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Pentagon braces for furloughs in sequester: How big a hit to economy? (+video)

Thousands of Defense Department civilian employees could be furloughed if Congress proceeds with the automatic federal spending cuts poised to take effect in March under the sequester.

Jessica Wright, acting Undersecretary of Defense, discusses the impact of sequestration and furloughs.
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The Defense Department has put its hundreds of thousands of civilian employees on notice: They will probably face steep pay cuts under a furlough program if Congress proceeds with the automatic federal spending cuts that are poised to take effect in March.

The furloughs would come alongside other big defense cuts, due to the so-called budget sequester, that would affect both military readiness and the wider economy.

“In the event of sequestration, we will do everything we can to be able to continue to perform our core mission,” Defense Secretary Leon Panetta wrote in a memo to employees this week. “But … the rigid nature of the cuts forced upon this department, and their scale, will result in a serious erosion of readiness across the force.”

For the economy, the Pentagon is both a major employer and a major buyer of goods and services. Forecasters say the defense portion of the sequester would put a noticeable dent in overall spending – felt most in states such as Virginia that have lots of civilian defense workers or weapons contractors.

It’s not yet clear whether the sequester will go into effect as scheduled on March 1, or how long after that it might take for the politically divided Congress to agree on some different budget plan.

The sequester plan, which stems from a 2011 Budget Control Act, is designed to help bring down federal deficits through across-the-board spending cuts,  if Congress can’t agree on a better plan.  

Defense cuts would account, under the law, for half the total. That amounts to about $45 billion in the current fiscal year.

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