If there were one thing that a stimulus package could do
effectively, it would be preventing layoffs by state governments.
State governments are required to balance their budgets, meaning
that in downturns they exacerbate the panic in the private sphere
by having to cut public jobs when tax receipts dry up. The
federal government, however, facing no balanced-budget
restriction, can give the states a countercyclical tool by
transferring funds to keep state employees on the payrolls. This
disrupts the deadly pro-cyclical effect of state budget
shortfalls. Furthermore, it allows for results you can measure:
unlike the Obama administration's nebulous "created or saved"
metric, states could simply look at their budgets and see how
much money they would have had to recoup by firing workers if not
for the transfers. Bottom line: any well-planned stimulus package
would ensure, before anything else, that state governments didn't
shed massive amounts of jobs.
And yet today the Wall Street Journal shows
just how quickly panicked states all around the country are
laying off or furloughing workers.
Almost makes you think that the Obama administration and
Congressional Democrats crafted their stimulus with
considerations other than simple economics in mind.
