Defense Budget Cuts of $45 Billion Seen by Pentagon

January 8, 2013

Bloomberg News

Tony Capaccio

The Pentagon faces a reduction of as much as $45 billion this fiscal year if automatic spending cuts take effect March 1, its comptroller said.

That level would be 27 percent less than the $62 billion in reductions the Pentagon would have confronted if the automatic cuts known as sequestration had begun last week as scheduled, Robert Hale told an audience at the Brookings Institution in Washington today.

President Barack Obama signed a last-minute budget deal on Jan. 2 that averted tax increases for most U.S. workers and delayed for two months the across-the-board spending cuts in defense and other programs. Hale said today that the legislation also eased some terms of the defense cuts for the fiscal year ending Sept. 30.

“These legal changes are quite complex, but it looks like about $45 billion,” Hale said of the potential cuts, adding that analysts are continuing to study the legislation. “They reduced the size of the sequestration in the negotiations.”

About $149 billion in military personnel funds for fiscal 2013 are exempt from the automatic cuts, shifting the spending reductions to civilian employees, contractors, operations and maintenance costs and weapons programs.

Hale said the reductions still would result in 9 percent across-the-board cuts in procurement and research that could include such major programs as Lockheed Martin Corp.’s (LMT) F-35 fighter jet. Reductions also would affect operations and maintenance.

“Inevitably there will be some delay” in presenting the Pentagon’s fiscal 2014 budget that was scheduled to be released Feb. 4, he said. “Normally we would be transmitting data” to the White House Office of Management and Budget now “and we are not,” Hale said.

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