While today's employment report showed the private sector added jobs for the ninth straight month, those gains were more than offset by the deep cuts by state and local governments. But those layoffs, the biggest in 30 years, didn't have to be this severe. After all, President Obama in June asked Congress for $50 billion in aid to the states to avert "massive layoffs of teachers, police and firefighters." But despite the prescient warnings, Capitol Hill Republicans said no.
Earlier this year, economist Stephen Gordon cautioned, that total government spending has been a drag on growth over the past two quarters" because "the increases at the federal level have not been enough to compensate for the spending cuts at the local and state levels." Now, four months later, that situation is getting worse.
As David Leonhardt summed it up the New York Times:

Local governments are cutting jobs at the fastest rate in almost 30 years.
They cut 76,000 jobs last month and over the last three months have cut 143,000 jobs, many in education, according to today's jobs report. That's 1 percent of total local-government employment across the country. Since the Labor Department began keeping records in the 1950s, the only other time that the cuts were so steep was in the harsh 1981-2 recession.

Combined with the winding down of the Recovery Act and the end of temporary hiring, the result is what the Washington Post's Ezra Klein deemed "the anti-stimulus."

The government is now impeding an economic recovery. But it's not for the reasons you often hear. It's not because of debt or because of taxes. Nor has it scared the private sector into timidity. It's because, at the state and local level, it's firing people. There are more than 14 million Americans looking for work right now -- to say nothing of the 9.5 million who have been forced into part-time jobs when they want, and need, full-time work -- and the government just added 159,000 more to the pool. Consider this: If we only counted private-sector jobs, we'd have had positive jobs reports for the last nine months. As it is, public-sector losses have wiped out private-sector gains for the past four months.

But it didn't have to be this way.
Back in February, 42 governors signed a letter pleading with Congressional leaders to extend the federal matching assistance program for Medicaid. And with good reason. 30 cash-strapped states, including Republican bastions Georgia and Alabama, had already assumed new federal Medicaid funds in their budgets. Worse still, drastic downturns in revenues combined with the recession's escalating demands for government services left the states facing an estimated $89 billion shortfall and up to 900,000 layoffs. And as Congress dawdled, 48,000 state and local government jobs disappeared in July alone.
But even as the mushrooming fiscal disaster in the states threatened to halt the national economic recovery in its tracks, Republicans with their eyes on the midterm elections said no. In June, the GOP filibustered a $112 billion aid bill, one whose price tag had already been reduced from $200 billion. Republicans also rejected $34billion to fund extended unemployment benefits and a $26 billion state aid package from Washington, though both were eventually signed into law by the President.
While House Minority Leader John Boehner led the Republican attack in labeling the Medicaid and jobs assistance a "bailout" for Democratic "special interests," President Obama said of the bill designed to help states save up to 300,000 jobs:

"We can't stand by and do nothing while pink slips are given to the men and women who educate our children and keep our communities safe."

And whose continued employment would help the national economic recovery.
To be sure, sending federal dollars to cash-strapped state and local governments provides a great bang for the stimulus buck. The Congressional Budget Office (CBO) put the Washington's return on investment as high as $2.5 for each dollar contributed, while John McCain economic adviser Mark Zandi pegged it a $1.41.
But as even as the Republicans' obstructionist chickens came home to roost on state and local payrolls around the nation, in New Jersey Governor Chris Christie added insult to injury. Christie announced New Jersey was canceling what Paul Krugman labeled "America's most important current public works project, the long-planned and much-needed second rail tunnel under the Hudson River." Reviewing the impact of New Jersey's shortsighted withdrawal from the $8.7 billion project (of which the state was on the hook for $3.2 billion), Krugman lamented:

Canceling the tunnel was also a blow to national hopes of recovery, part of a pattern of penny-pinching that has played a large role in our continuing economic stagnation.
When people ask why the Obama stimulus didn't accomplish more, one good response is to ask, what stimulus? Leaving aside the cost of financial rescues and safety-net programs like unemployment insurance, federal spending has risen only modestly -- and this rise has been largely offset by cutbacks at the state and local level. Many of these cuts were forced by Congress, which has refused to approve adequate aid to the states. But as Mr. Christie is demonstrating, local politicians are also doing their part.

Sadly, the toxic combination of Republican obstructionism and Democratic cowardice virtually ensures the dangerously counterproductive ideology of anti-stimulus will rule the day. Worse still, by all indications, next month the GOP will be not punished but rewarded at the polls. And as Krugman suggests, for Americans in general and state and local employees in particular, it is hard to see any light at the end of the tunnel.