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Looming cuts drive uncertainty, fear in defense sector

July 1, 2013

Col. Merrily Madero has been pulling her civilian workers at Air Force Space Command aside one at a time.

"I want to look them in the eyes," said Madero, the Peterson Air Force base command's top personnel officer.

In those meetings, Madero has filled them in on the furlough. A tool long-used by corporate America, it's hitting the Defense Department for the first time in July, with thousands of civilian workers taking 11 days off without pay by Sept. 30.

That's just a piece of sweeping defense cuts beginning to hit the Pikes Peak region as the Pentagon looks to cut up to $1 trillion over 10 years.

The Army is disbanding a Fort Carson brigade in a move that cuts the post's projected military population by about 1,500 by 2017. Bases through the region have cut maintenance contracts, resulting in hundreds of layoffs.

And with congress gridlocked on whether it will ease some defense cuts, the worst could be yet to come.

"It scares the crap out of me," said Norm Andersson, a Colorado Springs defense contractor and retired Army brigadier general.

Defense observers and those in business say the Defense Department downsizing could lead to a camouflage-clad great recession.

The cuts so far, though, are a ripple rather than a tidal wave.

The downsizing at Fort Carson ends several years of growth at the post. But with thousands of soldiers overseas at any time and the post's roster hanging around 22,700 soldiers now, disbanding one brigade and reorganizing other units is unlikely to have much impact. If all 24,500 soldiers are actually at the base in 2017, as Pentagon plans predict, the $2.2 billion annual economic impact of the post could actually grow.

The civilian furloughs are a one-time hit, that will hurt in the next few months,, but won't necessarily return in 2014.

But the uncertain future of defense spending is driving fear.

Defense Secretary Chuck Hagel isn't planning for the full measure of hits his department faces. Instead, the Pentagon is planning for about $50 billion in cuts in 2014, and, for now, not budgeting for another $50 billion in cuts mandated by sequestration. Unless Congress backs away from sequestration, automatic cuts that it approved in a deal to expand the debt ceiling in 2012, the defense budget will take the bigger plunge.

Sequestration imposes cuts across the federal government but hits defense spending especially hard. The measure was designed as a lever that would prompt Congress to cut a deficit-reduction deal. When it could not reach an accord, sequestration cuts took hold on March 1.

"Sequestration and the uncertainty of sequestration is impacting and will continue to impact our people, our planning and our purpose," Hagel said during a visit to Cheyenne Mountain Air Force Station on Friday.

That's making defense contractors nervous, said Steve Eisenhart, senior vice president for strategic and international affairs with the Colorado Springs-based Space Foundation.

"It's probably as bad as it has ever been in terms of the uncertainty," Eisenhart said.

Wes Clark, a retired Air Force general from Colorado Springs who has also retired from a second career as a defense contractor, said the uncertainty is forcing contractors to keep their payrolls tight and limit spending as the wait to learn the fate of the Pentagon budget.

"It's never-never land," Clark said. "How do you plan for something that you don't know if it's going to happen?"

If the full weight of the cuts hit in 2014, Pentagon leaders are warning of drastic reductions in troop numbers. The Army already plans to cut its force to 490,000 soldiers from 570,000, prompting the changes at Fort Carson.

"There will be further reductions if sequestration remains on the table," Army Chief of Staff Gen. Ray Odierno said in a Tuesday news conference.

The looming cuts are prompting some defense experts to warn of a "hollow force," a term used to describe the military in the years following the Vietnam war. Cuts in troop numbers combined with reductions in training and equipment expenditures could leave the nation with troops unready for combat, said Steve Bucci, a retired Army colonel who studies defense issues for the Washington D.C.-based Heritage Foundation.

"Soon we'll have a small, flabby military," Bucci said. "It will be the devil to pay to turn it around when the next threats come down the road."

Number-crunchers aren't ready to predict the impact of sequestration and other cuts on the Pikes Peak region economy.

"It is really too early to say what will happen," said Tom Binnings, a senior partner of Summit Economics LLC, a Colorado Springs economic research and consulting firm.

"Hopefully, reason will prevail and sequestration will be modified, moving away from across-the-board cuts to reallocating resources."


Gazette reporter Wayne Heilman contributed to this report

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