Potential cutbacks put defense jobs under the gun

By Kevin Miller

The Portland Press Herald

WASHINGTON – They’ve been called devastating, disastrous and, most recently, labeled by the White House as “bad policy” that was never intended to be implemented.

But with the political world focused on the upcoming elections, little is being done in Washington, D.C., to avert the first round of massive federal spending cuts that could affect thousands of jobs in Maine and millions more across the country.

The inaction and uncertainty have turned the cuts into fodder for political campaigns, including in Maine.

The White House released a report Sept. 14 on how the Obama administration would implement the across-the-board budget cuts – known as “sequestration” – if Democrats and Republicans fail to figure out a compromise, before year’s end, on reducing the federal deficit. Congress left Washington last week and is not due to return until after the November elections.

The White House report does not list individual programs or contracts, providing instead a large-scale view of the potential cuts. But even the general figures offer a sense of the scope of the reductions in areas of the federal budget important to Maine.

In fiscal year 2013, those nationwide cuts would include:

• A $2.1 billion reduction in Navy shipbuilding and conversion, a budget item that directly supports more than 5,000 jobs at Bath Iron Works, 4,700 civilians at the Portsmouth Naval Shipyard in Kittery and thousands more indirectly.

• A $285 million reduction in the Low Income Home Energy Assistance Program, or LIHEAP, which Maine and other New England states depend on to help poor residents heat their homes.

• A $712 million reduction in U.S. Customs and Border Protection, which would affect jobs along Maine’s border with Canada.

• A nearly $400 million reduction in non-defense budgets in the Coast Guard, which has operations in South Portland, Southwest Harbor and other Maine ports.

• A $148 million reduction in energy-efficiency and renewable-energy programs.

The threat of indiscriminate, across-the-board cuts was supposed to provide Congress – and the White House – with the incentive to come up with an alternate plan for addressing the deficit. But a “supercommittee” failed to reach a compromise and Congress has yet to act, although leaders on both sides of the aisle have suggested that steps will be taken before January.

Sen. Olympia Snowe, R-Maine, called the situation yet another example of partisan gridlock and said the Navy cuts in particular could have serious consequences for Maine.

“Cuts of such magnitude would likely force our Navy to eliminate plans to purchase at least one ship or submarine in FY 2013, a decision that would have long-term consequences on our nation’s naval capabilities and could harm vital components of our industrial base such as Bath Iron Works and Kittery-Portsmouth Naval Shipyard,” Snowe said in a written statement.

In July, the CEO of General Dynamics, which operates BIW, warned in a letter to members of Congress that “the uncertainty surrounding the ultimate nature of sequestration is already affecting our investment and hiring activities and this will accelerate as the months pass.” Jay Johnson added that the toll this uncertainty would have on General Dynamics’ employees and suppliers “should not be underestimated.”

Last week, General Dynamics spokesman Rob Doolittle said not much had changed since July. “We really don’t have much new information,” Doolittle said.

The uncertainty has led to wildly speculative predictions on how many jobs could be lost nationwide and in each state if across-the-board cuts were allowed to kick in.

Earlier this summer, an analysis produced for the Aerospace Industries Association predicted that Maine could lose more than 4,200 defense-related jobs and 3,000 non-defense jobs under sequestration. Nationwide, job losses could top 2 million, according to study author Stephen Fuller of George Mason University.

Another report by the Center for Security Policy and the Coalition for the Common Defense – two pro-defense organizations – cited the potential for nearly 5,800 job losses in Maine and $239 million in lost earnings.

Some critics have suggested such reports are overly pessimistic given the degree of uncertainty. Other observers, meanwhile, have discounted the predictions of mass layoffs beginning next year.

Todd Harrison, a senior fellow at the nonpartisan Center for Strategic and Budgetary Assessments, wrote last month that while the amount of money flowing to defense contractors would decline, the full impacts of sequestration would not be felt for three or four years. That would give defense firms time to prepare and adjust, whether through early retirements or other actions.

“Few immediate layoffs, if any, are likely to occur as a result of sequestration going into effect on January 2nd because on January 3rd virtually all contractors will be working on projects and activities where funding has already been obligated and thus is not subject to sequestration,” Harrison wrote in an analysis. “The defense industry will be forced to downsize and employment in defense companies will decline if sequestration occurs, but this downsizing will happen gradually over the months and years that follow as outlays decline.”

Civilian employees of the Department of Defense would be less fortunate, however, and could face layoffs beginning early next year due to the nature of the federal budget, he wrote.

The prospect of layoffs and other impacts is drawing the attention of political candidates, including those in the race for the Maine Senate seat being vacated by Snowe.

On Tuesday, Republican Senate candidate Charlie Summers toured D&G Machine, a 130-employee manufacturing and tooling company in Westbrook that supplies parts for Navy cruisers and Army combat vehicles as well as to non-defense firms. Summers used the visit as an opportunity to address the defense cuts and looming fiscal cliff.

“The (Obama) administration’s recent report underscored the devastating effect to our national security these defense cuts will have, but today I saw firsthand what the real impact could be for Mainers who work at D&G, or places like Bath Iron Works or Pratt & Whitney,” Summers said in a statement afterward. “Both Congress and the administration need to step up to the plate and lead on this issue to avoid the dual threat these cuts pose to our nation’s security and economic recovery.”

Former Maine Gov. Angus King, who is running for Snowe’s seat as an independent, called sequestration “the most avoidable financial crisis in history” and added that the situation was “created by Congress’ almost complete inability to do its job.”

“This is the reason that I’m running,” said King, who has yet to declare which party he would caucus with, if elected. “We have serious problems facing our country but rather than solve them Congress is unable to work together.”

King said in an interview that he supports the recommendations of an earlier deficit reduction committee – known as the Simpson-Bowles Commission – that endorsed a mix of spending cuts, new revenue and changes to the tax code and entitlements. Erskine Bowles, the commission co-chair and a former chief of staff to President Clinton, recently endorsed King.

Democratic candidate Cynthia Dill also cited the inaction as proof of much-needed changes to the “old boys’ network” in Washington.

“Until the face of the U.S. Senate better reflects the general population, the decision making won’t change,” Dill said in a statement late Saturday night. “There are more than 950 Maine-based companies that could lose valuable work if the sequestration agreement is not fixed adn that means our neighbors will lose their jobs, and their communities will suffer.”

Snowe, meanwhile, said last week’s news that the rating agency Egan Jones was downgrading the U.S. sovereign rating and threats that Moody’s might do the same should be a call to action to avoid the “fiscal cliff.”

“It’s time for us to roll up our sleeves and get to work, before our nation teeters off the brink,” Snowe said.

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