Study: Contractors Exaggerate Job Loss From Defense Budget Cuts

Flickr user afagen

Private industry’s warnings that automatic defense cuts under sequestration would cost more than 1 million jobs are exaggerated, according to a new study by a national security think tank.

"Despite claims made by defense contractor funded reports, the Pentagon is not a jobs program,” said William Hartung, director of the Arms and Security Project at the Center for International Policy. “Pentagon spending is a drag on the economy, not a spur to economic growth.”

The center’s report, called “Minimum Returns: The Economic Impacts of Pentagon Spending,” offers quantitative, state-by-state analysis intended to counter arguments from groups such as the Aerospace Industries Association that defense cuts will harm local economies.

The left-leaning group also argues that a well-planned drawdown in defense spending will not harm national security. "Now is the time to get serious about developing a forward-looking defense strategy that aligns with national priorities and reshapes the Pentagon budget so we can better respond to 21st century threats,” Hartung said in a statement. “A well-educated and healthy workforce supported by state-of-the-art technology, not wasteful Pentagon programs, holds out the best hope of spurring sustainable economic growth."

The study asserts that contrary to common arguments, “contractors will be cushioned from the impacts of cuts” due to a $100 billion backlog and Pentagon spending already in the pipeline. “Major Pentagon contractors are well positioned to absorb budgetary reductions, even at the 10 percent level or beyond,” said the study, co-authored by Natalie Peterson.

Likely cuts in the Pentagon budget in the coming years are projected to displace some 290,000 and 500,000 jobs, or less than half the industry’s warnings, the report said.

Nor is it true that such cuts would spread to the economies of all 50 states, the study argued. “Pentagon contracts are concentrated in a small number of states and 28 states have Pentagon prime contract awards that are less than 2 percent of their state gross domestic product,” it said. “If evenly distributed across all states, even a 10 percent reduction in Pentagon spending would have only a direct impact on one-fifth of 1 percent of the economic activity in these areas.”

Though several contractors have recently announced layoffs, the center cites healthy fourth-quarter revenues at Lockheed Martin, Raytheon and Northrop Grumman.

CIP also noted comments made Wednesday by Frank Kendall, undersecretary of Defense for Acquisition, Technology and Logistics. As reported by Politico Pro, Kendall told a group of contractors that the Pentagon “can support the number of prime contractors that we have -- it is still a large budget. We’re going to be contracting out hundreds of billions of dollars for a variety of things."

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.


When you download a report, your information may be shared with the underwriters of that document.