The U.S. budget cuts known as Sequestration are projected to reduce government spending by $1.2 trillion over 10 years. The cuts are already being felt by U.S. defense contractors.
Davis Interiors is a small company in Norfolk, Virginia that makes specialized furniture and fixtures for U.S. Navy ships. Administrator Whitney Metzger says the firm is already feeling the impact of sequestration.
“We have had to cut back on employee hours. Almost everyone in this company has had to go down to a four-day work week. Some employees have had to go down to a three-day work week. We are anticipating lay-offs, probably soon,” said Whitney.
Davis Interiors is one of the many private contractors in eastern Virginia that service the nation’s largest naval base and other military installations. All together, they employ more than 40,000 people.
The Defense Department’s plan to furlough almost 90,000 employees has not yet impacted the regional economy. But the cancellation of maintenance contracts for 11 ships based in Norfolk is already causing pain to contractors like Davis Interiors.
David Williams has worked for Davis Interiors for 25 years. He says this is the second time in two years that government budget cuts have caused sudden work slowdowns.
“I am very concerned about it because, I mean, I am still trying to recover from the last time this happened, and you get behind on your bills, and you struggle,” he said.
Whitney Metzger says with foreign wars winding down, defense contractors in the area know that military spending will be reduced, but the sudden sequester cuts are too severe and could put them out of business.
“We don’t know what is going to happen. We have contracts that we have been awarded that we will be able to see through, but after those, because of sequestration, no new contracts are being issued to anyone,” said Metzger.
Defense contractors in this region are the first to feel the impact of the sequester, and, if they remain in place, economists predict the entire state of Virginia will soon spiral into recession.
The cuts this year is about 5 percent of the U.S. budget.