Even before the federal government shut down 10 days ago, the 2011 Budget Control Act was squeezing spending through a process known as sequestration. It was the product of an earlier budget impasse in Washington where the automatic withholding of funds was to be triggered if Congress and the White House couldn’t negotiate a better agreement to reduce the deficit. When no deal materialized, the Budget Control Act held back – sequestered – 8 percent of the federal budget that already had been approved for non-defense programs and about 10 percent for defense.
This pressure on the federal budget is likely to continue and possibly increase even after the current stalemate is worked out, according to Peter Bluestone, a senior research associate in the Fiscal Research Center at Georgia State and the author of the study.
“Georgia’s economy may be seriously affected if Congress cannot reach an agreement on military pay and other Department of Defense spending,” Bluestone said. “We find that Savannah and Columbus are the most vulnerable regions to funding problems in this area, as well as to long-term potential federal cuts.”
He calculated the fiscal year 2010 level of federal spending in Georgia at $92 billion, or 22 percent of the state economy. He found that the money isn’t distributed evenly, which is why the impact of the cuts falls harder on some cities than others.
Savannah’s regional economy has the highest proportion of federal spending at 51 percent, followed by Columbus at 44 percent and Augusta at 34 percent.
With more diverse regional economies, Macon’s share was 29 percent while Atlanta’s was 14, according to Bluestone’s analysis.
The analysis comes as no surprise to Mercer University economics professor Roger Tutterow, who notes that the Department of Defense has a sizeable footprint in the state, traditionally providing financial stability.
“In the past, Georgia has benefited from the presence of large DOD installations,” he said. “It’s not an accident that the Georgia cities that held up the best during the 2008-09 recession – Columbus, Savannah, Augusta and Hinesville – all had a strong military presence. Further, Georgia has done pretty well in maintaining federal support during past (base-closing) cycles. If federal spending on defense is cut, it’s not unreasonable to expect the effect to be most pronounced in these areas.”