The specter of sequestration is on the horizon. Two weeks from today March 01, 2013 will trigger cuts in the federal budget that will affect the Rhode Island economy.
Sequestration is the “cancellation of budgetary resources, an automatic form of spending cutback”. The recent threat of sequestration arose from the Budget Control Act of 2011, which was passed by the last congress and signed into law by President Barack H. Obama on Aug. 02, 2011.
Rhode Island’s economy will suffer because of sequestration. It will hit one of Rhode Island’s biggest job sectors, which is the defense industry. According to the Rhode Island Economic Development Corporation, the industry was worth $ 1.75 billion dollars in 2008.
According to a press release released by Southeastern New England Defense Industry Alliance today, the state will have a significant economic loss. They stated that:
“the impact could be a reduction of 2,520 workers by September 2013” if sequestration is not averted and the DoD is forced to continue operating under a CR. Those figures were extrapolated from a small sample of SENEDIA members surveyed, who estimated there would be a combined reduction in their Rhode Island workforce (including short- and long-term furloughs and terminations) of more than 20 percent.”
The total job loss for the southern New England area if the sequestration occurs on March 01, 2013 could be as much as 80,000.
The monetary loss to the state will be in the millions. According to the RIEDC, the industry alone generates at least “$43 million dollars in tax revenue for the state, of which $35 million dollars is state income taxes.”
The Rhode Island economy is already in a precarious state having the second highest unemployment rate in the nation and if these scheduled cuts go through the state will have a rise in unemployment rate. As of December 2012, it was calculated at 10.2 percent down point eight from the same time the year before. The small gain that the state economy has been able to achieve will certainly be canceled out by congress’ failure to prevent further job losses in Rhode Island.