Indiscriminate cuts likely to lead to job losses: what the fiscal cliff means part 3

Greg R. Lawson Dec 28, 2012

The “Fiscal Cliff” is rapidly approaching. We have already discussed how this combination of tax increases and indiscriminate Federal spending cuts will cost Ohioans more, potentially handicap our national defense, all while failing to address the main driver of our increasing national debt:–entitlement spending. Additionally, make no mistake: indiscriminate cuts to Defense will also cost Ohioans jobs.

Defense spending should not be viewed as a “jobs program” or through any other type of Keynesian lens. Yet, as articulated in Part 2 of our series on the “Fiscal Cliff,” it is important to understand that Defense is, arguably, the most important function with which the Federal government is tasked. It is also explicitly referred to by the Constitution. Consequently, while the unbalanced cutting that targets Defense should be viewed primarily through the prism of how it will impact our overall security, it should be noted that there are many jobs in Ohio that will be impacted as well.

The exact number of jobs losses that can be expected due to Defense cuts as part of “sequestration” is practically impossible to nail down with certitude. Despite this, numerous efforts at some quantification have been attempted.

A study done for the Aerospace Industries Association estimated that Ohio could see a loss of 18.4 thousand jobs with a resulting $1.6 billion hit to the Gross State Product as a result of Defense cuts. This particular study understates the total number of likely job losses as it only took into account those in the aerospace industry in Ohio. Other industries such as those affiliated with the Joint Systems Manufacturing Center, popularly known as the Lima Army Tank Plant, or Battelle in Columbus were not included in the study.

Meanwhile, the Center for Security Policy (CSP) also attempted to put some numbers on paper. It used 2011 data regarding the dollar amounts for a variety of Defense related contracts as a baseline to approximate the cuts Ohio businesses could anticipate.

Overall, CSP estimated that Ohio businesses would stand to lose over $1.1 billion. You can view a dollar breakdown of the cuts by county here, by city here and by type of business here.

Obviously, substantial revenue losses translate into either hiring freezes (at best) or, more likely, less jobs.

The point here is not to argue that Defense cuts should be off the table. If the U.S. is ever to begin getting its domestic fiscal house in order, there can be no area of the budget that are sacrosanct. However, Defense, unlike entitlement spending, is a core function of government. A scalpel approach to Defense makes a great deal of sense, using a meat cleaver does not.

The tragedy of the present situation is that we now face a crisis bequeathed to us by politicians that were unable to make tough decisions earlier.

National tax policy reasonably could have been addressed years ago and resulted in a more fair and competitive tax code. It was not. Intelligent, not haphazard, spending cuts could have been implemented years ago that would put us on a more sustainable path. They were not. Now, we face a crisis that could result in millions of Ohioans taking home less in their wallets for a day’s work thanks to increased taxes which are set to be hiked in order to pay for unsustainable government spending. All the while, they will also be watching careless cuts to core government functions take place that will lead to unnecessary job losses and gaps in security.

We need a rational policy in D.C. that keeps us from going over the “Cliff” and puts us back on a path to security, sustainability and prosperity.