Panic Over Defense Cuts—Just Political Theater?
Business + Economy

Panic Over Defense Cuts—Just Political Theater?

REUTERS/Jason Reed

Secretary of Defense Leon Panetta’s announcement yesterday that the Pentagon would furlough 800,000 civilian workers if the planned sequestration cuts take affect sent tremors through the defense community and heightened fears about the looming automatic cuts. But for now, the furloughs at worse will force government workers to give up one day of work each week for 22 weeks – and none will lose his job. 

Panetta’s announcement came in the wake of reports that the sequestration would put 450,000 jobs in the nation's capital area at risk. President Obama said yesterday that the spending cuts in both defense and discretionary domestic spending would eliminate hundreds of thousands of jobs and stall economic growth. 

The sequestration cuts $85 billion this year--$43 billion from defense and an equal amount from domestic spending, the latter amounting to 5.1 percent of that budget. A recent analysis by a research firm called Macroeconomics Advisers said sequestration would shave 0.6 percent growth from the economy this year, and would result in the loss of 700,000 jobs.

At the same time, Pentagon officials are warning that the cuts would hamper military readiness. Army documents obtained by USA Today indicate that some 1.3 million jobs would be eliminated by sequestration, while state economies would lose $15 million. 

Make no mistake, there’s panic over cuts of 7.3 percent to a base defense budget that has soared since 2001.Maybe that’s why despite these dire warnings, hardly anyone outside the Beltway seems as concerned over the sequestration as the media.  It’s a non-starter with the general public.

Even politicians seem resigned to the cuts. Congress has left town for the week and has shown no enthusiasm to throw a quick deal together before the March 1 deadline. Obama has taken his missive directly to voters, but his message isn’t one of compromise; he’s blaming Republicans for the inevitable cuts.

Even people who closely follow the Pentagon believe the military is due for a drawdown. During the Iraq and Afghan wars, DOD’s budget swelled from $379.9 billion in 2004 to nearly $800 billion today. Gordon Adams, an American University professor and defense budget specialist, recently told The Fiscal Times that the international security landscape no longer required an $800 billion military, and that DOD is due for a post-war downsizing.

Source: The Washington Post

“We're in a defense drawdown and we'll be in one for long time,” Adams said last month. “The department is on a budgetary level that is unprecedented in its history. Not since World War II have we spent as this level. The Pentagon has a considerable cushion to deal with declining resources.”

The panic over sequestration also illustrates how the Washington region has been out of touch with the rest of America for the last decade. While the national economy has strained to sustain growth since the Great Recession, the capital region, buffered by runaway government spending, has been insulated from the layoffs and foreclosures that have devastated communities throughout the U.S.   

While the unemployment rate has hovered around 8 percent for most of Obama’s administration, the D.C. area unemployment has been steady at 5.3 percent—otherwise known as full employment.  When government workers are “furloughed” from a job, they’re never fired.  They may lose up to two weeks without pay, and they often get that money back. 

Washington’s reaction also ignores two economic realities. First, the budgeting process in Washington is broken and inconsistent with the rest of the country’s spending plans. A recent analysis by the Wall Street Journal found that federal spending in the Obama administration far outpaced private and business spending. In that sense, the sequestration is needed to bring the feds back in line with national spending trends.

Second, Washington is ignoring simple math. Forbes recently found that when adjusted for inflation, the $995 billion set to be cut over the next decade is actually a $110 billion increase. Only in Washington could a spending cut actually be a spending increase.

More doomsday prophecies like the ones issued by Panetta and Obama are likely to come as March 1 draws close. But look more closely: politicians here in Washington are being forced to swallow the nasty fiscal medicine that the rest of the country has digested for years. And they’re finding this medicine does not go down easily.