A Plan to Destabilize Cities & States
Republicans move to "starve the beast" and trigger chaos by refusing aid to cities and states in the latest round of pandemic relief
Publisher’s Riff
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There are many things packed into the $900 billion emergency economic relief bill passed by both chambers of Congress (and now faced with an uncertain week ahead), but needed aid for municipal and state governments is not one of them. It’s astounding on its face because logic would dictate city and state aid is common sense given the fact they have more direct influence on the everyday lives of Americans. But, it makes perfect sense if you’re skilled in identifying the ability of Republicans to carefully spread political traps when Democrats or anyone else least imagine such traps to happen.
It’s important to recognize that the adamant rejection of city and state aid by Congressional Republicans, particularly Senate Majority Leader Mitch McConnell (R-KY) is not about deficit concerns. This is all about starving city and state budgets to the point of fiscal collapse as the new Biden administration begins.
The Desperate State of Cities & States
During pandemic, we should have already expected a lot of pain in cities and states, especially in metropolitan centers. This is critical since more than three quarters of Americans - 83 percent - live in urban areas, up from 64 percent in 1950 (according to the Center for Sustainable Systems at the University of Michigan). As the Center for Sustainable Systems continues to note …
U.S. metro economies account for 91.1% of GDP, 91.8% of wage income, and 88.1% of jobs. Only 9 countries (including the U.S.) have a higher GDP than the New York City area.
The Peter G. Peterson Foundation also notes …
State and local governments are the fifth largest contributor to gross domestic product, comprising 9 percent of national economic activity in 2019, so their recovery after a recession is a significant factor in the wider national recovery. An analysis by the Tax Policy Center found that during the recovery from the Great Recession, state and local government activity fell rather than mirroring the wider recovery, an unprecedented occurrence. Consumption and gross investment fell by 4 percent over the period, though in recoveries from previous recessions it had grown by 6 percent, on average. That led to a decrease in payrolls of 3 percent, though in previous recoveries state and local employment grew by 3 percent on average. The authors conclude that rather than aiding in the recovery, the state and local government sector proved to be an economic drag.
Hence, if you’re a federal policymaker at a time like this, you’d want to save your cities and states - unless, you’re obsessed with accumulating as much political power as possible and, in this moment, see an opportunity to grab power by doing absolutely nothing for metropolitan areas.
Brookings Institution researchers noted that …
…. state and local government revenues will decline $155 billion in 2020, $167 billion in 2021, and $145 billion in 2022—about 5.5 percent, 5.7 percent, and 4.7 percent, respectively—excluding the declines in fees to hospitals and higher education. Including those fees to hospitals and higher education would bring these totals to $188 billion, $189 billion, and $167 billion.
We project that state and local income tax revenues will decline 4.7 percent in 2020, 7.5 percent in 2021, and 7.7 percent in 2022— $22 billion, $37 billion, and $40 billion, respectively. These moderate declines— especially relative to the declines that would have been estimated based on past recessions—reflect the low incomes of most of the unemployed and the large, taxable fiscal stimulus mentioned above. In fact, without the CARES Act, income tax revenues would have declined an additional $13 billion in 2020, $8 billion from unemployment insurance and $5 billion from PPP (Paycheck Protection Program).
State revenues are dropping fast and hard, as illustrated in this recent analysis and the table below from the Center on Budget and Policy Priorities …
There are an estimated 24 million people working as government employees on the state, local and federal level (15 percent of the overall national workforce of 156 million people), including 16 million who work for state and local governments, or 10 percent of the total national workforce. So far, according to the Economic Policy Institute, more than 1.5 million state and local government employees have lost their jobs because of fiscal bleeding from pandemic pressures - that’s already 9 percent of the total state and local government workforce in the country.
Food Insecurity, Violence and Poverty
Food insecurity has already risen in most states, just as those rates were declining - at least officially - prior to pandemic …
Violence has also spiked dramatically in most, if not all, major cities this year, with experts and law enforcement officials noting they haven’t seen such increases in homicides since the 1990s …
Poverty projections for 2020 are grim, as shown by the Urban Institute …
And job losses are heavy, especially in low-wage industries/sectors, according to the Center on Budget and Policy Priorities …
Which makes paying rent that much harder …
The Destabilization Plan
Cities and states are generally tasked with being the “first responders” for basic quality-of-life challenges the average American faces. These are the government institutions in place to provide direct support, using a combination of revenue from their own coffers and the federal government. Cities, along with states, must keep school districts alive, provide ongoing unemployment assistance, maintain public safety, offer rental subsidies and an array of other essential services and resources for residents. These support networks are not just a “safety net,” they are the cement holding cities and states together. If these services erode or completely fall apart to fiscal constraints, whole cities can descend into social destabilization and anarchy while states can dissolve into bankruptcy.
However, that’s what Republicans want, especially in the case of cities. An intentional failure to provide federal funding to cities and states is an attempt to strip those governments of the resources they need to keep struggling populations as stable as possible. But, Republicans are seeing an opportunity to indirectly, through rejection of funding, trigger a crisis whereby American cities are breaking down. This helps achieve several goals …
Cities descending into chaotic violence will put enormous pressure on soon-to-be President Biden, who will be eventually blamed for the destabilization.
With most cities being run by Democrats, it will be Democrats facing the most criticism from frustrated residents and constituents who will question the value of being energized for Democrats in upcoming 2022 elections.
These political disruptions may create openings to unseat Democratic mayors in the future and to dismantle Democratic Party holds on power in key cities.
Meanwhile, Republicans - suddenly crying “watch the deficits” - will push every attempt not to help cities and states
This also puts increased pressure on Congressional Democrats, who will be accused of not doing anything even as Republicans actively block everything their Democratic colleagues attempt at addressing these situations.
The goal is to undermine the ability of the Biden Administration to effectively respond to the crisis unfolding in America’s cities and states. He’ll absorb most of the blame, even as Senate Republicans will be the culprits rejecting every attempt to add aid for cities and states. Residents in key cities, for example, will be discouraged by and disinterested in Democrats, who will lose needed voter support over the next election cycles if this pattern continues. Voter turnout in the next election cycles will drop, too. The goal is to get more Republicans elected while damaging the credibility of Democrats on issues such as “law and order,” pushing the argument that Democrats don’t know how to manage cities or keep residents safe. That may provide an opening for Republicans to further solidify gains in gubernatorial and state legislative races, and enhance their position heading into the 2022 and 2024 elections. Democrats can’t be blindsided by it, but they most certainly will be, knowing their record by now. They should explore effective counter measures.
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