We are in the middle of a political and rhetorical donnybrook about the threat that falling off the fiscal cliff poses for our national security (to say nothing of what it would do to domestic discretionary spending). There will be some attention to this "crisis" in the last two presidential debates.
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It is a crisis carefully engineered by the Budget Control Act, passed in August 2011: If the Super Committee failed, which it did, automatic cuts, which legislative language dubbed a "sequester," would be imposed January 2, 2012.
In September of this year, the Office of Management and Budget solemnly certified that these cuts would take 8.2 percent of FY2013 appropriated funds away from every "program, project, and activity" (PPA) in domestic discretionary spending and a whopping 9.4 percent from the "non-exempt" parts of the defense budget.
But does this mean the end of our national security (and domestic well-being), as the political debate suggests? A little careful noodling about the impact of a sequester on the Defense Department suggests it might not be the end of the world. In fact, it might be exactly the fiscal discipline DOD needs.
Let me get technical for a moment, so we can actually see what might go on. First, the law made it clear that the administration could exempt funding for troops and their benefits (including retiree benefits) from the fiscal cliff. The administration has done that, so the troops will be okay. (Their number is coming down anyway as a result of the end of the wars in Iraq and Afghanistan.)
Then, there is the matter of procurement and what some see as the almost cataclysmic level of devastation that such harsh cuts would impose on the defense industry. Except they won't. It turns out the industry is pretty healthy, it has been for a decade, and it is working on contracts that have been funded in prior budget years, which are exempt from sequestration.
As the director of defense procurement put it: "The vast majority of our contracts are fully funded, so there's no need to terminate existing contracts unless the product is no longer needed." Lockheed treasurer Ken Possenriede agreed that sequestration was not a near-term problem: "If sequestration happens, just based on our normal business rhythm, we're comfortable from a cash-on-hand standpoint that we'll endure that."
How about military operations, including the war? Well, the war budget, which has never really been separate from the non-war budget -- that's a political fiction the executive branch and Congress set up, but the funds are, in reality, mixed -- is included in a sequester, which might sound terrible for the troops in Afghanistan.
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