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Pentagon Prepares to Warn 800,000 Civilian Workers of Furloughs

Dec. 31 (Bloomberg) -- The Defense Department is preparing to notify its 800,000 civilian employees that some of them may have to take unpaid leave next year if lawmakers can’t agree on a budget deal, according to a U.S. defense official.

While the notification would go out to all the Pentagon’s civilian workers, only a portion of them would be likely to face eventual furloughs under the automatic spending cuts known as sequestration, said the official, who asked not to be identified discussing personnel plans.

More than $600 billion in tax increases and spending cuts are set to start taking effect this week unless lawmakers can agree on an alternate deficit-reduction plan. The potential effect on civilian defense workers gained attention yesterday, when Senator Lindsey Graham said Defense Secretary Leon Panetta told him he’d have to send out “layoff notices” that would amount to “shooting the Defense Department in the head.”

Panetta “is worried to death that if we don’t fix the sequestration, we’re going to destroy the finest military in the world, at a time we need it the most,” Graham, a Republican from South Carolina, said on “Fox News Sunday.”

Gordon Adams, a professor at American University in Washington who was an official in the White House budget office during the Clinton administration, criticized Graham’s comments as “hyperbole” over what would actually be some unpaid days off.

“What the secretary probably said was that prudence would lead him to notify Pentagon civil servants that there might be some furloughs if sequester happened,” Adams said in an e-mail. “If sequester is ‘fixed,’ it might be for none of them. Certainly, none of them are layoffs.”

Troops Exempted

The White House budget office told Congress in July that it would exempt military pay and benefits from sequestration, meaning the administration won’t fire uniformed personnel or reduce their pay or benefits.

Panetta has previously raised the prospect of eventual furloughs for civilians.

“I do not expect our day-to-day operations to change dramatically on or immediately after January 2, 2013, should sequestration occur,” Panetta wrote in a Dec. 20 letter to Pentagon officials. “Should we have to operate under reduced funding levels for an extended period of time, we may have to consider furloughs or other actions.”

As the Obama administration and congressional leaders sought a last-minute deal to avert tax increases, the debate returned today to the unresolved cuts in defense and domestic spending.

Congressional Debate

Democrats in Congress want to delay the spending cuts for two years, at a cost of $200 billion, though they haven’t identified new savings to pay for it.

Republicans are insisting that any delay in sequestration be offset with new savings, which remains among the biggest sticking points in the final hours before the deadline.

Shares of the Pentagon’s top 10 contractors fell 0.3 percent in early afternoon trading, compared with a 0.2 percent gain in the Standard & Poor’s 500 Index.

Eight of the 10 defense companies fell, including Lockheed Martin Corp. and Raytheon Co., while 65 percent of companies in the S&P 500 rose, according to data compiled by Bloomberg.

About $500 billion would be cut from planned defense spending over a decade under sequestration. Those automatic cuts would come on top of $487 billion in defense reductions already planned over 10 years.

The across-the-board cuts would slice into military weapons programs and research funds. The Pentagon reductions may total as much as $62.3 billion in fiscal 2013, or 12 percent of its base budget, which excludes war funding. The government’s fiscal year begins Oct. 1.

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