Monday, October 22 , 2018, 1:19 am | Fair 63º

 
 
 
 

Lou Cannon: States, Cities Squeezed in Tepid Recovery

Governments shed jobs, raise taxes but is it the right prescription amid recession?

Government usually thrives during economic downturns. Ever since President Franklin D. Roosevelt launched the New Deal in the depth of the Great Depression, jobless Americans have turned to their government in time of need. Government employment at all levels — federal, state, and local — expanded in the dozen recessions since World War II, with pockets of exceptions in the “Ronald Reagan recession” of 1982-1983.

Lou Cannon
Lou Cannon

It has been different during the Great Recession, which technically ended months ago but remains a fact of life in much of the United States. Federal jobs surged temporarily, then ebbed with completion of the 2010 census. State and local governments are reducing payrolls and in some cases raising taxes, actions that impede the tepid economic recovery.

“State and local job reductions undoubtedly have been a drag on the economy,” said Leslie McGranahan, a senior economist with the Federal Reserve Bank of Chicago. “But the drag would have been much larger, however, without the federal stimulus legislation.”

This year, through August, states and local governments had shed 135.000 jobs, according to McGranahan’s data. A grim forecast by the National League of Cities issued in July anticipated that local government alone will lose 500,000 jobs during the 2010-2012 fiscal years. The actual job losses may be less if the pace of the recovery quickens, but the experts are not optimistic this will happen.

Corina L. Eckl, fiscal program director of the National Council of State Legislatures, anticipates that state revenues won’t reach pre-recession levels until 2014 in Florida, Georgia, Idaho and North Carolina and until 2015 in Arizona, Maine, Montana and New Mexico. In California, the poster child for fiscal dysfunction, state revenues are not expected to attain pre-recession levels until 2016.

It could have been even worse. McGranahan said that the state job losses would have been “almost unimaginable” without the federal stimulus bills that provided $188 billion in various forms of aid to states and localities. The largest chunk of this was contained in the American Recovery and Reinvestment Act of 2009, on which the total price tag has risen to $862 billion. The latest injection to states, in a $26 billion bill passed by Congress and signed into law by President Barack Obama last month, preserved the jobs of thousands of teachers and extended until June 30 a formula providing a more generous federal share of the funding for Medicaid, the federal-state program that provides health care for the poor.

Government contraction has damaged the recovery in several ways. It has marginally added to the unemployment rate, 9.6 percent nationally but higher in states where the housing bust hit hardest — California, Florida and Nevada — and in Michigan, where the auto industry cratered even before the recession. Unlike the federal government, most states and cities are legally required to balance their budgets. Their principal recourse in accomplishing this has been job reduction, often through attrition to sidestep battles with public employee unions.

Brevard County, Fla., is typical of the cuts made by local governments in hard-pressed states. With a budget reduction of 14 percent, the county laid off 118 employees and will not fill 86 vacant positions. Cities large and small have made similar reductions. Fresno cut its workforce by 660 employees and Dallas by 500. Flint, Mich., eliminated 23 of 88 firefighter positions and closed two fire stations.

Tax increases, never popular and particularly questionable during a recession, were also used to close budget gaps. States raised taxes by an overall $28 billion in 2009. This year, with elections approaching, most state legislatures avoided tax hikes. Even so, Eckl’s data shows that nine states raised taxes by more than 1 percent in 2010, with the largest percentage increases coming in Arizona (8.2 percent), Washington (6.4 percent) and Kansas (5.5 percent).

Not all the damage done in the states by the Great Recession is fully quantifiable. State and local governments in California shed 43,000 jobs between July 2009 and July 2010, according to economist Stephen Levy, director of the Center for the Continuing Study of the California Economy. But Levy thinks greater damage may have been done by reductions in the student bodies at University of California campuses, which he likens to “eating the seed corn” of future generations.

Education, embattled at all levels by the recession, is a vital segment of the nation’s intellectual infrastructure. The physical infrastructure may be even more threatened.

“Everywhere I go in the country, I hear the complaint that infrastructure has been neglected and is detoriorating,” said Scott D. Pattison, executive director of the National Association of State Budget Officers.

Cornell University economics professor Robert H. Frank, writing in The New York Times, praised Obama’s modest proposal for a $50 billion infrastructure renewal as a “small but welcome first step in this process.” With unemployment high and interest rates low, Frank sees this as the perfect time to launch programs that maintain and rebuild bridges, roads and water systems.

If it’s any comfort, the squeeze on government is not unique to the United States. Your correspondent recently spent time in London, where localities are pinched and the ruling coalition of Conservatives and Liberal Democrats has proposed major budget cuts and elimination of 400,000 government jobs over several years, mostly by attrition. A huge political debate has erupted in Britain over proposed cutbacks in social services, with the opposition Labor Party contending that they fall disproportionately on the backs of the poor.

There will be similar debates in the United States as the assistance provided by the federal stimulus bills is phased out and states struggle to make ends meet. Costs of social services have risen in the states because of high unemployment and housing foreclosures. Meanwhile, state revenues lag behind recovery, as often happens after recessions. The difference this time is that the recession is deeper than usual and the lag time greater.

Adding to the tension,  says Pattison, are uncertainties about what the landmark federal health-care bill will mean for the states.

“Whatever one thinks about the health-care bill, and it was certainly desirable to cover more people, it will probably mean more costs for the states,” Pattison said.

The first two years of the Obama administration have witnessed titanic struggles at the federal level between the two major parties on health care, the stimulus bills and various bailouts. In the next two years these struggles will shift to the states, where hard fiscal decisions will have to be made with diminished fiscal help from Washington.

— Summerland resident Lou Cannon is a longtime national political writer and acclaimed presidential biographer. His most recent book — co-authored with his son, Carl — is Reagan’s Disciple: George W. Bush’s Troubled Quest for a Presidential Legacy. Cannon also is an editorial adviser to State Net Capitol Journal, which published this column originally.

Support Noozhawk Today

You are an important ally in our mission to deliver clear, objective, high-quality professional news reporting for Santa Barbara, Goleta and the rest of Santa Barbara County. Join the Hawks Club today to help keep Noozhawk soaring.

We offer four membership levels: $5 a month, $10 a month, $25 a month or $1 a week. Payments can be made using a credit card, Apple Pay or Google Pay, or click here for information on recurring credit-card payments and a mailing address for checks.

Thank you for your vital support.

Become a Noozhawk Supporter

First name
Last name
Email
Select your monthly membership
Or choose an annual membership
×

Payment Information

Membership Subscription

You are enrolling in . Thank you for joining the Hawks Club.

Payment Method

Pay by Credit Card:

Mastercard, Visa, American Express, Discover
One click only, please!

Pay with Apple Pay or Google Pay:

Noozhawk partners with Stripe to provide secure invoicing and payments processing.
You may cancel your membership at any time by sending an email to .(JavaScript must be enabled to view this email address).

  • Ask
  • Vote
  • Investigate
  • Answer

Noozhawk Asks: What’s Your Question?

Welcome to Noozhawk Asks, a new feature in which you ask the questions, you help decide what Noozhawk investigates, and you work with us to find the answers.

Here’s how it works: You share your questions with us in the nearby box. In some cases, we may work with you to find the answers. In others, we may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your feedback on a specific issue or topic.

We also expect to work together with the reader who asked the winning questions to find the answer together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and we believe a transparent collaboration is the key to achieve it.

The results of our investigation will be published here in this Noozhawk Asks section. Once or twice a month, we plan to do a review of what was asked and answered.

Thanks for asking!

Click Here to Get Started >

Reader Comments

Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected]. Please provide your full name and community, as well as contact information for verification purposes only.