The Small Business Committee today held a hearing on the effects of sequestration on small business contractors and the industrial base. The hearing’s testimony included new data that shows that of the 2.14 million jobs at risk, 956,000 small business jobs will most likely be cut as a result of sequestration. According to research conducted by the George Mason University Center for Regional Analysis, sequestration will also result in a decrease in personal earnings of $109.4 billion, and a reduction in GDP of $215 billion. The Committee received testimony from Deputy Undersecretary of Defense Mike McCord as to how small businesses will be affected by cuts to the federal workforce, prime contracts, and subcontracts.
“Top administration officials, including Secretary of Defense Leon Panetta and the Chairman of the Joint Chiefs of Staff, have said the ‘sequester’ threatens our national security,” said Chairman Sam Graves (R-MO). “In addition to the threat to our safety, today’s testimony proves that nearly a million small business jobs could be sacrificed because of sequestration. This should serve as more incentive to replace these blind, indiscriminate, across-the-board cuts with smart and directed savings."
Graves continued, “House Republicans have offered credible solutions to replace sequestration, while Senate Democrats and the White House have not. The uncertainty of a looming sequestration is already having a negative effect on small businesses who are unable to rely on current contracts or pursue future contracting opportunities. This inhibits their ability to plan for the future, grow, and save taxpayers money through their efficiency and innovation. Even though several months remain before sequestration begins, it is apparent, from today’s testimony, that the Pentagon is indecisive about how to execute sequestration. This is a concern for me and the thousands of small businesses who fulfill contracts with the Department of Defense. There is still time to act on the tremendous amount of uncertainty that faces our economy. I call on the White House to join us in replacing these crude cuts with targeted, thoughtful savings.”
On May 10, 2012, the House passed the Sequester Replacement Reconciliation Act of 2012 (HR 5652), which is a plan to replace the sequester with responsible spending cuts in other federal programs. On September 13, 2012, the House passed The National Security and Job Protection Act (HR 6365), which would require President Obama to submit a plan to Congress by October 15, 2012. Small Business Committee Member Rep. Allen West (R-FL) introduced HR 6365.
To save taxpayer money, the Small Business Committee launched a comprehensive contracting reform initiative earlier this year, which includes legislation that encourages greater participation of small businesses in competitive procurement. Small businesses have proven that they can perform a service or produce goods for the government cheaper and often quicker than their larger counterparts. On Friday, May 18, 2012, the House passed the Committee's contracting legislation, which was included in the National Defense Authorization Act of 2013.
Materials for the hearing are posted on the House Small Business Committee’s website HERE.
Notable Witness Quotes:
Honorable Mike McCord, Principal Deputy Undersecretary of Defense (Comptroller) in Washington, DC, said, "If Congress fails to act on a balanced deficit reduction plan to avoid sequestration, it could harm the management of many defense investment programs, introduce inefficiency into the defense industry that supports us -- including small business – and cause long-term disruptions, even if the reductions only extend for one year. The Joint Committee sequestration would seriously disrupt our forces and programs and our workforce."
"While we can foresee the many harmful impacts of sequester, we cannot devise a plan that would eliminate or even substantially mitigate them. Again, sequester defies rational planning, as was intended. Congress has time to enact a balanced deficit reduction plan that would avoid sequestration."
"...sequester would be devastating to DoD and to every other Federal agency. The best outcome for the Department of Defense and for private companies -- large and small -- is for Congress to enact a balanced deficit reduction plan that halts implementation of this inflexible law."
Dr. Stephen S. Fuller, Ph.D., Dwight Schar Faculty Chair and University Professor Director, Center for Regional Analysis School of Public Policy, George Mason University in Arlington, VA, said, “The impact of the BCA of 2011 on both the public and private sectors, with the projected loss of 2.1 million jobs in FY 2013, will have a significant effect on small businesses and their employees. Workers in small businesses would suffer more than fifty percent (51.6%) of the projected job losses due to the spending reductions mandated by the BCA of 2011.”
“Small businesses will be impacted by the immediate reductions in federal procurement spending resulting from sequestration (direct impact), as subcontractors, suppliers and vendors (indirect impacts), and as businesses supporting the retail and consumer service needs of the workforce (induced impacts) that would experience layoffs and the loss of labor income due to sequestration.”
ML Mackey, CEO of Beacon Interactive Systems in Cambridge, MA, said, “While major program cuts will be necessary inside federal agencies, these cuts should be made with a purposeful and thoughtful approach in order to not only ensure an equal impact across the defense industrial base but also to ensure a rational approach that does not gut the advances made in government procurement to this point.”
Laurie Moncrieff, President of Adaptive Manufacturing Solutions in Burton, MI, said, “Further degradation of the small business base could result in the loss of sectors that are costly to rebuild, if not impossible; reduce competition, lead to the loss of innovation, increase unemployment, further erode skill sets, and a myriad of other unknown repercussions.”