| Examiner Coverage |
|
|
Federal spending cuts will ravage the Washington-area economy, and businesses are preparing for the worst with hiring freezes and budget cuts of their own, according to local economic experts. Virginia, Maryland and the District are among the top five jurisdictions where federal procurement dollars were spent in 2010, with $78.9 billion spent in the Washington region last year, according to a report by the Greater Washington Initiative.
But that flow of cash may slow dramatically.
Government agencies are preparing to make $1.2 trillion in spending cuts over 10 years, beginning in 2013. The severe spending reductions became necessary after a congressional “supercommittee” failed to reach a bipartisan deal to reduce the nation’s debt.
Businesses should start planning now to mitigate the effects once sweeping cuts take effect, according to Jim Dinegar, president of the Greater Washington Board of Trade.
“We know that businesses are making the decisions now,” Dinegar said. “They can’t sit on their hands and be uncertain forever, so they need to be proactive and start to make their moves now so that they’re not caught short.”
Dinegar, who hosted a panel Wednesday with local business leaders and economists discussing the cuts, said the region can still expect some economic growth, but not anywhere near the rapid rate of growth it has become accustomed to. High-quality jobs will continue to be added in the region, but won’t come close to job gains in the previous decade, when businesses added 285,000 jobs from 2000 to 2010.
Employers reported 42,474 job cuts nationally in November, according to the outplacement firm Challenger, Gray & Christmas. About 44 percent of those jobs lost were from the public sector, the firm reported.
“It’s an audit world, and we’re just going to have to be prepared for that,” said Alison Frisch, director of bids and proposals for Courtesy Associates.
The federal government makes up 12.8 percent of jobs in the region, but the scope of the federal government’s impact extends to nearly every other sector, according to John Stell, economist with PricewaterhouseCoopers. It’s the other 77 percent of job sectors, such as commercial real estate, hotels, airports, and even dining and retail industries, that will all feel the weight of the budget ax, he said.
While spending cuts spare individuals from tax increases, the effect of the supercommittee’s failure won’t be lost on the region’s government contractors, as well as real estate, travel, and hospitality industries in the region that rely on the benefits of a robust federal work force.
“Any instability in the public sector we feel immediately as an industry here,” said Solomon Keene, president of the Hotel Association of Washington, D.C.
