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The Washington Post: Trump’s hostility to cities threatens to worsen the recession

Sept. 14, 2020

By Robert McCartney

President Trump’s hostility to cities may help him politically, but it threatens to worsen the recession because metropolitan regions are the engines of the nation’s economic growth, officials and analysts say.

The risk arises not just from the president’s rhetoric criticizing urban unrest. Trump and his Republican allies in the Senate are also rejecting fresh financial aid to state and local governments and to public transit systems in a second coronavirus relief package.

That shortchanges areas such as the Washington region and is a recipe for deepening and prolonging the economic slump. About 1.3 million state and local government employees have lost their jobs since March, and economists project that number will more than double in the next 18 months without help from Congress and the White House.

“Cities are the economic drivers for future growth,” said Nan Whaley (D), mayor of Dayton, Ohio, and vice president of the U.S. Conference of Mayors. “If you want to get out of a recession caused by a pandemic, you surely don’t want to have state and local governments laying off people across the country, which is what is happening right now.”

Economic researchers say a major mistake by policymakers in the Great Recession of 2008 was a lack of adequate federal funding for state and local governments. Those governments support critical front-line services, including for schools, public health and small businesses, and their spending goes straight into the economy.

“It really does boggle the mind that we’re going to stiff the economic engine of the country here,” said Mark Muro, senior fellow at the Brookings Institution’s Metropolitan Policy Program. “We saw last time it led to a kind of scarring of the economy.”

Just 15 metropolitan areas account for more than 40 percent of the U.S. economy. The greater Washington region alone — stretching from Baltimore to Richmond — makes up 4 percent of the nation’s economy.

Congress must decide in coming weeks whether to approve a major stimulus bill similar to the $2 trillion package approved in March. Prospects for agreement appear bleak because of partisan gridlock.

The Democratic-controlled House approved a $3 trillion bill in May, including about $1 trillion for state and local governments and $15 billion for public transit. But the Republican-controlled Senate has not approved any bill, and even if there’s a compromise, GOP leaders have ruled out direct help for state and local governments or transit.

Trump is demonizing cities as part of his reelection strategy, in hopes of rallying his political base in rural and exurban areas. He wants to restrict federal funding to what he calls “anarchist jurisdictions,” including the District. In a recent tweet endorsing Maryland Republican congressional candidate Kimberly Klacik, he said Baltimore was “worst in the nation” and “last in everything.”

“Trump just viscerally hates cities,” said Richard Florida, a University of Toronto researcher and author of books on urban areas. “I think it’s partly psychological. He was raised in New York but never felt respected [by elites] there.”

GOP senators are wary of offending Trump, plus they say they don’t want to add to the nation’s debt or help Democratic-led states and cities that they say have been mismanaged.

But independent analysts say a steep recession is no time to try to rein in debt, and state and local governments are generally more fiscally responsible than Congress.

“We’re in this silly election season, and as a result, people are trying to score points instead of getting something done,” said JB Holston, the new chief executive of the Greater Washington Partnership.

Holston warned that transportation, health and education infrastructure will “fall apart at an accelerated degree to the extent that we don’t do the things that we should do. . . . A lot of that could be addressed if there were a state and local support effort.”

Mark Zandi, chief economist for Moody’s Analytics, said that except for a small number of cases, the criticism that state and local governments have been mismanaged was “a false narrative.” He noted that they generally have to balance their budgets, whereas the federal government is not obliged to do so.

McConnell’s rejection of federal aid for states risks causing a depression, analysts say

In the Washington region, the economic downturn has forced billions of dollars in state and local government budget cuts. The top budget officials in the District, Maryland and Virginia said the harm will be significantly more severe without additional federal aid.

“If we don’t get that, then we at the state level are going to be really in a life-or-death, sink-or-swim condition,” said Maryland Comptroller Peter Franchot (D). “The first stimulus really worked. The second one needs to go forward. The idea that you’re going to shortchange state budgets because they’re of a different political party obviously is unacceptable.”

Maryland has already cut its budget for the fiscal year that ends next summer by more than $500 million, with the largest share of the cuts falling on higher education. It still faces a deficit of more than $2 billion for the year, and the forecast for the following year is worse.

Virginia Secretary of Finance Aubrey Layne said states need help because the pandemic is lasting longer than originally anticipated.

“Contrary to what the administration is putting out, we are not turning the corner on this virus,” Layne said. “Quite frankly, the inaction of Congress is going to prolong the impact on the economy. It very much means that this is going to be a very slow recovery.”

The slump has reduced state revenue in Virginia by nearly $3 billion over two years.

District Chief Financial Officer Jeffrey S. DeWitt said the federal government doesn’t need to bail out states and cities that have underfunded pensions — one of the GOP’s main concerns — but just needs to make up for lost revenue until the economy picks up.

“If you want the recovery to be rapid, you need to keep businesses — and cities and states — afloat until the recovery starts. Otherwise, the recovery will be very slow, just as it was in 2008,” DeWitt said.

The District has slashed its budget by about $1.5 billion over 17 months because of the recession.

Several analysts said Republican opposition to federal aid for metropolitan areas was self-defeating because GOP-led states and counties need help, too. The economies of large red states such as Texas and Florida rely heavily on urban areas such as Houston, Dallas, Miami and Tampa. Also, Republican-led counties bordering urban areas benefit from economic dynamism in the cities, even if the latter are led by Democrats.

“While the impact on the major economic engines is in the foreground, there’s a lot of collateral damage on the red areas,” said Muro, of Brookings. “No one is a winner with this kind of approach.”

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