The deep federal spending cuts scheduled to take effect at the start of next year may trigger dismissal notices for tens of thousands of employees of government contractors, companies and analysts say, and the warnings may start going out at a particularly sensitive time:
Days before the presidential election.
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By law, all but the smallest companies must notify their workforce at least 60 days in advance when they know of specific job cuts that are likely to happen.
Obama administration officials say that the threat of layoffs is overblown and that Republicans are playing up the possibility rather than trying to head it off. The Labor Department said Monday that it would be “inappropriate” for contractors to send out large-scale dismissal notices, because it is unclear whether the federal cuts will occur and how they would be carried out.
Republicans reacted with fury, saying it is the White House that is playing politics.
“The president is focused on preventing advance notice to American workers that their jobs are at risk and on perpetuating uncertainty,” said Rep. Howard P. “Buck” McKeon (R-Calif.), chairman of the House Armed Services Committee.
The prospect of widespread layoff notices before Election Day — potentially hitting the swing state of Virginia hardest — underlines how the looming “fiscal cliff” at the end of the year is shaping the economy and politics many months in advance.
Economists say the threat of deep cuts in domestic and defense spending, coupled with automatic increases in taxes, is already a drag on economic growth and a source of enormous uncertainty for businesses, which are holding back on hiring and helping to keep the nation’s unemployment rate above 8 percent.
Republicans have seized an opportunity to attack President Obama over the planned cuts to defense spending, while Obama is pointing at the GOP, saying he will not roll back the spending reduction without Republicans agreeing to higher taxes on the wealthy to help tame the nation’s debt.
The far-reaching reductions in domestic and defense spending, along with the sharp tax increases, will take effect automatically at the start of the new year unless Obama and Congress act.
Although both sides want to stop the spending cuts, a deal seems unlikely until after the election.
A key defense industry group representing some of the largest contractors said it is reviewing the Labor Department’s new guidance, but the group said it still considers it possible that layoff notices will be sent to a large number of employees.
The giant defense contractor Lockheed Martin, which has more than 20,000 workers in the Washington area, has said it may notify more than 100,000 employees of potential layoffs ahead of the election. Lockheed said Monday that it is reviewing the new guidance. EADS, a major European defense contractor with U.S. operations, also has said it may notify employees of layoffs.
Spokesmen for Northrop Grumman and General Dynamics said last week they have not decided whether to do so, while a Boeing representative would say only that the company is planning for a worst-case scenario where the spending cuts occur. Two other large local contractors, Computer Sciences Corp. and SAIC, declined to comment.
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