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You are here: Home / News / ISU economist says Iowa economy would be hurt by federal cuts

ISU economist says Iowa economy would be hurt by federal cuts

February 26, 2013 By Dar Danielson

A member of the Economics Department at Iowa State University has run some numbers on the possible impact of the looming federal budget cuts known as sequestration. I.S.U. associate scientist, Dave Swenson, examined the proposed amount of cuts on the military and non-military areas of Iowa and believes they would add up to $292-million.

“After it multiplied its way all the way through the state’s economy and affected all of the jobs that could be affected as a consequence, it could result in lower employment in Iowa by 3,570 jobs and a reduction in earnings to those workers of 265-million dollars,” Swenson says.

The conventional wisdom has been that federal cuts wouldn’t have as much of an impact because Iowa hasn’t been hit as hard by the economic downturn as other states. Swenson doesn’t think that’s the case.

“Iowa isn’t fairing better than the rest of the economy, we’ve gotten away with that conclusion for far too long,” Swenson says. “We went into the recession a little big later than the nation — and yes we didn’t have as high unemployment as the nation experienced. “But our recovery has stalled significantly. While the national economy continues to add jobs, we’re just limping along.”

He says Iowa’s job market has even contract some in recent months. Swenson says the immediate impact of federal cuts depends on where in the state you live.

“If you’re in a community — let’s say in and around the Quad Cities where you have the Rock Island Arsenal — where you do have a high concentration of federal employment. Or you’re in Des Moines where you do have a very high concentration of military and non-miltary employment — those impacts will be felt,” according to Swenson. He says federal dollars taken out of those communities can’t multiply.

“Those federal agencies are gonna buy fewer supplies, goods and services. Or if you start implementing furloughs, that means household incomes are going to go down, and that means household spending is going to go down and that will multiply through the regional economy,” Swenson explains. “So, statewide, most folks aren’t going to notice it. Localized though, we’re going to have some nodes in the state where it will be very noticeable.”

The automatic cuts will take place if Congress does not act by the March first deadline.

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Filed Under: News, Politics / Govt Tagged With: Iowa State University

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