Why New York Needed the Federal Fiscal Relief – And Should Get More

Amy Traub

Why New York Needed the Federal Fiscal Relief – And Should Get More

The fiscal relief bill signed into law by President Obama on Tuesday will unquestionably benefit New York City and other states and municipalities across the country. At a time of sluggish job growth and straight-jacketed local budgets, the bill will help cities and states to maintain critical public services, especially funding for education. By passing this legislation, Congress has acted to mitigate the impact of the crippling recession on America’s children and on our long-term economic prosperity, which relies on an educated workforce. Yet praise for the new law has been muted. The state and local support it provides will help to prevent the recession from getting worse – yet it is far from enough. Opposition from the right forced legislators to limit the size of the bill, hamstringing the nation’s economic recovery. Mayor Bloomberg and other city and state officials should continue to make the case for additional federal support.

First the good news: The new law will direct $200 million in education aid directly to New York City and will provide $400 million in additional support for the city’s Medicaid program. In New York State as a whole, the law will enable 8,200 teachers to stay on the job in our classrooms.

Had the legislation not passed, cities and states across the country would have laid off more workers, more services would be lost, and additional taxes would be raised to cope with budget shortfalls. Consider those services first: as Paul Krugman pointed out in his powerful recent column, the lights are already going out in America. Classroom are more crowded, over-stretched fire companies are responding more slowly to emergencies, dangerous bridges go unrepaired, smooth and efficient roads are turned back into gravel. In New York we already see transit cutbacks, shorter library hours and shuttered senior centers.

Pundits and politicians on the right have tried to portray fiscal relief as nothing more than a giveaway to teachers and the other public employees who work to keep our communities running, but the reality is that the loss of public services has a powerful immediate impact on our quality of life and the nation’s future. Thankfully, the law passed by Congress will soften some future impacts in New York and nationwide. Yet even as he hailed the new federal aid to the city, Mayor Bloomberg warned of continuing revenue shortfalls that may leave him calling for more cuts in the next year.

The bill is also important for helping to sustain state and city spending and employment that provides vital support to the private economy. Wall Street economists, no liberals themselves, find that state and local spending cuts are a drag the nation’s economic growth. In short, cutting city and state spending kills private sector jobs, and maintaining some of that spending, as the fiscal relief bill does, preserves them It’s no wonder that the Economic Policy Institute projects the legislation will save more than 300,000 jobs, keeping not only teachers and police officers, but employees of the local businesses they patronize out of the unemployment line. As the U.S. Conference of Mayors notes, “This money will save jobs, and is an important first step in strengthening our nation’s economy.”

But the emphasis is one the “first step.” As we struggle to recover from the loss of millions of jobs, saving 300,000 positions is not good enough. Preserving employment for 161,000 teachers is necessary but not sufficient for cities facing layoffs of 500,000 employees in the coming years. It’s telling that the U.S. Conference of Mayors moves directly from praising Congress and the President for passing critically needed aid to calling for passage of the Local Jobs for America Act, which would more adequately address the devastating employment and budget consequences of the deep national recession. Rather than resigning themselves to killing jobs and slashing services to deal with the city’s continuing budget deficits, Mayor Bloomberg and New York City’s leaders should join the U.S. Conference of Mayors in demanding the support our communities genuinely need.

Postscript: A misguided focus on deficits and tax cuts also drove legislators to seek funding from a deplorably source, redirecting money from future food stamp benefits to pay for the budget relief our communities need now. This trade-off between our schools and hungry families should not have been necessary. Congress should act to restore funds for food stamps as soon as possible.