You can’t starve your way out of a recession (with Kitty Richards)

Episode Summary

Executive Summary: Kitty Richards argues that state and local governments should respond to the pandemic recession with fiscal relief, service preservation, and progressive tax increases on wealthy residents rather than austerity. She says cutting budgets deepens recessionary spirals, worsens inequality, and slows recovery, while targeted spending on healthcare, education, child care, and income support produces faster, broader economic gains.

Main Topics: State and local fiscal crisis (Priority: 5/5): Richards explains that collapsing tax revenues have left states and localities facing unprecedented budget gaps while still being responsible for essential services like healthcare, education, infrastructure, and transportation. Rejecting austerity (Priority: 5/5): She argues against the common reflex to cut services when revenues fall, warning that austerity harms families, communities, and the broader state economy. Lessons from the Great Recession (Priority: 4/5): The conversation revisits how post-2008 budget cuts delayed recovery, suppressed public employment, and left lasting damage to education and other services. Why government budgets differ from household budgets (Priority: 4/5): Richards explains that governments can borrow, while state cuts create ripple effects through lost jobs, reduced spending, and weaker local economies. Progressive taxation and multipliers (Priority: 5/5): She makes the case that taxes should fall on high-income households with lower spending propensities, while relief spending should flow to lower-income people who will spend quickly and locally. Pandemic response priorities (Priority: 5/5): Richards emphasizes that virus containment, eviction prevention, school funding, child care, and contact tracing are essential economic investments, not optional extras. Tax policy as a moral choice (Priority: 3/5): The discussion closes with a broader moral framing: society has enough money to address hardship, but chooses whether to do so through public policy.

Key Arguments: State and local governments should not cut core services during a recession because those services are essential to daily life and economic functioning. The federal government should provide state fiscal relief because states cannot run deficits like Washington can and need borrowing support to stabilize the economy. Austerity after the Great Recession prolonged recovery; the same mistake now would deepen and extend the pandemic recession. Public spending on healthcare, education, child care, and income support has high economic multipliers because recipients are likely to spend quickly. Progressive taxes on wealthy households are less harmful during downturns because high-income households are better able to absorb the burden and are less likely to reduce consumption sharply. The economic pain of the pandemic is highly unequal, so policy should be designed to protect lower-income households and those who have lost work. Pandemic containment is the foundation of recovery; no fiscal strategy can fully compensate for uncontrolled virus spread. States should reopen budgets, reverse cuts, and raise revenue from those most able to pay rather than shifting the burden onto struggling families.

Data Points: State and local spending gap if recovered historically: $800 billion higher in 2013 - Cited from an Economic Policy Institute report on what spending would have been if recovery had matched historical precedent after the Great Recession. Potential jobs supported by restored spending: 8 million jobs - Projected additional jobs that would have been supported by higher state and local spending in 2013. Unemployment rate under that scenario: 4.4% - Estimated unemployment rate if state and local spending had recovered historically. Delay in recovery from austerity: 4 years - Richards says grinding austerity delayed recovery from 2013 to 2017. Public K-12 education jobs never recovered: More than 750,000 layoffs by mid-May during the pandemic - She notes prior losses from the Great Recession never fully reversed and cites new pandemic-era layoffs. Households with employment or income loss since March: About half - Based on the Census Bureau’s Pulse Survey during the pandemic. Low-income households with lost employment income: 58% - Households earning less than $35,000 per year in the late-May Pulse Survey. High-income households with any income loss: One in three - Households earning more than $200,000 per year reporting any loss in employment income. High-income households with no reduction in work income: Two-thirds - Derived from the Pulse Survey data for households earning more than $200,000 per year. School participation age example: Five-year-olds in front of a laptop - Used as a critique of inadequate schooling models during the pandemic.

Pivotal Quotes: "in a time of a global pandemic, we should be expanding services, especially to those who are most affected by the pandemic and those who are most in need of government services, not cutting them." — Kitty Richards: Explaining why austerity is the wrong response to state revenue shortfalls. "the economy doesn't work like a household budget." — Kitty Richards: Responding to the analogy that states should cut spending like families do when income falls. "Tax policy is often seen as dry, but it's really it's a deeply moral conversation." — Kitty Richards: Closing reflection on the ethical stakes of tax and budget choices.

Implications: Listeners should expect calls for federal aid, progressive state taxes, and expanded public investment. The episode frames recovery as dependent on protecting low-income households, preserving services, and funding pandemic control, education, and child care rather than imposing austerity.