More Federal Help Needed for Stressed State Governments

From AFL-CIO Now Blog

"...[S]tates face a two-year $357 billion budget shortfall for the fiscal years 2010 and 2011, while local governments face an additional $80 billion deficit. The American Recovery and Reinvestment Act provided much-needed relief, but its $106 billion in aid to states fills only about 25 percent of the shortfall. The rest of the budget must be balanced by spending cuts and tax increases. Click here to read the report, “Dire States: State and Local Budget Relief Needed to Prevent Job Losses and Ensure a Robust Recovery.”

"State and local spending cuts can be particularly harmful to the economy, Palmer and Pollack said. Not only do they deprive citizens of needed public services like health care, transportation, education and safety, they also fall disproportionately on the backs of those with low incomes. Businesses’ sales fall, forcing firms to slash wages or lay off workers, and these workers then cut their own consumer spending. As a result, each dollar of spending reduction by state and local governments leads to $1.41 in lost economic activity."

"Without additional state and local budget relief, current and future shortfalls will cause millions of job losses and likely contribute to a drawn-out and painful recovery."

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Posted by Chuck Bell at 5:12 PM