GOP, Dems at impasse over defense cuts, despite calls for action

Democrats and Republicans are talking past each other when it comes to reversing $500 billion in automatic defense cuts set for Jan. 1, despite an increasingly loud push to cancel them.

Lawmakers in both parties say the automatic cuts through sequestration cannot take effect, and that they want them to be undone now. But even if both sides agree that sequestration cannot stand, the two parties remain unwilling to budge an inch on the $1.2 trillion-pound gorilla that stands in the way: taxes.

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The partisan disconnect played out on Thursday in dueling public appearances.

Sen. John McCain (R-Ariz.) led a group of seven Republican senators in a Capitol Hill news conference who warned of devastating consequences if Congress did not act soon, and McCain said the GOP was “stretching out our hand” to sit down and negotiate with Democrats.

Across the Potomac River, House Armed Services Committee ranking member Adam Smith (D-Wash.) gave a speech at the RAND Corp., where he also said Congress should avoid the “blunt instrument” of sequestration and said Congress needed a “sense of urgency” about its fiscal health.

However, Smith boldly predicted that Congress would likely stop sequestration from going into effect next year. “I do not think [it] will happen,” he said during the Thursday speech. 

Just exactly how lawmakers plan to avoid it is a much more difficult question. 

The problem is that the two sides still deeply disagree about how to achieve the $1.2 trillion in deficit reduction that would replace the automatic cuts to defense and non-defense discretionary spending — cuts that were designed to be so bad as to force the two sides to reach a deal.

“The military’s budget is a hostage to a fight that’s much larger, centered around tax cuts and entitlement reform,” said Mackenzie Eaglen, a fellow at the conservative-leaning American Enterprise Institute.

“The problem Sen. McCain and all members who want to address this right now are facing is that nothing has changed,” she said. “The dynamic of the debate and a deal to change the law are the same as they were a year ago.”

Democrats insist that Republicans must put tax increases on the table in a deficit deal, which Republicans have said they will not do. Republicans, meanwhile, accuse Democrats of being unwilling to touch entitlement spending.

The divide is what doomed the supercommittee in November, and set sequestration in motion.

As the clock ticks closer to January 2013, Pentagon officials and defense industry leaders continue to ratchet up their rhetoric about sequestration’s potentially disastrous impact.

At a Senate hearing this week, the Pentagon’s chief weapons buyer, Frank Kendall, said “hundreds of thousands” of jobs will be at risk if sequestration hits, and warned about broken contracts on big weapons systems.

“Across the department there are places where a devastating impact would occur, and of course that ripples down through all tiers of the industrial base,” Kendall said at his confirmation hearing Thursday. “There would be hundreds of thousands of jobs impacted by it.”

Most defense and budget analysts and many members of Congress say sequestration will not get dealt with until a lame-duck session after the November election. Sequestration is one of numerous big-ticket items that will likely get tackled in the final weeks of the year, including the expiration of former President George W. Bush’s tax rates.

Loren Thompson, an analyst at the Lexington Institute, said it’s quickly becoming more plausible that sequestration will actually occur — particularly if neither party gets a knockout blow in the November elections.

“It’s a measure of how paralyzed the political system is, that everybody agrees sequestration is a bad idea, and yet” it could happen, Thompson said.

“Depending on the outcome of the election, we could get sequestration not just for a few months, but a few years,” he said. “The explanation is really simple: If we get a split decision in which each party has a veto, they won’t be able to repeal the law.”

GOP defense hawks have pushed for Congress to avoid throwing sequestration to the lame-duck session, with bills from House Armed Services Committee Chairman Buck McKeon (R-Calif.) and McCain and Senate Minority Whip Jon Kyl (R-Ariz.) to push it back one year.

“I have never seen a lame-duck session that ended up in anything but a disaster,” McCain said. “For us to somehow say, ‘OK, we’ll wait until after the November election,’ is crazy.”

McCain and the other GOP senators raised the need for bipartisanship at their news conference, and called on President Obama to hold a meeting with Democrats and Republicans in Congress to hash out a deal.

“We’re open to any ideas — this has to be a bipartisan exercise,” Kyl said. When asked about Democrats insisting that taxes be on the table, however, McCain said, “Of course we are against tax increases.”

Senate Armed Services Committee Chairman Carl Levin (D-Mich.), who said earlier this year he believes sequestration will force the GOP to give on taxes, told The Hill he and McCain have yet to sit down to discuss a fix to the automatic cuts.

“Revenues have to be on the table, including tax increases on upper-income folks,” Levin said. “There’s no way you can do serious deficit reduction without including a significant amount of revenues, including. I believe, a tax restoration on the upper bracket.”

After appearing at McCain’s news conference, Sen. Marco Rubio (R-Fla.) accused Democrats of “playing chicken” with national defense spending.

“They’re willing to say that if we don’t concede the tax increases they’re willing to gut America’s national defense,” Rubio said of Democrats. “I think that’s a very dangerous proposition to take.”

Republicans have frequently quoted Defense Secretary Leon Panetta’s doomsday characterizations of sequestration in their pleas for not letting the defense cuts occur, while blasting Obama for not proposing his own solution.

Obama has said he will veto legislation undoing sequestration without providing its equivalent in deficit reduction.

Both Obama’s budget and the House Republican budget that passed Thursday would negate sequestration — Obama’s through tax increases and Ryan’s by shifting the discretionary cuts out of defense.

While neither has a real shot at becoming law on its own, Sen. Lindsey Graham (R-S.C.) suggested Thursday that the two budgets could be a starting point for negotiations.

“Both budgets, the president’s budget and the House budget, avoid the cuts to the Defense Department, they just do it differently,” Graham said. “OK, we’ve got two different ways of setting aside defense sequestration — let’s find common ground.”