Fiscal Cliff Could Have "Catastrophic" Impact on Pennsylvania
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The so-called fiscal cliff is what could happen if Congress doesn’t reach an agreement on federal debt reduction before the end of the year. As it stands right now, a combination of spending cuts and tax increases are scheduled to go into effect at the start of 2013. The Budget Control Act of 2011 requires a $1.2 trillion reduction in federal spending over a ten year period, coupled with tax increases for nearly all income levels. A report on what that would mean for the commonwealth was released by Pennsylvania State University. It found that if budget sequestration goes through, roughly 47,000 Pennsylvania jobs would be lost between 2013 and 2022.
“That includes about 30,000 jobs in the private sector and about 12,000 government jobs. It also includes a loss of almost $6 billion of total economic output, and about $3.5 billion in industry sales and about $2.1 billion in after-tax personal income,” said David Passmore, Penn State professor and one of the report’s authors.
Passmore pointed out, the federal budget cuts would be across the board, affecting both defense and non-defense spending. He said those cuts and resulting job losses would negate any positive economic growth seen in recent years.
“If sequestration occurs, we’re really likely talking about, rather than having about a 2 percent national growth rate, having a growth rate that is around zero, and rather than having around an 8 percent unemployment rate, we’re talking about an unemployment rate that would go up to about 10 percent.”
Lawmakers are working on ways to avoid the fiscal cliff – but there are disagreements over tax hikes. Democrats want to raise taxes on the nation’s top earners, but Republicans had previously said they would not support any tax increases. But, some have conceded in recent weeks that tax increases will have to be part of the overall solution, though many still oppose raising taxes on those who earn more than $250,000 annually. Passmore said member of both political parties know a lot is at stake.
“When you examine the numbers that are likely to occur as a result of sequestration, I think everyone is working very hard to avoid this,” he said, “it would mean catastrophic job loss for the state of Pennsylvania.”