No deal on fiscal cliff could cost Louisiana 28,000 jobs, university researchers say

WASHINGTON - By now, you've probably heard the news that failure by President Barack Obama and Congress to reach a deal on the so-called fiscal cliff means higher taxes and spending cuts in both defense and domestic programs starting January 1. This week, various think tanks and advocacy groups are discussing some of the other potential effects on Louisiana....

WASHINGTON - By now, you've probably heard the news that failure by President Barack Obama and Congress to reach a deal on the so-called fiscal cliff means higher taxes and spending cuts in both defense and domestic programs starting January 1. This week, various think tanks and advocacy groups are discussing some of the other potential effects on Louisiana.

One analysis by George Mason University economists predicted that the cumulative impact of no budget deal would cost Louisiana 28,000 jobs. For starters, according to the Pew Center on the States, a failure to reach a deal would cut 6.6 percent of all federal grants to Louisiana on an annual basis. 

Since much of that money has already been budgeted, it will like result in even more cuts by the state of Louisiana. Already, Gov. Bobby Jindal has implemented large cuts in health care services in response to a large reduction in federal Medicaid funds implemented last summer at the insistence of House Republicans.

"The longer Washington takes to avert the damaging consequences of sequestration and tax increases, the more communities across Louisiana must prepare for the worst," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt. "If the arbitrary combination of ill-thought out spending cuts and tax hikes take effect, it'll be another economic setback for small businesses and families in Louisiana."

Other effects:

• Since Louisiana allows state taxpayers to deduct their federal taxes from state returns, higher federal taxes that would take effect on January 1 for all Americans, if no deal is reached, would mean less revenue for the state.
• If no deal is reached, the Bush income tax rate reductions be rolled back for all Americans, not just for those with incomes under $250,000.
• Expanded child tax credits and earned income tax credits for low income working families enacted over the last decade would expire, if no deal is reached. The Center on Budget and Policy Priorities estimates that a single mom with two kids working full time at the minimum wage would see her child tax credit drop from $1,725 to $173 if the expanded benefits aren't extended.

Though President Obama and House Speaker John Boehner have significantly narrowed their differences, there's still no accord. At issue is what the cutoff point should be for people to continue to benefit from the George W. Bush cuts in income tax rates. Obama started out saying the rates should rise to Clinton-era levels for families once incomes exceed $250,000. Since then, he agreed to raise that threshold to $400,000 and recently suggested he could go as high as $700,000.

Boehner has said he'd only accept rate increases for families with income over $1 million and complained that the president hasn't yet agreed to enough cuts in federal spending.

On Thursday, Rep. John Fleming, R-Minden, said he opposes any increases in taxes, regardless of income, on grounds it would, in his view, hurt job growth. Others point to robust job growth during the Clinton years as evidence that the higher rates favored by the president for high income earners wouldn't hurt the economy.