WASHINGTON — Defense Secretary Leon Panetta is not known to bite his tongue.
So when the former budget guru was called to testify on the Pentagon’s spending plan earlier this month before Congress, he also refused to mince words.
Before the Senate Budget Committee, Panetta called the threat of $500 billion in further cuts to the defense budget over the next decade “nutty,” “goofy” and “insane.” He likened the potential cuts to a “gun to the head” and described the fiscal mechanism that requires them as a “meat ax” approach.
When Sen. Lindsey Graham, R-S.C., asked Panetta if the additional cuts were the “dumbest idea you’ve heard lately,” the defense secretary almost immediately nodded in agreement.
Panetta’s bluntness reflects a harsh reality: Whether he likes it or not, the Defense Department is facing nearly $1 trillion in budget reductions over the next decade. And Panetta will have to go along with it, unless an election-year Congress finds another way to achieve dramatic savings or simply repeals the sequestration law.
But his predicament begs an even tougher question: What will the U.S. military look like 10 years from now if the defense budget is slashed by nearly $1 trillion during the same period?
That’s not a pretty picture to imagine, according to several lawmakers and defense experts.
“If you look at the practical effects of sequestration” — the term referring to the additional reductions — “and if Secretary Panetta’s dire outcomes are already affecting the military that we have right now, they would be absolutely devastating,” said Mackenzie Eaglen, a resident fellow at the American Enterprise Institute.
Last month, Eaglen penned a CNN op-ed with Brookings Institution senior fellow Michael O’Hanlon that called sequestration a “Sword of Damocles” that was never expected to be invoked — not even by the advocates of the so-called “supercommittee” tasked with preventing it.
In Greek mythology, the obnoxious, self-assured courtier Damocles was tricked into attending a lavish banquet where a sword was suspended by a horse hair over his head. Although the dagger never fell, the moral of the story could apply to a Defense Department that has not faced such drastic budget woes in decades: Even those who see themselves as the most protected can prove just as much vulnerable.
When the supercommittee failed last fall to agree on a $1.2 trillion package to reduce the federal deficit, the same amount of automatic cuts was triggered. That worst-case-scenario batch of sequester cuts includes more than $500 billion in defense savings over the next decade and would go into effect in January 2013.
All of this comes as annual budget deficits creep upward, with the Obama administration expecting the red ink to top $1.3 trillion when this fiscal year ends on Sept. 30.
At the Senate budget panel hearing, Joint Chiefs of Staff Chairman Gen. Martin Dempsey was more explicit when pressed about the potential impact of the 10-year cuts.
“We’d have to redo our strategy and we’d not any longer be a global power,” he said without hesitation.
How we got here
On Nov. 21, after meeting behind closed doors for several months and shunning media inquiries, the supercommittee announced it would “not be possible to make any bipartisan agreement” before its self-imposed deadline.
The collapse of the supercommittee’s negotiations not only marked rock bottom for partisan compromise, but also the beginning of a painful and unexpected path toward austerity.
“There is a lot of shock right now that sequestration is a possibility, let alone a likely possibility,” Eaglen said. “I think the negotiators… thought that the prospect of automatic spending cuts would be scary enough for members to compromise. I think that was a little short-sighted because if recent history was any guide, it’s not surprising that the supercommittee failed.”
Adding salt to the wound were defense budget cuts already mandated by the Budget Control Act, the legislation resulting from last summer’s debt ceiling standoff that almost shut down the federal government. That law required $487 billion in defense savings in the coming decade.
The additional reductions spawned by the supercommittee’s failure would bring the Defense Department’s 10-year cuts to a total of almost $1 trillion.
Roughly speaking, sequestration would cause the Pentagon’s base budget to drop from $550 billion to $450 billion by 2023, said O’Hanlon, who spoke before the Senate Budget Committee last week.
In his testimony, O’Hanlon told lawmakers that he expects America’s military edge over China to decline from 4-to-1 today to 3-to-1 in five years under the Budget Control Act. But piling another half-a-trillion dollars on top of those acceptable reductions begins chipping away at the country’s national security, he warned.
‘You can’t build three-quarters of a ship’
In a letter to Graham and Sen. John McCain, R-Ariz., dated Nov. 14, Panetta told the lawmakers that sequestration would be “devastating” for the Defense Department. It would result in a 23 percent drawdown in the defense budget, which would in turn generate “many” civilian layoffs and an alarmingly smaller military, the defense secretary wrote.
At that time, the senators were trying to gauge the potential harm of the further reductions, even as the supercommittee toiled away on Capitol Hill.
Four months later, those cuts are more than an abstract threat — they are a pressing reality. Several sources interviewed for this story said the Defense Department would have to start planning for the sequester as early as this summer if Congress cannot devise a viable legislative alternative.
Before the Senate and House budget panels last month, Panetta reiterated that his current spending plan for fiscal 2013 does not factor in those additional reductions.
His letter to McCain and Graham painted a bleak picture of a U.S. military constrained by such severe savings, bullet point by bullet point: “The smallest ground force since 1940. A fleet of fewer than 230 ships, the smallest level since 1915. The smallest tactical fighter force in the history of the Air Force.”
Sequestration, Panetta continued, would “render most of our ship and construction projects unexecutable,” a point made by both Eaglen and O’Hanlon.
“You can’t build three-quarters of a ship or three-quarters of military housing on a base somewhere,” Eaglen said, repeating Panetta’s reminder in the letter almost word for word.
In a nutshell, defense experts agree the sequester cuts would prevent U.S. armed forces from basically multitasking — fighting multiple threats in different parts of the world.
O’Hanlon said sequestration would require the Defense Department to “start gambling” and be more selective about where to devote resources. He added he worries that certain countries would have to develop nuclear weapons to protect themselves if U.S. forces withdraw their presences nearby.
The additional cuts would also spell economic trouble, Eaglen said. She forecasted that the number of defense contracts would be essentially halved, delivering a major blow to the manufacturing industry.
For example, O’Hanlon predicted defense contractors would become skittish if the fate of their partnership with the U.S. military is put on the line.
“That requires you to fire people,” he continued. “Or cancel contracts with production lines and pay penalties to defense contractors that were otherwise supposed to build weapons. That’s the sort of thing that has to happen.”
Panetta’s letter last year reached an understated conclusion given his recent rhetoric: “A sequestration budget is not one that I could recommend.”
Viable alternatives, and their politics
Panetta, who is 73 and served as the House Budget Committee chairman from 1989 to 1993, has repeatedly urged lawmakers to devise some type of deficit reduction package that could prevent sequestration from going into effect next January.
Yet President Barack Obama has vowed to veto any legislative bypass of the additional cuts if it does not include raising taxes — an unpalatable ultimatum to the GOP-controlled House.
And in an election year already blotched with partisan gridlock, O’Hanlon sees little reason why lawmakers would suddenly come together for a unified approach to sidestepping sequestration.
“I’m not sure it’s going to be averted,” he said. “I don’t see any miracle solution coming down the pipe.”
But there are small signs of hope as the barrel begins turning in the “gun to the head” Panetta has deemed the sequester cuts.
In a statement, Office of Management and Budget spokesman Kenneth Baer hinted that the Obama administration may be open to re-examining the specifics of the automatic reductions.
“If necessary, the administration will be addressing important technical questions concerning a sequester, but now is the time to focus on enacting the balanced framework proposed in the President’s Budget,” Baer said.
Graham and other lawmakers have proposed trimming entitlement spending to ease the fiscal burden on the Defense Department.
That’s one avenue to dodge sequestration, O’Hanlon said, but cutting entitlement programs is just as much political anathema to Democrats as raising taxes is to Republicans.
In a perfect world, a deficit reduction package could balance taxes and spending cuts to avert the sequester, O’Hanlon explained. But in today’s Washington? Not likely, he said.
“In a substantive policy-making sense, it’s not that hard to find an alternative to sequestration,” O’Hanlon said. “In a political sense, it’s very hard.”
The sword looms
Panetta’s frankness has proven one of his defining qualities since the so-called “Sword of Damocles” hung itself over his department late last year.
While speaking to airmen in Louisiana last month, the former CIA director allowed himself a now-infamous moment of candor.
“I’ve been in hearings for the last three days — shit, I think I should get some kind of award going through that crap,” Panetta mused. “I mean, I told General Dempsey I need a new combat badge for going to Capitol Hill. With clusters.”
O’Hanlon downplayed the forthrightness of Panetta’s latest way with words, saying he would use the terms “very risky” and “unwise” instead of describing sequestration as something that compromises the country’s standing as a global power.
But Eaglen agreed Panetta is right to stoke urgency as that sword looms closer.
“I think his characterizations are accurate,” she said. “They’re colorful because I think he’s starting to be frustrated that Congress isn’t moving on sequestration. Imagine what he’s going to be saying in four months when they still haven’t done anything to solve this problem, because that’s certainly what we’re looking at right now.”
