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Across-the-board federal cuts could cost 2 million jobs, aerosopace industry-funded report says

at 12:43 PM ET, 07/17/2012

A new report commissioned by the aerospace industry contends that across-the-board federal budget cuts set to take effect in January 2013 could cost the country’s economy more than 2 million jobs and raise the national unemployment rate by 1.5 percentage points over the next year.

The report is the latest conducted by George Mason University economist Dr. Stephen Fuller on behalf of the Aerospace Industries Association.


Sen Kelly Ayotte (R-N.H.) is among those lawmakers calling for ‘alternate spending reductions’ (Associated Press)

“Every state, every community, every industry is on the chopping block,” AIA President and CEO Marion Blakey said at an event Tuesday unveiling the report. “The guillotine falls in just 168 days. Stopping it should be the very highest priority of Congress in the legislative days that remain this year.”

The automatic budget cuts included in last year’s debt ceiling deal, known as the “sequester,” have emerged as a key campaign issue that is likely to dominate Congress’s lame-duck session -- and perhaps even the months before Election Day.

Ramping up the pressure on lawmakers to come up with some alternative is the fact that federal law requires contractors who expect to be affected to issue early layoff notices to employees, 60 days ahead of when the cuts would take effect.

That would be a few days before Election Day.

The news conference comes as Senate Democrats are digging in their heels on a separate fiscal matter -- the so-called “fiscal cliff” facing the country at the end of the year -- seeking to damp up pressure on Republicans.

In that battle -- as well as in the fight over the sequester -- the impasse is largely due to disagreement between the parties over tax increases, an issue unlikely to be resolved until after Electon Day.

Last October, Aerospace Industries Association. commissioned a report by Fuller stating that 1 million jobs could be lost in the first year alone of the 10-year, across-the-board defense cuts brought about by last year’s debt ceiling deal.

Tuesday’s report takes into account projected cuts to both defense and non-defense spending.

Skeptics of those projections argue that the defense cuts would not lead to the “staggering” losses Fuller and others claim, pointing to reports that the across-the-board cuts would bring Pentagon spending back down to 2006 levels.

New Hampshire Sens. Jeanne Shaheen -- a Democrat who voted for the debt deal -- and Kelly Ayotte -- a Republican who voted against it -- both made the case at Tuesday’s event unveiling the report that Congress must avoid the cuts.

But their remarks made clear that the partisan divide between the parties when it comes to striking a grand bargain on the debt is as wide as ever.

“We should continue to work on a comprehensive solution that puts everything on the table,” Shaheen said. “It’s the right thing to do for our national security. It’s the right thing to do for our economy, and it’s the right thing to do for the people of this country.”

Ayotte, meanwhile, argued that both sides must come together to find “alternate spending reductions.”

“It is my hope that we would act in a responsible way before hundreds of thousands of people in this county get a layoff notice because we have failed to come together and to resolve this important issue,” she said. “And I think it’s also important that we not play chicken with our national security or our economy at this time.”

At the National Governors’ Association meeting over the weekend, Delaware Gov. Jack Markell (D), chairman of the group, said that governors may urge for a delay in the issuing of the layoff notices past the election.

Shaheen said in an interview Tuesday that she would consider supporting such a move if it included “a commitment to address the underlying debt and deficits.”

“I think we need to take some action in Congress that shows that we’re serious about addressing this and that we’re going to address it in a way that doesn’t just keep kicking the can down the road,” she said. “It may be that we need some sort of a short-term, interim measure to do that, but I think that’s what we need to be doing.”

Ayotte, too, said that lawmakers may work toward a shorter-term agreement to give Congress more space to work out a grand bargain.

She called the potential layoff notices “a clarifying moment” for lawmakers to come to the table and work out a path forward.

Meanwhile, former Vice President Dick Cheney is meeting with House Republicans Tuesday to discuss the sequester issue.

 
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