Unless Congress acts before January 1, sequestration will kick in and the defense budget will be slashed some $50 billion across the board—the first stage of cutbacks which could total $1 trillion over the next decade. That is certain to have a severe impact not only on Defense Department employees, civilians, and military, but also on the defense contractors that produce the vehicles, aircraft, ships, missiles, ammunition, and everything else needed to equip the armed forces.
Under the 1989 WARN Act (Worker Adjustment and Retraining Notification) companies with more than 100 employees are obligated to give 60-days notice of mass layoffs and plant closings. Lockheed Martin threatened to send out those notices on November 2, four days before the election–and with many of them arriving in swing states such as Virginia. That would not be good for President Obama’s reelection chances so his Office of Management and Budget has alternatively bullied and bribed the defense contractors not to send out the layoff notices–the demands of the law notwithstanding.
The Office of Management and Budget is now promising to compensate defense contractors for any legal penalties that would stem from violating the WARN Act, a federal law that requires employers to warn employees at least 60 days in advance of mass layoffs. The Obama administration had already been urging contractors to ignore the WARN Act in the case of the looming sequestration cuts, since the 60-day-minimum would mean hundreds of thousands of employees could get notices of pending layoffs just days before the presidential election.
But it’s one thing for the Obama administration to tell contractors that they shouldn’t worry about the law. It’s quite another to promise that the cost of any resulting lawsuits will be covered by the government (read: the taxpayers):
But the Friday guidance from the Office of Management and Budget raised the stakes in the dispute, telling contractors that they would be compensated for legal costs if layoffs occur due to contract cancellations under sequestration — but only if the contractors follow the Labor guidance.
The guidance said that if plant closings or mass layoffs occur under sequestration, then “employee compensation costs for [Worker Adjustment and Retraining Notification] WARN act liability as determined by a court” would be paid for covered by the contracting federal agency.
The House Energy and Commerce Committee released some brutally damaging emails for the Obama administration this morning, showing how reliant failed solar energy company Solyndra was on the government to stay afloat toward the end. As the Washington Post reports, the White House’s Office of Management and Budget found that it would be financially safer for the government to cut its losses in Solyndra rather than green-lighting additional loans — and yet the administration continued to gamble on the flailing company:
As the Obama administration moved last year to bail out Solyndra, the embattled flagship of the president’s initiative to promote alternative energy, a White House budget analyst calculated that millions of taxpayer dollars might be saved by cutting the government’s losses, shuttering the company immediately and selling its assets, according to a congressional investigation.
Even so, senior officials in the White House’s Office of Management and Budget did not discourage the Energy Department from proceeding with its plan to restructure a federal loan to Solyndra — a move that put private investors ahead of taxpayers for repayment if the company closed, the investigation by Republicans on the House Energy and Commerce Committee found.
The White House continues to deny there was any political favoritism involved, despite Obama’s cozy relationship with Solyndra execs and one of its main private backers, George Kaiser. But why else would the administration take such a financial risk on a likely loser, despite the findings from its own OMB? Why restructure a loan to let private investors get repaid before taxpayers? From an objective standpoint, the decision should be cut-and-dry. Even if the Obama administration didn’t care about squandering taxpayer money, you would think it would at least take it out of a high-risk investment when it had the option.