The companies that make America’s fighter jets, drones, and big-ticket weapons items warned in a press conference this week that a series of forced budget cuts known as “sequestration” would cost America more than 2 million jobs if it goes into effect.
Among other things, sequestration involves some $55 billion worth of automatic cuts in the defense budget. It’s set to go into effect in January unless Congress and the Obama administration can agree on a plan to curb the nation’s deficit.
Defense Secretary Leon Panetta has warned that such cuts would have dire effects on US national security.
Moreover, the cuts would reduce America’s gross domestic product by $215 billion, says Stephen Fuller, an economist at George Mason University who works with the Aerospace Industries Association. “The results are bleak but clear-cut,” he said. “The unemployment rate will climb above 9 percent, pushing the economy toward recession and reducing projected growth in 2013 by two-thirds.”
It’s not an uncommon view. Travis Sharp, a fellow at the Center for a New American Security, which has close ties to the Obama administration, warns that sequestration will “most definitely have negative impacts on employment and on workers in the defense industrial base.”
He worries, too, about the impact on defense research-and-development dollars, something he fears will be disproportionately affected by sequestration cuts. “A lot of the things that people use every day started out as research projects at the DOD,” he says, citing, for example, the Internet.
Others, however, say it's a good idea to keep the budget cuts in perspective. The DOD base budget under sequestration would be $469 billion – about what the Pentagon spent in 2006, when it was in the middle of fighting wars in both Iraq and Afghanistan. It was “not exactly a lean year for the Pentagon,” Dr. Preble notes.
Indeed, many of the predictions are overly dire, says Preble, who has studied regions that have experienced reductions in military spending in the past. Cuts initiated after the fall of the Berlin Wall in 1989 “were far deeper and faster than what we’re contemplating under sequestration,” he says.
Still, after an initial economic impact, those communities closely tied to the defense sector nonetheless “recovered quite quickly and prospered with a more diversified economy,” Preble says. “So the question really comes down to, How long is that economic adjustment process?” Research indicates that the effects are most dramatic the year they happen, then decline dramatically over time.
As for claims that defense cuts would mean millions of lost jobs? “That seems implausible considering that the cuts would amount to less than 3/10s of 1 percent of GDP,” Preble says. “More to the point, the defense budget should never be seen as a jobs program.”
