Every state and local government is in an austerity trap

Some of that is because state houses are full of reactionary conservatives and city halls are steeped in public-private neoliberal ideology. But there is also a major structural factor that makes all of that seem sort of rational.

The problem is that unlike the federal government, nearly all state and local governments face balanced budget rules for their current activities, with most needing to pass bond referenda for specific projects in order to borrow money.  So when the revenues fall short, which they shortly will start to do for all these state governments, they will face the choice of cutting spending and laying off workers or raising taxes on populations facing sharply reduced incomes and employment.  The sooner the federal government recognizes this and starts to do something, the better, although probably for now natonal politicians are hoping this will all be over before too much damage happens to the local governments, to the extent they are thinking about this at all, which I doubt.

In a crisis this forces local officials to make drastic decisions that threaten their own workforce and cripple their future capacity to serve the public.  A lot of them feel like they're doing the right or only thing. But that's because they're working with a limited concept of normal operations.  These are not normal times.  It is time to imagine a much better world with a wider range of possibilities.

Maxine Waters is trying to do that.

Waters' proposal, described in a memo to House Democrats, calls for direct cash payments — larger and longer lasting than in other proposals — and suspension of nearly all consumer and small business debt payments, supported by reimbursements to creditors through the Federal Reserve.

It calls for billions of dollars in grants to small businesses, boosting emergency homelessness assistance funds by billions, cutting all federal student loans by $10,000, and pumping $100 billion into public housing to kickstart the economy after the COVID-19 pandemic passes.

Waters, D-Calif., is calling for $2,000 a month in cash payments to most adults, and $1,000 a month for each child, for the duration of the pandemic. Treasury Secretary Steven Mnuchin has floated a $500 billion direct cash injection, but as a one-time offer, not the continuing monthly payments Waters proposes.

The Waters memo.. you can read it here... should be the standard by which all policy response is measured. It enumerates relief efforts that put people first. It offers real support to the scores of laid off. Instead of the narrow focus on sick leave or means-tested tax credits for middle class workers or massive bailouts for corporate criminals, the Waters memo considers the whole economy of part-time workers, gig workers and people who depend on informal cash only arrangements.

It also recognizes the dire situation that local governments find themselves in and offers immediate help.  These provisions would stand up cities that are already starting to furlough workers and cut services.

20.Support State, Territory, and Local Government Financing. This provision would authorize a program that requires the Federal Reserve to support state, territory, and local debt issuance in response to the coronavirus outbreak given the critical role these governments are playing.

21.Waive Matching Requirements for Municipal Governments. This provision would waive the requirement that state, territory or local governments first obtain matching funds prior to receiving certain federal grants.

There are provisions in the Waters plan beyond this that empower cities to rebuild their economies through small business aid and housing grants.  Everything is on fire right now. The Waters plan not only moves immediately to douse those fires it shows us the fastest and most equitable route to recovery.  It needs to happen and it needs to happen like yesterday. Call your congresspeople today and tell them that.