American state and city governments are bleeding out

American cities and states are staggering under the blows of the pandemic. People staying at home means these governments are being starved of tax revenue, while mass joblessness means a terrific demand on services that are largely funded by states like unemployment insurance and Medicaid. This is the main reason why aid to those governments, and especially to local transit authorities across the country, is about the most important thing to include in any new coronavirus rescue package (roughly tied with money to distribute coronavirus vaccines and renewing the temporary boost to unemployment benefits).

Senate Majority Leader Mitch McConnell apparently agrees with this, as he has reportedly suggested dropping his favored corporate pandemic liability shield if Democrats will agree to axe the aid to state and local governments. Because McConnell is a devious political nihilist, who is obviously aiming to harm the economy to sandbag the Biden administration, his stance is one more reason to double down on this aid. If he doesn't want it that badly, it must be good.

A bit of background: There have already been about 1.3 million layoffs of state employees across the country, which has badly harmed public services — particularly transit, because people fear to get on the bus or train. Transit authorities did get some help in the CARES Act, but as ridership practically collapsed back in April, inched back up to just 40 percent of normal in September, and is now falling again, that money has long since been spent. Now the biggest transit systems are planning for brutal service cuts next year, if they don't get some kind of aid.

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The Washington, D.C. authority is planning on "eliminating weekend rail service, reducing weekday rail service to 30-minute headways, closing the rail system at 9 p.m. and shuttering 19 stations entirely, and eliminating more than 30% of the bus routes that existed before the pandemic," writes Laura Bliss at Bloomberg CityLab. The New York authority has sketched out a plan for a 40 percent cut in subway service and halving commuter rail service. There are similar stories in Chicago, Boston, Atlanta, and elsewhere.

Economically speaking, these plans are pure poison. Transit systems are part of the economic foundation of any city, because they enable movement and therefore largely determine what kind of structures can be built. Cars virtually require sprawl, but the dense cores of most of America's biggest cities — Los Angeles, Chicago, Boston, Philadelphia, and above all New York City — have been built around at least semi-functional public transit. Cutting this much, therefore, would damage broader urban economies much, much more than would be saved by the cuts. A recent study estimated that New York's plan would destroy 450,000 jobs and erase $50 billion in income by 2022. Indeed, with such savage cuts it's easy to imagine a service death spiral as disgruntled commuters go elsewhere, requiring more cuts and bleeding more commuters, until the service is dead.

A similar story is true for all the other kinds of state and local services that will have to be slashed if help is not forthcoming. Firing teachers will mean more crowded schools, worse academic performance, and long-term damage to career prospects. Cutting back on road maintenance will mean expensive damage to cars as potholes go un-fixed. Ironically, given how Republicans have raised such a stink over defunding the police, their position here will practically require slashing police budgets since they cost so much. (While many leftists argue that is a worthy goal, they primarily favor boosting up other social welfare functions in their stead.) The social carnage will be unimaginable.

More generally, austerity causes broader economic damage by reducing the spending of the unemployed. It's a classic self-reinforcing spiral — for instance, when government workers get laid off, they stop going to their favorite restaurants, so those places lay off staff or go out of business, and so on. The tremendous austerity forced upon state and local governments a decade ago was a major part of why the recovery after the 2008 financial crisis was so slow and weak, and thus why the Democrats got rinsed in the 2010 midterms.

So far the bipartisan relief proposal under discussion in Congress includes $160 billion in state and local aid, plus $15 billion in transit aid. While well short of what a sensible federal government would provide — and reportedly half of what transit authorities were asking for — that would be far better than nothing. Encouragingly, Senate Minority Leader Chuck Schumer has thus far shot down the idea of ditching this aid. Let's hope McConnell can be bullied into saving the American economy and our cities.