Sen. John McCain on Wednesday accused President Obama of using taxpayer dollars to buy off defense contractors for political gain.
With the allegation, the Arizona Republican waded into a simmering showdown between defense companies and the administration over whether workers must be warned of possible layoffs associated with pending defense cuts.
Mr. McCain said the White House is acting outside its authority in its attempts to stop the companies from sending out notices of possible pink slips before the November election.
Mr. McCain particularly was incensed over recent guidance from the White House budget office that said taxpayers would pay the companies' legal bills if they are sued for failing to send the notices. Mr. McCain said he would do everything in his power to prevent any government money from being spent for that purpose.
"President Obama is telling defense contractors to ignore the law so that those layoff notices will not be delivered before the November elections," Mr. McCain said.
He added that companies "have a choice whether to rely on [the White House budget office's] politically motivated guidance or comply with the law, but I can assure them that I will do everything in my power to ensure that taxpayer dollars are not used to compensate contractors who do not comply with the law."
In addition, Mr. McCain said he asked Defense Secretary Leon E. Panetta to notify Congress of all costs associated with the layoffs at least 30 days in advance of reimbursing contractors for those costs. He also said he "intends to deny" any transfer of funds among defense accounts to pay for these legal costs.
Mr. McCain's efforts to undermine the administration's assurances to defense companies is the latest salvo in the partisan battle over automatic cuts to be split equally between defense and domestic spending, known in budget speak as "sequesters." They will take effect Jan. 2 under the terms of last year's debt deal unless Congress can overcome the impasse during a lame duck session at the end of the year.
The pending defense cuts could result in as many as a million jobs lost, Mr. McCain said, and while he remains committed to averting them, he cannot support the administration's plan to use billions of taxpayer dollars to give defense contractors a "free pass" through the election.
"In the current fiscal crisis of trillion-dollar annual deficits and crushing national debt, I cannot condone this administration's wasteful use of taxpayer funds to buy off contractors for political gain," he said.
The White House on Tuesday denied it had pressured the companies.
"Absolutely not," press secretary Jay Carney said. "Individual companies like Lockheed make the decisions according to their own interests."
Federal law requires companies to let their employees know about possible pink slips 60 days in advance, but sending out the notices just before the election could have angered thousands of voters in Virginia, a hotbed of defense contracting and a swing state crucial to President Obama's re-election bid.
With defense spending slated to take a hit of more than $55 billion, over the summer defense giants such as Lockheed Martin Corp., BAE Systems PLC, EADS North America and others had said they were planning to notify hundreds of thousands of employees of possible layoffs with the notices going out just before the November election.
To avoid that, the Pentagon and the White House budget office said late last week that the cuts are speculative and they won't immediately cancel any contracts Jan. 2. They also said the federal government would pick up any costs or liability the companies faced by issuing pink slips without the required warning.
After receiving the new guidance, Lockheed Martin, BAE and EADS said they no longer felt compelled to issue the layoff notices, which the companies earlier said would be needed under the Worker Adjustment and Retraining Notification Act, or Warn Act.
But a spokesman for BAE said the company still plans on notifying employees at a later time if Congress can't find a way to avoid the sequester during its fall session.
"Unless sequestration is avoided, we eventually may have no choice but to issue WARN notices to potentially impacted employees," wrote BAE spokesman Brian Roehrkasse in an email. "When that might happen will depend on the circumstances as they develop."
After hearing about the administration's latest assurances to defense companies, Sen. Lindsey Graham, South Carolina Republican and a member of the Senate Armed Services Committee, and House Armed Services Committee Chairman Howard P. "Buck" McKeon, California Republican, accused the White House of caring more about re-election efforts than workers' job security.
Also questioning the administration, Republican Sens. Chuck Grassley of Iowa and Kelly Ayotte of New Hampshire sent the director of the White House budget office a letter demanding to know the legal basis for its recent guidance.
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