Super Committee Failure — What it Means in VA

Just prior to Thanksgiving, the bipartisan “Super Committee” charged with eliminating the nation’s deficit essentially gave up on finding an agreed solution.

I know you were shocked to hear that.

Currently, the nation is running about a $1.3 trillion deficit, which is an estimated 8.5% of our nation’s gross product.  To put it in simple terms, our Federal government spends about 25 cents on every dollar earned, but only taxes 16.5 cents.

Clearly, that kind of math carries repercussions.  Federal borrowing essentially swallows the credit market and freezes out business and consumer loans.  And so we enter our fifth year of a depressed national economy.

The Budget Control Act of 2011, which created the Super Committee, mandates cuts in government spending of $1.2 trillion over the next ten years, if no agreement is reached.  The reductions will be split between civilian and defense programs, which projects the net loss of $500B (billion) to the nation’s defense budget — from that law alone.

The impact on Virginia from the mandatory cuts will be catastrophic, at least on paper.  Right now, about 14% of our state economy is based revenue from Federal procurement contracts.  (That is #1 in the U.S. per capita). Another 5% is based on Federal salaries. 

The major slice of this comes from defense-related spending concentrated around the Pentagon in northern Virginia and Hampton Roads in the southeast.  (Fairfax County and Arlington alone account for 57% of the Federal procurement money).

Economist Stephen Fuller has predicted that Virginia could lose over 100,00 jobs if these types of cuts ensue.  I disagree if only because “jobs find talent” in this world and our biggest asset in Virginia is the high quality of our educated work force.

Regardless, the 2011 Super Committee failure and the ramafications it has for our economy should be extremely concerning to all Virginians — and those who represent us in the U.S. Congress.

 

 

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  • Anonymous

    Chap:

    I am happy to read your post because it confirms that you understand the magnitude of the problem facing Northern Virginia. The Super Committee was stacked with partisan politicians and never had a chance of working. It was yet more disgraceful behavior from our political class in Washington, DC.

    As a native Northern Virginian I would like to say that I agree with your “jobs find talent” theory. However, as the head of a small but fast growing software company with offices in CA, MA and VA I simply can’t accept your wishful thinking.

    I find myself looking at where I want to hire people for my company (and we have hired 30 people this year) and routinely deciding against Northern Virginia. The quality of life in general and the transportation chaos in particular have made almost all of Northern Virginia unacceptable to the talented young people I need to recruit and retain. The transportation chaos is the direct result of freezing the gas tax at a level (in cents per gallon) that was last changed in 1986. Despite the fact that the cost of everything has risen dramatically since 1986 the tax on gas has remained frozen. The additional gallons sold are useful in supporting the additional population buying the the gas and crowding the road. However, the frozen gas tax has cut fast growing areas like Northern Virginia to the bone. I fear the damage is irreparable. Once a place is considered a poor place to live it can take decades to recover.

    The Commonwealth’s approach to higher education is also sorely lacking. Virginia has many very good colleges and universities. However, there are three that are routinely among the top 75 in the country – UVa, W&M, VT. Virginia also has three centers of economic strength – Northern Virginia, Richmond and Tidewater. None of our top three universities are in any of our top three centers of economic activity. This represents a catastrophic lack of vision, leadership and planning. There were numerous answers to this problem. First, the three top tier universities could have been forced into a serious multi-campus structure. The University of Illinois is a good example of this with a major campus in Urbana – Champaign and another in Chicago. The universities already near the economic centers could have been differentially funded to create top tier STEM (Science, Technology, Engineering and Math) programs. The University of Maryland at College Park is a good example of this. Currently, UMD – CP has the 14th rated Computer Science program in the United States. The closest contender in Virginia is UVA’s 34th ranked program. Some years ago, the University of Maryland had nowhere near that level of accomplishment. However, a coordinated effort by the Maryland state legislature, the university and local business leaders changed that. Virginia, once again, lacks the vision and leadership to implement such a common sensical plan.

    I could certainly go on. Virginia’s counter-productive love of a strict implementation of Dillon’s Rule could be a post in and of itself.

    The bottom line is that federal debt has been building for years. People have been heralding the debt crisis to come for many years. Virginia knew that its addiction to federal money was at risk as the federal debt mounted. Yet the political leadership in Virginia has stubbornly and stupidly refused to act until the full and predictable impact of that problem is now on us.

    We Virginians have only ourselves to blame for electing one General Assembly after another which sat on their hands and pondered their navels as the predictable crises mounted. I can only hope that Northern Virginia’s politicians for life such as Janet Howell, Bob Marshall and Dick Saslaw earn their place in infamy as our community goes the way of Detroit when its one major employer starts cutting back.