NC Budget and Tax Center

Experts, policy makers agree: Federal spending cuts bad for North Carolina’s economy

Now that policy makers are starting recognize that spending cuts hurt economic growth and contribute to job losses, it’s worth revisiting the looming threat to our state’s economic recovery posed by sequestration cuts to federal defense and non-defense programs.  While it’s clear that the sequestration cuts to Pentagon programs will hurt North Carolina’s economy, a recent report commissioned by the Aerospace Industries Association finds that cuts to non-defense programs will hurt as well.

Over the past few months, we’ve started to hear a lot about “sequestration”— $1.2 trillion in automatic, across-the-board spending cuts to the Pentagon and other federal programs like education, nutrition, healthcare, and research and development scheduled to phase in over the next decade if Congress is unable to agree on a deficit reduction package by the end of this year.

While the $600 billion in defense spending cuts—$60 billion of which take effect in January—would undoubtedly hurt North Carolina’s economy, and especially military communities like Fayetteville, and Jacksonville, the report finds that cuts to non-Pentagon programs will likely have an even more damaging impact, since military and non-military families alike rely on federal assistance with child care, education, Head Start, and the R&D dollars that support the state’s strengths in higher education and technology.

The AIA study suggests that such an approach is a bad deal for North Carolina’s economy, specifically finding that the sequestration cuts to nondefense spending would inflict almost double the economic harm as the proposed Pentagon spending cuts and would reduce the U.S. gross domestic product during over the next decade by a greater amount ($77.3 billion) than cuts to defense spending ($72.1 billion).

 

Instead, Congress should take a balanced approach to deficit reduction by including new revenues, rather than relying solely on spending cuts to close the federal budget deficit.

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  1. […] to a fiscally responsible alternative to the spending-cuts only approach to budgeting embodied in sequestration—the looming $1.2 trillion in across-the-board spending cuts to federal programs like Head Start, […]