Defense Budget Sequester Looms in Election Year

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As a result of failed deficit reduction negotiations, more than $500 billion is set to be cut automatically from the defense budget beginning January 2013. Combined, the Pentagon’s budget is on a path to $1 trillion in reductions over the next ten years. National attention on diverting from the automatic sequester arrives just in time for November’s election, as budgets, livelihoods and political careers remain in limbo.

The Bipartisan Policy Center reports, “the full defense and non-defense sequester cuts for just next year could-due to their arbitrary and abrupt nature-reduce U.S. gross domestic product by roughly half a percentage point in 2013 and cause more than one million jobs to be lost of the course of two years.”

The Budget Control Act of 2011, which increased the debt ceiling, also created the Joint Select Committee on Deficit Reduction who were tasked to make $1.2 trillion in federal spending cuts. When the bipartisan “supercommittee” failed to reach an agreement, sequestration process came into effect. An additional cut to funding is scheduled to occur on January 2, 2013 if an alternative is not found.

Figures put the resulting defense budget $28 billion below President Obama’s original proposal for 2013.

The sequester provision was designed to encourage cooperation, but partisan deadlock in Washington saw budget deadlines come and go with no compromise in sight.

“I think the supercommittee tried, but there is a lack of political will in this town to get things done,” House Armed Services Committee Chairman Rep. Buck McKeon (R-CA) said. “We put ourselves in a very, very bad position.”

For now, the defense industry ramps up lobbying efforts in an attempt to avoid dreaded sequestration. Lockheed Martin Corp. projects significant layoffs if the automatic cuts are not resolved or delayed before October.

American Progress reports, “Sequestration will cut government contracts with private industry in the coming year by about 10 percent, or $50 billion.”

The Supreme Court’s imminent health care ruling will affect budget dynamics even further. As Politico reports, if portions of the Affordable Care Act are repealed, billions of appropriated funds could be freed up and reopen budget discussions. The ACA’s individual mandate is projected to cost $282 billion over ten years, according to the Congressional Budget Office. Legislators and lobbyists may seek to turn earmarked funding for health care towards the Pentagon’s budget if the Supreme Court finds the reform law’s individual mandate unconstitutional.

According to the study by the Bipartisan Policy Center the sequester would indiscriminately cut 15% of the defense budget “at the program, project, and activity level”.

“The arbitrary nature of the sequester cuts will degrade U.S. military capabilities and readiness, undermining the effectiveness of any credible defense strategy, including President Obama’s Strategic Guidance, without accomplishing any sensible and necessary reforms to the defense budget.”

The political environment of an election year does not favor a solution before November. Members of Congress are preoccupied with keeping their seats safe before November. Furthermore, the prospect of a lame duck congressional session after elections doesn’t instill much confidence in a timely solution. In places like Florida and Colorado, possible fall layoffs could play a huge factor in the outcome of the presidential election. Yet, as last summer’s budget showdown illustrated, the President’s options for avoiding budget catastrophe may be limited.

A rally held today in Melbourne, FL drew attention to the economic impact cuts in defense and aerospace industries could have on the swing state on an individual level. Approximately 40,000 people are employed by defense firms in Florida and the latest study by the National Association of Manufacturers put the state fourth in projected job loss.

The study found 1 million jobs would be lost in 2014 if the sequester cuts take place, increasing the unemployment rate by 0.7 percent. California will be hit the hardest, with 148,000 jobs projected to be lost. Virginia and Texas follow closely.

“Congress must act to prevent this, and we must act as soon as possible,” ranking member of the House Armed Services Committee Rep. Adam Walsh (D-WA) wrote yesterday in an op-ed for Politico. “Even though the cuts are not scheduled to begin kicking in until January, defense contractors are preparing for those cuts by laying off employees and hurting our economy right now. They cannot simply cross their fingers and hope sequestration does not happen.”