Budget Cuts Could Have Dire Consequences for Business Aviation
September 25, 2012
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  • By: Jack Olcott, Business Aviation

    Automatic, across-the-board budget cuts on January 2, 2013 as stipulated in the Budget Control Act of 2011 will impact all government programs with few exceptions, such as Medicare, Medicaid and Social Security. The consequences of such action will be profound, if not devastating, to the nation’s economy, and Business Aviation will be challenged.

    The law calls for reductions from 8.5 to 10 percent for the 2013 fiscal year in non-exempt programs to begin on January 2, 2013. Note, however, that the fiscal year runs from October 1, 2012 to September 30, 2013, so that mandatory reductions in spending must occur over the remaining nine months of the fiscal year. Consequently, funding for programs will actually fall between 11.3 and 13.3 percent. For those readers who are interested in detail (or have trouble sleeping), there is the 394-page tome from the Office of Management and Budget entitled OMB Report Pursuant to the Sequestration Transparency Act of 2012 (P.L. 112-155), issued on September 17.

    According to the Administration’s report, total cuts in Federal spending under sequestration will be nearly $110 billion for 2013. Applying the Office of Management and Budget estimate that $92,000 in government spending creates one job, that reduction could reduce U.S. employment by over 1,000,000. Regardless of math, politics or whichever government estimates one wishes to believe, one fact remains clear: Our nation’s economy will experience a huge shock if our leaders in Washington do nothing.

    As a unique and vital component of our nation’s transportation system, Business Aviation will play a critical role in absorbing the harsh impact of sequestration should the sword fall on January 2, since the private sector will represent an even larger portion of Gross Domestic Product. Companies will be forced to expand their efforts to keep factories open and customers satisfied, and business aircraft will be one of the tools they will use.

    But contrary forces will be in play. Expect to hear from politicians who fail to understand and appreciate the value of Business Aviation as a tool for growth.

    Experts who handicap how Washington works anticipate that there will be a scramble to find new sources of federal revenue between now and January 2. Surely Business Aviation will be targeted. Expect proposals for increased user fees and alteration of the depreciation allowance for business aircraft, as well as other examples of Business Aviation being misunderstood.

    While always important, the need to communicate the value of Business Aviation is particularly critical now as the budget drama in Washington unfolds in an atmosphere of crisis and political obscuration. I urge readers of this blog to spread the good news of business aircraft as effective business tools. Communicate with your elected representative as well as with those running for office. Now more than ever, our nation needs Business Aviation. It is up to those who know Business Aviation to advocate for this form of transportation.