off the charts
POLICY INSIGHT
BEYOND THE NUMBERS
BEYOND THE NUMBERS
States made almost $3 in spending cuts for every $1 in new revenues to close the huge budget gaps that resulted from the Great Recession, our new analysis finds. It is the first attempt to quantify how states collectively balanced their budgets in the face of their worst fiscal problems in at least 70 years.
States have cut services by $290 billion and raised taxes and fees by $100 billion since 2008. Spending cuts made up 45 percent of states’ overall budget-balancing actions (see chart), which also included use of emergency federal aid and state budget reserves.
States’ reliance on spending cuts to close budget gaps carries heavy short- and long-term costs for the economy:
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- State and local governments have shed 641,000 jobs since August 2008. They have also cancelled contracts with vendors, reduced payments to businesses and nonprofits that provide services, and cut benefit payments to individuals. All of these steps have removed demand from the economy and slowed the recovery.
- By diminishing funding for elementary and high schools, making college less affordable, and reducing residents’ access to health care, the cuts threaten to make the U.S. economy less competitive over the long term.
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