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Sequester Defense Cuts Feared By Contractors After Year Of Campaign Fawning

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SEQUESTER DEFENSE CUTS
Republican vice presidential candidate, Rep. Paul Ryan, (R-Wis.), speaks at a campaign event at Partnership for Defense Innovation in Fayetteville, N.C., Thursday, Aug. 23, 2012. (AP Photo/Sara D. Davis) | AP

WASHINGTON -- During the 2012 campaign, politicians paid plenty of attention to defense contractors. They toured parts of the country that rely on their products, met with industry leaders, even held events at their places of business. All of this was done with hopes of conveying concern for the impending slate of defense-spending cuts that are part of sequestration.

Today, some of those same defense contractors feel frustrated and ignored. A number remain hopeful that a deal will be reached to stave off the $1.2 trillion cuts, half of which will come from defense spending. But with just four days to go, the prospects seem bleak. Sequestration is likely to happen, they've concluded, despite promises from lawmakers that it wouldn't under their watch.

"It has created a climate of turmoil and uncertainty," said Wally Kirkpatrick, founder and CEO of Alabama-based DESE Research, a veteran-owned small business that provides research in defense and other fields. "I join the chorus in echoing that it would be disastrous, detrimental to defense."

The sequester was prime fodder for presidential and congressional candidates alike during the 2012 cycle. Former Republican presidential nominee Mitt Romney and running mate Rep. Paul Ryan (R-Wis.) often visited military-heavy states. Paul was unveiled as a vice presidential candidate on the decommissioned USS Wisconsin battleship in Norfolk, Va.

Kirkpatrick attended a separate Ryan campaign event in October, where the congressman touted his commitment to military and missile defense. Kirkpatrick called the congressman's speech that day "terrific." He praised the Romney-Ryan ticket at the time. Today he he's dismayed that the Republican Party, as well as the Democrats, can't come to an agreement to wipe away sequestration.

"With the absolute demise of bipartisanship, finding compromise on critical issues to meet the nation's needs has totally disappeared," he said.

That the effects of sequestration would be a significant part of Ryan's messaging seemed evident from the moment his candidacy was announced. A couple of weeks after the Norfolk unveiling, the vice presidential nominee held a roundtable just south of Ft. Bragg in North Carolina, where he warned of the consequences of "Obama's defense cuts." Though Ryan voted for the Budget Control Act of 2011 that put the cuts in place, he highlighted the cost he said the sequester would inflict on North Carolina's $23 billion defense industry: 11,000 jobs, $650 million in wages, and $940 million in state domestic product.

Retired four-star Gen. Dan McNeill, who now serves as the president of The Logistics Company, sat on the panel at Ryan's roundtable. McNeill said it was not an endorsement; he would have done the same for the president's reelection campaign.

"I wasn't a potted plant for anyone," McNeill said. "[But] these are some significant cuts, and I think they leave the civilian leadership in the military and the military service chiefs and all of their subordinate commanders with not a whole lot of options. It's going to be a real challenge."

Six months later, he and other potential victims of sequestration are left discouraged. The alarm expressed by Ryan and other Republicans has been replaced with something closer to nonchalance. House Republicans insist they don't want the sequester cuts to take effect. But they're also upfront about their comfort in not replacing the cuts with other means of revenue, such as taxes.

"We had hoped that the administration and Congress would have found a way to avert the showdown, but we believe that this has become politicized to the point where our community will suffer," said Doug Peters, president of the Fayetteville-Cumberland County Chamber of Commerce, and one of the attendees from Ryan's roundtable in August. "When you have that much riding on one industry, as this community does, the threat of sequestration is alarming." The Fayetteville area is home to Fort Bragg and a rapidly-growing defense industry.

The effects have already been witnessed. The U.S. economy contracted by 0.1 percent in the fourth quarter as defense spending skydived and companies prepped for further cuts. The uncertainty of sequestration now, Peters added, means that contractors are unable to plan or hire, as they look to control costs until there are no more fiscal crises threatening economic stability.

"They are literally stuck in neutral and it's not a good place for them to be," he said.

Some contractors aren't as surprised by the impasse. Politics, after all, is different when the election ends.

"It's much easier to campaign than it is to govern," said Jeff Wassmer, president and CEO of Spectrum.

Wassmer, like others in his industry, has had a front row seat to the change in tone and approach. During the election cycle, former Republican Senate candidate George Allen visited his office in Newport News, Va., and praised the sequester replacement plan passed by House Republicans.

"There's nothing that excites people more than national security or is as big of a concern as is national security and defense," Wassmer says now. "To make that a political football is very easy to do -- it's been done in the past -- but it's … much, much different to go back and work something out."

Republicans weren't the only ones who warned about the sequester on the campaign trail. President Obama addressed the issue on the stump, mostly to reject claims that his administration embraced the cuts. "The sequester is not something that I proposed," Obama said during the final presidential debate, before erroneously blaming Congress for proposing the idea. "It will not happen."

"It appears today that likely was incorrect," said McNeil of The Logistics Company, who expects the cuts to take place. "My experience has been, in the 66 years of my life, a lot of people make a lot of promises in campaigns and don't always deliver ... the winners and losers both make promises and don't always deliver."

The president didn't just predict that sequestration wouldn't happen, he actively moved to prevent companies from planning for it. In October, his administration urged defense contractors not to issue employee layoff notices based on uncertainty over the looming defense cuts. Lockheed Martin, one of the largest employers in battleground state Virginia, followed that guidance and announced it would not issue layoff notices to 123,000 workers on Nov. 2, just days before the election.

Explaining its decision, Lockheed said it had been provided "important new information about the timing of DOD actions under sequestration" and stated its commitment to working with government officials on a solution that would stop the cuts from taking effect.

Today, the global security company finds itself preparing for the very outcome it was told would be avoided.

“We are working closely with our customers to understand how sequestration could impact all of our programs. Significant delays in funding for production programs could threaten the stability of our supply chains, increase costs, prolong delivery schedules and ultimately weaken our national security posture," Lockheed spokeswoman Jennifer Allen said in a statement provided to The Huffington Post. "Until sequestration is permanently eliminated, there will be an overhang on our industry that stifles investment in plants, equipment, people, and future research and development essential to the future health of our industry. We will continue to work with our government leaders to find a more effective solution to our nation’s fiscal challenges."

The hope of the White House is that the "overhang" Lockheed and others are currently experiencing is enough to incentivize Republicans into accepting a sequestration replacement bill more aligned with the president's priorities. That means revenue raisers to replace the spending cuts and the protection of some social safety programs.

Earlier this month the administration held a private meeting with chief executives from over a half-dozen defense contractors to discuss what the consequences of sequestration would be.

Among those in attendance was Marion Blakey, the president and CEO of the Aerospace Industry Association (AIA), a trade association that represents major aerospace and defense manufacturers. AIA spokesman Dan Stohr said "the messages were heard," but the partisan politicking that continues on both sides has provided little encouragement that a solution will be reached.

"We're extremely frustrated and disappointed," Stohr told HuffPost. "It never should have come to this."

"This is too big an issue for it to not be on the top of everyone's agenda," Stohr added. "We elect confident and capable people to make those decisions on behalf of the American people. It doesn't appear that those things are happening because of the politics … we expect more of our elected leadership."

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