What does sequestration really mean for DOD?

The super committee's failure to identify $1.2 trillion in budget cuts was expected to trigger a nightmare for DOD, but is it happening?

“For DOD, uncertainty means not being able to construct the Future Years Defense Program, which outlines the budget for the next five years and charts a course for the military’s future. Without a realistic FYDP, DOD cannot manage itself as effectively,” Berteau and Crotty wrote. “As the debate on sequestration moves forward, it will be in parallel with congressional action on DOD’s fiscal 2013 budget request, a proposal that will not include sequestration. We will learn more by watching this dual process as it plays out next year.”

The warnings were dire and came from the highest echelons of the government and Defense Department well before the Congressional super committee failed to identify $1.2 trillion in federal budget savings by 2021. The impact of sequestration on DOD is hanging over the Pentagon like a dark cloud, the “devastating doomsday scenario” predicted by Defense Secretary Leon Panetta now a reality.

Or is it?

Sequestration’s threat went something like this: If the super committee failed to act by Nov. 23, it would trigger automatic cuts equaling the aforementioned $1.2 trillion across the federal budget. The cuts would be split equally between defense spending and non-defense spending, effective Jan. 2, 2013. For DOD, this means about $600 billion in budget cuts over the next 10 years.

It’s a bit of an exercise in fuzzy math, but according to the Center for Strategic and International Studies, that would mean:

The major cuts to the budget lower the government’s interest payments considerably, so in reality that $600 billion is more like $492 billion from 2013 to 2021, divided into about $55 billion per year. Combine that with $450 billion in cuts from the Budget Control Act – the debt ceiling deal from August that established the super committee to begin with – and another $39 billion in cuts ordered by the White House, and DOD is looking at a total reduction in spending of about $980 billion over the next 10 years, beginning with the 2013 budget.

“While this is certainly a lot of money, it represents approximately a 15 percent reduction below the baseline 10-year budget provided by the Congressional Budget Office,” David Berteau, president and director of the International Security Program at CSIS, and Ryan Crotty, a research associate with the CSIS Defense-Industrial Initiatives Group, wrote in a Dec. 2 analysis piece. “Despite the outcry from the Pentagon, the total level of these cuts is less than catastrophic. Even under sequestration, the DOD budget in 2013 would be approximately equal to the base budget in 2007 (adjusted for inflation) and well above the low points of defense spending in the late 1990s.”

The current cuts are also well below historical post-war spending decreases – such as those following the Korean and Vietnam wars – something Larry Korb at the Center for American Progress pointed out in September and was echoed in the CSIS report.

Then there’s the possibility that sequestration might not even happen. For one, by the time it would take effect, the U.S. could have new Congress members and even a new president, and the entire law could be avoided wholesale by simply repealing it. And since the legislation still has more than a year to until implementation, Congress, theoretically, has time to come up with a better idea.

Those are possibilities, but far from certainties.

“DOD will begin taking actions in advance of the deadline, perhaps as early as next June or July. Congress is unlikely to act to change sequestration by that time. In addition, President Obama has said, ‘I will veto any effort to get rid of those automatic spending cuts to domestic and defense spending,’” the CSIS report stated.

So what now?

Berteau and Crotty predict that Congress will revisit previous deficit plans, including those proposed by the Bowles-Simpson commission last year and the Senate’s Gang of Six. And the Pentagon is already undergoing efforts to streamline and trim its budget, having been ordered to do so more than a year ago by former Defense Secretary Robert Gates.

But for DOD, the biggest impact right now is the uncertainty, and so much hinges on what remains to be seen.