The White House and Congress are hashing out a deficit reduction plan in lieu of the impending fiscal cliff, a general term referring to laws that will initiate $500 billion in tax increases and across-the-board spending cuts in January – including billions of dollars in military spending cuts. However, even if the fiscal cliff is adverted, an alternate plan is expected to still contain considerable defense spending cuts, financial experts say. And as local military contractors, the Anniston Army Depot and even Department of Defense officials brace for spending decreases, they and financial experts are still unsure of how those cuts might impact the defense industry.
Lt. Col. Elizabeth Robbins, spokeswoman for the Department of Defense, said the department began planning earlier this month for new budget cuts. Robbins agreed there is still plenty of uncertainty as to where and how big the cuts will be in the defense budget.
“It’s still too early to share specifics,” Robbins said. “We’re still hopeful Congress passes balanced cuts and sequestration is adverted.”
Sequestration refers to the planned defense cuts that are part of the fiscal cliff. According to the Congressional Budget Office, if nothing changes, next year the defense budget will decrease to $491 billion from $554 billion. Afterward, defense spending will grow with inflation, saving an estimated $500 billion over a decade.
To U.S. Rep. Mike Rogers, R-Saks, who is on the armed services committee and the committee on homeland security, failure to stop sequestration could seriously hurt the local defense industry, according to his spokeswoman.
“While many of these decisions will be difficult, sequestration could have a devastating impact on our military and impact our local defense industrial base,” wrote Shea Snider, spokeswoman for Rogers, in an email to The Star. “Washington must find a way to maintain our priorities like a strong national defense, while reducing spending in an effort to start to rein in the debt.”
Alabama’s military economy
According to a recent study from the Pew Center on the States, Alabama is more vulnerable to military cutbacks than most other states. The study shows that in 2010, defense spending made up 7 percent of Alabama’s gross domestic product compared to the national average of 3.5 percent – placing it in the top five states with the most federal defense money.
Anne Stauffer, project director for Pew, said how much Alabama will suffer because of military cuts next year depends on the details.
“It really depends on how the cuts are done … for the sequestration, salaries of uniformed military personnel are exempt, but anything else is susceptible,” Stauffer said. “But I do think this report shows there is a clear vulnerability in Alabama.”
Stauffer added that whatever military cuts occur, states will have to watch closely and decide what, if any, budget changes they might have to make.
Calhoun County has already felt the sting of military cutbacks this year.
BAE Systems, the world’s second-largest defense contractor, is shutting down one of its two Anniston facilities at the end of the month due to draw-downs of the Iraq and Afghanistan wars, eliminating 145 jobs in the process. General Dynamics, located at the Anniston Army Depot, announced that Jan. 6 will be the final day for 98 workers at the facility. Workers there mainly build and repair Stryker combat vehicles for the military. Hundreds of depot workers have also lost their jobs this year due to war draw-downs.
The local impact
U.S. Army Spokesman Mike Abrams could not speak as to how any new potential military cuts might impact work at the Anniston chemical weapons incinerator. The facility destroyed its chemical weapons stockpile last year and has been undergoing closure efforts ever since.
“We all realize these are challenging times,” Abrams said. “Regardless, our role doesn’t change – the team of people supporting the mission will continue to focus on today’s requirements with the resources given.”
Clester Burdell, spokeswoman for the Anniston Army Depot, had a response similar to Abrams’ comments.
“We realize these are changing times, but we will continue to support the war fighter,” Burdell said.
In regards to how depot officials suspected impending military cuts might affect the facility, Burdell referred questions to the Department of Defense. The depot employs approximately 6,000 people.
Like the Department of Defense, BAE Systems is unsure how new military cuts might affect the defense industry
“At this point, it is too early to determine how or if the fiscal cliff will impact our Anniston site,” BAE spokeswoman Shannon Booker wrote in an email to The Star. “As a company overall, we have long forecast the budget pressures that the DoD is experiencing today and spent much of the last two years aggressively restructuring our business to ensure our ability to be competitive in this changing market.”
To Ahmad Ijaz, director of economic forecasting at the Center for Business and Economic Research at the University of Alabama, said any cuts to military spending would be bad for the state.
“Absolutely, especially in north Alabama … there are a lot of different businesses in north Alabama with defense contracts,” Ijaz said.
However, Ijaz was unsure of the pain because Congress’ budget plans are still in flux.
“Nobody really knows how much the cuts are going to be,” Ijaz said.
Ijaz said the loss of military work and jobs would eventually be felt throughout the state’s economy.
“The direct effect is it hurts the main contractor itself,” Ijaz said. “But when you lose jobs, that results in less spending and less tax revenue.”
Staff writer Patrick McCreless: 256-235-3561. On Twitter @PMcCreless_Star.