Upcoming cuts in defense spending could deal a major economic blow to the Tennessee Valley, as thousands of workers at Redstone Arsenal could find themselves out of a job.
A report issued by the White House earlier this month warned that $109 billion in across-the-board cuts at the start of 2013 would be “deeply destructive” to the military and core government responsibilities.
The automatic cuts were mandated following the failure of a congressional deficit supercommittee to come to a budget agreement, and require a 9 percent cut to Pentagon programs and 8 percent cuts to domestic programs. The automatic cut process, known as sequestration, will affect virtually every government-funded program with the exception of military personnel and war-fighting accounts.
The overall impact of those cuts on counties in the Huntsville region remains to be seen, but those who are closely following the process don’t predict a favorable outcome.
A study released in July by George Mason University on the economic impact projects that Alabama would lose 38,778 jobs. Of those, 26,845 are projected to be Department of Defense jobs, while 11,933 are non-DOD jobs. However, that number also includes contract positions.
The report states that combined DOD and non-DOD agency spending reductions totaling $115.7 billion in fiscal year 2013 would reduce the U.S. gross domestic product by $215 billion. It estimates that spending restrictions would result in the loss of 746,222 direct jobs, including cutbacks in the federal workforce totaling 277,263, and decreases in the federal contractor workforce totaling 468,959 jobs.
The job losses, the report said, will affect “all sectors of the national economy.”
To make matters worse, tax cuts enacted during George W. Bush’s presidency will expire at the end of this year. Economists have dubbed the combination of the expiration of those cuts, combined with sequestration, as “the fiscal cliff,” with many warning it could drive the country back into a deep recession.
U.S. Congressman Mo Brooks, R-5th, said there are many jobs at stake at Redstone Arsenal. He chided President Barack Obama for making broad cuts that don’t outline how specific programs will be affected.
“In this instance, they used a percentage and applied it across-the-board. That’s not what sequestration does,” he said. “There is discretion within the Pentagon and White House to cut some programs more than others to reach the $50-plus billion defense cut requirement, but we don’t know what they’re going to do. It was a political document.”
Brooks said the House passed three-to-four bills to fix sequestration and its impact on national defense, but the Senate would not vote on them and Obama threatened to veto the measures.
What’s worse, he said, is that Obama has not released a plan on how federal money will be spent. He said even though the White House released a budget, the budget is only a roadmap and has no fiscal specifics. It’s the appropriations, he said, that detail how money will be spent, and no appropriation bills have originated with Obama.
Lakin Collins of Athens, who serves on Redstone’s Base Realignment and Closure Committee, predicts the upcoming cuts will be “painful.”
“I think the general public is not aware, or think, ‘Well, it’s not going to be as bad as they say,’” he said. “Probably the only people who are really paying attention would be those in jobs that are affected, primarily contractors and even direct employees.”
Collins said the cuts would be disheartening, considering all the recent moves to bring in federal and contract workers to Redstone through BRAC. He said the process has been beneficial for the Tennessee Valley as a whole.
“I’m thoroughly disgusted with our lawmakers because they’re sitting on their hands,” he said. “There’s plenty of blame to go around on both sides of the aisle. The fiscal cliff is coming, and it’s across the board.”
Joseph Cannon, who won election to the City Council’s District 4 seat in the Aug. 28 municipal election, is a contract employee at Redstone. He’s concerned about the proposed cuts, but praised his company for preparing for the future.
“We have Army and Navy contracts for the most part, and you can only hope your program is not one of them,” he said. “A lot of people have it in their minds that the (government) will never do this, but somebody who’s lost their job because of budget cuts knows what it’s like.”
He said North Alabamians can view the proposed cuts with caution, but added there are too many unknowns to be scared by the future. As an incoming councilman, he said the city would have to tighten its belt in preparation while also finding new sources of revenue.
The potential job losses could have devastating effects on Alabama’s economy. Unable to create a balanced budget, lawmakers left it up to Alabamians to pass or defeat a referendum to transfer $437 million from a savings account to prop up the ailing General Fund.
Fearing projected cuts in senior care, state services and the possibility of prison releases, Alabamians approved the measure by a 2-to-1 margin.
Those job losses, though, could impact a wide range of state revenue, including sales and property taxes. Unemployed workers at Redstone could pave the way for shuttered businesses, a flooded housing market in the Huntsville area and a glut of foreclosures.
“It’s always been a major scare for us,” said Athens Mayor Ronnie Marks. “There’s always a fear that something like this could impact our area.”
Council President Jimmy Gill and Councilwoman Dr. Milly Caudle discussed the possibility of raising the city’s sales tax revenue by one penny at a recent work session. Cannon said he could not support such a measure unless there are specific plans for how the increased revenue would be spent and it had the support of his district.
Marks said while a tax increase is not imminent, he is concerned about how the city’s revenue streams would be affected by cuts in Huntsville.
“We hope and pray it won’t hit us as hard as what’s projected,” he said. “We need to be cautious and plan for the what-ifs.”