You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation

What a Drag: Local Government Cuts Hit Home

We’ve been warning about the economic implications of the coming local government fiscal crisis for more than a year (see this paper and  event we did with the National League of Cities last fall). Now, the crisis is actually starting. Witness the dispiriting newjobs report.

In September, private sector payrolls increased by a tepid 64,000, after rising by 93,000 in August. However, the real story is the extent to which the disappearance of 76,000 local government jobs completely erased the private sector gains. This time, the story wasn’t just about the termination of 77,000 Census jobs but about a spreading wave of true local government cuts.

In short, what the New York Times’ David Leonhardt calls the fastest local government cuts in 30 years are now delivering on the fear that such losses could jeopardize the nation’s economic recovery by placing a heavy drag on a modestly improving situation elsewhere, or at least a stabilizing one.

And get ready for more of this. As Leonhardt notes, the local cuts are accelerating. Over the last three months local governments have cut 143,000 jobs--no less than 1 percent of the nation’s total local-government employment. What is more, our friends at the National League of Cities have just released their annual city fiscal conditions report which is full of baleful forecasts and declining indicators such as the onset for the first time of property tax collection declines. Things are almost certainly going to get much worse before they get better in the nation’s metropolitan areas.

All of which makes one think that Congress and the Obama administration sure should have invested in some temporary fiscal assistance to cities last fall when it was being discussed.

After all, as things stand now, the deteriorating situation among U.S. municipalities stands to serve as what Ezra Klein calls the “anti-stimulus”--one huge self-defeating drag on recovery in 2011.