It appears the Pentagon is starting to make some tough decisions. But tougher ones may be yet to come.
On Friday, the Navy delayed plans to have Huntington Ingalls Industries build a second aircraft carrier that could cost more than $11 billion, according to sources quoted by The Associated Press. This, as the Pentagon may be running out of creative ways to avoid deep cuts due to sequestration.
While one source told the AP that the delay in the aircraft carrier had nothing to do with the mandatory $500 billion cuts over the next decade, a defense official earlier said, "The department was deferring many contracts until it had more clarity about fiscal 2014 funding levels."
The AP report added, however, that the Navy will extend an existing "preparation contract" for Huntington Ingalls in order to avoid "a potentially costly gap in production." It is not known how much the extension will cost taxpayers.
Even as several defense companies' stocks hit multiyear highs on Monday—including, United Technologies, Boeing, Lockheed Martin and Raytheon—UBS said Pentagon spending in August was down 16 percent from a year earlier, at $13.6 billion, with most of the reductions coming from research and development. The Army took the biggest hit, with spending down 25 percent, followed by the Air Force, down 19 percent, and the Navy, down 2 percent.
Is it enough to meet sequestration's mandated cuts? Not according to the analysis. "Even with the recent decline, outlays are still running 15-20 percent above the level implied for modernization under sequestration."
Then there's Afghanistan.