Sequester cuts already hurting small businesses

(MoneyWatch) Although the across-the-board federal spending cuts known as the "sequester" don't take effect until Friday, they are already hurting small businesses around the nation.

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Economic impact of sequester cuts

Karen Mills, outgoing head of the Small Business Administration, recently that many small businesses have been hit as the Defense Department and other government agencies pared spending in anticipation of the cuts.

In 2011, the Pentagon awarded 20 percent its prime contracts and 35 percent of the agency's subcontracts to small firms, according to the SBA. As a result, more than two-thirds of defense industry purchases are by small suppliers, many of which are the only source for these specialty parts and technologies.

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Sequester cuts would be a "catastrophe" for DOD civilians

If the cuts are fully implemented , more than 2 million jobs could be lost, with nearly half of those coming from small business, according to a study by Dr. Stephen S. Fuller of George Mason University in conjunction with Chmura Economics and Analytics.

"Many small businesses are subcontractors, suppliers and vendors to larger scale businesses that are the prime federal contractors," he said. "These subcontractors, suppliers and vendors have little recourse when their contracts with their primes are scaled back or terminated; in fact the suppliers and vendors may not even know that their business is linked to a federal contract that could be canceled due to something called 'sequestration.' "

• As sequester looms public attention fades
• Hagel sworn in as defense secretary, calls sequester "a reality"
• Boehner says budget deal out of his hands

In addition to the loss of jobs, small business owners are worried about what the sequester cuts will do to the government research they rely on, according to a new poll. More than two-thirds of those surveyed said basic research funded by the federal government is important to private sector innovation. The Zogby poll commissioned by Research!America also found that 45 percent didn't want medical research funding to universities and other non-governmental institutions cut as part of sequestration.

Despite these preferences, 60 percent of respondents thought that the mandated cuts were a good way to reduce the deficit.

[tjhsan]

you can't get blood from a turnip

[magickpaul]

The sequester shouldnt hurt small businesses unless they are somehow getting money from the government. People should not be afraid of a sequester. We needed it a long long time ago and now its going to be more painful. We are 16 T in debt so we are going to have to drastically cut spending, not just increase revenue. Its sick how depenent so manyu people are on the government

[bc-1948]

I'll bet even you benefit from government spending. Think about that the next time you go to a doctor - drive on a paved road - make a phone call - and the list goes on and on. It will hurt small businesses.

[libbieclu]

How dump can you get! Small business do not have to "somehow" get money from the government to be impacted. It is the rippling effect that will harm small business--as people once again get laided off, hours cuts with wages being ultimately lowered--ie less money to spend in the community. Less money to spend in the community harms all business as when push comes to shove, people will delay buying things, making improvements, taking trips, etc just to make sure they have food on the table, the mortgage is paid and bills are paid. This all ripples into those who provide the goods and services and the level of people they employ, their hours, their layoffs. GW Bush is responsible for at least 10T in his wars and tax cuts. The 6T was due to the financial mess and resulting unemployment. Austerity has not worked in Europe--just what makes you think it will work here. Taxes have to be raised--and that can be done by closing tax loopholes. We are not--I repeat--we are not going to cut our way out of this mess. This type of cutting at this critical time in the economy's recovery will set us back--and will only make the debt worse as we loose tax dollars from wages and goods produced. Idiot!

[NoGov]

Obama is going into retreat mode! The public was tired of his gloom and doom and now the media is realizing his spin is false. "You didn't build that." "We had no knowledge that they were going to release illegals." I can't wait until his meeting tomorrow with leadership. How does the crow taste? You got 600 billion in tax increases two months ago and you want more? NOT!

[bc-1948]

Obviously you listen to Fox too much. Otherwise, you would know the "you didn't build that - was a referenced to the roads and infrastructure - all built with government funding.

[mecury69]

Let the cuts begin!!!!!!!!!!!!

It's about time the government scaled back. This is proof we have allowed government to become too big if reducing it 2% means millions of jobs lost.

Thanks for proving point Mr. President.

[bc-1948]

That's not government jobs - that is private sector jobs.

[mecury69]

Lesson 101 for Small Businesses....

don't put all your eggs in one basket.

Happens all the time to businesses, they rely on one contract/customer and think it is going to be there forever.

[bc-1948]

Lesson 102 - Small Businesses don't have a lot of flexibility on not "putting all their eggs in one basket."

[chatmandu7451]

Cut till it hurts then cut some more.

[mattrick78]

+1

[UltimateChampion]

Sequester "cuts" do not exist. These are reductions in rate of increase, i.e., we are still going in the whole, still in the red, still spending more than we can afford - we're just doing so at a slower rate. $85 trillion on a [non-existent] $4 trillion budget is peanuts. A drop in the bucket. I laugh whenever Obama talks about "my budget". He doesn't even have a budget! Never has!

Will people receive less government money as a result of the sequester? Yes, of course. But that's a GOOD thing!

[BBould]

I guess she hasn't heard? "A senior GOP aide on Wednesday highlighted news reports that Obama's political advisers now concede the cuts will not immediately disrupt federal services, managing public expectations in the wake of dire warnings." She continues the spin.

[UltimateChampion]

Maybe she'll have to backtrack on this article, just like Obama is now backtracking on his "The sky is falling!" mantra. I'm glad Republicans are calling the president's bluff.

[wcfanfourever]

We need to ACTUALLY REDUCE the Federal Budget 1% per year across the board until we get back down to a reasonable level.

There are so many damn departments and agencys that you could get rid of tomorrow and nothing would skip a beat. Federal Govt is out of control !!

Look at the number of federal employess five years ago and how many are drawing a gvt paycheck today. Not necessarry and we sure as hell cant afford it.

People are going to lose their jobs and find another one somewhere. Happens all the time the world isnt going to come to an end

[Larsen04]

If you actually "Look at the number of federal employess five years ago and how many are drawing a gvt paycheck today" as you suggest, you'd find the facts don't support your world view. Never in recent history has government employment shrunk as much as it has in this recovery. And those cutbacks have hurt the economy, not helped. See chart:

http://www.washingtonpost.com/blogs/wonkblog/post/public-sector-austerity-in-one-graph/2012/06/11/gJQAv89NVV_blog.html

[uisignorant]

People are so stupid and you Obambots just fall for it.
With a 4 trillion dollar sending 85 billion is nothing. Oboma is scaremongering and nothing else. It is a REDUCTION OF INCREASE not a cut. Where else in the world would you see if you were expecting a $100 raise and only got $98 you lost 2%.