With automatic budget cuts looming in Washington, the state’s Congressional delegation says Connecticut could eventually lose as many as 36,000 to 42,000 direct and indirect jobs if lawmakers fail to reach a fiscal deal.
The cuts would not take effect immediately and would be phased-in over time.
In a worst-case scenario, there could be cuts at major defense contractors like East Hartford-based Pratt & Whitney, Stratford-based Sikorsky, and Electric Boat if reductions at the Pentagon are enacted. Cuts could also come to teachers in Head Start, vaccines, and meals for senior citizens. It could potentially jeopardize the construction of a planned second submarine at Electric Boat in 2014, along with the potential halting of repairs to the USS Providence and the USS Miami submarines.
“It won’t be an immediate, earthquake-type effect, but it will be a cascading, building impact on job growth and employment, which we really need to avoid because we are all-too-slowly recovering in Connecticut,” U.S. Senator Richard Blumenthal told reporters Monday. ”The estimate is it would deprive us of about $3 billion out of a $240 billion GDP in Connecticut, which is a major hit to revenue and profits for our businesses but more importantly to employment here.”
He added, “There are various estimates as high as 36,000 [in job losses]. Those estimates may be too high, but we know for sure that there will be a huge hit in the tens of thousands of jobs.”
Some critics say that potential cuts have been widely overblown because they represent only 3 to 4 percent of the federal budget. On Wall Street, some of the talk is being dismissed.
“The hype over sequestration is a joke,” famed investor Stanley Druckenmiller said on CNBC last week. “I’m just not worried over sequestration.”
A well-known disciple of investor George Soros, Druckenmiller has wide influence with the insiders who trade millions of dollars of stocks on a daily basis.
Connecticut’s defense industry is watching the drama in Washington closely.
“We’re stuck in limbo,” said Paul Jackson, a spokesman for Sikorsky. “We’re doing what everyone else is doing: watching to see what Congress decides, and how and if it will impact the Pentagon and us.”
At Electric Boat, officials are also waiting for more details. “We really don’t know what the impact will be…until we get some specific direction from the Navy,” said spokesman Robert Hamilton. “There are too many unanswered questions.”
John Rathgeber, the president and CEO of the 10,000-member Connecticut Business and Industry Association, appeared at a news conference at Blumenthal’s Hartford office to say that the sequestration could lead to further problems that would exacerbate the state’s 8.5 percent unemployment rate.
“I think we underestimate the impact of sequestration if we just look at the jobs in the defense industry and the service-providing industries,” Rathgeber told reporters. ”I think the real impact here is in the unwillingness of the private sector to invest in a climate where they don’t know what the rules are going forward. … If we come to the table in an opportunity to compromise, I think we can unlock private-sector investment. We can get our economy moving forward.”
Following the fiscal cliff that reached a near-crisis level between Christmas and New Year’s Day, Rathgeber said, “It is definitely the second whammy in a very short period of time.”
U.S. Rep. Elizabeth Esty of Cheshire cited a study by George Mason University that said there could be 42,000 lost jobs if sequestration is fully implemented in Connecticut.
“It is just irresponsible, and we need to get people to the table,” Esty said in Hartford.
Blumenthal rejected the notion – as discussed widely in the national debate on CNN and other stations – that the impact represents only 3 percent of the economy.
”It’s way more than 3 or 4 percent,” Blumenthal said. ”It may look like 3 percent if you’re calculating it on an annual basis, but there are only seven months left in the fiscal year. For the Department of Defense, it’s more like about 10 percent. The problem with the cuts is they are completely inflexible. They are across the board. Any businessman who is told, you need to cut every division, every part of your business by 10 percent would say, ‘That’s crazy.’ ”
The cuts could particularly hurt Connecticut because of the nature of the economy and the workforce.
“If we lose them, we lose what makes Connecticut great,” Blumenthal said. “We don’t have oil wells. We don’t have the Grand Canyon. We don’t have gold mines. We have really skilled people who work at places like Electric Boat or Pratt and Whitney. If they are put out of a job, they will go elsewhere. We will lose that resource.”
The Congressional delegation, interviewed by Daniela Altimari and Jenny Wilson, had the following reactions:
“If you look at the fiscal cliff, a deal got put together in about 36 hours once Biden and McConnell started talking to each other,” said Democrat Joe Courtney. “There’s no question that it’s possible that something could move between now and Friday. But it does seem that, looking at the schedule that Boehner’s put out for the week and just the posturing right now, it’s not ripe for things to come together that quickly.”
Regarding the cuts, Courtney said, “It doesn’t happen all on one day at one time. So for example, in Groton, they’re talking about cancelling a repair job for the USS Providence, but that wasn’t really slated to come in until the end of the fiscal year, so it’s not like layoff notices will go out tomorrow because of the Providence being cancelled. But I was down there with the metal trades council this past week, and they were getting such good momentum in terms of hiring and now it just kind of puts a cloud over everything.
“That’s one example. I was at a Head Start program where they were talking about 40 slots would be eliminated for kids who are already in the program. So this isn’t like adding to the waiting list.
He added, “The latest conventional wisdom is, well, we can do it later in the month, March 27 is the next trip wire with the CR (continuing resolution) running out, but the problem is, if you’re running an agency, you really don’t have the luxury of assuming that cooler heads are going to prevail. You’re going to have to start making some moves. … That’s where I think the ripple effect for services is going to start being pretty widespread.”
When asked the possibility of a deal, he said “the pieces are there.”
U.S. Rep. Rosa DeLauro of New Haven said, ”It doesn’t have to happen. If people would be reasonable, we could end this. The President has made a proposal in a balanced way of what we can do by way of spending cuts and what we can do with regard to putting more revenue on the table, but our colleagues on the other side of the aisle don’t seem to want to move in that direction. They seem to want to prove a point, which is only disastrous for the American people.”
Concerning other cuts, DeLauro said, ”The loss of jobs, the loss of research grants for illness and disease through the NIH, almost 600,00 women may be jettisoned from the WIC program, cuts in Title 1.”
U.S. Rep. Jim Himes said:
“People are going to feel the sequester cuts in a variety of different ways. Almost all government services … are going to have to scale back their budgets. What that means on the ground is it means fewer TSA people in airports, delays probably as people try to travel, unemployment checks will be lower in amount than they otherwise would have been. It means some of our defense contractors are going to have to rethink their production schedules and potentially furlough some workers.
He continued, “Basically anything that the federal government touches … is not going to go away, but will be scaled back in a way that will create some unemployment, create some uncertainty, create some hassles for the people of Connecticut and the American people generally. I think it’s going to be felt starting in early March. And again, it’s not a government shutdown. It’s not going to be quite that dramatic, but perversely it will be felt quickly and hopefully enough so that the leadership in Congress and the leadership in the White House feels intensely the need to come together and do a deal. This is all happening because Congress and the President and the leadership generally have failed to get a deal done around our fiscal challenges, which is infuriating to me because we know more or less what that deal looks like, you know, Simpson Bowles , Rivlin Domenici—there’s been all sorts of plans out there. Plus or minus five percent, that’s the plan and yet the politics have intervened and so we find ourselves creating not just hassles for the American people but a really negative economic occurrence at a time when our economy can’t afford it because that deal has not been done.”
Himes added, “I wouldn’t rule out a last minute deal. I wouldn’t rule it out. But you know in my four years in Congress and certainly the last two years what I’ve learned is deals don’t get done until there is a feeling of crisis. My hope is—and in any responsible government—we would get this deal done before the first of March. So it’s still possible, but I fear that we are going to really need to see and feel some pain to get the leadership to do the deal that we can all support.
“It’s not looking very promising to get something done before Friday. I’ve already made plans to stay through the weekend and through next week, you know, the following week, because this is really important. If you look at the estimate of jobs, potential job losses in Connecticut, George Mason University estimated 42,000 jobs potentially lost in this state, this is a very serious matter, and these are jobs in families all across the state. You’re talking about teachers in Head Start positions, you’re talking about national guards, you’re talking about FAA air traffic controllers.
“This is really all across the state. It’s a very serious matter, and we need to get the deficit under control, but it should not be done in the way that when we have a fragile recovery more people are thrown out of work. It’s just the wrong approach.
“This is a point at which the Republicans in the House really have to decide whether they’re going to sit down and talk with the President about doing something and unfortunately a number of them are saying bring it on – we can take these cuts, we have too much spending. But..thinking about the magnitude on people’s lives, what that means, it’s totally the wrong way. Across the board cuts are never the right approach. Ever. And I’m strongly in favor of a balanced approach, that’s what we need to do, that’s what the public voted for in this election.
Esty concluded, “The frustration is that we were sent home last week without addressing this. We should have been in Washington last week. People should have been meeting, people should have been putting a bunch of proposals on the table and putting out a deal. That’s what we were sent here to do.”