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How Leon Panetta Could Change Washington as Next Defense Secretary

Momentum has been gathering to make considerable reductions in the defense budget. "If Gates has cut away the fat" from much of military spending, "then increasingly we're cutting away at muscle," says Andrew Krepinevich, president for the Center for Strategic and Budgetary Assessment in Washington.

Yet the pressure for cuts comes at a time when security challenges are increasing, analysts like Dr. Krepinevich argue. The challenge for the White House will be thinking strategically about which priorities can be trimmed - and which cannot.

China, for example, "is engaged in a military buildup trying to shift the military balance" in the Pacific, says Krepinevich. "Are we going to be a counterbalance?"