Small Contractors Will Struggle to Survive Spending Cuts, Economist Says
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Nearly half of the projected 2.14 million job losses expected to arise from impending mandatory federal spending cuts would come from small businesses, according to George Mason University economist Stephen Fuller.
Fuller testified before the House Small Business Committee on September 20 on the topic of "sequestration," or automatic spending cuts scheduled to take effect on January 1 as a result of last year's debt ceiling negotiations. “Not only will small businesses shoulder a disproportional share of the jobs losses attributable to sequestration, but their ability to survive these losses and remain viable further challenges the efficacy of sequestration,” Fuller said.
The new analysis by Fuller and the Aerospace Industries Association revealed that 956,181 small business jobs are at risk under sequestration.
Small businesses with prime federal contracts would immediately shed some 158,000 jobs representing 34.1% of all federal contractor jobs lost under sequestration, Fuller said. Of the 1.4 million private sector jobs supported by federal contracting and estimated to be eliminated by sequestration, 58% would come from small businesses.
The committee also heard from small business owners including Mark Gross, founder and CEO of Oak Grove Technologies. Gross says his company is putting on hold much of its planned construction on 200 acres of land adjacent to Camp MacKall Army Air Field in Hoffman, North Carolina.
In addition, he is minimizing his marketing campaigns and trade show participation. “Many of the business owners that I speak with are taking a similar approach as we are considering the uncertainty of sequestration; we are putting expansion, infrastructure expenditures, and indirect hiring on hold.”
ML Mackey, CEO of Beacon Interactive Systems, a small business located in Cambridge, Massachusetts, estimates that her software, which is used by the Navy, has saved the government $40 million over the past nine years. “I am by no means the first business owner, nor will I be the last, to tell a Congressional panel that sequestration will have major, negative impacts in areas ranging from business survival to national security. Nor will I be the last to argue that something must be done to stabilize our economy. Surely Congress can craft a more deliberate and careful approach than the current strategy, which will lead to considerable job loss and greater economic uncertainty at a time when job creation and economic growth remain a top priority for our country,” she told the committee.