In December, 60 Minutes, aired a report about state and local level budget deficits. Entitled The Day of Reckoning, the piece paints a grim picture for states like California and New Jersey and says states have $2 trillion in outstanding bond debt. The blame, according to CBS, lies squarely on the backs of public employees and their pensions.
New Jersey governor, Chris Christie, says of the “…”Totally unsustainable. We have a benefit problem,” Christie said. “It’s not an income problem from the state. It’s a benefit problem. And so we gotta change those benefits.” The Guardian picked up on it and wrote an article titled “$2tn debt crisis threatens to bring down 100 US cities“.
Economist, Dean Baker, takes the 60 Minutes piece apart, layer by layer.
Way back in the last decade the United States had a huge housing bubble. The Wall Street banks made money hand over fist making and selling the loans that fueled this bubble. The economic policymakers and regulators who were supposed to prevent the growth of such dangerous bubbles, people with names like Greenspan, Bernanke, Paulson, and Geithner, assured the public that everything was just fine. When they were proved horribly wrong, they then congratulated themselves for avoiding a second Great Depression.
This background is important to any story on the financial problems facing state and local governments, since it is 90 percent of the picture. It also would be good if the public remembered this history, since many of the people who either profited from the bubble or failed to take measures to counter its growth are now at the forefront in demanding that state and local governments sharply reduce their budgets and that public sector employees take big cuts in pay and benefits.
On Sunday night, the CBS News show 60 Minutes joined this campaign. The piece begins by telling viewers that:
“in the two years, since the ‘great recession’ wrecked their economies and shriveled their income, the states have collectively spent nearly a half a trillion dollars more than they collected in taxes.”
That’s not what the data show. If we look to the Commerce Department’s National Income and Product Accounts we find that in total state and local government spent $45 billion more than they took in (line 27). CBS does not give a source for the “nearly half a trillion” number.
Now, the GOP are continuing their assault on unionized public employees, auto workers, pretty much any labor force hoping to feed a family. Leo Gerard of the United Steelworkers explains how shipping jobs oversees is hurting the US economy.