Automatic Budget Cuts Lead To Dire Pentagon Predictions, Though Impact Could Be Less

* Pentagon says reductions likely to cause readiness crisis

* Law requiring across-the-board cuts limits flexibility

* Skeptics say threat exaggerated to pressure Congress for relief

By David Alexander

WASHINGTON, Feb 20 (Reuters) - The U.S. Air Force Space Command cautioned recently that if new budget cuts take effect, some of its round-the-clock missile-warning operations would begin working bankers' hours - raising concerns about detecting missiles targeting America.

But when questioned about these dire predictions by a concerned lawmaker last week, General Mark Welsh, the Air Force chief of staff, explained that flexibility in the system would let Space Command focus the cuts that take effect on March 1 on redundant, backup radar systems.

"What our Air Force space commander has decided to do is to try and concentrate the cut so that we are not at risk of not having warning of an incoming missile," Welsh told the House of Representatives Armed Services Committee.

Across the military services, officials are sounding similar warnings about the $46 billion in budget cuts beginning March 1 that will slash nearly every military program or activity by a flat percentage.

But even as they raise the alarm about everything from layoffs to reduced flying hours, defense officials are trying to assess how much flexibility they have to protect their most vital missions from the worst effects of the cuts.

Concern about the level of flexibility seems to depend upon where you sit. Military and civilian defense officials say they are facing a trio of converging constraints that give them little leeway to protect the most vital programs and projects.

But some outside analysts say the Pentagon is exaggerating the likely damage to pressure Congress to avert looming cuts.

"What the service chiefs have been plugging is a classic cherry-picking of some of the most horrendous things you could imagine won't deploy a carrier, pull equipment out of maintenance, shut down training exercises, reduce readiness rates," said Gordon Adams, a professor of national security policy at American University.

Adams, who worked on defense budgets at the White House in the Clinton Administration, said the warnings were a classic Washington Monument strategy, named after an Interior Department decision in the 1960s to respond to budget cuts by shuttering the iconic Washington Monument and other national parks.

TRIPLE THREAT

Pentagon officials say the threats from the budget cuts are real, caused by a what Defense Secretary Leon Panetta has called a "perfect storm of budget uncertainty."

President Barack Obama signed the Budget Control Act in 2011 requiring $487 billion in defense spending cuts over a decade. The law also put in place another $500 billion in mandatory, across-the-board Pentagon cuts under a mechanism known as sequestration.

Sequestration was never meant to go into effect, but was intended to coerce Congress and the White House into agreeing on more selective budget reductions. That deal never happened.

Compounding the Pentagon's financial quandary, Congress failed to appropriate defense funding for the 2013 fiscal year that began Oct. 1.

Instead, it kept the government running through March 27 using a continuing resolution. Although spending levels for 2013 are comparable to 2012, budget priorities differ significantly, with much more funding allocated to military operations and maintenance in 2013 than in 2012.

The Defense Department "is starting off with the wrong amount of funding in many of these accounts," said Todd Harrison, a defense budget analyst at the Center for Strategic and Budgetary Assessments. "Programs that were planning to spend more in FY13 are short funding, and programs planning to spend less have excess funding."

Because sequestration was not due to kick in until Jan. 2 and Congress was expected to resolve the issue by then, the Pentagon spent its funds in the first quarter of the 2013 fiscal year - October through December - as if the budget cuts were not going to happen.

With sequestration now due to begin on March 1, the Pentagon will be five months into the fiscal year when it has to cut spending, meaning the trims will have to come from seven months of spending rather than a full year, increasing the impact.

FLEXIBILITY

Pentagon officials have begun searching for ways to preserve funding for critical programs and activities.

Deputy Defense Secretary Ashton Carter has directed the military services to prioritize funding for the Afghanistan war, training for troops headed to the war zone, treatment of the wounded and preservation of family programs. He also asked them, where possible, to protect funding for the new U.S. military strategy, which calls for greater focus on the Asia-Pacific.

How much space the services have to protect those priorities is unclear. Under sequestration, the Pentagon is required to reduce spending by $46 billion in the final seven months of fiscal year 2013 by cutting an equal percentage from most programs and activities.

Obama exempted military personnel from the cuts, as permitted under the Budget Control Act. But that decision increases the percentage that must be cut from the other accounts. Officials estimate the cut will be about 9 percent.

The Pentagon has some flexibility on Afghanistan war funding as well. In practice, money for the war is treated as part of the department's operations and maintenance account. Officials have said they will offset cuts to war spending by delaying less-pressing maintenance and other activity funded from the account.

The Congressional Research Service (CRS) estimated earlier this month that funding for Afghanistan and general operations and maintenance would be about $263 billion. The cut from the two accounts required by sequester would be about $22.4 billion.

Since the Pentagon has already spent part of its funding for the year and has decided to protect war funding, it only has about $128 billion remaining from which to cut the $22.4 billion, CRS estimated. That amounts to a 17.5 percent cut.

Those figures are what have prompted the Pentagon to sound the alarm over sequestration, warning of an axe that will fall on training and maintenance, leading to a crisis in readiness.

"There are two problems here," Carter told lawmakers last week. "One is the continuing resolution. We very much need and would like to have an appropriations bill That will relieve a lot of pressure."

"With respect to sequester, we only have a few months left and we have to absorb $46 billion. What that means is you kind of have to go wherever you can get the money in that period of time. And so while additional flexibility is always helpful, at this point it doesn't help that much," he added.

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