Says Cuts Would Lower GDP Growth by 25 Percent
An economic impact analysis commissioned by the Aerospace
Industries Association projects more than one million American jobs
could be lost as a result of defense budget cuts if the deficit
reduction select committee fails to reach agreement on alternative
balanced budget solutions, triggering automatic cuts to defense
which could reach $1 trillion.
The Aerospace Industries Association lobbies on behalf of
aerospace and defense manufacturers.
Dr. Stephen S. Fuller, Director of the Center for Regional
Analysis at George Mason University and Economic Modeling
Specialists Inc. (EMSI) conducted the analysis on behalf of AIA.
“Our analysis reveals bleak outcomes for both the defense
industry and the economy as a whole if the budget sequestration
trigger is pulled and $1 trillion is cut from defense,” said
Dr. Fuller.
AIA President and CEO Marion C. Blakey (pictured) insists,
“Congress must find budget deficit solutions that don’t
sacrifice the jobs of those who supply the American warfighter. We
cannot add .6 percent to the current 9.1 percent rate of
unemployment, it would devastate the economy and the defense
industrial base and undermine the national security of our
country,” she added.
Commenting on the findings, Tom Buffenbarger, President of the
International Association of Machinists and Aerospace Workers said
“the spending cuts of the Budget Control Act enacted last
summer place at risk the jobs of highly skilled, highly motivated
workers. We can ill afford to idle these men and women and the
machines they operate indefinitely,” Buffenbarger added.
Dr. Fuller and EMSI concluded that under the scenario of a $1
trillion cut to defense spending, an option under consideration by
the budget deficit “Super Committee,” the flow down
effect from the aerospace and defense industry to its supply chain
and communities is significant, particularly given two factors. The
defense industry has a notably high rate of subcontracted work flow
and systems with high component volumes, driving job loss directly
to program partners and the supply chain.
Dr. Fuller’s analysis was based on an annual reduction of
$45.01 billion to the military modernization accounts from which
the aerospace and defense industry derives its revenues. “The
total impact each year of a $45 billion cut would be to reduce GDP
by $86.456 billion. This is equivalent to 25 percent of the
projected annual increase in GDP for 2013 and its loss would reduce
currently projected growth for 2013 from 2.3 percent to 1.7
percent,” Fuller said.
Also, given the relatively high wages earned by US aerospace and
defense workers, consumer spending in communities in every state
would decline significantly. “The multiplied impact of
aerospace and defense workers losing their job is very simple
– purchase of consumer goods goes down overnight, homes
become unaffordable and the housing crisis is compounded, and so
forth,” said Dr. Fuller. “The ten year defense budget
cut will be felt in terms of layoffs starting in 2012, escalate and
conclude by 2014,” he added.