President Barack Obama’s White House has told at least one defense contractor not to worry: Sequestration isn’t really going to happen.
According to House Armed Services Committee Chairman Buck McKeon, Office of Management and Budget (OMB) Acting Director Jeffrey Zients told Lockheed Martin CEO Bob Stevens not to worry about the potential sequester.
Sequestration cuts are set to automatically take place following the failure of the deficit-reduction super committee.
In an e-mail to The Daily Caller, a spokesman for Rep. McKeon confirmed that Zients had told Stevens that the sequestration will not take place.
The congressman paraphrased Zients’ comment: “Why would I spend time planning for it when it’s not going to happen? It’s just wasted time.”
As the Department of Defense and House Armed Services Committee prepare for the worst with the potential sequestration, the White House has yet to even acknowledge the $500 billion sequester that has defense companies doling out pink slips.
Companies like Lockheed Martin and Northrup Grumman are bracing themselves for mass layoffs in January, yet the White House’s OMB isn’t even factoring sequestration into its budget projections — a move that is leaving contractors puzzled as to their next steps. (RELATED: Sequestration could boost unemployment, altering 2012 politics)
“They [Lockheed Martin] have 126,000 employees, they don’t just get up and decide what they’re going to do that day,” McKeon said of Lockheed. “They plan, they work out ahead. The military plans and works out ahead. But they’ve been told not to for the sequestration.”
“We [OMB] — as a rule — believe that private meetings and conversations are private and don’t comment on them,” OMB spokesman Kenneth Baer told TheDC. “However, we are not aware of any such statement being made.”
“Of course, the sequester should not happen,” he continued. “By design, it was never intended to happen, but rather to be a motivator for Congress to act on deficit reduction. Ever since Congress was unable to pass $1.2 trillion in balanced deficit reduction as required by the bipartisan-supported Budget Control Act, the administration has been very clear that the only way to avoid the sequester is for Congress to do its job and pass the balanced deficit reduction it was charged to do. While OMB has not yet engaged agencies in planning, our staff is conducting the analysis necessary to move forward if necessary. Right now, however, there is time for Congress to pass balanced deficit reduction, and we hope that it will. Should it get to a point where it appears that Congress will not do its job and the sequester may take effect, we will be prepared.”
On Wednesday, the House Armed Services Committee issued a formal request calling for Zients to testify before the committee on the impact of the sequestration, noting the committee’s decision to move toward the reconciliation process.
“At a minimum, this information is for planning, and perhaps the additional insight into the realities of sequestration will incentivize all parties to offer alternative deficit reduction plans,” McKeon said in a press release.
The Office of the Navy was told to simply wait, and to not make any plans in response to the cuts just yet —advice that acts as a counter to the typical plan-ahead mantra of defense.
Despite growing worry from the House Armed Services Committee and the Pentagon, Obama created a plan to deal with the sequester before it became an issue: In the 2013 budget proposal, he included a policy that would replace the sequestration with $1.5 trillion in additional revenue — all gained from a substantial tax increase for citizens with a combined income of more than $250,000.
“With a sequester poised to take effect in January 2013 that would inflict great damage on critical domestic priorities as well as the country’s national security, it is especially important that the Congress come together and pass a balanced deficit reduction plan to replace this sequester and, also, go beyond its required deficit reduction,” the budget analysis reads.
Obama proposed similar tax increases in 2010, but the proposal was shot down by the House and Senate. It is speculated that the president will try to pass the same tax increase in the coming months, but it is likely to be denied by Congress yet again.
“It is absurd for him to think that he can do it now, yet that’s what he points to to avoid sequestration,” said Patrick Louis Knudsen, a senior fellow in budgetary affairs at the Heritage Foundation.
Currently, the Department of Defense has proposed more than $487 billion in budget cuts, but if the sequestration does occur, McKeon warned, there could be an additional $500 billion in cuts. OMB and the White House, though, hardly seem fazed by the possibility, adding doubt to whether the threat is real.
“The White House isn’t doing anything,” said Rep. Randy Forbes, a Republican member of the House Armed Services Committee.
While there is no way to predict whether the threat of a sequester is real or not, Knudsen believes that the White House is remaining quiet for one of two reasons: 1) They don’t have a plan with how to deal with it, or 2) They have a plan but don’t want to discuss it when facing voters in a few months.
The White House declined TheDC’s request for comment.
Each year, OMB releases projections for the upcoming fiscal year’s budget. Next year, MB projected that the Department of Defense would receive $524.5 billion — a 1 percent decrease from the 2012 budget. The report said that, despite cuts, the 2013 budget would “keep our military the finest in the world by investing in priorities.”
“He’s the commander in chief. That should be his utmost concern — how he deals with the defense budget.,” Knudsen said. “But he’s offered nothing specific on how to address these looming defense cuts.”
