How Sequestration Will Threaten Your Job

What happens to tech jobs if Congress and the President fail to agree on a deficit-reduction plan and drive off the so-called “Fiscal Cliff?” Unless you’ve been hiding out somewhere, you know that would lead to sequestration kicking in as soon as January. The one thing everyone agrees on is that won’t be good.

CliffSequestration means that across-the-board spending cuts will be triggered. The exact amount of those cuts isn’t entirely clear, but some estimates place them at about $1.2 trillion over a 10-year period. On top of those cuts, tax increases are set to kick in.

How will this impact your job. Here are the five most likely impacts.

  1. Somewhere between 1.5 million and 2 million people overall will lose their jobs. That’s a rough estimate based upon every billion dollars being worth 12,000 – 14,000 positions.
  2. A relatively high percentage of these lost jobs will be in IT, especially in the defense sector. Many tech workers are contractors, and the Department of Defense will have accelerate its already aggressive reductions in its contract workforce to deal with cuts.
  3. Science and research budgets will plummet. This will occur across the federal government, and will also affect academia through cuts to education. Last year, the Small Business Innovation Research program was barely reauthorized, an example of the type of R&D program that won’t survive sequestration.
  4. Cutbacks to core federal operations are also likely to lead to a drop in both consumer and investor confidence. This could directly impact hiring as well on the entire economy. A recent 312-point stock market drop is evidence that investors are getting nervous.
  5. Finally, cuts are bound to impact educational opportunities for those who want to enhance their technology skills, as well as for those who are already out of work and have been looking for new jobs. The cuts will affect all levels of education, from high schools to job retraining centers.

Regardless of who you voted for, I’m betting that few of you were voting for sequestration. More than most, IT has a critical connection to government and education and if our political leaders take use over the cliff we, again more than most, are going to feel the pain.

Image: Wikimedia Commons

Comments

  1. BY Pat Saison says:

    This is a Catch-22 situation–the cuts will be exacting in the areas that the country as a whole needs to bolster, to make the country more competitive and grow strategically.

    The big blob that spatters is Defense Spending and Wars; if such were cut, wherefore the problem? Do we need such expensive toys as the F-35, with its cost over-runs and limited range? Do we need another aircraft carrier when we have more than the rest of the world combined? Do we need another war, such as with Iran, after Iraq and Afghanistan? Do we need to project our military power overseas? Do we need to expand our military position in Asia?

    Sun Tzu stated in The Art of War (not in so many words) that a nation that extends war and occupies another country will bankrupt itself. This is what is happening to the USA. Past policies are bankrupting the country, and unless defense spending is scrutinized, controlled, and cut, and overseas adventures are curtailed, there is no resolution.

    Tally up what the wars have cost and are costing, add the cost of weapons programs, especially such as the F-35, aircraft carriers–acquisition and TCO. Would not savings from such solve the problem? Guns versus Bread & Butter, as the saying goes.

    • BY chris says:

      Totally agreed, we are in this position because we already spend too much money for defense. While other countries sit around and do nothing….

      • BY No More says:

        Defense is about 15% of total govt spending. You can close down every military base tomorrow and we’re still nowhere near solving our fiscal problems. The problems are Social Security, Medicare and Medicaid. Combined they take up 60% of spending. It’s where the cuts need to be.

      • BY No More says:

        http://www.usgovernmentspending.com/

        Defense is barely a blip on the radar compared to social security, medicare, medicaid and welfare.

    • BY Sam Issa says:

      I totally agree. But politicians don’t understand this language. They go with what get them elected rather than what is good for the country in the long run.

  2. BY Jon Paul Salas says:

    Is there some sort of political vindictiveness going on here?

  3. BY Richard says:

    I’d rather face forced “sequestration” then continuing our deficit spending practices. And while the cuts aren’t completely across the board, they do include cutting military spending. That alone makes me happy. In short I’d rather suffer a little now then suffer more later after we bankrupt our country.

  4. BY Yaad says:

    It will have some impact on H1 B holders as well. Many of the Federal Government departments use H1B holder to do the actual work. So, it is not a great thing for immigrants. Hope there is no cutback because Northern Virginia is dependent on these H1B holders for job, housing market.

  5. BY No More says:

    So Dice is now in the business of doing Obama’s bidding?

    We need to cut govt spending. And by a lot more than $1.2T over 10 years. In case you haven’t heard we have a 16 trillion debt right now and growing by over a $1T every year.

    I can tell the writer is a tech writer and has no clue about the economy. If you want a preview of what the US will look like in 5 years, go to Greece.

    • BY Stephen Lahanas says:

      Hi No More,

      What might your economic credentials be? The issue we’re having right now with Sequestration is a bi-partisan problem. Our debt is high right now but it has been higher before (as a % of GDP) – just after the Great Depression and WW2. We didn’t win that war and move from Depression to the strongest economy on Earth through budget cutting. It happened through investments – and investments in technology played a very major role then as they do now. Those investments grew the economy and eventually we did pay off most of those debts. In other words, you don’t grow through cuts – you increase revenue only by expanding the economy. Economic growth is not a ‘magic happens here’ scenario – it is not based on guesswork or assumptions.

      What I’ve tried to convey with this article is a key part of what’s really at stake in the budget maneuvering that’s going on right now – something that hasn’t been discussed too much in the rest of the press. Our investments in research in both science and technology drive every other part of our economy (not just defense). Take those away and you given an instant advantage to other countries that are already coming close to out-competing us. Countries like China who have no qualms about investing in their future. Modern nation states do not happen through philanthropy and corporate investments alone. Rational economic policy are required to make nations great – and we need to return to a rational budget process…

      As for Greece, the only reason the US now has 2% growth is due to investment rather than austerity. This is Greece’s 3rd year in a row of austerity policy and that policy is sinking their nation like a stone to the bottom of the sea.

    • BY Wo'O Ideafarm says:

      >> I can tell the writer is a tech writer and has no clue about the economy

      Exactly so. Sequestration isn’t going far enough. We need to line up every single representative and senator who voted for the bailout of the financial industry or for GM and introduce them to a firing squad. That would give the remaining congressmen a clue.

      I hold a “Ph.D. Lite” after studying at the graduate level in residence in the economics department at the University of Chicago. Economic illiteracy is pandemic, second only to moral illiteracy, and if we don’t wake up, another global war is coming. I am not being dramatic or overstating what I see and have seen for ten years. Global war is coming. Death. Massive death.

      The United States cannot be saved. But we can still save the ideals associated with the U.S. Constitution. There is no such thing as “a mixed economy”. There is no such thing as “socialism”. The choice is between the tribe and the family farm. Communism or Individualism. Economic autonomy or economic collectivism.

      Collectivism can work on a very small scale. The nuclear family is a collective. But it cannot work on the scale of 300 million people who, due to language and cultural differences, often literally cannot even speak to each other.

  6. BY mark says:

    Re: 1.5 to 2 Million losing their jobs: I will accept the stat that $1B in government spending equates to 12K to 14K jobs (although I have no idea where that comes from)…first that is over a period of a decade (assuming no spending changes in that entire period)…second, if true then why did the government need to spend $500k for each single job created from the stimulus spending? Seems like with the trillion spent on stimulus (which put us more into this debt) we could have “created or saved” those 1.5M jobs already… instead we only got 5 or 10 thousand jobs from that.
    Government (debt) spending is “good” (?), cuts (in the rate of spending, but not in absolute spending)=”disaster”. At least that’s the meme.
    GIGO

    • BY Stephen Lahanas says:

      Hi Mark,

      Couple of problems with your figures; 1 – nearly half of the stimulus money approved went for tax cuts; there is no way to measure correlation between tax cuts and job creation (in fact most evidence points that tax cuts don’t create jobs), 2 – The Sequestration cuts change the dynamic of what will occur in regards to budget cutting; a very large % of cuts will need to occur immediately if it happens (as opposed to being spread out over a decade). 3 – The Stimulus was $819 billion (here’s the breakdown http://www.washingtonpost.com/wp-dyn/content/graphic/2009/02/01/GR2009020100154.html ). 4 – The Stimulus created more than 1.5 million jobs, keep in mind the economy has lost somewhere around 2 million gov’t jobs since 2010 due to austerity measures (mainly at the state & local level); had austerity not kicked in and those jobs had been retained we’d be looking at about 1% or so less unemployment than we currently have (it’s around 7.9% so it should have been 6.9% w/o austerity).

      Ask yourself this question, if the Stimulus was such a bad idea why is that we in the US have 2% real growth now and all the nations of Europe practicing austerity have seen their economies shrink over the past few years? Economics ought to be evidence based. As a programmer would you take someone’s word that code worked or would you test it yourself to find out? We have 75 years worth of hard data on what investment does in regards to economic growth in this country. It is truly mind-boggling that some folks choose to ignore that data and continue to believe in theories with no evidence to support them. Had we not chosen in the 30′s 40′s and for the remainder of the past 75 years to invest in science, technology and infrastructure we would not now be the leading economy in the world. The only thing threatening that position is the bizarre austerity mentality that has gripped Washington. I call it bizarre because just 3 years ago we were a heartbeat away from the 2nd Great Depression. The last Great Depression required more than 15 years to correct and it was not caused by debt.

    • BY Wo'O Ideafarm says:

      >> $1B in government spending equates to 12K to 14K jobs (although I have no idea where that comes from)

      It comes from econometric estimates of the Hicksian IS-LM model, which is based upon the brilliant verbal analysis of John Maynard Keynes in the 1930′s. His brilliance notwithstanding, Keynesian analysis has been thoroughly discredited for fifty years. It’s persistence in general audience periodicals reflects the dumbing down of the population.

      Let’s say that I have just received a $1000 gross paycheck and there are zero income taxes, so I get to spend the $1000 any way that I want to. I’m going to spend it all, either right away or later. Even if I die and a chunk of it goes to my children, it is all going to get spent.

      Now change the story so that the government confiscates all of it and spends it, and does the same to all of its other slaves. Has aggregate spending just gone up? No.

      The above story is intended only to give you a sense of what is logically wrong with Keynesian analysis. Economic analysis is a difficult and beautiful field of human inquiry. Those who have not mastered it simply cannot understand their world.

      • BY Stephen Lahanas says:

        Actually, there are quite a few studies that have tried to estimate the number of jobs that come out of direct investment and not all of them are based on statistical models. Many of them are in fact based upon analyses of job growth in relation to specific investment. Keynesian economics has not been discredited – it’s disagreed with – there’s a big difference. Let’s review where it worked: 1 – The Great depression and WW2, The Marshal Plan (which led to the creation of 2 of the world’s most powerful economies – Japan and Germany), 3 – The Space Race and most recently it did keep our economy from going into freefall (and this isn’t a comprehensive list). Had we not shored up our economic system in 2008-9 we would have likely dropped into a full-blown Depression and taken the rest of the world with us.

        Per the $1,000 rhetorical question; your assumption that it will get spent is false. Right now, there’s more than $3 trillion in capital not being invested. Why, because those who have enormous pools of capital don’t need to spend – they can sit on it and earn capital gains by doing nothing. If you gave that $1000 to middle class folks that would be different (and in fact that’s what Bush did when the Great Recession was getting underway but it wasn’t enough to turn the tide). Your argument is the same one I’ve heard since the 1980′s – it cites no real evidence and a simplistic mathematical model taken completely out of context of any economic factors or policies. At some point statistical models and theory must be validated in practice – economics shouldn’t be any different than computer science in that regard. We’re not trying to decipher what Dark Matter is here – we’re assessing causal links between policies and outcomes in the real world.

        Here’s a question for you – if Keynesian economics is so out of touch, name one major 1st world economy that has achieved consistent economic growth without major investments in science, technology and infrastructure in the past 75 years? Let’s take this from theory to reality…

        • BY Wo'O Ideafarm says:

          My post was a bit of gun slinging. I am a “Chicago School” economist. Keynesian analysis is not entirely wrong. It is just fundamentally wrong.

          The debate that you propose simply cannot be done here, for two reasons. First, I am completely out of touch with contemporary scholarly economic thought. Second, these issues simply cannot be resolved, or even discussed intelligently, without the use of rigorous mathematical modeling.

          • BY Stephen Lahanas says:

            I’m familiar with the Chicago School. I’m also familiar with what we refer to in IT as “Magic Happens Here” – this would perhaps be a good motto for their approach. I even met Albert Laffer once upon a time. All I asked for though was one example.

            Let me ask you this; do you think for one minute that our economy won’t take a giant hit if these cuts are made? If not, why not? Cite some real world examples.

            It’s ok for folks to have political disagreements – that’s what our country is all about. What troubles me is that something that used to be universally understood and agreed upon by all our leaders in both parties has now become a bone of contention. What was agreed upon was that we would’t shut down the government over budget disputes or in anyway threaten our national credit rating. And before both parties since the 40′s agreed that investment was a good idea – the only area of contention was about how much and where. The biggest uncertainty in our economy right now is our political system – that’s scary, intentional and completely unnecessary (a crisis we’ve created ourselves as if we didn’t have enough to worry about already).

          • BY Wo'O Ideafarm says:

            > do you think for one minute that our economy won’t take a giant hit if these cuts are made

            To repeat, I will not debate economics here. But to respect you, I will answer your question and claim authority as an expert. (An expert in economic theory is somewhere between an expert in physics and the village idiot.) It’s up to you to decide how to view my opinion.

            Yes, the economy will take a hit if cuts occur. But it will take a bigger hit if the cuts do not occur. But you are focused on the wrong question. The important question is whether we have communism or individualism. There is no such thing as “socialism”. There is no such thing as a “mixed economy”. Either there is a common cooking put, into which all of the productive people put the fruit of the day’s hunt, and out of which all eat, or each family has its own cooking pot.

            The economy is going to take a huge ass hit if we make the wrong choice. And we are making the wrong choice.

          • BY Stephen Lahanas says:

            We will have to agree to disagree then.

            I come from families where most of the folks owned small businesses. I have my own small business. I’m a Capitalist, I’m neither a Socialist nor a Communist and I don’t believe that supporting national investments in Science, Technology and Infrastructure equates to either of those political idealogies. I think the implication that government investment equates to Communism is a bit ridiculous especially considering our government investments were the main way we managed to defeat Communism. We have practiced these policies for the better part of a century and maintained our Democratic Republic.

            Taking a half a trillion dollars out of our economy will not lead to growth – just the opposite. I base this contention not upon blind faith but rather on massive amounts of evidence which clearly demonstrates the correlation between investment and economic growth. We would not be having this communication at all if it were not for thousands of patents that came as a direct result of government-funded research…

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