05/09/2008 10:56 am ET Updated May 25, 2011

States & Localities Need Investments Now

For the first time since the Great Depression, America is experiencing a profound and disturbing trifecta: 1) 20,000 lost jobs in April (260,000 total so far in 2008); 2) unprecedented home foreclosure rates along with harsh drops in home values; and 3) skyrocketing retail prices for food, gas and other necessities. All of these add up to a harsh climate for American families.

As the economy started to sputter, the Bush Administration ignored the truth. President Bush, said "The fundamentals of our economy are strong ... Job creation is strong. Real after-tax wages are on the rise. Inflation is low." That willful ignorance of the economy until the 11th hour might be why President Bush and Republican leaders proposed more tax breaks for the wealthy and for business, and more spending on the war in Iraq, but little that would help most Americans. Business tax cuts have little or no effect on investment, while cuts for the rich are slow and have far less impact than those for the rest of the nation. And we have seen all too well over the past few years how dramatic increases in military spending show little return on the home front. Bush and Congress ended up agreeing to a stimulus plan focused on rebates. While we'll all eagerly cash those checks as they start arriving soon, that's hardly a robust package of investments designed to turn the economy around.

In this weak economy, many state and local governments are being forced to make painful cuts to health insurance programs, education and other important services to balance their budgets. As a result, millions of aging and disabled individuals and children will have their health care coverage cut or eliminated. Local governments are cutting public safety, education, social services and health care due to budget shortfalls from the precipitous drop in tax revenues.

At least ten states are moving toward cutting support for family access to health care. In Rhode Island, the governor moved to eliminate health care for thousands of low-income parents. In Kentucky, higher education funding has already been sliced by 5%. California is considering drastic cuts to home-based care that helps seniors and individuals with disabilities remain independent and in their own home. Firefighting resources may be cut in places where they are most needed, like San Diego. These are blows to our communities and to the survival of working families; they also combine with lower consumption to drag the economy even further down.

In the last economic downturn states tightened their belts to squeeze out savings from Medicaid. Now states facing at least $40 billion in budget shortfalls will be pressed to cut core programs, which could hurt kids and other vulnerable populations.

As Congress decides how to stimulate our ailing national economy and reinforce the fraying safety net, the first step should be substantial investments in state and local governments in order to infuse our economy with the energy it needs to recover, and to maintain current health care, education and other critical services. Investments produce the best, most immediate results when they go to low- and moderate-income working families for health care and food stamps, and to increasing financial support for state programs. Those investments lead to immediate spending, increasing their value to the economy.

Another important step is temporary relief for states and localities by increasing federal support for the Medicaid program that provides health care to people in need. That spending will be a boon to states' economies -- stimulating the economy and lessening job losses.

While the solution to our economic downturn seems clear to so many, would you be surprised to learn that Senator John McCain continues to focus on tax cuts as a solution? After all, even when pumping himself up for voters he admits that he's not an expert on the economy.

It's do or die time for millions who are struggling to get by. We've got to focus on health care, education and domestic priorities by investing in state and local government services to stimulate the economy.

That is why we need a new President who will take responsibility for helping working families and fixing the economy.