In a passage reflecting House Democratic spin on the supposed economic benefits of the stimulus package, today’s Washington Post reports that the bill includes aid “that many economists agree will enter the economic bloodstream quickly and trim further layoffs by state governments.” But from the vantage point of New York State, where Gov. Paterson is not proposing significant layoffs, the increased federal funding will serve mainly to support increases in already generous pay and benefits for unionized public-sector employees.
For example, roughly $4 billion in stimulus aid will flow over the next two years to New York’s K-12 public schools, where teachers are receiving average salary hikes of 4.2% in their most recent contracts, on top of gold-plated benefit packages whose costs are more rapidly escalating. The new federal money will simply relieve any pressure teachers’ unions might otherwise have felt to renegotiate or reopen their contracts. And when the stimulus money runs out in two years, the hole for taxpayers will be that much deeper.
In the short term, this will certainly “stimulate” public-sector unions. But it won’t do a thing for the economy.