Job-Creation Idea No. 2: Rescue The States - Dan Froomkin/HuffPo

[WillyT]

(Part of Huffington Post's America Needs Jobs series; also see the introduction and Idea No. 1.)

Job-Creation Idea No. 2: Rescue The States
Dan Froomkin - HuffingtonPost
First Posted: 09-22-10 08:23 AM | Updated: 09-22-10 01:45 PM

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State and local governments are the country's largest employers. They provide essential public safety, education, health and social services -- services that are even more needed during an economic downturn. But when the economy slows down and tax receipts drop, state and local governments have to cut back. And their spending cuts don't just reduce those necessary services, they work like an anti-stimulus -- dollar for dollar.

By contrast, if you want federal money to reduce the unemployment rate, economists generally agree there's no faster or more effective way than sending it to states so they can avoid layoffs or can actually increase their hiring. States are in a position to create lots of jobs almost instantly. And state and local spending has great "bang for the buck," as economy.com's Mark Zandi describes the per-dollar effect of spending on gross domestic product.

When you spend money on stimulus, you want that money to get spent over and over again, creating more and more jobs. Zandi has calculated that aid to state and local government has more bang for the buck than anything other than extending unemployment benefits or increasing Food Stamps allocations.

The 2009 Recovery Act (AKA the stimulus) included about $144 billion in aid to state and local governments through the end of 2010. But now the money is running out, and states are facing the prospect of massive layoffs.

In August, President Obama signed into law a bill sending states another $26 billion to save the jobs of thousands of teachers and other government workers -- but the original Local Jobs For America bill pushed by Rep. George Miller (D-Calif.) was for four times that much. And the Center for Budget and Policy Priorities estimates that the states' cumulative budget shortfall will likely reach $140 billion in the coming year.

Bob Pollin, an economist at UMass-Amherst, writes about the huge revenue shortfalls in the states:

The jobs recovery will not succeed until this situation is stabilized. How could it be otherwise? State and local governments account for about $2 trillion in annual spending, or 14 percent of GDP. Either directly or indirectly through their supply purchases, they generate 30 million jobs, 20 percent of the entire American workforce.

And the money sent to the states would translate directly to jobs, he writes:

The main activities supported by state and local governments are all effective sources of job creation, in comparison for example with military spending. Thus, infrastructure projects create 40 percent more jobs per dollar than spending on the military, healthcare creates 70 percent more jobs and education creates 240 percent more jobs. So if the government just moved its 2008 budget of $188 billion for Afghanistan and Iraq into support for education and infrastructure programs at the state and local levels, this alone would produce a net increase of about 2.3 million jobs per year.

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More: http://www.huffingtonpost.com/2010/09/22/jobcreation-idea-no-2-res_n_734460.html

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