
Defense Companies Warn Thousands Of Layoffs Imminent Due To Shutdown - bane
http://www.forbes.com/sites/lorenthompson/2013/10/04/defense-companies-warn-thousands-of-layoffs-imminent-due-to-shutdown/
======
Afforess
To provide a contrary viewpoint here, NPR's Planet Money had a rather good
piece a few weeks back on the downsides to drastically scaling back Military
Contractors.

The basic gist is that if contractors that supply all of one component or
product dry up, those former employees don't just stay unemployed, they go to
work in other industries. But, if in 5, 10, or 20 years, you decide you
actually need that component or product again, you can't just flip a switch
and re-activate manufacturing. The knowledge is gone, all the workers you had
who were trained in the process have gone into new fields, and rebuilding your
military production infrastructure is very painful. For a good example of this
in recent years, FOGBANK.

FOGBANK was a mysterious classified material critical to creating nuclear
warheads. Following the turn-down of the cold war and missile reduction plans,
the manufacturing plant was mothballed. And the process for creating it was so
secretive that no one remembered quite how to make it. Decades later, when
aging missiles needed replacements, the process for manufacturing was lost and
scientists couldn't reproduce the process based on the information left
behind. The US government ended up spending _a decade and over eighty million
dollars_ just to research and _rediscover_ the manufacturing process for this
one particular component.

[http://en.wikipedia.org/wiki/FOGBANK](http://en.wikipedia.org/wiki/FOGBANK)

Obviously FOGBANK is an extreme case, but it's a fair point worth considering.
Drastic cuts to military contractors may leave large holes in military supply,
especially of sensitive and classified materials.

NPR Planey Money episode:
[http://www.npr.org/blogs/money/2013/08/23/214928040/episode-...](http://www.npr.org/blogs/money/2013/08/23/214928040/episode-482-why-
the-u-s-keeps-sending-weapons-to-egypt)

~~~
beloch
Here's the thing... It is _not_ in a military contractor's best interests to
properly document and mothball any knowledge or capability so well that it can
be handed over to the government, stuck in a warehouse for decades, and be
dusted off by someone completely different without difficulty. Doing so is
tedious, expensive, and makes the contractor instantly replaceable. Failing to
do so is cheap, fast, easy and improves their odds of getting future business!

The flipside is that it's impractical to pay companies to maintain the
capacity to build everything they've ever built for all time. Imagine what it
would cost IBM to keep people trained in building new versions of every
product they've ever invented! If it costs billions to adequately document and
mothball the construction process for every wheel you've ever made, but it
only costs millions to reinvent the occasional wheel, what do you do?

~~~
Amadou
_The flipside is that it 's impractical to pay companies to maintain the
capacity to build everything they've ever built for all time._

The defense contractors handle that problem by putting those people on other
projects. Sometimes it is productive work, sometimes it is just any project
with a budget surplus. Their intent is to maintain institutional memory even
if the project itself has been mothballed.

That's what I saw happen to people numerous times while working as a
consultant to a couple of DoD contractors. I billed a crazy-high rate and they
even shuffled me off onto a peripheral program in order to keep me around as a
sort of security blanket for the original program that was (slowly) spinning
down.

------
adventured
If a normal business were as fiscally irresponsible as the US Government, all
of its employees would have long since been out of a job. I find it bizarre
that people apply a different financial standard and expectation to a nation's
finances as they would to their own or a business'.

The massive deficit spending, financed by the Fed, that keeps all of these
jobs going, is mostly in fact funded out of the pocket of Americans without
their knowledge. If we were forced to balance the budget tomorrow, a million
people would lose their jobs. Given the guaranteed increase in the cost of
debt over the next decade, that tells you exactly what is going to happen to
all of these jobs given our national debt will climb past $20 trillion (just
5% on $15 trillion wipes out social security or the US military).

This shutdown will end very soon, despite the hoopla. Not one of the major
financial problems that America has will be resolved however. An even bigger
disaster will merely roll closer.

The most surprising thing about what's going on, is the fact that so many
people dependent on government largesse have for so long been spared the
consequences of the out of control financial problems in DC.

~~~
jotm
Anyone still remember how those banks got bailed out by the government?
Wouldn't it be nice to have the gov save your company every time you do
something stupid :-)

~~~
dobbsbob
It would also be nice if my company could print it's own money, and I could
pick up a gun and jack the company next door and steal all their resources or
extort them without any legal repercussions. It would also be great if my
employees had to pay me back a tax everytime I gave them a paycheck so I could
get some more guns.

~~~
trentmb
I too would enjoy the franchise wars and have every restaurant called Taco
Bell.

------
ddoolin
So basically we're not making as many weapons, in which case you won't hear me
complaining.

~~~
fnordfnordfnord
Not trying to refute your point, nor even argue that we need a bunch of
nuclear weapons; but nukes have a shelf life. They have to be maintained /
reconditioned periodically.

~~~
ktsmith
Or we could eliminate this as an issue and decommission them.

~~~
fnordfnordfnord
Hey! That sounds like something that some kind of hippie peacenik might say,
or Ronald Reagan. Besides, it makes too much sense.

------
ck2
The first thing all these people do the day they are laid off is file for
unemployment (justifiably).

So this passes all the costs onto the states.

I am wondering why state governments aren't foaming at the mouth yet about
this.

~~~
Amadou
_The first thing all these people do the day they are laid off is file for
unemployment (justifiably).

So this passes all the costs onto the states._

Unemployment insurance is primarily paid for by payroll taxes that go into a
dedicated fund. That probably doesn't apply when the federal government
decrees an extension to unemployment benefits, but the first 180 days or so
come from that dedicated fund.

My understanding is that the payroll tax varies based on the historical rate
of lay-offs. So a company that regularly lays people off (say a hollywood
production company that lays people off at the end of every movie project)
will have a higher payroll tax than a company with much better employment
continuity. I could be wrong, that's just what I've been told and I have not
dug into the details, although I did marry a woman who works in movie
production.

------
JoachimSchipper
I'm not an American, so this question may be rather uninformed: why doesn't
this "furloughing" lead to a rash of "fsck you, pay me"? I know labor
protection isn't that strong, but contracts still mean something and plenty of
these workers are sufficiently unionized that they can't just be fired.

~~~
jcurbo
In cases where unions are involved, the terms of the furloughs are usually
negotiated with the unions beforehand. I don't know about contractors
specifically, but for civil servants, their unions were definitely involved in
the furlough negotiations during sequestration. In this case I don't know how
much they'd get to say since the entire federal government has shut down and
the issues go all the way to the highest parts of the government.

Also keep in mind furloughs are not layoffs - just unpaid leave.

~~~
VladRussian2
>Also keep in mind furloughs are not layoffs - just unpaid leave.

they pay back the salary for the furloughed days once shutdown ends - at least
that happened to gov employees after previous shutdowns

~~~
cantrevealname
>they pay back the salary for the furloughed days once shutdown ends

And here I thought that the sliver lining of the shutdown was that the
government would spend less taxpayer money this year!

So much for that hope.

~~~
bayesianhorse
I'd be surprised if chaotic, unorganized spending cuts would actually save
money in the long run.

------
lispm
Welfare through military spending.

------
avty
Lay them all off already, give our privacy back.

~~~
OWaz
What I get confused about and fail to understand, is why people get excited
about hearing that others are being furloughed. What's so good about people
not being able to support their family, or possibly default on debt and even
worse allow city and state budgets to shrink? We all lose together.

~~~
camus
Isnt that whole shutdown about spending ? well this is where money could be
saved, by aborting all these expensive and useless weapon deals, instead of
cutting food stamps for the poor. US society dont need new tanks, drones or
missiles. Let's cut defense spending.

~~~
adestefan
No. The shutdown is about a minority faction of the GOP trying to repeal the
Affordable Care Act which is already funded. It has nothing to do with
spending.

