BTC REPORTS: Federal Debt Deal a Bad Deal for North Carolina - Ill-Advised Cuts to Public Investments Will Undermine Efforts to ‘Win the Future’

By Edwin McLenaghan
Policy Analyst
August 2011

Executive Summary

  • The debt deal between President Obama and Congress requires at least $2.1 trillion in deficit reduction over ten years but failed to include any measure to create jobs.
  • The first part of the debt deal forces more than $750 billion in cuts to federal domestic investments and security spending over the next decade. The second part of the debt deal tasks the bipartisan Joint Select Committee to achieve a deficit-reduction target of $1.2 trillion over ten years. Failure to produce and pass a plan will result in $1 trillion in automatic, across-the board cuts to domestic investments, health care and defense.
  • The first round of 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 will hit the military, which is a critical part of many North Carolina communities and their local economies.
  • If the Joint Select Committee process fails, across-the-board cuts of $1 trillion over nine years will put an enormous burden on the same public investments and services affected by the first round of debt-deal cuts. Public investments that directly benefit millions of North Carolinians, including funding for public schools, housing and transportation, nutrition assistance for expectant mothers and very young children, worker retraining, science research, and early childhood education, will be forced to compete with one another for an ever-shrinking amount of funds starting in 2013.
  • North Carolinians are struggling to recover from the Great Recession, but the 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; reducing access to health services; and neglecting efforts to put people back to work.
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