‘Right-sizing’ state government downsizes region’s economy
The recently enacted state budget will have severe negative impacts on Western North Carolina’s economy, according to a new report released by the North Carolina Budget & Tax Center.
“In a misguided effort to “right-size” state government during a jobs crisis, this budget’s $2.6 billion in spending cuts only serve to downsize the state’s economy, with especially negative consequences for the rural Western region of North Carolina,” said Allan Freyer, a policy analyst with BTC. “This report demonstrates that deep cuts to public sector investments will also damage private sector businesses and increase unemployment across the board.”
Unlike other economic impact studies released during the recent budget debate, this BTC report examines the economic consequences of the “whole budget”—taking into account both the plan’s $2.6 billion in spending cuts and its $1.6 billion in tax changes in FY2012-13—for all seven regions across the state, and the results are ugly for Western North Carolina. Specifically, the BTC report finds the following:
The budget’s spending cuts take more money out of Western North Carolina’s economy than the cuts put back in, causing the region to lose $1.83 in spending cuts for every $1 it gains from the tax cuts included in the budget.
In addition, spending cuts will also more than wipe out any positive job creation related to the tax cut in the Western region, resulting in the destruction of 5,113 jobs and $225 million in lost labor income by FY2012-13 when the budget fully phases in. Contrary to the hopes of legislative leaders, these job losses will hurt the private sector, too—50 percent of the jobs lost in Western North Carolina will occur in the private sector, in industries like hospitals, retail services, and medical-device manufacturers.
The budget will damage rural Western North Carolina more than urban regions in the state: for every one job the budget creates in Western North Carolina through tax cuts, it kills 3.6 jobs, while urban Charlotte only loses 2.5 jobs from spending cuts for every job gained by tax cuts.
The counties included in the Western Region are: Alleghany, Ashe, Avery, Buncombe, Burke, Caldwell, Cherokee, Clay, Graham, Haywood, Henderson, Jackson, Macon, Madison, McDowell, Mitchell, Polk, Rutherford, Swain, Transylvania, Watauga, Wilkes, and Yancey.
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