Panetta said the "perfect storm" could force the U.S. military into the worst possible scenario, a "hollow force," Politico reported.
He said the Pentagon would ratchet back on non-critical military maintenance, freeze civilian hiring along with furloughing civilian employees, stop issuing certain contracts and take "other steps" to counter the possibility of a roughly $45 billion in spending cuts that could go into effect in March unless Congress acts.
Panetta and Joint Chiefs Chairman Gen. Martin Dempsey said March's potential across-the-board budget cuts, the expiration of the continuing spending resolution that keeps government operating and the possibility the country could breach its debt limit required such preparation.
"[Looking] at all three of those, we have no idea what the hell's going to happen," said Panetta, who's leaving as soon as his successor is confirmed. "All told this uncertainty, if left unresolved by the Congress, will seriously harm our military readiness."
"I'd like to believe that ultimately, Congress will do the right thing," Panetta said, but "my fear in talking to members of Congress is that this issue may now be in a very difficult place in terms of their willingness to confront what needs to be done to de-trigger sequester."
"So all those reasons, plus the uncertainty about what happens on the CR [continuing resolution], the debt ceiling, put all that together, and we simply cannot sit back now and not be prepared for the worst," he said.
Dempsey said while military leaders would do their best to protect the readiness of units fighting in Afghanistan, they would have to reduce the amount of money available for training and maintaining other units, Politico said.
"If we're required to do these cuts, suddenly we've got to achieve these levels of savings, how do you protect the war-fighters, those involved in Afghanistan, those areas that are critical to our national defense?" Dempsey asked. "So where do you go? You go to readiness, you go to maintenance, training, this is where the cuts are ultimately made, and when that happens, it make us less ready."