Sequestration Ax Looms Over Watsonville Companies, Report Suggests

Members of Congress and business lobbyists have been sounding alarms about sequestration—looming Pentagon budget cuts that could exceed $500 billion over 10 years.

They could begin in January if lawmakers don’t deal with the so-called “fiscal cliff,” including the fallout of the 2011 Budget Control Act.

But what does that mean for Watsonville?

Although military jobs and pay would not be affected, the cuts could trickle down to five local companies that did business with the Department of Defense last year to the tune of $4.45 million.

According to the Center for Defense Policy, which this week released updated data from several federal sources, these Watsonville companies did business with the Pentagon in 2011 (with the value of contracts noted):

• ($85,544,297) in the category of “Highway, Street and Bridge Construction.”
• V. J. Catalano, Inc. ($3,452,340) on East Lake Avenue for “General Line Grocery Merchant Wholesalers.”
• L-3 Communications Corporation ($929,953) on on Aviation Way for  “Communication Equipment Repair and Maintenance.”
• E M D R Institute, Inc. ($313,497) on Penny Lane for “Colleges, Universities, and Professional Schools.”
• ($162,826) on Westridge Drive for “Sporting and Recreational Goods and Supplies Merchant Wholesalers.”
• Dr. David L. Fried ($25,000) on Tumbleweed Lane for "All Other Professional, Scientific, and Technical Services."
• Heatwave Lab LLC ($9,384) on Aviation Drive for Electron Tube Manufacturing."

Pentagon cuts of 18 percent over 10 years are forecast under current plans.

An analysis in late August by Todd Harrison of the Center for Strategic and Budgetary Assessments (see attached PDF) said cuts would not affect funding already obligated in contracts, but would lead to “reduction in new contract awards, contract extensions, options, etc. … and likely force DoD to renegotiate contracts to buy in smaller quantities and cause unit costs to rise.”

Who would decide on the cuts?

The Congressional Budget Office says: “The [Obama] administration’s Office of Management and Budget has sole authority to determine whether a sequestration is required and, if so, the proportional allocations of any necessary cuts.”

Sequestration is the word used to describe automatic cuts mandated by the August 2011 Budget Control Act, which came after the national debt ceiling debate and failure of the congressional “super committee” to reach a deal on deficit reduction.

Nobody knows where the budget ax would swing.

Santa Cruz County boasted about 38 businesses and companies with defense contracts in 2011, according to a breakdown of the county’s congressional district by the Center for Security Policy.

On Tuesday, the right-wing think tank Center for Security Policy posted congressional district reports to help estimate the potential local economic impacts of the cuts to the nation’s defense budget under sequestration. 

Reports citing 2011 data showing the effect of 18 percent “sequestration cuts” for all U.S. states and territories, counties and cities.

The center, whose projects have criticized as biased controve projected that California would loses at least 141,130 jobs under sequestration, including 15,341 civilian Defense Department jobs and 125,789 private-sector jobs.

Citing the Aerospace Industries Association, the Center for Security Policy said: “Four out of five likely voters in critical battleground states want our leaders in Washington … to find an alternative to ‘sequestration’ budget cuts before the November elections take place, according to a Harris Interactive online poll.”

In 2007, a writer for Watching the Watchers said a column in a forum established by the Center for Security “called on President Bush to declare himself ‘President for Life’ and remove all Arabs from the Middle East so he can ‘repopulate the country with Americans.’ ”

But figures used in the center’s sequestration report appear to be unbiased.

The center said contract figures for the sequestration report “derived from public data at the Federal Procurement Data System based on queries from governmentcontractswon.com, and combined with public ZIP code data linked to congressional districts.”