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Defense cuts due to hit Mass. economy hard

Could cost 30,000 jobs, study predicts

The Bay State’s economy has benefited from a decade-long surge in defense spending, but that sector’s labor force is threatened by massive military budget cuts that are set for next year, the author of a new study warned Monday.

“It could be up to 30,000 jobs at risk,” said Marty Romitti, director of economic and public policy research at the University of Massachusetts’ UMass Donahue Institute, which prepared the report for the Defense Technology Initiative.

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“If it ends up being that significant,” Romitti added, “what you’ve done is, you’ve essentially taken away all the jobs that have been gained by the Massachusetts recovery over the last several years.”

Last year, Massachusetts received nearly $13.9 billion in contracts from the US departments of Defense and Homeland Security. That is down from a peak of $15.5 billion in 2009, but still 83 percent more than in 2003. The increase reflects a surge in spending on the wars in Iraq and Afghanistan, and on systems to defend against terrorist attacks.

Throughout New England, the US government spent nearly $34 billion on defense and homeland security in 2011.

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Defense expenditures generated about 130,000 jobs in the state, with a total payroll of $9.7 billion. Romitti said that the number includes 47,000 people directly employed by defense contractors and another 71,000 jobs at other companies that provide goods and services to the defense firms.

The state also benefits from strong defense spending in the rest of New England. The region’s other five states attracted $20 billion in military contracts last year. Romitti said that about 11,500 Massachusetts jobs come from money spent here by out-of-state defense contractors.

“The fact that they’re getting jobs in Connecticut, for instance, means that businesses in the Pioneer Valley are benefiting,” Romitti said.

Massachusetts builds a lot of military hardware; General Electric Co. makes jet engines in Lynn, for instance, and Waltham-based Raytheon Co. is a major producer of guided missiles.

But the single biggest chunk of money, 26 percent of the total, goes to research and development of new military technologies, at places like the Charles Stark Draper Laboratory Inc. in Cambridge.

“It’s really developing those next generations of weapons systems,” said Romitti, “keeping America out ahead of the rest of the world.”

But there is a huge cloud hanging over the defense sector because of the massive US budget deficit. The Budget Control Act, passed by Congress last year, will require the Pentagon to make $487 billion in cuts over 10 years, starting in 2013. In addition, Congress and the White House have agreed to a program called “sequestration,” in which $1.2 trillion in budget cuts will automatically go into effect over 10 years.

Sequestration will take effect next year, unless the plan is modified by Congress, and the cuts must come equally from defense and nondefense spending. That would mean an additional $600 billion in Pentagon cuts, or more than $1 trillion in the next decade.

“The defense sequestration cuts that are set to begin in January present a direct threat to this robust defense industrial base in New England, with the potential to result in thousands of lost jobs, and leaving our country less safe and more reliant on foreign suppliers,” Senator Kelly Ayotte, a New Hampshire Republican, said in a statement. But Romitti said there is some hope that Massachusetts companies could avoid the worst of the cuts. Romitti said the Pentagon plans to keep investing heavily in advanced technologies like unmanned aircraft, robotics, and network security software, areas where Bay State companies are strong.

Hiawatha Bray can be reached at bray@globe.com.
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