WASHINGTON — Increasingly concerned that time is running out for the U.S. Congress to avoid $500 billion in automatic defense cuts, the Pentagon is assessing all options, including the possible implications of a one-year, $100 billion government-wide, “mini-sequester” deficit reduction deal, Department of Defense (DoD) and industry sources said.

Officials in the administration of U.S. President Barack Obama are adamant they are not planning for sequestration and continue to urge lawmakers to pass a long-term debt reduction deal that would avoid automatic cuts entirely, but worries are mounting that lawmakers will be unable to strike a deal to cut revenues while increasing taxes before the November elections.

During a closed-door July 23 meeting with two dozen defense chief executives and other corporate officials, Defense Secretary Leon Panetta detailed four possible scenarios facing the department. He was joined by Frank Kendall, the Pentagon’s acquisition chief; Bob Hale, comptroller; and Brett Lambert, the industrial policy chief.

At the meeting, Panetta said he would rather see a more comprehensive, long-term deficit reduction deal, but suggested the most politically practical solution may be a short-term agreement of one or two years, according to participants.

The four scenarios they are considering:

  • Congress does not act and sequestration happens.
  • During the lame-duck session of Congress after the November elections, a plan is constructed to thwart sequestration.
  • Congress comes up with a $1.2 trillion cut to avert sequestration before the election.
  • Congress inserts language into a continuing resolution that delays sequestration another year or two when there is a less-heated political environment, but the government implements the first and perhaps second year of cuts, which some refer to as the “mini-sequester.”

As in past meetings, Panetta and top executives discussed how sequestration could result in massive job cuts and how other cabinet agencies should pressure Congress to modify the Budget Control Act of 2011 — the law that mandates sequestration to lower the U.S. deficit — should lawmakers not be able to agree on alternate ways to reduce the country’s debt.

“Panetta is right now the only cabinet official that is doing anything to try to ward off what is going to be a total disaster for all industries, not just the defense industry,” said one official who attended the meeting.

“Secretary Panetta and industry are 100 percent on the same sheet of music on the fact that everybody’s got to do everything we can to basically put pressure on the Congress to fix the problem,” the official said.

Panetta has repeatedly said full sequestration would be devastating to DoD and the defense industry.

There is a “strong sense” in the Pentagon that a long-term deficit reduction deal will not happen, another source said.

Republican and Democratic lawmakers are not expected to act on a debt compromise — specifically one that could include tax increases — prior to the elections.

“The department’s position is clear. We want a budget deal — one that’s balanced — so that we can avoid the devastating consequences of sequestration,” Pentagon Press Secretary George Little said. “The stakes are too high for a nation facing a serious fiscal crisis.”

Sequestration calls for $1.2 trillion in mandated cuts across the federal government during the next decade. The Pentagon’s share of those cuts is about $500 billion.

The 2013 share of the 10-year sequestration cuts totals about $109 billion across the entire federal government.

“Clearly it would have less impact than a trillion-dollar hit, [should] sequestration be fully implemented,” said Gen. Norton Schwartz, Air Force chief of staff, when asked about the impact of a one-year deal during an interview.

“We’re not privy to those conversations and if our target is an additional $100 billion, we will make choices based on the priority of our capabilities, those that are in demand from our combatant commanders, and so on,” Schwartz said. “The only thing that is very important is maintaining balance — balance between readiness of a smaller force and making sure that we don’t completely mortgage the future.”

The federal government has faced numerous shutdown threats over the past year as lawmakers in both chambers of Congress have been unable to agree on a plan to lower the federal deficit.

Since November, Pentagon officials have been frustrated with the lack of urgency Congress has shown to come up with a plan to avert sequestration. Panetta has routinely called for Congress to put everything on the table to address the debt, including defense and domestic spending, entitlements and revenues.

For months, DoD officials have insisted they are not planning for sequestration and would not start planning until directed to do so by the White House Office of Management and Budget.

People close to Panetta said he is frustrated that the Pentagon has been forced to spend so much time thinking about sequestration, especially as U.S. military operations around the world have intensified in recent months.

The Pentagon has been closely monitoring fighting in Syria, Iran’s continued pursuit of nuclear weapons and North Korean militaristic threats.


Vago Muradian contributed to this report.



89,000 Civilian Job Cuts at DoD Forecast under Sequestration

Dire Sequestration Warnings Could Hurt Firms, Some Execs Say

Pentagon Teams with Executives To Fight Cuts

DoD Official: Programs Safe if U.S. Avoids Sequestration

Supercommittee Failure Would Hit Military Space