Sequestration: The Sky is Not Falling

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


On August 2, 2011, Congress passed the Budget Control Act (BCA), which raised the debt limit, cut $917 billion in federal spending over 10 years, and established the Joint Select Committee on Deficit Reduction (the “super committee”). The super committee was supposed to produce legislation by November 23, 2011 to further reduce spending by at least $1.5 trillion over 10 years.

If the super committee failed to propose legislation reducing federal spending by the minimum amount, $1.2 trillion in automatic cuts would be divided equally between defense and various domestic spending programs. This sequestration process was intended to serve as a poison pill to force the committee to present a reasonable plan to Congress. Predictably, this less-than-super committee failed to even submit a proposal, meaning that when Congress fails to pass $1.2 trillion in cuts by the end of 2012, the automatic sequestration cuts will kick in on January 2, 2013.

Unsurprisingly, the agencies in charge of national defense have filled the airwaves and bylines saying the sky is falling and national security is imperiled. On June 29, 2012, Department of Defense (DOD) Secretary Leon Panetta stated that sequestration “threaten[s] the programs critical to our nation's security.”

Members of Congress have also chimed in, mostly decrying the damage of sequestration to national defense. House Majority Leader Eric Cantor (R-Va.) said the automatic cuts would “devastate the economy and threaten nearly a million jobs.” Although the stability of national security is a reasonable objection, “jobs” are not a reason to avoid sequestration.

A much more reasonable case against sequestration is that it may not entail a judicious method of reducing spending. Most observers have assumed that the process would involve across-the-board cuts (of approximately 12 percent) affecting all programs. However, the Office of Management and Budget may undertake a more thoughtful approach, whereby individual programs are analyzed to determine which should be eliminated.

By failing to act thus far, Congress has abdicated such a role in the process of reducing defense spending. Considering Congress’s penchant for supporting parochial items, this aspect of sequestration may be a positive development for taxpayers. Given the resources available to the executive branch agencies such as the various offices of inspectors general, the agencies in charge of national security may very well be best equipped to make the difficult decisions necessary to reduce spending to the level required by the BCA.

Regardless of the final machinations of the process, it is time for the country and its political leadership to consider paring defense spending for two reasons: first, national security spending has increased at an extraordinary rate in recent years, roughly doubling since September 11, 2001. While sequestration has been touted as the doomsday scenario for defense hawks, it would merely return national security spending to fiscal year (FY) 2007 spending levels.

The reduction in defense spending as a percentage that would occur as a result of sequestration is also not unprecedented in the nation’s history. Although estimates differ, most put the total reduction in defense spending at around 12-14 percent, compared to Presidents Dwight Eisenhower’s 27 percent reduction over eight years, Richard Nixon’s 29 percent cut over six years, and Ronald Reagan, George H.W. Bush, and Bill Clinton’s combined 35 percent reductions over 11 years.

The second reason cuts to the DOD could more easily be made than stated by opponents is that numerous programs could be eliminated without jeopardizing national security. One such example is the Medium Extended Air Defense System (MEADS), a program that has been plagued with cost overruns of nearly $2 billion and is 10 years behind schedule. An additional $16.5 billion would be required to complete the design and development and procurement stages, and an internal U.S. Army memo asserted that the program “will not meet U.S. requirements or address the current and emerging threat without extensive and costly modifications.” On July 31, 2012, the Senate Defense Appropriations Subcommittee included in its version of the FY 2013 DOD spending bill $380 million for the program. This occurred after three-of-four relevant congressional committees zeroed out funding. The September 2012 continuing resolution set to fund the federal government through March 27, 2013 included $195 million for MEADS.

Additional savings can be found in the DOD budget by returning funding that lingers in accounts originally meant for programs that have since been canceled or delayed, but remain in five-year budget plans. An August 8, 2012 Washington Post op-ed by Walter Pincus identified $3.8 billion “in recisions of money from about 75 programs that were in appropriations dating to 2007 but had not been spent,” including approximately $100 billion appropriated in 2007 that the DOD is still holding on to for the Navy’s DDG-51 destroyer program , which has been delayed. Returning this money to the federal treasury is a logical next step.

Part of the reason savings are hard to find in the DOD budget is that the agency has not been audited in years. Secretary Panetta acknowledged this in May 2012, saying the DOD “is the only major federal agency that cannot pass an audit today.” The Pentagon will not be ready for an audit for another five years, according to Panetta. In August 2012, Sens. Tom Coburn (R-Okla.) and Joe Manchin (D-W.Va.) introduced legislation that would force the DOD to undertake an audit.

Sequestration would also require the DOD to tackle issues it has failed to address in the past decade, including restructuring military retirement, healthcare, and pay scales. Similar reforms should occur in the area of compensation for DOD contractors. Currently, many contractors receive defined benefit pension plans, meaning taxpayers are on the hook should pensions lose value due to a declining stock market. Transitioning to defined contribution plans would help achieve tens of billions in savings. In January 2012, Citizens Against Government Waste released an issue brief outlining taxpayer liabilities for government contractors’ post-retirement benefits.

Unfortunately, the debate over sequestration has become dominated by discussions of the impact of lower defense spending on the economy and local jobs, and an atavistic determination that national security would be jeopardized. As threats to the country’s security change over time, so too should budgeting. Instead of becoming entangled in conventional rhetoric, leaders in Washington should undertake a sober review in order to determine the appropriate amount the U.S. needs to spend in order to effectively promote national security.

It is important to note that even with a return to the 2007 budget level, the U.S. would still commit more for defense than the next 17 countries combined. In March 2012, Chairman of the Joint Chiefs of Staff (JCS) General Martin Dempsey grudgingly admitted that even with the budget cuts imposed by sequestration, the U.S. would remain a global power.

Regardless of how sequestration plays out, changes need to be made at the Pentagon. The days of unchecked defense spending must come to a close. Reductions in security spending should be made in the most judicious manner possible, and the DOD has many viable options to achieve savings. On September 22, 2011, then-Chairman of the JCS Admiral Mike Mullen described the danger to the country in stark terms: “the single-biggest threat to our national security is our debt.” By pairing down its bloated budget, the Pentagon can help reduce the national debt and thereby increase U.S. security.

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