Bloomberg News

Defense Cut’s Full Impact Not Immediate, Analyst Finds

August 24, 2012

The defense industry wouldn’t feel the full impact of automatic budget cuts immediately, with weapons programs facing only a 3.5 percent reduction next year, budget analyst Todd Harrison said.

While most defense programs would be reduced by 10.3 percent under the cuts known as sequestration, they would take time to implement, Harrison, of the Center for Strategic and Budgetary Assessments in Washington, said yesterday.

“It will not mean an immediate reduction of 10 percent for the defense industry,” Harrison said in an interview with Mark Crumpton on Bloomberg Television’s “Bottom Line” in advance of a report on the cuts scheduled to be released today.

The delayed impact is the result of the “natural lag time” from when money is authorized by Congress to when it’s scheduled to be spent, Harrison said. Cuts in “budget authority,” or authorized spending levels, may not show up on industry accounting books until years later.

The most immediate effect of the automatic cuts may be on civilian Defense Department employees, Harrison said. They may be hit with 100,000 “layoffs or furloughs” in the weeks after Jan. 2, when sequestration would take effect if Congress fails to come up with an alternative deficit-reduction plan, he said.

The Obama administration has exempted military personnel from the cuts.

The defense reductions are part of $1.2 trillion in automatic, across-the-board cuts to domestic and national- security programs over a decade that will start in January unless Congress and President Barack Obama act to avert them.

The cuts were imposed after talks failed last year on a bipartisan plan to curb the nation’s increasing debt.

To contact the reporter on this story: David Lerman in Washington at dlerman1@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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