The Results Are In: Cutting Spending Has Hurt Economy

June 28, 2011 1:05 pm ET — Jamison Foser

Rep. John Boehner

If you've heard a conservative leader speak recently, you've probably heard about how states are the "laboratories of democracy." The concept isn't unique to conservatives, of course, but with a Democrat in the White House and national opinion swinging in favor of equal rights for gay people, Republicans are enthusiastically touting "states' rights" and speaking of the importance of states taking the lead in public policy innovation. So in recent months, the "laboratories of democracy" construct has been embraced by, among others, House Speaker John Boehner (R-OH), GOP presidential candidate Mitt Romney, Gov. Sam Brownback (R-KS), Chamber of Commerce president Tom Donohue, and Gov. Rick Perry (R-TX). 

But if Republicans really believe that policy experiments at the state level should inform national policy, they're going to have to discard their oft-stated claim that cutting government spending will create jobs and spur economic growth. Adam Hersh, an economist with the Center for American Progress Action Fund, explained yesterday that states that have cut spending during the economic struggles of the last few years have fared far worse than those that have increased spending:

[S]teep spending cuts are hampering economic recovery in some states, while other states that resisted cuts or increased spending are now seeing declining unemployment rates, faster private-sector job creation, and stronger economic growth.

From the start of the Great Recession in December 2007 through the end of 2010, 24 states have cut government spending by an average of 7.5 percent after adjusting for inflation. Another 25 states have expanded government outlays by an average of 11 percent. (The analysis excludes Alabama due to data problems reported by the National Association of State Budget Offices). And the differences in these states' economic performance could not be more self-evident. Relative to national economic trends, states that increased spending enjoyed on average:

    0.2 percentage point decrease in the unemployment rate

    1.4 percent increase in private employment

    0.5 percent real economic growth since the start of the recession

In contrast, states that cut spending saw on average

    1 percentage point increase in the unemployment rate

    2.1 percent loss of private employment

    2.9 percent real economic contraction relative to the national economic trend

House Speaker John Boehner has repeatedly claimed that cutting government spending will create jobs. He also says, "we always say here in Washington that the states are laboratories of democracy and they really are. When you look at the kind of innovative programs that go on in some states, you'll see other states copy them but there are things that we can clearly learn here." Well, the lab results are in, and Boehner's economic philosophy has had disastrous results. So he'll abandon his cut-and-grow fantasies any day now, right?

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