DEPARTMENT OF DEFENSE
Secretary of Defense Leon E. Panetta, second from
right, meets with members of the Aerospace Industries
Association, National Defense Industrial Association and
Professional Services Council in Arlington, Va., July 23.
Panetta and the group met to discuss the potential
impacts of sequestration on the Department of Defense
and the defense industrial base.
And while there are disparate opinions as to the impact
of the cuts in terms of job-loss projections and economic
growth, there is one matter on which policy experts seem
to agree: sequestration should not happen, and need not
happen if lawmakers can put aside their partisan bickering and agree to some sort of debt-reduction compromise.
“The point of sequestration was as a forcing mechanism for [legislators] to sit down and put their programs … on the table. It was to force them to compromise,” said Peter W. Singer, director of the 21st
Century Defense Initiative and a senior fellow in foreign policy at the Brookings Institution in Washington.
The defense budget is not the primary cause of the
nation’s $16 trillion in debt, he said, and while he would
prefer not to see the defense budget cut, it is a reality.
“Like it or not, and to be clear, I don’t like it, it will
be one of the victims,” said Singer, who suggests that
perhaps only those very close to budget dealings in the
defense community can see what the cuts might be
under a best-case scenario, which is a budget deal that
is signed into law. “The key is we have a choice. This
trend could become a catastrophe, as it is often paint-
ed. But it need not be. What matters most is not the
amount, but how this process in managed.”
Defense companies are bracing for a catastrophe. In re-
sponses sent in July to questions from members of the Se-
nate Armed Services Committee relative to the implemen-
tation of sequestration, chief executive officers (CEOs)
from Huntington Ingalls Industries, Honeywell Aerospace,
EADS North America, General Dynamics, Boeing and ITT
Exelis acknowledged the necessity of some spending
reductions but noted the difficulty in predicting with any
certainty the likely outcomes. They also expressed concern about the indiscriminate nature of how cuts would be
applied, the long-term effect on the industrial base and the
ability of their suppliers to weather the cuts.
Singer believes lawmakers are taking a chance by waiting until the end of the year to reach a budget compromise. And, like other defense industry observers, he feels
that the heated partisan politics and “rhetoric” on Capitol
Hill, fueled more so by the final months of the presidential race, hamper understanding and “mislead the public”
as to the nation’s budget crisis and, in particular, the
impact of sweeping Defense Department cuts.
“It is an exceptionally high-risk strategy to wait for
[a budget deal], because you are literally playing it
down to the last seconds on the shot clock,” he said.
Singer, however, added there is a danger in describing
sequestration’s potential impact as “catastrophic” and that
the military will be “unable to carry out a single mission.”
“What is happening in defense policy right now is
people will throw around things that have no basis,
that they know are not true, and yet they will be out
there pushing them. This kind of bad analysis and
heated partisan rhetoric makes that [budget] compromise far less likely to happen,” he said.
The challenge for those in the defense industry has
been how to process and share accurate projections as to
potential job losses and other impacts without yet having
a grasp themselves of where the cuts stand. Nonetheless,
the National Association of Manufacturers (NAM), the
nation’s largest manufacturing association, issued a
report earlier this year that looks at the combined impact
of the BCA’s budget caps and the automatic spending
cuts. The group said the cuts will cost the U.S. economy
more than 1. 2 million jobs, including 130,000 manufacturing jobs and 200,000 military jobs in 2014.
The report, “Defense Spending Cuts: The Impact on
Economic Activity and Jobs,” predicts not only that the
nation’s gross domestic product (GDP) will be 1 percent
lower in 2014, but unemployment will rise . 7 percent.
Among those hit hardest will be the ship and boat industry, losing 3. 3 percent of its jobs, and the search and navigation industry, losing 9. 3 percent of its jobs.
In a Sept. 7 statement, issued in response to the Bureau
of Labor Statistics’ jobs report for August released that day,
Jay Timmons, NAM president and CEO, said, “Any meaningful action on the approaching fiscal abyss has stalled,
and manufacturers are feeling the effects. Massive tax
increases and indiscriminate spending cuts threaten to
undercut any minimal economic gains we have seen. This
is unacceptable, and despite the excitement surrounding
the recent political conventions, manufacturers are growing more pessimistic by the day about our economic
future. Unless policymakers shelve the rhetoric, roll up
their sleeves and take action to end the unfavorable busi-