Normally when the public or politicians talk about economic recovery they focus on unemployment and consumer spending. However, the rile of state budget cuts are largely ignored, yet are intimately tied to both unemployment and consumer spending. State cuts are also the biggest concern related to economic recovery for many economists.

Why are nearly two thirds of economists surveyed by the Associated Press so worried about cuts to state budgets? Because of the actions that result from budget cuts and the impact these actions have on the economy as a whole. Most states handle budget shortfalls by cutting back jobs and spending in programs like education and public safety. The public employees that either experience wage cuts or job losses in turn pay less in state income taxes and put less money into their local economies (which also leads to a reduction in sales tax collections.)

Right now, it is estimated that states will have to make up for nearly $140 billion in budget shortfalls. The cuts will most likely result in around 900,000 jobs public- and private-sector jobs lost. These cuts and job losses will slow if not reverse the economic recovery that is taking place right now.

To tackle this problem, state governments need to consider a balanced approach to budget shortfalls. This means instead of just cutting essential services the state must also looking for ways to raise additional revenue.