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3 Reasons States Will Reopen Regardless of What Trump Says

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05/29/2020

Ever since state and local governments began imposing social distancing mandates, the media and policymakers have consistently exaggerated the role of the federal government in these measures. Early on, we heard about how “the United States” was locked down, and we now hear about the gamble President Trump is taking in “reopening America.”

The reality of these mandatory shutdowns, however, is that they are taking place under the authority of state governors and local officials. Outside of some travel mandates and border controls, the federal government has played a minimal role.

Trump and Dr. Anthony Fauci can deliver speeches all day about whether schools ought to be in session or workplaces ought to open up. But ultimately these decisions will be made by state officials, mayors and other nonfederal personnel.

Leaving aside why the states ended up taking a lead role in this, the fact remains that state and local governments are now in the driver's seat, and that means that state and local politics is what really matters.

Specifically, there are three big issues that will drive local politics as the year proceeds.

The first is unemployment. April's employment numbers showed that the United States lost 20 million jobs last month. The data for May is likely to be terrible also. This won't affect all states equally, but in a great many states, the unemployment rate is soaring to all-time highs. The oil price crash may lead to even greater employment losses in the oil and gas industries.

This will be followed by an equally alarming surge in missed mortgage and rent payments. Although many jurisdictions have stopped enforcing evictions for now, that can't last forever.

As fears over foreclosure, eviction, and unemployment rise, fears about COVID-19 will seem less immediate. Public demands for an end to forced business closures will grow. Governors and mayors will find themselves in the position of insisting that businesses remain closed while household incomes plummet. It's not clear that the politicians will win this standoff.

The second factor at play is the collapse in local government revenues. Many state and local governments are seeing some sources of revenue decline by 20 percent or more. The state of Colorado, for instance, is looking at a 10 percent cut in revenue just for the rest of this fiscal year. The next fiscal year looks even worse. We're seeing similar problems in most other states, with some states, such as Illinois, now facing huge shortfalls for state pension programs.

As a result, state governments are calling for bailout packages totaling up to $1 trillion. This would be on top of the trillions of dollars in other relief packages. It's not clear that such enormous amounts of money will be doled out to state and local governments any time soon. This will further increase pressure on state and local policymakers to abandon policies that shut down businesses, reduce tax revenues, and possibly eliminate the services that those revenues are supposed to pay for.

In many cases, the pressure will come from local politicians themselves, as county commissioners, state legislators, and city council members lobby for an end to revenue-killing shutdowns.

The third issue is schooling. Many school districts will need to implement budget cuts as a result of declining tax revenues. But an even bigger problem for many parents—especially in households where both parents work outside the home—is the prospect of schools being shut down this fall semester. It's not exactly a secret that many parents rely on schools for childcare. But if schools are closed indefinitely, it will put a sizable new financial burden on many parents.

Even though these parents have already paid for schooling through state, local, and federal taxes, these parents may have to pay out even more money to pay for additional childcare. Some schools may attempt to substitute online programs for in-school instruction, but that's clearly not a real substitute, and it's not what taxpayers have been paying for. Some lower-income families already devote over 30 percent of household income to paying for childcare. Ongoing school closures would destroy these family budgets. Nor should these families expect any sort of tax break. They have to pay for the schools, but as long as the schools remain closed, the parents won't get the benefits.

This article was originally published in The Hill.

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Contact Ryan McMaken

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and The Austrian, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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