In February of this year, 15 percent of the U.S. population—47.6 million people—were on food stamps.
Mississippi was the state with the largest share of its population relying on food stamps (22 percent), although the nation’s capital was even higher (at 23 percent). One in five residents in Oregon, New Mexico, Louisiana, Tennessee, Georgia, and Kentucky also was a food-stamp recipient.
Special mention
The 50 U.S. states are facing, in the midst of the Second Great Depression, a profound fiscal crisis.
That much is clear from a new report by the State Budget Crisis Task Force, chaired by Richard Ravitch and Paul Volcker. Their argument is that the current fiscal crisis will persist long after (or if) the national economy rebounds as the states confront rising health care expenditures, underfunded pensions, ignored infrastructure needs, eroding revenues, and expected federal budget cuts. While the authors of the report fail to propose any real solutions (apart from the need for more “transparent, accountable state government finances”), they do include two important observations.
First, while state government education—related primarily to public higher education—has continued to rise, states have been shifting the costs of this employment. They have cut back substantially on appropriations for higher education, and public colleges and universities have been forced to respond by raising tuition and, as reported by Reuters, recruiting financially secure foreign students.
Second, states have been cutting non-education employment sharply—in prisons, hospitals, institutions, courts, and state agencies. In the view of the authors,
This is a fundamental shift in the way governments have responded to recessions and appears to signal a willingness to “unbuild” state governments in a way that has not been done before.
The fact is, neither mainstream political discourse nor mainstream economic theory has anything substantial to offer in terms of making sense of the conditions and consequences of this fiscal crisis of the states. What is missing, in particular, is a class analysis of the current tax debate, which by his own admission James O’Connor failed to fully explore in his seminal 1973 book, The Fiscal Crisis of the State.
And yet our current discussion of tax policy is drenched with class. On one hand, we hear Keynesian calls to lower taxes on the middle-class, because the economic system needs people to spend more money. On the other hand, there’s the chorus to lower the tax burden on the rich—the so-called job creators—because the economic system needs more savings and investment. And then there are the poor, who are presumed to want to supply more labor power only if they receive less money from the state via cut in welfare benefits.
What we need to do is pick up where O’Connor left off and examine the class conditions and consequences of the current fiscal crisis of the states.
OK, 2 maps. . .
Both maps indicate that, according to a new Pew Center on the States study [ht: ja], most states are falling further and further behind in terms of funding employee retirement systems, both pensions and retiree health care.
Thus, for example, in 2010, only Wisconsin had fully funded its pension plan and 34 states were below the 80 percent threshold. By the same token, seventeen states did not set aside any money to fund their retiree health care liabilities, and only seven states had funded at least 25 percent of healthcare liabilities.
The response is, if anything, even uglier: nearly every state has moved to reduce its retirement bill in the last three years.
The most common actions included asking employees to contribute a larger amount toward their pension benefits; increasing the age and years of service required before retiring; limiting the annual cost-of-living (COLA) increase; and changing the formula used to calculate benefits to provide a smaller pension check.
Much the same, of course, is true in the private sector.
What this means is that, in the midst of the Second Great Depression, employees in both the public and private sectors are under assault—while they’re working and even when they retire.
Only four states—Alaska, North Dakota, Texas, and Louisiana—have created enough jobs since the recovery to get back to where they were prior to the recession. A couple more, New York and West Virginia, are expected to return to their prerecession peak later this year.
However, according to Steven Frable of IHS Global Insight, the majority of states still won’t get there until after 2014.
Eighteen states still are more than 5% below their 2007 employment levels, and the two worst-hit states — Nevada and Michigan — are still more than 10% off their peaks. Frable estimates those two states, as well as Rhode Island which has seen sluggish job growth, won’t return to prerecession peaks until sometime after 2017.
Clearly, in the midst of the Second Great Depression, it’s going to be a long and winding road back to peak employment in many of the United States.
Unions didn’t cause the Second Great Depression. And they didn’t cause the current fiscal crises, of the nation or the individual states.
But that hasn’t stop the Right from scapegoating unions, in the current campaign to strip public-sector workers of collective-bargaining rights and to expand the number of Right to Work states. Union opponents and their academic hired hands claim that eliminating collective bargaining and unions will improve state economic performance, without ever doing the appropriate research.
So, the question is, what are the facts? As it turns out, Richard Florida, with the help of the Canadian Martin Prosperity Institute, did a bit of research and came up with some relevant numbers. What did he find? For starters, unionization rates vary widely across states (from a high of 24.2 percent in New York down to 3.2 percent in North Carolina) and unionization has fallen off massively in the past fifty years or so (from 29.3 percent in 1964 to 11.9 percent today). When it comes to the individual states, the bottom line is: “Unionized states are better-off economically than non-unionized states.”
Why? Because unionization levels are positively correlated with hourly wages and median income. However, he finds no correlation between unions and either unemployment or inequality. And, a bit surprising, union membership is negatively correlated with the proportion of blue-collar, working class jobs in a state. Thus, unionization levels are higher in states with more highly educated workforces and knowledge-based economies.
Here’s Florida’s conclusion:
The basic fact that unions are positively associated with so many key measures of prosperity suggests that their existence has little to do with state budget problems. Unions are not the cause of the serious economic and fiscal problems that are challenging so many American states, which are result of the economic crisis, collapsed housing market and massively reduced revenues. In fact, the economic influence of unions has been dramatically curtailed as a result of the ongoing transformation of the U.S. economy. At the same time, the existence of unions does not appear to be enough to forestall growing income inequality within the U.S, states.
If we stick to the facts, unions are not responsible for the financial problems facing so many states. What, then, is responsible?
It’s capitalism, ma’am.
