Obama: “Our state and local governments face a vicious cycle”

June 14, 2010

Obama believes States and Cities need urgent help

I’m currently studying the city of Vallejo, California, because it is so far the biggest city of California (and I think in the USA) to have filed for bankrutcy so far. For my PhD I learn about the “do’s”, but I also have to learn about the “don’ts”, so the case of Vallejo it seems it’s a good one to look at some “don’ts”. But, it’s not only California, all across the USA, Europe and Japan, cities now are seriously struggling. Many has been said about the countries, but as Jane Jacobs and Robert Lucas clearly pointed out, the economic development and innovation does not come from the coutries, but more precisely, from the cities. So, in my opinion, we should pay more attention to the cities, even if the neo-classical economists and the different national media across the countries only look at the national level.
Unfortunately, we have had not to wait too long to start paying attention to the economy of the cities. They have been getting into trouble, and this last Friday, President Obama talking about the American cities expressed the urgency to focus on them: 

I am concerned … that the lingering economic damage left by the financial crisis we inherited has left a mounting employment crisis at the state and local level that could set back the pace of our economic recovery. Because this recession has been deeper and more painful than any in 70 years, our state and local governments face a vicious cycle. The lost jobs and foreclosed homes caused by this financial crisis have led to a dramatic decline in revenues that has provoked major cutbacks in critical services at the very time our Nation’s families need them most. Already this year, we have lost 84,000 jobs in state and local governments, a loss that was cushioned by the substantial assistance provided in the Recovery Act. And while state and local governments have already taken difficult steps to balance their budgets, if additional action is not taken hundreds of thousands of additional jobs could be lost. (….) Because the urgency is high—many school districts, cities and states are already being forced to make these layoffs,”

(Barack Obama, 12 June 2010)

Then according to the media he’s asking for $50 Billion in this emergency fund. Something that of course many policy makers can hardly support, not so much because of the 13 trillion debt the USA already has, but because it’s an election year and this looks a risky move. Obama in order to get the monies he continues, a) “I have called for a three year freeze in non-security discretionary spending”, b) put a “a fee on the largest Wall Street firms”, and c) put “agency incentives to identify ways to save money”.

For the first, I think that’s fantastic, although the main chunk of the discretionary budget is the military, so if this is not even discussed to be frozen then it does not go too far. In fact I think the US should not have a freeze but to reduce the whole thing. The question is, Does the American people prefer to keep having a huge military force or teachers in their towns and cities? The fact is that the majority of the people believe that education should be the priority, but the choice it’s not that easy, even if the US military budget sums more than the next 16 countries altogether. For the second measure, it seems that the majority of the people won’t have any problem on taxing the big ones in Wall Street. I mean, it’s like one of the wildest dreams of the middle and poor class. The third sounds like empty words, that I can not even say it is a good try.

Anyways, I don’t want to get into US politics. The main point here it’s not if they’re going to be able to do this, but to say that it seems that the US Government is realizing about the importance of the state and local level. From my view, this is very positive, even if it might be too late. They should have let bankrupt some companies, but cities can not and should not go bankrupt.

p.s. Having said that, I of course have to acknowledge that leading-Republican American guys really think Obama wants sincerely to destroy the nation, as well as the leading-Democrats though Bush wanted the same.

%d bloggers like this: