The U.S. government spends more on its military each year than any other nation by far, but it will be a restrained Department of Defense (DOD) that presents itself at this year’s Paris Air Show. That’s because a previously obscure fiscal mechanism known as “sequestration” requires the DOD to cut $41 billion, or roughly 8 percent of its $527 billion base budget, by September 30, the end of the fiscal year on the government’s calendar.
Sequestration, a feature of the Budget Control Act of 2011, was set in motion by the failure of political parties in the U.S. Congress over more than two years to compromise on reducing the $16 trillion national debt. The DOD is not alone in taking cuts; sequestration requires $85 billion in overall spending cuts across defense and non-defense agencies in FY2013, and $1.2 trillion in cuts over the next decade.
Ironically, defense spending was considered sacrosanct when sequestration first arose as a threat during the summer of 2011. With the Pentagon already absorbing $487 billion in spending reductions through FY2021 as required by the budget control act, the prospect of lopping off some $500 billion more through sequestration was considered so unsavory that warring politicians would be compelled to compromise on debt reduction. But they did not–and sequestration became law in March.
Some federal agencies, notably the Federal Aviation Administration (FAA), have managed to soften the blow of sequestration on employees that are considered essential to operations. In April, after five days of prolonged flight delays at major airports blamed on controller staffing reductions, Congress passed legislation that allowed the FAA to transfer funds into its operations budget. The agency then stopped requiring controllers to take unpaid leave, or “furlough” days, to help it meet its sequestration deficit.
Despite a drumbeat of warnings from senior Pentagon officials that sequestration will erode military training, readiness, procurement and research and development, the DOD has not managed to dodge the sequestration bullet. The DOD originally planned to furlough nearly all of its 800,000 civilian employees for up to 22 days each; those numbers have subsequently been scaled back to 652,000 employees, who will each be required to take 11 furlough days this fiscal year, beginning July 8.
“Furloughs for 11 days represent about half of the number we had originally planned, reflecting the department’s vigorous efforts to meet our budgetary shortfalls through actions other than furlough,” said Defense Secretary Chuck Hagel, who announced the verdict to grim-faced DOD employees in Alexandria, Virginia, on May 14. “There will be exceptions driven by law and by the need to minimize harm to the execution of our core missions.” As an example, he said, employees deployed or temporarily assigned to a combat zone will not be subject to furlough.
In remarks that same day in nearby Crystal City, Virginia, Lockheed Martin CEO Marillyn Hewson said the financial circumstances driving U.S. budget cuts are unprecedented. “The budget challenges are immense,” said Hewson, who presides over the world’s largest defense contractor. “The debt burden our country is bearing is unsustainable. We have to find a way to rein in spending, reduce the deficit and strengthen the economy. Right now, the path our country has chosen to achieve this is sequestration. We’ve never believed that was the right path to take.”
The American public will see–or not see–the effects of sequestration on the DOD’s budget. The most obvious manifestations are the cancellation of performances this year by the Navy’s Blue Angels F/A-18 Hornet fighter team, the Air Force Thunderbirds F-16 team and the Army Golden Knights parachute team. Local air shows, flyovers and events have been cancelled across the country. The National Museum of the U.S. Air Force in Dayton, Ohio, closed its Presidential and research-and-development galleries and cancelled its annual giant scale radio-controlled model aircraft show.
More concerning, the Air Force grounded about one third of its active fighter and bomber squadrons. “Twelve combat-coded squadrons have stopped flying, and important training has been canceled,” Air Force Secretary Michael Donley said on May 24. “Weapon system sustainment reductions will delay maintenance, increase costs and create backlogs. The impending civilian furlough will hamper us further and will impact morale and reduce productivity across the Air Force,” warned Donley. The Navy said it would stand down four carrier air wings and reduce two others to minimum safe flying levels.
In April, the Obama Administration submitted to Congress a $526.6 billion base defense budget for FY2014, excluding spending needed for the Afghanistan campaign, which represents about a 1-percent reduction in spending from the current fiscal year. The budget does not account for ongoing automatic cuts through sequestration, which could amount to $52 billion next year. Instead, it contains “balanced deficit reduction proposals that are more than sufficient” to allow Congress to replace or repeal sequestration, according to the DOD.
That may be wishful thinking. Analysts interviewed by The Washington Post described the DOD’s assumption that sequestration will go away by the end of the fiscal year as “foolhardy,” the paper reported. “Analysts said the budget also is problematic because the bottom line is predicated on initiatives that lawmakers have rejected, including base closures, cuts to health-care benefits and the elimination of weapons systems,” it said.
What the proposed new budget does do is continue developmental funding for the Air Force’s “big three” priorities: the Lockheed Martin F-35A Joint Strike Fighter; the Boeing KC-46A tanker; and the secretive long-range strike bomber (LRS-B) program. Rear Admiral Joseph Mulloy said the sea service is similarly committed to the Marines’ F-35B and Navy’s F-35C. “Both services are looking forward to the delivery of the airplanes,” he said. The budget funds 165 total aircraft, including 21 Boeing EA-18G Growlers and 16 P-8A Poseidons; 37 Lockheed Martin/Sikorsky MH-60R/S helicopters; 25 Bell AH-1Z/UH-1Y helicopters and 18 Bell Boeing MV-22 tiltrotors.
But ongoing uncertainty over DOD’s spending both next year and over the long term is not helpful to industry, which has already been “right-sizing” for several years by divesting manufacturing space, reducing workforce levels and culling management in anticipation of defense spending tapering off.
“We understand defense budget cuts are part of the overall equation to solve the U.S. fiscal situation, but it needs to be done in a logical, strategically aligned way–a way in which things can be prioritized,” Dennis Muilenburg, Boeing Defense president and CEO, told reporters in St. Louis last month. “Right now, the sequestration law as written and as contemplated for implementation is just creating a great deal of uncertainty. That doesn’t allow us to do long-term planning; that doesn’t allow our customers to do long-term planning–and that’s not a healthy, sustainable thing for either our customer or industry.”