More than 1 million American jobs could be lost as a result of defense budget cuts if the deficit reduction committee fails to reach agreement on alternative balanced budget solutions, and total cuts to defense reach $1 trillion.
The study, done by Stephen Fuller, director of regional analysis at George Mason University and Economic Modeling Specialists Inc. shows “bleak outcome” for both the defense industry and the economy as a whole.
“Congress must find budget deficit solutions that don’t sacrifice jobs of those who supply the American warfighter,” said Aerospace Industries Association president and CEO Marion C. Blakey. “We cannot add .6 percent to the current 9.1 percent rate of unemployment.”
Under the scenario of a $1 trillion cut to defense spending, the effect to aerospace and defense industry is “significant,” Fuller said.
The industry has a high rate of subcontracted work flow and systems with high component volumes, which means job loss will occur even outside the industry and throughout its supply chain.
The $1 trillion cut would equal about $45 billion to the military modernization accounts.
“The total effect…would be to reduce GDP by $86.4 billion,” he said. “This is equivalent to 25 percent of the projected annual increase in GDP for 2013 and the loss would reduce currently projected growth for 2013 from 2.3 percent to 1.7 percent.”
Cuts to jobs in aerospace and defense – given their high wages – would lead to less consumer spending nationwide.
‘The multiplied impact of aerospace and defense workers losing their jobs is very simple – purchase of consumer goods goes down overnight, homes become unaffordable and the housing crisis is compounded, and so forth,” Fuller said. “The 10-year defense budget cuts will be felt in terms of layoffs staring in 2012.”