UPDATE 1-Pentagon delays carrier's Mideast deployment over budget woes
* Pentagon faces $46 billion in cuts over seven months
* Seeks smaller-than-expected military pay raise for 2014
* Threatened cuts follow a decade of growth
WASHINGTON, Feb 6 (Reuters) - Defense Secretary Leon Panetta delayed deployment of an aircraft carrier strike group to the Middle East on Wednesday because of budget uncertainty, hours after warning that congressional inaction on financial matters threatened U.S. security.
The Pentagon also announced it would seek a smaller-than-expected 1 percent pay increase for service members during the 2014 fiscal year that begins in October, another sign of fiscal pressures on the military after nearly a decade of growth.
The outgoing Pentagon chief delayed the deployment of the USS Harry S. Truman aircraft carrier and the USS Gettysburg guided-missile cruiser because of uncertainty over the department's finances, Pentagon spokesman George Little said.
The two ships had been scheduled to leave their home ports in the United States bound for the Middle East later this week, officials said.
"Facing budget uncertainty ... the U.S. Navy made this request to the secretary and he approved," Little said in a statement. "This prudent decision enables the U.S. Navy to maintain these ships to deploy on short notice in the event they are needed to respond to national security contingencies."
The decision leaves the United States with one aircraft carrier in the tense Gulf region, the same force level it has had since December. Little said the U.S. presence was "robust," with a mix of ships and warplanes that could respond to any contingencies.
The decision to delay the carrier deployment came hours after Panetta warned in one of his final speeches as U.S. defense secretary that lurching from budget crisis to budget crisis was threatening U.S. national security.
He told students at Georgetown University in Washington that Congress' failure to deal with the government's financial problems put the Defense Department on the brink of having to absorb $46 billion in spending cuts over seven months.
The cuts, which are due to go into force on March 1 unless Congress acts to avert them, would require the Pentagon to put as many as 800,000 civilian employees on unpaid leave for 22 work days, reduce Navy operations in the western Pacific by up to one-third and cut Air Force flying hours, Panetta said.
'GRIDLOCK AND RECRIMINATION'
"It's difficult to believe, frankly, that the Congress would simply stand aside and ... allow the defense, economy and quality of life of America to be irreparably damaged," Panetta told the students.
"But time and again, they have postponed action and instead have fallen into a pattern of constant partisanship and gridlock and recrimination."
Panetta's remarks came as the Pentagon struggles to deal with the current budget climate. Halfway through the 2013 fiscal year, Congress has yet to appropriate money for the Pentagon. Instead, it is funding the department with a "continuing resolution" that keeps spending at 2012 levels.
The Pentagon, which was already implementing a $487 billion reduction in defense spending over a decade, is facing the possibility of a $500 billion across-the-board cut over 10 years under a process known as sequestration, beginning March 1, unless Congress can agree on alternative savings.
Confusion over the Pentagon's budget has set back efforts to produce a 2014 spending plan, and few details were available, but an official said on Wednesday the department would ask Congress for a lower-than-expected pay increase for uniformed personnel.
That would require lawmakers to stop linking pay increases to the Employment Cost Index. Under Pentagon guidelines, the expected pay increase for 2014 based on the ECI would be 1.8 percent. The department plans to ask for 1 percent instead.
Personnel costs have been rising rapidly at the Pentagon since 2000, with Congress sometimes approving raises higher than requested. The Employment Cost Index has risen 47.4 percent since 2000, while military pay has gone up 63.3 percent, figures show.
Concerned about Congress' inability to reach a deal to avoid more spending reductions, Pentagon officials have ordered the military services to begin taking immediate action to reduce costs and to report back this week on how they will implement additional cuts if the sequestration takes effect.
The Navy is planning to reduce short-term spending by about $6.3 billion, including canceling maintenance for dozens of ships and aircraft in the third and fourth quarters, reducing ship and aircraft operating hours and eliminating 1,121 temporary workers, mainly in shipyards and base support.
If additional budget cuts are implemented on March 1, the Navy will consider cutting flying hours on carrier-deployed aircraft in the Middle East by 55 percent and canceling several submarine deployments.
The U.S. Air Force will have to curtail its orders for Lockheed Martin Corp's F-35 fighter jet, restructure a $52 billion tanker contract with Boeing Co and reduce flying hours by 18 percent if the new budget cuts occur, the service said in a draft plan.
The Army plans to release 1,300 temporary employees, cut base operations by up to 30 percent and cancel ground and air maintenance in the third and fourth quarters, according to a draft plan obtained by AOL Defense and posted online.
If sequestration goes into effect, the Army could have difficulty meeting payroll, even if it furloughed all civilian employees for 22 work days, unless Congress agreed to let it shift funds between its budgetary accounts, the plan said.