Down to the Wire
As threat of sequestration looms, defense companies
hope for the best, prepare for the worst
By DAISY R. KHALIFA, Special Correspondent
but with a pledge to reduce the
deficit by about $2 trillion over 10
years through federal spending cuts.
Accordingly, it outlines two types
of reductions in the near and long
term, one of which involves spending “caps,” or limits on overall discretionary spending that reduce
spending by about $841 billion over
10 years. The DoD’s share is $487
billion over the next decade.
The other is sequestration, which
involves automatic spending cuts
totaling $1.2 trillion over 10 years,
split between defense and non-defense discretionary accounts that
were to go into effect unless a bipartisan, 12-member Joint Select Committee on Deficit Reduction, or
“Super Committee,” could produce a
deficit reduction plan of its own.
About $500 billion of those cuts were
to be borne by defense accounts.
The Super Committee, however,
The Office of Management and Budget, in its report
to Congress Sept. 14 as required by the Sequestration
Transparency Act of 2012, revealed that no amount of
planning can mitigate the effects of the arbitrary cuts.
“Sequestration is a blunt and indiscriminate instru-
ment,” the introduction to the 394-page report says. “It
is not the responsible way for our Nation to achieve
Policy experts from all sides have weighed in on the
potential impact of sequestration within the defense
sector, and on the economy as a whole, and how work-
ers, jobs and small businesses in the defense industry,
among others, might be affected.
Responding to questions from members of the Senate Armed
Services Committee relating to the implementation of sequestration, defense industry officials expressed concern about the
indiscriminate nature of how cuts would be applied, the long-term
effect on the industrial base and the ability of their suppliers to
weather the cuts.
■ Already facing $487 billion in spending cuts over 10 years as
part of the Budget Control Act of 2011, the Defense Department
would bear an additional $500 billion in cuts under sequestration.
■ The challenge for those in the defense industry has been how
to process and share accurate projections as to potential job
losses and other impacts without yet having a grasp themselves
of where the cuts stand.
■ Defense industry observers are concerned about partisan politics and “rhetoric” on Capitol Hill, and warn that “playing it down to
the last seconds on the shot clock” to reach some sort of deficit-reduction compromise “is an exceptionally high-risk strategy.”
Regardless of who wins the White House this November, a certainty facing the Department of Defense (DoD) — and nearly every U.S. federal agency — is spending cuts aimed at offsetting the
nation’s deficit over the next 10 years, according to
terms set forth in the Budget Control Act of 2011 (BCA).
What is not certain is another set of across-the-board federal budget cuts slated to go into effect Jan. 2
unless Congress does something to stop it. This threat
of cuts — under a mechanism called sequestration —
looms large for companies that do business with the
federal government and, if it takes effect as scheduled,
will hit defense companies particularly hard. Defense
spending cuts in 2013 alone could top $50 billion.
The BCA, signed into law by President Barack Obama
in August 2011, allows for an increase to the debt limit,