Are state and local governments killing the economic stimulus?
Back in 2008, President Barack Obama signed into law a $787 billion stimulus package. Despite the infusion of cash from the federal government, unemployment continued to grow and the economy remains weak. What's the problem? Is this proof that government spending can't help spur economic growth?
Over at Think Progress, Matthew Yglesias thinks we need to dig a little deeper. Because despite the big boost in spending from the federal government, other governments aren't doing the same.
Looked at comprehensively, what the country has been implementing is a mild version of the conservative policy prescription for boosting growth—fire bureaucrats and trim spending. And it's not working very well.
Yglesias argues that cities and states have actually cut spending dramatically, blunting the impact of the stimulus. He points to an analysis of state and local government payrolls that found public spending has decreased since the economic crisis began. Together, the cuts to the public sector at state and local levels outweigh the increased spending by the federal government.
What does this mean in real terms? Combined, state and local governments have shed more than 231,000 jobs in the past two years. That means that while the federal government is working to preserve or create jobs, policymakers at the local level are basically doing the opposite. As a result, these efforts to cut costs undo the policies of the federal government.
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