Jul 17, 2012
Sequestration - the automatic across-the-board cuts that will occur if an agreement cannot be reached regarding the nation's deficit.  These cuts would go into effect on January 1, 2012.  These defense cuts would take place over the span of a decade, amounting to $500 billion.

Prime Contractors in the defense industry are warning of massive layoffs, with Lockheed Martin threatening to layoff up to 123,000 personnel should sequestration occur.  Meanwhile, lobbying expenses from military contractors has increased by 11.5%, for a total of $15.9 million, in the first quarter of 2012 compared to the same quarter in 2011.  Northrop Grumman and Lockheed Martin increased their spending by 51% and 25% respectively.

Defense Secretary Leon Panetta made a plea to Congress in the end of June urging Congress to prevent sequestration budget cuts from threatening "the programs critical to our nation's security." 

Acting Office of Management and Budget (OMB) Director Jeffrey Zients has agreed to testify before his committee on the looming defense cuts.  This hearing will occur two weeks after the scheduled July 18 hearing in which members of the defense industry will discuss the impact of sequestration cuts on U.S. companies.

A majority of Democrats and Republicans (which includes the Obama administration) are opposed to the sequestration cuts, but both parties have so far failed to reach an agreement on the alternatives they could implement to replace the cuts.

By: Ira Evangelista, GovPartners Market Analyst

 

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