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Hearing of the House Armed Services Committee - Sequestration Implementation Options and the Effects on National Defense: Administration Perspectives


Location: Unknown

Good morning ladies and gentlemen. The House Armed Services Committee meets today to receive testimony on the Administration's implementation options for sequestration. Joining us today is the Honorable Jeffrey Zients, the Acting Director of the Office of Management and Budget and the Honorable Ashton Carter, the Deputy Secretary of Defense. Gentlemen, thank you for joining us.

Although this is the first day of August, when you look at the calendar there are only a handful of legislative days left to resolve the devastating across-the-board cuts to our military known as sequestration. The House has already passed a measure that would achieve the necessary deficit reduction to resolve sequestration for a year -- however, the Senate has yet to consider any solution, other than the President's proposal, which was defeated unanimously. And since he offered that failed proposal 6 months ago, the President has been virtually silent on the issue. This impasse, and lack of a clear way forward, has created a chaotic and uncertain budget environment for industry and defense planners. We heard from some of those leaders two weeks ago that even though cuts are scheduled for implementation January 2nd, companies are required to assess and start planning now, in accordance with the law -- and, sequestration is the law right now. Just because there is bipartisan consensus that sequestration is bad and should be replaced, it doesn't mean that we can wish away the law. The President wanted sequestration in the Budget Control Act and he got it. Let us also not forget that it was the President who put defense "squarely on the table" last spring. Until the President and the Senate come to the table with a proposal to resolve the cuts, we have no choice but to proceed as if sequestration will happen.

In part because of this rising tide of uncertainty and in part to help build the political will to resolve sequestration, this Congress has repeatedly requested information from the President and Office of Management and Budget on exactly how sequestration will be implemented. With two million active duty, civilian and private sector jobs at stake it is unconscionable this information has been denied to Congress, the Department of Defense and our industry partners. Make no mistake, we understand -- planning for sequestration won't lessen the damage. But failing to plan for it will make a terrible situation worse.

One bright light of bipartisanship in this impasse was the overwhelming House and unanimous Senate passage of the Sequestration Transparency Act -- legislation requiring the President to submit a report to Congress detailing how the Administration plans to implement the budget sequestration cuts. So this hearing is very timely, and seeing as the President already has that legislation on his desk, gentlemen, I think it's time to cut to the chase and start talking.

In fact, this hearing appears to have prompted a flurry of activity within the Administration. On Monday, the Department of Labor issued guidance on the applicability of the WARN Act, which requires notification to employees in advance of massive layoffs. Just yesterday, the President made the long-awaited determination that military personnel accounts will be exempted from sequestration. And Director Zients, yesterday you issued a memo to federal agencies that was a small step in the right direction. So there is even more to discuss.

The panel of defense industry leaders testified before this Committee that barring any additional guidance, they must proceed as if sequestration will become a reality, and under the requirements of the WARN Act notify their employees that they may well be laid off in the coming months. As one CEO put it, the Administration's failure to issue any guidance on sequestration has completed obscured the industry's near-term horizon with a "fog of uncertainty." We asked them for the specific guidance they needed. They've responded and I have to say, input from the Department of Labor wasn't on their list.

That's because the Department of Labor's own fact sheet on the WARN Act says it is inappropriate for the Department to issue guidance on the applicability of WARN Act. Nevertheless, on Monday night the Department of Labor urged employers not to follow the requirements of the WARN Act before the election. So instead of bringing his party in the Senate to the negotiating table to resolve sequestration, the President has focused on preventing advance notice to American workers that their jobs are at risk.

Despite the fact that we can all agree that sequestration will cause job losses and that is the law of the land, the President's Labor Secretary found a lot of excuses to explain why layoffs aren't foreseeable. I guess the conclusion is that the Administration doesn't believe Americans deserve the common courtesy of being given a couple of months notice before they lose their jobs. In the end, it doesn't matter. Each company will have to make its own conclusion as to whether or not the layoffs are "foreseeable". But I don't want to dwell on that ill-conceived guidance. Business leaders will do what they think is in the best interests of their employees and shareholders, and we are here today to talk about OMB's planning.

Director Zients, you have argued that no amount of planning or reports will turn the sequester into anything other than the devastating cut in defense and non-defense programs that it was meant to be. I fear this means many of our questions will go unanswered and our hearing will be used solely as an opportunity to push for the wholesale adoption of President Obama's budget plan.

I know we'll hear a lot today about "balanced deficit reduction", so I want to address the issue briefly. While the President's so-called "balanced" plan may sound fair, it quickly collapses under scrutiny. In a recent op-ed, Director Zients, you argue this "balanced" approach finds $1.2 trillion in savings, and reduces the deficit by $4 trillion by proposing $2.50 in spending cuts for every $1 in new revenue. But the numbers simply do not add up.

The $2.50-to-$1 ratio was arrived at by a series of budget gimmicks, claiming spending reductions that are actually tax increases and counting spending reductions that are already in law. It claims $848 billion in "savings" from ending the wars in Iraq and Afghanistan by counting funds that we all would admit will not be requested in the first place. And most troubling, it raises taxes on hardworking Americans and threatens an already weak economy. But even if that's the foundation for the President's solution, let the Senate bring some version of it to a vote. Then we'll have a conference and sort out our differences.

Until that happens, it is my sincere hope that we can end much of this uncertainty here today. Our allies are getting anxious and our adversaries emboldened. As one senior military official recently told me, America's inability to govern ourselves past sequestration plays directly into the hands of those who spread a narrative of American decline and will ultimately thrust us into a more dangerous world.

If this is not enough to compel action and straightforward talk on the part of the Administration, I do not know what it is. I look forward to your testimony this morning.

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