With the budget axe swinging heavily upon the defense department, Defense Secretary Leon Panetta warned that a potential $1 trillion cut to the Pentagon budget could raise U.S. unemployment by 1 percentage point. The estimate is based on Pentagon figures that says defense spending supports about 6 million jobs: 3.8 million directly and indirectly in the private sector, 700,000 directly by the Defense Department and about 1.5 million active duty military positions.
The August debt reduction deal between President Barack Obama and Congress directed the Pentagon to reduce spending by more than $450 billion against projections based on the White House 2012 budget request. These cuts, which would peak in 2013 and 2014, could result in 500,000 to 630,000 lost jobs the Pentagon estimates. This could raise the U.S. unemployment rate by four-tenths of a percentage point.
Plus, if a congressional “super committee” fails to reach an agreement on steep deficit reductions, it could trigger automatic across-the-board cuts that would require another $600 billion cut in national security spending. The Pentagon estimates these cuts could result in the loss of 1 million to 1.5 million jobs and raise unemployment by up to 1 percentage point.
If the Pentagon is forced to cut spending by $1 trillion over 10 years, about half of the annual reduction of $50 billion, could come from procurement and contracting said Tom Captain, head of the aerospace and defense unit at Deloitte LLP consultancy. A $50 billion cut would mean a loss of more than 160,000 jobs.
The House Armed Services Committee sent a memo out recently that estimated 200,000 civilian Defense Department employees could be furloughed as a result of cuts of $1 trillion, with large impacts felt in Virginia, Texas and California. It did not explain how it came up with these figures.
Rep. Howard “Buck” McKeon (R.-Calif.), chairman for the House Armed Services Committee, recently sent a letter to the super committee that said further reductions “will compound deep reductions Congress has already imposed and critically compromise national security.”
