Cities and States Facing Massive Revenue Shortfalls from the Feds Due to GOP Debt Ceiling Deal

For my friends on the right side of the aisle, I’ll remind you that Speaker John Boehner proudly proclaimed he got 98 percent of what he wanted in the new deal to extend the nation’s debt ceiling.  And once Standard & Poor’s downgraded America’s credit rating and panic griped Wall Street, Boehner blamed the President.  But that’s nothing due to the long term impact these spending cuts will have as they trickle down to states and cities which will not doubt hurt schools, weaken law enforcement, curtail fire and public safety, and provide significantly less service for those Americans who need it most at the Local level.

It’s a whole new definition of Trickle Down Economics, which was supposed to benefit those at the bottom of the economic ladder (and many of those at the bottom are still waiting for the benefits associated with the Reagan tax cuts).  The new Republican Trickle Down budget cuts will hurt those at the bottom of the economic scale faster.

The NY Times carried this editorial that spells it out nicely.

“In the space of just a few weeks, the Republican-led standoff on spending and taxes brought them a triple dose of bad news: a budget deal that will probably lead to a significant reduction in federal aid; a bond downgrade that could eventually trickle down to the local and state level, making borrowing more expensive; and a stock market plunge that is bleeding state employee pension funds.

Washington should have been trying to find a way to help states avoid the layoffs and cutbacks that have contributed heavily to the high unemployment rate. Instead, it seems to be doing everything possible to make the situation worse in state capitals around the country.

States have been cutting frantically for the last four years because of declining tax revenues, but the 2012 budget year will have the deepest cuts to education, health care and other services since the recession began. A recent report from the Center on Budget and Policy Priorities showed that nearly all states will spend less on vital services in 2012 than they did in 2008, after inflation, even though there are more children in public schools and more poor people on the Medicaid rolls.

That means that 100,000 low-income people will be kept out of Medicaid in Arizona, which has frozen enrollment. New Jersey plans to cancel Medicaid coverage for 23,000 parents. Texas eliminated prekindergarten money for 100,000 children. Ohio and Pennsylvania are each cutting school aid by more than 7 percent this year, which in Ohio is equivalent to more than 14,000 teachers’ salaries.

More layoffs are also likely in many states, on top of the 577,000 jobs eliminated by state and local governments since 2008. (More than a dozen states facing shortfalls have inexcusably cut taxes, or, as in New York, plan to let tax surcharges expire.)

And now comes the Budget Control Act of 2011, the deal reached in Congress to cut $2.4 trillion over the next decade in exchange for raising the debt ceiling. Although the deal could have been worse and was structured by White House negotiators to reduce the impact on safety-net programs like Medicare and Medicaid, it will do real damage at the state and local level.

The act will cut $917 billion out of domestic discretionary programs, about 60 percent of which will come from nondefense spending. That will inevitably reduce transportation, education and environmental aid sent to the states.”

The crisis on Wall Street last week has already cost the State of California Retirement System $6  billion according to the Sacramento Bee.  With 15 months to go before the next election cycle, voters negatively affected by these cuts should remember which party is responsible for it come November 2012. 



  1 comment for “Cities and States Facing Massive Revenue Shortfalls from the Feds Due to GOP Debt Ceiling Deal

  1. August 15, 2011 at 9:51 pm

    The Battle Has Just Begun

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