Cut spending, lose jobs
More specifically, CAP economist Adam Hersh found that states that ratcheted down spending saw a:
- 1 percentage point increase in the unemployment rate
- 2.1 percent loss of private employment
- 2.9 percent real economic contraction relative to the national economic trend.
States that increased spending experienced a:
- 0.2 percentage point decrease in the unemployment rate
- 1.4 percent increase in private employment
- 0.5 percent real economic growth since the start of the recession
Every 10 percent decrease in state spending coincided with a 0.4 percentage point increase in unemployment. That level of cuts also is associated with a 1.6 drop in state GDP.
