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.