Fiscal Cliff Threatens Bay State Industries

If Congress doesn’t avoid the year-end “fiscal cliff,” billions of dollars worth of medical research and defense contracts would be slashed, and perhaps nowhere would that be more keenly felt than in Massachusetts.

Massachusetts General Hospital has the nation’s largest research program, amounting to $750 million, about $400 million of which comes from the National Institutes of Health and other federal agencies, said Dr. Harry Orf, senior vice president for research.

Under the series of tax increases and spending cuts scheduled to take effect Jan. 1, NIH would immed-iately see an 8.2 percent — or $2.5 billion — cut, which would disrupt more than 2,300 grants supporting research in areas such as heart disease, diabetes and cancer.

Massachusetts would see $200 million in NIH funding cut annually over the next 10 years, said Tim Gens, executive vice president of the Massachusetts Hospital Association.

“We’re talking about almost a decimation of hospital- and university-based research,” Orf said. “This is not the time or place you want to cut federal spending.”
Hospitals and other health-care providers already are in their second year of a 10-year, $5.6 billion cut under the Affordable Care Act, Gens said, and if Congress fails to reach a compromise, another $1.1 billion would be slashed over 10 years across all Medicare providers, mostly in hospitals.

Those cuts could result in 17,400 health-care jobs lost in Massachusetts, including 11,200 in the first year alone, according to the American Hospital Association.

The defense industry, which employs more than 130,000 people in Massachusetts, receives $13.9 billion in contracts, 20 percent of which would be cut, according to the Massachusetts Defense Technology Initiative.

“The consequences are drastic from an economic perspective, but the consequences those cuts would have on our ability to defend the nation are even more disturbing,” said Christopher Anderson, the group’s president. “Rather than looking at whether something is a priority or not, the cuts would be across the board.”

Alex Zaroulis, spokeswoman for the state Executive Office of Administration and Finance, said it’s important to remember that the fiscal cliff would result not only from budget cuts but also from the expiration of tax breaks.

“The combination of those two things,” Zaroulis said, “would likely drive the economy into recession.”