A progressive strategy for addressing the next recession must include a deliberate, strategic focus on states and localities
No one can say with any certainty when the next recession will come, yet it’s clear that progressive advocates and policymakers should begin preparing now so they are ready to confront the challenges—and opportunities—a downturn presents.
As advocates, we should mobilize around two key strategies to respond to the next recession. The first strategy is to build demand at the state and local level for a large federal stimulus package that includes significant, lasting aid to the states. We should campaign actively against the notion advanced by the right wing and even moderate Democrats that there isn’t enough “fiscal space” to bail out workers and their communities during a recession. (Saying there’s not enough fiscal space is econ-speak for pretending the federal government doesn’t have the ability to run a deficit to support important programs in times of crisis).
The second strategy—which I will focus on here—is to ensure the progressive community has a strategic plan to mobilize communities and progressive state policymakers to develop a state-specific program for addressing the next recession. Governors and state legislators play an enormous role during a recession, and the policy and political choices they make in preparation for, during, and after a recession help determine how well communities weather a slump, and how quickly their state bounces back once the recession is officially over.
Unlike the federal government, state governments must balance their budgets. Too often during economic downturns, states pursue the austerity approach of slashing public spending to close gaping state budget deficits just when spending is most important—both for protecting workers and stimulating the economy. And even after the official recovery ends, state budgets typically take some years to bounce back to where they were pre-recession, and funding for key investments like K-12 and higher education has not yet returned to the level it reached before the Great Recession.
- According to a recent paper by EPI’s Elise Gould, there are still 116,000 fewer public education jobs than there were before the recession began in 2007. When the number of jobs that should have been created just to keep up with growing student enrollment is included, we currently have a 389,000 job shortfall in public education. That employment gap has a negative impact on both students and teachers in the form of larger class sizes, fewer teacher aides, fewer extracurricular activities, changes to curricula, and subpar wages and working conditions for teachers, all of which were brought to light by the recent wave of teacher strikes.
- State policymakers significantly cut the budgets of public colleges during the recession in an attempt to help plug the state budget gaps. Ten years later, that funding has not fully bounced back, according to a new report by the State Higher Education Executive Officers Association. Since the Great Recession, only nine states are back to their pre-recession funding levels, and another 11 have funding levels below the low point of the Great Recession. As a result, students are forced to shoulder the burden of increasingly higher tuition costs.
State policy makers and progressive advocates should start planning now
The best time to plan for a recession is before we’re in one: state and local policymakers should start preparing now. The overwhelming majority of governors—and a large share of state legislators—currently in office will still be there in 2022, which means they’re likely to be the policymakers who will be forced to make important decisions during the next recession. They have the rare gift of time, and they should use it wisely.
Governors should work closely with community leaders, state legislators, mayors, and their Congressional delegations to prepare. Each governor should create an inter-agency, inter-governmental task force with a clear role for community voices charged with identifying and implementing the state policies needed to best prepare for an economic downturn, as well as a coordinated plan to fight for all the federal aid it can.
Advocates need to coordinate efforts to prepare, too. In each state, groups from across the progressive movement should work together to create a table of organizations that represent union members and other workers, grassroots activists deeply tied to the needs of their communities, state research, policy, and advocacy organizations, and groups with strong communications infrastructure. This table should work together to identify the proactive policies needed before the recession hits; coordinate the research, policy, advocacy, and organizing work needed to convince policy makers that it’s in their self-interest—as well as the interests of the residents of the state—to get ahead of this looming crisis; and hold elected officials accountable for keeping the state afloat during the recession and steering their states through the recovery that follows.
Right now, state policymakers should act to:
- Shore up state budget reserves: In addition to ensuring there’s enough money in their rainy day fund to weather a recession, states should make sure they are able to actually spend funds. As Liz McNichol at the Center on Budget and Policy Priorities explains, far too many states have rules that cap the size of the funds, limit what the money can be used for, or require a supermajority of the state legislators to vote to approve spending.
- Raise taxes on corporations and the rich: States should raise taxes on corporations and the rich in order to shore up state budgets and make the state tax codes more equitable—even once the recession starts. Some will argue that recessions are bad times to raise taxes, and there may be a grain of truth to that. But because states have to balance their budgets, if they don’t raise taxes, the only other real option is to cut spending. But cutting spending during a recession – right at the time that public spending is more important than ever—is an absolutely terrible idea. Taxing the rich, who spend the smallest share of their income, puts the least downward pressure on demand in state economies. The net effect on demand is strongly positive if these tax revenues are used to support state spending. We should keep up a constant, steady drumbeat of “taxing the rich is good” and be prepared to seize the political opportunity when it arises. Public support for taxing the rich is extraordinarily high—76% of all voters think the wealthy in this country should pay more in taxes—including large majorities of Democrats (91%), Republicans (62%), and Independents (74%).
- Shore up state unemployment insurance systems. States should make sure their unemployment insurance system is in good shape and allows unemployed workers to access benefits quickly (which means they’ll spend those benefits quickly, too. No one receives UI and then squirrels it away in a savings account – they spend it immediately for necessities, and that helps the economy). A recent report by the Department of Labor’s Office of Unemployment Insurance found that the unemployment insurance systems in 24 states fall short of the recommended standard for the solvency of their trust funds.
- Stop spending like drunken sailors on flawed economic development deals that do little more than line the pockets of large companies who would have set up shop in a given locale anyway. In good economic times and in bad, state lawmakers face enormous political pressure to create jobs and lure businesses to locate in their states, and use economic development subsidies and tax abatements as bait. States waste billions of dollars each year subsidizing corporations that fail to deliver on their promises to create jobs and boost wages. Even in the best of times, giving away the milk for free is a terrible idea. In the context of a recession, when states have declining revenues and higher demands to use those revenues to provide the critical safety net that keeps families and communities afloat, it’s even worse.
- Develop a list of shovel-ready infrastructure projects. State infrastructure—schools, roads, bridges, public transit systems, even drinking water—is grossly underfunded and receives a D+ from the American Society of Civil Engineers. An infusion of federal stimulus dollars or state issued bonds for infrastructure could fix what’s broken while also putting people to work.
The choices governors and state legislators make impact not just policy but politics
When state policy makers fail to respond effectively during a recession, the economic impact is clear: people and communities suffer. What may not be as obvious is that state policymakers’ recession responses also shape the political climate for years after the recession ends.
Advocates need to be at the top of their game, with smart, strategic campaigns to shape states’ responses to the recession, not just to prevent a cuts-only approach, but to take control of the narrative. If progressive policymakers drop the ball during the next recession, right-wing ideologues will pick it up and run with it, and they won’t waste time stumbling around trying to figure out which direction to go.
Right-wing governors and state legislators successfully used previous recessions, the resulting state budget deficits and the slow recovery to advance their economic narrative, going on the attack against government, public sector workers and their unions, and cutting funding for things like education and infrastructure while giving away tax cuts.
Progressives need to play a strong defense and fight to protect important progressive policies, programs, and institutions not just during the recession, but during the recovery period as well. There is a politically dangerous window after a recession as the economy pulls out of its death spiral and starts to tick upward, but working people’s wages and living conditions have not. It’s often in that window of time that the right wing finds it politically expedient to go on the attack in order to capitalize on working people’s economic insecurity and racial anxiety in hopes of generating support for their agenda.
As states emerged from the Great Recession with continuing budget deficits, Republican Governors and legislatures seized the opportunity to advance their pet causes and continue their decades-long attacks on public perceptions of government as well as public service workers and their unions.
As soon as there was the slightest hint that their states were beginning to emerge from the Great Recession, the then-governors of Kansas, Maine, North Carolina, Ohio and Wisconsin began a tax cutting spree—(it didn’t hurt that they were delivering these tax breaks to their favorite constituents and donors right before the 2012 state legislative and 2014 gubernatorial elections). They did so despite data showing that, following the previous two recessions, state revenue shortfalls continued for several years.
As a result of that recovery-period tax-cutting, in 2016, 25 states were still providing less funding for K–12 schools than before the recession, after adjusting for inflation. While all states faced real revenue challenges immediately following the recession, most of the states that were still spending less on schools in 2016 had also enacted tax cuts between 2008 and 2016. Eighteen of the 25 states that provided less funding for K–12 education reduced their tax effort between 2008 and 2015. The 10 worst states for per-pupil funding in 2016 either reduced their overall tax effort or took action that had a net negative impact on revenue after 2008. Eight of the 10 states with the largest reductions in education funding compared with 2008—Alabama, Arizona, Florida, Georgia, Idaho, Kansas, Oklahoma and Virginia—reduced their overall tax effort.
The right wing governors who held office during the recession and the right wing candidates who rode economic insecurity and racial anxiety all the way to the governors’ mansions in 2010 moved quickly and decisively to advance their policy agenda and narrative arc. Wisconsin Governor Scott Walker was barely a month into his term when he took advantage of the state’s yawning budget hole to roll out the standard right wing talking points and blame the budget gaps on right wing ideologues’ favorite enemy: public employees and their unions. He launched his full on assault on public workers in Wisconsin, claiming he was introducing his Emergency Budget Repair bill (which later became Act 10) as a way to fix the state budget deficit by forcing higher benefit costs onto public employees and gutting collective bargaining. Walker stated, “So let me be clear, collective bargaining isn’t a right, it is an expensive entitlement. Once and for all, we are giving the taxpayers a voice in this debate. The larger philosophical issue is who controls things in government? Do the taxpayers, or do the public employee union bosses?”
Michigan Governor Rick Snyder was inaugurated in January of 2011, and by the end of March that year had signed into law the sweeping emergency financial manager bill that gutted local democracy in disproportionately black cities, allowing emergency financial managers to break union contracts, set school curricula and even dissolve municipalities.
As the progressive community considers its strategies to address the next recession, we must ensure we are ready to move thoughtfully, strategically, and rapidly at the state and local levels—not just at the federal level—to protect the workers, communities, programs and institutions most at risk in an economic crisis.