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Editorial: Loss of Federal $$ Is Wake-Up Call for N.M.

It’s called sequestration, but for New Mexico it should be called a reality check.

Because the actions of Congress — or its inability to act, in this case — should force New Mexico to take a cold, hard look its economic future.

The alarm bell has sounded.

Blame it on federal budget cuts set off by the failure of Congress last fall to reduce federal spending — and the U.S. Senate going on three years without passing a budget.

Although employment would continue to grow, it won’t grow as fast. That means New Mexico could have 20,000 fewer jobs by 2014 than it would have had without sequestration, according to the University of New Mexico Bureau of Business and Economic Research.

That’s a 0.5 percent reduction in employment; a substantial loss in an already poor state.

The bureau predicts a loss of 5,420 jobs in professional and business services, 4,260 jobs in the health care sector and 1,810 military jobs because of the federal cuts.

Talking money, the state could lose $1.35 billion in federal funding in 2013 and $1.9 billion each year after through 2021.

The loss of federal money and jobs will have a ripple effect through New Mexico’s economy. Federal employees spend money (or at least some of it) at local stores, whose employees spend at least part of their paychecks at local stores, and so on.

Political figures and others have long offered a somewhat perverse boast that New Mexico gets back much more money from Washington than it sends over. That is true, due mainly to spending on the national laboratories, military bases, national forests, programs for Native Americans and other federal entities, combined with a needy population with a large number of people who qualify for programs like Medicaid, food stamps and federal education funding. (Programs like Social Security and veterans’ benefits, Medicaid, unemployment insurance and programs that help low-income individuals are exempt from the mandatory cuts required by sequestration.)

The Census Bureau reports that federal spending in New Mexico was almost $28 billion in the 2010 federal fiscal year. And the BBER reports that New Mexico is the sixth-largest beneficiary of federal dollars per capita among the states and the District of Columbia.

This paternalistic relationship will continue at a reduced level, but is that really a solid foundation for an economy?

It is becoming increasingly clear that the answer is “no.” The national labs are an important part of national security, and isn’t that the primary role of government? If the labs are not safe from the budget ax, what is?

It may be comfortable basing the state’s economy on federal largesse. But, as BBER director Lee Reynis puts it: “If the federal government is so good, how come we’re so poor?”

The sequestration process comes at a time when the national economy has been struggling but is showing some signs of life. New jobless claims are down, as well as the official rate of unemployment. The stock market is up.

So now, in anticipation of an economic rebound, must be the time for New Mexico to figure out what it wants to be.

The lesson the state should have learned is that it can’t depend so heavily on federal spending. It must work to develop a strong private sector and become a better competitor — nationally and internationally — for business and private investment.

Doing this will require changes in everything from attitude to tax structure to make New Mexico more business friendly and competitive.

New Mexico should use this wake-up call to chart a new course and to take advantage of opportunities that will flow with a national economic rebound. Given the $15 trillion national debt we’ve run up, we really don’t have much choice. Because Uncle Sam is no longer our rich uncle.

This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.

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