Local Governments Bail Themselves Out
Federal money slow to come.
Reeling from rising unemployment and the shuttering of local businesses, municipalities are enacting mini-stimulus packages of their own. According to the Wall Street Journal, some are taking the traditional approach: Tax breaks and public works. Others are getting creative, rewarding shopping sprees with gift cards, giving no-interest loans to small businesses, and offering discounted office space for entrepreneurs.
New York City, where much of our current economic malaise originated, even earmarked $15 million of its $43 billion budget to help out-of-work investment bankers start their own companies.
Meanwhile, states like Ohio and Iowa are floating bond issuances to raise funds to put their citizens to work. Governors expect to generate tens of thousands of new jobs from bridge building, road improvements and other public-works projects that President Barack Obama's $797 billion stimulus package aims to cover. But rather than wait for the funds, or deal with strings inevitably attached to federal money, states are acting now.
This trend isn't likely to subside any time soon.
With the federal government running a massive deficit -- the Treasury Department spent almost $200 billion more than it took in this February -- states, counties and cities are reluctant to rely on aid from Washington. And with mind-boggling sums being siphoned off by the growing list of firms suckling at the government teat, AIG (AIG), Fannie Mae (FNM), Freddie Mac (FRE), Citigroup (C), and Bank of America (BAC) the worst offenders, it's no surprise local governments aren't confident they'll get theirs any time soon.
Further, as taxes rise to cover massive spending on tap for the next few years, those who had little to do with the housing bubble, Wall Street's collapse, or the credit crisis may begin to wonder why they're being asked to pick up the tab.
It's only a matter of time before local lawmakers begin to ask the serious question: Do we really want to go down with this ship?
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