news

Statement of the Honorable Nydia Velázquez
Ranking Member, Committee on Small Business
Hearing entitled:
"Sequestration: The Threat to Small Businesses, Jobs, and the Industrial Base"
September 20, 2012

When the Budget Control Act of 2011 was enacted last year, sequestration was included as an incentive for action. Unfortunately, the Super Committee was not so super and was unable to agree on a deficit savings plan. We are now facing the very sequestration that we had hoped to avoid. Beginning in January, it will become all too real as more than $100 billion in indiscriminate cuts take effect. This outcome should not be a surprise to anyone, as it is simply the result of a process that has been held hostage by a few unwilling to have an open-mind on fiscal issues.

By not agreeing on a balanced deficit reduction approach, we have chosen to limit our options. The consequences of this path are seen in the businesses we will hear from today. They are rightfully concerned about losing defense contracts and the impact it will have on their companies and employees. They have worked hard to build their businesses and the current situation is simply unfair to them.

Make no mistake – small firms will be among those hit hardest when these cuts take effect. Indeed, it is has been estimated that for every dollar spent in the defense supply chain, 70 cents flows to smaller companies. These firms developed their business model around what they thought was a reliable customer – the federal government. They now face the very real prospect of revenue shortfalls and layoffs due to mistakes made in Washington.

Of course, the impact is not just limited to businesses that contract with the federal government. Small retailers like gas stations and grocers will be hard hit by the ripple effects as unemployed workers scale back on consumer expenditures. Indeed, bipartisan estimates suggest that as many as 1 million jobs could be lost and we could see Gross Domestic Product reduced by one-half a percent.

Beyond losing customers, entrepreneurs stand to lose out on tools and resources they have relied on to grow, whether it is manufacturing initiatives at the Department of Commerce, loans programs at the Department of Agriculture, or counseling services at the SBA. So yes, it is clear that no one likes sequestration, but it is the path we are on – and you can't cut spending without cutting the very benefits that many of our constituents enjoy every day, whether they are defense contractors, general aviators, or the mom and pop restaurants on our street corners.

For these small business owners, this makes little sense and I do not blame them for their frustration. They would like a government that is able to problem solve, without making matters worse – and doing so in a manner that is not closed-minded. We cannot help small businesses if we don't put all the options on the table – and that means everything, even if you signed a pledge to Grover Norquist. My first priority is to small businesses – and that means being part of a give and take – for the better of this nation.

###