Study: ‘Fiscal cliff’ could hit jobs hard

Some of the biggest job losses could occur in federal contracting, where private businesses depend on purchases from the government.

This month, defense industry officials sent a letter to Washington signed by more than 130 industry CEOs, urging Congress and the president to work out a deal. They warned that companies are already being affected.

The fiscal cliff “has created uncertainty in the marketplace over the past year and has had a real impact on jobs, investment and innovation,” wrote Aerospace Industries Association Chairman and President David P. Hess. “Uncertainty is forcing companies to defer investments and hiring today, when we need it most.”

The pain isn’t going to be limited to the federal government and private sector. State governments are also bracing for potential reductions in federal funding that could force them to cut programs and lay off employees.

According to Federal Funds Information for States, states could lose $7.5 billion in federal funds for 161 grant programs, with the brunt of those cuts hitting schools.

The Virginia Education Association, the state’s teachers union, said federal cuts could deprive the state of $75 million in education funds and put 1,300 school employees out of work.

In Minnesota, state economist Tom Stinson said last week that the state could lose 115,000 jobs over the next two years, and that personal income could drop by 4 percent.

“The fiscal cliff is ultimate gloom,” he said.

This month, governors from Delaware, Minnesota, Arkansas, Utah, Wisconsin and Oklahoma met with President Obama and congressional leaders in Washington to talk about what may happen to them if the nation goes over the fiscal cliff. All of the governors urged the leaders to come to a compromise and said their states’ futures are resting on the outcome.

“It’s almost like we have to prepare one budget if they solve it and one budget if they don’t solve it,” Utah Gov. Gary Herbert, a Republican, told the Los Angeles Times. “And so states really understand the seriousness of this issue and the impact it’s going to have on our own budgets and our own economy.”

But the real impact the fiscal cliff has on jobs could have nothing to do with new policies. The uncertainty hanging over the nation has cast a pall over the economy throughout the year.

Massachusetts Gov. Deval Patrick, told the AP recently that his state is already suffering because businesses are too worried about the economy to spend money on creating new jobs or expanding their infrastructure.

Mr. Patrick, a Democrat, called last week for state spending cuts to close a $540 million budget shortfall, which he said was partly created by businesses’ reluctance to spend money.

“By all accounts, that uncertainly and the resulting slowdown in economic growth is the direct cause of our budget challenges,” he said.

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