Matt Yglesias looks at the fact that our economy, far from suffering from an outburst of socialism, is actually suffering from a collapse of state and local government employment is offered by this chart of state and local tax revenue:
As you can see, the bust in state/local tax collection is completely unprecedented in the postwar era. To the best of my knowledge, no states and no municipalities has preparations for anything like this. Consequently, the housing bust wound up creating an entirely secondary shake-up in employment and expenditure patterns at the state and local level. If this could have all been “automatic stabilized” away with access to the federal government’s current cheap, cheap, cheap borrowing costs we’d be in much better shape.