Within every dollar the Department of Defense spends in federal contracting, seventy-five cents go to subcontractors‚??the American small businesses that install windows, manicure lawns, lay bricks.
That‚??s why, according to American Enterprise Institute scholar Mackenzie Eaglen, a sweeping nine-percent cut of the Defense budget could hit the states harder than expected.
Updated data released by the Center for Security Policy this week shows that the five states that would absorb the greatest fiscal blow under sequestration are Virginia, California, Texas, Maryland, and Florida. While a few on that list are no surprise, such as the base-heavy, beltway-bordering states of Virginia and Maryland, the fact that Florida and Texas might take a harder hit than the military hub of North Carolina means the impact of funding cuts may travel past the bases.
Heritage Foundation defense expert Steve Bucci, a retired Army officer and former Deputy Assistant Secretary of Defense, said he expected service leaders to push as many of the cuts as possible away from active-duty troop resources and toward the National Guard and reserves, meaning even early estimates could show a limited picture of how far-reaching sequester cuts might be.
New report studied 26,000 documents
According to CFSP, which crunched newly available 2011 data for this most recent report, the figures were reached by sorting defense contracts by contractor location and place of work performance, trawling over 26,000 documents to construct the data piece-by-piece.
The bottom line: Adding cuts pending in the president‚??s FY13 Defense budget to the conservative estimate of $500 billion to be cut from the Department of Defense in the next decade under sequestration, the Center for Security Policy estimates that well over one million private-sector, non-military jobs will be lost, and the U.S. economy will hemorrhage $59.4 billion in lost earnings and $86.4 billion in Gross State Product.
Center for Security Policy Chief Operating Officer Christine Brim said the brunt of the job loss would likely be felt in the first year or two of the sequester as ongoing military contract projects were quickly defunded.
In the states, Virginia stands to lose the most: $9.8 billion over the next ten years after both budget cuts and sequestration. The private-sector job toll could be over 122,000, according to data the center culled from George Mason University‚??s Center for Regional Analysis.
‚??Who this really hurts this summer are small and medium-sized businesses,‚?Ě Eaglen said at a CFSP forum on Wednesday, noting that Defense Budget cuts will begin to be felt immediately.
The sequester mechanism was the result of bipartisan agreement in Congress last year, a part of the Budget Control Act. Now, political gridlock may result in what was never intended by either side: sequester cuts going into effect. Legislation passed by the House that would shift cuts to domestic programs or scale down the federal civilian workforce instead is expected to be ignored by the Senate, while President Barack Obama has threatened to veto any attempt to get rid of the sequester without raising taxes or working an alternative deal. Sen. John McCain (R-Ariz.) added his own likely doomed solution to the pile this week, filing an amendment to the farm bill calling for studies on the impact of sequestration as a ploy to buy more time. However, it‚??s unclear that the Senate will pass its version of the bill, with or without the amendment.
‚??I think, from where I sit, one of the most disturbing things is that no serious attempt from those who advocate a different solution, no serious legislation had been put out,‚?Ě said Robert Zarate, policy director for the Foreign Policy Initiative.
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