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Tuesday, September 2, 2014

Following Fiscal Cliff, Sequestration the New Big Fear

Congress finally passed a fiscal cliff deal late Tuesday night and President Obama signed it into law Wednesday morning, but America’s fiscal woes aren’t over. The United States hit the debt ceiling on Dec. 31, leaving Congress with roughly two months to vote on raising the legal limit on federal government borrowing.  Federal legislators also have two months to deal with a major issue for manufacturers: sequestration.

The fiscal cliff agreement delayed the issue of sequestration, which involves automatic cuts to the federal defense budget, by two months. If Congress does not act by then, provisions in the 2011 Budget Control Act will automatically cut $500 billion from defense spending over 10 years, in addition to $487 billion in spending reductions the same legislation already put in motion.

Sequestration could greatly impact defense contract manufacturers by significantly reducing orders. Aerospace contractors have already begun scaling back production and employment in anticipation of deep cuts.

The Aerospace Industries Association (AIA) released an open letter to Congress and the public calling on lawmakers to address the issue of sequestration, emphasizing the negative effect it would have on aerospace firms and the American economy as a whole.

“More than 2 million Americans across all sectors of the economy will lose their jobs starting in 57 days if our political leaders fail to fix the self-inflicted wound of sequestration and the dangers it poses to our warfighters and national security,” AIA President and CEO Marion C. Blakey said in the letter.

Although the AIA admitted that delaying sequestration was better than allowing it to begin, it also pointed out the dangerous risks posed by uncertainty about a permanent resolution.

“Delaying implementation of sequestration by two months does not eliminate the uncertainty facing our business leaders and our warfighters,” Blakey continued. “If sequestration is not solved in the next 57 days, it would be an abdication of responsibility by the leaders of this country, one that will only heighten Americans’ cynicism and cement the public image of a gridlocked Washington that simply doesn’t work.”

Brian Lane

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