Open Thread: What's Happening in YOUR State

The latest figures on unemployment have prompted VP Biden to admit that the Administation was rethinking the state of the economy. They would do well to look at the economy of states. With unemployment now officially hovering close to 20% there is a lot to worry about. 

While I ordinarily would not accord the UK's pundit Ambrose Evans-Pritchard much credibility, in a recent piece in the Telegraph, The unemployment timebomb is quietly ticking, he put together some useful statistics.

The shocker last week was not just that the US lost 467,000 jobs in May, but also that time worked fell 6.9pc from a year earlier, dropping to 33 hours a week.

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Some of the US pay cuts are disguised. Over 238,000 state workers in California have been working two days less a month without pay since February. Variants of this are happening in 22 states.

The Centre for Labour Market Studies (CLMS) in Boston says US unemployment is now 18.2pc, counting the old-fashioned way. The reason why this does not "feel" like the 1930s is that we tend to compress the chronology of the Depression. It takes time for people to deplete their savings and sink into destitution. Perhaps our greater cushion of wealth today will prevent another Grapes of Wrath, but 20m US homeowners are already in negative equity ( data). Evictions are running at a terrifying pace.

Some 342,000 homes were foreclosed in April, pushing a small army of children into a network of charity shelters. This compares to 273,000 homes lost in the entire year of 1932. Sheriffs in Michigan and Illinois are quietly refusing to toss families on to the streets, like the non-compliance of Catholic police in the Slump.

Robert Kuttner in today's Huffington Post calls for .Congress should pass an emergency revenue-sharing law, giving the states another $150 billion immediately.

State Fiscal Collapse. The states, unlike the Federal government, are not permitted to run current budget deficits. So in a deep recession, when tax receipts fall, their only choice is to cut program spending or raise taxes. Both are of course perverse in a recession, since they only further undercut consumer purchasing power.

As the new fiscal year begins, nearly every state is raising taxes or fees, or laying off workers and reducing programs.

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Massachusetts, with one of the most liberal governors, Deval Patrick, just hiked its sales taxes by 25 percent. A total of 24 other states have enacted tax increases and another 12 all have tax hikes on their agendas. Federal aid under the stimulus covers just 30 to 40 percent of the state shortfall, which is expected to total $350 billion by 2011. And 39 states have cut program outlays on the needy, according to the Center on Budget and Policy Priorities.

The New York Times reports that several states are cutting out summer school. This is just plain nuts.

In New York the State Senate is gridlocked as Democrats and Republicans battle for control. The New York City school system is one of the first victims of this. From the Wall Street Journal,  

 New York City officials scrambled Wednesday to re-create a system of school governance that hasn't existed in seven years after a deadlocked state Senate failed to renew the mayor's control over public schools before a Tuesday deadline.

For three weeks the state Senate has declined to tackle controversial bills, including one that would have renewed Mayor Michael Bloomberg's control over New York City schools. Without that approval, the city was forced to revert to its 2002 system, hastily choosing a city school board. But there are no provisions in place to establish such entities as local school districts, creating a situation, the mayor said, in which the city could be accused of running the schools illegally.

The state senators -- locked in a 31-31 tie after two Democrats defected and then one returned -- have repeatedly met in their respective party conferences only and then adjourned, since neither party has enough votes to make law. For a while the crisis seemed to have minimal impact beyond exasperating government officials and amusing political pundits. But now the Senate's refusal to agree on its leadership is starting to hit cities.

In addition to the school-control legislation, the Senate didn't vote on Mr. Bloomberg's request to increase the city's sales tax, depriving the city this month of $60 million -- roughly the amount the city spends to employ 600 police officers, the mayor said. The gridlock also is threatening billions of dollars in federal grants, state aid to municipalities and tax increases that would have balanced local budgets.


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