By CNN National Security Producer Jennifer Rizzo
The Pentagon has painted a doomsday scenario of a percentage point increase in unemployment if further cuts are enacted by Congress, but some analysts are questioning the math.
The figure, first cited by Secretary of Defense Leon Panetta back in September, assumes 1.5 million Americans would lose there jobs, adding a percentage point increase in the unemployment rate, if $1 trillion is cut from its budget.
The Defense Department is already required to cut $400 billion from its budget as part of an agreement that allowed President Barack Obama to raise the debt ceiling. The same deal created a congressional "super committee" tasked to find another $1.5 trillion in government savings over the next decade. If the commission cannot come to agreement on where the cuts should come from by the end of November, another $600 billion would automatically be axed from the defense budget. The automatic cuts are referred to as sequestration.
The numbers of jobs lost touted by Pentagon officials "seems like a high figure," says Heidi Garrett-Peltier of the Political Economy Research Institute at the University of Massachusetts.
The PERI analysis projects at most 1.16 million jobs will be lost and the unemployment rate would rise from 9.1 percent to 9.8 percent. While still a considerable amount, it does not add up to the full percentage point jump that the Defense Department predicts, Garrett-Peltier explains.
PERI estimates cuts in direct Defense Department jobs, indirect supplier and contractor jobs, and local business layoffs in communities where defense contractors have their facilities, as does the Pentagon's own estimate.
"Our analysis shows that directly and indirectly, 8.9 jobs are supported for each $1 million in military spending (public and private sector), and therefore $1 trillion in cuts would mean a job reduction of 890,000," said Garrett-Peltier. "If indeed the job losses amounted to 1.5 million, then the unemployment rate would rise by one percentage point. But 1.5 million jobs lost seems like a high figure"
William Hartung a defense budget analyst at the Center for International Policy agrees and thinks the Defense Department may be "front-loading" the numbers, meaning they are planning for much larger cuts in the first few years than would be likely.
"It is extremely unlikely that anything like $100 billion in reductions, one-tenth of the $1 trillion in possible cuts if sequestration kicks in, would happen in 2012 or 2013, the first two years covered by their estimate," said Hartung.
"The jobs impact will increase in later years, probably reaching peak level in 2015 or 2016, but by then unemployment may be lower, and therefore more of the displaced workers may find jobs." said Hartung.
Hartung says a more realistic figure would be a cut of $20 to $30 billion in 2012, which by the Pentagon's own method would probably yield 300,000 to 450,000 in job losses.
Pentagon spokesman George Little defended the estimate and said the Pentagon was not over-dramatizing consequences of cuts
"I think it is telling that it is not only the secretary but the military leadership of this department using words like 'devastating' and 'Doomsday Scenario,'" Pentagon spokesman, George Little, said Wednesday morning at the off-camera question and answer session with journalists.
After weeks of prodding the Defense Department on how they came up with their numbers the Pentagon released some of their methodology on Wednesday.
The Defense Department says it worked with Interindustry Forecasting at the University of Maryland to come up with it's figures, using a model that Garrett-Peltier says would be appropriate for this type of analysis.
But the Pentagon analysis implies that a 13.5% reduction in spending would result in a 25% reduction in employment, Garrett-Peltier said.
On why she thinks the numbers are high the professor said she didn't have enough information but could speculate that the assumptions or multipliers built into the model were off.
"The big discrepancy for me is how the Pentagon can claim that six million jobs are supported economy-wide by defense spending, but that 1.5 million jobs would be lost through sequestration," she said.
Multipliers measure the ripple effect flowing from the loss of direct defense jobs.
"Direct jobs building a plane have a ripple effect because there are jobs at companies supplying components, and in other sectors based on workers spending their wages (restaurants, for example)," said Hartung. "For example, the assumption might be that two jobs are created for every direct job (a multiplier of two). So, if the multiplier is too high, the number of jobs estimated could be greatly exaggerated."