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Further Defense Cuts May Raise Unemployment, Pentagon Aide Says

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U.S. Defense Secretary Leon Panetta
Leon Panetta has said the automatic reductions would be “devastating,” and the Pentagon issued a statement on its website this week warning of “devastating job losses, national security threats” and harm to the nation’s infrastructure. Photo: Jim Watson/AFP/Getty Images

Sept. 16 (Bloomberg) -- The Pentagon is warning that U.S. defense cuts that would be triggered by a failure of Congress’s supercommittee to agree on deficit reductions may add one percentage point to the national unemployment rate.

“We’re not talking about just military jobs,” Defense Department Press Secretary George Little told reporters traveling with Defense Secretary Leon Panetta back to Washington from San Francisco yesterday. “We’re also talking about jobs in the private sector that support the innovation and capabilities that we need to keep America strong.”

The nation’s unemployment rate stands at 9.1 percent. President Barack Obama has proposed a $447 billion jobs plan to boost hiring. The congressional supercommittee is proceeding on a separate course to reduce the deficit over the next decade.

The Pentagon is stepping up its expressions of concern over the possibility of automatic cuts triggered by a supercommittee deadlock. The Defense Department warned that such a stalemate could mean as much as $1 trillion slashed from its spending plans over the coming decade, including the $330 billion in cuts the Pentagon already has been ordered to make.

Impact of Cuts

Panetta has said the automatic reductions would be “devastating,” and the Pentagon issued a statement on its website this week warning of “devastating job losses, national security threats” and harm to the nation’s infrastructure.

The Pentagon warning may add pressure to find agreement on Capitol Hill. Little said the Pentagon has been in close contact with Congress on the risks.

“We would be looking at, in all likelihood, the smallest Army and Marine Corps in decades, the smallest tactical Air Force since the Air Force, as its own service, was established, and the smallest Navy in nearly 100 years,” Little said. “We would break faith with those in uniform who are serving. At a time of war, that’s unacceptable.”

Jim Albaugh, president and chief executive officer of Boeing Commercial Airplanes, also warned that cuts could trigger a one percentage point rise in unemployment, following a meeting of aerospace executives with Panetta on Sept. 14.

The Pentagon estimates the defense industry accounts for about 3.8 million related jobs in addition to the 3 million personnel in the Defense Department.

Earlier yesterday, the Senate Appropriations Committee approved a $513 billion defense spending bill for next year, about the same level as the current fiscal year and about $26 billion below the original White House request.

To contact the reporter on this story: Viola Gienger in Washington at vgienger@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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