/PRNewswire-USNewswire/ -- The following is a commentary written by Richard C. Leone, president of The Century Foundation, and Anthony Shorris, a fellow at The Century Foundation and former executive director of the Port Authority of New York and New Jersey:
While a lot of questions remain about how America got into this economic crisis, the new Congress and Administration quite sensibly have refocused the debate on the key immediate issue: how do we escape the whirlpool of job losses and recession swiftly and effectively? While some fringe-dwelling extremists still hold out for total reliance on the marketplace to sort things out, almost everyone else seems certain that our most immediate goal has to be to use federal interventions to restore demand for goods and services in order to reduce (and eventually reverse) the cascading rate of layoffs as fast as possible.
So it's particularly troubling that support is slipping for counteracting one of the biggest sources of the next round of job losses and spending reductions. Posturing and ideological cant on Capitol Hill are threatening to gut the $40 billion in assistance targeted for America's state and local public sector included in the House of Representatives stimulus package.
Meanwhile, all across the country - in red states and blue - governors and mayors are preparing to fire hundreds of thousands of workers at just the moment when jobs are most needed. While we hear plenty of echoes of yesteryear demanding corporate tax cuts in the far-fetched hope that they'll lead to fewer private sector layoffs, readers of another section of every local paper see vast numbers of middle class jobs poised for elimination. Already, 46 states are reporting collapsing fiscal conditions - the combined deficits of the states could approach $350 billion in the current and next fiscal years combined - and 36 of them are making massive reductions in state employees as well as other budget cuts that will require their localities to do the same. California has furloughed 200,000 workers already. New York City's Mayor Michael Bloomberg plans to drop 23,000 workers. Governor Jon Corzine in New Jersey has reduced the state workforce by 2,000, with more reductions to come. It's the same story in virtually every major state.
State and local governments are in dire need of a federal tourniquet to staunch the bleeding. They are required by law to run balanced budgets -- unlike the federal government or most companies, they can't borrow to pay for workers' salaries - so they have no tools to fight off job cuts when times get tough except to raise taxes, a politically unpalatable option anytime. Worse, state and local taxes are almost always more regressive than federal levies, forcing elected officials to risk voters' wrath just to hike those taxes that impose the greatest relative burdens on those most at risk.
Thus the two options open for governors, county executives and mayors struggling to balance their budgets as their own government's revenues plummet are entirely inconsistent with the thrust of the federal stimulus program.
Massive tax increases are on the table in virtually every state - New York's Governor David Paterson has proposed more than $3 billion in increases while Governor Schwarzenegger of California has his state looking at some $14 billion in revenue actions. Forcing states and localities to raise their own taxes mutes the impact of any federal tax cuts designed to stimulate the economy, while allowing massive numbers of state and local layoffs to offset nationally-funded job creation seems worse than short-sighted - it's just plain crazy.
Federal investments in state and local programs can not only preserve middle class jobs when they are most needed, but they can also meet one other test if handled wisely. There are few infrastructure projects or federal programs that can create jobs immediately while also making the nation structurally stronger for generations to come. Yet retaining teachers who educate children, keeping maintenance workers who preserve decaying infrastructure until replacements arrive, avoiding cuts in preventive health care services, or hiring police officers who take criminals off the streets can be investments in the future just as much as a new exit ramp off an exurban freeway. Yet the Senate stimulus package slashes $40 billion in support for the states at just the moment when it's needed most.
The kinds of crisis managers who are responsible for important facilities anywhere in the world are taught to ask four simple questions at the onset of any emergency, whether it's a fire, hurricane or terrorist attack: What happened? How bad is it? What's being done and by whom? And, how do we keep it from escalating? Today, America is facing an economic crisis much like these more familiar kinds of disasters, and the same four questions deserve to be answered. While we'll eventually sort out the answers to the first three of these, the recently altered Senate version of the stimulus bill shows we're at risk of making a dangerous mistake on the fourth.
Let's treat this like the crisis that it is, and stop the one form of escalating disaster we can be certain of ending. There will be plenty of time for experimentation and ideological point-scoring later. For now, let's just start by making sure the disaster we are confronting does not spread into the states and localities in which we all live.
Richard C. Leone is president of The Century Foundation, a public policy research organization, and former state treasurer of New Jersey. Anthony Shorris is a fellow at The Century Foundation and former Executive Director of the Port Authority of New York and New Jersey.