Business fears sequester ax will cut through profits

A variety of industries stand to suffer as looming federal spending cuts threaten to pare back government services.

The defense industry, led by the Aerospace Industries Association, and several medical trade groups have mounted a full-throated lobbying campaign against the budget sequester, which is set to take effect on Friday.

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Now that the cuts are just days away, more industries are beginning to fear major repercussions once the government begins to furlough hundreds of thousands of workers who inspect the food supply, promote exports and manage the skies.

Jay Perron, vice president of government affairs and public policy for the International Franchise Association (IFA), said his group is worried about the Small Business Administration’s (SBA) loan programs that many franchise-operators use.

“We haven't really lobbied on it yet,” Perron said. “If it's the case that it will affect the lending, we will definitely be lobbying on it.”

SBA Administrator Karen Mills has told appropriators in Congress that the cut from sequestration could affect the agency’s lending. The reduction would slash SBA’s loan subsidy by almost $16.7 million, leading to fewer 1,928 small business loans from the agency, Mills wrote in a Feb. 19 letter to Senate Appropriations Committee Chairwoman Barbara Mikulski (D-Md.).

SBA wouldn’t be alone, since every agency in the federal government would see their budgets slashed if sequestration takes effect.

Non-defense spending would take about a nine percent cut, while defense would be slashed by 13 percent, leading to a total of $85 billion reduction in spending for the remainder of the fiscal year.

Safety inspections are one government service that could be scaled back.

Acting Labor Secretary Seth Harris told Mikulski the Mine Safety and Health Administration (MSHA) would adjust its funding to complete inspections at coal mines, but some metal and nonmetal mine inspections might fall by the wayside.

The National Mining Association believes the mine safety agency will make do with less.

“We expect MSHA will find the necessary resources to fulfill its statutory obligations,” said Carol Raulston, a spokeswoman for the National Mining Association.

Others are not as optimistic, and see furloughed federal inspectors as an enormous threat to the private sector. Few would be hit harder than the meat and poultry industry.

“We consider this a code red situation,” said Colin Woodall, vice president of government affairs for the National Cattlemen’s Beef Association. “It would be a fundamental hit to our industry if they go forward with this.”

The Department of Agriculture (USDA) has warned that the sequester cuts would force furloughs of up to 15 days for employees of the Food Safety and Inspection Service (FSIS), which is charged with inspecting meat, poultry and eggs.

Without on-site inspectors at roughly 6,290 plants nationwide, some food producers would be forced to cease operations. USDA estimates that could cost more than $10 billion in production losses and $400 million in lost wages for workers.

Some meat industry groups have argued that the government is using the threat of furloughed inspectors as political leverage in an eleventh-hour showdown between the White House and congressional Republicans.

“We do think that they have options to prevent the furlough of inspectors,” said Janet Riley, a spokeswoman for the American Meat Institute. No inspections would result in work stoppages at the plants — leading to a decrease in the meat supply and then increases in prices, according to Riley.

But Agriculture Secretary Tom Vilsack told the group the department has no other option.

“Unfortunately, unless Congress acts to prevent sequestration, FSIS will have no choice but to furlough its employees in order stay within the budget Congress has given it,” Vilsack wrote in a letter to the group on Feb. 12.

Others are worried about furloughs for food inspectors and plan to escalate their lobbying if the sequester comes to be.

“If it does occur and the sequester does go through, we will be vocalizing and engaging a lot more than we have been,” said R.J. Karney, director of congressional relations for the American Farm Bureau Federation.

Other business groups have said it’s too early to know how the budget cuts would affect government services.

“It's premature to speculate on actual impacts. We urge the administration to ensure that as cuts become necessary, they will be implemented to ensure the fewest travelers are impacted and the system continues to be as safe as it is today,” said Vaughn Jennings, a spokesman for Airlines for America.

Obama administration officials have predicted major problems for the country’s travel system if the sequester goes into effect.

In a Feb. 11 letter, Transportation Secretary Ray LaHood told Mikulski the Federal Aviation Administration would see its budget slashed by more $600 million under sequestration, leading to lost work days for air traffic controllers and delays in air travel.

Homeland Security Secretary Janet Napolitano estimated wait times in airport security lines would increase by as much as an hour due to furloughs for Transportation Security Administration officers, according to her Feb. 14 prepared testimony before the Senate Appropriations Committee.

Other business groups are worried about trade. The International Trade Administration, which promotes trade and enforces U.S. trade agreements, would see its aid to U.S. exporters decrease by nearly $15 million, according to a Feb. 8 letter to Mikulski from Acting Commerce Secretary Rebecca Blank.

“It is certainly something that we find worrisome. Exports are increasingly critical to U.S. manufacturers,” said Lauren Airey, director of trade facilitation policy at the National Association of Manufacturers (NAM).

NAM has been active in pushing back against cuts into defense spending. But Airey said it’s still not known how the sequester will affect some of the federal agencies.

“It's hard to say what the impact will be,” Airey said. “We are still learning about what agencies will have to do under the sequester.”

Lobbyists noted that despite worry over the approaching deadline, lawmakers have managed to avert disaster in the past, most recently with the “fiscal cliff” deal.

“We have been down this road before and they have come up with a deal before it goes into effect,” said Perron with IFA. “We are watching it in how it's going to affect our industry but I would say that this is not a top-tier issue. We are watching, figuring out how it will affect business. Will it trickle down so much that it will reach to franchises?”

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