Published January 17, 2013
PINEHURST, N.C. – With a March 1 deadline looming for Congress to once again strike a deal in order to avoid $1.2 trillion in automatic spending cuts -- including $500 billion at the Pentagon -- some companies that rely on the defense industry are already bracing for the worst by canceling contracts and laying off workers.
Kathleen Volandt, president of Auroros, Inc., told Fox News that the constant uncertainty in Washington reduced her total revenues by 56 percent last year. A disabled veteran who employs three full-time staffers and 31 contractors at her Raleigh, N.C.-based information technology company, Volandt said each passing deadline just compounds the problem and brings nearly everything at her company to a standstill.
"We keep having to redo budgets because of contract changes," said Volandt. "We just lost two contracts because of the fiscal cliff. Right now, nobody's moving forward on any projects."
There is plenty of worry in North Carolina, which is home to seven major military installations and thousands of servicemen and women. The North Carolina Defense Business Association (NCDBA), an economic development group that supports defense contractors, said the cuts could be devastating, costing more than 34,000 jobs and more than $1 billion in state gross product losses.
Those cuts were originally set in motion as a product of the 2011 debt-ceiling deal. Lawmakers anticipated that they'd be able to strike a deal to spread the cuts around, but so far they have been unable to. In the latest deal to avert the fiscal crisis, lawmakers merely pushed off the cuts for two months.
NCDBA Executive Director Joy Thrash said avoiding the fiscal crisis on Jan. 1 and pushing the deadline further into this year has only confused her members even more.
"They were hoping at the beginning of the year that they could start fresh. But now it's two more months and they are wondering how are they going to survive," said Thrash, who is already hearing of layoffs and cutbacks across the state. "So, for the idea that this is going to happen in February or March, that's a false idea. It's already happening."
Research and development is more of a concern at K2 Solutions, a company that provides special operations support, canine training and logistics to the Department of Defense. Chief Operating Officer Jim Lynch said the company had already invested money and resources in anticipation of future projects. But with massive budget cuts looming and several Department of Defense contracts in limbo, those investments may have been for nothing.
While private businesses are used to ups and downs in the economy, Lynch said the automatic spending cuts looming in Washington are something completely different.
"What we don't understand is when cuts are arbitrary, as they are with sequestration," said Lynch. "We don't know what's going to be cut. Nobody knows. There is no plan. What successful business today has been successful without a plan?"
For Thrash, getting federal lawmakers to understand that uncertainty and delays are bad for business is a top priority. She has been lobbying most of North Carolina's congressional delegation to get something done before the fear of the unknown kills any more business.
Sen. Kay Hagan, D-N.C., who sits on the Senate Armed Services Committee, has been hearing the same concerns about the uncertainty surrounding Department of Defense contracts from businesses and groups such as the NCDBA. Hagan said she hopes Republicans and Democrats can work together to come up with a solution in the weeks to come.
"I share the frustration of our North Carolina business owners whose contracts with the Department of Defense have been held up or delayed because of uncertainty over sequestration," Hagan said in a written statement to Fox News. "Indiscriminate cuts are not the way to reduce our deficit, and kicking the can down the road is not the way to provide certainty for our small business owners who want to do business and grow their companies."