July 12, 2012 7:54 pm

Virginians fear ‘fiscal cliff’ defence cuts

President Barack Obama will try to turn the politics of the “fiscal cliff” to his advantage when he travels to Green Run High School in Virginia Beach and Phoebus High School in Hampton on Friday – his latest stops on the re-election campaign trail.

But things may not be so simple for him in this nook of south-eastern Virginia, a pivotal swing state in the November race for the White House.

Mr Obama is expected to focus on his plan to extend Bush-era tax cuts for the middle class – due to expire at the end of the year – while allowing them to end for the wealthiest Americans, in an effort to contrast his visions on economic policy with Mitt Romney’s, his Republican opponent.

But on the ground, voters might have another overriding concern. Hampton Roads, as the region is known, has a heavy concentration of naval shipyards, military facilities and families of US soldiers and sailors. Its residents will want to know how the Obama administration plans to prevent automatic spending cuts to the defence budget worth $500bn over 10 years starting in 2013 – another element of the country’s looming fiscal contraction, or “fiscal cliff”.

Bobby Scott, a veteran Democratic congressman from the area, says about 50 per cent of the local economy is dependent on the Pentagon. “When you pull that plug, everybody suffers,” Mr Scott says.

But the White House does not have much to offer in the way of answers.

The administration says it wants to avoid the planned cuts, with Leon Panetta, defence secretary, issuing dire warnings about their impact on the US military. But it seems unlikely that it can stop them from happening any time soon.

The cuts were triggered by the failure of a bipartisan “supercommittee” of lawmakers to identify $1.2tn in deficit reduction over the next decade – or face an equal amount of forced reductions – as part of a deal to avert a default on US debt last summer.

Since then Congress has been unable to find a consensus to unravel the reductions, which include a big chunk out of the Pentagon.

“The political system seems not to be able to come to grips with a way to resolve this, that’s what people are talking about,” says Mike Petters, chief executive of Huntington Ingalls Industries, a large builder of ships, aircraft carriers and submarines for the US Navy, based in Newport News.

Mr Petters, who describes himself as politically fiercely independent, says his company’s production has long lead times of three to five years, so it would not see an impact immediately. But he worries that some of his suppliers will start to slow down.

Republicans in the region do not believe Mr Obama has done enough to prevent the planned defence cuts, which are already causing some contractors to prepare for the issuance of lay-off notices. As the deadline draws closer, this could work to the advantage of Mr Romney, they believe.

“This is a breach of his duty as commander-in-chief,” says Scott Rigell, a freshman Republican congressman from Virginia Beach who is a former car-dealer and former marine from a family of marines.

“I don’t have any indication that the president has offered any viable path out of this,” he says.

Republicans have proposed offsetting the defence cuts with reductions in other government programmes, such as food stamps, but Democrats have rejected that proposal.

Interactive graphic: Race for the White House

The backgrounds and platforms of the main candidates

Meanwhile, Republicans have been pushing for the White House to be more transparent in itemising the programmes that would be slashed through “sequestration”, to offer more clarity to contractors. But the administration has resisted.

Vic Fazio, a former Democratic congressman from California and a senior adviser to Akin Gump, the law firm, said it did not make sense for the White House to “telegraph where those cuts were to occur at a point when they are adamantly opposed to making them”.

And as an ally of Mr Obama’s, Mr Scott defends the president’s handling of “sequestration”. He says simply allowing all the Bush-era tax cuts to expire for American households earning more than $250,000 per year would produce sufficient revenue to almost completely wipe out the so-called “sequestration” cuts.

The Obama administration has not explicitly said those savings could be used to replace the defence cuts, but last year it did lay out a plan to reduce long-term US deficits including a mix of new spending cuts and tax increases. “The president has prepared a fiscally responsible alternative and there has been no response,” says Mr Scott.

But the cries of outrage are coming loud and clear – which Mr Romney’s supporters hope will drown out Mr Obama’s visit. “What is at stake is not only a potentially major economic blow to the Commonwealth [of Virginia] but a great deal more: our national security in a dangerous world,” said Bob McDonnell, Republican governor of Virginia, in a statement released by the Romney campaign.

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