With the possibility of sequestration becoming more of a reality every day, many organizations are planning for the worst. The cuts, which include $600 billion in reductions to the Pentagon budget by 2013, are set to begin in less than a month unless Congress and President Obama can come to some sort of budgetary agreement. Furthermore, any sequestration cuts would combine with the long term reduction in U.S. military operations overseas (which use their own special budget). You can see while some defense contractors, and their representatives are worried.
Some U.S. cities have particular reason to worry. Since the start of the wars in Afghanistan and Iraq, the boom in defense spending has resulted in a goldmine for some small cities with defense manufacturing plants. Often these cities have not diversified their economies, instead relying on those large contractors to boost public coffers. However, now these cities are reeling at the threat of the possibility that local employers will cut of tens of thousands of jobs if sequestration takes affect at the start of next month.
This apprehension towards with the possibility of significant budget cuts over the next few months is oddly not echoed by the heads of some large defense contractors. The Washington Post reports that many top executives are large defense contractors are bucking the trend, expressing confidence that sequestration will not occur. The article by Marjorie Censer and Jim Tankersley reports that executives at major defense contractors like Northrop Grumman and General Dynamics are claiming that sequestration will not have an effect on their near term bottom-line, with the later company even conducting a risk assessment toward the company’s finances that makes the assumption of no sequestration. This confidence was only likely reinforced during President Obama’s sixth State Of The Union address in which he implored all policymakers to work to avoid sequestration cuts.