Thursday, February 21, 2013
As the March 1st deadline for automatic federal budget cuts approaches, their potential effect on California is becoming increasingly clear. “Sequestration” cuts could slow the state’s economic recovery – and perhaps even create a new budget deficit.
There are two ways sequestration could affect California: direct federal spending cuts of about four billion dollar and the reaction to those cuts from the state’s people and businesses. Jason Sisney with California’s non-partisan Legislative Analyst’s Office said the state’s economic growth will likely slow from about two percent to one-and-a-half percent.
“Now, that’s just from the spending alone. If sequestration causes businesses and consumers to become less confident, and if it causes the stock market to decline, then the effects could be even greater,” Sisney said.
Specific regions and industries would be particularly hurt, such as San Diego’s military community. Sequestration would lead to more than three billion dollars in California defense cuts.
The greater the impact, the greater the loss of revenue – which could lead to a state budget deficit.