As Economy Enters The Great Stall, Finances of State and Local Governments Become a Problem

How Does Firing Hundreds of Thousands of Employees Create Jobs?

One of the areas hardest hit by The Great Recession was state and local government.  The impact was severe, and in order to help preserve vital services the Obama Administration included in its 2009 Stimulus program substantial grants to state and local government to help preserve services and employment.  That Stimulus money has run out, and the economy has stalled out and here is the result.

large states face similar problems, a clear sign that they are still not out of the woods several years after the housing bubble burst, the recession began and many states made big spending cuts. Florida, California, New York andNew Jersey have all seen their tax collections come in below expectations in recent months as the nation has continued to struggle with high joblessness, a weak housing market, a sliding stock market and worries about theEuropean debt crisis. The states are collecting more in taxes than last year, but not as much as they did before the recession began, and not as much as they expected when they drew up their budgets last spring.



Republican See a Welcome Trend
The Rest of us See a Loss of
Government Services and Higher Unemployment



Even with the Stimulus money local governments were having to cut employees.  Recently though the reductions have increased, so much so that losses of state and local government jobs are contributing to the economic stall.  Here is what it looks like at the local level for employment.

There is no hope that Washington will react to this in a positive manner.  Republicans believe aid to things like education is just bailing out teacher’s unions and Democratic voters.  For them the loss of revenues and increased deficit at the state and local level are ammunition for the plan to cut government spending.  So far from being a problem, the fiscal crisis are an opportunity. 

And yes, some states that Republicans control have cut taxes  and some will be going ahead with future tax cuts even as employment in critical areas like education and law enforcement are reduced.  It may not be entirely the fault of Republicans, it may be that they just cannot help themselves.