February 22, 2010

The cliff, layoffs, and another stimulus/state rescue

Andy Smarick's analysis is correct: Arne Duncan and Barack Obama are talking this week about pending teacher layoffs to lay the groundwork for more stimulus/state-budget-rescue discussions. I suspect I have one analytical and one policy disagreement with Smarck, though. First, it's not a "second stimulus," because we're moving into a period where there will be a lot of smaller spending packages, so this is going to be the fourth or maybe fifth stimulus proposal in this Congress. And this is going to be harder than an extension of unemployment benefits or anything else that costs under $25 billion, because states and local governments are still in horrid fiscal shape. I suspect Smarick would oppose another large federal rescue of state budgets, but I think it's absolutely necessary or we face another 1937. Teachers and other civil servants don't spend as much of their income immediately as those receiving unemployment benefits, but it's still a better emergency economic policy to keep most public employees at work than any tax cut except the publicly-invisible withholding reductions implemented last year. And as happened last year, there may be considerable inconsistency in the behavior of state-government politicians, many of whom may publicly be horrified about any additional federal spending but need it in reality. (The public conflation of TARP and ARRA doesn't help here.)

For anyone still arguing for budget cuts as public-policy colonic, all I can say is that I hope that you can still argue that point in a year or two without risking pitchforks from the public, if only because you didn't win the argument.

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Posted in Education policy on February 22, 2010 9:49 AM |