Fiscal Cliff Would Slow Texas' Economy by 1.2 Percent, White House Predicts

Earlier this month, state legislators met in Austin to learn what damage Texas might sustain if the country careens off the fiscal cliff, which is now frighteningly near. The short answer is, quite a bit.

As the Austin American-Statesman reported, state agencies stand to lose as much as $1.1 billion if Congress and the president fail to reach a deal. The Texas Education Agency would bear the brunt of the cuts, with $517.6 million in lost federal funding, but a dozen other agencies, from the Texas Department of State Health Services to the General Land Office, would also lose considerable revenue. The consequences -- a reduction in services, much of it coming on the backs of the poor -- are predictable.

That's one part of the equation. The other is how the fiscal cliff's tax hikes will impact the state's economy. The White House recently released numbers on that based on an analysis by the National Economic Council and the Council of Economic Advisors.

According to the report, middle class tax hikes will hit 8.7 million Texas families, who will pay an extra $2,200 on average. That would result in a $15.3 billion reduction in consumer spending in Texas, which would slow the state's GDP growth by 1.2 percentage points.

The White House report is, of course, arguing not only for the preservation of tax cuts for middle class families but for the expiration of cuts for those making more than $250,000. That argument won out in November but has yet to prevail on Capitol Hill, where Congress is still being dysfunctional.

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Eric Nicholson
Contact: Eric Nicholson