States deliver health care, and essential social and educational services to Americans. When the states are poor, the poor are really poor. California is asking the federal government to be backstop insurance so private investors will loan California money. Without the help, 2 million low income people will lose health insurance, thousands of teachers and firefighters will be laid off. The losses are concentrated among the vulnerable, the aged, the sick, and children in all states when economic downturns affect state revenues. States don’t have a Federal Reserve bank or the ability to run deficits like the Feds do. Federal aid is hard to get.
In a Financial Times article, which was festooned with a picture of Obama and Schwarzenegger, UCLA economist Daniel Mitchell summed up the political situation: “California is trying to do what North Korea is trying to do,” he says. “And that is to get Barack Obama’s attention. California doesn’t have a missile to shoot off like North Korea but if we have to put sick and dying children on the street … ultimately, the Obama administration is not going to be able to run away from that.””
The Center for Budget Priorities keeps track of how badly states are doing. They conclude that at least 47 states don’t have the money to pay for the services they planned on providing.
The Economic Policy Institute reports that the child poverty rate will double in this recession: “The rate, at 18.0% in 2007, is likely to grow to 27.3% among all children and an astonishing 52.3% for black children.” Shame on the green-shoot exclaimers, we don’t have recovery until child poverty stops growing.
