States and native governments are on the verge of huge layoffs if further incentives usually are not in place

Patricia Cohen of the New York Times reports:

[I]It turns out that this budget crisis is color blind. Six of the seven states expected to see the biggest drop in sales over the next two years are red states, led by Republican governors and won by President Trump this year. This comes from a report by Moody’s Analytics.

Those at the front agree. “I don’t think it’s a red or blue state problem,” said Brian Sigritz, director of state finance studies for the National Association of State Budget Officers. Top National Governors Association officials – Andrew M. Cuomo of New York, a Democrat, and Asa Hutchinson of Arkansas, a Republican – gave one Explanation This fall it says: “This is a national problem and requires a bipartisan and national solution.”

While there is talk, talk, talk of a different incentive, and now there is some hope that something (albeit far too small) could be approved before 2021, Republicans are determined to not provide financial support to state and local governments as part of it Provide assistance from any aid package.

The effects vary from state to state based on their sources of income. Wyoming, North Dakota and Alaska, which rely heavily on oil revenues to fill the state coffers, have been hit hard by the pandemic as demand in the transportation sector has plummeted and oil prices are now below the break-even point of many producers. States like Nevada, Florida, and Louisiana have seen their tourism sectors at risk as fewer people risk infection from travel. Whether Republican or Democrat-led, states that are dependent on sales and income taxes and have declined sharply in the past nine months are seriously considering layoffs of first responders, librarians, park workers, and teachers.

Nationwide, as in the Great Recession, teachers were hardest hit nationwide. Georgia, for example, cut its K-12 funding by nearly $ 1 billion. California has cut its spending on higher education by about the same.

Dan White, director of fiscal research at Moody’s Analytics, told Cohen that the best result that could be expected without further government aid would make the situation “the worst since the Great Depression.” And take years to get us out.

The effects can be felt everywhere. The Kansas City, Missouri city administrator has asked each department to prepare for budget cuts of 11%. That could mean firing 180 firefighters and paramedics, as well as 200 police officers, closing a police station or two, and collecting less rubbish. It would also likely slow down permit approval and meet other private business needs.

As we saw during the pandemic, the negative effects hit more people of color than whites. This is also true of the public sector, which has provided colored people in many states with some of the best job opportunities available for decades. The layoffs caused by pandemics affect them disproportionately.

Michael Leachman and Elizabeth McNichol from the Center for Budgetary Policies and Priorities report:

The states’ adjusted estimates suggest that in the absence of further federal support, deficits will amount to around 11 percent of their budget in fiscal 2021 and 10 percent in 2022, which in most states begins next July. Additionally, the cost of states has increased due to higher enrollment in Medicaid and other programs. Including these higher costs, states’ estimates put deficits through fiscal 2022 at around $ 305 billion.

These estimates could easily prove too optimistic. While the economic damage from this recession has so far been more focused on low-income families than in previous recessions, it may not continue to do so in the months ahead.

In June, Josh Bivens and David Cooper of the liberal-minded Economic Policy Institute wrote that without further federal aid, we are facing an outcome like this:

If federal policymakers do nothing to address these shortfalls, the United States could end 2021 with 5.3 million fewer jobs, with losses in every state. If Congress passes inadequate aid – less than $ 1 trillion– –They will unnecessarily guarantee a significant employment gap by the end of 2021. If they pay $ 500 billion in aid during that time, the employment gap will likely be around 2.6 million. If they get $ 300 billion in aid, the employment gap will likely be around 3.7 million. While empirical estimates of the deficit should guide the thinking of policymakers, they can (and should) avoid setting a fixed sticker price on state and local aid by tying that aid to economic conditions. If the economy recovers faster than projections fueling the estimated $ 1 trillion shortfall, less help will be needed. If instead recovery were delayed, more would be needed. After all, filling the estimated deficits would only return state and local governments to their pre-crisis fiscal status quo. However, the unique features of the current economic shock will place greater demands on public services than they did before the crisis. More federal aid to these governments is likely to be needed to go beyond macroeconomic stabilization and promote the general good.

An important lesson from the Great Recession is that without adequate help to states and local governments, the economic pain will be immense and long-lasting. Another reason is that in states where all or most of the public sector workers were retained, the private sector recovery was faster and about 2% more robust than in states where large segments of their workforce were laid off.

The Senate Republicans appear determined to continue to pound these state and local governments, the people they hire, and the people they serve. They argue, as they never do when tax cuts are the subject of their wealthy friends, that financial relief is too expensive without ever realizing how expensive the result of not complying with those relief will be, both financially and socially.

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