DOD sequester: Day one

March 1 marked D-Day for sequestration as lawmakers and President Barack Obama failed to reach a deal to avert the across-the-board spending cuts. With $85 billion in budget reductions mandated for this fiscal year, agencies now must get serious about implementing cuts within their various departments.

Throughout Washington federal officials and analysts alike spoke out about the cuts, most prominently about the pain sequestration will – or will not, depending on who was speaking – cause Americans across the country.

"Even with these cuts in place, folks all across this country will work hard to make sure that we keep the recovery going. But Washington sure isn't making it easy," Obama said after a last-ditch morning meeting with congressional leaders proved to be yet another stalemate. "It's important to understand that not everyone will feel the pain of these cuts right away. The pain, though, will be real."

If there was a common theme throughout "sequestration day" and the many discussions it launched, the idea of gradual-but-inevitable effects was it. While some experts disputed the claims that cuts will be disastrous to the economy and military readiness, it was widely noted that impact will trickle down during the coming months and years.

At the Defense Department – where $46 billion in cuts are being leveled – the influence is already being felt and now will be accelerated, top DOD officials and analysts said. Ahead of implementation of the cuts, the services outlined plans for reducing costs, including the curtailment of Army training and reductions in Air Force flying hours, Navy steaming days and the number of ships at sea.

"Let me make it clear that this uncertainty puts at risk our ability to effectively fulfill all of our missions," Defense Secretary Chuck Hagel said at a March 1 Pentagon press conference. "The leadership at the Pentagon, all of us, have two serious concerns. First, the abrupt and arbitrary cuts under the sequester, and second, the lack of management flexibility we now face in the current [continuing resolution]. For the past two months DOD has begun to see the effects and consequences of that uncertainty."

Now, DOD will take on further risk, Hagel said.

While military personnel are exempt from sequestration, they are not immune to sequestration's impact, Deputy Defense Secretary Ashton Carter said at the briefing.

"If you planned to fly, or to train in the next few months – that's their duty, that's their responsibility to our national security, and they're not going to be able to do that," Carter said. Such operational fallout comes in addition to the roughly 800,000 civilian DOD personnel who will now face furlough, a move that will begin taking effect in April, once required notices have been issued. The defense industrial base also is bracing for impact, where effects in many cases will not be immediate but will eventually reverberate through both the private sector and the Pentagon.

"The contractor workforce depends on us and we in turn depend on them," Carter said. "We don't make anything here in the Pentagon so we depend on the industrial base...many of them will be affected very directly by this because we will be cutting back on contractor spend. We have to find $46 billion between now and the end of the year, and the civilian and military workforce...only provide a few billion dollars. The rest will affect contractors."

While Carter called the contractor impact "serious and immediate," others say it may not be as bad as many fear. According to Todd Harrison, senior analyst at the Center for Strategic Budgetary Assessment, some contractors will feel the effects sooner than others, but it might not be all bad news.

"The decline in revenues will be gradual. For equipment manufacturers, it will happen gradually over years. For service contractors, it will happen more quickly," Harrison said. "But because DOD will have to go back and renegotiate contracts...it is possible that some parts of the defense industry, while they may see revenues decline, [they] may see profit margins increase. They may be able to negotiate contracts in more favorable terms."

The Pentagon, too, faces ramifications in dealings with industry. If sequestration truly remains in effect for the rest of the year, the services may default on some contracts, such as multi-year procurements. That will mean penalties and wasted taxpayer dollars, Harrison said.

Across DOD, the cuts – which have been painted as catastrophic by top officials – are in keeping with broader post-war trends as the U.S. draws down its presence is Afghanistan, some analysts noted. "This is not a meat-ax; it's a gradual series of steps," said Stimson Center’s Gordon Adams, former associate director at Office for Management and Budget and now professor at American University. "The drama of the CR and the sequester...are really a reflection of a broader trend here, which is the defense budget is coming down. And it's going to come down over the next 10 years steeper, in my judgment, than the $487 billion" previously outlined by former Defense Secretary Leon Panetta.

Adams, speaking on a March 1 conference call, was joined by Center for American Progress's Larry Korb in saying that the doomsday scenarios predicted for the military are overblown.

"Nobody wants this. Everybody thinks it's not the way to run a railroad, not to say the world's largest organization," Korb said. "But I think that even with sequestration, given the guidance you get from OMB, you can do it without impacting our readiness to deal with the threats we face."

While Harrison – who also noted that further budget issues loom in the March 27 expiration date of the current CR – cautioned that DOD officials should watch their Armageddon-esque rhetoric, Carter reiterated his stance that sequestration poses dangers for national security.

"This country is turning a strategic corner...coming out of the era of Iraq and Afghanistan, we're trying to address the national security problems that are going to define this country's future," Carter said. "We also have to understand that we're going to have [fewer] resources than we have in the past decade. This is something different. This is something that is not managerially, or from a national-security point of view, prudent."