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Hagel Says Pentagon Will Do What’s Needed to Manage Cuts

Defense Secretary Chuck Hagel said the U.S. military will find ways to cope with across-the-board budget cuts that began yesterday and that will have “far- reaching effects” over time.

“Effective immediately, Air Force flying hours will be cut back,” Hagel said yesterday at a Pentagon news conference. “The Army will curtail training for all units except those deploying to Afghanistan.”

While Hagel, who was sworn into office this week after a partisan confirmation fight, warned of consequences from the cuts known as sequestration, he stopped short of the dire language used by his predecessor, Leon Panetta, who had talked of an approaching fiscal “doomsday.”

“We will manage these issues,” Hagel said. “These are adjustments. We anticipated these kinds of realities, and we will do what we need to do to ensure the capabilities of our forces.”

The Pentagon faces about $46 billion in budget cuts during the remaining months of this fiscal year and $500 billion over nine years unless Congress and President Barack Obama agree on an alternative plan to reduce the federal deficit.

Hagel expressed confidence that Obama and lawmakers will reach consensus “at some point to avert tremendous damage” to the U.S. military. When asked, Hagel and Deputy Secretary Ashton Carter could cite few immediate effects from sequestration.

April Effects

While Hagel said four Navy air wings will “gradually stand down,” the first such limiting of operations won’t happen until April.

“Later this month, we intend to issue preliminary notifications to thousands of civilian employees who will be furloughed,” Hagel said. Pentagon officials have said the unpaid leave for as many as 750,000 workers, averaging one day a week, wouldn’t begin until April 25.

Defense analysts such as Todd Harrison of the Center for Strategic and Budgetary Assessments say the Pentagon has exaggerated the effect of the cuts.

“This is relatively mild compared to some previous drawdowns in defense spending,” Harrison said yesterday on a conference call with reporters. “This is bad policy, this is not a way to run your government, but this is not going to make us a second-rate power by any means.”

Lawrence Korb, a former assistant secretary of defense and a senior fellow at the Center for American Progress in Washington, said of sequestration: “You can do it without really impacting our readiness to deal with the threats that we face.”

‘Abrupt, Serious’

At the Pentagon, Carter responded to such criticism, saying, “All this is going to be abundantly obvious, starting tomorrow and building through the year.”

“This is not subtle,” he said. “This is an abrupt, serious curbing of activity in each and every one of our key categories.”

Defense contractors will be “affected very directly,” Carter said, because the cuts may result in “fewer weapons systems in a contract than we anticipated were going to be put in a contract,” he said.

Republicans on the House Armed Services Committee held a news conference yesterday to demand that defense programs be spared from cuts in any compromise aimed at reversing sequestration.

“Don’t plan on cutting our national defense one more cent,” said Howard “Buck” McKeon of California, the committee chairman.

Cuts Detailed

Pentagon accounts will be cut by 7.8 percent across-the- board from full-year levels, the White House’s Office of Management and Budget said in a report to Congress last night. The defense cuts are effectively 13 percent because they are being squeezed into the seven months remaining in the fiscal year, according to the budget office

The cuts apply to funds from this fiscal year that aren’t yet obligated under a contract as well as unspent money from previous years.

Among specifics in the report relevant to defense contractors, the Navy’s aircraft account has $20.8 billion, including $2.91 billion in unobligated funds from prior years. A 7.8 percent reduction equals $1.62 billion from the account that pays for aircraft made by Boeing Co. (BA), Northrop Grumman Corp. (NOC) and Lockheed Martin Corp. (LMT)

Ships, Jets

Similarly, the Navy’s $22.5 billion shipbuilding and conversion account, including $7.5 billion in unobligated dollars, would be reduced by $1.75 billion. The dollars go to programs built by Huntington Ingalls Industries Inc. (HII), General Dynamics Corp. (GD), Lockheed, Austal Ltd (ASB) and Raytheon Co. (RTN)

The Air Force’s aircraft procurement fund holds $22.8 billion, including $9.75 billion from prior years. The account bankrolls Lockheed and Boeing jets and drones built by General Atomics and Northrop Grumman. This account will take a $1.78 billion reduction.

The Air Force’s $6.6 billion missile account, which pays for Raytheon air-to-air missiles, as well as Boeing satellite- guidance kits for bombs and Lockheed Martin cruise missiles, is reduced by $514 million.

The Army’s $7.4 billion aircraft account, which primarily pays for helicopters built by Boeing and United Technologies Corp. (UTX)’s Sikorsky Aircraft unit, is reduced by $576 million.

To contact the reporters on this story: David Lerman in Washington at dlerman1@bloomberg.net; 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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