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Fiscal cliff: Industries serving military would lose jobs

Fiscal cliff: Industries serving military would lose jobs

With its heavy concentration of military facilities and defense companies, San Diego could be one of the hardest hit regions in the country by the fiscal cliff. The process called sequestration calls for automatic spending cuts of $1.2 trillion over 10 years, split equally between military and domestic programs.

he effect of sequestration on the Defense Department wouldn’t be immediate, however, giving the military time to avert a worst-case scenario. Funding for active-duty military personnel will be exempt from the cuts.

Longer term, if no deal is reached, the impact on the local economy would be profound.

According to an analysis commissioned by the Aerospace Industries Association and released over the summer, California stands to lose 225,464 jobs in fiscal 2012 and 2013, more than any other state in the nation. That could translate to more than 30,000 lost jobs in San Diego, local economists said.

The military is facing a budget reduction of $492 billion over a decade, with a $55 billion annual across-the-board cut beginning in January.

Almost all of the defense reductions will be made by cutting discretionary expenses in 2013 and by lowering the caps on defense appropriations for 2014 through 2021, according to the Congressional Budget Office.

The automatic cuts will reduce discretionary defense spending by about 10 percent in 2013 and reduce the caps on defense appropriations by lesser amounts thereafter, declining to 8.5 percent in 2021.

“Our perspective is it’s a significant impact on the region,” said Larry Blumberg, executive director of the San Diego Military Advisory Council. “Nothing’s changed from what we’ve been saying all year. It’s a dumb way to do things.”

In a Dec. 20 memorandum, Defense Secretary Leon Panetta wrote that day-to-day operations at the Defense Department should not “change dramatically” on Jan. 2, because funding would still be available. Sequestration would reduce available funds for the entire fiscal year, which ends Sept. 30.

“This means that we will not be executing any immediate civilian personnel actions, such as furloughs, on (Jan. 2),” Panetta wrote. “Should we have to operate under reduced funding levels for an extended period of time, we may have to consider furloughs or other actions in the future.”

Active-duty salaries and benefits, and retired military pensions appear to be safe from any cuts, Blumberg said.

For the defense industry, the biggest issue in the short-term is the uncertainty, said Jim Johnson, president of the San Diego Military Advisory Council.

“Not knowing how the cuts will be executed is problematic,” Johnson said. “There’s no way to plan. I think there’s already been some effect on how the industry is going to go forward.”

A separate analysis focusing on the region, conducted by the San Diego Regional Economic Development Corp., the San Diego Regional Chamber of Commerce, Connect and the San Diego Military Advisory Council, identified the following areas that could see impacts from sequestration: The third aircraft carrier currently slated for the region, the Navy’s Space and Naval Warfare Systems Command, the Fleet Readiness Center Southwest aircraft maintenance facility at North Island Naval Air Station, the Marine Corps Recruit Depot boot camp and shipbuilding and repair jobs.

“The biggest problem is the inability to rationally plan how to execute things,” Johnson said. “Hopefully, the leaders in Washington will get the message. The lack of action is really destructive.”

Source: By Nathan Max, U-T San Diego News - 30 December 2012

Photo: Going over the fiscal cliff could cut funding for such things as the Global Hawk 30 unmanned aerial vehicle, a drone developed at Northrop Grumman's San Diego operation. Image courtesy of Northrop Grumman. (Photo by Northrop Grumman)



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