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LAEDC: Cuts would cripple local defense firms

Economic development group asks Congress to act before automatic budget cuts take effect

Posted: August 10, 2012 2:00 a.m.
Updated: August 10, 2012 2:00 a.m.

In this June 1 photo, the new Boeing Phantom Eye unmanned drone, designed to stay airborne for days, takes off on its first autonomous flight at Edwards Air Force Base.

In response to potentially disastrous cuts to defense spending, the Los Angeles County Economic Development Corp. announced Thursday it has formed a strike team — the L.A. Jobs Defense Council — to urge Congress to act in the face of looming cuts set to take effect in January 2013.

The failure of the supercommittee to agree on a budget deficit reduction plan last year allows the 2011 Budget Control Act to kick in automatically come January. Nearly one-half trillion dollars, or $487 billion, in defense cuts are already agreed upon.

The automatic cuts, referred to as “sequestration,” will translate to another round of automatic defense spending cuts, totaling $500 billion, if members of Congress cannot come to a bipartisan solution.

In a statement, the County Economic Development Corp. asked members of Congress to set aside their differences and political motivations to find budget solutions that will ward off the cuts.

The County Economic Development Corp. also said its strike team will look for “locally driven strategies to help mitigate the most devastating impacts faced by residents and communities” should the automatic cuts be implemented.

Failing to reach a compromise and resolve the budget deficit issues would be an absolute disaster for the already struggling California and Los Angeles County economies, the statement said.

“From an industry perspective, because of the specter of sequestration, the near-term horizon is completely obscured by a fog of uncertainty,” Robert Stevens, CEO of Lockheed Martin, said in his testimony before the House Armed Services Committee in mid-July.

With just 167 days remaining until the automatic budget cuts are triggered, the defense industry has little insight into how the cuts will be implemented, no insight into which programs will be curtailed, which sites will be closed, which technologies will be discontinued or which contracts will be reformed, Stevens said.

“Already we are seeing a slowdown in new hires,” said Congressman Howard ‘Buck’ McKeon, R-Santa Clarita. “Troops who have fought for their country for the past decade are being told their service is no longer needed. Our enemies are becoming emboldened.”

The northern region of the county is the center of the most innovative and skilled workforce employed by the defense contractors in design, testing and production of equipment used by the armed services, said Norm Hickling, senior deputy to L.A. County Supervisor Mike Antonovich.

“We cannot allow this industry to be dismantled,” Antonovich said. “We look forward to working with our region stakeholders in the important effort.”

In a recent study, the Aerospace Industries Association noted the sequestration cuts will affect all areas of the economy, not just defense if the cuts go into effect.

The trade association estimated that 2.14 million American jobs could be lost, the nation’s GDP will be reduced by $215 billion; and the personal earnings of the workforce will be decreased $109.4 billion — striking another blow at an economy struggling to recover.

The study outlined the impact in all 50 states and found that the largest potential job losses will potentially come from California, Virginia and Texas.

The County Economic Development Corp. projects about 18,000 Northrop Grumman and 11,000 Boeing jobs in L.A. County could be lost, with some estimates placing the county’s potential for lost defense-related contract revenue at $2 billion.

Statewide, the automatic cuts could result in the loss of 135,000 private-sector jobs and $11.7 billion in gross state product from defense-related cuts alone if Congress fails to come together, the County Economic Development Corp. said in its statement.

“Unless our leaders in Washington take action, massive cuts have the potential to devastate our economy,” said Marion C. Blakey, AIA president and CEO. “In addition, more than 1 million defense-dependent jobs on the line will risk our national security, economy and the technological innovation that keeps America Second to None.”



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