Obama’s Defense Cuts Could Cost Economy $61 Billion While Endangering National Security

Travis Korson
By Travis Korson | February 16, 2012 | 3:47 PM EST

This past Monday, the Obama administration presented its 2013 budget to Congress, with projected defense budget cuts, described by Rep. Howard P “Buck” McKeon, Chairman of the House Armed Services Committee as “over $45 billion less than the President's request for last year."

This first round of cuts agreed to under the Budget Control Act of 2011 (BCA) and reflected in this budget, will take $487 billion dollars (9%) from the Department of Defense over the next 10 years.  If the sequestration mechanism of that BCA is allowed to trigger, another $500 billion will disappear from the accounts designated to protect the American people, a $1 trillion (18% of defense budget) total cut over the next 10 years.  This second tranche of cuts is not reflected in the current budget but will happen unless Congress acts and can somehow overcome a promised Obama veto.

The Center for Security Policy calculated the economic effects of these possible cuts in their “Defense Breakdown Economic Reports,” released Monday and found the following:

  • Public data for 2010 shows American businesses earned over $344 billion supporting America’s defense.
  • But under these 10-year defense cuts of at least 9%, American annual business losses could be greater than $30 billion. American businesses may have to fire workers.
  • And at the “Sequestration” level of at least 18% in defense cuts, American annual business losses could be greater than $61 billion.  Some American businesses may have to shut down.

The reports also break down this information, on the state, county, city and congressional district level as well as by type of business: minority owned, veteran and service-disabled veteran owned, women owned, and small disadvantaged.  The goal is to assist community leaders and citizens in understanding how these defense budget cuts may affect their local businesses and jobs and prepare for the economic tsunami.  To see how your local community will fare, visit

Iran is months away, according to some reports, from obtaining a nuclear weapon, North Korea is in the midst of an uncertain regime change and the Arab Spring rages across the Middle East.  Despite these increased threats, America is drawing its military down.  Pair the national security implications with the economic impact and the outcome could be a significantly weakened America.

Efforts are underway in Congress to prevent this “doomsday scenario,” according to Secretary of Defense Leon Panetta, from occurring.  The House “Down Payment to Protect National Security Act” HR. 3662 and its Senate companion S. 2065 seek to fund the sequestration trigger for one year through a revenue-neutral scheme of attrition in the federal workforce.  This legislation would allow Congress more time to find a permanent solution for this issue.

The Center for Security Policy’s “Defense Breakdown Economic Impact Reports” are part of a broader 2012 initiative, the Coalition for the Common Defense, to educate and engage the American public on the importance of maintaining a strong national defense.  We encourage American citizens of all walks of life to get involved and use this tool, as well as the many others available to them to help prevent the gutting of our nation’s defense.  If we don’t the results could be disastrous.

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