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CHART: States That Cut The Most Spending Have Lost The Most Jobs
By Guest Blogger on Jun 27, 2011 at 2:15 pm
Our guest blogger is Adam Hersh, an economist at the Center for
American Progress Action Fund.

Govs. John Kasich (R-OH), Rick Snyder (R-MI), and Scott Walker (R-WI)
There’s a new cult of economic thought sweeping the nation — or at
least many Republican (and even some Democratic) political circles.
Its adherents cling to the erroneous belief that sharp government
spending cuts will revitalize economic growth and create much needed
new jobs
Speaker of the House John Boehner (R-OH) is an ardent follower of this
Cut-Grow cult, as are a number of high profile governors. For
instance, Gov. John Kasich (R-OH) declared, “We’re going to have to
reduce spending…to create a platform for economic growth.” When Gov.
Chris Christie (R-NJ) delivered his budget to the state Legislature he
argued, “We must continue to cut government spending” to create jobs
and prosperity for New Jersey families. Gov. Scott Walker (R-WI) vowed
his budget “lays [the] foundation to create jobs.”
Now these Republicans want the American public to drink a giant glass
of their Cut-Grow Kool-Aid. But the data actually show the opposite of
their claims to be true: steep spending cuts are hampering economic
recovery in some states, while other states that resisted cuts or
increased spending are now seeing declining unemployment rates, faster
private-sector job creation, and stronger economic growth.

From the start of the Great Recession in December 2007 through the
end of 2010, 24 states have cut government spending by an average of
7.5 percent after adjusting for inflation. Another 25 states have
expanded government outlays by an average of 11 percent. (The analysis
excludes Alabama due to data problems reported by the National
Association of State Budget Offices). And the differences in these
states’ economic performance could not be more self-evident. Relative
to national economic trends, states that increased spending enjoyed on
average:
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
In contrast, states that cut spending saw on average
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
Steep state spending cuts have gone hand-in-hand with rising
unemployment rates, falling private-sector payroll employment, and
lower growth in state’s gross domestic product, or GDP — the sum of
all goods and services produced by labor and equipment in each state,
less imports.
Take private sector jobs, for example. 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. The downward sloping red line shows the relationship between
cuts to state spending and changes in private sector employment
relative to the national average since the start of the Great
Recession. 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.
Certainly policymakers should seize every opportunity to eliminate
waste and improve the efficiency of delivering government functions.
But spending cuts achieved or championed by conservatives are aiming
much deeper at public services and public investments critical to
economic recovery now as well as the future of U.S. economic growth
and competitiveness.