In his New York Times column on state governments, Nobel Laureate Paul Krugman warned of the dangers of "Fifty Herbert Hoovers." Krugman examines how the states have the power to diminish the benefits of the federal recovery plan through poorly timed and excessive budget cuts, potentially turning the current recession into another depression. The lesson we should have learned from Hoover is that such cuts in a time of crisis only make things worse; that is exactly what dozens of states are planning to do (see the Center on Budget and Policy Priorities recent report). These modern-day Hoovers are threatening to suck vital jobs and services out of their state economies, thereby neglecting their neediest constituents.
In response, over 200 economists from 37 states have signed a letter urging state governments to "maintain the public services that are critical to the health of the economy and the well-being of working families," because "cutbacks at this time would further slow the economy and harm those already hardest hit by the downturn."
These actions are critical to ensure a quick recovery in each state, and to the nation as a whole. We understand that states have a need to balance budgets, but there are many ways to do this, with several alternatives to cutting spending. The Center on Budget and Policy Priorities outlines a list of options. The best solution depends on each state's unique circumstances, and we are by no means advocating that states make no cuts at all. We are, however, suggesting that states consider the millions of people who depend on Medicaid, unemployment insurance, and state supported child care before slashing funding for these programs.
The federal government has intervened boldly with the American Recovery and Reinvestment Act, providing billions of dollars to the states. These funds are specifically targeted toward services that should not be cut during a recession, and that will help to get the economy on the road to recovery. It's now up to the state governments to decide if they want to help in this effort, or if they want to be roadblocks to recovery. In his article, Krugman asks: "is America... less able to afford help to troubled teens, medical care for families, or repairs to decaying roads and bridges than it was one or two years ago?" At least 200 of us say no, and we believe most Americans agree. These services are too important for too many people to cut.
Read economists' letter and view signers