Defense cuts could hinge on '12 election

Republicans in Congress who want to reverse the $500 billion in automatic cuts facing the Pentagon budget early next year are unlikely to gain traction with their arguments until after the 2012 election.

Budget-watchers say the political environment and the track record of the 112th Congress make it almost a sure bet that the defense triggers included in last summer’s debt-ceiling deal won’t be dealt with before a lame-duck session.

“Until there’s an actual solution, which requires goring somebody’s ox, nobody’s likely going to be the one to step up,” said Russell Rumbaugh, co-director of the Budgeting for Foreign Affairs and Defense program at The Stimson Center. “Nobody has an incentive to go first.”

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This would leave just two months to change the trigger before the cuts are implemented on Jan. 1, 2013.

The potential cuts to defense are likely to be a presidential election issue used by both President Obama and his Republican opponent.

Former Massachusetts Gov. Mitt Romney has already attacked Obama for the potential $1 trillion in cuts to the Pentagon budget — between sequestration and caps from the Budget Control Act already agreed to — while Obama is looking to campaign against a do-nothing Congress.

Republican senators have promised to offer legislation early next year to prevent the cuts, while House Armed Services Committee Chairman Buck McKeon (R-Calif.) introduced his bill last week, which would undo the first year of automatic cuts.

Democrats quickly slammed the GOP proposals, generating a letter from more than 90 House Democrats that urged Obama to veto attempts to back out of the sequester.

The exchange is likely to be repeated again and again next year as the election approaches and partisan positions are hardened.

Most Democrats don’t want to see sequestration’s across-the-board cuts to happen in either defense or non-defense spending. But even hawkish Democrats have said they are unwilling to change the sequester without Republicans giving ground on revenues. This is the same impasse that has bedeviled policymakers repeatedly this year.

McKeon thinks waiting to deal with the cuts until after the election is a mistake.

His bill would stave off the first year of sequestration cuts by saving $127 billion through attrition in the federal workforce. McKeon’s proposal, which would hire back only one federal worker for every three that leave over the next decade, would cover the cost of automatic cuts for both defense and non-defense spending in 2013, giving Congress “breathing room” for a permanent fiscal solution.

“I don’t want to wait until November,” McKeon said. “Everybody can’t wait forever to make their decisions.”

McKeon and others have warned that waiting for a year to change the sequestration cuts will have negative consequences, as it will leave the Pentagon, service members and the defense industry in a cloud of uncertainty as the Defense budget is hashed out with a $50 billion variable looming in the 2013 budget.

The Pentagon has said it is not planning for sequestration-level cuts, which Defense Secretary Leon Panetta has labeled a “doomsday scenario.” Drafts of the 2013 Defense budget have accounted only for the first-year reductions agreed to in the debt-limit deal, which the Pentagon says will total $489 billion over the next decade.

“If the Pentagon was currently preparing a budget that reflected the cuts from sequestration, then it would be implicitly conceding that it could manage those cuts,” said Travis Sharp, a fellow at the Center for a New American Security.

For the defense industry, a year of uncertainty would stop companies from investing in military spending, further harming an industry that’s already bracing for contraction, said Cord Sterling, vice president for legislative affairs at the Aerospace Industries Association.

“From every reasonable, rational approach, we want to get this resolved as soon as possible — we need to know what’s going to happen,” Sterling said. “When your company’s very survival could depend upon decisions that are made or not made, you cannot take that risk. You cannot sit there and say DOD hopes it will go away.”

One key reason most don’t expect sequestration to get resolved until the lame-duck is that another big ticket item — the Bush-era tax cuts — expire at the end of 2012.

The combination of the Bush tax cuts expiring and the threat of automatic defense cuts will shift the onus on the Republicans to act in a reversal of this year’s big budget battles in Congress.

“The status quo benefits the Democrats’ political preferences, which are to let the Bush tax cuts expire — at least for the wealthiest Americans — and to use the increase in revenue to pay off deficit reduction,” Sharp said.

“Republicans might actually have more of an incentive to reach a deal earlier as opposed to later, because the later they go, then they’re in a situation where they really don’t want tax cuts to expire and so they have to concede more to get the Democrats to come on board,” he said.

Of course, even if both sides want to change the automatic cuts to defense spending, this past week’s payroll tax debate has shown the two parties often find a way to reach an impasse even when they are seeking a similar goal.

“I would probably expect leaders to undo sequestration,” Sharp said, “but I think it’s pretty foolhardy at this point to bet on our political leaders reaching a compromise."