The last several years have definitely delivered contractors across the country, and in the Southeast region as well, more than the average amount of uncertainty. The so-called "financial meltdown" of late 2008, the health-care debate and the Deepwater Horizon incident in the Gulf of Mexico last summer all contributed to this sense of unease and uncertainty. In each case, when events were unfolding, it was actually difficult to foresee what would happen in the end.
Now, the current political impasse in Washington, D.C., over raising the nation's debt limit is only adding to the uncertainty. The question initially in people's minds was, "What happens if the U.S. defaults on its debts?" There are no good answers to that question.
In his latest report on the debt-limit talks, Tom Ichniowski of Engineering News-Record includes perspective from contractors to the ongoing political situation.
ENR quoted Andy Ball, president and CEO of Webcor Builders, San Mateo, Calif., who said, “If the federal government defaults and stops paying its bills, the result will not only be devastating, it will potentially have a negative impact on job growth for years to come.”
In a minor assist to Tom, I contacted a pair of contractors in the Southeast to get their thoughts on what's happening in Washington. Bill Caldwell, president of Waldrop Mechanical in Spartanburg, S.C., and current chairman for the Carolinas ABC, says the ups and downs being caused by these injections of uncertainty is certainly unique.
“I’ve been in this business for 37 years," he says. "We’ve ridden the roller coaster (before), but we’ve never ridden anything quite like this.”
Aside from the likely construction cuts, Caldwell thinks a deal of some kind would at least restore a certain level of confidence for business interests in the U.S. and around the globe.
“Until people have a real strong sense of confidence in our economic system here in South Carolina, in the United States and around the world … a lot of these big companies (will keep) sitting on the cash that they’re accumulating," he says. "They’re not going to be spending money on capital projects or maintenance. They’ll just sit back and wait to see what happens.”
A short-term deal might provide some certainty, but only so much, he says. “That could possibly ignite some confidence by the business community.”
I also asked Ray Riddle, vice president with Holder Construction Co., Atlanta, what he thought the likely impact on construction would be. His initial remarks were telling: "I wish I knew," he said.
Additionally, Riddle said: "My gut is telling me that whatever deal is reached will be a short-term solution to get us more time to negotiate longer-term structural changes, or let the election next year be a referendum on whose approach is best. In either case, reaching a deal is likely to have little impact. A tight money supply, uncertainty over regulations, and a generally hostile relationship with business will keep most businesses on the sidelines through the 2012 election cycle."
Significant budget cuts could have devastating impacts, though, Riddle adds.
Either way, he says, "I would think that the federal government is going to have to decide what to spend money on and what not to. If they cut capital projects, construction market shock takes place. If they reduce services or support, the overall economy is hurt. And if they don’t pay the debt, financial markets fall. All three mean no way to finance public projects."
Summing up, Riddle said, "Personally, I think a short-term deal will get done, nothing changes, and we wait it out for the next election."
Hold on. This roller-coaster ride isn't over yet.
What are your thoughts on this situation? Chime in with your comments!
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