Finally, we get it. The stimulus bill is really working. Who is benefiting from the $700 billion package? State and local government, that’s who. So, your tax dollars are going from the Federal government to some state and local governments to supplement the taxes you are not paying to them. You buy less, so less sales taxes. Your house is worth less, so less real estate tax revenue. State and local governments would never cut costs, so they need your money. Now, they just get it from Washington.
What are they doing with the money? They have hired more union workers. The Bureau of Labor shows 12,000 new employees added to the rolls of state and local governments.
And, they are passing out raises. Pay and benefits rose 4%. In the private sector it was 0.8%, the lowest since tracking started in 1980.
Other state and local spending was flat after adjusting for inflation. So, bottom line, state and local government income is down substantially. But, expenses have gone up. They have kept everything but employment costs flat and used Federal money to add employees and pass out raises in a recession where the private sector has cut 1.3 million jobs and virtually cut raises.
So, stimulus funds let state and local government avoid making needed cuts. What will they do when the stimulus money dries up? They will raise taxes to recover the lost revenue from the Feds.
Isn’t all this reassuring?
