Friday, September 28, 2012

Sequestration on the campaign trail

While people like me concentrate on issues such as how to deal with a celebrity fender bender during CARMAGEDDON II STORMWATCH , others concentrate on things that may be more important.

Governments do a lot of wonky things that most citizens don't give a hoot about. But certain isolated segments of the population really really care about it.

If your company does business with the Federal Government, then the word "sequestration" has probably been uttered by you a lot over the past few months - maybe a million times or so. If you're not familiar with the term, it became relevant last year as part of the August debt ceiling deal between the Republicans and Democrats. The deal established a "super committee" to craft a long-term budget deal, with the following caveat:

The law passed last August imposed an across-the-board $1.2 trillion cut – so-called sequestration – if the Super Committee [failed] to come up with an alternative plan by Thanksgiving. Those cuts will hit defense and domestic programs equally.

Well, no agreement was reached by the deadline, and no agreement is going to be reached in an election year, so the cuts are set to take effect in a few months.

While procurement officials and government contractors are talking about sequestration non-stop, the term really hasn't penetrated the rest of the country yet.

That may change:

Republican Presidential candidate Mitt Romney criticized President Obama on Thursday for signing the budget sequestration plan, saying it is a threat to Virginia’s economy and national security.

Speaking before veterans at an American Legion hall in Springfield, Va., Romney said sequestration would lead to 136,000 lost jobs in the state. He also said the cuts would leave the United States vulnerable at a perilous moment in international affairs.

(For the moment, ignore the fact that the Republicans in the House strongly supported the August 2011 bill. This is a business blog, not a political blog.)

As I write this, I don't know if Obama has responded, or what Romney will say on other stops on the campaign trail. But even if neither candidate says much more about sequestration before the election, the winning candidate will have to deal with sequestration after the election. Either some last-minute deal or workaround will be struck that avoids the cuts, or the cuts will take effect on schedule. Because any last-minute deal would be, by definition, last-minute, there will be a lot of business uncertainty over the next few months.

If you're thinking of starting a new government contracting business, now is not the time.
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