Mitch McConnell says that halting teacher and firefighter layoffs might be nice but it’s a “local” problem so the federal government shouldn’t do it.
Local government is a local problem. But the problem with local government employment is that it costs money. At the moment for localities to raise funds to pay teachers and firemen is quite costly. Households and small firms are in a fragile state, and taxing then at higher rates to support public service could be very damaging. The federal government, by contrast, can currently borrow money at negative seven-year real rates. When you borrow money, normally you pay inflation. Medium term federal borrowing can currently be done at a negative interest rate. That means it’s very very very cheap for the federal government to borrow money. Consequently, where “local” problems are being caused by lack of money, it makes a ton of sense for the federal government to step in and take advantage of its access to free money.
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