"There's some debate over how well certain forms of stimulus "work." That is to say, whether a tax cut increases spending, which increases jobs, which increases total economic output. But there's no debate over what state and local aid does: It allows the continuation of programs that are already ongoing, the preservation of jobs that people already occupy, the protection of tax rates that are currently in place. It doesn't promote economic expansion, which is a somewhat uncertain business. It prevents economic contraction, which is a much more predictable project.
If states have to cut $120 billion from their budgets, that money -- and the things it does -- will just leave the economy. There will be fewer jobs, higher taxes, less financial aid. None of that is speculative. There's no theory in which it doesn't happen. This is a large economic contraction that we've decided to allow, because we would prefer to allow it than to put down the money -- much less money, incidentally, than it will cost to extend the Bush tax cuts for the rich -- necessary to prevent it.
Of everything that's happened since the financial crisis, this is, to me, the most frustrating. It is a decision we, as a polity, are making to prolong our economic pain and slow our economic recovery. It is needless and senseless and largely the result of political, rather than economic, disagreement. And when it happens, we will all look around at one another and lament our slow recovery, and our terrible economy, and our inept political leaders, who have clearly done something wrong, even if we're not sure exactly what." --Ezra Klein