Threat of deep gov't spending cuts is cloud hanging over towns that rely on defense jobs

The question of whether Congress will avoid the steep automatic spending cuts set to take affect in January is a big issue in communities that depend on defense spending, and a comment President Obama made at Monday night's debate seems to be adding to the anxiety in those communities.

Reduction in defense spending is a large part of the $1.2 trillion in cuts scheduled to kick in Jan. 2. Obama said onstage in Florida, "it will not happen," but campaign adviser David Plouffe quickly rephrased that claim, saying the cuts "should not happen."

Such continued confusion and uncertainty about the fate of government spending hangs like a dark cloud over the swing state of Virginia, in particular Prince William County, where one in four residents works in a defense or government-related job threatened by the automatic cuts known as sequestration.

William Hobson, who grew up in the county  and is now the general manager for defense contractor Rockwell Collins, fears the impact.

"The biggest problem is the uncertainty, not knowing what's ahead  for business programs, and then if cuts come, that's going to be longer term, too," he said.

Because of the prevalence of reliable government jobs here, northern Virginia has largely been cushioned from the effects of the recession. If the steep spending cuts happen, that will change, says Stephen Fuller, an economist at George Mason University.

"Northern Virginia receives about 75 percent of the  federal funds that are coming into Virginia that are subject to sequestration," he says.

The cuts were part of a 2011 deal to raise the federal debt ceiling to avert an unprecedented default. Republicans and Democrats decided to use the threat of objectionable cuts to prod Congress into agreeing on more reasonable cuts at a later date. But congressional negotiators never agreed on those more reasonable cuts, leaving the door open for the automatic cuts.

Fuller says Virginia could lose more than 200,000 jobs. It's one of the reasons that both political parties - two weeks away from a pivotal election  - are distancing themselves from these painful potential cuts they agreed to in the summer of 2011.

So toxic is the threat, that the White House recently told defense contractors not to alert employees of potential layoffs ahead. That, in direct contradiction to the so-called WARN  act - which requires such notification.

"It's akin to being  in a car and all of  a sudden you find you're playing chicken and you got your whole company in there and they're saying to you, if we go over the cliff we'll help you out provided you don't tell the folks that are in the car with us," said Guy Mossman, the CEO of defense contractor Orbis.

Senate Republicans Lindsey Graham and John McCain have sent a letter to the White House warning they will "block any effort by the administration to reimburse contractors who fail to provide the required WARN Act notifications."

Graham adds, "The WARN act is the law of the land, sequestration is the law of the land. No matter how much you may not like the law you have to follow the law in America."

Even outside of Virginia, the automatic cuts will have profound  and damaging consequences, should they occur. Fuller, the George Mason economist, thinks that it could reduce employment across the economy by 2.1 million jobs in 2013.