Since taking office in July, Defense Secretary Leon E. Panetta has been clear that his biggest challenge isn’t overseeing the wars in Afghanistan, Iraq or Libya. Instead, it’s dealing with the biggest reductions in defense spending that the Pentagon has confronted since the 1990s.


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“The changing international security landscape and the new fiscal constraints are framing my defining challenge as secretary of defense: How do we build the military we need to confront a wider range of threats and at the same time, reduce spending to control record deficits?” Panetta said, according to a copy of his prepared remarks.

The former CIA director and chief of staff to President Clinton was short on specifics on how he plans to whack another $350 billion in projected defense spending over the next 10 years, much less an additional $500 billion or so that could result if Congress can’t agree on a deficit-reduction package by November.

But Panetta did offer some general insights into which areas of the Pentagon’s massive budget he’d be willing to sacrifice.

For starters, the defense secretary said he’s confident that he can squeeze an extra $60 billion in “efficiencies” over the next five years by targeting overhead, “waste and duplication.” Exactly what kinds of waste and duplication? Panetta left that to the imagination, but said the total sum is on top of $150 billion in “efficiencies” that his predecessor, Robert M. Gates, had identified last year.

Beyond that, however, Panetta made clear that the areas he’s scrutinizing most closely are personnel costs and the size of the armed forces.

He noted that total spending on military compensation and health care have soared by about 80 percent since 2001, even though the number of troops has increased by only 5 percent. While he said those wearing uniforms must be “fairly compensated, that they get the benefits they have earned,” he also called the rise in personnel costs “unsustainable.”

In recent weeks, Panetta has tried to reassure active-duty troops that he will protect their retirement benefits and that any changes would be grandfathered in — meaning, those already serving would be exempted. In his speech on Tuesday, he said he’d take that approach “when I can.”

Besides singling out the soaring cost of health care for military retirees, as he and Gates have previously done, Panetta indicated for the first time that paychecks for the troops won’t automatically increase each year anymore.

That’s sure to be a touchy subject among the rank and file, many of whom have logged repeated deployments to Iraq and Afghanistan.

As Gates noted wryly in April, when he was forced to reassure the troops that they would be paid even if legislative gridlock forced the federal government to shut down: “As a historian, it always occurred to me that a smart thing for government was always to pay the guys with guns first.”