With Washington so far unable to avert the looming fiscal crisis, much of the attention has been on the more than $500 billion in tax hikes set to take effect Jan. 1.

But failure to strike a deal also means the first wave of roughly $1.2 trillion in spending cuts will hit starting next month.

Of that, about $492 billion will be carved out of the Pentagon over the next decade -- that's about $55 billion a year starting in 2013. It was a scenario so dire that for months Defense Secretary Leon Panetta had claimed his department wasn't even planning for it. Now, it could be reality.

Retired Army Gen. Jack Keane said the implications for the military could be "very serious."

He said the Pentagon is "already in financial trouble because there's already been a $480 billion cut that's being applied right now as we speak.

"To take another cut on top of that ... is devastating," he said.

And it will make it more challenging for the military to maintain its troops, its equipment, and its preparedness, Keane said.

The broader defense industry also will be hit -- this is part of the reason that budget forecasters say the fiscal crisis could cause another recession. Private companies that do work for the Pentagon may not get the government contracts to keep them in business, which in turn hurts security more.

Daniel Goure, with the Lexington Institute, a public policy group said: "Severe budget cuts could literally put the national security at risk if the companies that make the F-35 fighter, or nuclear attack submarines, or artillery pieces don't have the money to keep going, have to lay off their work force, have to close facilities."

Democratic Rep. Jim Moran said he's trying to prepare his constituents in northern Virginia, which is home to many people who work in the defense industry.

"My district would be the most adversely affected anywhere in the country," Moran warned.

Panetta also warns these cuts will "inflict lasting damage on our national defense."

President Obama and congressional leaders met Friday afternoon at the White House in a last-ditch effort to strike a deal that can avert the tax hikes and spending cuts. Senate leaders later emerged and said they would work over the weekend to craft a new bill.