By PHILIP EWING | 9/10/12 5:00 PM EDT
Major defense contractors have confirmed they’ll send tens of thousands of employee layoff warnings shortly before Election Day, according to correspondence released Monday by Arizona Sen. John McCain.
McCain, the top Republican on the Senate Armed Services Committee, wants to jump-start congressional action to avert automatic, across-the-board budget restrictions set to take effect early next year. Hawks and defense vendors hope the threat of mass layoff warnings in late October will light a fire under a deadlocked Congress. Already, they point out the mere threat of the year-end “sequester” is hurting the defense industry and the broader national economy.
“The looming threat of sequestration cuts is forcing companies to delay hiring and capital investments, which, in turn, contributes to the sluggishness of the economy and continuing high unemployment rates,” McCain said in a statement.
Under the terms of last year’s deal to raise the U.S. debt ceiling, Congress mandated that $500 billion in defense budget growth over the coming decade automatically would be “sequestered” starting on Jan. 2. Lawmakers, industry leaders and Pentagon officials all have said those cuts must be undone, but Democrats and Republicans have been deadlocked over how to resolve the standoff.
The defense industry’s latest attempt to break the logjam is to argue that sequestration would mean a major dip in its cash flow and therefore constitute a threat to jobs. That threat triggers a labor law that obliges companies to warn workers they could be laid off, officials argue. Industry leaders and congressional hawks hope members of Congress across the board will be so leery of layoff notices shortly before the election that they will resolve sequester.
To that end, McCain’s office released letters from the CEOs of thirteen major defense vendors, of which three said they already know they’ll send the warnings: Lockheed Martin, the world’s biggest defense contractor; EADS North America and BAE Systems. Several others left open the possibility, including Raytheon, General Dynamics, SAIC and Northrop Grumman. Other CEOs said they didn’t expect they would need to issue layoff warnings, or that they wouldn’t issue them unless the Defense Department specifically terminated or restructured their existing contracts.
Each CEO complained about the uncertainty caused by the potential cuts, and each reinforced industry leaders’ longstanding warnings about the dangers of sequestration, citing studies that have found it could cost millions of jobs and put the U.S. economy into recession.
“Should sequestration occur, I believe it will have a devastating impact on our company and the defense industry,” wrote Lockheed CEO Robert Stevens. “It will undoubtedly lead to facility closures and significant job loss. It will disrupt our advanced manufacturing operations, erode our engineering expertise and capability and accelerate the loss of critical skills and knowledge.”
Still, even with McCain’s release of the CEO letters on Monday, few observers expect Congress to resolve sequestration before the Nov. 6 election, and it may not even agree on an answer this year.
SOURCE: POLITICO
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