It seemed a good idea at the time. But sequestration, an ugly word for an ugly thing, now threatens to rip the heart out of America’s defence budget.
Sequestration was part of the deal hammered out last August to extend America’s debt-ceiling when it was on the verge of default. The deal set up a congressional “super-committee” charged with cutting the deficit by $1.5 trillion on top of the $917 billion already agreed on. Sequestration was the gun pointing at the super-committee’s head. If it failed, $1.2 trillion-worth of across-the-board cuts would be automatically triggered on January 2nd 2013, split evenly between discretionary security and non-security programmes over the next nine fiscal years. In November, the super-committee admitted failure. Since then, nothing has happened. But the sense of foreboding has grown.
The Pentagon is now faced with having to slice another $55 billion a year from its spending in each of the next nine years, on top of the cut of $487 billion over ten years already agreed to. Military pay and benefits are exempt from the sequester, as are “overseas contingency operations” (the war in Afghanistan), so the money will have to come out of a remaining defence pot of $375 billion/.../
The defence industry is bracing itself for the possibility that almost every significant contract may have to be renegotiated. As Todd Harrison of the Centre for Strategic and Budgetary Assessments observes, sequestration is a bad way to save money. As procurement is cut, the unit costs of new aircraft and ships increase until cancellation looms as the only sensible option. Nor does it confront the real problem in the defence budget—the ever-expanding share taken by pay and benefits.