Sequest(hys)teria: The political drama

The shadow play over a coming defense sequester is in high gear. Last
week at a Bloomberg defense conference Sens. John McCain (R-Ariz.) and
Carl Levin (D-Mich.) and Reps. Jim Moran (D-Va.), Peter Welch (D-Vt.),
Randy Forbes (R-Va.) and Norm Dicks (D-Wash.) clearly had their lines
down. Each waxed at high pitch about how disastrous a sequester next
year would be for our defense capabilities and our global role.
Contracts would be canceled, troops laid off and workers fired in
droves.

Other defense barons, such as House Armed Services Committee Chairman Buck McKeon (R-Calif.) and think tanks, also weighed in — the Bipartisan Policy Center asserted last week that the defense budget could fall 15 percent next year.

{mosads}Sequester is a popular sideshow on the midway. In reality, the defense budget is in a steady decline, the fourth since 1953. But it is more fun, and better politics, to focus on the sideshow than this main event. To paraphrase “Casablanca,” it is a shock to see politics in this joint.

How realistic is this drama? First, high-pitched voices are not going to exempt defense from the sequester. It was put on the table to get taxes on the table.

That’s a perfect opportunity for Democrats to argue that Republicans want to feed the wealthy and for Republicans to argue Democrats want to starve national security. Good campaign stuff.

Second, this emperor has no clothes. What Congress makes it can unmake, and unmake it Congress will after the election, carving out a new short-term deal from the many issues on the table: the debt ceiling, tax cuts, a doctors’ payment fix, the alternate minimum tax, payroll taxes. Congress will boot sequester down the road, and continue to argue.

Third, there is much special pleading here. Defense industry execs are rallying and the industry is contributing 60 percent of its campaign funds to Republican candidates this year. While the “defenders of defense” are in full throttle, domestic program advocates are dispersed and their political message is not out there.

Fourth, the sequester is not as tough on the budget, the industry or the work force as one might think. Managing a $50 billion reduction in defense in one year — about 8 percent of the affected funds — would be hard but not impossible. While the president will probably exempt military personnel, the sequester would affect the base defense budget by around $530 billion, war spending by $88 billion and DOD’s backlog of unobligated balances by another $88 billion.

We are withdrawing at a steady pace from Afghanistan, which has already left money on the table. And most of the war budget is for “operations and maintenance” — the most fungible part of the defense budget, completely mixed into non-war spending. DOD is likely to have a high degree of flexibility in how it manages these funds and a good dose of transfer authority to help with management.

Furthermore, a million jobs are not at stake. Two-thirds of those cited are “induced jobs,” not defense jobs. This broader employment is affected by everything (and typically counted many times over, depending on what direct spending is being focused on). If lower taxes and spending unleash productivity, all those carpenters, insurance agents, chefs and auto dealers should benefit from the economic recovery unleashed by smaller government. Less cynically, when the broader economy grows, so do those jobs. They are not tied to defense.

For the defense industry, a sequester would reduce the defense budget to its 2007 level, healthy for the firms and the work force. But times have changed.

There is not a “defense industrial base” any more. There are a few big contractors, but most of the work is done by commercial high-technology suppliers who also happen to sell in the defense market. They will be equally affected by how the economy recovers, not where the defense budget goes.

The main event is the defense build-down, not the sequester. The typical build-down — Korea, Vietnam, the Cold War — lowers defense budgets 30 percent in constant dollars over 10 years. If we took a trillion dollars out of the defense plan DOD projected last year, it would, at 17 percent, be the most shallow build-down we have experienced since World War II.

The industry and the Pentagon both know it is coming, deeper than Secretary Leon Panetta has forecast. It is already under way. Typically, the forces shrink (check, happening now), procurement budgets fall (check, the industry has anticipated this for at least a year and is laying off people, unrelated to the sequester). Congress and the Defense Department need to focus on managing this main event, not the sideshow.

Adams is a professor at the American University’s School of International Service and a distinguished fellow at The Stimson Center. From 1993-1997 he served as the senior White House official for national security budgets.