After months of delay, Pentagon told to plan for "fiscal cliff"

WASHINGTON (Reuters) - The Pentagon said on Wednesday that after months of delay it had been told by the White House budget office to begin planning to implement automatic spending cuts in January that would reduce defense outlays by $500 billion over the next decade.

Pentagon spokesman George Little said the department, which for months had been instructed not to prepare for the automatic cuts, had now been told by the White House Office of Management and Budget to begin "internal planning" for the reductions.

"Naturally we hope very much that sequestration will be avoided and that we don't enter that phase in early January 2013. We don't want to go off the fiscal cliff, but in consultation with OMB we think that it is prudent at this stage to begin at least some limited internal planning," he said.

The OMB instruction comes as the White House and lawmakers are engaged in a last-ditch effort to find an alternative package of revenue increases and spending cuts that would enable them to avoid the $1 trillion in automatic across-the-board cuts required under sequestration.

The automatic cuts, which are widely seen as a bad idea, were included in last year's Budget Control Act as a mechanism to coerce lawmakers to come up with an alternative package to reduce deficits. So far they have failed to reach a compromise, and the spending cuts and tax increases are due to start going into effect in a month.

Half of the automatic spending cuts would fall on the Pentagon. The $500 billion would be in addition to the $487 billion in cuts to defense spending mandated in the Budget Control Act. The department began implementing those reductions in its 2012 budget.

The Pentagon has repeatedly said over the past year that it had not begun planning for the automatic cuts because it had not received guidance to do so from the budget office. In recent months, at the direction of Congress, it had begun looking at the impact the cuts would have.

"That's been our focus, so we know what the potential impacts might be. And that obviously helps us create a baseline for what we need to plan against," Little said.

With the new White House guidance, the department had begun to broaden that effort.

"We're framing the planning effort internally right now," he said. "We need to understand what we need to do."

Little said officials will be looking at how the cuts would affect the department's 3 million employees and their families and how to begin communicating with civilian workers and uniformed service members about the reductions.

Little said the department also might be looking at the effect on weapons programs and other spending.

"Personnel ... certainly is something that is of serious concern to me. But I wouldn't rule out that we're looking at other areas as well," he said. "I think it would make sense for us to look at the full landscape of what might be affected inside the department if sequestration were to occur."

(Reporting By David Alexander; Editing by Eric Beech)

Source: http://news.yahoo.com/months-delay-pentagon-told-plan-fiscal-cliff-180817806--business.html

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