Thu, December 01, 2011
Now that the Congressional Super-Committee’s attempts to produce deficit cuts have failed, the Budget Control Act calls for specific budget cuts that commence in January 2013. If this actually comes to pass, the resulting defense-related cuts would have a significant impact in Massachusetts and elsewhere.
According to the Center on Budget and Policy Priorities, the Budget Control Act calls automatic defense cuts of $54.7 billion annually, with an equal amount in non-defense cuts.
A report from the Center for Regional Analysis at George Mason University released in October provides a glimpse at the economic impact of the projected defense cuts. Among other things, the study projects that military equipment purchase cuts of $45 billion will cause more than 1 million job losses nationwide when the loss of related non-defense jobs is added in.
Of particular interest in the Bay State: the report predicts that 38,000 jobs will be lost due to the significant amount of military contracting in the Commonwealth. Only Florida, Texas, Virginia, and California are expected to suffer larger job losses than Massachusetts. A recent article in the Boston Business Journal indicates that Budget Control Act cuts would be estimated to reduce Raytheon Corporation’s revenues by $1.2 billion.
The expected economic impact of defense spending cuts will give support to Congressional voices now calling for reneging on the spending cuts originally dictated by the Budget Control Act. It’s too early to say whether Congress will actually buckle on plans to reduce the budget deficit, but there will be strong temptations to avoid any measures likely to result in job losses in the midst of a still-weak economy.