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The harm that Covid-19 is wreaking on the economy has the potential to cause sustained damage for years into the future. With rising demand for public services in the face of widespread job losses and insufficient help from the federal government, the catastrophic domino effect of the pandemic on the economy is just beginning. And instead of beefing up support to struggling residents, elected officials nationwide — many beginning to prepare their budgets for the next fiscal year — are threatening devastating cuts to public services. We know from recent history that these cuts will be targeted in the same communities of color that have already borne the brunt of the pandemic’s casualties.
It doesn’t have to be this way. Even as they prepare to slash services, states and cities will continue to pay $160 billion in annual interest straight into the pockets of Wall Street investors. But by replacing this debt with direct, zero-interest loans straight from the Federal Reserve to local and state governments, that $160 billion now spent on interest payments could instead be directed towards desperately needed essential services such as education, housing, healthcare and transportation.
It’s time to, as we put it, #CancelWallStreet, and instead focus on bolstering the services that can help protect our communities going forward.
Removing the interest burden from state and local governments would more than pay to keep services fully funded, plugging budget holes for every town in the country. Additionally, according to a new report from Action Center on Race and the Economy, that money could help 13 million families avoid eviction, or pay for free childcare for every working family in the country.
Now more than ever, elected leaders are responsible for policy and budget solutions that will provide immediate, effective help for the people they serve. With continued unemployment or underemployment, the sustained need for Covid-19 testing and treatment, the costs associated with distance learning for students and teachers, and much more, it’s critical that we identify where public money is being wasted and where it could instead be used to address the multiple crises working people face. The last place our taxpayer dollars should be going is to Wall Street investors. That’s why we need the Federal Reserve to step in.
Two of the nation’s biggest cities are already working on this idea. One resolution was recently introduced in Los Angeles by Councilmembers Bob Blumenfield and Mike Bonin, and a similar resolution will be introduced at the Chicago City Council’s next meeting on October 7. The two cities would each save over $1 billion per year, respectively, if relieved of these harmful and unnecessary interest payments to Wall Street.
As I’ve written in these pages before, the entire municipal lending system is a scam perpetrated by wealthy banks on the backs of taxpayers. Rather than pay their fair share in taxes, the wealthy lend that money to states and cities and charge interest for it, doubly hurting taxpayers by lessening the tax base and siphoning repayment money away from the budgets of essential services.
It’s time for the Federal Reserve to provide state and local governments with the financing they need to avoid harmful budget cuts that will make economic recovery even more difficult — and harm Black, Latinx and Indigenous communities in particular. Elected officials across the country should join the effort to #CancelWallStreet, treat budgets like the moral documents they are, and prioritize services that will save lives.
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