Federal aid for state budgets

Paul Krugman has some insightful things to say about the urgent need for federal aid for struggling states during a fiscal crisis:

[S]tate and local governments operate under fiscal rules that lead to booming spending and tax cuts when the economy is strong and the reverse when the economy is weak. This is bad governance: services are cut precisely when people need them most. It’s also bad macroeconomics: it exacerbates the business cycle….

Obama mentioned aid to state and local governments in his press conference yesterday. Indeed. This is a very quick form of fiscal stimulus, because it’s not about starting new spending, it’s about sustaining current spending. It should be done immediately.

My own experience with the state budget process has been here in NY, where Fractured Atlas has gotten some generous line items from supportive members of the legislature.  The state also provides a vital bedrock of support to arts organizations through the New York State Council on the Arts.  Because of its dependence on Wall St. for tax revenues, NY is now one of the states most threatened by the economic meltdown.

Of course, NY is not the only state facing a looming budgetary collapse.  It’s happening across the country and it’s only going to get worse.  Krugman’s one of the smartest economic minds out there, and he’s dead right about the urgent need for federal aid.  As this debate unfolds over the coming weeks or months, we should all be prepared to make some phone calls and send some emails to our elected representatives.


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