Socking It to the States

Sentient observers know that American state and local governments face a historic crisis--that they are cutting vital services and raising taxes, mainly on those already most stressed in difficult times. Schools in Oregon are closing early; New York City plans to close firehouses and reduce garbage pickups. States have already closed gaps of $50 billion in their 2003 budgets. Now they face the necessity of imposing measures almost twice as drastic for 2004.

In this crisis, fiscal assistance from the federal government to the states and cities--in two words, revenue sharing--remains our most urgent economic policy need today. To see this, just compare it with all the alternatives.

Monetary policy has run out of steam. Continued low interest rates help to ward off the evil day when consumer bankruptcies and mortgage foreclosures begin to explode, but they cannot produce a recovery on their own. That will happen only after household balance sheets improve--a process of paying down consumer and excessive mortgage debts that has barely started. And so Alan Greenspan has faded into the wallpaper; he emerges nowadays only to make timidly optimistic forecasts. There is nothing much more he can do.

Subscriber Login

User Name

Password

Subscribe Now!

The only way to read this article and the full contents of each week's issue of The Nation online is by subscribing to the magazine. Subscribe now and read this article -- and every article published since for the past five years -- right now.

There's no obligation -- try The Nation for four weeks free.

• Get The Nation at home (and online!) for 68 cents a week!
• If you like this article, consider making a donation to The Nation.
• Reprint this article. Click here for rights and information.