Study: 9% unemployment if Congress doesn’t stop sequestration

posted at 12:01 pm on July 17, 2012 by Rob Bluey

The congressional Super Committee is long gone, but the consequences of its failure will be felt by millions of Americans unless Congress addresses mandatory cuts that take effect Jan. 2, 2013.

A new study released today by economist Stephen S. Fuller of George Mason University and the Aerospace Industries Association estimates that 2.14 million U.S. jobs will disappear as a result of the Budget Control Act’s sequestration mandate. That would push the nation’s unemployment rate above 9 percent.

Automatic cuts totaling $1.2 trillion will hit the defense industry particularly hard. Defense-related jobs makes up about half of the lost jobs, according to the study. The report estimates losses for other sectors of the economy as well: 48,059 jobs in healthcare, 98,953 in construction, 473,250 in manufacturing. California, Virginia and Texas will fare worst.

Aerospace Industries Association President Marion C. Blakey and Fuller will share details about the study at The Bloggers Briefing at noon ET Tuesday at The Heritage Foundation. Click here to watch it live.

Fuller predicted an uptick in unemployment without action from Congress:

The unemployment rate will climb above 9 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.

The first year of cuts will result in a $215 billion drop in America’s GDP. The overall U.S. workforce also faces a $109.4 billion decrease personal earnings.

Cuts to America’s military are particularly alarming. The across-the-board cut of more than $500 billion over the next decade comes in addition to the $487 billion in cuts already proposed by President Obama for the Department of Defense. The Budget Control Act hits the military hardest.

At the release of today’s study, New Hampshire’s two senators — Republican Kelly Ayotte and Democrat Jeanne Shaheen — warned of the consequences of inaction. Ayotte emphasized the impact on America’s military in particular:

Military leaders have been clear that defense sequestration will deprive our troops of the resources they need and undermine our national security for generations. This new study underscores that sequestration will also crush our economy, devastate our defense industrial base, and put tens of thousands of Americans out of work.

Defense readiness is already a mounting concern. All branches of the military are attempting to do more with less, relying on SUVs for combatextending the life of aircraft and cutting back on our Navy fleet.


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Kohath: That’s a nice argument. However, I believe it is a matter of historical record that Defense ‘cuts’ (used in the sense that the federal government uses the word) are one of the few cuts that actually occur.

I also do not believe the argument that someone else’s pain will make it easier for other people to share that pain. I think it is much more likely that if you tell Grandma that her Social Security is getting cut after telling her that we cut a much bigger portion of the Defense budget, she’ll ask (not without some justification), “Well, why don’t you use the money you saved from the Defense cuts to pay for my Social Security?”

This is not a winning argument. This is also ignoring the fact that the proportion is much bigger than ‘leading’. 2 to 3 times is ‘leadership’. 14 times is punitive. And, again, this is only counting sequestration, not other planned ‘cuts’ to DoD.

In short, I believe ‘leadership’ is explaining to Grandma that no matter what else happens in our budget, her Social Security has to get reduced or eliminated. It is not relying on schadenfreude to cushion the blow.

Scott H on July 17, 2012 at 1:59 PM

Kohath: Bankruptcy, by law, is as fair and equitable to the creditors as possible. And, again, you can reduce the Defense budget to 0, along with ALL discretionary spending, and still run a deficit. So why are we reducing the Defense Budget instead of other budgets? Because our politicians are gutless? If that is true, we need either to vote in better leaders (or find leaders who are more accountable), or this country deserves to fall apart.

And, as to the invasion question, I do believe that if we cut DoD the way they’re going to, rather than the way you should (and this is not a question of how much money), then yes, we are leaving ourselves open to an invasion (if no one else, from China) in the next ten years.

Voter: I expect Paulbots to have a more realistic picture of at least economic policies than that. :p

Scott H on July 17, 2012 at 2:03 PM

One of my family members has a friend who joined the Army right after high school and wanted to make it his career. He has been pink slipped and will be losing his employment in September. There are 500K troops who are losing their jobs this fall.

Are you saying that the Army is firing 500,000 of its 560,000 personnel? A 90% cut?

There was a mayor of some city on Fox this morning who said that they will lose a minimum of $200K jobs if this happens. That is just one city.

Well, I guess republicans and democrats now agree that higher government spending is necessary for job creation.

We will be in as bad a shape with our military (maybe worse) than when Pres. Bush took office in 2001. Remember, Clinton reduced our military by 25%.

Our massive military budgets from the 1950s-1990s were justified by the Cold War with the Soviets. No Cold War, no massive budgets. Our military was way more than sufficient to cope with pre- and post-9/11 needs. Another 1,000 tanks or 500 bombers would not have prevented 9/11. Bush and Obama both have stupidly misused the military in long term occupations and counterinsurgencies rather than just punishing Al-Qaeda and the Taliban and then getting the hell out.

AngusMc on July 17, 2012 at 2:03 PM

Cutting government spending only eliminates inefficient, wasteful jobs

FloatingRock, I am going to assume that this is sarcasm?

Scott H on July 17, 2012 at 1:43 PM

Seriously, how can you possibly imagine that I’m being sarcastic? The government is extraordinarily wasteful and inefficient, don’t you think? Are you one of our left wing trolls that loves big-government, by any chance?

FloatingRock on July 17, 2012 at 2:12 PM

Because someone has to go first. Someone has to lead. You want it to be Grandma’s Social Security check first? Well, even if you do want that, it will be hard to sell that to Grandma.

And you want it to be little Billy’s dad, who is a soldier.

Try selling that to Billy.

BobMbx on July 17, 2012 at 2:17 PM

FloatingRock: Not in the least. However, the idea that ‘cutting government spending only eliminates inefficient, wasteful jobs’ is incredibly deluded.

Are you aware of exactly how the government determines which jobs get cut? It is, in almost all cases, one of seniority. So the engineer who has spent his entire 20-year career being political and not doing his job will keep his job before the highly conscientious engineer who has been doing his job well for only 5 years. This is true even though the 5-year engineer does his job much better than the 20-year engineer. This is an example that completely contradicts your statement.

(Generally, before the mandatory cuts based on seniority, the department will offer severence packages to those that want to leave. Those that opt to leave are generally your better employees, as those who are merely political and have worked the seniority system know, at some level, that they are unsuited to private-sector work.)

Scott H on July 17, 2012 at 2:18 PM

Fiscal sanity cuts is bad? Um, no.

This warmed over Keynesian BS is not worth of “my side.”

I hope Hot Gas isn’t going to start advocating that massive deficits are OK, as long as it’s Our Side doing the spending.

MNHawk on July 17, 2012 at 2:19 PM

There was a mayor of some city on Fox this morning who said that they will lose a minimum of $200K jobs if this happens. That is just one city.

There’s something I’m not getting. Is there some number of $200k/year jobs being lost (which would probably be a good thing for that city’s budget), or is it 200k jobs will be lost?

I gotta ask? Which city? Coruscant?

BobMbx on July 17, 2012 at 2:22 PM

I apologize to Scott H, I shouldn’t have assumed he is a left wing troll, there are plenty of people on the far-right that love big-gov too, unfortunately, otherwise they can’t create their police-state, nanny-state, warfare-state or their corporate/social welfare-state.

What the ruling class doesn’t want the people to realize is that if not for all the corruption of the American way by their cronies and special interests, our budget would already be in balance and we would not be engaging in generational theft to the tune of 16 trillion + inflation, destroying the future prosperity of young Americans.

FloatingRock on July 17, 2012 at 2:26 PM

And you want it to be little Billy’s dad, who is a soldier.

Try selling that to Billy.

BobMbx on July 17, 2012 at 2:17 PM

Sorry Billy. We can’t afford to pay for as many soldiers. Your dad will just have to find a private sector job. He is a capable individual. We need guys like your dad producing rather than defending, because we can’t pay soldiers without more people producing.

Kohath on July 17, 2012 at 2:29 PM

FloatingRock: You have no need to apologize to me, as you asked if I were a troll, rather than saying something and then appending, ‘you left-wing troll’.

However, neither am I a right-wing troll. I have already stated in this thread that I find the _specific_ arguments being made in the post to be rather anticonservative. However, that does not prevent me from noting also that the sequestration, as presented, is not, IMO, in the best interest of the country.

I would have no problem with it if I could deduce any sense of fairness in the apportionment of the sequestration. However, I can find no absolute or relative metric that reveals this sequestration as anything other than a punitive measure against a part of our government that is not primarily responsible for the fiscal position we are in. Therefore, I opposed the apportionment of cuts of this sequestration.

Scott H on July 17, 2012 at 2:32 PM

In short, I believe ‘leadership’ is explaining to Grandma that no matter what else happens in our budget, her Social Security has to get reduced or eliminated. It is not relying on schadenfreude to cushion the blow.

Scott H on July 17, 2012 at 1:59 PM

Sorry Grandma, we’re not even willing for Defense to be cut 10%. They’re more important than you. You just have to learn to do with less, so the Defense spenders don’t have to even think about doing with less. A 10% cut means we’ll get invaded … or something.

Kohath on July 17, 2012 at 2:38 PM

Defense shouldn’t be a sacred cow; it’s hypocritical. We spend way more than we need to and I’m sure there’s plenty we can trim without affecting true military readiness.

JDSX on July 17, 2012 at 2:47 PM

Sorry Billy. We can’t afford to pay for as many soldiers. Your dad will just have to find a private sector job. He is a capable individual. We need guys like your dad producing for rather than defending, because we can’t pay soldiers without more people producing.

Kohath on July 17, 2012 at 2:29 PM

Billy says:

But, there aren’t any jobs because the taxes are so high, and no one has any money to engage in commerce, which is the demand side of the economy, and that drives production, and that means jobs. More jobs means more tax revenue without raising existing rates or imposing new taxes, and that keeps Dad and Grandma funded.

Now, lets talk about the free loaders who don’t contribute to society in anyway……

There are lots of Billys, and Billy is smarter than you think.

BobMbx on July 17, 2012 at 2:49 PM

Kohath: Damned straight I’m not willing to cut Defense by 10% when we cut entitlements by less than 1%. Defense isn’t the problem; Entlements are.

Scott H on July 17, 2012 at 2:55 PM

JDSX: Nothing should be a sacred cow, and as such cutting over 9% of the Defense budget while cutting less than 1% of the Entitlements budget is more the issue here.

I think people calling for the (comparative) gutting of the Defense budget when the Defense budget isn’t what is causing our fiscal problems right now are quite hypocritical when those others aren’t willing to discuss the real fiscal issue (entitlements).

Scott H on July 17, 2012 at 2:59 PM

Billy says: … Now, lets talk about the free loaders who don’t contribute to society in anyway……

Let’s talk about them too, Billy. They say exactly the same thing about their government checks as you say about your dad’s. But there’s not enough money for all the checks any more. How do you propose we convince them that “we win, you lose” is the policy we should all agree on?

Hurry up and convince them Billy. Your dad’s military paychecks will stop coming in a few years anyway, when the country is bankrupt. What’s your great argument? Billy? Hello?

Kohath on July 17, 2012 at 3:03 PM

Kohath: Damned straight I’m not willing to cut Defense by 10% when we cut entitlements by less than 1%. Defense isn’t the problem; Entlements are.

Scott H on July 17, 2012 at 2:55 PM

So let’s all play “you go first”, “no, YOU go first”. For a few more years. Until the end. Great plan.

Kohath on July 17, 2012 at 3:06 PM

How’s it feel to be yoked to your fellow citizen like a barnyard animal?

ISN’T COLLECTIVISM GREAT?

Good Lt on July 17, 2012 at 3:20 PM

But the Democrats think this is an election winner for them!!!!!!!!!!!!!

bflat879 on July 17, 2012 at 3:23 PM

Would prefer the massive cuts to raising taxes. Please do not cave, Republicans.

casuist on July 17, 2012 at 3:28 PM

Well, I guess republicans and democrats now agree that higher government spending is necessary for job creation.

AngusMc on July 17, 2012 at 2:03 PM

How about instead of not cutting defense, we cut the $1 Trillion dollars a year in stimulus spending we’re still doing because the CBO rolled it into the baseline and the Senate Democrats refuse to even let a budget come to the floor to fix this mess? The continuing resolutions just say “Spend what we did in 2009 on what we spent it on in 2009!” with that stimulus a slush fund for Obama.

Jobs funded by massive government spending would be lost, yes, but they already come at too high a price. A $50,000 a year government job costs the private sector $80,000.

The GAO found massive duplication in the government. We could save more than the tax increases on the wealthy would generate by just consolidating that.

Yes, cuts will be painful, cost the jobs of people on government contracts, hurt people on the dole. But we’ve been avoiding small pain for so long that the huge pain is coming. Reform entitlements, cut duplication and waste even in the Pentagon, slash regulations and let the people go that have been hired to enforce them and create an economy where all those people let go can find jobs, start businesses and get on with life!

PastorJon on July 17, 2012 at 3:40 PM

Well, I guess republicans and democrats now agree that higher government spending is necessary for job creation.

AngusMc on July 17, 2012 at 2:03 PM

And I object to the word “necessary”. No, government spending is not “necessary” for job creation. But people are hired on government contracts and at government agencies. We would be better served leaving that money in the private sector for private companies to create those jobs.

PastorJon on July 17, 2012 at 3:42 PM

I think 9% unemployment is a pretty rosy estimate actually. The cascade effect will probably end up bringing unemployment (the way they calculate it now) up to more like 10.5 to 11%.

That’s NOT counting under-employed, people who’ve given up, etc.

This isn’t the way to fix the budget problems at all. It’s pretty stupid actually. I’d go over the many things that can be done to remedy this, but common sense to liberals is like eating cinder blocks with battery acid coatings. Not gonna happen.

Get rid of the socialist pig liberal progressives and we have a chance.

Wolfmoon on July 17, 2012 at 3:45 PM

Doesn’t matter, if unemployment goes up they’ll just blame Republicans and the media will help them.

Wagthatdog on July 17, 2012 at 4:12 PM

Let’s talk about them too, Billy. They say exactly the same thing about their government checks as you say about your dad’s. But there’s not enough money for all the checks any more. How do you propose we convince them that “we win, you lose” is the policy we should all agree on?

Hurry up and convince them Billy. Your dad’s military paychecks will stop coming in a few years anyway, when the country is bankrupt. What’s your great argument? Billy? Hello?

Kohath on July 17, 2012 at 3:03 PM

The difference being Billy’s dad in the military, or as a defense contractor is actually contributing something of value to society. What are contributions to society by the freeloaders who sit on their butts all day collecting handouts?

There is waste in the military that could be cut – like all the pork spending that politicians force on DoD for things the military doesn’t even want or need. But if we need to make a choice about giving an earned paycheck to a worker vs a handout to a freeloader doing nothing – I’ll cut the freeloader entitlements.

dentarthurdent on July 17, 2012 at 4:54 PM

But if we need to make a choice about giving an earned paycheck to a worker vs a handout to a freeloader doing nothing – I’ll cut the freeloader entitlements.

dentarthurdent on July 17, 2012 at 4:54 PM

We don’t need to choose. We need to cut both of them.

Kohath on July 17, 2012 at 6:03 PM

500K of the entire military force, not just the Army.

That’s approximately 35% of the entire armed forces of the United States. You are saying that 35% of our military has been fired? Sorry, but you are going to have to provide a link to that.

AngusMc on July 17, 2012 at 6:09 PM

My opinion is let the axe fall, the F-22 fighter jet program’s price tag alone was revealed to be $1 trillion. So our nation is going to be invaded if half of a fighter jet’s program is slashed? ($492 billion)

To me, a lot of these defense contractors are no different than Solyndra. It’s not free market capitalism, it’s shady, pay for play crony capitalism under the guise of national security.

I don’t why we as conservatives are expected to turn a blind eye to government waste when it involves the Pentagon.

BradTank on July 17, 2012 at 1:02 PM

1. The F-22 has already been terminated. You’re talking about the F-35.

2. The $1 trillion figure is a 55 year total program cost, including all production and maintenance costs. The number is in dispute due to various dubious assumptions being made.

3. The approximate cost of maintaining legacy fighters (and the cost of producing a limited number of new F-16′s and F-18′s) over that same timeframe if F-35 is cancelled: approximately $4 trillion.

Moose Drool on July 17, 2012 at 8:24 PM

I swear it’s true, i worked somewhere that next years budget was never as much as this years budget, and I cut every year, and I called people on the phone and said can you do without this, what do YOU think you could do without? and sometimes they got to choose.

Actually my darling boss said I should not do what everyone does and make a lot of dramatic cuts to things people still wanted, no psychodrama, she said we would cut what no one sees and no one wants.

Send the pentagon budget around to my house, i will mark it up and send it back. No preconceived RULES: I get to make them up as I go along. I will need the freedom to make new deals over the phone, to get more for our money. Ok.

Fleuries on July 17, 2012 at 10:58 PM

Wait, wait – I thought that as conservatives we *wanted* the government to cut spending. Don’t we?

Don’t we also argue that government spending doesn’t help employment (eg: stimulus not creating jobs – remember that?). So why does the government cutting back on spending suddenly cost gazillions of jobs? Isn’t the argument that government reducing spending would have a *positive* impact on the economy? Yet… this bit suggests that it will have a *negative* impact on the economy – and you agree?

When did HA become a proponent of Keynesian economics?

I get and share the concern regarding defense spending, and yet… most of the reasoning here seems to run counter to conservative thinking regarding government spending and its effects on the economy, jobs, etc…

Midas on July 18, 2012 at 1:20 AM

Are these the same ‘expert economists’ that claimed that the Obama stimulus would create millions of jobs and have unemployment at ~5% this very day?

I do not believe ANY of the employment losses.

What scare mongers constantly do when presenting their BS is to pretend that EVERYTHING is done in a STATIC environment while they know this is NOT what happens in the real world.

For a perfect example of useless scare mongering ‘the sky is going to fall’ BS look at the employment picture in Wisconsin. NONE of the ‘expert economists’ have apologized for presenting their total pack of lies.

So far the only issue I have seen is the ABJECT FAILURE of Leon Paneta to put forward ANY plan for dealing with the smaller increases that what he originally asked for. Paneta has FAILED in his duty to this country.

Freddy on July 18, 2012 at 3:20 AM

When did HA become a proponent of Keynesian economics?

I get and share the concern regarding defense spending, and yet… most of the reasoning here seems to run counter to conservative thinking regarding government spending and its effects on the economy, jobs, etc…

Midas on July 18, 2012 at 1:20 AM

Guess it depends on whether folks are anarcho-Capitalists or if they are merely for reduced government.

We tried anarcho-Capitalism in this country. What we ended up with were unions (and thus a foothold for Socialists), monopolies, and the Federal Reserve Board. Not to mention the slums, child labor, sweatshops, thousands losing their farms to the banks and so on.

We’ve also tried “big government”. I still think that some things like the TVA, the CCC and the GI Bill were good for America. Can’t see much positive from the Great Society measures, though.

From what I’ve seen elsewhere, many Conservatives and Libertarians don’t blame just big government for our economic problems but also big businesses and major banks-more along the lines of the intertwining of corrupt government with these powerful concerns.

We’ve run into this arrangement on other threads at HA. Is a company that uses government to rip us off any better than just the government itself ripping us off? Oh, but then we tag those companies with the “crony” label and it’s OK.

I maintain that if a company is to make money, then they’re going to any way they can. They don’t sit around and have philosophical arguments about the writings of Keynes or Adam Smith.

How many business people out there would turn down a chance at a big contract with the federal, state or local government because of economic ideology?

Private enterprise will not and cannot do all the things we expect to have in modern society, because it is not their concern or beyond their capabilities. The governments at the various levels are supposed to step in and fill these gaps.

Our Forefathers didn’t like being run by the East India Company anymore than they liked being run by a heavy-handed monarch and a corrupt parliament. They weren’t against central government nor against industry, but sought a balance between the two that at the same time guaranteed individual rights.

Dr. ZhivBlago on July 18, 2012 at 9:10 AM

Does anyone remember how we won the cold war? It has now been turned against us to great effect, by our own leaders. It will end badly for us if not addressed.

aceinstall on July 18, 2012 at 11:59 AM

Yes indeed. The defense cuts are going to be significant. The military organization I was just recently working at takes a 75% personnel cut as of 20 September… Other military organizations are not taking cuts that severe (but still substantial), but in addition to the personnel cuts, a large number of the remaining personnel will take a pay cut of approximately 20%. It’s all going to impact the Army town right off the base, restaurants are going to get hit, stores… they’re still building houses like gangbusters out here – but who’s going to buy them at the prices they want? and a lot of the contractors will leave instead of staying with that kind of pay cut.

Should be interesting to see how the cuts are reported, because this is going to be a pretty big spike in unemployment.

John_G on July 18, 2012 at 1:10 PM

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