Defense hopes for sequester relief

The odds of rolling back the sequester are improving with the fight against Islamic militants and the possibility that Republicans will control the Senate, budget experts and defense firm analysts say.

While repealing the automatic spending cuts is unlikely and even easing the cuts remains an uphill climb, opponents believe they have new, favorable arguments on their side.

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Those talking points include the falling budget deficit and the emerging twin threats of Ebola and the Islamic State in Iraq and Syria.

“I think there is significant hope for an adjustment, but it may be taken in stages,” said Geoff Davis of Republican Consulting, a former member of the House Armed Services Committee.

“My view is that we should get rid of it all together but political realities call for triage. First thing we have to do is stop the bleeding and clear the air way,” he said.

Defense firms have clamored for relief from the sequester, though they’ve been reluctant to stick their necks too far out publicly.

“The industry is not being passive but it's afraid to get involved in political matters,” said Loren Thompson, a consultant who works with multiple contractors. "Industry hates sequestration but no one wants to be seen as being too partisan, one way or the other."

The political problems facing a new Congress are familiar.

The 2011 Budget Control Act that introduced the sequester imposed equal cuts on domestic and defense spending. President Obama has been unwilling to replace cuts to the Pentagon without a commitment from congressional Republicans to ease cuts on the domestic side.

But budget analysts see the 2013 two-year budget deal by House Budget Committee Chairmen Paul RyanPaul Davis RyanDemocrats hit Scalia over LGBTQ rights Three-way clash set to dominate Democratic debate Krystal Ball touts Sanders odds in Texas MORE (R-Wis.) and Senate Budget Committee Chairman Patty MurrayPatricia (Patty) Lynn MurrayDemocrats hit Scalia over LGBTQ rights EXCLUSIVE: Swing-state voters oppose 'surprise' medical bill legislation, Trump pollster warns Overnight Health Care: Juul's lobbying efforts fall short as Trump moves to ban flavored e-cigarettes | Facebook removes fact check from anti-abortion video after criticism | Poll: Most Democrats want presidential candidate who would build on ObamaCare MORE (D-Wash.) as something that could be repeated next year.

“The only really feasible solution is a small deal that raises the defense budget caps by $5 to $10 billion and also raises the non-defense budget caps by the same amount,” said Todd Harrison, senior fellow at the Center for Strategic and Budgetary Assessments.

There’s a “pretty good chance, greater than 50 percent” that Congress could strike another small deal like Ryan-Murray, he said.

The Ryan-Murray budget deal set ceilings on defense spending in fiscal year 2014 and fiscal year 2015 at $520 billion and $521 billion, respectively. The deal also set non-defense caps at $492 billion in those two years.

For fiscal year 2016, under the sequester caps, defense spending would be limited to $523 billion — an increase of just 0.06 percent. In fiscal year 2017, it would be limited to $536 billion.

Defense firms describe those numbers as crippling.

“Across the board, the defense industry is concerned about the impacts of sequestration,” said John Keast of Cornerstone Government Affairs, who says it “hits everywhere.”

Non-defense spending would be limited under the sequester in 2016 to $493 billion, and to $504 billion in 2017.

With President Obama entering his final two years in office and Republicans wanting to show they can govern — particularly if they control both chambers of Congress — there is at least some hope for cooperation, experts say.

And calls by some lawmakers to increase funding for the Pentagon, but also to increase health spending because of Ebola, points to a deal where some limited relief could be offered for both defense and non-defense spending.

Sequester was a way to enact historic budget cuts but was never seen as a “long-term solution” for excess spending, noted Davis.

But many Republican lawmakers in the House are likely to buck at any steps to increase spending.

“If Congress becomes more Republican, there are a good many members who think sequestration is not a bad thing in terms of keeping spending in check,” said David Urban of American Continental Group.

Some are skeptical about the sequester's impact on the Pentagon and argue the Defense Department can afford to take the cuts.

Lindsay Koshgarian, research director for the National Priorities Project, which studies the federal budget, points out the Defense Department was previously able to withstand sequestration by shifting money to the overseas contingency operations (OCO) fund. That account is not affected by the defense budget cap because it's used for emergencies like the war on the Islamic State in Iraq and Syria (ISIS).

“Some have estimated that by shifting money there, it has almost completely offset the sequestration cuts that were themselves diminished after the budget deal in 2013,” she said.

“When you’re talking about these potential cuts that are in the range of $20 to $50 billion, we would still be far and away the number one [military] spender in the world. The Pentagon and its defenders have a lot of justification they need to make for why that [higher] level of funding is necessary.”

Megan Wilson contributed