Virginia Gov. Terry McAuliffe warned Wednesday that the Washington region’s economy — currently enjoying a steady recovery — would suffer if Congress fails to prevent a second round of federal spending cuts know as sequestration.
“Congress does not have to vote for it,” McAuliffe reminded. “It happens automatically. Congress now has to vote to stop it. I have no idea what this Congress will do and we’re all working hard and lobbying our respective members of Congress, but it’s a big deal for this region. It’s a gigantic deal for Virginia.”
With Republicans and Democrats in Congress again feuding over spending, the federal government could be headed for another shutdown this fall. Sequestration, created as an alternative to a budget deal in 2011, forced a first round of cuts in 2013 and, barring its repeal or suspension, will force another this fall.
Defense Department officials have spoken more optimistically in recent weeks that the second round of cuts may be avoided, but the stakes are higher for Virginia than perhaps any other state.
The commonwealth is the No. 1 recipient of Department of Defense spending and it has been bleeding federal jobs and contracting work in recent years. From 2010 to 2012, Virginia experienced $9.8 billion in defense cuts, the governor said, with the vast majority of losses in Northern Virginia.
The cuts contributed to anemic growth in the commonwealth’s gross domestic product in recent years. Virginia posted 0.6 percent GDP growth in 2011, 0.7 percent in 2012 and 0.4 percent in 2013. Last year it posted 0.0 percent growth, ahead of only Alaska and Mississippi among states.
Other economic indicators in Virginia and the Washington region, including unemployment and office vacancy, have improved this year. Virginia’s unemployment rate in April was 4.8 percent, below the national average of 5.4 percent. McAuliffe also said he would announce a budget surplus next week.
Even if the second round of cuts doesn’t take place however, McAuliffe said “we will be working through our economy for three or four more years as we try to grow out of this.”
He has been trying to pivot to private industry for job growth, pitching an assortment of companies around the globe on doing more business in Virginia. Tuesday he was in Arkansas, speaking at the Wal-Mart manufacturing summit and promoting his state as a place for companies to “on-shore” manufacturing jobs.
In a year-and-a-half as governor, he has also emphasized investments in personalized medicine and cyber security. Speaking at the meeting Wednesday, McAuliffe said cyber security was potentially a $155 billion industry, one that he called “the best opportunity to bring some business in.”
“This is one area where the federal government is going to spend billions of dollars building in the future,” he said.
The governor also sounded the alarm, however, on transportation concerns he has, primarily related to the future of Metro and Dulles International Airport.
Frustrated at Metro’s protracted search for a new general manager and leery given the federal government’s warnings about the system’s safety shortfalls, he said the organization’s leaders need “to get their act together.”
The second leg of the Silver Line, expected to extend beyond Dulles into Loudoun County, is already delayed until at least 2020. McAuliffe has been trying to attract businesses to relocate there, including the Washington Redskins, who are looking for a new stadium. But many of those pitches are contingent on Metro extending the Silver Line.
“I have waited long enough for an executive director. We need a dynamic leader. We need one soon. I am tired of waiting,” he said.
Dulles has become a point of contention because ridership at Reagan National Airport, a far smaller airport, has risen dramatically, while Dulles has struggled.
Some of the shift came after Congress allowed additional long-distance flights to operate from Reagan. The governor said that the decision was “wreaking havoc” on Dulles and that Congress needed to act there, as well.
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