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Usually a Job Engine, Localities Slow US Economy
WASHINGTON – In a healthy recovery, states and localities produce jobs, expand social services and help fuel the nation's economic growth.
Republican Governor of New Jersey, Chris Christie, is among the many governors who have continue to say that cutting budgets is the path to job growth. Evidence for this, however, is increasingly scarce. State and local governments cut 30,000 jobs in May, the seventh straight month they've shed workers. Rather than add to U.S. economic growth, they're subtracting from it. (AP Photo) Then there's the 2011 recovery.
The U.S. economy is moving ahead, however fitfully. Yet state and local governments are still stuck in recession. Short of cash, they cut 30,000 jobs in May, the seventh straight month they've shed workers. Rather than add to U.S. economic growth, they're subtracting from it.
And ordinary Americans are feeling it — from reduced services to fewer teachers, police officers and firefighters.
Few see the pain subsiding soon. Mark Vitner, senior economist at Wells Fargo Securities, expects state and local governments to slash 20,000 to 30,000 jobs a month through the middle of 2012.
Joel Naroff of Naroff Economic Advisors notes that when states cut spending to balance their budgets, as required annually, a ripple effect multiplies the damage: Companies that do business with states and localities suffer. These companies, in turn, scale back their own hiring.
"There's a whole slew of private companies that have to cut back when they don't get the (government) contracts they had been getting," Naroff said. "You can't balance a budget and say everything's going to be beautiful."
Moody's Analytics estimates that each job in state and local government supports an additional 1.3 jobs elsewhere in the economy.
The cutbacks stretch across the country:
• Monticello, Ga., has cut its police force in half — to five. It had planned to eliminate the force entirely until it found the money to keep some officers, says Police Chief Bobby Norris.
• Zanesville, Ohio, just cut nearly 50 jobs from its schools, mostly through layoffs. "People have to realize: There's just so much money," says school Superintendent Terry Martin, who had to close a $7.2 million budget gap through 2016. "We have to watch every dime that we spend."
• In Alameda, Calif., police and firefighters last week couldn't save a drowning man in the ocean because the fire department had cut funding for water rescue training, wet suits and other equipment.
The Great Recession officially ended two years ago this month. By the same point during previous recoveries, state and local governments were engines of growth: In the two years after the 1990-91 recession ended, for example, they'd added 430,000 jobs. At the same point after the 2001 recession ended, they had added 249,000.
This time is different. More than 467,000 state and local government jobs have vanished since the recession officially ended in June 2009, including 188,000 in schools.
The Great Recession of 2007-2009, the longest and deepest downturn since the 1930s, dried up state and local tax revenue. It also escalated demands for social programs like Medicaid and unemployment benefits and "ate through their rainy-day funds," notes Michael Gapen, senior U.S. economist at Barclays Capital.
For a while, federal stimulus spending cushioned the blow to state and local finances. But that money is running out. And it probably won't be replenished. The federal government is preparing to cut its own spending to shrink huge budget deficits.
States like Wisconsin, New Jersey and Ohio have first-term governors who "are trying to make their names by cutting spending," Naroff says. "It wasn't the `in thing' before to become a governor and immediately slash and burn. Now, you've got economic and political realities that are different from any time before."
Analysts hold out hope that state governments might be on the verge of a rebound. State tax revenue is forecast to rise 2.1 percent in the fiscal year that starts July 1, according to a report last week from the National Governors Association and the National Association of State Budget Officers.
But 29 states say they'll still spend less in the 2012 fiscal year than in 2008. And local governments are still waiting for a recovery in tax revenue. They rely heavily on property tax revenue, which continues to sink with the collapse in home prices in many areas.
"The state revenues are coming back, but the local revenues probably haven't seen the worst of it," says Christopher Hoene, director of research at the National League of Cities. "We still have another year to go for sure."
Steven Leslie, financial services analyst for the Economist Intelligence Unit, a research firm, predicts that tight government spending at the local, state and federal levels will persist during a prolonged period of slow growth.
"If I were going to tell college graduates what careers to follow," he says, "I wouldn't recommend public service."
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26 Comments so far
Show AllIn other words, the Empire's evil plan kill off most of us and to herd the rest of us into cattle cars is right on track. They'll keep enough of us underlings around to farm around the outskirts of the superfund sites, with replacements to spare, as we work ourselves to death with inadequate food, water, shelter.
Yes, as long as Obama continues to imitate Herbert Hoover's 1929 supply-side approach to addressing the 2008 meltdown, the US will become a mature thrid world nation.
Yeah, something like that dismal life you describe. States need to succeed from this madness.
You can add Florida to that list of states with new Governors who are trying to show their bona fides to their tea party supporters by "slash and burn" recession-generating job cuts. Rick Scott, elected as a businessmen who knew how to "create jobs," has quickly proven (?) himself by cutting jobs from thousands of state workers. Apparently in this state you can do anything if you label it as a "job-creating" move. Scott has also signed a law repealing decades of "growth management" in a woefully over-developed state on the spurious ground that relieving developers of onerous state regulations will encourage more development and of course....create jobs. Other posters will also want to nominate their own Governors for inclusions on this Wall of Infamy.
Fla. here who voted this ass in power? oh, your vote doesn't count it's already fixed.
Yeah! Yeah! But we have money for the important things like endless war and Wall Street bailouts. And who can't feel good about those billions spent for Homeland Securitys x-ray machines that give us excellent tit and crotch shots? Keep bending over America.The elite really enjoy sticking it to you stupid asses.
Start with Department of War, oh, I am sorry, I meant defense first, then we can talk about making the corporate 'people' and wealthy pay the same percentage of their income for their membership in America TM as I have to. If we still have a budget problem, I am open to any suggestion you may have.
Your claim is that government--federal? state? local?--is "bloated and obese." As compared to...governments of other countries? Past governments of the United States? A standard conservative politicians have adopted? If you want to criticize government spending, at least say what you mean.
Consider the fact that on May 1, 2003 George W. Bush declared "Mission Accomplished" in Iraq. Meaningful explanations are not what our government gives. The truth is that yes, the money is there to pay employees living wages, the money is there to cover everyone with universal non-profit healthcare, the money is there to educate our children, but the people who have acquired the money are holding it, paying it out to shareholders or CEO bonuses or buying back stock. American productivity has increased but the share of the rewards going to the workers has decreased. You can thank the con men and tricksters in Washington and their paymasters on Wall St. for steadfastly engineering (legislating) the accumulation of wealth at the top. That's right where they want it, just like the situation in Iraq is just how they like it.
I believe the definition employed by economists is that a recession ends when there are two consecutive quarters of growth in the GNP. It doesn't matter if that growth occurs mostly in the financial sector (bringing no benefit to workers) or if that growth is no more than .1%. Of course, a definition could be created that reflects the suffering of workers--looking at the unemployment rate, those not covered by health insurance, the foreclosure rate and so on, but the managers of our capitalist system would not use it. Better to lie and pretend this recession was just a bump in the road.
It reminds me that the Milton Friedman types are taking credit for the reduction in poverty throughout the world, an outcome of our economic system. The World Bank defines the threshold of poverty at 1.25 cents per day. With that number they can point to a decline in the poverty rate. Wonder how many Americans could survive on five hundred bucks a year? Not so many. If you define poverty at 2.50 a day, you find out that capitalism worldwide has INCREASED the poverty rate. Cherrypick the numbers and you can prove any argument.
dbl
Reasoning with conservatives is as futile as trying to reason with a cow, a sheep, a mule or a dog. They only react to fear, punishment, sex, violence, greed, and chasing a ball around.
The only thing wrong with the American economy is that most of the money is at the top and illegal wars are being fought on a Federal credit card.
War is the real unfunded liability, but they are going after Social Security and other programs that benefit the American people and circulate money into the economy.
The corporate imperial energy wars in Iraq and Afghanistan have saddled the public with $5 Trillion in debt along with the annual "defense" budget at about $1 Trillion. That money could be a source of jobs and economic recovery.
Tax the rich and corporations at appropriate levels and end offshore tax evasion and stop the wars and outrageous military spending and the Federal budget could be balanced and beneficial programs restored and improved. Etc.
Tell the Money Power to fall on its own sword as it generated the crisis in the first place. Hudson writes yet another long explanatory article that ought to be understandible for the literate, http://www.counterpunch.org/hudson06062011.html
As is being said ever more often: Gut Imperial spending and raise taxes on the rich and especially on Money Power corporations and their financial transactions and fiscal solvency will rapidly return and allow the funding of the absolutely necessary crash program to shift from fossil fueled power generation and transport systems to alternative sources in a last-ditch effort to mitigate the catastrophic efffects the already changing climate is bringing.
WAKE UP CALL:
Since 1999 who do you think brought in more gross income, the entire population of the United States or collective local and federal government in the United States?
Bet you never thought about that question before.
People are spoon fed the tax income aspect of government but where the "silence is golden" rule has played out over the last forty years was toward government's "other" income other then taxes of investment and enterprise income. The now larger percentage of the gross income is investment income such as: Funds for advance liabilities; self insurance; pension funds; etc.
Now most people are under the false impression that government pensions are the employees funds. Well, that predominately is not the case. Most local government pension funds are set up as "strictly participatory. What that means in analogy is: it is like buying a ticket to ride a train say from NY to CA. NY is when you retire, CA is when you die.
As is the case with a train ticket, you can ride the train to your destination but when you arrive you don't take a piece of the train with you, you just had a ticket to ride.
The same applies to strictly participatory government pension funds, the employee and the taxpayer bought a ticket to ride and 100% of the fund is owned by the local government, the employee does not own 1c of the fund but is under agreement for their ticket to ride from a payout from "the returns" generated from the fund.
Those local government funds to meet pay outs from the fund's return each year will use may factors to determine that the funds balance needs to be X to accomplish a return of Y.
The primary factor is how many employees there are now; expected to be 5 - 10 - 15 - 20 years down the road and what their salaries will be at retirement after accounting for inflation and cost of living / salary increases.
If a government employee say is getting $75,000 now and at retirement is expected to be making $125,000 and say for examples sake at retirement they are under contract to get 80% of their last salary (for this example we are not going to factor in other benefits such as medical which would inflate the figures), then that means for that employee the local government will maintain X to equal Y. So with that in mind if a 10% rate of return is projected that means X would be $1,000,000.00 to equal the Y of $100,000. Now if the projected (actuarial projection) of getting a 5% rate of return was used then that means X would now have to be $2,000,000.00 to equal Y.
Being that local government "own" the fund balance, many games are played on actuarial projection used when projecting need 10, 15, 20 years down the road. The bigger the funds balance the bigger the power base that is created in the management of those funds. Where the money is invested worldwide, whose project gets backed, etc...
As it relates to the article I am replying to here, this is the knock your D in the dirt aspect per cutting 30,000 jobs: The local governments have previously done their projections as if the majority of those 30,000 would reach retirement and thus the $$$$$$$s were stashed away to meet those "tickets to ride". When 30,000 are then axed it frees up most of that stash to be used elsewhere.
Let's do some basic math: If at retirement say out of those 30,000 20,000 were factored in to have made it to retirement and on average would have been getting $100,000 per year. Also let's say the local government at the present was using an actuarial projected 5% rate of return. So with Y being $100,000 and the X being $2,000,000.00 times 20,000 that equals $40,000,000,000.00 (40-billion dollars) that just appeared that is not needed to fund those "tickets to ride"
Here's where the nasty plays out: Being that the public is being played not to even look at the basics of an issue like this, those local governments now with a surplus in those fund balances can now withdraw and spend those monies and use them at their discretion without public oversight or in fact as has been the case without public knowledge that it was being done in the first place.
Then a few years go by and we hear from government (the train company): Oh look, the economy has recovered, we can start hiring again so for each new employee the process starts again from the now depleted "standing" balance of the fund with government saying we need to put more money in the pension funds to cover our "tickets to ride". Then the taxpayer "AND" gov employees get bilked again and government perpetuates building and accentuating their massive power base from the growth of those funds.
On a last note as a shocker for your cognitive thinking per the question I asked in the beginning of this reply: In 2007 I looked at collective government's (local and federal) gross income of Investment, taxation, and enterprise. The collective investment income (domestic and international) was the greatest percent of the gross income. The total from all three categories was about 14-trillion dollars. The entire gross income of the population of the United States, Bill Gates, the guy working at McDonalds, Government and private sector employees, salaries, wages, and their investment income was about 10.2-trillion dollars.
When you have our "collective" government bringing in more gross income then the population of the United States my wouldn't Russia and Chine be envious? Oh, I forgot, they saw the errors of their ways and are shifting into our blue print of operation. We wrote the better plan for control combined with absolute wealth generation for government as the population is masterfully entertained with sound bite conditioning and distraction to perpetuate business as usual from within government.
TREASON: "Treason doth never prosper; what's the reason? For if it prosper, none dare call it treason." Sir John Harrington, 1561-1612
Walter Burien - CAFR1.com
Simplistically speaking, government spending is all that is driving the economy and the stock market. Cut government spending and the stock market bubble pops! Hang on to what's left of your 401K.
The plan is working as it was intended to do and the democrats are too stupid and corrupt to do anything about it. The right wing has won the battle for America.
LOL @ New Jersey. They elected a cow for governor! MOOOOooooooooo.
GOP why haven't the tax cuts done much except suck the treasury dry and made the deficit worse? That's because the GOP doesn't have an agenda. They don't think. They blindly follow the same tired agenda instead of being open to new ideas and what's happening in the real world. They shamelessly pander to the rich, nothing new, and the old white men need to retire. Go home.
Why are we preoccupied with Anthony Weiner's weiner and not unemployment or evictions or the homeless or Wall Street crimes??
We need jobs! The government is no longer in a position to create them. What can we do? Here's my idea: Launch an entrepreneurial blitzkrieg fueled by the financial power of Wall Street to create lots of jobs on Main Street! This will ramp up employment quickly and put money directly into the hands of the people who need it now: the consumers (whose spending represents 70 percent of GDP). This enormous financial turbo-boost to the economy will reinvigorate economic activity and quickly return the eight million jobs lost during the Great Recession. How do we make this happen? Read my proposal: http://jpbulko.newsvine.com/_news/2011/04/20/6500827-a-modest-proposal-to-save-the-american-economy-entrepreneurial-blitzkrieg-as-job-creation-vehicle-
Joseph Patrick Bulko, MBA
Hey Mr. MBA, why don't you return to school and learn something useful, instead of that corporate indoctrination you were taught which has destroyed our economy.