Defense Firms Fear U.S. Budget Cuts

July 9, 2012

A specter is haunting Washington—the specter of sequestration.

That's the term budget wonks use to describe automatic federal spending cuts that are set to begin in January. For months, U.S. aerospace and defense firms have warned that across-the-board cuts put into law by last year's Budget Control Act would spell disaster for the industry. Now they are starting to talk openly about when they might have to hand out pink slips to their employees.

With more than $50 billion in new Pentagon cuts set to kick in in early January, industry officials say they must begin notifying employees of potential layoffs or plant closings this fall, consistent with state and federal laws. In an election year, however, it's unclear whether lawmakers can agree on a deal to reverse some of the cuts.

It's also unclear how extensive the job cuts would be. The National Association of Manufacturers said in a June 21 report that Pentagon spending cuts may lead to the loss of more than 1 million jobs, including 130,000 manufacturing jobs, by 2014. 

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