Sequestration compromise may come too late to prevent economic blow, Levin says
June 12, 2012
WASHINGTON — The chairman of the Senate Armed Services Committee warned Tuesday that even if Congress finds a compromise to avoid looming automatic defense spending cuts, it might not come quick enough to avoid a serious blow to the nation’s economy.
Under plans approved by Congress last year as part of a failed deficit-reduction bid, the Pentagon will face about $50 billion in spending trims each of the next 10 years. Sen. Carl Levin, D-Mich., told reporters that he believes a majority of lawmakers want to avoid the automatic cuts, known as sequestration, scheduled to go into effect in 2013. But with Republicans and Democrats at odds over whether tax increases should be included in the solution, he fears that compromise won’t happen until after the November elections. That’s too late for budget planners and defense contractors, who need answers before the start of fiscal 2013 on Oct 1.
“We’re going to find a way out … but the big problem is when,” he said. “If it comes in the lame-duck session, it could come too late to avoid a severe weakening of the economy coming just from the prospect of sequestration.”
On Monday, members of the House Armed Services Committee said that a number of aerospace companies and military contractors have already alerted employees of possible layoffs if the budget issues aren’t resolved before the new fiscal year.
David Langstaff, president of the information technology firm TASC Inc., said he has heard from Pentagon budget experts that they’ll start trimming spending plans if a solution isn’t reached by then, even if the actual cuts won’t go into effect until three months later.
Levin acknowledged that a full sequestration alternative likely will not be approved before the end of summer. But he is hopeful that minor compromises on tax and budget issues will calm fears that the cuts are a foregone conclusion.
But even those agreements have been elusive. Levin mentioned a possible extension of tax cuts for middle-income families as an area of compromise, but action on that idea has been bogged down over whether to extend those for high-income families.
He admitted that barring any real progress on a shared deficit-reduction solution, Congress may simply “kick the can down the road” and repeal the automatic cuts.
“I don’t think that’s the way to go … but I can’t say it’s not something that some would consider,” he said.