Hagel, speaking to the Chicago Council on Global Affairs, said the Pentagon's proposed 2015 budget was a difficult balancing act that required canceling popular older weapons and slowing the growth of military pay and benefits to have enough funds for training.
"Sustaining our edge in the face of new strategic and fiscal challenges will require Congress' partnership in making tough choices, always looking at our broader national interests instead of narrow constituencies," Hagel said.
But he noted that lawmakers so far have balked at accepting the hard consequences of their budget decisions, which would cut nearly $1 trillion in proposed defense spending over a decade.
"Even as Congress has slashed our overall budget, they have so far proven unwilling to accept necessary reforms to curb growth in compensation costs and eliminate DoD's (Defense Department's) excess infrastructure and unneeded facilities," Hagel said.
His remarks came a day after the Armed Services Committee in the House of Representatives proposed a series of changes in Pentagon spending priorities, attempting to save some weapons programs while cutting funds that could affect readiness. It also rejected any effort to eliminate excess base capacity.
As Hagel was speaking in Chicago, the U.S. military chiefs of staff appeared before the Senate Armed Services Committee to press lawmakers to support their bid to slow the increase in military compensation and make other spending reductions.
"We can't do this alone," Army General Martin Dempsey, the chairman of the Joint Chiefs of Staff, told the panel. "Our recommendations have lacked congressional support, notably our request to reduce base infrastructure and retire weapons systems that we no longer need and cannot afford."
He said the result was that the armed forces lacked the funding they need for training and modernizing weapons systems.
Military compensation, including healthcare and other benefits, has grown by about 50 percent over the past decade and now makes up about half of the Pentagon budget. Analysts have warned that unless the department gets control of the spending, personnel costs may begin crowding out other critical needs.
To address the issue, the Pentagon is proposing a 1 percent pay raise for most uniformed personnel in the 2015 fiscal year beginning Oct. 1, smaller than the rate of inflation. Pay for generals and admirals would be frozen.
The department also is proposing to slow the growth of tax-free housing allowances, reduce the subsidy for military commissaries and reform the TRICARE health insurance program for military families and retirees.
The proposals are expected to save the Pentagon $2 billion in 2015 and $31 billion over the next five years.
The Military Officers Association has estimated the proposed compensation reforms would cost a sergeant with a family of four about $5,000 in lost purchasing power per year.
Admiral James Winnefeld, the vice chairman of the Joint Chiefs, estimated the impact would be half that, about $2,500.
He said a sergeant or petty officer second class with three dependents and six years on the job earns about $64,300 including base pay and benefits. Under the reforms, they would earn about $76,000 by 2019, he added.