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Automatic Defense Cuts Called ‘More Likely Than Unlikely’

Deputy Defense Secretary Ashton Carter said today “it is more likely than unlikely” that automatic defense cuts of as much as $45 billion will be triggered March 1.

Spending reductions known as sequestration will take effect across most of the federal government if Congress and President Barack Obama fail to reach agreement by March 1 on an alternative plan to reduce federal deficits.

“From what I hear, I have to conclude that it is more likely than unlikely that we’ll actually have to do this,” Carter said of the cuts in an interview today at the Pentagon. “We are serious about being ready.”

Carter becomes the first Pentagon official to say publicly that sequestration is likely to happen. House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, said Jan. 27 on NBC’s “Meet The Press,” “We think the sequesters will happen because the Democrats have opposed our efforts” to craft a compromise.

In one indication of a spending slowdown, Pentagon contracts slumped 23 percent in the first three weeks of January. Defense Department awards fell to $10.1 billion in the period compared with $13.1 billion during the same weeks in 2012, according to data compiled by Bloomberg.

The change may reflect the military’s unwillingness to sign deals without a firm budget. A stopgap measure signed by Obama authorizing U.S. spending expires on March 27.

Temporary Workers

The first visible step the Pentagon will be forced to take by mid-February is to start dismissing all or some of its 46,000 temporary workers, Carter said.

No layoffs have begun, he said. Instead, the services and organizations that make up the Office of Secretary Defense have been authorized to “selectively, and as they need to, release temporary” workers or not renew their contracts, Carter said.

“I expect, given the amount of money we need” to save by the end of the year, “that there will be widespread use of that authority but I would not go so far as to say every one of the 46,000” will be released, Carter said.

Defense Department managers have been directed to give Carter a report by Feb. 8 detailing planned budget cuts, including how many temporary workers might be released.

By mid-February, the Defense Department is also likely to begin notifying its 800,000 civilian employees that they face mandatory unpaid leave one day a week starting in April unless sequestration is averted, he said.

To contact the reporters on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net; Gopal Ratnam in Washington at gratnam1@bloomberg.net

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

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