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Lightening Beutner's Burden: The Impossible Battle of LA's Jobs Czar

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Mayor Villaraigosa's hiring of a jobs czar in January was met with groans of too little, too late. Why was the mayor only now turning his attention to Los Angeles's 13.2 percent unemployment rate? Actually, the cynics had the problem backwards. The high-profile appointment of Austin Beutner as chief executive for economic and business policy was premature, not overdue.

His post is better suited to an economy in full recovery. This is a point he should emphasize to the Mayor and, better yet, any member of Congress who will listen to him explain why LA alone cannot create the conditions that will put people back to work. With the persistence of fiscal deterioration and skyscraper high unemployment, Congress must quickly pass urban-focused jobs legislation to help LA and other struggling cities finally bring the recession to a close.

While he is in Washington championing his "30/10" transit plan, Mayor Villaraigosa should express support for a bill introduced last week by Rep. George Miller. The Local Jobs for America Act is one of the only proposals in Congress that would directly create jobs in the cities where they are needed most. The bill would provide $75 billion to local communities to support 750,000 public sector and nonprofit jobs, and additional funding for 50,000 on-the-job private-sector training positions. For Los Angeles, this could mean thousands fewer unemployed workers and reinvigorated job growth across sectors to support economic development and assist struggling households.

Restarting the national economy is impossible without first restarting its economic engines: cities. Metro areas are responsible for 90 percent of the country's GDP and 86 percent of employment. The Los Angeles metro generates almost 40 percent of California's GDP and 36 percent of its jobs. But the recession has sapped cities of their economic potential and power. At the same time, plummeting tax revenue has strained municipal budgets because city governments, unlike the federal government, can't run deficits. Yet when Washington last year released $787 billion dollars to stimulate job creation and economic growth, it focused on states and neglected cities. In turn, states have hoarded stimulus funds and cities have been left to run out of gas. The Government Accountability Office reports that states used stimulus funds to fill budget gaps, but will still cut aid to cities by as much as $30 billion in the next three years. City leaders had direct authority over less than one percent of the recovery package.

Urban officials played second fiddle during negotiations of the stimulus package to state politicians who exploited superior access to Washington's corridors of power. Federal officials solicited "shovel-ready" project ideas from mayors, but dropped them in favor of funneling money through Sacramento and other state capitals. Obama's latest budget repeats the same mistake, including $25 billion for state budget assistance but only $2.8 billion for major urban programs as city budget deficits nationally rise to $29 billion in 2011. Even this meager investment in transportation, affordable housing, and energy efficiency is at risk of failing as layoffs and service cuts prolong the recession and stall recovery in LA and other cities.

The $700 million deficit LA faces over the next two years is actually $100 million greater than the $600 million in grants the city was awarded in the recovery package. It will necessitate austerity measures--layoffs, pay cuts, spending freezes, tax increases, and investment delays--that soak up money coming to LA through the federal stimulus and the federal budget. One recent study found that federal dollars intended to jumpstart recovery have merely counteracted the spending cuts and tax increases carried out by state and local governments. The stimulus stopped the bleeding but didn't mend the wound.

Now, Beutner could imitate other cities and states and fashion a miniature stimulus package, modest in design and impact. But such a "stimulite" is likely to fail because municipal balanced-budget rules mean that any new expenditure must be offset by corresponding tax increases or spending cuts. LA would just end up giving with one hand and taking away with the other.

A better strategy is for Beutner to push for passage of Miller's Local Jobs for America Act. Without it, LA will be squeezed tighter by the vice of increased demand for services and diminished ability to provide them. The rhetoric of shared sacrifice, which tends to scapegoat city labor unions without addressing the root causes of the recession, will not change this reality.

As a financial expert, Beutner is all-too-familiar with the warnings about a "new normal" of high unemployment and slow growth sounded by Mohamed El-Erian of Newport Beach investment manager PIMCO. Unless he gets a lifeline from Washington, Beutner will fight an impossible battle against this normalcy and be forced to defer big plans for a new economic beginning.