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How Congress got to this point
Last year, the nation was approaching the federal debt ceiling and Congress came away with the Budget Control Act, which was a relatively quick way to raise it.
That legislation also formed what was called a “super committee” of 12 legislators, an equal number of Republicans and Democrats, to look at a more long-term solution to reducing the federal deficit.
In case the super committee failed to reach an agreement, Congress created a set of extreme budgetary cuts that would go into effect if a resolution were not reached. The proposed reductions were intentionally severe and designed to force Congress to agree to a plan that would rein in deficit spending.
Those drastic budget cuts are called sequestration. The super committee failed to come up with a deficit reduction plan, and if Congress does not reach an agreement by the end of the year to stop or delay them, they would go into effect in January 2013 and end in 2021. About $1.2 trillion in cuts would be made during that time, and would be in addition to other reductions planned in federal spending.
Reductions were designed to spread across agencies, and would equal about $109 billion a year for 10 years; about half would be cuts to defense. The budget for military personnel could be exempt, as well as Social Security and veterans’ benefits.
Much of the disagreement is tied to Congress not agreeing on whether budget cuts should be accompanied by an increase in taxes.
NICOLE CLARK

Unless Congress acts to forestall across-the-board federal budget cuts currently scheduled to go into effect in January, the impact could be severe for St. Mary’s County, which is dependent on federal defense dollars.

One congressional adviser says the implementation of what is called sequestration is unlikely. But for now community leaders in St. Mary’s can only play a waiting game, wondering whether Congress will allow the reductions to occur and what the consequences would be.

A report issued by the Office of Management and Budget says several U.S. Navy functions could be slashed by 9.4 percent, in areas including aircraft and weapons procurement, as well as research, development, test and evaluation — all tasks that are carried out by the Naval Air Systems Command, headquartered at Patuxent River Naval Air Station.

It’s not clear exactly how the cuts, if they occur, would be executed locally, said Todd Morgan (R), a St. Mary’s County commissioner and defense contracting consultant.

However, funding for the Naval Air Warfare Center Aircraft Division is not slated for cuts, Morgan said, referencing the OMB report. NAWCAD is a major employer at Pax River and supports testing, research and development of aircraft and associated technology.

Regardless of which buckets of Navy money are tapped, one researcher said the budget cuts could potentially cripple St. Mary’s job market if they were allowed to go forward.

Stephen Fuller, director of the Center for Regional Analysis at George Mason University, estimated that as many as 7,554 full-time, nonmilitary jobs could be lost in St. Mary’s next year if Congress allows sequestration to occur. Fuller examined potential effects of sequestration nationwide and compiled a report commissioned by the Aerospace Industries Association. The report estimates job loss and other economic consequences of sequestration throughout the nation, and has been cited by politicians, media and government officials. Fuller calculated figures at the county level for The Enterprise.

“I believe that report like I believe the man in the moon,” Morgan said. However, cuts in some form are most likely coming to the defense budget, he acknowledged. And the sequestration threat, he admitted, “is one of the things that keeps me up at night.”

But Morgan said he’s not panicking. The county “has worked really hard over the last few years to increase our business base outside the NAVAIR community,” he said.

Major job loss is a potential consequence of sequestration, but “at this point, I consider it a highly unlikely scenario,” said Del. John Bohanan (D-St. Mary’s), who is also an adviser to Rep. Steny Hoyer (D-Md., 5th).

Serious work on finding a solution will likely begin between the November election and the end of the year, he said.

At least 54,950 people are working in St. Mary’s, according to most recent figures from the county economic development office. About 22,400 of those jobs were associated with Pax River as contractors, government civilians or military personnel, according to the office of economic development.

Many areas of the county economy — such as retail, taxes collected to pay for local schools and other noncontractor jobs — are tied to Pax River’s robust workforce. Fuller’s estimates for St. Mary’s take that into account.

Of the overall job loss projected for St. Mary’s unless sequestration is halted, Fuller said, 2,637 could be direct jobs — including government employees and contractors directly supporting the government. About 1,530 jobs lost could be subcontractors and vendors supporting the defense industry, he said. But, Fuller estimated 3,387 of the jobs could be employees not directly affiliated with Pax River.

“These are people who don’t know they’re going to be impacted,” Fuller said. They would be affected by changes in consumer behavior. People might “hunker down,” Fuller said, and not spend as much money in a clothing store, or not purchase a car or begin a home renovation.

Fuller based his estimates on federal dollars coming into the county for payroll and procurement. Actual amounts, he said, would be calculated when the federal government announces which programs would be cut.

The report projects a total of 114,795 Maryland jobs lost — falling behind only California, Virginia, Texas and Washington, D.C., — through the 2013 fiscal year, which began Oct. 1. The report estimates that 2.1 million jobs could be lost nationwide.

It sounds bleak, but all is not lost, Morgan said. “There’s a possibility that Congress will get its act together,” he said.

Hoyer agreed that sequestration would adversely affect the country and, he said, “Southern Maryland won’t be exempt from that.”

It would be “irrational and harmful” and have a significant effect on the defense industry here, he said. However, Hoyer said he is hopeful Congress will come to a new deficit reduction plan in the lame-duck session after the election.

Hoyer said he worked to get support from 100 legislators, of both parties, and urged them to sign a letter pledging to support the congressional super committee charged with finding a solution to reducing the deficit.

So far, that letter and the super committee have failed to derail the threat of sequestration. Congress would need to reach an agreement before the new year to avoid the massive cuts.

“Just not knowing is causing some anxiety,” said Glen Ives, former Pax River commanding officer and president of the Southern Maryland Navy Alliance, who is now vice president at a large defense contracting company.

“I don’t want to say the sky is falling,” he said. But businesses won’t just wait until something happens. “The companies I worry about are the small businesses that are totally focused on DoD,” he said.

On a national scale, some defense-focused companies have started looking at options, from reducing office space to laying off employees in anticipation of the cuts.

St. Mary’s largely has avoided that trend. The county has been the fastest growing workforce in the state and held the highest median household income growth rate in Maryland, according to the county’s 2012 technology handbook, which tracks businesses and trends associated with defense.

At least 213 businesses in the county are listed as technology firms. About 53 percent of those companies provide engineering services. The rest provide computer, management and scientific consulting, research and development support and aircraft manufacturing. Almost all of them are associated with NAVAIR and Pax River.

Like many federal agencies, NAVAIR is not saying much about the impact of these possible budget cuts. A spokesperson said NAVAIR is not planning for sequestration and is awaiting further guidance from OMB.

NAVAIR officials aren’t the only ones waiting. Sequestration calls for comparable reductions — from about 7.6 to 10 percent — to other defense services, as well as nondefense federal agencies and programs, including those focusing on education, child and family services, health services, the Centers for Disease Control, food processing plant inspections, disaster response, air traffic control and border protection. Medicare would be cut by up to two percent.

Reductions could cause some government efforts to collapse and force programs to break contracts. The severity of that threat leads some to believe that Congress will act to delay or disarm sequestration before it occurs.

“You’re obviously bracing,” said Morgan. “But you’re bracing for something that’s an unknown.”

nclark@somdnews.com