- The Enterprise
- The Recorder
The defense contracting industry is constantly in a state of flux. That’s the nature of the business. When a company is on top of its game, the rewards can be great. But Department of Defense contracts, no matter how lucrative, expire or must be renewed. Lose a big contract and people can lose their jobs.
For decades, St. Mary’s County has attracted established aviation and support firms, and entrepreneurial people have grown their own companies here, large and small. This is all made possible, of course, by the presence of Patuxent River Naval Air Station, and these private companies involved in the high-risk, high-reward government contracting business have brought prosperity that has rippled through the entire community — St. Mary’s has among the highest median household incomes in the nation.
But always there is an ebb and flow; projects come to Pax River, projects go. The defense contracting companies know this. Their business model is based on it, and the successful ones thrive by planning for it, and by retaining old contracts and winning new contracts based on past performance.
Right now, though, things are different. An element of uncertainty has been introduced that changes the rules, that makes it tougher for defense contractors to plan and to invest. It’s the still-looming “fiscal cliff.”
This was supposed to be settled by now, as the new year began. The threat of substantial tax hikes for most people was averted by the New Year’s Day action of Congress, although Social Security payroll taxes are going back up 2 percent this year after a two-year reduction.
But much remained undone by Congress; most significantly for St. Mary’s, there has been no decision on averting deep, across-the-board government spending cuts, with half of them coming from the Department of Defense. Instead the threat of what is called sequestration remains, but with the cuts deferred until March.
Unless Congress comes up with an alternative, sequestration could mean budget cuts of between 7.6 and 10 percent to the Department of Defense budget. How this would impact St. Mary’s contracting firms, and the military and civilian personnel working at Pax River, is uncertain. Some say the type of work done at Pax River would be shielded from the most drastic cuts. Nevertheless, the uncertainty has led some companies with military contracts to restructure and reduce overhead costs, according to the president of the Southern Maryland Navy Alliance.
But here is what is certain. The inability of Congress to do its work in a rational way has hampered the nation’s economic recovery. Now these impending meat-cleaver budget cuts that Congress set up to scare itself into making responsible decisions, which it has so far failed to do, are injecting unneeded insecurity into St. Mary’s County’s economy.