Sequester battle continues with no end in sight

The Obama administration tries to undercut a political threat by the defense industry as the saga grinds on.

The Obama administration attempted to undercut a political threat by top leaders in the defense industry on Monday as the never-ending trench warfare over sequestration kept up its churn.

The Department of Labor announced that under present law, vendors would not have to notify their employees this fall they could be laid off if the automatic, across-the-board budget restrictions take effect. In fact, an administration white-paper said, it would be “inappropriate” for them to do so.

Here’s what Labor wrote in its guidance:

It is unlikely that employers will have enough information to predict which contracts will be affected and therefore which plants could close and which groups of employees could experience employment losses at least without additional information about FY 2013 funding (which has not yet been enacted) and how agencies will operate within the constraints of a January 2 sequestration order (should one have to be issued) … Where, as here, employers now have virtually no information from which to determine whether their contracts will be affected, there is no basis on which to form a business judgment.

Elsewhere, Assistant Labor Secretary Jane Oates summed up the situation even more concisely:

Questions have recently been raised as to whether [the Worker Adjustment and Retraining Notification] Act requires federal contractors — including, in particular, contractors of the Department of Defense — whose contracts may be terminated or reduced in the event of sequestration on January 2, 2013, to provide WARN Act notices 60 days before that date … The answer to this question is “no.”

The “uncertainty” about sequester that has so bothered the defense industry is being turned back on it by the Obama administration, which argues, hey, how are you going to know what people to warn you’ll lay off if you don’t know what your business will look like after the dust settles? (To which House lawmakers have said: This is why we need the Pentagon to do a comprehensive study of the after-effects! And the vortex continues to spin.)

But even though Oates wrote it would be “inconsistent” with the law for a Lockheed Martin to issue tens of thousands of layoff warnings, the note doesn’t seem to indicate whether that is actually illegal. Lockheed and the other brand-name firms could well send anything they want to their employees, up to and including potential layoff warnings, just to try to goose voters into goosing politicians to resolve the sequester.

Some people are already sold — Bryan McGrath writes that Obama can’t afford to risk tens of thousands of layoff advisories so close to Election Day, and as such he expects Congress to cut a deal by Oct. 15. Still, if Lockheed’s and others’ layoff threats are such a potent weapon, why would Republicans take it away? House leaders have already said they don’t want to deal with sequester until this year’s lame duck session, and as they approach their biggest goal in recent memory — dethroning the president — they want to fire everything in the magazine. So Republicans could make noises about wanting a deal but keep up their tough line so the layoff warnings go out anyway.

The problem with this never-ending melodrama is that, to continue the weapon metaphor, sequestration is a live grenade in a locked room. If it goes off, it’ll hit everyone. Unless the political reality changes drastically between now and November, no one expects a decisive electoral result for either Republicans or Democrats. So the deadlock we see today could well continue into the winter, and the Democrats with no incentive to compromise now may have even less then — especially if a desperate Lockheed went against the Labor Department’s guidance and decided to play its layoff card, with an implicit GOP blessing.

Senate Majority Leader Sen. Harry Reid has made clear that if his opponents want to get nuts, he too is willing to get nuts. Republicans can wail and moan all they want about forfty million jobs lost in the aftermath of sequester, Reid has said (in so many words) but if they won’t play ball his way, he will let the grenade go off. This has always been the fiendish genius of the Doomsday Device — anyone can use it but no one can master it. And that could mean, ironically, that Republicans defense advocates might fold first.

All along, Democrats seem to have been betting that war-weary and spending-averse voters on both sides of the political spectrum will care less about defense than all other election-year priorities. They may have a point. Defense advocates in D.C. have spent months shrieking and banging pots and pans over sequester. Where’s any evidence they’ve moved the needle with voters whose own livelihood wasn’t on the line? Conventional wisdom has it that Obama has better “national security” cred than his GOP opponent, Mitt Romney. With an anemic economy and high unemployment, how much do voters care?

Virginia Gov. Bob McDonnell, Northrop Grumman CEO Wes Bush and several other top political and defense industry leaders staged a “rally” outside Washington on Monday to protest the sequester. Their audience of white-collar defense contractors and government employees need little prodding. But what do people in Pittsburgh or Indianapolis or Phoenix think? They might hear “$1.2 trillion in reduced federal budget growth” and think, Yes please!

Which could be yet another reason defense advocates want to resolve sequester before the election — based on some polls, Americans want to dial Pentagon spending back much further than even today’s most draconian scenarios. Lockheed and Republicans assume that sounding the alarm about DoD’s budget will be a winner with voters, but that could also make it a target. That’s yet another incentive for Democrats not to go along with a deal until the last minute — or at all.