By John Karabias
7:00 AM CST, November 25, 2012
For Maryland businesses, the seemingly never-ending political season and the cloud of economic uncertainty that accompanied it were supposed to have subsided at election's end. However, just as we thought we had put the campaign season behind us, impending dangers to Maryland's economy have emerged in the form of the so-called "fiscal cliff."
The cuts to defense and non-defense discretionary spending that comprise half of the fiscal cliff (or sequestration process) would have a devastating and disproportionate effect on Maryland. As a local, small business supporting the Department of Defense (DOD) and Department of Homeland Security (DHS) at critical military installations across the state, our staff of engineers, software developers and other IT professionals would be severely affected by such drastic and indiscriminate cuts. Our company has already taken measures to deal with previously planned cuts to defense programs; additional reductions of this magnitude would severely curtail our ability to maintain our current workforce.
While we realize that sacrifices must be made at all levels of government to reduce our national debt, the sheer size and scope of the potential cuts would damage our military's readiness and the nation's ability to adequately defend the homeland. For the sake of our brave men and women in the military and for the Maryland businesses that support them, it is imperative that our lawmakers act swiftly to avoid going over the fiscal cliff.
Sequestration would set in motion some $1 trillion in spending cuts over the next nine years in addition to equally significant tax increases on businesses and individuals. This would amount to the largest fiscal austerity package ever enacted and, according to the Congressional Budget Office, would plunge our economy back into recession. Under current law, a whopping $100 billion would be removed from the economy in 2013, with exactly half of the cuts to come from the DOD budget. Defense Secretary Leon Panetta has stated that such cuts would have a debilitating effect on crucial DOD systems and could potentially render our military unfit to deal with certain national security threats.
The other $50 billion would come from discretionary spending, including DHS, an agency supported by countless Maryland businesses. Under the proposed sequestration process, the DHS budget would be cut by 7.8 percent on top of expenditure reductions already implemented by the agency. These measures would almost assuredly result in major layoffs across the DHS contracting industry.
According to a study by the Center for Regional Analysis at George Mason University and Chmura Economics and Analytics, the proposed cuts to defense and non-defense discretionary spending would reduce gross domestic product (GDP) by $215 billion and cost the U.S. economy 2.14 million jobs in the first year alone. What's more, approximately 114,795 of the job losses would come from Maryland, removing $11.57 billion from our state economy. This would put extreme upward pressure on statewide unemployment and place additional strains on the state budget as safety net spending increased.
The fruits of our industry's labor are not confined to the deserts of Middle Eastern countries or the waters of the South China Sea. The defense industry makes profoundly important contributions to society that reverberate well beyond the battlefield. Technical innovations that have spawned from within the DOD and the defense contracting industry have led to transformational technological progress over the last century. While the Internet remains among the most widely renowned DOD inventions, similarly important advances in chemistry, engineering, and medicine have been commercialized and have paved the way for a healthier, more productive and more prosperous United States of America.
Looking to the future, our industry is investing heavily in science, technology, engineering and math (STEM) education at the local and national level. At Aberdeen Proving Ground, the defense industry has raised hundreds of thousands of dollars for STEM education and organizes an annual STEM Summit with regional leaders in government, academia and industry to develop a STEM-based curriculum for the workforce of tomorrow.
As the end of the year draws closer, so too does the potential for economic calamity in Maryland. Our legislators have a closing window to prevent the type of spending cuts to our defense and homeland security programs that would inhibit our military's effectiveness and endanger a large sector of our state's economy. Let's hope they take responsible measures to reduce our nation's deficit without putting our national defense and local businesses at risk.
John Karabias is a senior analyst at RTR Technologies in Aberdeen and co-founder of Emerging Business Leaders at APG. His email is email@example.com.