TW: Cities and states are facing budget crunches across the country. Whenever you see these headlines think deflation. The Federal government can initiate counter-cyclical spending like crazy but these deflationary cyclical economic realities largely counter-act the Federal actions (so yes imagine if the Federal government was cutting its spending too, what do you think the unemployment rate would be then?).
Regardless, local governments are going to have to start making tough choices. They are now butting up against a tough interest group, local unions. Everyone is going to have to sacrifice- social security recipients, wealthy folks, folks with one too many flatscreens AND government unions members. Not just the grass cutters either. Firemen, police, prison guards; they are all very powerful unions and they all need to absorb cuts. Graft and featherbedding permeates many of these unions just like rapacious greed permeated many Wall Street firms.
From Economist:
"Most cities are cutting services. Hiring freezes are the norm. Employee-related costs—payroll, pensions and health benefits—make up the largest part of any city budget, generally 60-75% (and more than 80% of Chicago’s). Richard Daley, Chicago’s mayor, recently proposed that the city’s 3,600 non-unionised workers should take 16 days of unpaid holiday by December 31st. New York City is preparing to cut 3,800 municipal jobs. Atlanta, meanwhile, is imposing a 36-hour work week for almost all its city workers, including the police. This has saved “the Big Peach” $11.5m.
In Chicago Mr Daley wants unionised employees, who comprise 90% of all city workers, to make concessions as well. The unions, unsurprisingly, are refusing to budge. They want a guarantee that if they comply with Mr Daley’s demands now, they will not face layoffs as Chicago’s revenues continue their downward slide. Antonio Villaraigosa, Los Angeles’s mayor, is seeking 1,200 city worker layoffs and 26 furlough days to close his $529m deficit. Up to 2,800 could be fired unless the unions make concessions. Boston has had better luck with its unions, who have recently given up pay rises or deferred them.
Union concessions are also needed to reduce pension and health costs. These will be even trickier to negotiate. Underfunded pension plans are a growing worry for many cities. Philadelphia wants new recruits to contribute more to their pensions. Kansas City hopes to reduce health costs though increased employee contributions.
...Many will be in worse shape in 2010 and 2011, according to the National League of Cities, a lobby group. But most are plugging present holes with little thought for the morrow.
...Pittsburgh is in relatively good shape because it largely missed the housing and dotcom booms enjoyed by the rest of the county. Indeed, it is currently building a new sports arena and a new hospital. Because of its 2003 brush with bankruptcy, it cut its city workforce by a quarter, implemented a salary freeze and made many hard decisions, such as closing fire stations. The other cities in Pew’s report could learn a few lessons from Pittsburgh."
http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=13745782
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