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Federal Debt Deal a Bad Deal for North Carolina

North Carolinians are still struggling to recover from the Great Recession, but a new report from the NC Budget & Tax Center shows that the recent federal debt deal threatens to make things worse by weakening efforts to improve education and worker retraining; cutting back on research for innovation and growth; allowing our roads, bridges, and schools to continue deteriorating; and reducing access to health services.

To make matters worse, the deal ignored the country’s highest priority by neglecting to include any efforts to put people back to work, even at a time when interest rates are so low that investors will actually pay the federal government to hold onto their money.

The first round of $750 billion in cuts will fall hard on North Carolina’s public schools, economy, and military communities. Roughly half of these cuts will hit federal domestic investment spending, one-third of which flows through state governments into local communities to support public schools, workforce development, law enforcement, health and human services, and infrastructure. The other half (at least for the first two years) will hit spending on national security, mostly the military, which is a critical part of many North Carolina communities and their local economies.

If the Supercommittee process taking place this fall fails to come up with a workable plan to reduce medium-term deficits (i.e., over the decade), there will be across-the board cuts of roughly $1 trillion over nine years on top of the first round of cuts to domestic investments and security spending that constituted the first part of the debt-ceiling deal.

The across-the-board cuts, which are split evenly between domestic investments and defense, will put an enormous burden on many of the same public investments and services affected by the first round of debt-deal cuts. The result in North Carolina will be that funding for public schools, housing, maternal care, early-childhood education, worker retraining, and science research will all be in competition with one another for an ever-shrinking amount of funds starting in 2013.

The debt deal’s potential cuts to national defense are likely to hit North Carolina’s military communities – and the state’s economy – especially hard. Major cuts to the military will occur if the Supercommittee fails to take a balanced approach that can pass both chambers of Congress. The impact of these cuts will be felt across North Carolina, as the military’s presence in the state accounts, directly and indirectly, for an estimated one in ten jobs.

These harmful consequences underscore the need for the Supercommittee to take a balanced approach to reducing the long-term deficit. The members of the Supercommittee must also commit to implementing concrete measures that will boost the economy and create good jobs for the millions of Americans – and half-million North Carolinians – who are still struggling to find work.

4 Comments


  1. Eunice

    August 30, 2011 at 12:09 pm

    Consumer confidence sinking to two-year low. The Obama malaise is settling in just like it did for Jimmy Carter. Who in their right mind would want another four years of this ?

  2. Ed McLenaghan

    August 30, 2011 at 12:19 pm

    Before attributing the pace of the recovery to current politicians of either party, I’d recommend reading the work of economists Carmen Reinhart and Ken Rogoff, whose work demonstrates that recoveries from financial crises (especially severe ones) take a long time (an average of 4.8 years in post-WWII financial crises).

    http://economix.blogs.nytimes.com/2011/04/29/after-the-falls/

    http://money.cnn.com/2011/04/05/pf/visionaries_carmen_reinhart.moneymag/index.htm

  3. david esmay

    August 30, 2011 at 2:02 pm

    Considering the devastating and lasting effects of programs put in place by the Bush administration, it will take a decade for us to recover from eight years of mismanagement.

  4. Jimmy

    August 30, 2011 at 5:06 pm

    I guess if you see nothing positive about the future, the only resort is to go back in time and bash Bush.

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