South By North Strategies, Ltd.

Balancing State Budgets

A new report by the Center on Budget and Policy Priorities outlines a “balanced approach” for states to use in confronting their budget crises.

When states face a deficit, an across-the-board reduction in spending is often the first response that comes to the minds of policymakers. But as this report shows, states in fact have a far wider range of policy choices they can employ to close deficits and maintain important services — the need for which grows even as revenues falter. Many of these budget-balancing policies do far less damage than budget cuts do to state economies. Some have the added advantage of strengthening the long-term fiscal situation of the state — beyond the immediate need to achieve a balanced budget this year or next.
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The key is to construct a balanced approach to state budget balancing, instead of overly relying on spending cuts. The enormity of deficits in many states suggests that no one strategy can be sufficient on its own to fully close deficits. By using a balanced approach, states can minimize harm to the individuals, families, and businesses that depend on state services, and can also avoid further damaging economies already made fragile by the pressures of a recession.

State Government Drag

The Economist asks why federal policymakers are ignoring the economic drag caused by collapsing state budgets.

State legislatures are looking a combined budget gaps worth more than the size of the House jobs legislation, and senators busy themselves stripping aid to states from their bill. Mr [Paul] Krugman has written that what the euro zone needs is tighter fiscal integration to offset the burdens imposed by a uniform monetary policy. But if America is any indication, tighter fiscal integration doesn’t mean a thing if the people running the show at the federal level are short-sighted, provincial, and apt to choose grandstanding over good policy.

Around the Dial – Feb.16

Economic policy reports, blog postings, and media stories of interest:

• The New York Times asks what will happen when housing aid unwinds.
• Brad DeLong offers ideas for job creation.
• Bob Herbert discusses the class dimension to the recession.

NC’s Jobless Recovery

In the February issue of Business North Carolina, editor Ed Martin explores what a “jobless recovery” would mean for the state’s labor force. The story features the perspective of John Quinterno of South by North Strategies, Ltd.

Said Quinterno of the human consequences of a jobless recovery:

“There are a variety of consequences for employees. It injects a lot more uncertainty into their lives — and financial instability. Income swings more wildly. If the spouse has to go to work, there’s the compound issue of child care. Even in a relatively skilled field now, you don’t have much employment or financial security, so that can put a strain on the economy and growth in demand.”
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Fear becomes a factor. “If people are afraid, they’re not going to eat out once a week or go to the movies or write that check to the United Way,” Quinterno says. “It ripples out to the larger economy. If you’re talking about jobless recovery, firms are going to want to add labor when they have the opportunity to sell more goods and services, but they can’t if there’s not much demand for them.”

Expiring Unemployment Benefits

Absent congressional action, the emergency unemployment insurance benefits authorized under the recovery act. The National Employment Law Project reports that an expiration would result in 5 million unemployed workers losing their unemployment insurance benefits by June 2010. This includes 1.7 million workers who will not be able to access any emergency benefits and 3.3 million individuals who will be eligible for fewer weeks of emergency benefits than currently is the case.

In North Carolina, an expiration of the emergency benefit program will cause an estimated 3,216 workers to lose benefits in March and 13,515 individuals to lose insurance assistance by June of this year.