10 Apr 2013

Overturning the sequester: US defense budget preview

President Barack Obama is due to outline a new deficit reduction plan in his overdue 2014 budget. Under these measures, the military would receive more money during the next decade than currently allowed by law.

Under legislation passed in 2011 and brought into force recently, cuts were enforced across the board in most programs after Congress failed to find other ways to trim the deficit by $1.2 trillion in the coming decade.

President Obama is expected to take measures to scrap this controversial legislation, reducing the automatic cuts to defense spending over the next decade to $100 billion, down from $500 billion. It is expected that he would achieve this in part by increasing tax on the country’s top earners.

Other proposed plans include $100 billion in defense reductions and restraints in the growth of Social Security and Medicare, the federal program that pays most of the health costs for the elderly.

Mr Obama has previously called the automatic sequestration cuts ‘arbitrary’ and ‘dumb’.

However, given that the sequestration came into effect due to the ability of Democrats and Republicans to reach an agreement on taxes and spending, it is also likely that Obama’s plans will be derailed in Congress, leading to further fears regarding the ‘debt ceiling’.

Many in the defence industry have therefore come to expect that long-term automatic cuts to defense programs could be here to stay.

White House officials last night said that if the Obama plan is adopted by Congress, the annual federal deficit would gradually decline to 2.8 percent of the nation’s gross domestic product to 1.7 percent by 2023.

Many have warned that failure to agree on new terms would do major harm to the US defense industry and that if personnel, operation and maintenance costs keep rising, they may consume the entire defense budget by 2024, leaving no funding for weapons procurement, military construction or family housing.