Execs: Sequester is a big jobs killer

Execs: Sequester is a big jobs killer

Defense-industry executives warned a House panel on Wednesday the nation will lose hundreds of thousands of jobs if Congress does not stop $500 billion in automatic cuts to the Pentagon. 

The executives, from Lockheed Martin, EADS North America and Pratt & Whitney, told House Armed Services Committee members that layoff notices could be sent out as early as November, two months before cuts begin in January. 

Lockheed Martin CEO Bob Stevens said his firm alone stands to lose 10,000 employees if the cuts go into effect as planned. 

The warning came the same day the House approved legislation requiring the Obama administration to provide details on how it would handle the cuts.

The bill, sponsored by House Republican Conference Chairman Jeb Hensarling (Texas), enjoyed broad support from both parties and passed easily on a 414-2 vote. The two “no” votes came from Democratic New York Reps. Eliot Engel and Maurice Hinchey.

The GOP-backed bill also would put pressure on the Obama administration and Democrats to redesign the sequester to spare the Defense Department from cuts.

The Senate has already approved similar legislation, meaning both chambers have called for President Obama’s budget office to show exactly how it would implement the first $55 billion cut to the Pentagon’s budget in 2013.

This will increase pressure on the administration to be forthcoming, but because the House and Senate approved different bills, the Office of Management and Budget is under no legal obligation to explain how it would move forward with the cuts. 

Congressional Republicans, Democrats and the White House all say they would like to avoid the mandatory defense cuts. The cuts are a part of the sequestration agreed to when Congress approved a hike in the debt ceiling last summer. The deal would also impose $600 billion in cuts to domestic discretionary spending starting in 2013.

Democrats and Obama have demanded that Republicans agree to raise some taxes as part of a deficit-cutting plan that could replace the sequester. A handful of Republicans have expressed a willingness to look at tax loopholes, but most will not agree to tax hikes as part of a deal. 

Only one of the three defense executives testifying on Wednesday endorsed raising taxes to replace the defense cuts. 

Pratt & Whitney President David Hess said “everything,” including tax hikes, should be on the table to stop the cuts. 

“I think everything has to be on the table now,” Hess said in response to Rep. Robert Andrews’s (D-N.J.) question on whether tax increases needed to be part of a sequestration alternative. 

Stevens and EADS North America CEO Sean O’Keefe did not endorse the possibility of tax hikes, which drew a rebuke from Rep. Adam SmithDavid (Adam) Adam SmithOvernight Defense: Latest on scrapped Korea summit | North Korea still open to talks | Pentagon says no change in military posture | House passes 6B defense bill | Senate version advances House easily passes 7B defense authorization bill Overnight Defense: Over 500 amendments proposed for defense bill | Measures address transgender troops, Yemen war | Trump taps acting VA chief as permanent secretary MORE (D-Wash.), the House Armed Services Committee’s ranking member. 

He chastised the defense industry chiefs for fanning the partisan flames over sequestration, while refusing to support any possible sequestration solution.

Despite the devastating effect sequestration will have on the industry, defense executives “refuse to move the needle at all on a solution to that problem,” Smith said. 

When Congress proposes tax increases or deeper cuts to social welfare programs to stave off defense cuts, “you … take steps that systematically kick our legs out from under us as we try to deal with it,” he said. 

“That attitude ... is the No. 1 problem” facing Congress in terms of getting a sequestration deal done, Smith said. “Everybody protects their own piece.”

Armed Services Chairman Rep. Buck McKeon (R-Calif.) praised Wednesday’s bipartisan vote for signaling the need to avoid the sequester. But he also put the blame for the lack of a deal squarely on the White House’s shoulders, saying the administration has provided no guidance to Congress or the defense industry on how to deal with the looming cuts under sequestration. 

“My fear is that [White House] guidance will come much too late,” said McKeon, who argued industry executives learned little from a June meeting on sequestration with Defense Secretary Leon Panetta. 

Stevens, the Lockheed chief, took his own shot at the administration, saying the defense cuts under sequestration did not jibe with the Pentagon’s plans for supporting Afghan troops after U.S. soldiers leave Afghanistan. 

“The president and secretary of Defense have spoken extensively about those [postwar] requirements,” Stevens said. “Sequestration does not align with any of them.”

That lack of White House guidance has forced industry executives to plan for the worst, setting the entire industry up for “endless argument, litigation and gridlock,” O’Keefe said. 

White House press secretary Jay Carney put the blame on Congress, saying it was the responsibility of lawmakers to work on sequestration. 

“If Congress doesn’t do that now, it must do that after the election ... the alternative is to ignore the problem that’s easily fixable,” Carney said Wednesday. 

— Pete Kasperowicz contributed to this report.