Friedman foresees fiasco from fiscal federalism

In this month’s Dollars and Sense, UMass Professor of Economics Gerald Friedman offers a clear, chilling, and historically informed assessment of how the Crisis of 2008 will continue into 2010 and beyond as the States, hobbled by limited fiscal capacity, will be forced to cut jobs and public services.

The Economic Crisis in the States — By Gerald Friedman — Dollars and Sense: Real World Economics

… without serious action, a sharp drop in government employment, with a loss of a million jobs or more, is what we can expect over the next year. This has implications for the economy as a whole and also for the well-being of large parts of the American public who depend on state and local government services. Two intrinsic features of the American system of government come together to threaten a social disaster: the limited capacity of state and local governments to spend beyond their immediate revenues even in the harshest economic crises, and our peculiar federal system in which education and social services are largely funded by local and state authorities rather than by the federal government, with its deep pockets and ability to spend beyond its revenues as needed to maintain existing services….