State and Local Budget Shortfalls Will Cause Heavy Drag on Growth

Source: Ethan Pollack, Economic Policy Institute, Economic Snapshot, November 18, 2009

The recession has led to large budget shortfalls for state and local governments, which unlike the federal government, cannot run deficits. To balance their budgets, they must cut spending and/or raise taxes. These actions depress consumer demand, cause job losses (a majority of which will be in the private sector), and in general create a drag on the economy.

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