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Defense officials press Congress for budget flexibility

U.S. Deputy Secretary of Defense Ashton Carter adjusts his glasses during his meeting with Japanese Senior Vice Defence Minister Shu Watanab
U.S. Deputy Secretary of Defense Ashton Carter adjusts his glasses during his meeting with Japanese Senior Vice Defence Minister Shu Watanab

By David Alexander

WASHINGTON (Reuters) - Senior defense officials said on Tuesday they were doing their best to offset the worst impacts of $46 billion in budget cuts that began this month, but they will have to slash personnel and weapons programs if reductions keep coming in future years.

Deputy Defense Secretary Ashton Carter told a conference of industry officials that the Pentagon was facing a "double absurdity" of having to implement across-the-board budget cuts generally seen as bad policy while being funded for last year's spending levels and priorities.

"We're in the absurd position that it is only lawful to build the ships we built last year," Carter told a conference sponsored by defense consultant Jim McAleese and Credit Suisse.

Carter and other top Pentagon executives spoke amid a growing sense that the U.S. military will be hit with hundreds of billions of dollars in cuts over and above $487 billion in reductions already planned for the next decade.

The Defense Department was hit on March 1 with a $46 billion budget cut for this year, the first installment of $500 billion in new spending reductions facing the Pentagon over the next decade unless Congress and the White House agree to an alternative.

The department is also being squeezed by financial constraints imposed by the legislative mechanism Congress used to fund the government through March 27. Unable to reach a budget deal, they passed a resolution that extended funding based on last year's spending and priorities.

As a result, the Pentagon has more money for weapons programs than it requested but is facing a multibillion-dollar shortfall for operations and maintenance. Pentagon officials are urging Congress to give them an appropriation that would shift the funding into the right accounts for this year's priorities.

But even if Congress gives the department flexibility in making this year's cuts, it has given no sign that it plans to avert the rest of the $500 billion in cuts over the next decade.

Christine Fox, director of the Pentagon's Cost Assessment and Program Evaluation, said the department would have to look at the affordability of every one of its programs in order to make cuts of that magnitude and "it is not going to be pretty."

"I believe we're going to have to begin to reduce force structure immediately and significantly," she said. "In order to make the immediate $50 billion a year cuts, we are going to have no choice but to gut modernization (of weapons and equipment). The only place to get immediate savings quickly as we bring the force down responsibly is to cut acquisition programs."

WEAPONS PROGRAMS ON CHOPPING BLOCK

Chief weapons buyer Frank Kendall told the conference that some weapons programs may face termination if Congress and the Obama administration do not find a way to roll back additional budget cuts, but he declined to say which programs would be particularly vulnerable.

Kendall said the Pentagon would seek to protect some programs, including cybersecurity and Lockheed Martin Corp's F-35 Joint Strike Fighter, if lawmakers gave it some discretion about how additional cuts were implemented. But that meant some other programs might face termination.

Lockheed, Boeing Co, General Dynamics Corp and other big weapons-makers are anxiously waiting for details about which of their programs could be hit, and by how much.

Weapons makers have been laying off workers and consolidating facilities for some time as they brace for the biggest decline in U.S. military spending since the 1990s.

Defense officials have warned that this year's budget cuts could force them to put up to 800,000 Pentagon civilian workers on unpaid leave for 22 days and would leave a large portion of the military unprepared for combat by the end of the year.

Carter said the Pentagon leadership was "committed to doing everything in our power under this deliberately restrictive law to mitigate its harmful effects on national security."

But he and other officials noted the difficulty of doing their jobs in a climate of budget uncertainty. Pentagon Comptroller Robert Hale said the turmoil has delayed the 2014 budget. The president usually unveils it in February.

"I don't know what my budgets are going to be. I'm standing on quicksand right now," said Heidi Shyu, assistant secretary of the Army for acquisition, logistics and technology.

Navy Admiral Jonathan Greenert, the chief of naval operations, said he was particularly concerned about small suppliers of critical components.

"I worry about the industrial base. If it's not the prime (contractor) it's below the prime, it's the second or third. It's Bob's nuclear valve shop, Jimmy's nuclear," he said, noting that 90 percent of the Navy's nuclear components come from companies that are a sole supplier.

"I can't say it's vulnerable, but that's the one I worry about most," Greenert said.

Officials have said cuts of $50 billion per year over a decade will force the Pentagon to throw out the new defense strategy it implemented last year, which called for a shift in strategic focus to Asia-Pacific and the Middle East.

Since the new budget cuts went into effect on March 1, defense officials increasingly have been talking about revising the military strategy to align it more closely with the resources the department is likely to have in the coming years.

"If there are to be substantial additional cuts, what we ask for is time to redo this strategy," Hale said. "We need to reconsider it so that we have a blueprint that's consistent with whatever level of resources we are likely to get and gets as much national security ... as we can."

(Additional reporting by Andrea Shalal-Esa; Editing by Eric Beech)

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