House Weighs Budget Cutting Iraq, Afghanistan War Funding by $39 Billion

Sept. 21 (Bloomberg) --The U.S. House is considering a stopgap measure to fund the beginning of fiscal year 2012 that would reduce the budget for the wars in Afghanistan and Iraq by $39 billion.

Congress is running out of time to approve annual spending bills for the government, including the Pentagon, for fiscal 2012, which begins Oct. 1.

To avoid a federal shutdown, the House has prepared a stopgap measure to carry the government through Nov. 18. The measure would fund the Pentagon at 1.5 percent below this year’s budget, about $7.5 billion less, including military construction funds.

The House failed in its first attempt to pass the stopgap measure today because of a dispute over disaster relief aid to victims of Hurricane Irene and other calamities.

The Defense Department received $532 billion in 2011, which reflects the base budget, military construction and nuclear stockpile maintenance. The Pentagon base budget, without military construction and the nuclear programs, is $513 billion for fiscal 2011.

The Pentagon wouldn’t continue to receive $158 billion it got last year for the wars in Afghanistan and Iraq, where U.S. forces are being reduced. Instead, the measure allows for $119 billion, the amount approved by the House in its version of the 2012 defense appropriations bill.

“The biggest surprise is the immediate contraction” from overseas contingency funds, said Jim McAleese of McAleese and Associates, a consulting firm in Virginia.

This will have an unanticipated impact on the defense industry, he said.

“Much of the industry had anticipated that the Defense Department would continue to spend $13 billion per month to support the two wars,” McAleese said. “The bill contracts that down to $10 billion a month, which is a cut of 25 percent. This will directly translate into their revenues and earnings per share.”

To contact the reporter on this story: Roxana Tiron in Washington at rtiron@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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