Dude, the recession’s in your backyard

Blogger (and University of Tennessee Law School faculty member) Glenn Reynolds writes “DUDE, WHERE’S MY RECESSION?” and notes:

“U.S. unemployment lines got shorter last week, as the number of people filing for the first time for unemployment benefits fell by 18,000 to 365,000 on a seasonally adjusted basis in the week ended May 3, the Labor Department reported Thursday.”

Mr. Reynolds should have peeked out his backdoor first:

[Gov. Phil Bredesen of Tennessee] said the first quarter was the third worst on record, and the second quarter “is certainly shaping up to be worse than that.” This is more evidence that the economic slowdown is spreading beyond the ‘bubble’ states (like California and Florida) and impacting state and local government tax revenue in other states too.The article mentions that Tennessee is cutting 5% of their state workforce. This is the typical negative feedback loop at the beginning of a recession: a weak economy leads to less tax revenue leads to state and local job cuts that further weakens the economy.

UPDATE: Welcome Instapundit readers (and thanks Mr. Reynolds, for the link). I don’t think the quote above inferred “in deep recession” or even in some kind of recession as much a precursor to an economic downturn exacerbated by bad decision making. Whether you fail to save or borrow beyond means, it’s still bad decision making. How do you know when you “are in a recession” anyway?

Comments

mockmook says:

How does cutting government jobs weaken an economy?

Michael Gracie says:

In some areas of the US, government jobs make up a fairly significant portion of the employment base – I suspect there are at least a handful of states where the state government is the largest employer. If you cut those jobs, those people immediately spend less. The tax base falls further.

Tax cuts (or other such trickle-down stimulus that you may infer to), happen much later (if ever). And unlike the federal government some states are required to maintain balanced budgets, meaning they can’t just borrow their way out of short-term fiscal imbalance. If you take into consideration the problems in the auction-rate markets, some cannot borrow at all.

JorgXMcKie says:

Oddly enough, governments that make promises (i.e. wage, benefit, and pensions) that aren’t both conservative and actuarially sound usually end up having to lay off employees. Slowing economic activity merely exacerbates the natural tendency of elected officials to overspend by bringing the bad news earlier. Perhaps governments might consider living within their means, saving for a rainy day, and making realistic (rather than rosy scenario) budget revenue projections. Just a thought. And no one, *NO ONE*, has the right to a job paid for by my tax dollars.

Michael Gracie says:

Agreed on all accounts. Unfortunately, most elected (and appointed) officials never bought the “living with their means” upgrade to their jargon generators.

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