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With job losses 'speculative' only, Capitol Hill not panicking over sequester cuts

The sequester -- a series of sudden, deep cuts in military and domestic spending -- was supposed to be so destabilizing and unthinkable that it was conceived specifically to force Washington to work together on an alternative budget.

But in the face of dire warnings from President Barack Obama and some congressional leaders about these looming spending reductions, there seem few signs of panic on Capitol Hill now that they are just weeks away.

Forty-four billion dollars in cuts to federal outlays are set to start on March 1, amounting to an eight percent cut in defense spending and six percent in non-entitlement non-defense spending.

"These sudden, harsh, arbitrary cuts would jeopardize our military readiness," President Barack Obama said in his State of the Union speech, and would "devastate" federal spending on education, energy, and research.

Despite such language from Obama, the reductions may not seem as immediate or terrifying to some members of Congress as the rhetoric would make it seem. There was no sense Thursday of Congress needing to get a deal clinched this week. After the House voted Thursday on a procedural motion on a Republican bill to extend a two-year pay freeze for federal employees, it headed off for a week's recess.

President Barack Obama explains his view on what a sequester would do to the U.S. economy while delivering the State of the Union on Tuesday.

"Our work schedule frankly does not match the gravity of the challenge that our country faces," said Rep. Joe Courtney, D-Conn., at a House hearing on the spending cuts Thursday before the subcommittee on Workforce Protection, which is part of the Education and Workforce Committee.

But as Courtney also indicated, there's nothing magical or irrevocable about March 1. "There is still time" to devise an alternative, he told the hearing. Congress and the president could come up with a deal on March 1 "or even on March 2," he said.

The thinking among some in Congress is that the bargaining over the spending cuts -- known as "the sequester" in Capitol Hill lingo -- will be folded into negotiations on the continuing spending resolution that expires on March 27.

For large Defense Department contractors such as General Dynamics, which is building the Virginia-class submarine in Groton, Conn. (in Courtney's district), the Department of Defense funds "are already well into the system," Courtney said. Procurement for submarines plays out over several years and doesn't come to sudden stop.

"Contracting officers (in the Pentagon) who have to deal with these defense vendors -- they are not going to turn the switch off on Day 1," Courtney said.

He added, "It's not going to be done by the Department (of Defense) all at once, in one single day."

He cited Senate testimony this week from Admiral Mark Ferguson, the Vice Chief of Naval Operations, that the two subs slated to be built in 2013 are, in Courtney’s words, "pretty much solid, even if sequestration kicks in."

But the subs slated for 2014 "could be at risk, and that's not a good thing, but it's not going to trigger an immediate reduction of workers on March 1."

He added later he was not trying to minimize the damage that would be done if sequester cuts took effect -- damage such as postponing the deployment of the aircraft carrier U.S.S. Harry Truman to the Mediterranean and the loss of some funds for Head Start programs, including ones in his district.

Layoffs just 'speculative and unforeseeable'
But even as Obama warns about the suddenness of the spending cuts, Assistant Secretary of Labor Jane Oates, in testimony Thursday before the subcommittee on Workforce Protection, re-affirmed what the Obama administration told employers last July: At the moment, despite the threat of spending cuts, firms with federal contracts are not required to send out the 60-day plant-closing and worker-layoff notices to their employees that would be required by the 1988 WARN (Worker Adjustment & Retraining Notification) Act.

Any layoffs that might be caused by the spending cuts -- for example at defense contractors such as Boeing and General Dynamics -- are, for now, "speculative and unforeseeable," in Oates' words. That was the view of the Labor Department last July and she affirmed that it remained her view as of Thursday.

Since there's so much uncertainty about whether the cuts will occur, the firms can't know if some of their workers will need to be laid off. Therefore they need not issue the WARN notices -- until and unless they get specific information from the federal government of contract terminations or program cuts that would result in layoffs.

But employers may be put in a legally awkward and costly bind -- the WARN Act imposes large legal liabilities on employers if they fail to give their employees warning -- but then later order mass layoffs or plant closures.

The Obama administration, in a memo issued last September by the Office of Management and Budget, has told companies with federal contracts that it will reimburse them for litigation costs and other costs if they follow the Labor Department guidance and later get hit with lawsuits from laid-off workers under WARN.

As lawyers prepare for possible litigation over WARN, some House Republicans say they're willing to live with the sequester cuts if there's no other way to cut spending.

Rep. James Lankford, R-Okla., one of GOP's rising stars and the chairman of the House Republican Policy Committee, told reporters Thursday that the sequester "is the law of the land … I would much rather find a way to replace it with a more reasonable long-term perspective of how we deal with our long-term debt issues. But if we don't have anything else, we don't have anything else. It is the law; it's going into effect."

Lankford said he opposed the idea of simply pushing back the effective date of the spending cuts.

'False promise'
Republicans are facing pressure from conservative groups to stick with the spending cuts since they are already embodied in law and not merely theoretical.

The conservative Club for Growth said last week, "The cuts that were promised in the sequester should be done, in whole, this fiscal year and not punted a day past when they are supposed to go into effect."

Any sequester replacement bill should not include tax increases or "another false promise to do more cuts later," the group said.

Some Republicans may be more concerned about the $44 billion in cuts than they are publicly acknowledging, but nonchalance is a better negotiating posture than panicky desperation.

At this point some Republicans appear to be following the advice given by conservative columnist Charles Krauthammer last week.

Obama figured that "draconian defense cuts would drive the GOP to offer concessions," Krauthammer wrote. But this move, he said, "backfired. The Republicans have offered no concessions. Obama's bluff is being called and he's the desperate party."

Krauthammer said, "The Republicans finally have leverage. They should use it."

There might be more awareness and alarm among people back home in congressional districts if certain groups weren't exempt from the spending cuts.

But these groups -- some of them potentially loud and powerful -- are in fact exempt from the spending cuts and would suffer no direct harm. They include uniformed military personnel (their pay is exempt from the cuts), people collecting Social Security benefits, and federal (including military) retirees.

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