Secretary of Defense Leon Panetta told reporters this week that “we are seeing the formation of what I would call a perfect storm of budget uncertainty.” He was referring to the possibility of 1) a sequester being implemented on March 1; 2) a continuing resolution (CR) that could extended after March 27 for the entire year; and 3) a debt ceiling crisis [at the end of February] that could weaken the economy.
Panetta reminded reporters that DoD is already doing its part in deficit reduction. “We have implemented in our budget plan the $487 billion in spending reductions that we were asked to do by the Congress over the next decade.” Repeating a warning he has been making for months, Panetta said additional cuts resulting from this “perfect storm” could “seriously harm our military readiness.”
Extending the CR for the entire year would result in a five percent cut to DoD operating accounts (about $11 billion taken out of Operations and Maintenance (O&M) accounts), he said. Allowing sequestration to go into effect would lead to a decrease of $18 billion in operating accounts. In addition, Panetta warned that to protect the warfighting budget, DOD would have to cut another $11 billion from readiness funding in the base budget. These cuts amount to about a 20 percent reduction in base budget operating accounts, with cuts to the Army reaching almost 30 percent, he emphasized.
But, the effect of absorbing these cuts does not end with the operating accounts. Panetta said these forced reductions would mean “disruptions to almost every weapons modernization and research program.”
DoD has no choice but to prepare for this “extraordinary budget uncertainty,” Panetta stressed. Therefore, he has told the military services and defense components to take “prudent measures” to ensure that they are able to accomplish core missions.
This guidance provides a menu of actions that the military services and DoD components can take including: freezing civilian hiring; terminating temporary hires; and curtailing travel, training, conferences, and administrative services. They can also review contracts for possible savings, cancel third- and fourth-quarter ship maintenance, and review ground and depot-level maintenance. The guidance also calls for Under Secretary of Defense (AT&L) clearance for research and development and production contract modifications over $500,000.
Military services and DoD components have also been told to develop plans to implement civilian unpaid furloughs as a precautionary measure if sequestration goes into effect.
Panetta emphasized that actions taken under this guidance “must be reversible to the extent feasible and must minimize harmful effects on readiness.” He will continue to work with Congress to resolve this uncertainty. But, he said, DoD has the responsibility to protect the nation’s security and therefore has an obligation to “prepare for the worst.”