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The Sequester affects Alaska too

February 27, 2013

The US is likely soon going to pare its profligate spending by ‘sequester’ or forced savings. Alaska is highly dependent on federal expenditures and will not emerge unscathed from expenditure cuts.

The looming sequester in the US slow the economy and weigh down GDP in Alaska. The sequester’s $85 billion cut in discretionary spending this year is only 2.4% of total US federal outlays over the past 12 months of $3.58 trillion. However, those outlays include $2.19 trillion in spending on entitlements, which are a redistribution of income that doesn’t have a direct impact on GDP through its federal government component. Federal government spending in GDP, in current dollars, was $1.20 trillion during Q4-2012. That’s where the sequestration cuts will hit, as they account for 7.1% of this total.

A 7.1% spending cut for Alaska would mean:

 

Commentary

The Alaska economy is not immune from the pending sequestration cuts. Expect a 7% reduction borne mainly by the US military in Alaska.

The figures used by the Business Insider seem too high to be believable. A reduction on employment of 10,000 is too high. The actual number employed by the federal government is only 16,000, so 7% less would mean around 1,100 jobs.

Sources