WASHINGTON — In a signal of deepening doubt that Washington will find a way to cut through mounting political chaos to avert looming spending cuts and tax increases, the Pentagon announced Wednesday it has finally begun to prepare for the plunge off the “fiscal cliff.”
As directed this week by the White House Office of Management and Budget, the Defense Department will begin planning for what Defense Secretary Leon Panetta has often called the “meat ax” of sequestration — across-the-board spending cuts that would slash more than $50 billion a year out of the defense budget for a decade.
The announcement followed more than a year of defense leaders saying they would not budget for sequestration. The cuts would come on top of about $500 billion in spending reductions over a decade that the department has already endorsed and would devastate national defense, top DOD officials have repeatedly said.
Defense Department operations, which would endure half of the $1.2 billion in automatic cuts to discretionary spending mandated by the Budget Control Act of 2011, didn’t appear to top the agenda as Republicans and Democrats dug in for a continued fight over how to reduce the deficit.
Both sides have submitted deficit-cutting proposals, but Republicans don’t want to raise tax rates, while Democrats, led by President Barack Obama, insist the wealthiest Americans must pay more.
Each side is blaming the other for the looming plunge, which analysts say has the potential to throw the U.S. economy into recession.
“Nothing is going on,” House Majority Leader Eric Cantor said Wednesday after a meeting with fellow Republicans. “We ask the president to sit down with us.”
Democrats point the finger in the other direction, and top White House aides indicated the possibility that Obama might let sequestration happen if Republicans don’t allow tax rates to rise, The Associated Press reported.
“This is a choice of the Republican Party,” said Dan Pfeiffer, White House communications director. “If they are willing to do higher rates on the wealthy, there’s a lot we can talk about. And if they are not, then they’ll push us over the cliff.”
The ongoing tumult leaves the question of how to fund near-term Pentagon operations up in the air. The Senate on Tuesday passed a $631 billion defense bill that outlines funding for DOD operations for the current fiscal year, including a 1.7 percent raise for troops. Now, amid sequestration maneuvering, Senate and House negotiators must reconcile two versions of the bill to deliver one to the president’s desk for signing.
Regardless of whether automatic cuts are averted, the Pentagon likely faces billions more in cuts on top of the $500 billion DOD leaders endorsed in last year’s budget talks.
A budget proposal that Republican leaders sent to White House this week calls for $300 billion in cuts to discretionary spending, with a goal of saving $2.2 trillion over 10 years. The DOD’s cut of federal discretionary spending is roughly half, meaning the Pentagon would absorb significant additional reductions.
With less than a month to go before sequestration cuts begin taking effect Jan. 3, planning is just getting under way, Pentagon press secretary George Little said Wednesday.
Little said he had assembled a communications team that would explain impacts of sequestration to the DOD workforce but top DOD and White House officials must first determine what those impacts are likely to be.
A few things are clear. Under a presidential order issued in July, military salaries and benefits will not be cut as a result of sequestration, but the rest of the Pentagon — civilian workers’ pay and benefits, operations, research and development, acquisitions — will be subject to cuts.
If sequestration happens, defense leaders hope to dull the “meat ax” as much as possible, Little said.
Although sequestration was designed as an extreme, punitive mechanism to push legislators to solve the budget problem, Little said, “Our intent is to not implement sequestration in an absurd way internally inside the Department of Defense.”
Should legislators and the president fail to pull back from the cliff by the end of 2012, Little said, the full effects will not be felt immediately in the Defense Department and could still be averted by quick action next year.
“If sequestration were to take place, we have this month and then we have, I think, a few months in 2013 as well,” he said. “Everything is not going to be decided on Jan. 3. People will still come to work, we think, at this stage.”