* Appropriations panel backs base budget of ${esc.dollar}513 billion
* War spending in Iraq, Afghanistan set at ${esc.dollar}118 billion
* Carter says deeper cuts could hit programs, personnel
(Adds Carter quotes, Panetta meets industry leaders, Lockheed statement)
By David Alexander
WASHINGTON, Sept 13 (Reuters) - The nominee to become Defense Secretary Leon Panetta's top deputy cautioned against "draconian" cuts in the U.S. military budget on Tuesday as a proposal to tighten defense spending next year began working its way through the Senate.
A Senate panel recommended ${esc.dollar}630 billion in defense spending for the 2012 fiscal year beginning in October, freezing the Pentagon's base budget at ${esc.dollar}513 billion and calling for ${esc.dollar}118 billion for the U.S. wars in Afghanistan and Iraq.
The Pentagon base budget approved by the Senate Defense Appropriations Subcommittee was ${esc.dollar}26 billion less than requested by President Barack Obama and nearly ${esc.dollar}20 billion less than approved by the House of Representatives. The full Senate Appropriations Committee will consider the bill on Thursday.
The panel's action was the first dealing with the defense budget since Congress reached an agreement in August that calls for ${esc.dollar}350 billion in cuts to national security spending over 10 years.
The agreement also created a committee to seek further spending cuts. If the bipartisan panel fails to reach a deal by the end of the year, it would trigger automatic across-the-board reductions that could slash defense national security spending by another ${esc.dollar}600 billion.
That trigger has worried many lawmakers, industry executives and Pentagon officials who fear heavy cuts could jeopardize national security and undermine the industrial base that supports the military.
But other defense experts say the Pentagon's budget has become bloated over the past decade and could absorb as much as ${esc.dollar}1 trillion in spending cuts over the next 10 years.
"TRULY DRACONIAN"
Defense Undersecretary Ashton Carter rejected that view on Tuesday during his confirmation hearing to become Panetta's deputy defense secretary, telling the Senate Armed Services Committee that cuts over and above the ${esc.dollar}350 billion approved in August would be "devastating."
"Just the scale of it alone would lead us to have to consider truly draconian things -- abandoning major weapons systems, furloughing civilian employees and abruptly curtailing training because we couldn't pay for fuel," Carter told the panel.
He said a committee failure to reach an agreement would be particularly bad because the ensuing cuts would hit everything equally.
"It's arbitrary," Carter said. "It's across-the-board, meaning that it deprives us of the opportunity for choice, strategic choice. It puts a haircut across everything. So you get yourself in a circumstance where, for example, you can't execute. You can't buy three-quarters of an aircraft carrier."
Defense industry officials, led by Jim Albaugh of Boeing Co <BA.N>, met with Panetta at the Pentagon on Tuesday to express their concern about the looming budget cuts and said later they had a good meeting that enabled them to stress their need to be able to compete globally.
Panetta underscored the importance of maintaining the skills and capabilities of the defense industrial base as well as continuing to invest in research and development, Pentagon spokesman George Little said.
But he also stressed the need to work together to find efficiencies in the current tight-budget climate, Little said.
The spending measure recommended by the defense appropriations subcommittee included ${esc.dollar}117.8 billion for the wars in Iraq and Afghanistan, That's about ${esc.dollar}41 billion less than in the current fiscal year, largely due to the planned withdrawal of U.S. forces from Iraq by the end of 2011.
To achieve the lower base spending levels, the Senate Defense Appropriations Subcommittee recommended billions in cuts, including ${esc.dollar}695 million to Lockheed Martin's <LMT.N> F-35 Joint Strike Fighter program, the Pentagon's largest procurement project.
It also recommended termination of the Joint Light Tactical Vehicle Program, which aims to produce a replacement for the Army and Marine Corps' fleet of Humvee vehicles, and rejected the Navy's request for a Mobile Landing Platform vessel, saying it should be delayed for a year.
Senator Daniel Inouye, chairman of the panel, sought in prepared remarks to reassure lawmakers that the cuts to defense spending would not undermine military readiness and would fully support members of the military and their families.
He said the budget included a 1.6 percent pay raise for military personnel, ${esc.dollar}250 million for shortfalls in military personnel and ${esc.dollar}40 billion for defense health programs, a ${esc.dollar}1 billion increase over the 2011 levels.
Lockheed Martin said in a statement said it recognized the "difficult challenges" in preparing the new budget and didn't want to comment until full details were released to the Senate Appropriations Committee on Thursday.
(Editing by Eric Walsh)
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