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Who Gets Hurt the Most If US Goes Off 'Fiscal Cliff'

Monday, 19 Nov 2012 | 2:37 PM ET
Colin Anderson | Photographer's Choice | Getty Images

Much of the discussion about fixing the fiscal cliff has been at the abstract level: the need to cut federal spending by $2.5 trillion and raise $1.6 trillion in revenue over the next decade.

But those big numbers obscure real pain that could be inflicted at the local level where federal spending in some places is a huge part of the economy and where the government is the only employer in town.

A look at how federal spending cuts would impact local and state governments shows how difficult spending cuts will be politically: both big red states and blue states benefit from federal largesse. (Read More: What Is the Fiscal Cliff?)

It also highlights the potential economic pain: some states with high unemployment rates like California and South Carolina, will shoulder the added burden of federal spending cuts.

Drilling down to the county level, there are places like Liberty County, Georgia, where the federal government employs one out of four workers because of Fort Stewart. The spending cuts may not hit active duty personnel, but the 3,000 civilian workers attached to Fort Stewart could face cutbacks. (Read More: Complete Coverage of the Fiscal Cliff)

Who Gets More Federal Money?
CNBC's senior economics reporter Steve Liesman explains who would fall the hardest if the U.S. went over the fiscal cliff.

A county-by-county map, compiled using DIVER software by Lumesis Inc., shows immediately the pervasiveness of federal spending. The deepest red areas are those with the highest federal spending per capita.

The red along the eastern seaboard is the result of Federal Emergency Management funds. A report from the Office of Management Budget shows that FEMA funds could be slashed by $900 million, including $580 million of disaster relief funds.

Dare County in North Carolina leads the nation with $175,000 in per capita Federal spending by virtue of $5.6 billion in FEMA funds for its 35,000 residents, according to Lumesis. Florida is red also because of a heavy concentration of social security payments and other states receive more education or welfare funds. (Read More: How to Trade the 'Cliff' If No Deal Is Reached)

Another swath of red across the nation's midsection results from drought relief, crop insurance and other agricultural subsidies that come from the Department of Agriculture's Risk Management Agency. Like other federal outlays, its spending could be subject to roughly 8 percent in automatic spending cuts, including $470 million in farm subsidies.

Which states would be hit the hardest? The Pew Center on the States, looking at defense and non-defense spending found, not surprisingly, that Virginia, Maryland and the District of Columbia are the most reliant on both, with about 20 percent of all their state or district GDP's coming from Federal spending.

Pew points out the huge differences in the way states will be hit. While defense spending accounts for 3.5 percent of total state GDP, it's around 15 percent for Hawaii. Pew wrote that because many states have their own fiscal challenges, they "have limited capacity to absorb further fiscal and economic pressures."

Another way to look at the effects of the fiscal cliff is by Federal jobs. In some places, Federal jobs can represent a huge part of the workforce.

For example, in Grant County, LA, 22 percent of the workforce consists of federal jobs as a result of the high-security Federal prison in Pollock. Under the sequester, $537 million of federal prison salaries and expenses could be cut.

Few places even come close to Martin County, Indiana, where 59 percent of its workforce is federal as a result of the Naval Surface Warfare Center, among the largest naval installations in the world even though it's landlocked. (Read More: Boehner: I Believe We Can Do This' and Avert 'Cliff')

State by state, there are blue states like California and red states like Texas with high federal employment as a percent of the total. But that's how the sequester was designed: to spread out the pain sufficiently among states and counties and the political parties to provide enough incentive to bring all parties to the table to make a deal.

But in some cases, that could require a senator to vote for cuts that would hurt his or her largest employer, the federal government.

-BY CNBC's Steve Liesman; Follow him on Twitter @steveliesman

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