BEYOND THE NUMBERS
States Cutting Jobs, Hurting Economic Recovery
- Local school districts have cut 154,000 education jobs since August 2008.
- Cities, counties, and other local governments have cut 202,000 jobs.
- State governments have cut 69,000 jobs.
The previous week, the Commerce Department reported that cuts in the services that states and localities provide were responsible for slicing one-tenth of a percentage point off GDP growth in the October-December period. That may not sound like a lot. But as the recovery struggles to pick up steam, the last thing it needs is a push in the wrong direction.This bad situation may get even worse. Economist Mark Zandi told a Congressional committee last Thursday that he expects a new round of spending cuts at the state and local level to shave another 0.4 percentage points off GDP growth over the course of 2011. Goldman-Sachs similarly predicts a similar impact of 0.5 percentage points. Those predictions may actually be optimistic. Our latest survey found that states must find $125 billion worth of spending cuts or other budget-balancing measures for the 2012 fiscal year, which begins July 1 in most states. If states pursue a cuts-only approach to closing these gaps, as opposed to tapping reserves and raising additional revenues, the loss of GDP could approach a full percentage point and slow job creation by as much as 850,000 public- and private-sector jobs. Unfortunately, it looks like many of the nation's governors are taking just that kind of cuts-only approach to resolving their budget gaps. State legislators should reject this course and take a more balanced approach.