Congress today passed a $26 billion package of financial support for states that will prevent about 500,000 layoffs at the state level, mostly of public school teachers. Republicans delayed the bill for four months and nearly succeeded in blocking it.
It’s worth noting that this bill will be nearly as important in stabilizing the economy as last year’s economic stabilization act was, but at about 1/30 of the price. Partly this is happening because of a more serious mood in Washington, which leads legislators to look for small-scale but highly effective measures to help the economy. Partly it is because this was a Democratic bill, with Republican efforts to load on special tax breaks for wealthy investors rejected early on.
Despite this measure, a large number of state and local government layoffs are on the way. Some of the teachers’ jobs may be safe, but more cutbacks in police, prisons, public health, child care, tourism, and inspections are unavoidable. These layoffs could still be large enough to leave the U.S. economy with net job losses over the next year.