AURORA | With $1.2 trillion in government spending cuts looming early next year as part of a deal negotiated during last year’s debt-ceiling fight, Colorado could lose more than 42,000 jobs, according to a study released last month.
And in Aurora, where defense and aerospace contractors like Raytheon Company and Lockheed Martin are some of the city’s biggest employers, officials say the spending cuts could hit particularly hard.
“We are looking at a huge financial hit,” said Dick Hinson, senior vice president at the Aurora Economic Development Council.
Hinson estimated that Aurora could stand to lose more than 3,000 jobs if the proposed cuts take effect.
The Aerospace Industries Association commissioned a study released last month that said 2.14 million jobs could be lost if the sequestration mandate included in last year’s Budget Control Act takes effect in January.
The report, conducted by Stephen S. Fuller, the Dwight Schar Faculty Chair and Professor at George Mason University, said Colorado alone could lose a total of 42,000 jobs in the defense and non-defense sectors.
“The results are bleak but clear-cut,” Fuller said in a statement announcing the report. “The unemployment rate will climb above 9 percent, pushing the economy toward recession and reducing projected growth in 2013 by two-thirds.”
Last year, Congress set up the “sequestration” process as part of a deal to raise the debt ceiling and avoid defaulting on the government’s debts. If Congress couldn’t agree to a deal before January 2013 to reduce the deficit, $1.2 trillion in cuts would kick in, about half of those in defense spending.
With just a few months before the cuts would kick in, Hinson said local business leaders are worried.
While they know about half of the cuts will hit defense spending, Hinson said local business leaders aren’t yet sure what exactly the cuts will mean.
“Right now we are looking at a $500 billion cut in defense-related industries,” he said. “And nobody knows where those cuts are going to come down.”
With the uncertainty in the market, Hinson said businesses are already backing off spending and investing, worried that next year government projects might not be there.
“That’s the main concern — the uncertainty of the whole situation,” he said.
At Lockheed Martin, which employs more than 750 people in Aurora, company officials echoed that uncertainty.
“We have no guidance from the U.S. government on how it will be implemented. We don’t know which programs, sites, technologies, or suppliers will be impacted. But without guidance from the government that allows us to narrow the potential impacts by business, site, contract, program or technologies, it’s impossible to predict who it will impact and when,” the company said in a statement last month.
And with an election looming in November, few people are hopeful that a compromise will be reached.
“Congress has been paralyzed by inaction,” he said.
The debate has largely stalemated as Democrats insist a compromise to the budget struggles include some tax hikes on the wealthy, and Republicans are adamant that nobody’s taxes should go up.
During last summer’s debt-ceiling fight, both of Aurora’s representatives to Congress — Rep. Mike Coffman, R-Aurora, and Rep. Ed Perlmutter, D-Golden — voted for the legislation that set up the sequestration process.
Leslie Oliver, a spokeswoman for Rep. Ed Perlmutter, said that while Perlmutter voted for the measure last year, he has also backed several plans to cut the deficit without sequestration kicking in.
“I think he is hopeful that it can and we can work out a deal,” she said.
Rep. Mike Coffman, R-Aurora, said in an email last week that he hopes to find a solution that would avoid the cuts.
“No doubt, it is my goal to come up with an alternative to avoid these cuts that fall disproportionately on the Department of Defense,” he said.
As for the issue of increased taxes, Coffman said that will be addressed in the debate over extending the Bush tax cuts.
“I’m optimistic that an agreement can be reached,” he said. “Although I would like to see all of the Bush tax cuts extended, I will take whatever I can get.”