Now of course the whole point of this is that the situation is temporary...federal money cannot be the #1 source of revenue for any state or local government for long. But it's good news that seems to indicate that the stimulus was not only necessary but useful as well.A huge influx of federal stimulus money to state and local governments more than offset a sharp drop in tax collections, helping to put the brakes on the nation's economic decline, new government data show.The stimulus funds helped reverse six months of spending declines, pushing state and local government expenditures up 4.8% in the second quarter, reports the Bureau of Economic Analysis.
"The money has caused a very sharp change in the path of the economy, which had been in steep decline," said Chad Stone, chief economist at the liberal Center on Budget and Policy Priorities in Washington, D.C.
Federal cash is now the No. 1 revenue source for state and local governments, surpassing sales and property taxes, the government data show.
The flood of federal money lifted total revenues by 7.5%, overcoming an 8% drop in tax collections.
In other words, the main reason the GDP was only -1% was due to the stimulus kicking in. It will continue to kick in hopefully and provide even more benefit to Americans. Lord knows we need it.State and local governments are adding new workers and raising pay:
•Employment. State and local governments added 12,000 workers, a 0.1% increase, in the quarter, reports the Bureau of Labor Statistics. The private sector cut 1.3 million jobs, a 1.2% reduction, during this time. Federal employment was flat.
•Compensation. Pay and benefits rose at a 4% annual rate in the second quarter for state and local workers, BLS reports.
For private workers, compensation was up at a 0.8% annual rate, the lowest since the government started keeping track in 1980.
The jump in government spending — federal, state and local — was the key reason that the nation's gross domestic product declined just 1% in the quarter, a sharp improvement from a 6.4% first-quarter drop.
It'll be needed too, considering all the layoffs in state and local governments as the new fiscal year takes effect. Third quarter numbers will probably show a drop in state and local government employment...but the drop would be much steeper without the stimulus package.
Still, this stimulus has to translate into more private sector jobs too, not just government ones. We still have a long ways to go.
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One interesting note coming out of those second quarter economic numbers: the "failed" stimulus package from February appears to be working. In fact, if it wasn't for the stimulus, state and local budgets would be far worse off than they are right now.
You realize, of course, that right-wingers find this all horrible -- they want state and local governments to be cash-strapped, and they bloody well don't want the federal government helping them, even temporarily (The Tenth Amdement! The sacred Tenth Amendment!). Even though we always counted government spending as part of GDP in the past, and even though a government worker's $20 bill buys just as many groceries as $20 in the hands of someone who works for a Randian capitalist, Obama is president now, so any positive effect on GDP as a result of federal intervention doesn't really count, per the wingnuts.
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