Because federal grant dollars go into a variety of programs, states that receive funding for defense spending are likely to be the most adversely affected if the economy goes off the cliff. For instance, Pew's report highlights that this spending "makes up almost 15 percent of Hawaii's GDP, compared with just 1 percent of state GDP in Oregon."
While the CBO projects that the fiscal cliff would provide an economic headwind of about 0.5 percent of GDP in 2013, the group sees the need to stabilize the U.S. debt picture. Pew, citing the CBO, reports that failure to address the debt "would result in lower economic growth due to higher interest rates, more borrowing from foreign countries, and less domestic investment."
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