While calling the current budget sequester and the continuing lack of a defense appropriation bill harmful to the entire defense industry, Carter sought to reassure defense industry representatives attending a conference here that the department intends to “think and act ahead of today’s turmoil” by making strategic budget decisions for the future.
“We must continue to look above and beyond this year to the future, to the great strategic transition that is before us and to providing the country the defense it needs for the amount of money that it has to spend,” he said.
That transition comprises ending more than a decade of conflict and shifting focus toward the Asia-Pacific region, “where America will continue to play its seven-decade-old pivotal stabilizing role in the future,” he said.
At the same time, Carter said, “threats to the United States have not been sequestered,” mentioning North Korea, Iran, cyber threats and al-Qaida.
Carter acknowledged the ongoing budget uncertainty likely will create “second-order effects” that will last for years, with one of them perhaps being a pivot of the defense industry itself.
“The act of sequestration and longer-term budget cuts and the prolongation of uncertainty could limit capital market confidence in the defense industry,” he said, adding that “companies may be less willing to make internal investments in their defense portfolios. “Some of them have certainly told me that,” he added.
A $46 billion across-the-board cut in defense spending through the Sept. 30 end of the fiscal year took effect March 1 after Congress failed to reach an agreement on how to reduce the federal budget deficit. As he has in the past, Carter predicted the impact the cuts will have on everything from military readiness across the force to furloughs for the department’s 800,000 civilian employees.
“[Defense] Secretary [Chuck] Hagel and I and the entire DOD leadership are committed to doing everything in our power under this deliberately restrictive law to mitigate its harmful effects on national security,” the deputy secretary said. But he called the sequester and the ongoing continuing resolution now funding government operations in the absence of a federal budget a “double absurdity.”