Reid Dismisses Pentagon’s Threats of Layoffs
Business + Economy

Reid Dismisses Pentagon’s Threats of Layoffs

REUTERS/Yuri Gripas

The defense industry is turning up the heat on Congress and the White House with threats of massive layoffs unless  the government calls  off $500 billion or more of automatic across-the-board cuts in Pentagon spending beginning early next year. And while Republicans and some Democrats favor canceling or diluting the major defense cuts agreed to last summer, Senate Majority  Leader Harry Reid, D-Nev., seems unmoved.

Reid, the most powerful member of the Senate, told reporters on Tuesday that it would be a serious mistake for Congress and President Obama to back down from the cuts now, and that it would signal to the nation and the world that lawmakers lack the resolve to address the mounting debt.
“Remember, the Congress of the United States voted to do this,” Reid said following a meeting with the Democratic caucus. “If we’re serious about setting an example for the rest of the world and setting an example for our constituents, then we should live by what we agreed to.”

Lockheed Martin Corp,  Boeing Co. and General Dynamics  have warned recently they will have to lay off workers, shut down or consolidate  assembly plants, cut back on purchases from suppliers and make other savings in anticipations of defense budget cuts of   15 percent or more beginning early next year.

The National Association of Manufacturers warned in an analysis  issued last Thursday that the across the board budget cuts would destroy nearly 1 million jobs by 2014, with Virginia, California and Texas taking the biggest hits -- each shedding more than 100,000 jobs. Other states  that would be hard hit include Florida, New York, Maryland, Georgia, Illinois, Pennsylvania and North Carolina.

The automatic spending cuts – known as sequestration – were approved by Congress and the Obama administration last July as part of major legislation to raise the debt ceiling while reducing the long term deficit. The Budget Control Act requires $1.2 trillion in automatic cuts over the next decade, evenly divided between domestic and defense,  with the first $109 billion taking effect January 2, 2013.

But since then, many Republican and Democratic lawmakers, Defense Department officials and budget experts have come to regret the action fearing that it will lead to a hollow military force and pose hardships for members of the military and their families. Last month, the GOP-dominated House passed legislation that would spare the Pentagon the additional cuts while shifting the burden of savings completely to domestic social programs.

Shortly after Reid insisted he would stand by sequestration, GOP leaders  responded that they take the industry warnings seriously, especially in light of Defense Secretary Leon Panetta’s recent testimony that sequestration – on top of previous defense cuts approved by the administration – would wreak havoc with the nation’s defense policies and strategies.

Lawmakers and fiscal policy experts are voicing deep concern that the nation is headed for a cataclysmic fiscal cliff by the end of the year when Bush era tax cuts and other tax breaks are set to expire at the same time the spending cuts begin to kick in. The Congressional Budget Office, Federal Reserve Chairman Ben Bernanke and other policy experts warn that the combination of the deep spending cuts and the sudden surge in taxes could spur another recession.

Sen. John Cornyn of Texas, a member of the GOP leadership, told reporters Tuesday that he and other lawmakers were “trying to make some sense out of what is a slow motion train wreck that we see occurring here with the sequester, particularly in the defense industry, where up to a million private sector jobs would be affected unless it’s adjusted.”

“There have been some bad choices made, but now we’re going to have to find our way out of it,” Cornyn said. “And I think we would be better off doing it earlier rather than waiting for the lame duck session” after the November election.

“I guess the most puzzling part of this is to me that the president and our Democratic friends don’t seem to be acting in their own political self interest,” Cornyn added. “The  economy is flat and the economy is going to do nothing but get worse as long as there is this uncertainty both in terms of the sequester and the tax increases.”

Sen. John Thune, R-S.D., another GOP leader, said, “If this thing goes into effect, you are going to see a lot of layoffs because of the 60 day requirement of [federal law] that they notify employees in advance,” Thune said. “You could see a lot of those notices coming out late summer or early fall,” just before the election.