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States That Cut The Most Funding Lost The Most Jobs: Analysis

State Funding Cuts

First Posted: 06/27/11 05:47 PM ET Updated: 08/27/11 06:12 AM ET

Republican governors have touted spending cuts as both fiscally responsible, and economically prudent. But a new analysis casts doubt on that narrative.

In recent months, Gov. Scott Walker (R-Wis.) and Gov. John Kasich (R-Ohio) both claimed their budgets, heavy on the spending cuts, would pave the way for job growth in their states, as Think Progress notes.

Yet according to research performed by CAP economist Adam Hersh and posted on Think Progress, it seems states that cut the most funding lost the most jobs. And according to the site, in fact, the country is split pretty evenly between the 24 states that cut spending between 2007 and 2010, and the 25 that expanded government outlays.

On average, states that increased spending performed significantly better than cost-cutting states, with their unemployment rates actually dropping by 0.2 percent (as opposed to 1 percent increase in cost-cutting states), private-sector employment increasing by 1.4 percent (as opposed to a 2.1 percent loss) and 0.5 percent "real economic growth" since the start of the recession (as compared to a 2.9 percent economic contraction relative to the national economic trend).

Says Think Progress:

This graph shows that state spending is not just about jobs for public service workers, but also has far reaching consequences for private businesses and their workers... States that cut spending are seeing significantly more job losses in the private sector than states maintaining or increasing spending levels. For every 10 percent cut in state spending, state economies lost 1.6 percent of their private-sector jobs.

The analysis comes as Congressional Republicans have demanded trillion dollar budget cuts as the price for their votes to raise the debt ceiling. Republicans have also balked at the notion of raising taxes as part of any debt ceiling agreement.

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Filed by Simon McCormack  |