Public Employee Press

Fiscal crisis, Washington
Federal stimulus urgent for city, state

By GREGORY N. HEIRES

Come January, Ronald Reagan will be rolling over in his grave.

In his first inaugural address on Jan. 20, 1981, Reagan famously proclaimed that “Government is not the solution to our problem; government is the problem.”

President-elect Barack Obama has signaled that government action to confront the nation’s deepening economic crisis will be his top priority when he assumes office in January.

Some compare his stimulus plan to Franklin Roosevelt’s New Deal, which set the country on the path out of the Great Depression of the 1930s with programs that The Nation magazine reports cost about $500 billion (in today’s dollars).

Obama’s transition team estimates that his stimulus package will range from $300 billion to $500 billion.

His aggressive policy would reverse the neo-liberal dogma of recent decades — deregulation, free trade and tax cuts for the wealthy. These policies created the greatest economic inequality since the 1930s, destroyed millions of union manufacturing jobs, sparked the mortgage crisis and the collapse of Wall Street and put the squeeze on the public sector as states and municipalities confront privatization, limited revenue and shrinking budgets.

A severe, prolonged recession
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, praised Obama’s commitment to creating green jobs, helping the auto industry, aiding the public sector, and investing in health care, education and the infrastructure. “I am very encouraged with what they have been saying,” he said.

Obama outlined his plan in broad terms when he introduced his economic team on Nov. 24. He noted that the United States faces the possible loss of millions of jobs and called for a strong and rapid government response to the recession, which many economists believe will be the most severe in decades.

As the financial crisis spreads beyond the mortgage and banking systems to the rest of the economy, with unemployment rising rapidly and consumer spending falling dramatically, Obama and Congress are hearing a growing chorus of voices supporting bold economic action.

The AFL-CIO says the recovery plan should restructure mortgages to keep people in their homes, extend unemployment assistance for jobless workers, help states and cities continue to provide public services and invest in job-creating infrastructure projects. Organized labor’s top priority is the Employee Free Choice Act, which would make organizing easier and ultimately raise working-class incomes.

Aid for states and cities
According to the Center on Budget and Policy Priorities, fiscal shortfalls loom for 41 states this year and next. States and cities are calling on the federal government to pump billions of dollars into the public sector to address their declining revenues and growing budget gaps. Facing multibillion dollar deficits, the governors of New York, New Jersey and Connecticut have called on Washington to extend unemployment benefits, expand food stamps and increase Medicaid reimbursements.

As governors and mayors nationwide move toward sharp cutbacks in government services and jobs, economists warn that shrinking spending and eliminating paychecks would speed the downward spiral.

“It doesn’t help anyone to lay-off public-sector workers in the middle of a downturn,” said Baker.

Obama said his plan would consist of “a two-year nationwide effort to jump-start job creation and lay the foundation for a strong and growing economy. We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels.”