The impact on Nevada’s economy and employment will be staggering if Congress and President Barack Obama can’t agree on a deficit reduction plan by January.
Failure to reach a pact to avoid across-the-board cuts, or sequestration, would trigger funding cuts split equally between national security and non-security government programs. That means the Department of Defense would be forced to lop an additional $500 billion from its expense accounts during the next 10 years.
Rep. Joe Heck, R-Nev., a member of the House Armed Services Committee, fears the worst because of the prominent role defense programs play in Nevada’s economy with key installations as Nellis and Creech Air Force bases, Fallon Naval Air Station and Hawthorne Army Depot.
“We’ve got to rein in our spending and bring spending under control, but sequestration will undermine the military’s ability to protect our nation,” Heck said Friday.
The direct effect on active-duty facilities and the ripple effect for defense contractors in Nevada that support military operations would cripple an already weak economy, he said.
A recent study by a conservative defense think tank, the Center for Security Policy, shows 1,672 active-duty military personnel could lose their jobs with 580 civilian Defense Department workers under the mandatory cuts.
Given that Nevada defense contractors earned more than $1.33 billion in 2011, defense cuts as high as 18 percent under sequestration would mean contractor revenue losses of more than $239 million per year starting in 2013.
The ripple effect, as Heck described it, would translate to 6,247 job losses, or a $285 million decrease in the gross state product, and $236 million in annual lost earnings, according to the Center for Security Policy.
The center’s report shows Clark County’s annual revenue would fall by $28.5 million under a 9 percent defense programs cutback from 2013 to 2021 or by $57.1 million under an 18 percent sequestration reduction.
“Defense is already taking a $487 billion cut over the next 10 years, and that’s without sequestration,” Heck said, noting that Defense Secretary Leon Panetta “has said we can handle the $487 billion but sequestration would undermine the military.”
Heck said that after 10 years of defense cuts, the United States would have the smallest ground force since 1940, the smallest number of ships since the onset of World War I and the smallest Air Force since 1948.
He said contractors who support the Nevada National Security Site, formerly the Nevada Test Site, and the Nevada Test and Training Range would be affected too.
“Certainly there is going to be a hit. We are looking at thousands of jobs lost in Nevada, whether it’s from the ranks of the active-duty personnel living in the community and driving the economy, Department of Defense employees, or the ripple effect,” he said.
Heck said defense contractors have started slowing growth and have stopped hiring because they must give 60 days notice for layoffs. That means that if January triggers cuts under sequestration, defense contractors would have to give out thousands of anticipated layoff notices to employees in October.
To avoid sequestration, he voted in favor of the Sequester Replacement Reconciliation Act of 2012, which passed the House by a 218-199 vote on May 10.
A month before the House vote, Sen. Harry Reid, D-Nev., the Senate majority leader, spoke on the Senate floor criticizing Republican attempts to go back on the sequestration budget agreement.
“In the House, Republican efforts are under way to undo a hard-fought August agreement to cut more than $2 trillion from the deficit over the next decade,” Reid said on May 9.
“They reflect fundamentally skewed priorities. They hand out even more tax breaks to multimillionaires and shield corporate defense contractors, all at the expense of hardworking, middle-class families, the elderly and those in greatest need,” he said.
Contact reporter Keith Rogers at firstname.lastname@example.org or 702-383-0308.