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Recession pummels South’s ‘miracle' economy

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Alabama's Jefferson County was forced to lay off 1,000 workers earlier this week – about one fourth of its workforce – after risky investments in municipal bonds went awry.

It's put a damper on local celebrations and weekend excursions on Lake Oconee. And it has conservatives worried about the future of the pro-business economy epitomized by the South, a strategy some economists say laid the foundation for the credit and housing crash.

"Ultimately, the recession is going to hit us [in the South] harder," because of the higher percentage of people in poverty, says Marianne Hill, senior economist at the Institutions of Higher Learning in Jackson, Miss. At the same time, she notes, Southern politicians are reluctant to tax the wealthy.

The income gap grew three times faster in the South than the national average in the past decade or so, says Ms. Hill, even as Southern cities such as Atlanta, Austin, and Raleigh became some of the fastest-growing cities, attracting banking and research communities.

In Mississippi, wages for the highest earners grew by 23 percent between 1995 and 2003, compared with 9 percent for the rest of the country, according to the Institutions of Higher Learning.

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