The Effects of Budget Cuts on Texas

Study says federal budget cuts in January could devastate states.

File:  Air traffic controllers.

Texas may lose as many as 160,000 jobs, defense losses could be catastrophic.

Texas could lose as many as 160,000 jobs, third most in the nation, if the U.S. Congress and the Obama administration don’t come to terms on the federal budget. If the two don’t act before Jan. 2 of next year, the Budget Control Act’s sequestration mandate will go into effect and budget cuts of $1.2 trillion over 10 years will begin. And projected defense cuts are claiming the most attention.

A study on the effects of the cuts was recently conducted on behalf of the Aerospace Industries Association, one industry that would be hit particularly hard by Defense Department cuts that are part of the trillion-dollar automatic budget cuts.

The 160,000 Texas jobs would represent about 7 percent of the total 2.13 million jobs lost throughout the nation if the budget cuts are put in place. Texas would rank second only to California, which could lose 225,000 jobs, and Virginia, which could lose as many as 207,000.

House Armed Services Committee Vice Chair Rep. Mac Thornberry of Texas said that he does not think money should be spent on defense just to create jobs, “But you also need to have your eyes wide open about the economic impact of huge cuts to defense and the effect it would have on jobs, as well as the even more important effect it would have on our national security.”

Dr. Stephen Fuller from George Mason University, one of the authors of the analysis, said those types of cuts nationwide could push the unemployment rate above 9 percent nationwide and move the country toward a recession. “An already weak economy will be undercut as the paychecks of thousands of workers across the economy will be affected from teachers, nurses, construction workers to key federal employees such as border patrol and FBI agents, food inspectors and others,” he said. At risk, according to the report, are more than 48,000 health care jobs, more than 98,000 in construction, approximately 473,000 in manufacturing and more than 615,000 federal jobs in both defense and non-defense.

In Texas, heavy defense cuts could be crippling. Nationwide, the Department of Defense would suffer most of the cuts, $492 billion, while the remaining $708 billion in cuts would be shared by other federal agencies.

There are 14 military bases in Texas and more than 270,000 service members stationed here. One of the nation’s largest defense contractors, Lockheed Martin, has a plant in Fort Worth and a joint operation with another company in San Antonio to provide engine maintenance, repair and overhaul to the military. Lockheed Martin Chief Executive Robert Stevens testified before a recent congressional committee hearing saying his company could have to let 10,000 employees go if the automatic spending cuts go into effect in January. He said he has never been so concerned about the health of his industry. But he also warned that the budget cuts will result in reductions in the number of FBI agents on the job as well, and the number of Border Patrol officers available, the number of people processing social security claims, the number of air traffic controllers, Coast Guardsmen and “so many more people whose jobs will be cut back.” He predicted that sequestration would have “extremely adverse impacts on our U.S. economy at a critical time.”

In Texas, state officials have estimated the economic impact of the U.S. military payroll for active duty, reserves and civilians tops $77 billion. Military contracts in the state total more than $60 billion. The State Comptroller’s Office even notes that federal military spending helped Texas replace more than 430,000 jobs lost during the Great Recession. In 2008 and 2009, Texas was the top recipient of Department of Defense spending, with $65 billion spent in the state in 2008 and another $42 billion in 2009.

The magnitude of the cutbacks that could go into effect next January could take a devastating toll on the State.

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