The Fiscal Cliff Isn't Over
Last week, Congress and President Obama managed to stave off the fiscal cliff by resolving one of its major issues: Taxes. Far less attention, however, was paid to the fact that the politicians failed to resolve “sequestration,” the lesser-known part of the fiscal cliff which promised around $1 trillion in budget cuts for the federal government, including $500 billion from the military. Instead of coming to a deal on sequestration, Congress delayed the cuts from taking place until March. Defense Secretary Leon Panetta has said he hopes Congress can use these two months to prevent sequestration altogether, according to the American Forces Press Service.
As I reported in my January story on the military in Massachusetts, such cuts could have a major impact on jobs in our state, which relies heavily on contracts from the departments of Defense and Homeland Security. Massachusetts sees an annual $14.2 billion economic impact from the military bases, and $13.9 billion from the defense contracting industry. While our bases are relatively small, we get major dollars for research:
The truth is that while Massachusetts continues to attract all sorts of military spending, most of it doesn’t have much to do with the training and housing of soldiers anymore. These days, it’s our brainpower, rather than our brawn, that the military is interested in tapping. It works like this: The Department of Defense identifies a problem it needs fixed and starts looking around for solutions, often to tech-focused academic centers like MIT, or to research companies like Raytheon. These organizations win contracts to tackle the problem, and get to work. The military funds the research, which, in the case of an academic institution, often leads to the formation of private tech and defense companies that supply the solutions to the military’s problem. Remove the federal dollars, though, and the whole ecosystem collapses.
The Washington Post reported yesterday that contractors are “quietly optimistic” for a resolution of the sequestration delay—featuring “modest” cuts—Congress has proved again and again that it’s far from reliable. Until then, uncertainty will reign.