San Diego Business Journal

Possible Sequestration Cuts Could Hit Region Hard

Monday, February 25, 2013

If Congress can cobble together an acceptable agreement and dole out measured budget reductions, there’s a good chance that San Diego could see more federal dollars coming its way, says Kelly Cunningham, economist with the National University System Institute for Policy Research.

That’s because the Defense Department has made the Pacific Rim a key focus, and plans to continue maintaining San Diego as one of the nation’s strategic military hubs, Cunningham said.

However, San Diego could stand to be a big loser should Congress fail to come to some agreement on a planned slew of automatic budget cuts taking effect March 1, said Cunningham.

“We estimate that if sequestration takes effect, it will have a much bigger effect on San Diego than on many other areas of the country because of the fact that we have so many federal operations here,” Cunningham said. “In our estimate, it would cause a $5 billion impact on the local economy over the year.”

The planned cuts would be applied to every facet of the federal government but have much deeper implications to Defense Department spending because of the heavy presence of the military and of defense contracting industries based here, he said.

NUSIPR estimated San Diego’s gross regional product last year at $186 billion, but should sequestration be applied, that number could contract. In other words, the region could very well fall back into a recession, Cunningham said.

— Mike Allen