The failure of Congress last year to forge a plan to reduce the deficit gradually over the next ten years now threatens to trigger large, across-the-board, and arbitrary “automatic” spending cuts divided equally between defense and other “discretionary” parts of the budget on January 3, 2013. This would have a major negative impact on San Diego since the military accounts directly or indirectly for one out of every four jobs.
The Pentagon has not yet started planning on how the cuts would be implemented. Defense contractors, however, are generally not adding to payrolls and could have to send out possible layoff notices later this year if the uncertainty over funding levels for various programs continues.
Defense spending has probably peaked for at least the near term. In fiscal 2011, total spending for national security (including programs funded by departments separate from the Department of Defense) was $711 billion. Current plans show spending slowing to $670 billion in fiscal 2012 to $640 billion in fiscal 2013. The unleashing of automatic spending cuts or “sequestration” would further slash spending to $580 billion next year.
With the nation’s economy already weak, it is imperative that Congress and the President develop a reasoned approach to reduce the nation’s deficit over time. Most economists agree with analysis by the Congressional Budget that such a process must include the entitlement programs (Social Security, Medicare, and Medicaid).
The importance of defense-related activities in the San Diego region makes it especially vital to this area that a “fiscal cliff” be avoided next year.