Pessimism growing on deal to avert deep cuts to Pentagon spending

Lawmakers are struggling to head off $500 billion in automatic defense cuts before the end of the year despite a shared desire in both parties to reverse them.

Key senators on defense issues are beginning to press for action now on sequestration and have started meeting in small groups to try and find some way to cancel, delay or otherwise avoid the reductions to the Pentagon budget.

But the two sides have yet to find much common ground on alternative cuts to federal spending, or even on the proper size and cost of the military itself.

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The failure of the supercommittee last year set in motion the $1 trillion in automatic cuts to defense and non-defense spending. At the time, the consensus was that the two sides would likely come together on an agreement to change the policy in the lame-duck session after the election.

But some lawmakers are growing pessimistic about the chances for addressing the issue this Congress. House Armed Services Chairman Buck McKeon (R-Calif.), who has a bill to delay sequestration for one year, told reporters Thursday that the idea of a lame-duck deal was always far-fetched.

McKeon questioned why anyone would think, “that we’re all going to come together in a Kumbaya moment and solve all these problems” after one of the “nastiest” elections in recent memory.

Instead, McKeon is proposing that Congress “kick it down the road” now, delaying sequestration so that companies do not have to worry about the uncertainty of a $50 billion cut to the defense budget next year.

The defense industry has helped press the issue, as large contractors like Lockheed Martin have signaled they may issue federally-mandated layoff notices to all of their employees — potentially just days before the November election.

Most Democrats and Republicans, as well as the Obama administration, do not want the cuts from sequestration to occur. But the two parties remain deadlocked — as they were on the supercommittee — about where to find other deficit reduction. Democrats insist that tax increases must be part of the deal, while Republicans say that entitlement spending has to be addressed.

Another issue that’s working against a deal is that the defense cuts are a key bargaining chip for the “fiscal cliff” facing Congress in the lame-duck session, when lawmakers must tackle the expiration of the Bush tax rates and other big-ticket spending issues.

Defense insiders say many are looking to the two heads of the Senate Armed Services Committee, Chairman Carl Levin (D-Mich.) and ranking member John McCain (R-Ariz.), to be the catalyst for a bipartisan deal, and the two have started discussions.

But finding common ground has already proved difficult.

In a roundtable with reporters, Levin floated that the defense and non-defense spending could be cut $100 billion each over the next decade, rather than $500 billion, to help contribute to a deal.

McCain called that idea a non-starter.

Still, both senators told reporters Thursday after speaking at a Bloomberg Government Defense Conference they weren’t discouraged by the disagreement, and it wouldn’t dampen their talks.

“We are putting everything on the table in our discussions,” McCain told reporters. “That’s the only appropriate way to do it.”

McCain said he was open to the idea of considering raising revenues, something that was also endorsed by McCain’s close Senate ally Sen. Lindsey Graham (R-S.C.). That could go against an anti-tax pledge most Republicans have signed from Grover Norquist’s Americans for Tax Reform.

The GOP senators aren’t endorsing raising tax rates like Democrats want, but are backing the idea of closing tax loopholes.

Levin told The Hill McCain’s openness was encouraging, and said it was a break from the no-new-taxes pledge.

“I don’t think you can raise enough revenue frankly by just closing tax loopholes, but … the acknowledgement that you have to move to additional revenues is important,” Levin said. “To move away from the pledge which has been given is significant.”

The Senate also took a step forward on the floor this week, including a bipartisan amendment in the farm bill that would require the White House and administration to explain the impact of sequestration, both for defense and non-defense.

For the House, where there’s more opposition to raising any revenues, signs of progress are hard to find.

“The Senate will compromise — the problem is the House,” Rep. Jim Moran (D-Va.), who sits on the House Defense Appropriations subcommittee, told The Hill. “There’s no deal without some revenue, and I don’t see the House Republican leadership accepting serious revenue increases.”

Levin also placed blame on House Republicans for the gridlock. “The problem is Republican leaders in the House — they will not talk about revenues,” he said. “As long as they take that absolute stand they can’t get anything done.”

House Republicans counter that they have passed a budget that averts sequestration, although it’s one that Democrats oppose because of deeper cuts to non-defense discretionary spending.

Republicans also point the finger at President Obama for threatening to veto bills that undo sequestration but don’t include revenues. Obama and Pentagon officials have said that Congress must do its duty and find the alternative deficit reduction to reverse the automatic cuts.

McCain has repeatedly called for Obama to get himself involved in the negotiations to avert sequestration. When asked Thursday morning after speaking at the Bloomberg conference about a timeline for meeting with the president, McCain responded: “Today. Before lunch.”