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What's behind Romney's ad claim in Virginia

Updated at 7:50 pm ET Republican presidential nominee Mitt Romney campaigned once again Thursday in the battleground state of Virginia, where he has been running television ads warning voters about the dire effects of the automatic spending cuts which President Barack Obama signed into law last summer.

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Republican presidential candidate Mitt Romney greets supporters after speaking at a campaign rally in Fairfax, Virginia, on September 13, 2012.

For decades the commonwealth had been a reliably Republican state in presidential politics, but that all changed in 2008 when Obama became the first Democrat to carry it since Lyndon Johnson in 1964. 

Once again this year, Virginia is hotly contested: an NBC News/Wall Street Journal/Marist survey released Thursday showed that among 996 likely voters in Virginia, 49 percent would choose Obama if the election were held today, while 44 percent would vote for Romney, and 5 percent were undecided.

“His defense cuts will weaken national security and threaten over 130,000 jobs” in Virginia, contends one of Romney’s latest ads, referring to Obama. And it makes perfect sense for Romney to be running this ad in Virginia – because it’s the state that would likely be the hardest hit by defense spending cuts mandated by the Budget Control Act.

Under that law, which Obama signed as the culmination of a deal with Republican congressional leaders to get them to agree to raise the government’s borrowing limit, the cuts in spending – not only defense outlays, but non-defense outlays as well – will start in January. In congressional jargon these cuts are called “sequestration.”

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According to the Congressional Budget Office, the law will reduce outlays by $65 billion during fiscal year 2013.

The Budget Control Act was designed to make these cuts so harsh and politically unpalatable, that it would force Obama and congressional leaders to devise an alternative solution, like some combination of tax increases, tax reforms, and more selective reductions in spending.

But Obama and GOP leaders couldn’t agree on any alternative, so for now the automatic across-the-board cuts – with most, but not all, entitlement spending exempted – will start in January, unless Congress votes to postpone them, which it may well do in the post-election lame duck session.

If the cuts do take place, one estimate prepared by Stephen Fuller, director of the Center for Regional Analysis at George Mason University in Virginia, finds that they will cost the economy more than 2 million jobs and will decrease personal income by more than $100 billion in 2013.

GOP presidential candidate Mitt Romney campaigns at a rally in Fairfax, Virginia.

It was Fuller’s study, which was prepared for the Aerospace Industries Association , that the Romney campaign cited as the source for its ad’s claim that “his defense cuts will weaken national security and threaten over 130,000 jobs” in Virginia.

Fuller did a state-by-state estimate of the job losses that the defense cuts in the Budget Control Act would cause.

For Virginia, his estimate is 136,191 defense-related job losses, which would rank the state first in the nation in the number of defense-related jobs at risk.

Compared to states that are roughly comparable to Virginia in their population size, such as New Jersey and Washington, Virginia’s economy is far more defense reliant.

The state is home to major defense contractors such as General Dynamics and DynCorp, both of which have their corporate headquarters in Falls Church. It is also home to major Navy bases at Norfolk and Virginia Beach, Army bases such as Fort Belvoir, and the Marine Corps base at Quantico.

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Will Congress be able to put aside its grudges and postpone the automatic cuts before year end? “The leadership in both the House and the Senate that I've talked to say it will get done, but most say not before some ugliness happens,” DynCorp CEO Steven Gaffney told investors in a conference call last month.

And General Dynamics CEO Jay Johnson said in July in a letter to the Senate Armed Services Committee, “While precise outcomes are impossible to predict at this juncture, we can be assured that the disruption and confusion that will result (from the automatic spending cuts) and its impact on national defense would be profound.  The toll that this uncertainty would have on the skilled people of General Dynamics and our suppliers should not be underestimated.”

Fuller’s job loss estimate for Virginia includes: direct layoffs by defense contractors and federal agencies, indirect job losses at suppliers and vendors that depend on the Defense Department’s primary contractors, and “induced job losses” among workers whose jobs depend on the dollars spent by those with defense-related employment, for example, the chef or cashier at a restaurant that has a large clientele of defense industry workers.

Fuller said in an interview on Thursday that no federal agency has yet specified how it would cut back if the Budget Control Act mandate takes effect in January. “I don’t know if they know that at this point, and they’re all hoping they don’t have to,” he said.

So without specific guidance from each agency, Fuller assumed that the cutbacks would be proportional to the amount of federal payroll and procurement spending that occurred in each state in 2010, the last year for which that data is available.

“Virginia ranks number one in the country in DOD spending, just passes California,” Fuller said. Although his estimate can’t be exact, it does strongly suggest that “Virginia is more vulnerable because it has more.” 

Fuller used an econometric model called the IMPLAN Pro model – which uses standard techniques to quantify spending effects on states and metropolitan areas. The CBO uses similar methods to quantify the effects of the 2009 stimulus law.

One quibble a viewer might make about the Romney ad is the phrase “his (Obama’s) defense cuts.”

Yes, Obama did sign the bill into a law. So it surely this is his law and these are his cuts.

But it is also true that 174 House Republicans (including Romney’s running mate Rep. Paul Ryan of Wisconsin) and 95 House Democrats (including Democratic leaders Rep. Nancy Pelosi of California and Rep. Steny Hoyer of Maryland) voted for it. In the Senate it also won overwhelming bipartisan support, with 46 Democrats and 28 Republicans voting for it.

But in his interview on NBC’s Meet the Press last Sunday, Romney said, “This sequestration idea of the White House, which is cutting our defense, I think is an extraordinary miscalculation.”

When he was reminded that GOP leaders supported it, he added, “I thought it was a mistake on the part of the White House to propose it. I think it was a mistake for Republicans to go along with it.”

In an interview on FOX News Wednesday night, Ryan said, “We passed the legislation in the House – I authored it – to prevent it (sequestration) from happening by cutting government spending elsewhere.” He blamed what he called “these reckless defense cuts coming down the pike” on “President Obama’s lack of leadership.”