Cuts will cripple economy
Sequestration wrong for state’s high tech
If you asked most Americans where new inventions and high-tech jobs come from, they’d probably say Silicon Valley and tell you something about Steve Jobs’ garage. But actually, start-ups and innovators are booming all over this country. New high-tech hotspots like the Raleigh/Durham Research Triangle and Austin’s “Silicon Hills” pop up every day.
Here in Massachusetts, we know this story better than anyone. From the Route 128 corridor and the Kendall Square biocluster in the east to the research labs at Amherst in the west, Massachusetts has thrived on the cutting edge for years. We lead the nation in patents per capita and 5 percent of our local economy is plowed right back into R&D, the highest re-investment rate anywhere in the world. As a result, high-tech companies generate 20 percent of all wages paid in the commonwealth and local unemployment stands 2 points below the national rate.
Aerospace and defense are especially powerful drivers of this high-tech economic strength, plucking talent from world class facilities like MIT and WPI and finding synergies with military research at Hanscom Air Force Base and the Army Research Lab at Natick. Overall, aerospace and defense support 110,000 jobs in Massachusetts and over 2 percent of our local GDP.
But short-sighted decisions in the Congress have put this economic engine needlessly at risk. Last year’s pointless brinkmanship over raising the debt ceiling left in its wake a trillion-dollar sledgehammer of automatic budget cuts known as ‘sequestration.” These will slam into research budgets and defense investments in less than three months. It could hurt our state’s high-tech economy if Congress doesn’t act.
For Massachusetts high tech, the results would be devastating. Experts say the cuts to R&D alone will drag down national GDP by as much as $860 billion over the next nine years, a proportional hit of approximately $22 billion to Massachusetts.
The cost in jobs would be even more severe. Experts say the total sequester — including both defense and domestic spending cuts — will destroy 2.14 million jobs, 38,200 here in Massachusetts. Cuts to R&D alone will eliminate 200,000 American jobs next year. That would simply kneecap our nation’s high-tech economy.
And most of the pain will be felt in small and mid-sized companies like the engineering shops, tooling companies and materials fabricators that make up America’s deep and rich aerospace manufacturing base. That’s because about 70 cents out of every military purchasing dollar goes to supply chain companies, where three-quarters of defense manufacturing jobs are found. One study indicates that nearly half the jobs destroyed by sequestration will be at companies that employ fewer than 500 people, a hit of 28,000 to commonwealth small businesses in 2013.
These suppliers are linchpins of our economy, but they are also home to critical engineering and technical capabilities America needs to build and maintain the strongest, best-equipped, and most capable military in the world.
Companies like my firm, Millitech Inc. (part of Smiths Group), in Northampton. We design and manufacture high-performance antennas, radars, sensors and other precision components used in satellites, radios and other military devices that operate at extremely high frequencies and require near-perfect accuracy and reliability.
At the cutting edge — where companies like Millitech operate — innovation never stops and we are constantly investing in research and developing new capabilities and products. A 2011 RAND study on aircraft design explains that, as technology has grown more complex and the pace of change has accelerated, innovation and technical expertise have “shifted to small- and medium-sized firms.”
This culture of innovation ensures that America’s military stays a step ahead, but it also fuels “spin-off” inventions that boost the civilian economy as well. For example, iRobot is a ground-breaking Bedford company making autonomous service robots like the famous Roomba vacuum. But iRobot actually started on a research grant from the Pentagon’s legendary DARPA office and its first product was the military PackBot used for bomb disposal and hazmat duty.
Sequestration cuts will decimate this kind of R&D, depriving our military of critical technologies and choking off the flow innovation into the civilian economy. Reducing the deficit is important, but not through mindless sequestration that will pull the rug out from under the high-tech economy.
We saw in the 1990s that the surest way to bring down our debt is through long-term economic growth that benefits all Americans and boosts government revenues due to increased activity across the entire economy.
That means strengthening the high-tech businesses that are building the economy of tomorrow, not sacrificing them on the altar of congressional gridlock and mindless sequestration.
Bob White is vice president, Millitech Inc. Manufacturing Services Division in South Deerfield.