Thursday, May 3, 2012

Washington Perspective -- Sequestration

This past Friday Ms. Mackenzie Eaglen from American Enterprise Institute briefed a group of Airpower Advocates on the effects of sequestration.
To remind you – sequestration is the effect of the Budget Control Act of August of last year. The act set up the so-called "Super Committee" of House and Senate members from both political parties. If the Super Committee failed to find $1.2T in budget cuts, then an automatic cut kicks in starting on 1 Jan 13. Congress has until then to: (1) Amend the Act; (2) find different cuts; (3) combination of finding different cuts and raising taxes; or (4) let sequestration take effect. The President has stated he will veto any attempt to amend the Act.
The effect of sequestration would be to cut defense (to include DoD, DHS, parts of State, and Intelligence community) and non-defense accounts by $600B each over the next ten years. If the cuts are "straightlined," this would mean about $50B per year out of DoD’s budget. This would be on top of the $50+B already taken out of the defense budget. Every defense professional in Washington believes this is a really bad outcome. Secretary Panetta and Chairman of the Joint Chiefs of Staff GEN Dempsey have testified that sequestration would devastate the defense of our nation and have stated that America will cease to be a global power if it happens.
Ms. Eaglen’s brief lays out the issue and shows the consequences if sequestration occurs. See:
I’d like to point you to three of her slides. First – most experts believe this issue will not be resolved until after the November elections … in a lame-duck Congress. However, on slide 5 Mackenzie points to the range of issues that may also be awaiting legislation. The list is … huge.
Secondly, there are hints on the Hill that a "grand bargain" will be struck … a compromise reached to lower the effects on DoD. However, Mackenzie points out on slide 11 that the same sets of programs threatened under sequestration will also be threatened under partial sequestration.
Finally – and this is important – on slide 15, she quotes Lockheed Martin CEO Robert J. Stevens:
"The very prospect of sequestration is already having a chilling effect on the industry. We’re not gonna hire, we’re not gonna make speculative investments, we’re not gonna invest in incremental training because the uncertainty associated with $53 billion of reductions in the first fiscal quarter of next year is a huge disruption to our business."
Defense industry is not waiting … its shareholders and Boards of Directors have to react to the possibility of a very large cut in defense. This means they have to hold back hiring, training, etc. The longer this issue is not addressed, the worse the effects will be.
Additionally, the Aerospace Industries Association [http://www.aia-aerospace.orgsponsored a study on the effects of taking $1T out of defense spending. The overall effect will be the loss of over one million jobs. A summary of the study can be found here:
Finally, Todd Harrison from the Center for Strategic and Budgetary Assessments has a short brief on sequestration … his forecasts for the future has, thus far, proved accurate. You can find the brief at:
For your consideration.

Michael M. Dunn
Air Force Association
“The only thing more expensive than a first-rate Air Force is … a second-rate Air Force.”  --  Senate staff member

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