1. Developed for Southeast Georgia Friends
of Fort Stewart and Hunter
Hurt, Norton & Associates
(202) 543-9398

2. INTRODUCTION
 The 2011 Budget Control Act requires the Pentagon's budget to be reduced by
$54.7 billion starting Jan 2nd, 2013, using a process known as sequestration.
 On January 2, 2013 the president must issue an order canceling funding
authority for the sequestered amounts.
 If sequestration is never mitigated or stopped, the law requires DoD to cut
$54.7 billion annually over the next 10 years. This is in addition to the
$487billion DoD already plans to cut over the next 10 years.
 Total cuts under full sequestration = $1.2 trillion. DoD’s share is approximately
$500 billion.
 Fort Stewart and Hunter Army Airfield could be seriously threatened through
deleterious funding impacts of sequestration.

3. INTRODUCTION (CONT.)
 Defense contractors predict the $54.7 billion cut will force plant closures and trigger large
layoffs.
 Lockheed Martin and some other defense contractors have elected NOT to send layoff notices
prior to the elections.
 This decision was based on the guidance from the Department of Labor that said the
administration would pick up the tab for contract cancellation and severance costs associated
with sequestration.
 Congressional leaders and the president have said they want to stop the cuts, yet Congress has
yet to negotiate or pass a bill that would reverse the reductions.
 President Obama has vowed to veto any proposal that increases the federal deficit and does
not include additional revenues (increased taxes).

4. INTRODUCTION (CONT.)
 A frustrated Defense Secretary Leon Panetta recently said he
would take ‘whatever the hell deal’ Congress can make on
sequestration.
 Deputy Defense Secretary Ashton Carter recently sent a memo
telling the Defense Department and military service heads to
continue ‘normal’ spending operations.
 DoD continues to insist they are not ‘planning’ for
sequestration, but will be prepared to address the sequester
cuts should Congress and the president not act.

5. SEQUESTRATION AND THE ECONOMY
 The cuts impacting DOD’s budget could:
 Reduce the nation’s GDP by $215 billion;
 Decrease personal workforce earnings by $109.4 billion;
 Cost the U.S. economy 2.14 million jobs.
• GDP growth in 2013 could be reduced by two thirds and
unemployment will increase by as much as 1.5 percentage points
raising the current national rate above 9 percent.

6. UNDOING SEQUESTRATION
 Only a new law can undo or delay sequestration.
 Stopping or delaying sequestration could take a number of forms, including:
1. The president and Congress could have reached a deal and enacted a law before the elections –
Congress has adjourned for the elections so this option has been ‘overcome by events’.
2. The president and legislators may reach a long-term deal during the lame-duck session of
Congress after Election Day and before Jan. 2, 2013.
3. Before Jan. 2, 2013, Congress may pass and the president may sign a law to delay sequestration
to allow more time to negotiate a solution.
4. The president and Congress may work out a deal after sequestration kicks in that would
retroactively restore some or all of the budget cuts.
5. Congress may pass a bill undoing sequestration and, with a two-thirds vote in both houses,
override a presidential veto, should one occur.

7. UNDOING SEQUESTRATION (CONT.)
 Consulting firm insight: Congress is most likely to consider option #3:
“Reach an agreement to delay sequestration for a specified number
of months.”
 A four to six month delay until the May/June 2013 timeframe is being
discussed among some lawmakers. A spending offset would be
required, so defense could still experience some reductions, but not
$54 billion in 9 months.
 Ultimately, Congress and president will have to adopt a long-term
solution and enact into law.

8. CONTINUING RESOLUTION (CR)
 Sequestration will take place on Jan. 2, 2013 whether or not a fiscal
2013 defense appropriations bill has been passed.
 The president signed a six month CR funding the government through
March 27, 2013, on Sept. 28, 2012.
 Funds provided by a CR are subject to the fiscal 2013 sequester in
the same way as funds provided by a full appropriations law.

9. IMPLEMENTING SEQUESTRATION
 2011 Budget Control Act, requires every "program element" be cut by
an even percentage.
 The $54.7B represents a 9.4 percent cut to all 2013 defense
appropriations not committed to contract, or exempted by law.
 About $500 billion is subject to sequestration - $54.7 billion = 9.4
percent.

10. IMPLEMENTING SEQUESTRATION (CONT.)
 The reductions will lead to a “near-universal disruption” to each of the
Pentagon’s more than 2,500 weapons procurement and research accounts
as well as operating budgets for military installations.
 The OMB report on sequestration released September 14, 2012, calculated
the impact of the cuts to the ‘account’ level and not to the ‘program’ or
‘activity’ level. The report projected all accounts would experience about a
9.4 percent cut in 2012.
 Will Fort Stewart and Hunter Army Airfield be impacted by the $54.7 billion
cut? The degree is unknown, but the DoD comptroller has said civilian
hiring freezes and furloughs are inevitable if sequestration is not averted. In
a worst case scenario, SEN Chambliss recently told community leaders
the region could lose up to 7,000 jobs.

11. SEQUESTRATION & BRAC
 While sequestration and BRAC are separate issues, they are
inextricably linked due to austere budget realities.
 If sequestration does come into effect, a future round(s) of BRAC
would become virtual requirements in order to meet the terms of the
defense budget reductions.
 If sequestration is implemented in January 2013 or is delayed, it will
give the Pentagon more justification to press for a 2015 or 2017
BRAC.

12. POLITICAL LANDSCAPE
 Both political parties are playing brinksmanship with sequestration.
 President Obama is placing the onus on Congress.
 The President does not think he will be hurt in the election by not seriously addressing
sequestration beforehand.
 If reelected, President Obama will use any sequestration deal as leverage for revenue increases
(and the expiration of Bush-era tax cuts) in the lame duck session or beyond.
 If Obama is not reelected, he will have little incentive to make any grand bargain for
sequestration during a lame-duck session – a sequestration delay would be possible with
Obama as a lame-duck president, but by no means certain.
 GOP nominee Mitt Romney has indicated that he would protect the defense budget from
sequestration if elected, and even roll back the initial tranche of $500 billion in cuts that the
military has already said it could safely absorb.
 If Romney wins, Republicans could be less inclined to retreat on taxes and move toward a
broader compromise.

13. WHAT TO BE DOING NOW
 Defense community groups and elected officials at the state and local levels must
continue to press federal lawmakers to act on sequestration.
 Sooner is best. Since Congress has adjourned for the November elections, the
earliest anything could be enacted would be during the post-election lame-duck
session, which begins the week of November 12, 2012.
 Some Members in both the House and Senate continue to press for a deal to undo
or delay sequestration. Senator Saxby Chambliss has been among the most active
and vocal for such a deal.
 A sense of urgency is paramount:
 The lame-duck session will be legislatively busy, and the politics of any deal-making will be
shaped by the outcome of the election.
 It is far preferable for sequestration to be addressed before it goes into effect on January 2,
2013. Addressing it retroactively is better than not at all, but the continued uncertainty will have
detrimental effects on the Department of Defense, other federal agencies, and the defense
industry as a whole.