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Spending cuts endanger NoVA

August 2nd, 2011

From the Washington Post:

The agreement could immediately lift the cloud of uncertainty over the economy. It would end a political stalemate that could have caused the United States to default on its obligations for the first time. Over the long term, the deal could help free the nation from what is fast becoming a crushing debt.

But, many economists say, the agreement could endanger the anemic economic recovery — because of both what the deal includes and what it doesn’t. The government would cut back on spending, which has softened the blow of the slowdown, while failing to renew measures, such as a payroll tax cut, that have put money in consumers’ pockets.

The debt deal represents a striking reversal from a year ago, when jobs were atop the government’s agenda and both parties were arguing over who had the best plan to increase employment. But even as the agreement threatens to tamp down growth this year and next, it doesn’t go nearly as far as financial analysts and some senior officials had hoped toward reining in the national debt later this decade.

In short, some economists warn, deficit savings are too modest in the future and too severe in the present.

The Debt Crisis Bill could possibly crater Northern Virginia’s prosperity by immediately cutting hundreds of billions of dollars out of defense spending.  The defense industry is one of the engines driving the train here in Northern Virginia and has been the cause of our prosperity while other areas, even in Virginia languished with tempid economy. 

In another WaPo article:

Defense firms around Washington have already been shrinking, but the proposed cuts would slice even further into an industry that is a pillar of the region’s economy, according to economists.

The proposed budget deal would cut $350 billion from defense budgets over 10 years, in the first defense reductions since the 1990s, according to the White House. But the contraction could go much further because the deal calls for the possibility of more deficit-reduction measures by the end of the year.

Under the plan, proposed by President Obama and congressional leaders, if a bipartisan committee does not reach agreement on a second round of cuts after negotiating for about four months, a “trigger” mechanism would kick in, forcing automatic cuts of $600 billion in defense programs.

What we don’t need here is unemployement.  Unemployment means relocation for many.  Relocation means high paying jobs and respective  employees move elsewhere.  The housing market recovery would be dealt a fatal  wound.  The Hampton Roads defense industry could also be hit, to a somewhat lesser degree.  Right now, these two regions are carrying Virginia high  and giving her national recognition as the place to go to do business. 

The Tea Party might have just dealt Virginia a lethal blow.  When America gets over its love affair with sound bites and realizes what just happened, there might be even more people leaving the area in 2012–those careless, naive legislators who stupidly ushered in a legislative sound-bite we all have to live with, regardless of consequences.  They might just be voted out of office.

The road to economic recovery depends on an infusion of cash into the economy, not everyone tightening their belt. 

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  1. marinm
    August 2nd, 2011 at 11:52 | #1

    Some of the major programs that I know about or am part of have been talking about tightening budgets for awhile. I don’t think any well run program (or defense contractor providing support to a program) hasn’t already done some forecasting to figure out what’s now “needed” and what’s a “nice to have”.

    Will people lose jobs under this correction? Yup. Sucks but it happens. Part of life I suppose.

    From an idealogical point of view we can’t continue to be the World’s Police forever. It’s unsustainable.

  2. August 2nd, 2011 at 12:48 | #2

    Would you say that if you were the one getting the pink slip, especially with new babies?

    I don’t think we can ever afford to be cavalier about job loss, especially in NoVA.

    I see way too many people who are just one degree of separation from the feds talking and acting way too smuggly. Those employees need to remember also that it is easier to fire in the private sector and also that longevity is not your friend. The older you are/more experienced, the more you cost. When cost cutting becomes an issue, sometimes the 2 for 1 becomes an issue.

    I have been in this area long enough to see some mighty unexpected surprises.

  3. Elena
    August 2nd, 2011 at 13:47 | #3

    Great point Moon. As long as it doesn’t affect you who gives a crap? Marinm, very disappointing, very disappointing. Where ARE the jobs exactly? Oh yeah, right, no where. Government plays a role in setting the policy that helps create a postive economic environment. We have had Bush tax cuts in place SINCE the recessin, and WHERE, where are all those jobs those tax cuts provide? No where, because they aren’t happening. but big oil should get subsidies from me and you? Why is that O.K. again?

  4. marinm
    August 2nd, 2011 at 15:39 | #4

    As I’ve gone through a few pink slips in my time I know the kick in the gut feeling. Knowing you have a mouth to feed at home makes it worse. Three mouths before mine — heart wrenching. But, how are things different today than they were a week ago? I work at the pleasure of my company and that of the government. On any given day I can walk into work and be told to pack up my stuff. No notice whatsoever. No “rule” about having to be written up a number of times or having to go through an arbitrator. Nothing. I *live and work* with the idea I can be let go.

    So, knowing that you have to make certain plans.. Savings, education, certification, knowing contacts, having other work lined up just in case.. There are two types of people on this planet. The quick and the dead.

    “I don’t think we can ever afford to be cavalier about job loss, especially in NoVA.” Job loss happens. It happens regardless of locale. What matters is how quickly a skilled employee can find employment after an event. It may require taking a pay cut (been there, done that), taking less meaningful work (I’d work at McDonalds if it meant feeding my kids), commuting longer distances, going into a different type of work, etc. Years ago when employees were just hammering employers for 10% per year raises, bonuses, threatening to leave if they couldn’t wear sandals to work, etc.. Now that employers are in the drivers seats we seek that time to complain. Mind boggling.

    “I see way too many people who are just one degree of separation from the feds talking and acting way too smuggly.” It’s less about being smug and more about understanding the nature of the work and our ultimate employer. It’s a cycle. To use a sports analogy – we’re heading into a rebuilding year and not all of us are superstars. Some will be sent to the minors and some will just be sent home. It means try harder to be a super star than just a clock watcher.

    Elena, what exactly is disappointing? That I understand how our (my) work is cyclical and that heaven forbid we see down years? But, let’s apply your logic. Mr. Obama’s plans have been going strong these 2 years and how’s unemployment doing? Where are all the jobs?

    See how that works?

    I *agree* with you that we do NOT need to subsudize big oil. Will you agree with me that we shouldn’t subsudize Big Education, Big Healthcare, Big Welfare, Big Unions, etc……

    Say it with me. Smaller govt is our friend. Big Government is the debil.

  5. August 2nd, 2011 at 15:50 | #5

    Lets just talk about subsidizing ‘big education.’ Are we speaking higher education or k-12? What we are talking about varies greatly depending on level. If we are talking k-12, it isn’t subsidized. There are way too many unfunded mandates to ever think k-12 is subsidized. One plan that has been around ever since I can remember is impact aid. That is the federal govt giving localities some cash for every kid of a federal employee/military person because of their impact on a locality. I don’t think I would call that a subsidy either. That is just helping to pay the rent.

    Many of the things you have described have hit my family over the years. You can be salesman of the month and come in the next day and told to clean out your desk because company goals and objectives have changed.

    I don’t recall the demands on employers. When did that supposedly happen?

  6. August 2nd, 2011 at 15:52 | #6

    Oh, I forgot to answer your question about what has changed? Quite a bit has changed. We will learn more as the debt deal is finalized. It will hit our area though, given the defense cuts.

  7. marinm
    August 2nd, 2011 at 16:30 | #7

    Big Education at the K-12 level inclusive of Big Labor (or Big Teacher if you will) Education even at the county level takes more than 50% of our budget. That’s a pretty big expendature.

    To your 2nd para of #5 at work we call that: Going from Hero to Zero. You can also call it the “What have you done for me lately” employer idiom. ;)

  8. August 2nd, 2011 at 16:43 | #8

    Yes, all sorts of names. However, under normal times, it usually isn’t quite as pervasive. re hero to zero syndrome.

    Remember that big labor isn’t in education in a decision-making capacity in most of the south. I can’t speak to the north east however. I don’t think 50% on education is all that much. Bedroom communities spend more on education than retirement communities for obvious reasons. PWC has been a bedroom community ever since I first moved here. I don’t expect it to change, also for obvious reasons.

    As long as there are federal and state mandates regarding special groups of kids you are going to have high education costs. When you look at how much more it costs to educate a child who has special needs compared to a kid in the gifted program or regular ed, it all becomes clear.

    The alternative is families with children with severe disabilities just keep their kids home. Of course then you get into the question about forcing abortion on women who have severe fetal anomolies? Is that ethical? Most people would say no. On the other hand, ask those same people about how much money schools get and you get an answer that is incompatible with the first answer.

    If Prince William pays just under $11,000 a year to educate Little Johnny in regular ed, contemplate what it costs to educate little Julie who has cerebal palsy and is emotionally disturbed. The costs quadruple at a minimum. Most of the costs are personnel with some going towards busing and equipment.

  9. marinm
    August 2nd, 2011 at 17:09 | #9

    http://www.cato.org/pub_display.php?pub_id=11432

    The video is a nice way of breaking down how taxpayers could get the same level of education that the Obama kids are getting for the cost of taxpayers using DC public schools.

    If you look closely you’ll see Arlington on his list as well. ;)

  10. August 2nd, 2011 at 18:49 | #10

    In the first place, you cannot compare private schools to public schools. Why? Private schools don’t have to take everyone. Public schools do. Right off the bat, the playing field isn’t level.

    That ends the conversation. Whoever that was acts like schools hide their per capital costs intentionally. Perhaps the right questions aren’t being asked.

    Finally, you get what you pay for in most instances. A school system can save plenty of money stuffing as many kids in classes as they can and cutting back on specialty programs and athletics. So your kid goes to a crappy school. Some people don’t care.

    What attracts business to an area? Good schools.

    So actually I don’t understand the point of the Cato Institute.

  11. Starryflights
    August 3rd, 2011 at 04:12 | #11

    Thanks for the article, moon.

    We all need to get off this delusion that debt reduction is going to create jobs. Deficit reduction is never and will never be about creating jobs. The Repugs have been less than honest when they claim government austerity measures will spur job creation. It will cost jobs, not create them, as we’re all about to figure out.

    The fact is, deficit reduction should have been a priority ten years ago, when the economy was strong, unemployment was low, and the government was running surpluses. That would have given us leeway to focus on debt reduction.

  12. Cargosquid
    August 3rd, 2011 at 10:29 | #12

    We all need to get off this delusion that government spending will spur private sector job growth. Deficit spending is never and will never be about creating jobs outside of the government sector. Demidiots have been less than honest when they claim government stimulus measures will spur job creation. It costs jobs, not creates them, as we’ve already seen.

    The fact is, deficit reduction should have been a priority ten years ago….oh, wait, it was. Deficits dropped to less than $200 billion in 2007. And the government has never run a surplus as Clinton’s was created with accounting tricks. And conservatives have focused on debt reduction for decades, but nobody listened.

    There. Fixed it.

    • August 3rd, 2011 at 11:34 | #13

      There is no delusion. If defense contracts dry up, people will have less money to spend, especially those who are out of work. What on earth do you think spurs the NOVA economy? The Federal government.

      Deficits dropped to less than $200 billiion in 2007? What country?

      That is perhaps one of the most ludicrous statements I have ever read.

  13. Elena
    August 3rd, 2011 at 11:58 | #14

    Cargo,
    What world are you in? Govt investments CAN and DO spur private sector investment. Why is it that northern virginia, Richmond, and Norfolk do not suffer the same fiscal crisis as parts of central and southern Virginia? Because of government investment. What happens when people lose their jobs, they longer pay taxes but instead suck money from the public coffer via unemployment benefits and a downward cycle worsens in our economy.

    • August 3rd, 2011 at 12:23 | #15

      @Elena, People do have to pay federal income tax on unemployment, which I think it sort of self defeating.

  14. Elena
    August 3rd, 2011 at 12:28 | #16

    thanks for the info Moon. Probably not paying as much as their job paid into the tax coffer though.

  15. Cargosquid
    August 3rd, 2011 at 13:13 | #17

    @Moon-howler
    http://blog.heritage.org/2009/03/24/bush-deficit-vs-obama-deficit-in-pictures/

    Bush deficits in 2007. http://blogs.wsj.com/economics/2007/10/05/deficit-for-fiscal-2007-slides/
    The Congressional Budget Office estimated Friday that the U.S. federal budget deficit for fiscal year 2007, which ended Sunday, was about $161 billion, or 1.2% of gross domestic product. That’s down from the $248 billion shortfall recorded in fiscal 2006, which translated into 1.9% of GDP. The Treasury Department will report the official tally later this month.

    Ooooohh….its all about NOVA. I see. That’s the only job market that matters. Ok. If its gov’t spending that builds jobs, then, lets go full blown communist and have the gov’t hire everybody. Simple.

    Please show me where gov’t spending makes NON-GOV’T jobs. I mean you did read this part, right?

    “creating jobs outside of the government sector.”

    Government does not create industries, wealth, or jobs in the private sector. Now, if you are talking about tax supported jobs…oh yeah. Government jobs are increasing. The size of the government has NEVER been bigger. So, yes. NOVA, and other government supported areas might get hurt. “instead suck money from the public coffer” applies to both unemployment benefits AND tax supported salaries. It all comes from the same bucket.

    According to your logic, government can NEVER be reduced and MUST expand, so as to prevent job loss. That’s not the purpose of government nor should government jobs be any safer than a private job. When those government jobs are no longer needed or are to expensive to keep, they SHOULD be gone.

    This is why Virginia needs to get off of the public trough and develop more private industry and be allowed to expand its energy industry. Or do you like the fact that our state is dependent upon the whims of fickle, idiotic, and corrupt politicians? Look at the current argument by our Senators and Governor against the movement of a carrier to Florida for security and military reasons because it would hurt our economy. The Navy states that its needed and, in fact, there used to be a carrier group in Florida. Look at the criticisms of Cantor because he supported the unneeded second F-35 engine development but your statements are identical. We need unnecessary political development to keep jobs.

    In your world, government spending, with increased taxes, never seems to harm anyone but reduced spending, with reduced taxes kills jobs……..ok, then.

    Want more jobs? Support lower and more simplified taxes and regulations.

  16. Cargosquid
    August 3rd, 2011 at 13:43 | #18

    “In the first place, you cannot compare private schools to public schools. Why? Private schools don’t have to take everyone. Public schools do. Right off the bat, the playing field isn’t level.”

    Exactly. So..privatize ALL the schools. And keep the funding public. Send that money directly to the parent. And if the parent has special needs children, subsidize them.

    If a locale spends $10K per child, then parents get $10K per child. THEY pick the school. And if said school accepts less, then, the parents keep the extra or if they homeschool, the parents keep that money. If a school demands more…the parents make up the difference.

    The schools pay for all admin help and hire the principals. The State/County would be responsible for Supervisors and above.

    You’ve mentions unfunded mandates. Hey, guess what! Reduce the scope and power of the fed’l gov’t and you get less of them. Kill the entire dept of Ed and all of its regs/laws/mandates and return education to the state and it gets cheaper.

    • August 3rd, 2011 at 15:07 | #19

      Cargo, your gang of people I consider political thugs want to dismantle social security, medicare, and now public education. It isn’t going to happen.

      There are lots of kids out there that private schools will not take.

      Why should public funds be dumped in to a private institution where there is no public control. Absurd.

      What else do you want to do away with? Don’t forget to include my pension.

  17. Elena
    August 3rd, 2011 at 15:00 | #20

    Cargo,
    How would you create jobs in the private sector?

  18. Elena
    August 3rd, 2011 at 15:04 | #21

    Cargo,
    In your world I imagine there is no dept of ed, energy, EPA, commerce, housing, etc etc. What role does the federal government play?

  19. Elena
    August 3rd, 2011 at 15:10 | #22

    Oh, to answer you question about govt spending creating jobs……

    every defense contractor and everything their paychecks go towards, well like, food, housing, cars, restaurants, vacations, etc et

    How about all the industry created by NASA and other innovative science endeavors. How about govt grants to private industry, etc etc.

  20. Cargosquid
    August 3rd, 2011 at 16:28 | #23

    I would create jobs by allowing business minded people to create jobs. That sounds simple, but the CEO and founder of Home Depot states that he could not create that company in today’s business environment.

    In my world, the Dept of Ed is gone and education authority reverts back to the states. The dept of energy was created to make us more energy independent. FAIL. the EPA, while it usually acts as a decent referee, has fallen prey to political activism and is following the current fad du jour of declaring CO2 as a pollutant. It should be reined in by Congressional oversight.

    Social Security is a ponzi scheme that needs to be reform, if not dismantled. Medicare is a monster that is horribly run. Public education does not need to be in control of the Fed’l government.

    Public funds where there is no public control? Apparently you don’t like the GI bill then. Or did not read where I stated that supervisory control would still be left to the counties/states.

    Elena, again, everything you mention is gov’t sponsored. And it doesn’t need to be. Was Edison working for the gov’t? Was Home Depot or Fed Ex created by the gov’t?

    Under your logic, why shouldn’t every thing be accredited to the gov’t or why shouldn’t the gov’t just hire everybody and emplace them where needed?

    Are there gov’t related jobs? As I said…yes. Private industry is not created by the gov’t spending more and more money. How many businesses were created by the 900+ billion stimulus? Apparently….none.

    Let’s assume that you get your spending. How do we pay for it? Taxes ARE the only way to pay for it. Its already been proven that higher tax rates will reduce job growth. But, lets increase taxes anyway…..how many jobs are created when taxes are raised to pay for increased spending? Our budget NOW borrows 42%. That will get higher no matter how much more we tax. We cannot keep pace with spending. Historically, no matter what the tax environment has been, the US takes in about 16-18% GDP. That has not changed. Spending is growing from about 20% to 25%.

    But, getting back to gov’t creating businesses and jobs…..where are they? Congress has been spending 1.5 trillion in deficits, including stimulus bills targeting non-existent shovel ready jobs, since 2009. So, where are your jobs? And our rates would have been higher if the “Bush Tax Cuts” had not been renewed. Personally, I would have let them expire and laughed when the unemployment rate jumped in reaction to that. I don’t have a problem with saying, “I told you so.”

    Boehner should have just allowed the Senate bill to pass. Both of the “deals” are going to result in rising costs, lowered markets, inflation, and default. That way its only the Democrats fault. I would have voted “present” on the deal because both SUCK.

  21. Elena
    August 3rd, 2011 at 22:55 | #24

    weren’t those Bush tax cuts prevented from sunsetting because those rich people are the “job creators”? Not working out so well is it.

  22. Starryflights
    August 4th, 2011 at 04:15 | #25

    Come on, Cargo, ex-Navy guy, who do you think builds ships, planes, tanks, weapon systems, radar systems, bases, even logistics systems to manage bean, band-aids and bullets – civilian contractors do, of course.

  23. Cargosquid
    August 4th, 2011 at 09:55 | #26

    Starry,

    Yep…again….gov’t paid. NOT private industry. The shipbuilders may be contracting out to them, but the gov’t did not CREATE the business. There is no wealth creation going on. Those payments are coming out of the taxes paid by the workers. Gov’t can be a customer. But please name the industry that gov’t creates. Who owns it? Who are the stockholders? What profits does it make?

    Gov’t spending harms business in certain ways. If we continue to borrow like we are, how are we going to pay for all those nice toys the Navy wants? If our budget is eaten by entitlements, how do we pay that shipyard? We’ve dropped to a 250+ ship fleet because we can’t afford something larger. Because other spending is taking over. We have to borrow to pay for our entire military and that interest is going to eat into our budget.

    But keep thinking that the gov’t is the source of the economy…..I know I won’t change your mind.

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