Georgia poised for big hit to economy in sequester cuts

It’s generally thought that with the full implementation of the mandatory budget cuts of the sequester beginning on March 1, the nation’s economy will go into recession. Even if the economy doesn’t contract, growth will undoubtedly slow.

But in a recession caused by a steep decline in one sector of the economy, some areas will be harder hit than others.This is a subject I’ve touched upon several times now, including here.

As more data is becoming available, it’s now clear that Georgia’s economy will be particularly hurt by the sequester.

USA Today’s Services lay out sweeping state-by-state spending cuts suggests that defense cuts will cost Georgia 17,163 jobs, the 5th worst among the states.

A new study by Wells Fargo, using data from the Pew Center on the States, notes that federal spending makes up 6.9 percent of Georgia’s GDP. That’s lower than in our neighbors South Carolina and Alabama, but still puts Georgia near the top quintile of states (see map below).

From that Wells Fargo piece:

Smaller towns that host large military bases are probably the most vulnerable areas in the sequestration battle because so much of their economic wellbeing is tied to the continued flow of defense dollars. Georgia is home to three such areas: Columbus, Warner Robbins and Hinesville.

Pew’s interactive The Impact of the Fiscal Cliff on the States: Sequestration confirms those vulnerabilities and adds others.

Federal grants subject to the sequester make up 8.5 percent of Georgia’s revenue. That’s tied for second place in terms of most reliance with Illinois (South Dakota is an outlier at 10.3 percent).

Here’s a look at the states, from Wells Fargo, using data from Pew:

For the record, I’m all for cuts in defense spending — sensible cuts over a reasonable period of time. I also think we can make cuts — or increase revenues — for a broad range of other federal spending, both with regard to the discretionary spending covered by the sequester and mandatory spending of entitlement programs.

But the sloppiness of the cuts of the sequester are going to be needlessly sudden and painful to many small communities in America that have grown largely because of federal spending priorities. We can handle this better.

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