Large new cuts in defense spending would "terribly weaken" U.S. national security, Defense Secretary Leon Panetta said Tuesday as he and Secretary of State Hillary Rodham Clinton used a rare joint interview to argue that the nation cannot afford to keep playing partisan chicken with its finances.

Panetta expressed optimism about progress by American-led forces against the Taliban in Afghanistan and by NATO forces in support of anti-government rebels in Libya. He cited those conflicts as examples of why severe cuts to spending on defense and diplomacy would be dangerous.

Panetta said the Pentagon is prepared to make $350 billion in cuts over the next 10 years, as agreed by Congress. But he warned of dangers to the national defense if bigger reductions are required.

The recent deficit compromise reached between the White House and Congress set up a special bipartisan committee to draft legislation to find more government cuts. If the committee cannot agree on a deficit-reduction plan by year's end or if Congress rejects its proposal, it would trigger some $500 billion in additional reductions in projected national security spending.

"This kind of massive cut across the board, which would literally double the number of cuts that we're confronting, that would have devastating effects on our national defense; it would have devastating effects on certainly the State Department," Panetta said.

Clinton said Americans should understand that in addition to preserving military strength, it is in the nation's security interests to maintain the State Department's role in diplomacy and development. She suggested that the political stalemate over spending cuts has put that in jeopardy.

"It does cast a pall over our ability to project the kind of security interests that are in America's interests," she said. "This is not about the Defense Department or the State Department. ... This is about the United States of America. And we need to have a responsible conversation about how we are going to prepare ourselves for the future."

Clinton acknowledged that it is harder to defend the State Department budget than military spending.

"It's a harder case because I think there's a lot of both misunderstanding and rejection of the work that is done by the State Department," she said.

She and Panetta appeared together at National Defense University in an interview conducted by Frank Sesno, director of the School of Media and Public Affairs at George Washington University. Several members of the audience, which included military and civilian officials, also posed questions.

In deploring a fresh wave of violence in Iraq that killed at least 70 people Monday, Clinton also suggested that the Iraqi government is not doing all it can to prevent terrorist acts.

"The Iraqis themselves have more capacity than they did have, but they've got to exercise it," she said. "And we spend a lot of time pushing our friends in the Iraqi government to make decisions, like naming a defense minister and an interior minister, so that they can be better organized to deal with what are the ongoing threats."

Panetta was adamant that severe new budget cuts would undercut the nation's role in the world.

"Very simply, it would result in hollowing out the force," he said, alluding to reductions made in the aftermath of the Vietnam War that left Army units undermanned and ill-equipped. "It would terribly weaken our ability to respond to the threats in the world. But, more importantly, it would break faith with the troops and with their families. And a volunteer army is absolutely essential to our national defense."

Panetta was asked about news reports that the Pentagon was considering reducing military retirement benefits, which, along with military health costs, have ballooned in recent years.

Though those payments have been considered sacrosanct — part of the bargain the nation makes with those who protect it — the economic and debt crises have put those issues squarely in the crosshairs.

A private sector advisory panel last month drafted a plan to eliminate the current system under which those who retire with 20 years of service get immediate, lifetime payments of some 50 percent of their salaries, ramping up to 87.5 percent for 35 years of service. Those with less than 20 years get nothing.

The advisory panel found that 83 percent of people who have served get nothing, and that for this budget year the government contribution to military retirement benefits will be $46 billion.

Though the report is not complete and it is non-binding at any rate, the board recommended the system be scrapped and replaced with a 401K-type defined contribution plan, grandfathering in the disabled and retirees.

"It's the kind of thing you have to consider," Panetta said. He quickly added that it must have a grandfather clause so the government does not "break faith" with the military force.


Associated Press writers Matthew Lee and Pauline Jelinek contributed to this report.