Panetta's comments about budget reductions come nearly three weeks before the so-called congressional super committee reaches a key deadline. The Pentagon stands to see $600 billion in automatic cuts if the committee does not come up with an alternative plan.
"There will be some huge political challenges," Panetta told the Times in an interview that took place Friday. "When you reduce defense spending, there's likely to be base closures, possible reduction in air wings," he said.
The days of a counterinsurgency-focused force might be coming to a close.
The Times reported that Panetta "did not envision maintaining a ground force large enough to conduct a long, bloody war and then stability operations in North Korea or Iran, as the United States did in Afghanistan and Iraq."
Among the proposals he was considering, Panetta told the Times that the Pentagon was considering raising fees for the military's health insurance program. Military retirees and families, who are guaranteed the military benefit for life, pay only $460 a year in fees, the Times said.
He also told the Times he would consider supporting the creation of a "binding commission" that would review military retirement pay. He did not give details of potential pay reductions.