* Automatic cuts due to kick in on Friday
* Virginia, Maryland, D.C. could lose 450,000 jobs -study
* Confusion exists among local companies about impact
* Marks reversal in U.S. government spending trend
By Ian Simpson and Anna Yukhananov
WASHINGTON, Feb 28 (Reuters) - U.S. government workers normally unfazed by political gridlock are angry that they will be disproportionately hurt by Washington’s inability to reach a deal to avoid some $85 billion in automatic budget cuts due to kick in on Friday.
The indiscriminate spending cuts, which will occur unless President Barack Obama and Congress reach a last-minute agreement, threaten to puncture the affluence of the U.S. capital and its suburbs, where incomes and house prices have benefited from decades of federal largesse.
The area’s 375,000 federal workers are bracing for possible furloughs and pay cuts that also stand to drain the budgets of local municipalities and possibly force companies doing business with the government to lay off staff.
“It’s like a bull’s eye: any target, we are there,” said Jay Matthews, who works in the chief counsel’s office at the Internal Revenue Service in Washington. “They target us because they think we make too much money. And they target us because they think we’re lazy.”
The Pentagon said last week it planned to put its 800,000 civilian defense employees around the world on 22 days of unpaid leave, or furlough, this year if the cuts went through.
That amounts to a 20 percent pay cut for Erika Townes, 38, a nurse at the Joint Base Andrews military facility in Maryland who said she supports four children and a disabled husband on less than $50,000 a year.
“Most people I work with are one paycheck away from being homeless - one. That’s the way the economy is right now,” she said.
The cuts, known as “sequestration,” are already law, though they were never intended to go through when lawmakers devised them in 2011 as part of a U.S. debt limit agreement. It was believed that the cuts would be so big and indiscriminate that Democrats and Republicans would come up with an alternative.
But neither side has budged on how to resolve the impasse, with the Republicans drawing a line on further tax increases and Democrats refusing major cuts to the Medicare health program for seniors and other government entitlements.
Carolyn McMillian, a financial management specialist at the Food and Drug Administration office in White Oak, Maryland, said she was working 12- to 14-hour-days, keeping a tight rein on spending for FDA inspectors.
Inspectors who travel alone are discouraged from renting a car; they must rely on public transportation or try to find a government vehicle.
“I‘m hoping Obama and Congress have a meeting of the minds at the last minute so they can compromise,” McMillian said. “I would tell them to treat it as if they were in our shoes.”
The Washington region, with its 5.6 million people, accounts for just under 5 percent of the U.S. population but gets 9 percent of federal spending and 15 percent of Pentagon outlays.
Federal procurement in the Washington area has climbed from less than $5 billion in 1980 to its peak of more than $80 billion in 2010, with the rise steepening since the Sept. 11, 2001 attacks on the United States, according to George Mason University data.
The automatic cuts could cost an estimated 208,000 jobs in Virginia, 127,000 in the District of Columbia and 115,000 in Maryland, according to George Mason University’s Center for Regional Analysis.
About two-thirds of the job losses in Virginia, home to the Pentagon and such defense companies as General Dynamics Corp and naval shipyards at Newport News, would come from $46 billion in Pentagon spending cuts, the study said.
With an eye to the “sequester,” planners at Fairfax County, Virginia, which is home to the Pentagon, this week proposed a fiscal 2014 budget that was 0.37 percent smaller than the previous year‘s. County workers would get no pay raises.
The impact on county finances was “unknown and potentially significant,” Fairfax County said in a statement.
Jim Dinegar, president and chief executive of the Greater Washington Board of Trade, said businesses have frozen hiring, contractors are pressing lawyers to hold down rates, and companies are reluctant to take work without a guarantee of payment.
“Right now, everything is delayed,” Dinegar said.