Large defense companies and industry associations have claimed that the threatened sequestration cuts to the federal budget would cause an immediate hit to the bottom lines of contractors, their workforces and consequently the broader economy if the cuts kick in as planned on Jan. 2. A new study finds that’s not necessarily so, but that on the other hand, cuts to federal civilian employee payrolls would happen almost overnight.
In the Defense Department, 108,000 civilian full-time equivalent jobs would likely disappear right away, but sequestration’s effects on most of DoD’s contracted spending would take months or years to fully manifest themselves, according to a think tank’s close examination of the Pentagon’s 2013 spending plans and the law that mandates the automatic cuts.
The budget knife of sequestration was designed to affect all programs equally, immediately taking available funding for most federal nondiscretionary spending programs down by about 10 percent in fiscal year 2013. The idea was to create a mindless budget-cutting chainsaw that would be so destructive to federal programs that all members of Congress would come together to find an acceptable alternative.
Effects of sequestration unequal for DoD
Lawmakers have so far failed to do so, but the study by the Center for Strategic and Budgetary Assessments finds the actual effect of the cuts in the first year would be extremely unequal, at least in the Defense Department.
In 2013, most contractors will be working on projects whose funding has been obligated months or years beforehand. And sequestration has no power over any budget dollar the government has already signed up for with dollars from earlier years.
“On Jan. 3, nearly all defense contractors will be working on projects where funding has already been obligated,” said Todd Harrison, CSBA’s senior fellow for defense budget studies. “There’s actually some cushion here for the defense industry. They won’t see an immediate reduction in 2013. They’ll see much less.”