As John Polacek walks through his western Pennsylvania factory, he waves to the people that work for him. But don't call them employees.

"We don't hire an employee. We hire a family, and that's the way we like to treat them," Polacek said. "And they want jobs for life here. They're not going to move on until the next guy gives him a pay raise. They're here because they like working here. They like the fact that they are saving American lives doing the defense work that they are doing here."

JWF Industries is a military subcontractor. It makes parts for vehicles like Humvees and Strykers that get manufactured by larger companies like Lockheed Martin or BAE. Polacek employs 450 people, but he's worried some will be out of a job beginning next year if the Defense Department has to cut more from its budget.

The Pentagon is already required to cut nearly $500 billion as part of an agreement that allowed President Barack Obama to raise the debt ceiling. The same deal created a congressional "super committee" tasked to find more than a trillion dollars in government savings over the next decade, but no solution was reached.

If Obama and Congress cannot come to agreement on where the cuts should come from, another $500 billion would automatically be axed from the defense budget in a process referred to as sequestration.

If a massive cut like that happens, Polacek is worried the little guys will be hurt the most.

"It's the first tier subcontractors like us that are going to feel the impact, and these guys may not be here come January because of that," he said. "The impact to this town is a lot more brutal than it will be down in the beltway of Washington, D.C., because there are fewer jobs available here for these people to go get.

Johnstown, a manufacturing town in western Pennsylvania, was once at the heart of the booming steel industry. With that industry mostly gone since the 1970s, the local economy is struggling to hold on to the jobs they have left. As of the 2010 Census, Johnstown's median income was only $24,819, half of the national median income.

It's numbers like those that make the term "sequestration," which was already hard on the ears, even uglier for lawmakers up for election in their home districts. Major contractors like Lockheed Martin have warned they are obligated to put out notices this fall to the employees that if a deal is not reached by the year's end, thousands may be laid off.

Its timing, right before the November election, has made it into a major campaign issue in towns like Johnstown across the country where military contractors are major employers.

"If you have defense contractors who are looking at their defense contracts and wondering if they're going to get paid, then obviously they're all concerned," said Republican candidate Keith Rothfus.

In Pennsylvania's 12th Congressional District, which includes Johnstown, Rothfus has come out hard against the Democrat in office, Rep. Mark Critz, accusing him of not doing enough to make sure the automatic cuts do not happen. The district is no stranger to defense contractors, having been the home of John Murtha, the former chairman of the House Armed Services Committee.

Critz's response is to ask how could his opponent do any more than he has done.

"I would ask, 'OK, how? Tell me how,'" Critz said. "Just because he's not part of the conversation doesn't mean we're not doing something. We are working on this diligently."

Critz, who's on the House Armed Services Committee, said the problem of the across-the-board cuts is being discussed every day.

"What happens to the big guys sort of trickles down to all their subcontractors, and that's where the issue really is," Critz said. "If this is 80% of their business and they go away ... it's not like turning on a light switch, that when they go away you just turn the light switch back on when you need them."

For John Polacek the time for finding a solution is running out. He will have to send out layoff notices if Congress cannot come up with an alternative to the cuts before the end of the year. He calls the back and forth between the two parties political posturing.

"It's the Democrats and the Republicans on both sides of the aisle in gridlock. No one wants to meet in the middle," he said. "You stand a very good chance of hundreds of thousands of Americans being laid off come January because they just can't meet in the middle and say, 'Let's do what's best for America. Let's do what's best for these little town like Johnstown, Pennsylvania, and other places around the country.'"