The Economist’s R.A. points out one of the stimulus bill’s many inadequacies: Lack of aid to the states.
NOT long ago I noted that early in 2009, Christina Romer estimated, based on data overestimating American employment by 1 million workers, that a federal stimulus of $1.2 trillion was called for. Ultimately, Congress passed a stimulus bill worth about $800 billion. But that is not where the impact of government policy on growth ends; one has to think about state and local governments, too.
State budgets have been a persistent drag on output, offsetting much of the discretionary boost from stimulus.
Employment is another casualty of Bathtub America: Not just the public sector workers who lose their jobs when state and local governments contract, but the private sector ones whose employers fold or cut back when government contracts dry up, or move their operations overseas to escape our increasingly decrepit and antiquated infrastructure.
And how does the Senate respond to this crisis? Guess:
Senate Majority Leader Harry Reid, D-Nev., on Thursday unveiled a jobs bill that does not contain state aid. A Senate Democratic aide said Reid hopes to back a state aid measure in the future. Republican support, however, remains questionable.
(…)
States are looking at a total budget gap of $180 billion for fiscal 2011, which for most of them begins July 1. These cuts could lead to a loss of 900,000 jobs, according to Mark Zandi, chief economist of Moody’s Economy.com.
A million more jobs down the drain, and no one in the Senate wants to do anything. It’s too bad none of them actually have to represent any states, otherwise they might have to pay some kind of political price for it.
