Sequestration is coming.
The business that came up with the concept of “Mutually Assured Destruction” is now locked in an internal battle to preserve its own existence.
As it stands right now, on January 2, 2013 the Department of Defense base budget will take an immense and — for some businesses — catastrophic drop in funding as part of the deal reached after the failure of last year’s supercommittee.
Nobody really wants to see that happen. But to reach a deal, longtime adversaries will have to overcome their differences and work together. Will it work? Find out here.
Here’s how we got to this dire point
The deal reached for the debt ceiling involved a cap to the Defense budget, which right now stands at a projected $525 billion for next year.
Since the supercommittee failed, additional automatic cuts to the Defense budget will go into effect, unless a new deal can be made. This is called “sequestration.”
It means the Defense Department will have to cut another $50 billion for Fiscal Year 2013, bringing the Department of Defense budget to $472 billion, close to a 10% additional cut.
That cut could cripple the military, drive defense firms out of business, and would cost hundreds of thousands of jobs across the country.
The Defense Department just wants enough money to run the military well
This year, the cuts have already slashed the military budget to a recent low.
Defense Secretary Panetta has gone on record stating how dire the cuts will be, how devastating they will be for the military, and that he’s convinced there is no way that Congress will ever try to actually go through with it.
That message has been reiterated at practically every Pentagon press conference since the original vote last year.
Look to the Pentagon to serve as the fire under Congress to act, releasing increasingly stronger worded warnings and possibly even structuring the cuts in a way that compels congress to act coherently.
House Republicans want to see the Defense side of sequester killed right now
The people on the hill who want to see the cuts go away most of all are easily the House Republicans.
House Armed Services Committee Chairman Buck McKeon, whose district houses many defense contractors working around Palmdale, California, is adamant about the need to make the cuts go away as soon as possible.
McKeon told the Army Times that postponing handling of the issue until after the election is ludicrous, as he doesn’t think that Congress has the “maturity” to handle the cuts at that point.
Another reason the House Republicans want to stop the cuts is that many of the jobs losses in the aerospace and defense sector — jobs in Virginia, North Carolina, Texas, and parts of California — will be removed from Republican or swing districts.
The defense industry is looking at a massive losses of revenue if any of this goes through, and will fight it to the death
It seems like the defense industrial complex still fully understands the concept of mutually-assured destruction. They’re not messing around on this one at all.
The military budget comprises, in many cases, the primary source of revenue for these firms.
The aerospace and defense companies that dominate the business — Lockheed Martin has come out in front of the pack — are opposing the planned cuts and fighting tooth and nail to keep the military budget safe.
They’re pressing on Congress to act to stop the cuts, and they’re very well positioned to do so. The Defense sector has one of the most active lobbying segments and generous political contributions.
Even more, they’re breaking out the big guns. If cuts go through, there will be across-the-sector layoffs.
They’ve threatened to send out notices of termination right before this November’s election.
That might make Congress move.
Senate Republicans are willing to accept tax increases if it means saving the defense budget
The Senate Armed Services Committee is extremely bipartisan. They have an excellent working relationship across party lines. Look to the Senate Republicans for leadership on how the negotiations will go.
Senator John McCain has gotten to the point where he is willing to raise taxes if it means saving the defense business.
McCain told Bloomberg that he thought a plan to raise revenues could serve as a blueprint to make the necessary money to offset the cuts.
He described the mandatory additional cuts as “so devastating that the Secretary of Defense will not even contemplate the plans necessary to implement sequestration,” referring to the fact that the Defense Department has remained mum on their planned response.
Aerospace and Defense industry unions will have to team up with their longtime adversaries, management
What’s that old saying about politics and bedfellows?
This is one of those situations where longtime antagonists will have to come together to stop the cuts.
The workers in the aerospace and defense industry arguably have the most to lose of anyone, as sequestration would almost assuredly mean mass layoffs across the sector and many sectors associated with it.
It’s already estimated that the cuts to defense would cause the loss of a million jobs.
So, despite the fact that the machinists just finished striking at Lockheed Martin less than two weeks ago, labor and management will have to team up this time to prevent the cuts from happening. Union members can vote, companies cannot.
Congressional Democrats want to see many of the other cuts go away, and are willing to give on defense
The mistake made when considering the cuts is thinking that it’s something that anybody particularly wants.
Were it up to most of the mainstream factions on the hill, Sequestration wouldn’t happen.
In addition to the massive cuts to the Defense money, scores of other government programs — the national park system, the Federal Aviation Administration, many different agencies — are seeing cuts on par with the defense budget cuts, some even worse.
What to expect from the Democrats is that they will be willing, in the end, to restore much or all of the defense cuts, but that they will also try to ensure that revenues increase to pay for that and that non-defense programs are salvaged in part or in whole.