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Lindley Estes is a business writer for The Free Lance-Star and Fredericksburg.com. This blog is on Fredericksburg-area business. Send an e-mail to Lindley Estes.

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Sequestration could hit local economy, but extent unclear

Fredericksburg-area economic development directors say the fear and uncertainty surrounding sequestration has caused employers to delay new investments, but it remains unclear how hard the federal cuts could hit the local economy.

Sequestration, set to take effect Friday, is Washington-speak for a large package of federal budget cuts put in place during the debt ceiling deal in 2011. Lawmakers who approved the cuts didn’t want them to actually take place; they were meant to push Congress into negotiating a different, less harsh package of cuts, but such negotiations have so far gone nowhere.

A large percentage of the cuts would come from defense. That could hit regions that are heavily dependent on defense and federal contracting work, such as the Fredericksburg area.

It remains unclear whether Congress will reach a last-minute deal to stave off the automatic cuts. Each federal department would also handle the cuts differently, so it’s difficult to quantify the exact impact on the economy should sequestration take effect.

The uncertainty surrounding what comes next has had some effect locally, economic development directors say. Some companies have put off hiring and investing in their businesses until they get a better sense of what the rules will be going forward, said Spotsylvania County Economic Development Director Tom Rumora.

Fredericksburg Economic Development Director Karen Hedelt believes the economic recovery that has started to take hold locally has been held back by the sequestration cloud, as people are more careful with their spending and companies hold off making new investments. But nobody seems to really know the exact impact that the cuts would have, said King George County Economic Development Director Nicole Thompson.

Should the cuts go into effect, Caroline County would probably be less affected than the remainder of the Fredericksburg region because of its lesser dependence on federal spending, said Caroline Economic Development Director Gary Wilson.

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Permalink: http://news.fredericksburg.com/businessbrowser/2013/02/28/sequestration-could-hit-local-economy-but-extent-unclear/