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:

  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

  • Cyber Risk Report: Cybercrime Trends from 2016

    In our first half 2016 cyber trends report, SurfWatch Labs threat intelligence analysts noted one key theme – the interconnected nature of cybercrime – and the second half of the year saw organizations continuing to struggle with that reality. The number of potential cyber threats, the pool of already compromised information, and the ease of finding increasingly sophisticated cybercriminal tools continued to snowball throughout the year.

  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

  • GBC Issue Brief: The Future of 9-1-1

    A Look Into the Next Generation of Emergency Services

  • GBC Survey Report: Securing the Perimeters

    A candid survey on cybersecurity in state and local governments

  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.

  • eBook: State & Local Cybersecurity

    CenturyLink is committed to helping state and local governments meet their cybersecurity challenges. Towards that end, CenturyLink commissioned a study from the Government Business Council that looked at the perceptions, attitudes and experiences of state and local leaders around the cybersecurity issue. The results were surprising in a number of ways. Learn more about their findings and the ways in which state and local governments can combat cybersecurity threats with this eBook.


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