"One of the lessons of the Great Recession is that it affected state and local government very harshly due to property taxes, then unemployment getting very high, then income taxes falling," said Stephanie Aaronson, director of economic studies at the Brookings Institute. "It's part of the reason that the recovery from the Great Recession was so slow - state and local spending was a drag on overall spending for almost a decade." Ah yes, the balanced budget amendments which all those red states love so much are actually millstones around those state's necks in times of fiscal imbalance caused by economic factors outside any state or local government's ability to control. Nancy Pelosi and the Dems are actually trying to help these red states from facing the catastrophic choice between cutting budgets and firing workers due to the statutory requirements of ill-thought-out statutes designed to exacerbate negative economic trends at the worst possible time.
And states are in a worse place now than they were then. State budget shortfalls are on track to exceed $500 billion this year, according to the Center on Budget and Policy Priorities. Even calculating in federal aid from the COVID-19 relief packages Congress has passed, plus states dipping into their rainy-day funds, that number still hovers around $360 billion - a figure that dwarfs the $283 billion they lost after the Great Recession.
Almost all of the states have to maintain a balanced budget, largely a result of bills passed in the last 30 years. During shortfalls, that means they have to impose austerity measures like raising taxes and slashing spending. Those measures can have ripple effects - in the aftermath of the Great Recession, for example, one of the results of those strictures was sky-high tuition at state colleges, which contributed to the growing student loan debt crisis.
"A lesson of the Great Recession is even though we got a lot of great federal stimulus, it was offset by state and local austerity efforts that hurt the recovery," Arnab Datta, senior legislative counsel at Employ America, told TPM.
To try to offset that, one of the integral differences in the aid Democrats are proposing for states this time around is that it can be used to make up for revenue shortfalls. The aid in the last package could only be put toward expenditures related to fighting the pandemic, such as the cost of providing health care.
The funding would also stop the bleeding among the public-sector jobs state and local governments maintain, stemming layoffs which would strain unemployment benefits, another tenet of the relief package. Without the aid, "states will have to start laying off workers " which they've been doing but not in huge numbers," said Aaronson.
But of course, the GOP wants to ignore the ticking time bombs that their own political ideology put in place that not only will gut state and local governments, they will actually harm millions of taxpayers looking for help in these dire times only to find forced austerity.
Heck of a job GOPers.