Where Are We Now – Pentagon Spending and Sequestration

The week of July 16 was a big one in Washington for Pentagon watchers. The House of Representatives voted overwhelmingly to approve the fiscal year 2013 Defense Appropriations bill, while the House Armed Services Committee held hearings on the potential impact of upcoming spending cuts on the Pentagon’s budget.

The FY2013 defense appropriations legislation includes $519 billion for the Pentagon’s annual “base” budget, plus an additional $88 billion for funding related to military operations in Iraq and Afghanistan. The House passed the bill by a vote of 326 to 90.


Surprising to many, the House also adopted a bipartisan amendment to the Pentagon funding bill that cut funding. The amendment offered by Rep. Mick Mulvaney (R-SC) and Rep. Barney Frank (D-MA) cut the bill’s funding by $1.1 billion, freezing it at the current level. The amendment passed by a vote of 247-167, with 89 Republicans voting “aye.” And while several other amendments to make deeper cuts were rejected, and the amount cut by the amendment was small, this was the first time either the House or Senate has voted to cut military spending since before the terrorist attacks of Sept. 2001. Some analysts suggest that the vote indicates uncertainty about the level of support on the Hill for current levels of Pentagon spending.

Meanwhile the Chairman of the House Armed Services Committee, Congressman Howard "Buck" McKeon (R-CA), held a hearing to get the perspective of the defense industry on the impact of sequestration – the automatic spending cuts scheduled to go into effect in January 2013. Among the witnesses – all of whom were defense industry representatives – was Robert Stevens, President and CEO of Lockheed Martin, the nation's largest defense contractor. And while the witnesses all characterized the potential impact of additional Pentagon spending cuts as dire (or words to that effect), none were able to identify specific Pentagon programs which would be cut. And Pratt & Whitney President David Hess clearly offended some Republican members of the committee when he implied that tax increases ought to be considered as a way to stave off Pentagon budget cuts. “I think everything has to be on the table now,” Hess said.

Earlier in the week the defense industry’s top trade organization – the Aerospace Industries Association (AIA) – released a report that stated the projected $500 billion in cuts to Pentagon spending over a decade would result in 1.1 million jobs lost in the industry. Interestingly, unlike an earlier version of this report, the new AIA report also looked at the impact of sequestration on non-defense federal programs. The report said that non-defense cuts would result in an additional 1.1 million jobs lost. But as I wrote recently, the Pentagon is actually better positioned to absorb any funding cuts than non-defense federal program.

Stay tuned, folks. There’s more to come from Washington as Congress and the president spar over what to do about these automatic spending cuts.