Tags: fiscal | cliff | govt | contractors

CNNMoney: Looming ‘Fiscal Cliff’ Cuts Cause Paralysis Among Govt Contractors

By Michelle Smith   |   Friday, 10 Aug 2012 12:06 PM

The potentially massive spending cuts associated with the so-called fiscal cliff are still months away, but according to CNNMoney, small businesses that rely on government contracts are already feeling the pinch.

If Congress does not act to provide an alternative, at the beginning of January 2013, $110 billion in spending cuts will be automatically triggered. No one knows exactly where these cuts will be or how deep they will be. Many areas of the federal budget will likely be affected, but defense spending is expected to be particularly hard hit. And defense is a sector in which many government contractors thrive.

The uncertainty has prompted some federal agencies to delay projects and terminate programs.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

CNNMoney says company owners are already reporting that the looming cutbacks are causing their firms to slow business and shrink production and could threaten jobs.

But, employees at the smaller firms aren't the only ones at risk of feeling the pressure.

The Washington Post warns that tens of thousands of employees could receive dismissal notices days before the presidential election.

As some major federal-funds beneficiaries, such as Northrop Grumman and General Dynamics, ponder what to do, Lockheed Martin, a giant defense contractor, has said that it might notify more than 100,000 employees of potential layoffs before the election.

Some argue that businesses are using labor cuts to pressure the government, but others point out that the uncertainty created by the looming fiscal cliff is one that cannot be ignored. For one reason, there are legal implications if they do not notify their employees.

All but the smallest companies must notify their employees at least 60 days in advance when they know of specific, probable job cuts, The Washington Post reports.

Some state laws are even stricter, requiring employers to provide even more generous periods of notice.

“There's just paralysis. People aren't making long-term strategic decisions. They're inching along,” Craig Parison, chief operating officer of software development firm Invertix, tells CNNMoney. 

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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