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: http://www.afa.org/members/CommTools/APA/OpEds/eaglen.pdf
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.org] sponsored 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: http://secondtonone.org/analysis-projects-one-million-jobs-at-risk-from-defense-cuts
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: http://www.afa.org/PresidentsCorner/WashingtonPerspective/2012/harrison.pdf
For
your consideration.
Mike
Michael M. Dunn
President/CEO
Air Force Association
“The only thing more expensive than a first-rate
Air Force is … a second-rate Air Force.” -- Senate staff member
Michael M. Dunn
President/CEO
Air Force Association
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