- The Washington Times - Sunday, June 10, 2012

The Pentagon could hold onto its crown jewel weapon systems even though looming automatic federal spending cuts would inflict a $54 billion gash in the 2013 defense budget, military budget analysts say.

Instead of terminating weapons, the Pentagon could trim its projected spending under the Budget Control Act, which calls for a nearly $1.2 trillion reduction in federal spending over 10 years and mandates a 10 percent across-the-board cut in its first year, beginning Jan. 2.

While painful, the indiscriminate chopping would offer a silver lining: If a newly elected Congress next year can reach a compromise to scale back cuts in 2014 and beyond, the military would be able to save its cherished big-ticket items, such as the F-35 Joint Strike Fighter jet, a new Army troop carrier and 11 active aircraft carriers, because they would have survived the law’s first year.

“For the most part they would not terminate programs in the first year,” said Todd Harrison, an analyst at the Center for Budgetary and Strategic Assessment. “They would just slow them down and scale them back. They don’t spend the money as quickly.”

Loren B. Thompson, who heads the Lexington Institute defense think tank, has studied the law and worked the numbers for sequestration, as the mandatory cuts are called.

If the Pentagon exempts personnel cuts, as the law allows, and spreads top-line cuts to weapons production and readiness, the actual defense spending reduction in 2013 might be only 5 percent to 6 percent.

That’s because the law targets money Congress authorizes, which can take several years to spend, rather than “outlays,” which are government checks actually written

A ‘penalty squestration’

Mr. Thompson argues in his Early Warning Blog that this may not be all bad for defense contractors.

“With everyone seeming to focus on the negative right now, it’s easy to overlook the fact that cuts to budget authority made in 2013 will spread out over several years, reducing the near-term impact on contractors,” he writes.

“In fact, it’s possible that the cost-cutting companies like Lockheed Martin and Northrop Grumman are pursuing in anticipation of sequestration will save the companies more money than budget cuts take away.”

The Pentagon has prepared a $525 billion budget for 2013, a more than 5 percent reduction from the previous fiscal year’s spending plan. Sequestration would cut the 2013 its budget to about $471 billion.

Mr. Thompson sees a new Congress next year as a possible savior, “sending a signal to investors that sequestration isn’t going to last for very long.”

For proponents of new weapons to replace old ones, the second year of sequestration is the key.

Mr. Harrison said the law was written to spur a so-called congressional “supercommittee” last year to reach a budget compromise. It failed and was disbanded.

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