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What will federal budget cuts mean for local economies?

Former Vice President Dick Cheney visited Republican senators on Capitol Hill to convey his message that defense spending cuts will hurt the U.S. military. Local mayors are concerned that lost government contracts will threaten their local businesses. 

By Lauren French and David AlexanderReuters / July 18, 2012

Former Vice President Dick Cheney, who also served five terms as Wyoming's representative in the House, returns to the Capitol to meet with Senate Republican leaders at a political strategy luncheon, in Washington. He voiced concerns about cuts to defense spending.

AP Photo/J. Scott Applewhite



Former Vice President Dick Cheney told Republican lawmakers on Tuesday that looming defense cuts could have a serious impact on the U.S. military, even as a new analysis predicted the budget reductions that begin in January could cost 2 million jobs.

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Lawmakers on Capitol Hill fretted over how to resolve the issue but remained dug into their longstanding positions. Democrats are calling for increased revenues as well as further budget cuts and Republicans are insisting on spending reductions alone and no new taxes.

Cheney's visit to the Capitol came as mayors of two major U.S. cities warned that the looming $1.2 trillion federal budget cut is the biggest threat to their local economic recoveries. The 10-year, across-the-board cut is due to go into force on Jan. 2 under a process known as sequestration. 

Cheney, who was defense secretary during the first Gulf war and presided over the post-Cold War military drawdown, told Republican lawmakers in a closed-door session the problem should be fixed but made no specific recommendations, said Senator Lindsey Graham.

"I thought he did a very good job (explaining) about how he reformed the Pentagon, eliminated some weapons systems that were wasteful ... (and) basically impressed upon us that the sequestration that we are about to enter is just devastating to long-term planning and readiness," Graham said.

Phoenix Mayor Greg Stanton, speaking at a defense industry event, said Arizona stood to lose 50,000 high paying aerospace and defense jobs as a result of "Congress's failure to deal with looming indiscriminate cuts" to the defense budget.

"That is the Number One threat to our local economy," Stanton said. "And it would put our city, and the state I represent, back to recession. It is exactly the wrong direction for us to go in."Mayor Jerry Sanders of San Diego, where defense is one of the major industries, said the cuts would lead to a loss of confidence, and once that happens "our economy is going to go back to right where we were and cities have nowhere to go but have to cut vital services."

Congress passed the Budget Control Act last year to try to impose fiscal discipline on a federal government that has been running trillion-dollar deficits and has amassed a $15.8 trillion debt.

The measure called for the Pentagon to reduce its projected spending by $487 billion over the next decade and trimmed non-defense spending by a similar amount.

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