The Obama administration is unlikely to make payments to defense contractors to cover severance costs caused by across-the-board Pentagon cuts, according to defense analysts.
The prospect of the payouts has sparked a political firestorm, with congressional Republicans comparing them to bribes and saying they'll do anything possible to stop the government from making the payments.
But the likelihood of the payments being made is actually quite remote, defense analysts say, because the companies won’t feel the effects of sequestration immediately.
The government also is not planning to cancel contracts the day the cuts take effect.
All the same, the Office of Management and Budget sweetened the pot in guidance to defense firms last week.
OMB said that federal agencies would cover companies’ costs if they have to lay off employees due to sequestration prior to a 60-day federal notification requirement.
“They’re promising something because they know they won’t have to do it,” said Todd Harrison, a defense budget analyst at the Center for Strategic and Budgetary Assessments/.../
Harrison published a study earlier this year on that point. He argued that defense companies would be harmed deeply by sequestration — but it would take time because the companies already have contracts they are working on that won’t go away on Jan. 2.