I've been meaning to raise this point, so I'm glad Paul Krugman saved me the effort. Is it an accident that just as the stimulus package is waning, the economy is stalling?:
The Austerity Economy, by Paul Krugman: Do the dismal economic numbers really reflect the turn to fiscal austerity? I keep hearing people say no, because austerity hasn’t actually happened yet in America. But they’re wrong.
The fact is that the fading out of the stimulus, and in particular of aid to state and local governments, is already and noticeably leading to substantial withdrawal of government demand. Look, in particular, at actual government purchases of goods and services — governments at all levels buying stuff — which is what standard macroeconomics says should have the highest multiplier, since unlike transfers and tax cuts it is by definition spent rather than saved. Here’s the picture, showing changes in real spending over the previous year:
When the recession officially ended, spending was rising at an annual rate of around $60 billion; now it’s declining at an annual rate of $60 billion. That difference is around 1 percent of GDP, and maybe 1.5 percent once you take the multiplier into account. That makes the turn toward austerity a major factor in our growth slowdown.
Still, I guess the beatings will continue until morale improves.
Let me continue the point via the CBPP:
State and Local Job Cuts Continue, Especially in Education, by Nicholas Johnson, CBPP: Today’s jobs report shows that in August, cuts by states and local governments — especially school districts — wiped out private-sector job gains. ...
The state and local sector cut 15,000 jobs in August. That comes on top of a whopping 66,000 jobs lost in July... — the worst single month of job loss for states and localities since the recession began in December 2007. States and localities have eliminated 671,000 jobs since employment peaked in August 2008 (see ... graph).
Not coincidentally, July was also the first month of the new fiscal year for most states, one in which they are facing the double-whammy of weak revenues (which remain well below pre-recession levels) and the expiration of temporary federal aid.
Some 14,000 of the state and local jobs lost in August were in local school districts, bringing to 293,000 the total decline in school-district employment since August 2008 (see second graph).
Cuts in state education funding are a big reason behind these education-related job losses. As we reported yesterday, the vast majority of states for which data are available are cutting basic education grants to local school districts to below pre-recession levels. Some of the cuts exceed 20 percent.
These troubling numbers raise a disconcerting question: What kind of an economic future will this country have if we keep cutting education?