Defense Cuts: Super Committee Bark Might Be Worse Than Its Bite
House and Senate members of the “super committee” shortly will be gearing up for their first meeting, which is expected to take place by mid-September. They will have until Nov. 23 to vote on a deficit-reduction proposal that would go to the full Congress before year’s end.
Panic already has set in across federal agencies and their contractors.
For the Pentagon, the most dreaded outcome is deadlock. If the panel fails to agree to a comprehensive plan of spending cuts and revenues that reduces the national debt by $1.2 trillion, there will be across-the-board budget reductions, and half would come from defense. These automatic “sequester” cuts would be implemented beginning in 2013.
The Pentagon already is moving to cut $350 billion as part of the debt agreement that was signed last month. But the sequestering would result in total cuts of nearly a trillion dollars over 10 years. Defense already has pushed back, with Secretary Leon E. Panetta warning that the trigger option would have “catastrophic” consequences. The defense industry also is mobilizing to persuade the super committee that these cuts would be devastating to one of the few sectors of the U.S. economy that creates high-paying jobs and exports big-ticket products overseas.
Analyst Todd Harrison of the Center for Strategic and Budgetary Assessments says the trigger provision would inevitably bring down the 2013 base defense budget to approximately $472 billion, compared to the administration’s earlier projections of $571 billion. Adjusting for inflation, funding would hold near that level for the following eight years.
“DoD should immediately begin contingency planning for how to handle such a reduction,” says Harrison.
Some insiders just see empty threats. The super committee is just buying time for politicians to get through next year’s elections so they can convince voters that they are serious about tackling the debt, says John M. Simmons, a senior adviser at Akin Gump Strauss Hauer & Feld LLP, a lobbying firm in Washington, D.C.
“This is all about the 2012 election,” he says.
What about sequestration? “I don’t believe it’s ever going to happen,” says Simmons. There is no plausible scenario under which the Pentagon would be able to cut $600 billion on short notice, he says. It would be the fiscal equivalent of trying to stop a freight train on a dime. “You can’t immediately get rid of personnel, you can’t cut operations in the middle of ongoing wars,” Simmons says. The easy targets are the procurement and technology accounts, but that only would achieve relatively minor savings.
Sequestering would be nearly impossible to implement on the prescribed timeline, says Simmons. But defense and industry leaders still worry that the super committee will give the Pentagon a big haircut without the benefit of proper analysis on the merits of particular programs. “Anything that is across-the-board cuts sounds good to the public, but is very bad policy,” Simmons says.
Also undermining the panel’s weightiness is that it will be working on the assumption that the Bush tax cuts will be allowed to expire in 2012. If that doesn’t happen, several more trillion dollars in cuts would have to be made to keep the deficit under control.
Simmons says the panel should help the Pentagon pare back on wasteful spending by proposing another round of base closures. Despite being political footballs, BRAC rounds in the end save the government money, he says. “I would be shocked if the super committee does not come forward with a recommendation to go through a base closure round.”
There is enough low-hanging fruit across the Defense Department, he says. The Air Force alone has 20 percent more bases than it needs, given its shrinking fleet, Simmons says. “They don’t have enough money to maintain the existing facilities,” he says. The savings from closing bases could be used for infrastructure improvements that would save even more money down the road, such as replacing old buildings with energy-efficient ones.
Industry lobbying is ramping up, and will focus on preserving procurement programs. The Aerospace Industries Association unveiled a messaging campaign — called “Second to None” — that taps into fears that the United States may become a second-tier power unless investments are made in key technologies. The association is asking its member companies to engage elected officials.
AIA worries that the deficit debate has been hijacked by “extreme” voices. “Many are saying we need to take a meat axe to the very aerospace and defense programs that have made us the world’s only superpower, built this country’s middle class, and driven world-changing innovation like the Internet, cell phones, GPS and life-saving breakthroughs like CAT scans and dialysis,” says an AIA advisory to members.
Voices of reason are being drowned out, the memo warns. “Moderates are calling for a more careful approach that cuts waste and gets rid of things that don’t work or that we don’t need. … Even as we balance budgets, the United States must do what it takes to remain second to none.”
Simmons says these lobbying efforts are only marginally effective, unless they are precisely targeted. The bottom line is that the 12 individuals on the super committee pretty much can do anything they want, he says. But if the pundits are right, the panel will spend more time demagoguing and posturing than cutting the deficit, and before we know it, it will be 2013, with many new leaders in office. Depending on the outcome of the elections, Congress could repeal any of the super committee’s proposals, he says. “I don’t believe we’re going to be here in January 2013 talking about sequestering with $1.2 trillion.”