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Looming Federal Fiscal Cliff Could Cost Texas 160,000 Jobs

September 10, 2012

AUSTIN, Texas - A looming budget battle in Washington could cost 160,000 jobs in Texas. Lawmakers last year gave themselves until the end of this year to reduce the federal deficit by more than a trillion dollars over the next decade. If Congress can't agree on a plan, automatic cuts will kick in. Known as "sequestration," the cuts were designed to be unpopular and painful to all sides, as an incentive to compromise.

But tax-policy analyst Ali Mickelson fears partisan politics this election season could prevent a more productive solution.

"That's sort of the reason that this sequestration is looming. It's because of that partisan divide. Nobody's been able to agree, and that may continue to be the case."

Republicans accuse Democrats of being willing to gut the defense department, while Democrats say the GOP is trying to protect tax breaks for the wealthy. If lawmakers can't avoid the "fiscal cliff," Texas is likely to lose more jobs than any other state except California and Virginia. That's according to a recent George Mason University report, which also calculated that the reduced federal funding would remove about $16 billion from the state's economy.

More than half of the Texas job losses would come from defense cuts. Much of the rest, Mickelson says, would affect education. But as tough as that sounds, she thinks sequestration might actually be preferable to some alternatives.

"If we have, in response to avoiding sequestration, sort of a rushed one-sided budget that goes through, that could potentially cost more jobs, more services, that could be bigger cuts."

The automatic cuts were a provision of the Budget Control Act of 2011. They would go into effect in January, and could send the country back into recession during the first half of next year, according to the George Mason University study, with 2.14 million job losses nationwide.

See report at

Peter Malof, Public News Service - TX