent 16. Of our future 300 -- -- continued. Fiscal restraints. Must direct future shipbuilding resources. Toward platforms. That can operate in every region and along the full spectrum of conflict. Additionally at my direction -- maybe -- submit alternative proposals to produce capable and lethal small surface combat. Generally consistent with the capabilities of -- I directed -- -- to consider a completely new design existing ship designs. And a modified -- here. These proposals are due to me later this year in time to inform next -- by -- its. If sequestration spending levels return 102016. And beyond. We will be forced into much tougher decisions on the navy surface with. Six additional ships would have to be laid out. And we would have to slow rate which -- biased source. The net result of sequestration level cuts would be ten fewer large surface combatant ships. And the navy's operational inventory by -- 23. Under sequestration spending levels the navy would also -- procurement. The carrier variant of the joint strike fighter for two years -- The Marine -- is inherent agility. Crisis response capabilities. And maritime focus make it well suited. To carry out many priority -- under the president's defense strategy. Accordingly if the president's budget levels are sustained for the next five years. We could avoid additional reductions in in strength. Beyond those already planned. Today the Marines number about 190. -- They won't draw down to 182. House. Sequestration level cuts are we impose a 2016 and beyond the Marines would have to shrink further to 175000. Under any scenario we will devote about 900 more Marines to provide enhanced. Embassy security around the world. Finally -- We seek -- highly ready. And capable are. Able to dominate any opponent across the full spectrum of operations. -- achieve this the army must accelerate the pace and increase the scale of its post war brought. Today there are about 520000. Active duty -- Which the army and plan to reduce to 490 dollars. However the strategic choices in management review and the Q2 QDR. Both determined that since we are no longer sizing the force for -- stability operations. In army of this size is larger than required to meet the demands of our defense strategy. Given reduced budgets. There's also a larger than we can afford to modernize and keep right. We have decided to further reduce active duty army and strength to a range of four -- 42450. Soldiers. I've also accepted the army's recommendations. To terminate the current ground combat vehicle program. And redirect the funds toward developing a next generation plant. I've asked the leadership of the army and the Marine Corps deliver new realistic visions. For a vehicle modernization. By the end of this fiscal year. The changes -- -- would result in smaller army. But would help ensure the army remained. Well trained. And clearly superior. In arms and equipment. While -- more capacity -- some additional risks even if we execute extend. Or simultaneous. Ground operation. Our analysis showed that his force would be capable of decisively defeating aggression. In one major combat theater. As it must be. Also defending the homeland of supporting air and naval forces engaged. Here and another theater against an episode. If sequestration level cuts -- reimposed in 2016. The active duty army would have to draw down -- -- -- strength of 420000. So. The army National Guard and reserves. -- also brought down in order to maintain a balanced force. Today the army National Guard members about 355000. Soldiers. And the reserves about 205000. Sold. 12017. Under our recommendations. There would be 335000. Soldiers nomination won't force structure. And -- 95000. Reservists. If sequestration returns in 2016. The army National Guard would continue drawing down further. -- 3151000. Army reserves would -- down 185. We are protected the National Guard reserves. From cuts to the extent possible. But in order to maintain -- ready and capable force at a time of fiscal constraints. No component of beauty can be entirely exempted from reductions. This 5% recommended reduction guard and reserve soldiers to smaller. In the -- 13% reduction in active duty soldiers. Are mindful that many in the guard and reserve community and in congress. Have argued that the reserve components should be protected from cuts because they provide more troops at lower cost. -- our priority. Was having the largest possible force. In the event of a large scale prolonged war. That would be reason. However our defense -- holes for more than. Surge capacity. Is just one fact. -- we must prioritize readiness capability. And -- -- And while it is true. -- reserve units are less expensive when they are not Mobil's. Our analysis shows that a reserve unit he's roughly the same cost. As an active duty unit when mobilized and deployed. Guardsmen and reservists perform well in Iraq and Afghanistan. We could not achieve what we do need -- place without. But experience shows -- specialty requiring greater collective training. Achieve combat proficiency. And service immigration. Should resign in a full time force. Where these capabilities will be more ready. And available to commanders. What best serves our national security. Is when guard and reserve units complement the active force. That's why we've recommended army guard Apache attack helicopters be transferred to active -- duties. The active army will transfer Blackhawk helicopters to the National Guard. Where they will bolster the guards needed capabilities in areas like disaster relief. And emergency response. These changes to the guards' helicopter fleet are part of a broader realignment of army aviation. Designed to modernize its fleet. And make it highly capable and more -- The force will retire -- -- was in the jet ranger training helicopters used it for -- The active -- overall fleet would decrease by about 25%. But it would be significantly modernize. Under the president's budget for. The guard fleet of helicopters would decline by 8%. But it would gain new Blackhawks. And the army will sustain the guard's fleet of white utility helicopters. If sequestration level cuts reimposed. In 2016. The army would have to cut fifty of these helicopters from the guard force. Well any force reduction has some risk. The future guard helicopter force will still serve as an important operational and strategic. Compliment. To our active duty force. While also being equipped for state and federal requirements for a homeland defense. Disaster relief. And support to civil authorities. In making these difficult decisions on the guard and reserves. We affirm the value. -- highly capable reserve component -- -- the focus on our military can best meet future demand skills. Fiscal constraints. We make choices based on strategic priorities. Clear facts. Unbiased analysis. And fiscal realities. And with the bottom line focus. On how best we can defend the United States. Beyond force structure and modernization. -- to challenge of GODs personnel office civilian and Northrop. Which make up about half of all defenseman. Here -- complied with congressional direction. To reduce or civilian personnel numbers. And work to reshape our civilian workforce. So that it has the skills needed for the future. Given -- steps already taken to reduce civilian personnel costs. Including a three year pay freeze. No realistic effort to find further significant savings can avoid dealing with military compensation. That includes pay and benefits for active and retired troops both direct and in kind. Primary way to reduce overall payroll spending has already been discussed. Reducing the total number of people in uniform. Are bringing down the military force structure and instrument. But since two small force. -- too much risk to our national security -- We must also address spending on pay and benefits for service members. Which since 2001. Has risen about 40% more than growth in the private sector. One of the reasons is that congress boosted pay increases. Above levels requested by DOD -- -- And new benefits and increases in current pay and benefits were also beyond what most active duty personnel -- expected. We're had been promised and join -- doctor. As -- United States senator I supported these proposed. It was the right thing to do at the time. Given the burdens being placed on our service members the military's recruiting and retention challenges. And the fact that we had few constraints and defenseman. But today. DOD faces a vastly different fiscal situation. And all the services continued in the recruiting and retention goals. This year we are concluding combat operations in America's longest war. War that has lasted thirteen years. Must now consider fair. And responsible adjustments to our overall military compensation package. For fiscal year -- fifteen -- will recommend. A 1% raise in basic pay for military personnel. With the exception of general and flag officers whose pay will be frozen for one year. Basic pay raises beyond. Fiscal year -- -- fifteen will be restrained -- raises will continue. We are also recommending a number of change. -- will slow the growth of tax free housing loans. Which currently cover 100% of housing expenses until they cover an average of 95%. -- housing expenses. With a 5% out of pocket contribution. In comparison. The average out of pocket expenditure was 18%. In the late nineties. We will also no longer reimburse for renters insurance. Or three years. We will reduce by one billion dollars the annual direct subsidy provided to military commissioners. Which now totals one point four billion. We're not shutting down concerts. All commissary we'll still get free rent. And pay no taxes. There will be able to continue to provide a very good -- -- service members and retirees. Much like our back our post exchange. Which do not receive direct subsidies. Overseas commissary is in those in remote locations. Will continue receiving. Direct subsidies. And we will simplify and modernize our -- care health insurance program. By consolidating plans and adjusting deductibles and co -- ways encourage members to use the most affordable means of care. Such as military treatment facilities preferred providers. And generic prescriptions. Last retirees in some active duty family members to pay a little more in their deductibles and culprits. But their benefits will remain affordable and generous. As it should. Protect the most vulnerable under this plan medically retired service members their families. And their survivors of service members who die on active duty would not pay the annual. Participation fees charged to other retirees. And would pay a small portion of the cost for health care other than retirees. Our proposals do not include any recommended changes to military retirement benefits. For those now serving in the armed force. We are awaiting the results of the military compensation -- retirement modernization commission. Which is expected to present its report in February 2015. We will await that commission's report before pursuing reforms. In this here. But DOD continues to support the principle of grandfather. For any future changes to military contacts. The adjustments to military compensation. Presented in this year's budget plan will enable each of the military services to invest. More critically important modernization and readiness. While still allowing him to recruit and retain. A high quality to -- offer deserved. Generous competitive. And sustainable benefits. The sale will enable us to sustain a well trained ready Agile. Motivated. And technologically superior force. Although these recommendations do not cut anyone's pay I realize. They will be controversial. Congress has taken some important steps in recent years to control the growth in compensation spending but we must do more. He holistic. And comprehensive approach. Must be taken to compensation change. Continuous piecemeal changes will only magnify uncertainty. And magnified doubts. About our service members with our service members. About whether promised benefits will be there in the future. Instead we must keep -- men and women in uniform. -- -- -- -- We've made it. America has an obligation to make sure sure there's members in the families are fairly. Inappropriate conferences. And cared for during and after their time in uniform. We also have a responsibility provide our troops with the finest training and equipment costs. So that whenever America calls -- They are prepared with every advantage we can give them so that they will return home safely effects. The president's budget fulfills both of these promises to -- service members and their families. Our proposals. Carefully crafted to reform military compensation the fair responsible. And sustainable way. We recognize that no one serving our nation in uniform today is overpaid. For what they do for our country. But if we continue our current course. Without making these modest adjustments now. The choices will only grow more difficult and more painful down the road. We won't get after. Have to either cut in the compensation even more deeply and abrupt. -- we will have to deprive our men and women of the training and equipment they need. To succeed in back. But either way. We would be breaking faith -- -- And the president and I. Will not allow that to -- Recommendations I've described will help bring our military in the balance over the next decade. And responsibly position is for hero both strategic and fiscal concert. There will allow the military to protect our country and fulfill the president's defense start. But with some increased levels of risk. We should be clear about these risks. For the near term because of budget limitations even under the bipartisan budget -- The military will continue to experience gaps in training inmates. Putting stress on the force. And diminishing our global already has even have to stand. A heightened alert posture in regions like the at least -- out. The additional 26 billion dollars provided viewed two DOD by the president's opportunity. Growth and security fund. Would allow us to continue to restore and sustain -- Helping to mitigate this risk. We also face the risk of uncertainty in a dynamic and increasingly dangerous security. Budget reductions inevitably reduce the -- margin of error in dealing with these risks. As other powers are continuing to modernize the weapons portfolios. To include anti air anti -- systems. And a smaller force strange our ability to simultaneously respond to multiple major contingent. Over the president's budget. Our military. Will still be able to defeat any address. We can manage these anticipated risk under the president's budget plan. But they would grow significantly. If sequester level -- -- in fiscal year and sixteen. If our reforms are not accepted. Or if uncertainty on budget levels continue. As I've made clear. -- scale timeline. Continued sequestration -- cuts would require greater reductions in the military size. Reach and margin of technological superiority. Under sequestration spending levels. We would be gambling that our military will not be required to respond to multiple major contingencies at the same thing. Esquire recommendations beyond. Fiscal -- Tony fifteen provide a realistic alternative. Two sequestration level cuts sustaining adequate readiness and modernization most relevant to strategic -- -- -- -- long term. But this can only be achieved by the strategic balance of reforms and reductions the president and I will present to the congress next week. This will require congress. Congress to partner. With the department of defense and making politically difficult choices. Which -- address more specific. When I testify before congress. -- -- -- these recommendations I have as I often do. Look to the pages American history regardless. In doing so. An admonition by Henry stamps and stood up. Writing after World War II. Roosevelt's secretary -- during that time. Said that Americans must act in the world as it is. And not in the world as we -- should work. -- and knew that America's security at home depended on sustaining our commitments abroad. And investing in a strong national defense. He was and who knows. This is it time for real. This is a budget recognizes the reality of the magnitude of our fiscal challenges. The dangerous world we live -- And the American military's unique. And indispensable role in security of this country and -- today's volatile war. There -- difficult decisions. Ahead. That is reality were living. With this reality comes opportunity. The opportunity to reshape our defense and -- -- to be better prepared. Position and equipped. To secure America's interest in the years ahead. All of DOD's leaders these men -- sitting here today. And I. Have every confidence that this will be account thank -- You have been listening to Defense Secretary Chuck Hagel as he addressed. And laid out his plans for a very drastic and dramatic shift in the military budgets here. And certainly we want to bring in ABC's Louis Martinez -- the Pentagon for some more details on the proposal. Louis thank you for joining me a lot of headlines coming out of this and a lot of pain across the board for all branches. Give us a rundown of what stuck out to you. Well the -- headlines here Michelle that -- the army. Being reduced even further than 490000. That we've been anticipating for several years going down somewhere between 44450000. That's going to be the lowest number of army forces since 1940 just before the start of world war to for the United States' entry. Back then in the United States I -- -- has around 300000. Now 490000. Was somewhere in the range of where we were in during the peace dividend years Natalie -- And of course during wars in Iraq and Afghanistan those numbers bumped up almost. -- 600000. But can now -- -- making the case that the wars in Iraq and Afghanistan have gone away basically. And we need to reduce their size. And therefore that this is that kind of -- -- measure given. The realities of the -- of fiscal realities depending -- is working under right now. So because they're looking at the price -- here. The -- ten wart hog that's a standard anti aircraft -- combat. Support aircraft that one's going to go way it's been around for forty years. Cagle said this is an aircraft that was designed to take on Soviet tanks and at the time has come to move on the venerable U2 spy plane that is gonna go -- This is actually a reversal from a couple of years ago -- that you two. Which is a man aircraft was chosen over the. Global hawk aircraft which is on -- The time that program is way too expensive now defense officials say that they admit that they global -- is cheaper and more effective so they're gonna do away with the YouTube. Another thing is for the navy. They're gonna keep eleven carriers but at least for another two years the key thing here. Is that the United States -- has eleven aircraft carriers and has been speculation that they might be reduced to ten. That most likely carrier being -- and let them -- it could be done away with would be the USS George Washington. Which have been -- -- in Japan and was scheduled for retrofitting while the key thing here is that they're gonna have to decide whether -- eleven carriers are ten. And another key point it's gonna have to factor -- is whether. -- -- station is going to be allowed to and continue. -- frustration being these automatic spending. -- -- -- ask you about that because this whole budget is built around whether or not sequestration will continue beyond 2015. Of course our Defense Secretary given us the numbers here of how that may change of whether we decide to make cuts now as a nation as congress. Or whether or not those will be imposed. Upon the military branches and personnel cuts through sequestration can -- -- break that down a little bit. While he basically laid out that there is some risk. In terms of the reductions that he's laid out today but. That risk is manageable what he's saying is that if those -- -- cuts continue or the next two years beyond that to your time -- that they got a little respite in right now. That -- potentially that -- may not be manageable. And that's why he doesn't want in the rest of the deity doesn't want sequestration -- to be allowed to continue as it to be a tough sell for congress because you know they. That the fiscal realities it's fair. They wanna see cuts up on Capitol Hill and the course the budget control act. From two years ago is what has driven a lot of the cuts -- -- you're gonna -- -- defense officials even this morning are saying. You know these are strategic driven cuts there were talking about here. If we were talking about just doing away with budgetary numbers -- -- would that you would see different realities and over presenting you today. I see have to take at face value that what they're talking about is a combination of both. The budget cuts driven by strategy and because of the fiscal realities of where we are today. And that strategy laid out by Defense Secretary Cagle mentioning that these proposed changes would allow the military all branches. To be. At the ready. Smaller but more ads -- ready to react in case. How does these proposed changes give the US and change their ability to respond to threats. Well it didn't like he said it's it's it's about capacity building in other words you don't need the numbers that you needed to occupy. -- you don't -- the numbers they have a larger force in Afghanistan. They're moving away from that what they want is -- more technologically driven more Agile force like he said in one it has capacity. Which means they have the capabilities. To do more with less and that's why they're they think they can -- the numbers down -- one key thing that you heard him talk about here. Is that we will be able. To manage a full war. And but we won't be able to do a simultaneous -- and that maybe -- most people but that's actually been a strategy for the last several years. -- the Pentagon a couple years ago moved away from that simultaneous conflicts strategy is that Cold War. -- so of what he's talking about -- he thinks is doable. But he says that if you move Bian that that kind of a situation -- United States has to move into an extended occupation. What they call stability operation here depending on. Or if you that there is another. Force it comes on and a potential further conflict then that could be risky. But for now they they think that they they're good where they are. And -- you mentioned there are a lot of what -- here and certainly what happens with sequestration. And a lot of numbers that will be floating around in the months to come as secretary. -- -- lays this all out to congress says he mentioned he will do next week. Give me an idea though are these cuts eminent somewhere across the board we've heard a figure here that personnel cuts which are very controversial make up about 50% of the Pentagon's budget. Well that's actually number that's been rising over the last decade. Part of that is has to do with congress -- matching. The pay scales of the civilian sector with the military sector. And as a result is that the added health care benefits that have been given -- it the military forces over the last decade. And so yes. Everybody's on board that -- change is has to come over the next decade. But it's unclear how -- gonna happen -- military commission that's looking at how compensation. Might be changed over in the future because this is a very very -- she. Citing what he said Michelle up on Capitol Hill now off other another thing this is -- we're talking about downsizing over probably the next -- -- said the army's track downsizing I was gonna. Probably happen over the next couple of years they are already in the process of downsizing -- 490000. This further 13% cut. It might come a -- in a much faster timeframe than we anticipate. Now got -- -- tell you that. It's unclear how this is gonna be -- Capitol Hill because you know that A ten aircraft that I spoke about earlier. It has a lot of backers on Capitol Hill and sold last December -- that funding bill the national defense authorization act. They included language and they're saying we don't want the Yates had to be retired and we don't want any funds to be used for that for this year. Who knows what battle what that -- for next. And of course reduction in forces that's on the table we've also heard it sequestration continues. That that taboo that -- no one wants to hear about is base closures in the future that could happen as well not exactly on the table yet. But it's not off the table. It's not off the table it's looking at the Pentagon is one of the last couple of years and congress is just not reacted to it favorably. The base closure process is very complicated. But you you're gonna talk to people here in -- -- -- say that over the last -- year's bracket as it's called. Has done really great things for the military's -- -- streamline operations domestically here. In United States it set combined every it's basically eliminate redundancy in certain parts. But the Pentagon wants to see more than done away with because they want to get even leaner and more. -- and you know -- there are a lot of things that were laid out and touched upon you -- some of the veterans in the -- retirement funds that aren't on the table right now either but. It seems like nothing is necessarily. Saved here. -- not everything is on the table and of course they -- really stressed that there is not going to be any reduction in pay. For anyone right now there's going to be 1% increase. With for military. Service members this year which is pretty typical commerce. Actually make some of those raises even higher on occasion. When after the budget is proposed to them. But in terms of military compensation like you said that is going to be used a difficult fight over years to come that's why you don't hear them talking about military compensation. In one Cagle said it towards me and that is lengthy comments. -- -- talk about or some places where they can make some savings for example those military commissary is located on military bases we get discounts on purchases. Typical we've been told is that they're gonna do away with the subsidy which -- gave military members a 30% discount on prices. Instead it's going to be -- 10% discount. They're gonna be other things and in terms of what they want to do it -- care and whose eligible are not but again these are very tricky subject matters that. Congress is -- ultimately have it. -- and Louis there have been discussions over the last decade since 9/11 have read read. Reducing the forces shifting it around getting smarter with the technology but is it safe to say that this is the more the most severe. Proposed cuts that we've seen. -- you you heard -- say at the very top that we've been in a conflict now for thirteen years and this is going to be the first time that we. Come up with a new way of how we're gonna look towards the future because we've been so wrapped up in this. -- -- in Iraq and Afghanistan for the last thirteen years that we need to move and come up. With new funding levels that basically matched a strategy that they've developed in recent years. So that's going to be -- if he thinks this is -- a breakthrough moment for the Pentagon. And what remains to be seen is how much congress -- -- is actually gonna agree with them. And in terms of how some of these cutbacks need to be -- because they're the ones that control the purse strings here and ultimately their budget than you these budget depends on what happens on the senate and house. Wars and this is a huge issue on both sides of the -- in every community around the country in this politically charged electioneering where congress is that so divided. Where -- the majority of Democrats -- Republicans stand on this issue and can they make average. Well this is actually east and a certain issue theory you're right this is an issue we're at but there's some commonality -- bridging between both parties. They're at such odds up on Capitol Hill but there is an understanding that. They spending levels of -- -- here at the Pentagon for the last decade just cannot be maintained. It's a realistic it's not just coming from the administration it's being echoed on Capitol Hill. The -- -- out just how far they should go and where those cuts should be made. -- some. More Cox against defense -- up on capitol argue that you need to keep the hardware. Others -- in the democratic side might say that you need to make more personal and types of personnel cuts. But it's. He does the party line beards doesn't seem to matter as much because. National security. Becomes -- seems to bridge everything and again and be slight differences but right now there's commonality on capital. And I guess we'll see as the congress gets word of this and as they talk with. Expect secretary Cagle next week of how this will all play out. -- Martinez thank you for your expertise. You have been watching an ABC news digital special report I'm Michelle Franzen in New York.

This transcript has been automatically generated and may not be 100% accurate.

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