Wednesday, November 7, 2012

Sequestration & Innovation

Over the past two years, there has been a Herculean struggle occurring in Washington wherein those calling for deficit and debt reduction have run headlong into those who wish to ensure that the recovery has time to take hold. This struggle is about to take place once more in December and the battle lines are drawn between partisan boundaries. The stakes are very high.

Let's look for a moment at what Sequestration is:
Under sequestration, an amount of money equal to the difference between the cap set in the Budget Resolution and the amount actually appropriated is "sequestered" by the Treasury and not handed over to the agencies to which it was originally appropriated by Congress. In theory, every agency has the same percentage of its appropriation withheld in order to take back the excessive spending on an "across the board" basis. 
The size of the automatic cut if it occurs will likely be at least $1.2 trillion over a ten year period. Defense spending for 2013 would likely be cut by about $110 billion. Conservative estimates state that every billion dollars spent on defense equates to about 12,000 jobs, thus the defense cuts alone would lead to 1.3 million jobs lost in January sending the unemployment rate back over 10%. The full impact could be as high as two million jobs lost - and all this right when the economy is still struggling and was supposedly the number one concern of most voters in this week's election.

Sequestration will cost jobs, and will greatly impact IT and R&D in the US
It's not just the number of job losses that are troubling though, it's what types of jobs will be lost. Much of the cuts will fall directly on IT and Research and Development budgets. These programs and jobs represent the fundamental backbone of America's innovation infrastructure. Just last year we barely managed to save the SBIR program (Small Business Innovation Research) but Sequestration would likely kill it instantly along with any number of other activities which help give this nation its competitive edge. Our innovation infrastructure is a job creation and business creation machine - one that has put us in the lead and kept us there for decades.

Everyone agrees that the deficit must be paid off and it will be - but only if the economy stays strong - because if it sinks again no amount of budget cutting will make up for the revenue shortfall in a depressed economy and we will find ourselves stuck in multi-dip Recessions. The amount of debt we accumulated after WWII was higher than our current burden and we paid that off, but we did it after the war was won. If we sacrifice this nation's innovation infrastructure to pay off a small part of a larger bill then the ultimate cost will be much higher than we can bear.

Copyright 2012  - Technovation Talks, Semantech Inc.


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