Defense industry group: Big budget cuts mean big job losses
July 17th, 2012
07:56 PM ET

Defense industry group: Big budget cuts mean big job losses

By Mike Mount

More than 2 million jobs could be lost if Congress does not agree on a budget plan by the end of the year, according to a defense industry group's report on a budget bill that would cut total federal spending by more than $1 trillion over the next decade.

The report, released Tuesday by George Mason University and commissioned by the Aerospace Industries Association, a group that lobbies for many companies in the defense industry, estimates that 1.09 million private-sector and federal jobs connected with the Department of Defense would be lost, and nearly as many nondefense jobs.

The report, titled "The Economic Impact of the Budget Control Act of 2011 on DOD and Non-DOD Agencies," examines the ripple effect from the potential cuts, known as sequestration, that resulted from a congressional deal struck last fall during negotiations on the current budget deal.

Those result of those negotiations was that Congress and the president were unable to agree on a deficit-reduction plan. If there is no agreement by January 2013, the Pentagon and other federal agencies would be forced to cut spending by $1.2 trillion over the next 10 years.

The Department of Defense would receive most of the cuts, $492 billion, while the other federal offices would share the remainder of the cuts, totaling $708 billion.

The defense-sector job loss numbers are up slightly from a similar report the AIA released last October, which looked only at a limited number of accounts that would hit the defense industry in reaching a total of 1.06 million lost jobs. The latest report looks at the effect of sequestration on all accounts that would affect the defense industry. The October report did not look at the effect on other federal agencies.

"This report shows that sequestration is not just a defense problem, it's an American problem," said AIA President and CEO Marion C. Blakey. "Unless our leaders in Washington take action, massive cuts have the potential to impact everyone from the defense worker to teachers, health care professionals, government employees and beyond."

According to the new report:
- 1,090,359 jobs across the defense sector would be lost;
- 107,220 of those jobs would be in the federal sector;
- 1,047,349 jobs would disappear related to the budget cuts for other federal agencies
- More than half of those nondefense jobs - 510,229 - would be federal employees.

While the total effects would be spread out over each of the 10 years of the cuts, the report says the biggest impact would come in fiscal year 2013, in which a $115.7 billion cut would reduce the U.S. Gross Domestic Product by $215 billion, creating a drag on U.S. economic growth.

The drop in the GDP, combined with the 2.1 million job losses, "would erase the GDP gains projected for the first half of 2013, pushing the economy back into recession, and raise the national unemployment rate to 9.0 percent or higher by the end of 2013," according to the report.

The report also showed a state-by-state estimated job loss if the cuts were to happen. Virginia, home to numerous defense contracting companies and military bases (including the Pentagon) topped the list for the most defense-related job losses with 136,191. California was a close second with 135,209 and Texas third with 98,979.

While lawmakers agree they want to avoid sequestration from occurring, they have yet to cut a budget deal that would eliminate the threat. To add to the drama, Republicans are accusing the administration of not allowing the federal agencies to plan for potential cuts, but the Office of Management and Budget, the White House's department in charge of administering the sequestration if it occurs, says it has things under control.

In a response to CNN's Security Clearance questions earlier this month about the Republican accusations, OMB spokesman Kenneth Baer said that while the White House agency "has not yet engaged agencies in planning, our staff is conducting the analysis needed to move forward if necessary. ... Should it get to the point where it appears that Congress will not do its job and the sequester may take effect, OMB, DoD, and the entire administration will be prepared."

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Filed under: Congress • Pentagon
soundoff (5 Responses)
  1. Joe from CT, not Lieberman

    But Congress agreeing on a budget plan would mean that Mitch McConnell would have to do something instead of following his stated agenda of making Barak Obama a one-term President!

    July 18, 2012 at 9:23 am | Reply
  2. George Patton

    The all-powerful M.I.C. really has nothing to worry about when it comes to big cuts in "defense" spending. Neither Barack Obama nor Mitt Romney will let it happen nor will Congress since they all work for the M.I.C. Each time we run out of money over this, the Chinese will always come through and loan us more as our other creditors. These useless people will however, cut Medicare and Social Security and let our schools become overcrowded to try to make up the difference!

    July 18, 2012 at 8:59 am | Reply

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