Last week, the White House’s Office of Management and Budget was required by law to report to Congress about how sequestration will be implemented. The late report may be made public today.
In the meantime, the defense industry, which employs over one million Americans, is left to guess just how badly its workers are going to be hit when sequestration takes effect in 2013. And the rumor mill is churning. I’m hearing that the White House budget guidance will be thin and largely lacking in new or substantive details.
If that’s the case, the president’s vagueness will likely be motivated by the same “concern” (read: politics) that led the Department of Labor to issue guidance on the WARN Act layoff notices to industry earlier this summer. Remember, the WARN Act requires defense companies to give 60 days notice to employees they’re planning to lay off. But the Labor Department, which has no jurisdiction over WARN Act notifications, decided it should issue a guidance memo to defense contractors telling them that they really weren’t required by law to notify employees of prospective layoffs… and especially not if those notices were going to go out the week before the election. Of course, it’s the federal courts, not Labor, that adjudicate whether employees’ rights have been violated.
Let’s review the bidding here: The law requires a report on sequestration plans and WARN Act notifications. The administration thinks both should be ignored. Both were put into place to help Americans workers and their families plan ahead or look for new opportunities and take advantage of state programs while still on payroll. Which is why, regardless of OMB and Labor Department obfuscation, many major defense companies are seriously weighing the possibility of issuing these layoff notices at some point in the next few months.
Wondering what the real impact is going to be? We get a look via Capitol Hill in this release from Senators McCain (R-AZ), Ayotte (R-NH), Chambliss (R-GA), Cornyn (R-TX), Graham (R-SC), Inhofe (R-OK), and Lieberman (I-CT) detailing the damaging effects of the uncertainty surrounding the outcome of sequestration that are already underway and in a series of letters to the Hill from defense contractors.
General Dynamics, EADS, Exelis, and Lockheed Martin CEOs all made clear that contracts have slowed, and the future is too unclear to make investments or hiring decisions. The key point of their correspondence is not that layoffs are coming as a result of sequestration but that thousands of jobs are going unfilled or being lost now due to uncertainty in an already fragile economy.
While Washington stalls on major budget questions, businesses are acting. EADS Chairman and CEO Sean O’Keefe said it most succinctly: “American workers are unemployed today because of the uncertainty that has been allowed to surround sequestration.” That’s today. Now imagine next year.