With the Mother of All Bear Rallies about to enter its second year and the banking business going like gangbusters, one could lose sight of the fact that quite a few American cities, counties and states are facing the most dire economic circumstances since the Great Depression.  San Francisco became the latest casualty of hard times when it put more than 15,000 of its 26,000 workers on notice that they will be laid off at the end of this week. Most supposedly will have the option of being rehired to work shortened hours, but they will not be returning to the same jobs. For one, employees with many years on the job will lose their seniority and many supervisory positions will be eliminated. And for two, the city will no longer be bound by certain past agreements with the unions.  By cutting workers back to 37.5 hours and reducing their paychecks by 6.25 percent, Mayor Gavin Newsom hopes to save $100 million. However, the total budget shortfall for the 2010-11 fiscal year is $522 million, so the city will need to come up with additional, presumably drastic, ways to close the $422 million gap that will remain.

Mind you, this is not some depressed town with a down-and-out manufacturing base and no economic options. In fact, the tourist economy has remained relatively robust, and redevelopment has turned the once-dingy South of Market area and warehouse district into thriving incubators for new businesses. But like so many other large cities, San Francisco has been expanding its payroll at several times the rate of the private sector in recent years, resulting, for one, in more supervisors making six-figure salaries than any of the rank-and-file workers and taxpayers can comprehend, much less pay for.

A Bloodbath

Newsom calls his plan a “pro-job alternative,” since the goal is to keep as many workers on the payroll as possible and to allow them to keep their health benefits. But because it is overly generous benefits that have been dragging most large cities toward bankruptcy in the first place, it seems unlikely that he will be able to make good on his promise. Workers are describing it as a bloodbath, but in view of the enormous budget cuts that remain ahead, tomorrow’s “Black Friday” could be just the beginning of San Francisco’s downward spiral. A close acquaintance of ours who works for the city notes that the carnage is as bad or worse in numerous other cities, including Pittsburgh, San Diego, Charlotte, Baltimore, Seattle, Atlanta and Los Angeles.  As the Great Recession drags on, the idea of raising taxes to cover huge budget deficits will drive under not just marginal businesses, but strong ones that have so far managed to eke out survival.  There are no easy answers, and even the difficult choices that are being made now hold no guarantee of success.

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-- Posted Thursday, 4 March 2010 | Digg This Article