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Panetta Offers to ‘Educate’ Congress on Pentagon ‘Doomsday’ Cuts

Aug. 5 (Bloomberg) -- U.S. Defense Secretary Leon Panetta is telling Congress that the debt-reduction agreement President Barack Obama signed into law this week includes a “doomsday mechanism” that could lead to dangerous cuts in military spending.

Speaking at his first Pentagon news conference yesterday, Panetta focused on so-called sequestration, the procedure that could force lawmakers on Capitol Hill to enact across-the-board budget cuts if Congress rejects the recommendations for slashing U.S. debt from a “super-committee” authorized by the new law.

“I and others here have a responsibility to really educate the leadership on the Hill of the dangers if they allowed sequestration to take place,” said Panetta, a former director of the Office of Management and Budget and ex-chairman of the House Budget Committee.

An automatic $500 billion in defense spending cuts could result if the super-committee deadlocks or its proposals fail in Congress. Panetta called the procedure a “kind of doomsday mechanism” that could “result in a further round of very dangerous cuts across the board.”

“I came into this job to fight and my intention is to fight to make sure that, hopefully, some common sense prevails here and that the committee does its work in looking” at other areas of the budget, he said. Deep cuts “would do real damage to our security, our troops and their families and our military’s ability to protect the nation.”

Cutting and Withdrawing

Fighting the budget cuts is likely to preoccupy Panetta during his first six months in office along with overseeing the drawdown of U.S. troops in Afghanistan and possible commitment of some U.S. personnel in Iraq after all 46,000 are supposed to leave in December.

Pentagon officials are conducting a comprehensive review of strategy, overhead and policy intended to determine how the military implements what the Office of Management and Budget yesterday said was about $330 billion in specific cuts.

Panetta and Joint Chiefs of Staff Chairman Admiral Michael Mullen said the initial round of defense-spending reductions were achievable. Mullen called them “fair and reasonable.”

The first installment of reductions represents about 7 percent of planned Pentagon spending through 2021. This is on top of $78 billion the Obama administration last year forced the Pentagon to absorb through 2016 in deficit reductions.

“I am confident we can meet the targets that we’ve been given thus far,” Mullen said. “If those cuts were to double,” he said, “that’s very dangerous for the country.”

Done It Before

“We are at the start of the fourth defense build-down we have done since the Korean War,” said Clinton-era OMB defense director Gordon Adams in an e-mail. “We have done it before and we can do it again.”

Defense Department cuts could include a substantial reduction in the military’s 1.43 million service members and possibly eliminate subsidies for the Pentagon’s chain of subsidized grocery stores.

Democrats say they will use the threat of automatic defense cuts to prod Republicans to accept tax increases as part of the $1.5 trillion debt-reduction deal -- or charge they would rather protect the rich than the military.

Republicans said Obama and Democrats could end up showing they are weak on defense if the military budget is slashed.

Robert Stallard, a defense analyst for RBC Capital Markets LLC, said Panetta is sounding like his predecessor, Robert Gates, in seeking to protect most of the Pentagon’s programs.

Panetta’s “track record at CIA does not suggest he is a ‘hatchet man,’” Stallard said. Panetta previously headed the Central Intelligence Agency.

Stallard, in a note to clients, said he doubts Congress’s super-committee will succeed and there is “serious risk” the automatic cuts will be triggered by a November deadline.

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

To contact the editor responsible for this story: Terry Atlas at tatlas@bloomberg.net

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