For months now the defense industry has been making an impressive effort, in the midst of a general election campaign, to exempt the defense budget from going over the fiscal cliff -- sequestration -- set to take effect on January 2, 2013. At the heart of their advocacy has been the argument that a defense sequester would be devastating to employment, forcing the layoff of hundreds of thousands, if not millions, of workers.
The Aerospace Industries Association funded an impressive series of studies by economist Steven Fuller of George Mason University, purporting to show that more than a million jobs would be lost as a result of defense sequester.
And industry leaders lined up behind this message, announcing that they would have to let their workers know, just before the election, that their jobs were in jeopardy. Several, including Lockheed and European giant EADS threatened to send their entire workforces notifications, under the Worker Adjustment and Retraining Notification (WARN) Act, that they were at risk of layoffs.
Politicians have piled on, starting with Republican defense stalwarts like Senate Armed Services Committee members Sen. John McCain, Sen. Lindsey Graham, and Sen. Kelly Ayotte, and House Armed Services Committee Chairman Rep. Buck McKeon, who has been running this theme for more than a year. Democrats, perhaps in self-defense, have joined the call, including Armed Services Chairman Sen. Carl Levin, Sen. Jeanne Shaheen, and Sen. Sheldon Whitehouse.
Now they all face the Emily Litella moment. Emily was Gilda Radner's character on Saturday Night Live, who would run through reams of erroneous commentary until someone told her that she had misunderstood the subject she was riffing on. Like talking about the "deaf penalty" when the subject was the "death penalty." "Never mind," Emily would say, ending the monologue.
The industry has now totally undercut the AIA and the politicians, because the government has explained the subject and the industry has said: "Never mind."
Although industry has said that the WARN Act requires it to issue layoff notices 60 days before sequestration takes effect -- i.e., on November 2, just days before the election -- in reality, no such notification is necessary. As the Department of Labor explained in a July 30, 2012 advisory guidance, such notices are not required because it is not certain that sequestration will actually happen and because there is no certainty that existing contracts will be affected if it does.
That was not enough for the industry; Lockheed President Robert Stevens continued to argue that he would send WARN Act notices. Then the Department of Defense and the Office of Management and Budget weighed in. On September 28, Richard Ginman, the Pentagon's director of defense procurement and acquisition policy, replied to an earlier letter from Lawrence P. Farrell, Jr., the head of the National Defense Industrial Association ,saying that sequester was very unlikely to have a serious, near-term impact on the industry.