U.S. Defense Secretary Leon Panetta gestures as he briefs the media at the Pentagon Briefing Room in Washington, DC January 26, 2012
U.S. Defense Secretary Leon Panetta gestures as he addresses media representatives in the Pentagon Briefing Room on Jan. 26. Details of Defense Department budget cuts that Panetta discussed then are contained in a document recently obtained by Reuters. REUTERS/Kevin Lamarque

At a time when the US job numbers have started to improve, the looming cuts in defense budget can play spoilsport. The Pentagon said last week thousands of jobs can be lost across the defense industry if lawmakers do not act decisively to ensure that the possible $500-billion cuts are prevented.

Frank Kendall, the Defense Department’s acting undersecretary for acquisition, technology and logistics, said the defense budget cuts would force the Pentagon to break many hard-won contracts with the industry. This will include a deal with Boeing for the development of a new re-fuelling plane.

Kendall told the Senate Armed Services Committee that if the mandatory cuts, termed as sequestration, are put into effect there could be breach in the KC-46 and Littoral Combat Ship contracts, forcing the Pentagon to renegotiate those deals. Also the US Navy will be hit with a $15-billion annual cut when these cuts are passed.

Last August, President Barack Obama and the Congress agreed on defense cuts of $487 billion over a decade. On top of this another $500 billion of cuts to defense programs is expected unless Congress changes the existing law. According to the law if Congress does not produce enacted savings of at least $1.2 trillion additional $500 billion defense budget cuts will be initiated.

It is seen that the initial $487 billion cut is an acceptable level of risk, but additional $500 billion is not considered so since such deep cuts in defense investments could result in the loss of many jobs. Defense Secretary Leon Panetta has constantly condemned the additional cuts, saying these will have devastating effects.

Kendall said that the additional cuts could have a serious impact on many of small and medium-sized businesses connected to the defense industry. The Senate Armed Services Committee has asked Kendall to submit a report by May 10 elaborating the effect of the current budget cuts on small and medium-sized businesses.

Also Kendall made it clear owing to tighter Pentagon finances, weapon programs that go over the budget are more likely to get scrapped.