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Fiscal Cliff Deal Yields Short-Term Benefit for Defense Spending

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  • January 6, 2013
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While last week’s agreement to stave off automatic defense cuts in the current fiscal year of about $55 billion provides only a two-month reprieve, the last-minute deal to avert the fiscal cliff restores $15 billion, and possibly more, to the defense budget that would have been cut under 2011′s Budget Control Act.

Calculation of the impact of last week’s American Taxpayer Relief Act on fiscal 2013 defense spending is tricky, according to CQ, and subject to varying interpretations by budget experts.

The primary benefit of the legislation is its two-month postponement of sequestration that cancels $12 billion of defense spending reductions that otherwise would have been imposed this year, lowering the scheduled, across-the-board cut for the department from $55 billion to $43 billion.

Separately, the fiscal cliff deal reduces the impact of the ‘other sequester,’ an $11 billion hit to FY 2013 defense spending stemming from the continuing resolution lawmakers passed in September to fund the government through March.

That stopgap measure provides $557 billion for defense on an annual basis, an amount that exceeds the defense spending cap imposed by the Budget Control Act by $11 billion. To enforce the spending cap, the Office of Management and Budget would have been forced to trim FY 2013 defense spending by $11 billion later this month.

Last week’s fiscal cliff rescue, however, establishes a different spending cap for this year that would require only a $7 billion reduction from a larger budget category of security spending. DOD’s share of that would be roughly $5 billion, Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities, estimated for CQ.

In all, the eleventh-hour deal means that even if sequestration ultimately is triggered in March, Pentagon officials would need to identify only $48 billion to $50 billion in savings in FY 2013 rather than $66 billion.

DOD is “absolutely better off,” Kogan said.

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