The US Defense Department has started planning for sweeping budget cuts if Congress and President Barack Obama fail to agree to a deal to avoid a looming fiscal cliff, officials said Wednesday.
The White House Office of Management and Budget (OMB) instructed the Pentagon this week to begin preparations for defense spending reductions of up to 10 percent as the clock ticks on a January deadline that will trigger steep automatic budget cuts and tax hikes.
“We think that it is prudent at this stage to begin at least some limited internal planning,” Pentagon spokesman George Little told reporters.
“We’ve been consulting with OMB and been instructed to pursue internal planning on sequestration (the automatic spending cuts). We are at the very start of this process. We don’t have all the details firmed up.”
Little said the Pentagon believed the cuts would be “devastating to our national defense” but suggested some painful moves would not have to be carried out immediately after the January deadline.
For months the Pentagon had insisted it was not planning for the worst as it had not been instructed to do so by the White House budget office.
If Obama and Republican lawmakers cannot clinch an agreement, tax cuts enacted under former president George W. Bush will expire on January 1, at the same time as huge automatic spending cuts come into force, likely throwing the economy into recession.
The Pentagon would have to absorb half the automatic cuts, amounting to $500 billion over 10 years, including $52.3 billion in the upcoming fiscal year.
The Obama administration has proposed a defense budget of $525 billion, along with an additional $89 billion for the war in Afghanistan.
The Pentagon was already scaling back projected defense spending by $487 billion over the next decade.
Little said the fiscal crisis would jeopardize a new US military strategy launched in January of this year that envisages a shift towards the Asia-Pacific region, with investments in special forces, cyber security and unmanned drone aircraft.
“It puts — at least temporarily — the strategy in jeopardy,” he said.
Lawmakers drafted the drastic budget cutting mechanism, known as sequestration, to force both political parties to reach a compromise.
The automatic cuts would apply to all military spending except for salaries of troops.
Otherwise, the Pentagon had limited breathing room to manage the reductions, and would have to look at how the cuts would affect the department’s work force of three million, including reservists and civilian employees, according to Little.
“It is across the board but even with relatively drastic reductions in a short period of time, we can make decisions inside particular lines of the budget to define priorities,” he said.
“We don’t have full flexibility but we have some space for decision-making.”
The automatic cuts would be phased in over months and not carried out immediately in January, he added.
“If sequestration would take place, we have this month and then we have, I think, a few months in 2013 as well.”