WASHINGTON (Reuters) - The Pentagon, trying to free up cash in the face of a yawning U.S. deficit, unveiled a series of cost-cutting measures on Wednesday that will shed thousands of jobs and shut down an entire military command.

Defense Secretary Robert Gates said he hoped the shakeup would show Congress that the Pentagon would spend tax dollars wisely during tough economic times and address long-standing concerns about wasteful expenditure.

But Gates warned in some of his strongest language yet against any future effort to actually cut overall defense spending, which is still growing, but at a much slower rate than it did in the years after the September 11, 2001 attacks.

“My greatest fear is that in economic tough times that people will see the defense budget as the place to solve the nation’s deficit problems,” Gates said.

“As I look around the world and see a more unstable world, more failed and failing states, countries that are investing heavily in their militaries ... I think that would be disastrous.”

The U.S. budget gap hit a record $1.41 trillion in fiscal 2009 and is poised to grow wider this year, unnerving many Americans grappling with unemployment at a lofty 9.5 percent.

But many of the proposed cuts are also almost certain to upset members of Congress, who face the potential loss of jobs in their home districts in an election year.

Beyond U.S. fiscal constraints, Pentagon officials are also mindful that their budget will come under increased scrutiny as the United States winds down the war in Iraq. President Barack Obama has announced plans to start withdrawing troops from Afghanistan starting in July 2011, conditions permitting.

Gates said it was important not to repeat past mistakes where economic troubles or “the winding down of a military campaign leads to steep and unwise reductions in defense.”

“If you were to graph the defense budget going back the last 40 or 50 years, it would look like the EKG of a fibrillating heart,” he said.

“What we need is modest, sustainable growth over a prolonged period of time that allows us to make sensible investment decisions.”

CONTRACTORS FIRED, BASES MAY CLOSE

Pentagon officials declined to say how much the measures would save exactly but described them as part of a previously announced effort to free up more than $100 billion to sustain U.S. forces and upgrade its arsenal over the next five years.

The cost-cutting initiatives include scaling back the number of generals across the U.S. military and slashing funds for defense department contractors by 10 percent each year for the next three years -- a potentially massive reduction involving thousands of people.

Obama, in a statement, praised the announcement as part of Gates’ efforts to “reform the way the Pentagon does business.”

“The funds saved will help us sustain the current force structure and make needed investments in modernization in a fiscally responsible way,” Obama said.

Gates also asked the armed forces to identify U.S. military bases for closure and said he was shutting down the U.S. Joint Forces Command (JFCOM), which has 2,800 U.S. military and civilian staff and about 3,000 contractors.

Four-star General Ray Odierno, who is now overseeing the drawdown in Iraq, was slated to assume the helm of JFCOM after he leaves Baghdad in September.

“I told Ray that his assignment at JFCOM is essentially the same as his assignment in Iraq, and that is working himself out of a job,” Gates joked.

Senator Jim Webb, one of Obama’s Democrats and a prominent member of the Senate’s armed services committee, was critical of the effort to close down JFCOM, which is based in his home state of Virginia.

“It goes without saying that we should achieve efficiency in our nation’s defense budget,” Webb said.

“However doing so at the expense of the command that is leading the charge for the future of our military doctrine and training would be a step backward and could be harmful to the capabilities of the finest military in the world.”