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Uncertainty grows over Pentagon budget

Fiscal cliff deal puts DoD budget front and center

Jan. 6, 2013 - 01:24PM   |   Last Updated: Jan. 6, 2013 - 01:24PM  |  
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Permanently avoiding massive Pentagon budget cuts could prove difficult as Washington enters a fight over the nation's borrowing limit, a coming political battle that will bring big federal spending cuts to the forefront.

The two-month delay to pending Pentagon spending cuts included in the last-minute fiscal cliff deal passed last week shows both U.S. political parties oppose the across-the-board cut to planned military spending through sequestration.

But it's not that simple, as the two parties remain far apart on the details.

In fact, finding a mix of deficit-reduction components deemed politically appetizing to both could derail anti-sequestration efforts and trigger on March 1 the $500 billion, decade-long cut to projected Pentagon budgets.

The fiscal cliff-avoidance measure "doesn't change a thing about sequestration, other than moving the goalposts a few, small steps," House Armed Services Committee member Duncan Hunter, R-Calif., told Defense News through a spokesman. "Defense cuts might be delayed two months, but when that time comes, and it's right around the corner already, we're back at square one."

For months, sequestration was tied to efforts to extend tax breaks for most Americans while raising rates on the highest earners. Now it will be part of what lawmakers and pundits say will be a nasty fight over the debt ceiling. And that, they agree, is a big problem for the defense sector.

"At this point, sequestration will probably only get the attention it deserves if it's isolated from other big budget issues and dealt with separately," Hunter said. "Otherwise, the outcome could be more delays and uncertainty, and whether we're talking businesses or national defense, or anything else, that's no way to budget."

As the effort to avoid the sequestration cuts begins, the two parties appear very far apart on how to put together a suitable deficit-paring package.

Obama is insisting that new federal revenues be a part of a sequester-killing deal. The president on Dec. 31 said lawmakers must find both revenues and other cuts to offset any delay to the twin $500 billion defense and domestic cuts, saying the plan must be "balanced."

But congressional Republicans say they will resist further revenue-raising measures beyond the high-earner tax hikes in the fiscal cliff bill. GOP members have long been resistant to anything that would increase federal revenues.

Instead, Republicans are salivating for the debt-ceiling fight, eager to battle Obama for big federal spending cuts.

"Democrats now have the opportunity and the responsibility to join Republicans in a serious effort to reduce Washington's out-of-control spending," Senate Minority Leader Mitch McConnell, R-Ky., said. "That's a debate the American people want. It's the debate we'll have next. And it's a debate Republicans are ready for."

Former U.S. Comptroller General David Walker said last week during a television interview that "we're going to see a big battle over spending as part of the debate over the debt ceiling and the [continuing resolution]."

What does that mean for the defense sector? "My guess is the odds of another delay have gone down and the odds of actually having a sequester have gone up," said Todd Harrison, a senior budget analyst at Washington's Center for Strategic and Budgetary Assessments.

For defense, the potential problem lies in a changing GOP ideology and simple math.

"Senator McConnell says spending now means entitlement programs," said one former congressional aide. "What are you going to do, completely gut the non-defense part of the budget?"

Sen. Bob Corker, R-Tenn., said several times last week that Washington should immediately move to dramatically cut the costs of domestic entitlement programs.

But several analysts say cutting entitlement programs to get to deficit-reduction targets is not politically feasible.

That means the math likely will lead to some level of further Pentagon cuts if a deal is struck or frustrated lawmakers walking away from talks and allowing the full $1 trillion in defense and domestic cuts to kick in.

Several sources said if they were either Defense Secretary Leon Panetta or Joint Chiefs Chairman Gen. Martin Dempsey, they would be very nervous with their massive budget tied directly to what will be a debate about the size of government and how much it should spend.

Heritage Foundation analyst James Carafano tweeted on Jan. 2: "Talk of more #fiscalcliff(s) starting [to] sound more like speed bumps to higher taxes, more government spending & bigger defense cuts."

Hawkish lawmakers are banking that an ample number of congressmen will be mindful of Panetta's warnings about the national security implications of sequestration, causing them to put aside worries about how to pay for the delay.

"The secretary of defense and the chairman of the Joint Chiefs of Staff have said they will be unable to defend this nation if sequestration happens," Senate Armed Services Committee Ranking Member John McCain, R-Ariz., told reporters Dec. 31. "That's good enough for me, and it should be good enough for anybody that's negotiating."

But analysts say the current House GOP caucus no longer includes military spending as an untouchable plank of its party platform. It has in many ways been replaced by an intense focus on cutting spending, shrinking the federal government and paring the deficit by any means necessary.

"They came to Washington not to govern," one former official told Defense News recently. "They came to Washington to burn down the castle."

Gordon Adams of American University, who oversaw defense budgeting for the Clinton administration, offered another frightening scenario.

Pentagon funding currently exceeds spending caps put in place by the 2011 Budget Control Act. "If there's no [sequestration] agreement by March 1, there will be a sequester. And the Pentagon and Energy Department would take a $42.5 billion cut," Adams said. "That would bring the level of Pentagon and Energy spending below the cap."

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