* Cites improved tone of discussions among lawmakers
* Pentagon would safeguard war spending, multiyear contracts
* Unpaid furloughs for civilian employees very likely
* Effects seen phased in over months
By Andrea Shalal-Esa
WASHINGTON, Nov 29 A top Pentagon official said
on Thursday he is "cautiously optimistic" that Congress will
avert automatic budget cuts that are due to kick in on Jan. 2,
citing some increased willingness among Republicans to consider
additional revenue now that the presidential election is over.
Pentagon Comptroller Robert Hale said the tone of discussions
between Republicans and Democrats had improved and neither side
wanted to see the additional cuts to military spending, which
would total $52 billion in fiscal 2013 alone, take effect.
"Winston Churchill once said you can always trust Americans
to do the right thing, after they've tried everything else
first," Hale told an investor conference hosted by Credit
Suisse. "I think we've tried about everything else first."
U.S. stocks moved higher on Thursday amid signs of progress
toward a deficit-reducing agreement that would avoid big
spending cuts and tax hikes dubbed the "fiscal cliff."
Lockheed Martin Corp, Boeing Co, Northrop
Grumman Corp, General Dynamics Corp, Raytheon Co
and other defense companies are anxiously watching
congressional negotiations, but say they are bracing for some
additional cuts to defense spending, regardless of what happens.
President Barack Obama and Congress agreed last year to cut
projected national security spending by $487 billion over the
next decade. The Pentagon faces another $500 billion in
across-the-board cuts beginning in January unless Congress
reaches a deal on other spending cuts or revenue increases.
Hale reiterated that the cuts required under sequestration
would have a devastating effect on the Defense Department, if
Congress were unable to reach agreement on other
deficit-reducing measures, but said the effects would likely be
phased in over a period of months, not days.
He said the department would "almost certainly" be forced to
implement unpaid furloughs for civilian workers. The cuts would
also result in fewer purchases of weapons, delays in programs
and higher unit costs, as well as decreased services for
military families and retirees, he said.
Hale told industry executives and Wall Street analysts that
the Pentagon was finalizing its budget plan for fiscal 2014,
based on the assumption that the sequestration would not occur.
If it did, he said, the department would first have to revamp
its budget plan for fiscal 2013, then adjust the plan for 2014.
While no detailed planning was under way for how to
implement the automatic budget cuts, Hale said the Pentagon
would act to protect war-related spending and safeguard
multiyear contracts signed with industry to avoid penalties.
"You will not see cataclysmic changes," Hale told the
He also appealed to weapons makers to continue efforts to
reduce overhead costs, noting that labor costs had risen more
sharply in the defense business than the commercial sector.