For Defense Contractors, That’s a Heck of a Budget Trigger

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If you are a defense contractor and you make weapons or trucks or planes or whatever, beware the “enforcement mechanism” in the budget deal. Here is the summary from the White House.

  • Immediately enacted 10-year discretionary spending caps generating nearly $1 trillion in deficit reduction; balanced between defense and non-defense spending.
  • President authorized to increase the debt limit by at least $2.1 trillion, eliminating the need for further increases until 2013.
  • Bipartisan committee process tasked with identifying an additional $1.5 trillion in deficit reduction, including from entitlement and tax reform. Committee is required to report legislation by November 23, 2011, which receives fast-track protections. Congress is required to vote on Committee recommendations by December 23, 2011.
  • Enforcement mechanism established to force all parties – Republican and Democrat – to agree to balanced deficit reduction. If Committee fails, enforcement mechanism will trigger spending reductions beginning in 2013 – split 50/50 between domestic and defense spending. Enforcement protects Social Security, Medicare beneficiaries, and low-income programs from any cuts.

So if the committee doesn’t come up with a plan for spending cuts or fiddling with the tax code to come up with new revenues or Congress doesn’t enact that plan, the axe falls on $750 billion in defense spending over 10 years.