By Mike Brown
August 6, 2012

The mayors of Phoenix and San Diego travelled to Washington July 17 to participate in the release of an analysis of the devastating economic impact of the Budget Control Act's sequestration mandate that will take effect on January 2, barring Congressional agreement on an alternative federal deficit reduction strategy for the decade ahead, and to underscore the severity of the damage that this sequestration would have on the nation's cities.

A new economic impact analysis by Dr. Stephen Fuller of George Mason University concludes that 2.14 million American jobs are at stake if the sequestration crisis is not averted and automatic across-the-board budget cuts of $1.2 trillion begin to be imposed on both defense and domestic government spending.

“The results are bleak but clear-cut,” Fuller said in a press conference sponsored by the Aerospace Industries Association. “The unemployment rate will climb above nine percent, pushing the economy toward recession and reducing projected growth in 2013 by two-thirds. An already weak economy will be undercut as the paychecks of thousands of workers across the economy will be affected, from teachers, nurses, construction workers to key federal employees such as border patrol and FBI agents, food inspectors and others.”

Fuller's study, conducted on behalf of AIA, indicates that, in the first year of implementation alone, the automatic spending cuts will reduce the nation's GDP by $215 billion and decrease personal earnings of the workforce by $109.4 billion. The largest year-over-year spending reduction would occur in FY 2013, Fuller reports, with spending reduced 12.1 percent – for the Department of Defense (DOD), an 11.5 percent reduction following a small nominal increase in FY 2012; for non-DOD agencies, a 9.8 percent reduction from FY 2012 levels.

Phoenix Mayor Greg Stanton, Chair of the U.S. Conference of Mayors Task Force on Defense Transition, said sequestration was the number-one threat to the economy of his city. The report's findings, he said, “…are proof that Arizona faces serious job loss – nearly 50,000 high-wage jobs – at the expense of Congress's failure to deal with looming, indiscriminate cuts to our aerospace and defense industries. We can't afford to take that kind of a hit. We know some cuts will happen, but we need to be strategic, propose a solution and protect jobs to keep our momentum going forward out of the recession, not backward.”

“Like every other city in the country, San Diego has been struggling to recover from the worst national recession in nine decades,” said Mayor Jerry Sanders. “Arbitrary, politically motivated cuts to the national defense budget are the last thing our city needs right now, given that a quarter of all jobs in this region are tied to the defense industry.”

Fuller's analysis, which details both defense and domestic job loss by occupational category, projects the loss of 48,059 jobs in healthcare, 98,953 in construction, 473,250 in manufacturing, and 617,449 in the federal workforce. His state-by'state analysis finds that combined DOD and non-DOD cuts would hit California, Virginia, Texas, District of Columbia, and Maryland the hardest in terms of job loss.

“This report shows that sequestration is not just a defense problem, it's an American problem,” said AIA President and CEO Marion C. Blakey. “Unless our leaders in Washington take action, massive cuts have the potential to devastate our economy.”

Also present for the release of the Fuller study were New Hampshire U.S. Senators Kelly Ayotte and Jeanne Shaheen. “Military leaders have been clear that defense sequestration will deprive our troops of the resources they need and undermine our national security for generations,” said Senator Ayotte, who is the Ranking Member of the Senate Armed Services Readiness Subcommittee. “Republicans and Democrats must work together now to find alternate spending reductions that will not add a national security crisis to our fiscal crisis.”

Shaheen thanked AIA for covering both defense and domestic impacts of sequestration: “Focusing on only one half of the problem creates the impression that we only need half a solution, but that won't work,” she said. “We cannot continue to avoid tough decisions on the future of our debt and deficit. We should continue to work on a comprehensive solution that puts everything on the table.”

The Fuller report, The Economic Impact of the Budget Control Act of 2011 on DOD & non-DOD Agencies, is available online at http://www.aia-aerospace.org/assets/Fuller_II_Final_Report.pdf.