There was never any question that Defense Secretary Chuck Hagel would have to wield the budget axe—simple fiscal and political math guaranteed that—but many wondered how he would swing it: Would he chip away at the edges of the defense budget, like Robert Gates? Or would he make just enough cuts to claim that the Pentagon had already paid at the office when sequestration rolled around, like Leon Panetta?

Today we got a big hint when Hagel gave a major policy address at National Defense University at Fort McNair in Washington. Hagel called a downturn in defense budgets “inevitable,” and correctly observed that the money-chewers in the defense budget were acquisitions, personnel costs, and overhead. In fact, many of his statements echoed recommendations in our May 2012 report with the Project on Government Oversight, Spending Even Less, Spending Even Smarter. Some examples:

·        “Despite pruning many major procurement programs over the past four years, the military’s modernization strategy still depends on systems that are vastly more expensive and technologically risky than what was promised or budgeted for.“ Exhibit A: The F-35 Joint Strike Fighter. The costs of most expensive acquisition program in the Defense Department’s history have nearly doubled to $400 billion dollars, but DOD continues to center its air strategy around the aircraft. We recommended canceling variants of the plane built for the Navy and Marines with capable but less expensive aircraft, for a savings of $61.7 billion.

·         “Fiscal realities demand another hard look at personnel – how many people we have (military and civilian), how many we need, what these people do, and how we compensate them for their work, service, and loyalty with pay, benefits and health care.” The cost of TRICARE, DOD’s health care system, has more than doubled in the last decade and now exceeds $50 billion. The minor reforms we recommend echo those made in a DOD review, and would save the department $76.5 billion over the next decade.

·         “Despite good efforts and intentions, it is still not clear that every option has been exercised or considered to pare back the world’s largest back-office.” We often point out that the Pentagon is the world’s largest bureaucracy, a word that is not synonymous with efficiency. DOD can save money by stopping the proliferation of stars and bars in the agency’s management ranks, as well as cutting down on service contractors—a goal set by Gates. Reducing DOD service contracts by 15 percent over the next ten years contractors would save a whopping $372 billion.

So does this speech make Hagel a fiscal warrior? Unfortunately, talking about change doesn’t make it so: Many of his observations have been made by others before him and even proposed to Congress, only to get shot down. Hagel also gets a demerit for repeating the old saw that DOD will be operating with “significantly less resources.” From when, exactly? Sequestration will take the Pentagon “back” to our 2007 wartime budget, which was near its historical peak.

But Hagel gets a gold star for what may be the biggest change heralded by his speech: Admitting the need for “matching missions with resources,” meaning resources must inform strategy. “We cannot simply wish or hope our way to carrying out a responsible national security strategy and its implementation,” he said. Let’s hope the ears on Capitol Hill and in the Pentagon hear that common-sense  message.