Skeptics Doubt Planned Defense Cuts Will Mean Massive Layoffs

Defense industry execs and hawkish lawmakers are playing political games, skeptics say.

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Defense industry executives and pro-military lawmakers are warning of massive layoffs if new spending cuts are triggered, but skeptics are starting to question the validity of those figures.

At issue are several studies, including one commissioned by a top defense and aerospace trade association, that estimate a new batch of planned Pentagon spending cut would cause 1 million jobs to be lost next year.

The Aerospace Industries Association and the International Association of Machinists and Aerospace Workers released a report in October conducted by a George Mason University economist that concluded further defense cuts would push the U.S. economy into a new recession.

That report's findings spread like wildfire among pro-military lawmakers, and has become a core tenant of their push to stave off $500 billion in cuts over the next decade. Those cuts would kick in next January if lawmakers fail to agree on a broader $1.2 trillion debt-paring package.

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Military spending hawks are increasingly leaving Capitol Hill to address Washington insiders about the dangers of the new cuts—and the industry-commissioned study is among their most-used talking points.

"The reality is that sequestration not only undermines our national security, it will hurt our economy and could fundamentally tear our defense industrial base," New Hampshire Republican Sen. Kelly Ayotte told a Brookings Institution forum Tuesday.

A growing number of defense analysts are starting to question the 1 million lost jobs estimate.

Gordon Adams, who over saw defense budgeting for the Clinton administration, says the industry-commissioned study fails to account for "a whole bunch of other things."

For instance, if the new cuts occur, Washington would be spending about $55 billion less than planned each year on the military.

"That's $55 billion that wouldn't just disappear into the ether," says Adams. "There would be other economic benefits from borrowing $55 billion for defense."

"The AIA study doesn't tell the whole story," says Adams. "It tells you something, but only up to a point."

California Republican Rep. and House Armed Services Committee Chairman Howard "Buck" McKeon, told reporters last week if the new defense cuts are triggered, local economies will suffer. That means dry cleaners, grocery stores and other small businesses will be forced to cut staffs or even close for good.

That won't always be the case, Adams says, with some portion of the defense cuts will be directed elsewhere into the economy, meaning the overall impact from the reductions in annual Pentagon spending would be blunted.

The nation's largest defense firms say they will begin issuing warning notices to employees this fall, informing them that big layoffs are imminent.

Ben Freeman, a senior analyst at the Project On Government Oversight, says industry officials are playing politics.

"Despite the doomsday rhetoric and contractor funded 'studies' reporting grossly overinflated job losses they claim would result if the Pentagon's more than half-a-trillion dollar budget is cut, there is absolutely no reason these companies would need to have massive layoffs," says Freeman. "This is nothing more than a political stunt."

"The reason for such tactics is simple," Freeman says. "Defense contractors are getting more money from taxpayers than they ever have, save one year. A Price Waterhouse Coopers review of the aerospace and defense industry rejoiced that [last year] delivered 'a second consecutive year of record revenues and profits'."

And defense firms and their congressional allies are fighting a vicious political battle to keep it that way.

As the debate rages about the true effects of more cuts, pressure is building on the White House to issue official figures on what would happen.

McKeon told reporters last week that Lockheed Martin CEO Robert Stevens asked the White House's powerful budget office for guidance on the economic effects of deeper defense cuts.

"They told him, 'Don't worry about it. It's not going to happen'." To McKeon, "to say that is kind of voodoo magic."