Contractors say sequester will ‘shatter’ security plans

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Key defense contractors said Monday that automatic federal spending cuts set to begin next month would hamstring their ability to develop critical machinery, equip military personnel and help maintain national security.

David Langstaff, president and chief executive officer of TASC Inc., said it would be “irresponsible” to allow the spending cuts, known as sequestration, to take effect Jan. 2.

“Sequestration … will shatter our ability to execute the U.S. national security strategy,” Mr. Langstaff said during a panel discussion with three other defense industry CEOs at the National Press Club.

The defense contractors urged lawmakers to reach an agreement on a framework to avert sequestration, which would cut $1.2 trillion from the federal budget over the next decade. The Defense Department would lose $500 billion over that period, beginning with a more than $50 billion cut to its 2013 budget.

“Cuts at that level are irresponsible at almost any way you look at it,” Mr. Langstaff said.

Wes Bush, president and CEO of Northrop Grumman Corp., said that “getting to a framework agreement that would allow the nation to move forward is critical.”

Dawne S. Hickton, president and CEO of RTI International Metals Inc., said the automatic spending cuts would curtail progress on programs that have been years in the making.

“What we’re manufacturing in our plants today is going in a military program two or three years down the road,” Ms. Hickton said.

In addition, the spending cuts would hurt defense companies’ ability to recruit talented personnel and negatively affect the jobs of tens of thousands of defense workers, the contractors said.

Defense companies planned to notify employees of impending layoffs in preparation for the spending cuts before Election Day, but the White House asked the companies to delay that action, saying it would cover the cost of potential lawsuits.

“Do federal employees get furloughed on Jan. 2 or Jan. 3? Nobody really knows,” Mr. Bush said. “We can’t stand here today and predict what will happen, even though it is just a few weeks away, because we will each have to make those decisions based on the environment at the time.”

Sequestration was designed as a mechanism to force lawmakers to craft a budget deal, but negotiations have stalled over disagreements about increasing taxes and cutting programs.

The defense contractors urged lawmakers to compromise on both issues.

“We need to stop believing or pretending that there’s a scenario out there that offers no defense cuts,” Mr. Langstaff said, adding that the spending cuts should be phased in and targeted strategically.

David Hess, president of Pratt & Whitney, a division of United Technologies Corp., said he and the other CEOs “pay our taxes every year. Regardless of the tax rate, we’ll continue to do so regardless of the tax policy going forward.”

“What I hope Congress hears,” Mr. Langstaff said, “is that … there are a lot of people in the business community who are actually taking a pragmatic, practical approach and not just standing behind pronouncements around ideology.

“I think that’s an important sign, and I hope Congress recognizes that creates for them space to get the deal done.”

Mr. Bush added that the country’s image abroad is at stake, as well as the impasse’s effect on the global economy.

“If we fail to come together as a country, the signal that sends about the capability of the United States of America to get its own house in order is a very negative signal,” he said. “And I think we all recognize that the global economy operates on a view of confidence. That will have a very negative impact on that confidence.”

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