Sequester: How might it impact area car sales?

Sequester: How might it impact area car sales?

The deadline on whether sequester of the government will happen has passed. Its happening albeit we wont know the full effect until later this month – we think. How will it affect the area economy and its dealers? No one knows, of course. The idea behind passing the bill last year mandating sequestration if no grand bargain was reached on the budget was that the spending cuts were so onerous and arbitrary that Congress would be shamed into agreeing on a budget deal. We all know the rest.

But because federal employees must be given 30 days notice for furloughs, the unpaid time off cannot begin until the end of March. That gives Congress more time, after the March 1 deadline, to work out a deal. NADA chief economist Paul Taylor believes Congress will pass legislation in the next few days enabling compromise on administration rules for the sequester.

But its unclear how long that might take or if it will happen at all. If the sequester does go through, everyone expects that the Washington area will be hurt the most, since the local economy is so dependent on federal dollars. Two out of every five dollars in the metropolitan areas economy come directly from the federal government, said a report in the Washington Post, citing economists at the George Mason University Center for Regional Analysis. Many federal employees have received furlough notices saying they will need to take one day of unpaid leave every two weeks, from March 27 until the end of September, the end of the fiscal year.

The burden is harder for civilian Defense Department employees, who must take a disproportionate share of the cuts to make up for active-duty military being exempt. Civilian staff could lose 20 percent of their pay. That will apply to 46,000 employees in Maryland, 90,000 in Virginia and 13,000 in the District, according to the White House report of state-by-state impacts.

One might assume that a cut in area income means consumers are less likely to make what is usually a discretionary purchase, a new vehicle. But dealers are optimistic by nature, and two WANADA member dealers quoted in USA Today seem unconcerned. Of course this will impact our region, but we dont think it will impact our auto sales at all, said Tammy Darvish, of DARCARS. And although Jack Fitzgerald of Fitzgerald Auto Malls said he heard rumbling of car buyer concern over sequester recently, he attributed it to media hype. Its affecting our business, he said, but it will pass because they arent cutting that much.