Monday, September 26, 2011

DoD Cuts could increase Jobless Rate by 1%

Our lawmakers are trying to get spending and the deficit under control but the way they are going about it may have some unpleasant unforeseen consequences. Defense Secretary Leon Panetta has warned Congress that if they fail to agree on debt-ceiling talks and trigger $1 trillion in Pentagon budget cuts, they could add 1 percentage point to the U.S. jobless rate.

Under the current deficit-reduction plan, the Pentagon must slash more than $400 billion in defense spending over the next decade. In addition to that, the newly created deficit-cutting super-committee has until Nov. 23 to reach a consensus on budget cuts. If the committee members can't agree, or if Congress rejects its plan (which is entirely possible), automatic cuts of $1.2 trillion would hit the government accounts, with half coming from defense spending.

The trillion dollar total would force spending reductions that likely would necessitate shrinking the size of the Army, Air Force and Marine Corps to the smallest numbers in decades and also lead to the smallest Navy in nearly 100 years.

"We would break faith with those in uniform who are serving. At a time of war, that's unacceptable," one of Panetta’s assistants told reporters.

According to a new Pentagon analysis, the defense industrial base provides 3.8 million private-sector jobs. The 1 percentage point increase in the unemployment rate would include government, military and private-sector jobs. The current national unemployment rate is already 9.1 percent.

Defense officials have argued repeatedly that triggering the automatic spending reductions would mean slashing military programs based on arithmetic rather than on sound national security strategy. Panetta and his predecessor, Robert Gates, have insisted that government leaders and lawmakers must decide what they want their military to be able to do, and then cut the budget accordingly, rather than take a percentage off all the accounts.

Defense spending has nearly doubled since the Sept. 11, 2001, terror attacks to more than $500 billion. That spending is separate from the $1 trillion-plus for the wars in Iraq and Afghanistan in the past decade.

Pentagon officials have said the initial cut of $400 billion or more will be tough but manageable, but adding another $600 billion "is a red line that this government should not cross."

Live Long and Prosper....

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