MEDIA RELEASE: Reducing Federal Deficits Without a Significant Revenue Increase Would Cost NC Billions

Ryan Budget Cuts Would Be Three Times Bigger Than Automatic Cuts Scheduled for January

RALEIGH (August 6, 2012) — If significant new revenue isn’t included, efforts to reduce federal deficits would almost certainly damage North Carolina’s economy, finds a new report by the Center on Budget & Policy Priorities, a non-partisan policy research organization based in Washington, D.C. Coming on top of recently-enacted cuts to state spending, drastic cuts to key federal investments in schools, roads and bridges, safe communities, and disaster relief would severely damage the North Carolina’s sputtering recovery from the Great Recession.

The House-passed budget from Congressman Paul Ryan is an example of the kind of approach Congress would take if it rejects deficit reduction that includes revenues, according to the report. Under Ryan’s plan, North Carolina would see an estimated loss of 22% or $635 million in federal funding for education, clean water, law enforcement, and other state and local services in 2014 alone. Ryan’s plan would also shift other very large costs to states by reducing sharply federal funding for Medicaid (in addition to repealing the health reform law), and deeply cutting funding for highway construction and other transportation projects. Cuts of this magnitude will damage vital services and impact the private sector already struggling with depressed consumer demand for their goods and services.

While everyone supports fiscal responsibility, deficit-reduction shouldn’t come at the expense of our state’s economic future,” said Alexandra Sirota, Director of the Budget & Tax Center, a project of the North Carolina Justice Center. “If Congress doesn’t take a balanced approach that includes revenues as well as spending cuts it will damage our ability to educate our children, build roads and bridges, and have clean water and safe communities—the essential tools for building a strong economy in the future.”

Federal funding for states, counties, and cities very likely would be decimated by an unbalanced approach to deficit reduction in the next decade. That’s because there’s broad bipartisan agreement that significant deficit reduction is needed, but federal policy makers also agree in broad terms that deficit-reduction savings from other major parts of the budget – defense, Medicare and Social Security – should be limited during that period. Federal funding for states and local areas would thus be one of the few remaining sources of large potential savings.

These cuts likely would bring federal aid to state and local governments to historic lows. By 2021, under the Ryan budget, federal grant programs for states, counties, and cities likely would be less than half the average of the last 35 years.

North Carolina is already struggling to recover from the recession. More and more spending cuts only add to the unemployment lines, hurt business contracts, and reduce customer sales, "said Allan Freyer, Public Policy Analyst with the Budget & Tax Center. "Taking another $635 million out of North Carolina’s economy is no way to make things better."

These cuts would add to the $2.9 billion in spending cuts Congress already made to state and local aid last year and the 11% reduction in state spending enacted by the General Assembly since the beginning of the recession in 2008. Taken together, cuts of this magnitude are hindering our state’s already sluggish recovery.

The Center's full report can be found at this link.

FOR MORE INFORMATION CONTACT: Alexandra Forter Sirota, Director of the Budget & Tax Center, alexandra@ncjustice.org, 919.861.1468; Jeff Shaw, Director of Communications, jeff@ncjustice.org, 503.551.3615 (cell).

 

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