50°
Cloudy
SUN
 77°
 46°
MON
 66°
 47°
TUE
 64°
 41°
WED
 68°
 46°
THU
 70°
 47°

Fed cuts would have limited immediate California impact

SACRAMENTO — Looming federal spending cuts are expected to dampen California's economic recovery at a time when a housing rebound and job growth are gaining traction, but come Friday the immediate effect may not prove to be the fiscal doomsday that President Barack Obama has predicted.

The White House estimates that in California, 64,000 civilian defense workers would be furloughed and 1,200 teaching and teacher aide jobs would be put at risk from the mandatory budget reductions known as the "sequester." Obama administration officials also said the state will see program cuts in children's vaccines, senior nutrition, student work-study jobs and assistance for victims of domestic violence.

While a bigger concern is what might happen in the long term, most of the effects will not be felt right away. Even if the $85 billion in across-the-board reductions happen nationally, the amount cut in California will be just a fraction of the state's $2 trillion gross domestic product, which according to 2012 estimates would be the world's eighth largest economy.

Federal furloughs won't start for a month due to notification requirements, giving negotiators some breathing room to work on a deal. And while Obama said there is no smart way to let the cuts kick in, members of Congress are considering taking action to give agencies flexibility over what to cut.

Meanwhile, some of the biggest drivers of federal spending such as Social Security and Medicaid are exempt from the automatic reductions.

"You always have to assume that nothing will happen for a month, and by then they may have resolved it," said Stephen Levy, director and senior economist at the Palo Alto-based Center for Continuing Study of the California Economy. "Who knows who's playing chicken?"

Most state economic forecasts already have accounted for some kind of federal budget cuts, meaning that California can expect tepid growth of about 2 percent for this year.

© The Press Democrat |  Terms of Service |  Privacy Policy |  Jobs With Us |  RSS |  Advertising |  Sonoma Media Investments |  Place an Ad
Switch to our Mobile View