If Congress fails to reach a consensus that keeps the U.S. economy from falling off the fiscal cliff, the effects in York County could be devastating.
An economist and local leaders weighed in Wednesday, explaining what could happen if unchanged federal laws yield tax increases and spending cuts.
"If we go off the fiscal cliff at full steam, that will be a big problem here," said Kurt Rankin, assistant vice president and economist for the PNC Financial Services Group. After a 10-year career with Moody's Analytics, he joined PNC in 2010 to provide economic analysis for the bank's Midwestern footprint.
A particular economic blow in the county could come in the form of a reduced Department of Defense budget. Already trimmed by the ending of wars in Iraq and Afghanistan, defense spending could see another 50 percent cut without government intervention.
"Our local defense contractors are concerned about the uncertainty of it all. There's a fear of the unknown, and it's hard for them to come up with a business plan for 2013 and 2014 without knowing the path the government is taking," said Bob Jensenius, executive vice president of the York County Chamber of Commerce.
At BAE Systems, it could mean a 10 percent reduction in its workforce.
Randy Coble, a spokesman for the defense contractor, which makes military vehicles at its West Manchester Township facility, said 4,000 jobs could be lost at its locations across the country.
How many of the 1,300 York County employees would be affected was unclear, said Coble.
"It's too early to say what will happen at the York site or to the programs that are operated there," he said. "We're certainly watching the situation very, very, very closely."
Waiting for government to act sometimes affects workplace morale, Coble said.
"Being uncomfortable with uncertainty is a natural human emotion," he said.
BAE's government relations team has been reaching out to lawmakers, explaining the deep cuts proposed in the Defense budget would impede the contractor in being able to meet the needs of the military.
"We've been asking decision makers to help us continue providing war fighters with the tools they need," Coble said.
Lawmakers will likely spend the next two months hashing out an agreement that keeps spending cuts from being too dramatic, Rankin said.
"It wouldn't benefit either political party if they didn't," he said.
Regardless of what's decided before January, the economy is expected to lag during the first quarter of 2013, Rankin said. Growth is expected to pick up, however, during the latter half of next year if an agreement is reached to stave off the $650 billion hit that could be delivered by government inaction.
"Households will be willing to spend after the fiscal cliff is resolved," he said.
Because many people either paid down debt during the recession or wrote it off through bankruptcy, disposable incomes and savings accounts have grown, Rankin said.
The country's savings rate is 4.5 percent, which is very high for the U.S. economy, he said.
"We haven't seen consumer potential this strong since the early 1990s," Rankin said.
To weather the Great Recession, consumers developed a bunker mentality, holding back on their spending. As jobs slowly continue to grow, home prices slowly continue to increase, manufacturers export more goods and home-building permits increase, consumers will gain confidence.
"U.S. consumers make up 75 percent of the economy. It's driven by workers bringing home a paycheck and spending that paycheck," Rankin said. "Consumers will start spending again, and they will lead the economic recovery."
- Candy Woodall can also be reached at email@example.com.