Sequester day dawns in the D.C. area with little immediate impact

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Local,DC,Maryland,Virginia,Politics Digest,Matt Connolly

After weeks of dire forecasts about the consequences of automatic federal budget cuts, Washington-area residents awoke Friday to a region mostly unchanged by the onset of sequestration.

But the longer President Obama and Congress stay stalemated, the more likely it is that effects of the cuts will begin to register.

While the $1.2 trillion in federal budget cuts over the next decade are set to occur, with $42.7 billion each taken from defense and nondefense spending this year, experts say the government has time to sort things out before larger ramifications are felt.

"The cuts won't come quickly," said Stephen Fuller, director of the Center for Regional Analysis at George Mason University. "And the ones that are most evident will still be a month off and beyond."

If cuts do come, the D.C. region will likely take the biggest hit due to its reliance on federal spending and employment. Sequestration could end up costing the region up to 465,000 jobs and $3 billion to $4 billion in local GDP, according to Fuller.

On the defense side, the Pentagon has plans to furlough civilian employees one day a week for up to 22 weeks, enough to save up to $5 billion. While uniformed military personnel are exempt from cuts, some training of troops will be curtailed.

Private companies that rely on military spending may be the first to see cutbacks.

"The first thing that's going to happen is our federal contractors will be affected," said Wells Fargo economist Michael Brown. "This is where we expect to start seeing the hit locally."

Some companies are already feeling the effects of spending declines. Local defense contractor General Dynamics said it lost $2 billion last quarter due to defense cuts, while Lockheed Martin Corp. CEO Marillyn Hewson told stockholders that the sequester "harms military readiness and would hollow out our military forces."

It is difficult to separate the hype from the reality when it comes to the impending cuts. Secretary of Education Arne Duncan has said 40,000 teachers and aides will be laid off. But Duncan was forced to admit earlier this week that his claims about teacher layoffs that had already occurred were greatly exaggerated.

Federal agencies warned that budget cuts will mean hours-long delays at airports. But those claims have been challenged in various news accounts.

IRS employees will have five to seven furlough days, though the agency will hold off until after tax season.

Some officials conceded that the real impact of the cuts is hard to predict.

"We haven't been through a furlough like this for so long," said Colleen Kelley, president of the National Treasury Employees Union. "The last time furlough notices were issued to employees other than for work-related reasons was in '95 for the government shutdown."

Washington's Metro system could lose $22 million if the sequester goes into effect. General Manager Richard Sarles said Thursday that his agency will lose $12 million in funding for capital projects and an additional estimated $10 million in fares when federal workers stay home on furlough days.

Those kind of indirect effects will start to take hold in the months to come, Brown said.

"Think about the food trucks parked outside of these [federal] agencies," he said. "Even some of them will start to feel these effects"

Liz Essley and April Burbank contributed reporting.

mconnolly@washingtonexaminer.com

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