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Mississippi Economy Vulnerable To Federal Cuts

By Jeffrey Hess | Published 29 Jul 2011 02:09pm | comments
Governor Haley Barbour says the state isn't making back up plans.

Mississippi's economy could take a hit as law makers in Washington figure out what and how much federal spending to cut. MPB's Jeffrey Hess reports that the Magnolia state is one of the most vulnerable economies because of a heavy reliance on federal funding.

A recent study by Moody's Analytics found that roughly 25-percent of Mississippians personal income comes from the federal government....second only to West Virginia.

Much of that federal money flows right back into the state economy, and some economist, such as Dr. Marianne Hill, senior economist for the Institutions of Higher Learning, fear that the lost federal support will drag consumer spending.

"If there were to be steep cuts in federal spending in the state, that could prolong the state's recovery," Hill said.

Republican Greg Harper represents Mississippi third district...He has called for a cuts-only approach to dealing with the federal deficit, says raising taxes would do worse damage to the economy than the loss of program funding.

"These things go on and you spend money that you don't have. So there is nothing that is mean spirited about saying 'why don't we roll back these spending levels for programs that we want to keep and we like?'. It is better to give them a hair cut than it is to pull a Thelma and Louise and drive them off the cliff," Harper said.

Speaking last week at the Neshoba County Fair, Mississippi Governor Haley Barbour, who also supports focusing on spending cuts, says the state is not making back up plans to replace the funding and sees the cuts as a necessary step.

"As the federal government spends less, as it must do, we have to bear our share. The good news is that we can do that. Social security spending is not going to go down. It is just going to go up more slowly," Barbour said.

Dr. Hill says transfers from the federal government to the state are equal to one-third of the state's gross product, and  says deep cuts could slow Mississippi's recovery.

"We would see, for example, a rise in unemployment and a drop in personal income. It would be a very difficult situation," Hill said.

In addition, many short term responses to the National recession are set to expire this year, and Moody's estimates that could drain 37-billion dollars out of consumer wallets...that's tough on an economy that is two-thirds reliant on consumer spending.

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Governor Haley Barbour says the state isn't making back up plans.


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