The budget deal that passed Congress yesterday means the page is turning on a prolonged period of fiscal uncertainty, Defense Secretary Chuck Hagel said today during a joint news conference with Army Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff.
The deal, still to be signed by President Barack Obama, eases sequestration’s hold on the defense budget during fiscal years 2014 and 2015, Hagel said.
“It gives us some predictability for those two years,” the defense secretary explained, before noting that the deal is an encouraging step in the right direction.
At least in the short term, the bipartisan budget agreement gives the department three things it needs: certainty, time and flexibility, Dempsey said.
“And in so doing, it will allow us to address most of our near-term readiness challenges and restore some readiness that we had lost over the past year-and-a-half or so,” he added.
“But, even with this agreement … DOD still faces very difficult budget decisions,” Hagel said.
The agreement reduces the original $52 billion sequestration cut in fiscal year 2014 by roughly $21 billion -- about a 1.2 percent reduction compared to fiscal 2013 instead of the expected 6 percent reduction. The fiscal year 2015 cuts are reduced by about $10 billion, Hagel said.
“We'll use those funds to restore spending on readiness,” the defense secretary said. “We will also work to minimize disruption to our most critical modernization efforts.”
While these cuts are less than originally mandated under sequestration, they are still about $70 billion deeper than the president's budget request, he said.
However, the department was prepared for this scenario, Hagel said.
The Strategic Choices and Management Review conducted earlier this year examined several potential budget situations, providing a baseline for DOD to work from as it sets future defense spending priorities, he said.
“We will continue to press ahead with our efforts to cut DOD's overhead and infrastructure costs, improving our acquisitions enterprise, and continue to make the tough choices on force structure,” Hagel said.
The department can no longer put off military compensation reform, he continued. As they are currently structured, military compensation programs are unsustainable, Hagel said. Allowing the growth in military compensation costs to continue unchecked would force the department to make disproportionate cuts to military readiness and modernization, the defense secretary said.
“We will work with Congress to bring the rate of growth of our compensation and benefits programs in line with budget limitations and fiscal realities,” he said.
Although such cuts are unpopular, tough decisions must be made, he added. “The leadership of DOD is prepared to engage the Congress in achieving compensation reform. But any changes to cost-of-living adjustments should not apply to medically disabled retirees,” Hagel added.
“Of course, the remainder of sequestration still lurks on the horizon beyond these two years,” Dempsey said. “And so, some of the force structure changes -- force structure reductions -- that we had planned based on sequestration will march on.”
“I hope that in the time we've just now bought for ourselves, this two-year period, we can continue to have a conversation, a discussion, a debate, and an understanding about what full sequestration would do to the military forces of the United States,” the chairman said.
(Follow Claudette Roulo on Twitter @rouloafps)