Congress partially lifted the across-the-board budget caps in 2013, but the caps are set to kick in again in fiscal 2016. Defense Secretary Ash Carter called them "the collateral damage of political gridlock" and told Congress the cuts would hurt every aspect of the Defense Department.

"If sequestration were to persist over time, the long-term consequences would be harder hitting. We would ultimately have a military that looks fundamentally different, and that performs much differently, from what our nation is accustomed to," Carter wrote in the testimony.

Civilian pay and benefits amounts to $79 billion - or about 15 percent of the base DoD budget - while military pay and benefits amounts to $169 billion or 32 percent of the base budget, according to Carter.

But the military has already cut all it can from modernization, operations, maintenance and training budgets, which means the Defense Department would have to re-evaluate all of its spending to make ends meet - including cutting pay and benefits, he said.

"Everything else is on the table," Carter said. "We could be forced to consider pay cuts, not just cuts in the growth of compensation."

He said he would insist that any new cuts be accompanied by a "frank reassessment of our strategic approach to addressing the threats we face around the world" and the various missions Congress has had the military take on.

The military would also look at ways of shedding excess infrastructure apart from a round of base realignment and closures, which requires Congressional approval. Instead the military would consider all other means of cutting costs, Carter said.

"I cannot tell you right now exactly what that means DoD is not resigned to the return of sequestration but I can tell you that I will direct the department to look at all aspects of the defense budget to determine how best to absorb these cuts. No portion of our budget can remain inviolate," Carter said.

A prolonged period of smaller defense budgets will almost certainly mean a smaller, less capable, and less ready military, Carter said.

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