Mass. Economy No Longer Outpaces Nation’s, Could Get Hurt by “Fiscal Cliff”

The Massachusetts economy is no longer growing faster than the national economy, according to MassBenchmarks, a Bay State economics journal published by the Donahue Institute at UMass. 

The state’s economy had been outpacing the country as a whole since the beginning of the recession. Municipal layoffs, slowing economic conditions globally, and a variety of other factors have brought Massachusetts down to earth says Robert Nakosteen, editor of the journal, and a professor of economics at UMass Amherst. He says lagging growth in Europe and China, which are trading partners to many high-tech businesses in eastern Massachusetts, is rubbing off in that part of the state.  But, he says, the western part of the state is more immune to global volatility.

“We have really lagged behind the eastern part of the state in our economic growth out here in the west, but we’re not really experiencing the volatility that the eastern part of the state is now experiencing.”

Nakosteen says western Massachusetts has also been immune to the east’s growth. He says a much broader turnaround in the world economy would be needed for significant economic growth to take hold in western Massachusetts, and a global downturn could harm the region as well. 

Another looming concern to the state’s economy is the so-called “fiscal cliff” – the combination of federal tax increases and budget cuts scheduled to automatically go into effect at the end of the year. Nakosteen says proposed defense cuts could harm the Bay State’s defense sector in the long-term. 

“The effects would be serious, they would be long-term. It’s an event that doesn’t have to take place, it’s an event that, if the politicians at the federal level were to act responsibly, could be avoided, and we’re hoping that’s the case.”
 
Nakosteen says he expects congress and the president will take action to avoid the fiscal cliff, but he doubts anything will be done until after November’s election.