The nation may have avoided the fiscal cliff for now, but a prominent economist tells the Virginia Association of Bankers and state business leaders that Congress only delayed across-the-board cuts or sequestration for a couple of months.
She says if the U.S. House and Senate don’t find a solution by March 1, it will take effect and Virginia would take the biggest hit.
Economist Chris Chmura says in the previous year, Virginia won more federal contract awards than any other state. She says without sequestration, Virginia should expect to see point nine percent economic growth. But if the next round of sequestration takes effect, it could send the state into a recession and result in the loss of 156-thousand jobs, mostly in Northern Virginia and Hampton Roads:
“When we look at all of the spending that goes out—here I’m just looking at D.O.D. contracts, about 50-percent of it is professional business services. And if we go to Northern Virginia, a lot more than 50-percent of all those contracts in Northern Virginia are going to professional business services firms. If we look at Hampton Roads, almost 50-percent is in manufacturing for D.O.D. contracts and of course, that’s because of the ship building sector down there.”
Even if an alternative is found, Chmura says Virginia will still grow slower than the nation this year, which is rare. She also warns that by the end of March, another government shutdown is looming if the Senate and Congress don’t approve funding. Chmura spoke in Richmond at the Second Annual Financial Forecast Event.
-by Tommie McNeil
Virginia Public Radio 