Commentary Magazine


What a “Super Committee” Does to the Economy

As we await the creation and deliberation of the “super committee” to determine the future of national defense, it’s worth taking a look at how this instability impacts the economy.

The prospect of massive – and unpredictable – future defense cuts isn’t just a concern for national security officials. It’s also reportedly spooking defense contractors, who are hesitant to hire new employees in such a volatile atmosphere.

From reading local news reports, we learn communities across the country are already bracing for the prospect of additional economic turbulence:

San Diego:

The impreciseness of the deal and the uncertainty about where budget cuts will come from does little to help the fragile economic recovery in San Diego and could potentially have a huge impact on the region’s job growth in the coming years, experts said.

The deal imposed $1 trillion in budget reductions over the next decade but did not outline where cuts would be made, virtually ensuring continued hesitance among consumers and businesses that will keep them from spending. That doubt is expected to guarantee the unemployment rate in the county will remain about 10 percent through the rest of the year with very little job growth, experts said.

Washington, D.C.:

The hundreds of billions of dollars in cuts to military spending proposed in the federal debt-reduction deal would hit the Washington region’s defense industry hard, forcing layoffs and undermining the local economy for several years, analysts said.

Defense firms around Washington have already been shrinking, but the proposed cuts would slice even further into an industry that is a pillar of the region’s economy, according to economists.

Scranton, PA:

“We have to be concerned about cuts in the defense budget,” said Austin Burke, president of the Greater Scranton Chamber of Commerce. “The defense industry is a major employer in our regional economy. They provide high-quality jobs, manufacturing and high-tech jobs and well-paying, family-sustaining income.”

Fort Wayne, IN:

“One of the areas that might really likely affect the Fort Wayne economy is defense cuts, which are certainly going to be a large part of this whether they’re triggered or whether they are considered by this committee,” said Wolf.

Jobs losses follow any federal spending cuts. But it’s the looming uncertainty of these defense reductions that’s especially pernicious.

“The long-elusive debt ceiling pact President Obama signed into law Tuesday leaves federal contractors with many questions about their ability to perform long-term planning, according to industry representatives,” Government Executive reported today.

Add these stories to the news today that planned layoffs in July hit a 16-month-high – partially due to shedding defense jobs from corporations like Lockheed Martin – and the forecast doesn’t look bright for the defense industry. It’s a little-noted consequence of such an ambiguous and drawn-out debt ceiling deal, but one that could ultimately end up hindering Obama’s attempts to restart the economic recovery.