"I don't think we have to choose between our national security and fiscal responsibility," Panetta said about the cuts, which are part of an Aug. 2 debt proposal required to prevent the United States from defaulting on its loans.
Speaking at a National Defense University conference, Panetta was backed by U.S. Secretary of State Hillary Clinton in his defense of the military's budget. Clinton said the military "has to be given the tools to do the jobs we send them out to do."
"A lot of what we're going to have to do in the future is not sending our young men and women into harm's way but trying to avoid that in the first place," Clinton said.
"It would result in hollowing out the force," Panetta said. "Any kind of cut like that would literally undercut our ability to put together the strong national defense we have today."
He added that drastic budget moves would "terribly weaken our ability to respond to the threats of the world but more importantly it would break faith with the troops and with their families."
"A volunteer army is absolutely essential to our national defense," he said. "Any kind of cut like that would literally undercut our ability to put together the kind of strong defense we have today."
The Defense Department makes up more than 19 percent of the U.S. fiscal 2012 budget. The debt deal imposes $350 billion in cuts with a possible additional $500 billion in cuts if Congress can't agree on more reductions by Christmas.
Despite recent violence in Iraq and Afghanistan, Panetta remained positive about progress in those countries, citing the steady weakening of al-Qaida and a marked buildup of internal security forces there. However, he stressed the U.S. operations should continue.
"Those that are suggesting somehow that this is a good time to pull back are wrong," Panetta said. "This is a good time to keep putting the pressure to make sure that we really do undermine their ability to conduct any kind of attacks on this country."
Clinton said that although the United States will continue leading countries toward democracy, peace and human rights, other players are key to promoting the nation's interests.
"Part of leading is making sure that you get other people on the field," Clinton said.