Sequestration worse than thought, Pentagon frets

Thursday - 12/13/2012, 5:42am EST

When it comes to describing the consequences of sequestration on national security, Defense Department leaders haven't held back on strong adjectives over the past year: Pentagon officials have said automatic budget cuts would be "draconian," "devastating" and "deeply destructive."

But as the Pentagon begins its long-delayed process of planning to implement the cuts, leaders are concluding that they may have to contend with a cut that is $10 billion larger than previously planned.

The assumption until recently has been that the Defense Department would be liable for an immediate cut of $52.3 billion from its 2013 ledger. But planners now are grappling with the possibility that the actual tab may be as much as $62 billion.

The reasons are buried in the web of federal law that agencies would use to implement sequestration, should Congress and the President fail to agree on an alternative. The Budget Control Act, passed last year, provided the deadlines and some of the details for fail safe, across-the-board cuts that were never supposed to happen. But the 2011 law relied heavily by reference on an earlier sequestration plan, passed in the 1980s, which makes things more complicated.

"You have to establish the baseline you're cutting from, and that's a question we've had for a long time. The way the baseline is established is that if we had a budget in place, we'd use that. However, it appears there's a provision that you cannot be above a certain level, and we're above that cap," a senior Defense official said Wednesday. "So we've got to get down to the cap and then we've got to take the $52 billion off of that."

Waiting for 2013 budget

Whether or not DoD would truly exceed the Budget Control Act's caps on spending in 2013 is a purely theoretical question, though, at least so far.

Like the rest of government, the Pentagon doesn't yet have a legally-enacted budget for the full year. It's operating under a continuing resolution through the end of March, and it remains far from clear what the department's full budget will be for the fiscal year that began Oct. 1.

Also complicating matters: the ultimate arbiter of how sequestration will be implemented is the Office of Management and Budget. OMB still has not clearly instructed agencies as to whether the across-the-board cuts would be implemented at the level of individual programs, projects and activities, or whether the slicing will apply to budget accounts, said the official, who spoke on condition of anonymity because of the sensitivity of the ongoing negotiations between the White House and Congressional leaders.

Account level gives flexibility

DoD is advocating for the cuts to be taken at the account level, which would give it at least some flexibility to determine where money is spent.

But even if the reductions were made at the broader level of budget accounts, the additional $10 billion would alter some of the Pentagon's previous predictions about sequestration, the official said.

Earlier thinking about the cuts suggested the Pentagon would be able to avoid renegotiating deals with its suppliers. That's a scenario DoD would strongly prefer to avoid, since reopening hard-won contracts would almost inevitably lead to higher costs. But the calculus Defense planners now are considering would change that.

"We did an assessment last fall of a handful of programs to see what the impacts of different levels of cuts would be. An extra 2 percent does make a significant difference," the official said. "It pushes things over the threshold. There are lines that include, for example, support funding, and we'd try to take the reductions in that side of the house. But we'll get to the point where we can't do that in a few cases."

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