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Defense budget faces more fiscal cliffs

Jan. 8, 2013 - 08:26AM   |   Last Updated: Jan. 8, 2013 - 08:26AM  |  
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As euphoria dims over avoiding the so-called fiscal cliff Jan. 1, the Defense Department faces a new reality: There will be three more opportunities to cut military spending between now and April.

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As euphoria dims over avoiding the so-called fiscal cliff Jan. 1, the Defense Department faces a new reality: There will be three more opportunities to cut military spending between now and April.

The American Taxpayer Relief Act of 2012, passed by Congress on New Year's Day and signed by President Obama the next day, avoided income tax increases on all but 2 percent of U.S. taxpayers by permanently extending Bush-era tax breaks.

The measure also fixed a long-standing problem with Medicare reimbursement rates that was important to seniors including military retirees and extended expiring unemployment benefits for about 2 million people.

Passed by margins of 89-8 in the Senate and 257-167 in the House, the legislation did not resolve the threat of $110 billion in across-the-board cuts in federal programs. Instead, it simply moved the date when across-the-board cuts must be ordered from Jan. 2 to March 1.

Defense Secretary Leon Panetta said Jan. 2 he is pleased that the cuts, known as sequestration, have been delayed.

"Unfortunately, the cloud of sequestration remains," he said. "The responsibility now is to eliminate it as a threat by enacting balanced deficit reduction."

Panetta, former chairman of the House Budget Committee and former director of the White House Office of Management and Budget, said putting off sequestration isn't the same as solving the problem. "Congress cannot continue to just kick the can down the road," he said.

The agreement, reached through direct negotiations involving Vice President Joe Biden and Senate GOP leader Mitch McConnell of Kentucky, also fails to address what to do about the fact that the nation has reached the $16.3 trillion limit on the national debt, and it includes no plan for what happens when the temporary appropriations bill that is keeping the government running expires March 27.

"The problem is, we set up three more fiscal cliffs" with spending cuts the primary response at each step, said Rep. Jim Moran, D-Va. "All that is left is spending cuts."

Putting off sequestration, which threatens a $55 billion cut in defense spending in 2013, gives lawmakers more time to try to reach a deal on an alternative $1.2 trillion deficit-reduction package.

But a delay also has the potential to ratchet up the pain if a deal isn't reached; instead of having eight months to make the automatic cuts, the Defense Department would be forced to achieve the same level of savings in six months.

The shorter time period reduces flexibility in making the cuts that would hit every Pentagon budget account other than military personnel, which is exempt from sequestration, at least for this year, under waiver authority invoked by Obama.

Saving more money in less time without cuts in the number of service members or how much they receive in pay, allowances and bonuses will deepen the impact of reductions in operations and training costs, civilian payroll, and purchases of weapons and spare parts.

For example, defense officials would still consider unpaid furloughs for the 800,000 federal civilian employees but would be unable to spread the furloughs out over a longer period of time to lessen the impact.

Similarly, instead of reducing base maintenance and repairs, the services might have to halt all but emergency repairs to save the same amount of money in less time and could be forced to cancel, rather than delay or downsize, training exercises, giving full training only to units that are about to deploy.

Rep. Buck McKeon, R-Calif., the House Armed Services Committee chairman who spent 2012 trying to find a way to protect DoD from sequestration, said he voted for HR 8 "with important reservations."

"Rather than shield a wartime military from further reductions, this deal leaves the force vulnerable to sequestration's devastating and arbitrary cuts, and it leaves Congress and the president with much work to do to end the crisis," McKeon said. "Every day of uncertainty over further reductions limits our ability to fight the war in Afghanistan, keep Americans free from harm at home, and prevent potential conflict abroad."

Defense cuts remain a possibility as Congress faces the additional fiscal deadlines.

"We cannot continue to have the world's largest and most expensive military by far, the lowest taxes of any of the major economies, the most expensive and inefficient health care, and continue to allow our country's infrastructure to fall apart while America ages and grows," said Rep. Earl Blumenauer, D-Ore.

The new agreement, he said, "represents absolutely the least we could have done and, tragically, institutionalizes for the next Congress the madness of short-term frenzy around self-inflicted deadlines that have no reality to them."

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