The Obama administration's top two foreign-policy officials waded deeply into domestic politics on Tuesday, calling for tax hikes to help close the budget deficit and warning against deep cuts to the budgets of the Pentagon and State Department.
Defense Secretary Leon Panetta and Secretary of State Hillary Rodham Clinton made an unusual joint appearance before a military audience at the National Defense University on Tuesday, using their combined political stature to push Congress toward a "balanced" debt-reduction deal that wouldn't fall disproportionately on their two departments.
The two officials have known each other for decades, with Panetta serving as head of the Office of Management and Budget and then as White House chief of staff during the Clinton administration. They appeared comfortable together on stage, referring to each other by their first names and frequently telling jokes. When the moderator asked about their two "gigantic" departments, Clinton—whose budget is roughly one-twelfth the size of Panetta's—quipped, "Well, he's gigantic," drawing laughter from the crowd.
Still, they focused on a serious message about the risks of future budget-cutting. Panetta—like his popular predecessor, Robert Gates—made clear that he would use some of his own political capital on behalf of the State Department even as his own Pentagon faces unrelenting budgetary pressures.
"Our national security is our military power, our Defense Department, but it's also our diplomatic power and the State Department," Panetta said, adding that deep, across-the-board cuts to the two departments "would have devastating effects on national defense and devastating effects certainly on the State Department."
The last-minute deal that President Obama signed with congressional leaders to raise the debt ceiling calls for roughly $400 billion in defense cuts but also included a triggering provision that would automatically cut more than $500 billion in additional Pentagon spending if specific targets were not reached. Panetta and other top Pentagon officials have been loudly warning that cuts of that size would damage the military's ability to carry out its missions.
"It would result in hollowing out the force," he said on Tuesday.
Neither secretary is a stranger to budget politics, and many of their comments had a distinctly partisan overtone. Panetta, the former OMB chief, said that balancing the budget would require tax increases and changes to entitlement programs such as Social Security. Cutting discretionary spending, like the Pentagon's budget, would not free up enough money, he argued.
"If you're serious about dealing with budget deficits, you can't just keep coming back to the discretionary parts of the budget," Panetta said.
Clinton, for her part, noted that the federal budget had been balanced during her husband's two terms in the White House, through a combination of spending cuts and higher taxes, a formula that she said would also work today.
"This is not ancient history," she said. "We had balanced budgets."
Asked if tax increases, which are anathema to most Republicans, would need to be part of any future budget-balancing package, Clinton answered without hesitating: "Yes, absolutely."
She and Panetta both acknowledged that the budget pressures on their departments show no sign of easing. Panetta, for example, said that senior Pentagon officials were weighing a proposal to massively revamp the existing retirement system for the nation's 1.4 million troops.
"It's the kind of thing that you have to consider," Panetta said. "Everything has to be on the table."
The recommendation from a high-level advisory panel established by Gates calls for tossing out the existing retirement system, which gives a fixed pension to anyone who has served for 20 years or more, and replacing it with a 401(k) plan with government contributions. Service members wouldn't be able to access the funds until they reach 65, the country's normal retirement age. Military officials estimate that the change would save roughly $250 billion over the next 20 years.
Panetta told the audience that if the retirement policy were to be revamped, he would seek to ensure that current troops were grandfathered so that they received the full benefits promised to them. The comment drew loud applause from the hundreds of uniformed military personnel in the crowd.
"I know my audience," Panetta joked.
Most of the session focused on the budget and other domestic issues, but the two Cabinet secretaries also faced questions about Libya. Panetta and Clinton said that Muammar al-Qaddafi's hold on power seemed to finally be weakening in the face of advances by the country's rebels, ongoing NATO air strikes, and the defections of key loyalists such as the country's interior minister, who fled to Cairo earlier this week.
"The sense is that Qaddafi's days are numbered," Panetta said.