Is It Time To Panic?
Excerpt from Justin's February Newsletter
As a result of the Federal Budget Control Act of 2011 and the failure of the resulting "Supercommittee," the nation was introduced to the so-called "Sequestration." The Sequestration imposed across-the-board spending cuts to a variety of Federal spending. It was designed to never happen, but it did.
There is no state in America where the Federal Government spendt more per capita than the Commonwealth of Virginia. As such, the imposition of the Sequestration cuts had panicked the entire Commonwealth. Then-Governor McDonnell formed a Commission to prepare the Commonwealth for the significant economic impact of the cuts. The impact of the reductions rippled through the economies of jurisdictions across the Commonwealth, including Northern Virginia. Bond rating agencies placed many Federally-dependent governments on notice that possible downgrades were imminent.
Overall, the Sequestration cuts reduced Federal spending by a little over $1 trillion over nearly a decade. Regardless of whether you felt as though the cuts to spending were necessary, the reductions left a mark on the region's economy.
The new Administration is now preparing to make their own mark on Federal spending. If published reports are to be believed, the reductions being proposed would dwarf the Sequestration cuts of 2013. If these reports are accurate, and cuts of over $1 trillion per year are enacted, the consequences for our region and our City would be catastrophic.
Again, the relative merits of these spending reductions are a discussion for another time. The impact of them will be dire for our City. We must prepare for the worst and respond accordingly.
All of these reductions will disproportionately affect our region and our City. They will impact direct Federal revenues to the City, consumption taxes paid to the City, and eventually our real estate market.
Rather than panic, I suggested to my colleagues that the City should develop an "Emergency Plan" to respond to this threat.
I believe that any such plan should include tactics to prepare the City's fiscal condition, deploy new economic development tools, and provide for land-use initiatives.
I'm hopeful that the City can move quickly to address this threat.