Local Governments and the Recession

Chris EdwardsIn response to the crisis, Congress and the Federal Reserve have provided cities and states with hundreds of billions of dollars in aid. But there are calls for more from theFed chief, lobby groups such as theNational League of Cities, and Democrats andsome Republicans on Capitol Hill.News articles are whipping up fears of an apocalypse unless Congress passes another state ‐​local aid package.Politicoclaims that states and cities are “slashing” services with “severe” cuts, whileEducation Weekworries about “draconian” cuts to schools. TheNew York Timessays that the virus is “ravaging” state budgets, whileBloombergworries about California ’s looming “budget disaster.”Such scare stories were common during the Great Recession a  decade ago. But we can look back and see that the overall budget adjustments at the time were not that severe, particularly for local governments, which I examine here.Arecent study by the Council of Foreign Relations in support of more state ‐​local aid gets the history wrong with regard to local governments: “The deep economic recession of December 2007 to June 2009 and slow recovery put many subnational budgets in unusually dire straits … The situation was particularly bleak at the local level, where many balance sheets were battered by the collapse of home values and property tax revenues.”In fact, nationwide local tax revenues did not fall during the Great Recession, asBEA data from Table 3.21 shows ...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs