ARRA is not enough

Local governments’ economic struggles could slow the entire nation’s rise from recession, according to a new report from the Washington-based Economic Policy Institute (EPI).

While the American Recovery and Reinvestment Act helped, the $106 billion in ARRA aid to states totals only about 25 percent of the $437 billion state and local budget shortfall, and budget-balancing actions like raising taxes or cutting services depress consumer demand and cause job losses, according to EPI’s policy analyst Ethan Pollack. Pollack says that each dollar of spending reduction by state and local governments results in $1.41 in lost economic activity.

Pollack’s report is available at www.epi.org/economic_snapshots/entry/snapshot_20091118/.

Source: Center on Budget Policy Priorities (state shortfall and budget relief), National Association of State Budget Officers (rainy day funds), and Pollack’s analysis and National League of Cities (local shortfalls).