The American Recovery and Reinvestment Act has provided a critical boost to New York State and New York City during a period of severe economic decline. The White House estimates that the stimulus package saved or created almost 150,000 jobs in the state in 2009. The Mayor's Office estimates more than 20,000 jobs created or saved, not including those created by the "multiplier" effect of government spending. In New York City, just two funding streams have been responsible for almost 90 percent of these jobs: funds for education and funds for Medicaid. Congress' likely passage of a fiscal relief bill composed almost entirely of funding in these two areas is then good news for New York.
But these demonstrable benefits of the stimulus contrast with continued high unemployment and pose the question: Could the stimulus have been more effective, and how should any future jobs bill -- however unlikely -- be structured?
The vast majority of federal stimulus funds was funneled through state governments: Less than one percent of stimulus spending went directly to cities. Because cities are "lowest" in the federal hierarchy, city leaders govern in the most uncertainty when awaiting federal and state decisions about fiscal assistance. And yet cities and metro areas contain the majority of the nation's jobs, the majority of the nation's population, and the majority of the nation's economic output. Their importance is somehow obvious when we discuss the supposed negative impact of financial reform on New York City, but not when we talk about where stimulus funds can be most effective. Cities should not be an afterthought in discussions of job creation and economic stimulus, they should be the first thought.
A critical component of the strength of cities is the strength of their public sector: Are services available to those who need them? Can the public sector provide a buffer against a contraction in employment in the private sector? In fact, a vibrant public sector is a critical component of recovery in the private economy, providing jobs and boosting demand even as it creates a safety net for the disadvantaged. Goldman Sachs, for example, slashed their GDP forecast when their analysts determined (incorrectly, it now seems) that Congress would not extend fiscal assistance to state governments.
Tying these pieces together -- cities as drivers of the American economy and the public sector as vitally important during an economic downturn -- lends support for urbanizing federal policy. A good place to start would be the Local Jobs for America Act, which targets assistance to job retention and creation in local governments throughout the country.