The Fiscal Crises of the States: Neoliberalism’s Next Terrain of Struggle, and Ours

By Michael Hirsch

Social peace as corporate America’s prescription for sound labor relations was always more mist than material, but even that fog lifted after the Reagan Administration destroyed the Professional Air Traffic Controllers Organization in 1981. The PATCO attack declared open season on union hunting, leading to a radical shrinking of union density in the private sector, a downsizing of heavy industry and an outsourcing of jobs to low-wage nations. Now get ready for the ongoing assault on public sector workers, for a drastic shrinking in the services they provide, and for the political space and opportunity for a fight back.

Virtually every state is undergoing a second or third round of budget cuts, an evisceration of public services and an ideological and political attack on its public sector workers and their unions led by state businesses, their good-government toy poodles and right-of-center think tanks. In order to fill huge budget holes, public workers are being laid off or their positions attrited, even as more contracts – often noncompetitively bid and often not even cost-effective – are let to private vendors for the same work. California, Illinois and New York are the hardest hit, in part because their public services are among the most generous, even as states elected officials studiously avoid enacting progressive tax legislation.

The states’ budget shortfalls – what John Shure of the Center on Budget and Policy Priorities calls “a revenue collapse” – are the outcome of the late 2007/2008  recession, the Wall Street mortgage bond market/housing bubble collapse that followed, and the drop in state taxable revenues. Yet even before Wall Street’s September 2008 crash, 29 states already faced total budget gaps of at least $48 billion. After Wall Street stopped shuffling housing debt but before the federal government began playing 52 Pick-Up, some $15 trillion in personal wealth disappeared.

The effect: 8 million jobs lost in the last three years even as the 2009 federal stimulus package led to a growth in GDP and a shrinkage in job losses. The Economic Policy Institute estimates that without the February 2009 recovery act’s injecting  $787 billion into the economy, the nation would have lost an additional 1.5 million jobs. While many, including Paul Krugman, argued that the stimulus was weak tea compared to the jolt needed to shock the economy awake, it did have demonstrative results. Not so the Bush administration’s TARP dollars put into banks too big to fail – the single largest investment the Treasury Department ever made for U.S. banking – and which is still largely unaccounted for.

State government shortfalls in fiscal years 2010 and 2011 are expected to reach $375 billion, says the Center on Budget and Policy Priorities. Among the worst hit: California, Illinois and New York, which expect to massively cut health care and education spending and lay off thousands of state workers to close respective shortfalls  of $12.3 billion, $13 billion and $9.2 billion.

What these shortfalls mean for the working classes of these states is a collapse in public services, attempts at the mass firing of state and municipal workers, the slaughter of pension and benefit standards and a battle even  for the survival of public sector unions, which today constitute the majority of the nation’s unionized workforce.  The fiscal crises of the states and who pays for the crisis is the terrain on which class struggle will be fought in the coming five years.

Don’t expect a battle with “the state” in traditional binary, them-and-us terms as much as discrete and localized brawls with several things in common:

• A business class resistant to any diminution of its wealth and power or even assuming a fair share of the tax burden.
• The ratcheting up of press attacks on public workforce salaries and benefits, especially pension funds and health care, abetted by a series of alleged “good-government” groups. New York’s is the Citizens Budget Commission,*  but every major city has one shilling for the corporate class.
• A public sector battle royal because a majority of the some 15 million unionized workers in the U.S. are now government employees, and budget cuts mean layoffs, which in turn mean hot union-management contention.
• A ripple effect far beyond those union members immediately harmed to all working people and the poor, and a delegitimation of government precisely because it’s not doing its job.
• The real possibilities of a national fight-back, waged state-by-state and even county-by- county.

Read the entire  piece here:

http://www.dsausa.org/dl/Spring_2010.pdf

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