Panetta: DOD cuts could up jobless rate by 1 point

Defense Secretary Leon Panetta warned Congress on Thursday that if lawmakers fail to agree on debt-ceiling talks and trigger $1 trillion in Pentagon budget cuts, they could add 1 percentage point to the nation's jobless rate.

Pentagon press secretary George Little said Thursday that Panetta has relayed those numbers to lawmakers in person and in calls this week, urging Congress to avoid the deadlock that would require the sweeping cuts.

Under the current deficit-reduction plan, the Pentagon must slash more than $400 billion in defense spending over the next decade. In addition, a newly created deficit-cutting supercommittee has until Nov. 23 to reach a consensus on budget cuts. If the committee members can't agree, or if Congress rejects its plan, automatic cuts of $1.2 trillion would hit the government accounts, with half coming from defense spending.

The trillion dollar total, Little said, would be devastating for the military, forcing spending reductions that likely would necessitate shrinking the size of the Army, Air Force and Marine Corps to the smallest numbers in decades and also lead to the smallest Navy in nearly 100 years.

"We would break faith with those in uniform who are serving. At a time of war, that's unacceptable," Little told reporters traveling with Panetta back to Washington after security meetings with Australian leaders in San Francisco.

Citing a new Pentagon analysis, Little said the defense industrial base provides 3.8 million private sector jobs. He said the 1 percentage point increase in the unemployment rate would include government, military and private sector jobs. He did not know how many jobs that entails or how many could be lost in the individual government and private sectors.
The current national unemployment rate is 9.1 percent.

The new comments reflect the Pentagon's growing worries that partisan divisions on Capitol Hill could foil any attempt to reach an accord on spending cuts and revenue changes to meet the debt reduction plan. Defense officials have argued repeatedly that triggering the automatic spending reductions would mean slashing military programs based on arithmetic rather than on sound national security strategy.

Panetta and his predecessor, Robert Gates, have insisted that government leaders and lawmakers must decide what they want their military to be able to do, and then cut the budget accordingly, rather than take a percentage off all the accounts.

Defense spending has nearly doubled since the Sept. 11, 2001, terror attacks to more than $500 billion. That spending is separate from the $1 trillion-plus for the wars in Iraq and Afghanistan in the past decade.

Pentagon officials have said the initial cut of $400 billion or more will be tough but manageable, but Little said adding another $600 billion "is a red line that this government should not cross."

Past efforts to reach compromise on major debt-reducing proposals have run aground over mutually exclusive demands: Republicans oppose raising taxes and Democrats are against cutting benefit programs.