NSBA Testifies on Sequestration

September 20, 2012

Last week, NSBA Board Member ML Mackey of Beacon Interactive Systems in Cambridge, Massachusetts testified before Congress on the likely impact sequestration will have on America’s small-business community—specifically, small-business contractors. Throughout the hearing, held by the U.S. House Committee on Small Business, Mackey warned that, while the federal deficit is a major concern, sequestration is not the best, most efficient way to address it.

“Simply cutting the top line of agency budgets is not strategic and has the potential to devastate key programs with a disproportionate impact on small business,” Mackey said. “While major program cuts will be necessary inside federal agencies, these cuts should be made with a purposeful and thoughtful approach.”

Enacted as part of last year’s debt ceiling agreement, Congress and the administration agreed to sequestration as a reduction in overall federal spending of about 2.7 percent, or a total of 1.2 trillion over 10 years. However, due to significant entitlement program exemptions, those programs subject to sequestration will actually see cuts of around 8 to 10 percent which will kick in beginning in January 2013 unless Congress passes some kind of near term extension or a broad deficit reduction plan.

In her statement, Mackey outlined two key concerns of small-business contractors under sequestration: first, to address government personnel reductions and tight budgets, contract bundling will almost certainly increase; and second, subcontractors—where many small businesses start out and remain—could be the first cut from a prime contract. In addition to significant impacts on small businesses engaged in the federal marketplace, there are several programs facing cuts that provide important assistance to America’s small businesses in a variety of ways including lending programs, regulatory assistance and exporting.

According to NSBA’s 2012 Mid-Year Economic Report, 34 percent of small-business owners anticipate a recession in the coming year. Economic uncertainty is the most significant challenge facing small business and addressing the deficit is the number one thing they want policymakers to do. However, there is a very real concern that small businesses will bear a disproportionate and unfair burden under the current sequestration plan.

Mackey also took time to thank the Committee for their efforts to include NSBA-supported small-business contracting reforms in the FY2013 National Defense Authorization Act, calling those reforms a positive step forward.

“Small businesses create efficiencies, we are agile and flexible, which saves the government money,” Mackey stated. “We believe that program managers and contracting officers should be incentivized to create efficiencies and cost savings through increased work with small business, not the other way around.”

Please click here to download the full testimony.

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