The economic impact of potential federal aid reductions extends far beyond direct beneficiaries, affecting states’ job markets and overall economic health.
Proposed Cuts Could Devastate State Economies
A massive budget resolution from the House of Representatives proposes more than $1 trillion in cuts to programs under the House commerce and agriculture committees, including vital safety nets like Medicaid and the Supplemental Nutrition Assistance Program (SNAP). While the Senate has yet to develop its own budget plan, researchers have analyzed the potential consequences of these dramatic reductions.
Economic Impact Analysis Reveals Troubling Projections
Researchers from the Commonwealth Fund and George Washington University’s Milken Institute School of Public Health conducted a comprehensive analysis of the economic ripple effects. Their study examined potential cuts of $880 billion to Medicaid and $230 billion to SNAP over ten years, distributed proportionally across states.
Job Losses and GDP Decline Predicted
The findings are concerning. By 2026 alone, these cuts could eliminate over 1 million jobs nationwide, trigger a $113 billion drop in combined state GDPs, and cause nearly $9 billion in lost state and local tax revenue. Notably, the reduction in state GDPs would exceed the $95 billion in federal savings, creating a net economic loss.
Some States Face Disproportionate Impact
The employment consequences would not be distributed equally. New Mexico could lose approximately 634 jobs per 100,000 residents, making it the hardest-hit state. Kentucky and Washington, D.C. follow closely with potential losses of 579 and 560 jobs per 100,000 people, respectively.
Political Considerations May Temper Cuts
Despite Republican control of the White House and Congress, implementing deep cuts to popular entitlement programs presents significant political challenges. Recent polling indicates broad support for maintaining or increasing Medicaid funding, even among Republican voters. This public sentiment may give lawmakers pause before approving substantial reductions.
Beyond “Waste and Fraud” Arguments
Proponents of cuts often suggest they can be achieved by eliminating waste and fraud. However, the researchers emphasize that substantial funding reductions would inevitably have major financial consequences by reducing the flow of dollars into state economies, affecting healthcare providers, grocery stores, and other businesses where beneficiaries spend their assistance.
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