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Originally published Thursday, June 21, 2012 at 10:05 PM

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Automatic Pentagon cuts could wipe out nearly 1 million jobs

The report, by the National Association of Manufacturers (NAM), is the latest in a growing heap of studies warning of dire economic consequences if policymakers fail to avert about $100 billion in cuts to the Pentagon and nondefense programs next year.

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WASHINGTON — Across-the-board budget cuts scheduled to hit the Pentagon in January would eliminate nearly 1 million jobs by 2014, with Virginia, California and Texas absorbing the biggest hits, and Washington state losing more than 25,000 positions, according to an analysis released Thursday.

The job losses probably would include about 750,000 private-sector positions, including about 100,000 jobs in manufacturing, even as President Obama is promoting manufacturing as key to the nation's economic recovery.

The report, by the National Association of Manufacturers (NAM), is the latest in a growing heap of studies warning of dire economic consequences if policymakers fail to avert about $100 billion in cuts to the Pentagon and nondefense programs next year. The cuts, known as a budget "sequester," were adopted last summer as part of a debt-reduction deal.

Separate analyses by George Mason University, the Bipartisan Policy Center and the aerospace industry have reached similar conclusions. The Senate on Thursday approved a bipartisan plan to require the Obama administration to say how it would implement the cuts and to detail the impact on the Pentagon and other federal agencies. If the House passes the measure, a report would be due in August.

The defense cuts are of particular concern to manufacturers — not only big defense contractors such as Boeing and Lockheed Martin but also hundreds of smaller firms in their supply chains. The NAM study, conducted by the Interindustry Forecasting Project at the University of Maryland, projects the aerospace industry could lose 3.4 percent of its jobs by 2015 because of downsizing at the Pentagon. Shipbuilders could shed 3.3 percent of their workforce by 2014. And employment in the search and navigation equipment industry could drop by nearly 10 percent by 2016.

Taken together, the January cuts and defense reductions already required under budget caps approved last summer could cost the nation as many as 1.1 million jobs and trim 1 percent from the nation's gross domestic product (the sum of all goods and services produced in a year) by the end of 2014, the peak year for job losses, according to projections.

California, Virginia and Texas each would shed more than 100,000 jobs. The study predicts Florida, New York, Maryland, Georgia, Illinois, Pennsylvania and North Carolina would round out the top 10. Washington state would rank 16th, with a loss of 26,800 jobs.

The Pentagon and those who service it — largely military contractors — have been a loud, unified voice, pressuring lawmakers about the cuts and their potential impact on local economies. For example, Northrop Grumman executives met with members of the Connecticut delegation to announce a plant in Norwalk would be closed and 315 workers laid off in part because of the impending sequester, said a person who attended the meeting but requested anonymity. (A company spokeswoman declined to comment.)

Defense Secretary Leon Panetta has come to Capitol Hill more than once to complain about the cuts, and Republicans have offered several bills, including one that passed the House, to undo sequestration. Members hammer the issue daily; the House Armed Services Committee has devoted its entire Web home page to the issue.

Efforts to forge a compromise have been frustrated by Republicans who oppose any revenue increase and Democrats who say revenue must be part of the package. Now, some Republicans are even talking about raising taxes.

Arizona Sen. John McCain, senior Republican on the Senate Armed Services Committee, said Thursday that a revenue increase may be possible as a means of averting the automatic cuts.

The threat "is so devastating that the secretary of defense will not even contemplate the plans necessary to implement sequestration," said McCain, who cited elimination of tax breaks for ethanol as part of a potential compromise.

Rep. Norm Dicks, D-Wash., said he would like to see "positive steps taken" on a legislative fix before the November election. "This is all about trying to improve the economy of the United States and reduce the deficit," he added.

In fact, some lawmakers' political lives may depend on a pre-election solution, said Dov Zakheim, senior adviser at the Center for Strategic and International Studies and a former Pentagon comptroller.

Defense contractors are required by law to notify employees in advance if they are likely to lose their jobs, and the requirement is 60 days in most states. With sequestration scheduled to take effect Jan. 2, the 60-day notices may come days "before some of these folks are going to have to get re-elected," Zakheim said.

"You're going to see pink slips flying in October from contractors across the country" unless action is taken by then, said Rep. Randy Forbes, R-Va., who added that a significant number of military personnel also could lose their jobs.

"We could be giving pink slips to 150,000 active-duty military members," he said. "That's like doing away with the entire Marine Corps."

The likeliest outcome is that Congress will sidestep the fiscal challenge and pass a continuing resolution that merely would postpone cuts, Zakheim said.

"I don't think this Congress can cut the deal," he said.

Compiled from The Washington Post, Bloomberg News, The New York Times and Seattle Times staff

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