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Defense Cuts Would Spike Unemployment

There’s no question the automatic budget cuts set to take place next January will have major national security implications, but what about the economic fallout? Sequestration doesn’t just mean a reduction in military readiness, it also means reductions in defense and non-defense jobs. According to a new study by the Aerospace Industries Association, the unemployment rate would reach 9 percent or higher under these cuts (h/t Rob Bluey):

“The results are bleak but clear-cut,” said [Dr. Stephen S.] Fuller. “The unemployment rate will climb above 9 percent, pushing the economy toward recession and reducing projected growth in 2013 by two-thirds. An already weak economy will be undercut as the paychecks of thousands of workers across the economy will be affected from teachers, nurses, construction workers to key federal employees such as border patrol and FBI agents, food inspectors and others.”

The analysis concludes that the automatic spending cuts mandated in the Budget Control Act of 2011 affecting defense and non-defense discretionary spending in just the first year of implementation will reduce the nation’s GDP by $215 billion; decrease personal earnings of the workforce by $109.4 billion and cost the U.S. economy 2.14 million jobs.

This is about more than national security. A sudden reduction in defense-sector jobs could devastate whole communities, flooding the already-oversaturated job market with masses of newly unemployed. These aren’t unnecessary or obsolete jobs, they’re ones that are still critical for national defense.

The Obama administration and Congress may not be able to avoid dealing with this issue for long. As Dov Zakheim wrote last month at Foreign Policy, employers will be required to inform their employees of the possible termination 60 days before the sequester goes into effect — which just so happens to be Nov. 2, 2012:

 In addition to its impact on the government’s budget, the sequester will also trigger the WARN Act, which requires employers to give a minimum of sixty days notice to private and public sector employees whose jobs are being targeted for possible termination. Those politicians seeking re-election to national office should take note that Nov. 2, 60 days before Jan. 2, when the sequester comes into force, is just four days before election day. They may find it very uncomfortable having to explain to potentially hundreds of thousands of people who have been given WARN Act pink slips why they deserve to be returned to office after they did nothing about the sequester.

Can you imagine massive layoff warnings a week before the election? How has the Obama administration failed to address this issue so far?


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