The looming shadow of sequestration may be getting a little smaller. Three lawmakers say they believe with more than 50 percent confidence a deal will be worked about before the Budget Control Act and other financial changes kick in Jan. 2.

“I think it’s 80 percent plus that we will avoid sequestration,” said Sen. Mark Warner (D-Va.), Wednesday at panel discussion sponsored by Bloomberg Government and Deloitte in Washington. “The question is though is this going to be a big enough deal and will it be enough of a down payment that it will lead to something else subsequently that will actually avoid the kind of enormous consequences of $16 trillion in debt.”

Sen. Bob Corker (R-Tenn.) and Rep. Chris Van Hollen (D-Md.), who is also the ranking member of the Budget Committee, are less optimistic than Warner, but still believe it’s more than a 50 percent likelihood that sequestration will not happen.

Corker put out a deficit reduction plan last month that includes several of the long-held Republican-sponsored ideas, including less generous inflation adjustment for Social Security and a gradual increase in the regular Social Security retirement age to 68 and the Medicare eligibility age to 67.

Corker’s plan also includes $749 billion in higher tax revenue claimed by capping itemized deductions at $50,000.

Corker said the debt limit is the real line in the sand to get something done in the coming weeks. But he said he wouldn’t support kicking the can down the road or going only a small portion of the way toward what’s needed — at least $4 trillion in deficit reduction over 10 years.

“There’s an old adage that says you don’t learn a lot from a second kick in the shin by a mule,” Corker said. “We’ve been down this road of process. We had 12 very high caliber people who worked on the supercommittee-six Republicans and six Democrats. Who would have ever thought when we are going to spend $45 trillion of your money over the next decade, this outstanding group of people couldn’t come up with $1.2 trillion in savings? It’s almost beyond belief, is it not? For me, since I know all the decisions we have to make are not intellectual demanding, they just take political courage. Again, there isn’t a lot to learn. We’ve had two dry runs. This 112th Congress put the fiscal cliff in place so we would resolve this issue right now, and that’s what we need to do.”

Contractors also could see cuts

None of the three lawmakers could say how close to the January deadline the deal would come.

The panel discussion revolved around political issues, specifically whether or not to raise taxes and cut entitlements. But Warner said the trickle down effects on other things such as contracting, the debt ceiling and the possibility of a government shutdown have an impact that is nearly as great.

For instance, Corker’s bill would reduce the deficit by cutting federal employee pay and benefits. This led to the National Federation of Federal Employees to call Corker’s plan a “greatest hits of anti-federal employee provisions.”

Corker would freeze pay until 2015, replace one federal worker for every three that leaves and other spending cuts to benefits.

He said after the panel discussion that there is plenty of room for contracting cuts too.

“You know when the Pentagon cannot produce an audited statement of where their monies are going, there’s no doubt a lot of contracting issues, especially there, can and should be looked at,” he said. “I don’t think anyone around here would disagree our federal government is larger than it needs to be. So certainly having constraint on your direct overhead is an important thing to do with employees. But also I couldn’t agree more with the contracting piece. Hopefully, part of what we will see happen with the Budget Control Act where we are cutting a trillion dollars over the next decade is going to be a tremendous compression of want we are doing through government contracting.”

Van Hollen also said contractors are part of the solution to cut the deficit. He said the first sign of things to come came in the Defense authorization bill the Senate passed Tuesday night.

“There are proposals out there which would save the government money by saying the taxpayers are not going to reimburse contractors for the amount of salary on a government contractor job,” he said. “As I said, it’s in the range of $250,000 or maybe a little lower.”

Pay cap passes Senate

The provision Van Hollen is talking about is the contractor pay cap. Right now, agencies reimburse the first $763,000 of an executive’s salary.

Under this provision, it would come down to $230,000. The bill also requires DoD to issue a report detailing contractor compensation costs over the past several years.

The support for this provision in the House isn’t strong and industry associations are against it.

Neither Van Hollen nor Warner promised, at least during the panel, to protect federal employees or contractors from becoming part of the fiscal cliff deal.

Warner, however, said many contractors are telling him the Senate needs to fix the situation and implement the recommendations in the Simpson-Bowles report instead of the sequestration and other changes.

Uncertainty creates inefficiencies

He said Simpson-Bowles, which was the bipartisan commission looking at how to fix the deficit, called for about $5 trillion in spending reductions and revenue increases, while the Budget Control Act requires about the same amount.

“Maybe the most ridiculous thing that has taken place in the last couple of things, particularly from some of those who say they want to not make government inefficient is this constant jerking back and forth of a potential government shutdown,” Warner said. “Nothing is more inefficient to the largest organization in the world, the federal government, and DoD is a subset of that, than starting and stopping the amount of tens if not hundreds of millions of dollars in contracts that is lost each time you grind to almost a near halt of government. You stop contracting and restart it, it’s crazy. Everyone I’ve talked to said at the end of the day, we will live with whatever budget you give us, but give us that two to three year runway so we can plan against it.”

Corker agreed with Warner about the inefficiencies of the stopping and starting of the government. He said that’s why putting “lines in the sand” around taxes or entitlements or the debt ceiling causes so many problems.

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