Industry accused of exaggerating job losses from sequestration

A think tank analyst says sequestration may not result in as many defense-related job cuts as industry officials claim.
 
Peter Singer, director of the 21^st Century Defense Initiative at the Brookings Institution,  argued Tuesday that a report on projected job losses that the Aerospace Industries Association released in mid-July was based on flawed economic assumptions. Furthermore, he wrote, it was unlikely AIA had the data or the means to predict possible job losses at the level of detail in the report.

“The notion of projecting specifically what would happen all the way down to the exact job numbers lost and in the exact location is deeply flawed, all the more so when based on uncertain or even erroneous assumptions,” Singer wrote.

The AIA report projected that the defense portion of sequestration would lead to the loss of 1.09 million jobs through fiscal 2013, Singer said. The analysis was conducted by economist Stephen Fuller, director of the Center of Regional Analysis at George Mason University, in conjunction with Chmura Economics and Analytics.

According to Singer, only 1 in 70 workers in the United States is involved in defense and aerospace. A recent study by Deloitte, also commissioned by AIA, found that 3.53 million jobs -- direct, indirect or induced -- were sustained by those industries, he noted. This includes jobs unrelated to the Pentagon, such as manufacturing passenger jets, he said. “So if 1.09 million direct, indirect and induced jobs were lost from the 10 percent cut of sequestration, that would mean nearly a third of the overall jobs sustained by the industry would evaporate, an extreme projection to say the least,” Singer wrote.  

“These kinds of projections grow equally questionable when you look at them from the bottom up, rather than top down,” he added.

Singer argued that when faced with cuts, the Pentagon could opt for delaying or canceling purchases of, say, new fighter jets. While this would be bad news for states where the new jets would have been produced, it could be good news for existing production lines, he said. The unpredictability of the cuts makes impossible any specific projections, like those AIA released, he said.

“Top experts in the field don’t, for example, yet know whether the cuts would or wouldn’t fall on the personnel side, whether Pentagon civilians and or those uniform, which could have a hugely variable impact,” Singer said. “In a post-sequestration political environment, there might be changes in anything from personnel costs structures to TRICARE and other benefits systems, as all sorts of things not on the table might be pushed into play.”

The possibility of sequestration has defense industry officials concerned. Top officials at the Defense Department have met with industryrepresentatives recently to discuss the possible scenarios that the Pentagon is preparing for.

AIA Vice President Cord Sterling disagreed with Singer’s analysis. He emphasized that AIA’s study is an extension of previous research and is in line with the recent National Association of Manufacturers report on the impact of defense cuts, as well as the “fiscal cliff” report the Congressional Budget Office released in May, which also included the impact of tax cut expirations. 

“The study done by Dr. Fuller and Dr. Chmura, the study by the National Association of Manufacturers, and the CBO report are coming to the same conclusion: massive job losses directly from the cuts, from the loss in consumption” Sterling said. “In addition, just today, [the Office of Management and Budget] said it’s absolutely the case that sequestration would destroy many American jobs, and [the Defense Department] and Democrats and Republicans in Congress agree.”