Pentagon Spending Shouldn’t Slow Before Cuts, Carter Says

The Pentagon’s No. 2 civilian directed military departments and acquisition personnel to proceed with normal operations, including training and contracting, even though action hasn’t been taken to avert looming spending cuts.

The Pentagon “needs to continue normal spending and operations,” Deputy Defense Secretary Ashton Carter told Defense Department and military service heads in a memo obtained yesterday by Bloomberg News.

Defense programs would have to absorb about $500 billion in cuts from planned spending over a decade under sequestration, reductions in defense and certain domestic programs that will begin to take effect on Jan. 2 unless President Barack Obama and Congress agree on action to avert the technique aimed at cutting the federal deficit.

“We do not want our programs, personnel and activities to begin to suffer the harmful effects of sequestration while there is still a chance it can be avoided,” Carter wrote in the memo dated Sept. 25. He directed commanders and managers to “continue the defense mission under current laws and policies, without taking steps that assume sequestration will occur.”

Carter’s guidance “is fully consistent with the Pentagon’s sequestration strategy to date, which has been to just ignore it and assume it will go away,” Todd Harrison, a defense budget analyst for the nonpartisan Center for Strategic and Budgetary Assessments in Washington, said in an e-mail.

Post-Election Session

Congress has adjourned until November, meaning that any resolution would need to be accomplished during a post-election session.

“I’ll take whatever the hell deal they can make right now,” Defense Secretary Leon Panetta said at a news conference yesterday at the Pentagon. “The problem now is that, you know, they’ve left town, and all of this has now been put off into the lame-duck session.”

The Obama administration, in a report released Sept. 14, outlined $1.2 trillion in cuts that it said would be “devastating” to federal programs.

The White House Office of Management and Budget said sequestration would require chopping $109 billion from the budget in fiscal 2013, with $54.7 billion coming from defense and $54.7 billion from domestic programs.

Lockheed, Huntington

According to the report, the Air Force’s $21.3 billion aircraft procurement request would be cut by $2 billion, hitting aircraft and electronics makers such as Lockheed Martin Corp. (LMT), Boeing Co. (BA), Northrop Grumman Corp. (NOC), Raytheon Co. (RTN) and L-3 Communications Holdings Inc. (LLL)

The Navy’s $22.7 billion shipbuilding and conversion account would be cut by $2.1 billion, which would affect builders Huntington Ingalls Industries Inc. (HII) and General Dynamics Corp. (GD)

“Commanders and managers should not alarm our employees and their families by announcing personnel actions related to sequestration or suggesting that these actions are likely, nor should commanders and managers hold back on obligation of funds -- either for investment or for operating programs -- if those funds have been obligated in the absence of the sequester threat,” Carter wrote.

Although all fiscal 2013 funds are subject to sequestration, “we cannot imagine a scenario in which already- obligated funds funds would be sequestered,” Pentagon spokeswoman Lieutenant Colonel Elizabeth Robbins said in an e- mail.

“Rather, once sequestration kicks in, the full sequester amount will be exacted from the unobligated funds remaining,” she said.

Year’s Worth

Harrison said the trouble with that approach is that “if sequestration does occur, you will have to implement a year’s worth of cuts in the nine remaining months of the fiscal year” that began Oct. 1, he said.

“The cuts will have to be deeper,” he said, “and some cuts require more time to implement, such as giving furlough notices to civilian employees, so you may end up with only seven or eight months to implement the cuts.”

While Panetta has said Congress must act to stop sequestration, Republican lawmakers and Mitt Romney, the Republican presidential nominee, have said Obama should be taking the lead.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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