Speaking at a conference Monday of the Association of Defense Communities, Panetta said potential cuts to defense spending would "hollow out the military," the Department of Defense said in a statement.
Military spending will be cut across the board by $500 billion over the next decade under a "sequestration" policy if Congress cannot pass a debt reduction plan.
Panetta said if sequestration becomes reality, "it'll be a disaster for national defense and it would be a disaster, frankly, for defense communities as well."
The department plans to deal with the budget crisis by becoming a "smaller, ... leaner and more agile force," he said
The military will refocus on its strategies in the Asia-Pacific region, the secretary said, and become vigilant against threats from cyberspace, he said. In addition, the department's strategies must include protecting and investing in its industrial base.