AP News

Fiscal cliff could hit NC defense, research jobs


RALEIGH, N.C. (AP) — North Carolina's political and corporate leaders, like those in the other 49 states, are worried about how far the year-end "fiscal cliff" in Washington could pull down their own citizens and businesses.

Unless Congress and President Barack Obama agree to an alternate deficit-reduction plan this month, citizens nationwide will face the same big automatic tax increases and the scaling back of services and defense-related reductions that starts $1.2 trillion in spending cuts over the next nine years.

Many economic analysts say another failure to get the country's fiscal house in order will lead in the short term to a double-dip recession in 2013, with millions of job losses nationwide. But with North Carolina's economy still struggling to shake off the Great Recession, a fiscal train wreck should make state leaders even more nervous.

"This is serious stuff," Gov. Beverly Perdue said. "It's just across the board, unnecessary cuts that are being proposed. ... You can't take this much money out of the economy."

North Carolina's unemployment rate remains the fifth-highest in the nation at 9.3 percent. Outside groups calculating the potential pain to defense and research — two influential sectors — say the state could see tens of thousands of additional job losses as the state economy seems to be slowly picking up.

"We're going to have an impact — clearly, adverse impact — on the state," said Michael Walden, an economist at North Carolina State University, who predicts negative growth in the state during the first quarter of 2013 without an agreement. "This is the 'anti-stimulus.'"

The "fiscal cliff" scenario resulted from the failure of Congress and the president to reach a specific deficit-reduction deal in 2011. At the same time, tax cuts backed by then-President George W. Bush, as well as tax cuts and credits approved in 2009 and later, are all set to expire Dec. 31.

The state's high jobless rate also could mean roughly 100,000 people would lose or be unable to receive extended federal unemployment benefits expected to expire at the end of the month, according to the state Division of Employment Security. Obama and other Democrats have been trying to make extending those benefits part of the negotiations.

The White House says a family of four in North Carolina earning the median income of $63,700 will see their taxes rise by $2,200 annually without a resolution.

The spending cuts would be across the board and reach amounts largely from 8 percent to 10 percent, but it's difficult to identify which areas would feel acute pain the quickest.

A study for the Aerospace Industries Association by a professor at George Mason University in Virginia estimated North Carolina could lose 29,329 overall jobs related to automatic spending cuts by late 2013, with about 60 percent coming from the non-defense related positions.

Total employment created by awards from the National Institutes of Health would decline by about 1,600 jobs, according to the United for Medical Research coalition. NIH operates the National Institute of Environmental Health Sciences in Research Triangle Park. The state's major universities benefit from government research dollars, sometimes turning out startup companies that help create even more jobs.

"The very future of our state depends on sustaining this federal research funding," said a newspaper column written by the chancellors of North Carolina State University and UNC-Chapel Hill and president of Duke University.

The U.S. Senate Appropriations Committee estimated in July that North Carolina would see $129 million in reductions in federal health, education and labor grants during this fiscal year. The cuts in part would mean 353 fewer people receiving prescription drugs to combat AIDS and HIV and 4,000 fewer children receiving child care subsidies, according to the committee report.

Education reform efforts in North Carolina also could be harmed through federal spending cuts that would affect more than 200,000 students in the state, Superintendent of Public Instruction June Atkinson said earlier this year.

The state's defense industry would be harmed most in the technology sector, where investments in cyber-security, unmanned aerial vehicles and data analytics likely would be curbed, said Lance DeSpain, executive director of the nonpartisan North Carolina Military Foundation, which seeks to boost the state's defense economy. North Carolina has the third-largest active-duty military population in the U.S.

Privately-held Lord Corp., based in Cary, does about 15 percent of its business in the defense-related aerospace sector, which includes making parts for Apache, Black Hawk and Chinook helicopters, company CEO Rick McNeel said.

Without an alternative deficit-cutting plan in place, McNeel said he expects spare parts sales to the military to slow, and the company will think twice next year about filling dozens of marketing, sales and research positions in Cary, where 342 full-time employees already work.

"It will definitely slow our hiring down until they do address it," McNeel said. "It's just all very uncertain."


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