The House passed a six-month spending bill that will keep the lights on in government agencies until March 2013. Democrats and Republicans made a bet that the next Congress will find more favorable terrain for them, and kicked any contentious spending issues into it. They may do the same on the fiscal cliff, but there’s not likely to be any action there until the lame duck session, when they’ll know the outcome of the elections. So the calculus could change there.

Justin Elliott has a useful story on how the press and politicians have inflated the military budget cuts that are part of the sequester that triggers at the end of the year. The total budgetary savings from the sequester are $1.2 trillion, equally divided between defense and discretionary spending. However, that includes the savings that come from reduced interest payments over ten years. If you borrow less because of spending cuts, your financing costs go down, to put it simply, and the annual cuts are closer to just $55 billion/year for 9 years.

Senator’s McCain, Graham and Ayotte have been lobbying against the sequester defense budget cuts, but there’s a question about their use of facilities of military defense contractors to make their pitches, especially when the contractor’ PACs contribute to their campaigns.

When you talk about “the Ryan budget,” you have to make a set of distinctions. There are actually at least three Ryan budgets. The first, which pre-dates his ascension to the chair of the House Budget Committee, was a ridiculous conservative fantasy that slashed taxes and increased deficits by something like $60 trillion over time. When he actually came into power, he had to come up with a more legitimate document, but only slightly. That led to the 2011 budget, which eliminated traditional Medicare entirely for people under 55 and turned it into a voucher program, and that frightening many Republicans. His latest version tries to hide the Medicare destruction and instead radically slashes everything else except the military.

It looks like several defense contractors will side with high-profile Republicans and ignore the Department of Labor guidance, and send out layoff notices to thousands of their employees four days before the election. At least two contractors will press ahead.

Defense contractors have come up with a particularly devious way to undermine the automatic cuts to the military budget in a way that could impact the Presidential election. Under the Worker Adjustment, Retraining and Notification (WARN) Act of 1988, government employees must be notified 60 days in advance of any layoffs. Defense contractors are taking that to mean that they must give such pink slips to practically their entire workforce, consisting of hundreds of thousands of employees, to comply with the law. This is notably one of the first times that a government contractor has ever proactively complied with the WARN Act, they typically must be hounded to warn their workers. But this would have the effect of freaking out politicians with the threat of massive layoff notices four days before the 2012 election (60 days from the trigger enactment date of January 2 would be November 2, the Friday before the election).

The President signed HR 5872 today, known as the Sequestration Transparency Act of 2012. This law, which sailed through Congress with almost no objection, requires the President to submit a report to Congress within 30 days, so by September 6, 2012, a “detailed report on the sequestration required to be ordered … for fiscal year 2013 on January 2, 2013.” The report needs to contain estimates of how many cuts will be required for which specific federal agencies, including all discretionary and defense cuts. The idea is to force Obama to identify what programs he would cut, and then accuse him of planning it.

The defense industry has a single-minded purpose for the balance of the year – get Congress to avert $600 billion in cuts to the military budget that automatically trigger, by any means necessary. That would include replacing those cuts with tax increases, so defense contractors are pushing Republicans to consider tax increases in lieu of defense cuts.

There was a big breakthrough in the Presidential race, with implications for US fiscal policy, that sort of slipped by unnoticed on a Friday in August. Mitt Romney, the presumptive Republican nominee, argued for a one-year delay in the trigger, the automatic cuts to defense and discretionary spending set to go at the end of the year. Importantly, he did not identify an offset. He merely said that the trigger ought to be delayed.

The Rosencrantz and Guildenstern of the US Senate, John McCain and Lindsey Graham, have planned a touring company production, assisted by their newest understudy, New Hampshire Sen. Kelly Ayotte (somewhere Joe Lieberman is sobbing), which will go around the country and warn about the dangers of defense cuts. This could end up gaining some traction, and represents an attempt to turn the deficit/jobs debate onto Republican-friendly turf.