Saving American Cities

Robert Pollin: If the Fed was serious about strengthening the basic economy, it would bail out American cities

June 26, 14

Bio

Robert Pollin is professor of economics at the University of Massachusetts Amherst. He is the founding co-director of the Political Economy Research Institute (PERI). His research centers on macroeconomics, conditions for low-wage workers in the US and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the US. His latest book is Back to Full Employment. Other books include A Measure of Fairness: The Economics of Living Wages and Minimum Wages in the United States and Contours of Descent: US Economic Fractures and the Landscape of Global Austerity.

JAY: So we've talked about before about what the Fed could do in terms of trying to force banks to invest more in the economy. They've been shoveling money to the big banks to keep them liquid. Of course, it's done far more than just keep them liquid. They've used all this money and they've been making a killing, a killing, record profits.

But the question is: why aren't they doing more for the basic economy? And one would think one could start in the cities. And you've been working on that. What could the Fed do for the cities?

POLLIN: Thank you, Paul. So about two weeks ago, there was a very, very interesting conference in Washington organized by the outstanding organization Americans for Financial Reform. The conference was titled "Banking without Wall Street". So what really can we do to run a banking system that doesn't have to--every decision and every dollar doesn't have to flow through Wall Street and benefit Wall Street? Rather, as you put it, what can we do to really help the basic economy? And one area of the basic economy, obviously, is our state and local governments, our municipalities.

Municipalities are the biggest source of employment in the whole country. So there's about 14 million people that are employed or indirectly tied to municipalities. Now, the municipalities were put under severe stress during the Great Recession. The Great Recession ended, by the way, officially ended five years ago. So we're five years past the Great Recession. But state governments are still operating under austerity budgets if they're still operating. There are some cases--notably, especially, Detroit, that has experienced default. But the state and local governments, and municipalities in particular, have been unable to grow, have been unable to hire back the teachers, the health care workers, the public safety workers that make up the core of municipal activities. What we say municipal government, we really made public education, we mean health care, we mean safety, we mean parks. That's what we're talking about.

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