San Diego’s economy is bracing to take the brunt of the federal government’s spending cuts under sequestration. And economists are concerned that, without a long-term resolution, the local economy could fall into recession as a result.
The cuts will remain in place unless Congress and the president can reach an agreement on less sweeping methods to reduce spending, versus these across-the-board reductions that are hitting the military, which, of course, has a huge presence in San Diego.
“Our population is 1 percent of the national population,” said Kelly Cunningham, economist at the National University System Institute for Policy Research. “But we get about 3 percent of federal spending. So the impact of sequestration is tripled here.”
National University estimates sequestration will have a negative $5 billion impact on the local economy. Since the local gross domestic product is $187 billion, that would represent a 2.7 percent reduction in growth.
The San Diego economy has been growing the last two years by a tepid 2.3 percent. That means sequestration could wipe out gains in other industries and push the local GDP into a decline.
“Other parts of our economy are still healthy,” Cunningham said. “But to take that kind of a hit could really hurt San Diego.”
Mark Cafferty, CEO of San Diego Regional Economic Development Corporation, said the sequestration cuts would have a significant impact.
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