White House seeks more Pentagon budget cuts

Wed Sep 28, 2011 8:20pm EDT

* White House said seeking $489 bln in budget cuts

* Panetta meeting with military commanders

* Veterans' benefits said spared further cuts

By Andrea Shalal-Esa

WASHINGTON, Sept 28 (Reuters) - The White House is seeking an additional $25 billion in long-term Pentagon budget cuts after deciding to exempt spending on programs for military veterans, a top U.S. defense consultant said on Wednesday.

New guidance from the Office of Management and Budget calls for the Defense Department to find $489 billion in spending cuts, up from the previous total of $464 billion, said Loren Thompson, chief operating officer of the Lexington Institute.

Thompson, citing multiple sources in the military and industry, said the move followed a realization by Obama administration officials that cutting the budget of the Department of Veterans Affairs would be politically untenable.

"It appears that the White House is making a political calculation that there will be less election fallout from cutting weapons programs than from cutting veterans' benefits," Thompson said.

Secretary of Defense Leon Panetta will discuss budget cuts for the first time on Thursday with heads of the military's geographic commands as well as other senior Pentagon military and civilian leaders.

"This going to be a wide-ranging discussion on budget priorities," Pentagon spokesman George Little said. "The secretary is very interested in hearing from the combatant commanders their views on where savings need to be found."

He said the military commanders would be briefed on current budget realities, followed by "a free-flowing discussion to solicit ideas from them on where we might find savings."

"It is, I think, the first time in a major forum that the secretary has set down in a concerted way with the combatant commanders to solicit their input on the budget."

Thompson said military service leaders were beginning to band together to pressure Panetta to resist what they considered "draconian cuts."

The budget cut deliberations are being closely watched by U.S. weapons manufacturers, who have already begun laying off workers at arms plants around the country after a decade of strong growth in defense spending.

President Barack Obama and Congress reached an agreement in August to reduce national security spending by $350 billion over 10 years, as estimated by congressional budget officials.

Measured against the Obama's proposed budget for fiscal 2012, the agreement translates into cuts of about $464 billion, a sum that would increase to $489 billion under the revised budget guidance from the White House, Thompson said.

The August agreement mandates additional cuts in defense spending of $600 billion if a congressional "super committee" does not agree on further cuts in spending by year's end.

Panetta has said that cuts of that magnitude -- about $1 trillion over the next decade -- would increase the U.S. unemployment rate of over 9 percent by 1 percent.

In a letter to lawmakers dated September 15, White House Budget Director Jack Lew warned that the additional cuts could jeopardize national security and should be avoided.

He said defense spending could be cut by 15 to 25 percent from the level projected for fiscal 2013, depending on whether Obama decided to exempt military personnel funding.

That would "almost certainly" result in furloughs of large numbers of civilian workers, cuts in training, force reductions and dramatic cuts in weapons purchases, Lew said.

"In short, there could be significant impacts on major military capabilities and on our ability to execute the current national security strategy," he wrote. "It is critical to avoid triggering additional deep cuts in defense and non-defense programs." (Additional reporting by David Alexander; Editing by Richard Chang)