Defense execs warn of looming job loss because of defense cuts
WASHINGTON (CNN) — Chief executives of leading defense companies told a House panel Wednesday they would have to start informing employees just before the 2012 election that their jobs would terminated in January if Congress fails to make a budget deal, triggering hundreds of billions of dollars in defense cuts that would ripple through the defense industry sector.
The four CEOs testified before the House Armed Services Committee and echoed what many defense industry officials have been sounding the alarm about for months: The automatic cuts, known as sequestration, would be devastating to the defense sector and the economy.
Testifying before the House panel were the chief executives from industry giants Lockheed Martin, European Aerospace Defense Systems (EADS) and Pratt and Whitney, as well as the head of an small aerospace business, Williams-Pyro.
House members asked the four witnesses when they thought they would have to begin to inform employees of the potential termination of their jobs because of the possibility of sequestration cuts.
“Our sense is, 60 days from January the 2nd, with timely notification, puts the notice at the end of October, early November for 60-day notification states. New York is a 90-day notification state. I think we’d set that back, obviously, 30 days in time, and it would be the end of September, early October,” said Lockheed Martin CEO Robert J. Stevens.
Stevens has been an outspoken voice in the defense industry on the negative effects he across-the-board cuts would have on his and other companies in the defense industry.
But on Wednesday, Sean O’Keefe, former NASA administrator and now CEO of EADS North America, joined in the debate, telling House members his company has “already begun to notify members of Congress who represent districts in which we operate and do business, as well as governors of those respective states, that we may be compelled to do this.”
The chairman of the House Armed Services Committee, Rep. Buck McKeon, R-California, has been the leading Republican on the Hill in the fight to repeal the law. This is his seventh hearing on the topic. But bi-partisan fighting on an agreement to a budget deal before the end of the year, which would eliminate sequestration, has not occurred. Republicans have upped the ante by bringing the defense industry into the political fight.
Also on Wednesday, the House of Representatives passed the Sequestration Transparency Act of 2012, legislation that would require the White House to explain how it will apply sequestration across all the federal agencies.
“By requiring the administration to tell the American people exactly how they intend to implement sequestration, we will hopefully incentivize all stakeholders to find a solution as soon as possible,” McKeon said in a news release.
“The House has passed legislation that makes sensible cuts and avoids the devastating impacts of sequestration on American national security. Unfortunately, the Senate continues to block all of these solutions,” McKeon said.
Earlier this month Sen. John McCain, R-Arizona, sent a letter to the major defense company CEOs asking them what effects sequestration would have on their bottom line.
Republicans have blamed the Obama administration for not giving any guidance to federal agencies, including the Department of Defense, to plan for the potential cuts. In turn, defense industry officials have complained they do not have any guidance on what contracts might be hit.
Further pushing the industry message, a major aerospace defense group, the Aerospace Industries Association, released a report it commissioned saying more than a million jobs in the defense sector would be lost.
But William Hartung of the Center for International Policy, a Washington-based policy analysis organization, said the defense industry is being hypocritical.
“It is sadly unsurprising that, yet again, the largest Pentagon contracting lobby would come out with a study calling for more money for its own members. You have to think about where these studies come from and how they’re performed,” Hartung said.
Meanwhile, Lawrence Korb, a long-time defense policy analyst, bashed McKeon on Tuesday for his continued drumbeat on sequestration’s negative effects on the defense industry.
“This is an example of hypocritical thinking,” Korb said. “If Rep. McKeon and similar Republican leaders cared about job creation, they would support funding for the industries that are most effective at creating jobs.”
Sequestration will not cut only the defense budget, but it will also cut hundreds of billion of dollars from other federal agencies, including those dealing with health care and transportation.
The hearing took a more social-awareness turn when Rep. Hank Johnson. D-Georgia, said House Republicans would not “call on community leaders, church leaders, the owners of mom-and-pop businesses or struggling homeowners to testify on the impact of all these cuts to help the poor and the jobless and the sick.”
Johnson then asked the witnesses if they would hypothetically be willing to give up 5 percent of their paychecks if the Bush-era tax cuts were made permanent and if it meant that doing so would also eliminate sequestration.
The four witnesses did not answer Johnson’s question and left him to conclude they would not give up their paychecks.
“That is exactly the sentiment that is being represented by the Republicans here in Congress. They will not impose any taxes, any tax increase on those who can afford to bear it because of the Grover Norquist pledge,” Johnson said referring to the anti-tax advocate’s pledge some members of Congress signed. It does not permit them to bring any revenue into the Treasury through tax increases.
While some committee Democrats started an ideological discussion about who is to blame for sequestration, McKeon concluded the hearing by reminding the panel why the industry representatives were testifying.
“These people are here today at our request to talk about the guidance that they need to implement the laws that we have passed,” he said.
“We’re just wanting to know how, as business people, do you expect us to comply with the law that was passed and carry out those instructions to the best of our ability.
“That’s what this hearing was for,” McKeon said.