Paul Krugman is a MUST-READ
In States of Depression he explains, in detail, why the recovery is not stronger, including providing specific comparison with the recovery on Reagan's watch. The biggest single drag on the economic recovery is state and local governments cutting back on their employment, something that falls especially heavily on my profession, teaching. AS Krugman puts it rather bluntly near the beginning of his column,
one significant factor in our continuing economic weakness is the fact that government in America is doing exactly what both theory and history say it shouldn’t: slashing spending in the face of a depressed economy.Some of this of course is because the sources of revenue for state and local governments remain significantly depressed as a result of the collapse of the financial services industry and of the value of housing. It is worth remembering that local governments are heavily dependent upon taxes on real property, and state governments upon income and sales taxes. All of these sources remain depressed, so states and localities, which by law/state constitution almost always have to run balanced budgets, have been making cuts to employment and purchases.
These state and local cuts have led to a sharp fall in both government employment and government
