| Get Jonathan Bernstein's newsletter every morning in your inbox. Click here to subscribe. Democrats, and the economy, are suffering right now because Democrats 11 years ago made a critical mistake. In 2009, congressional Democrats acted fairly aggressively to put money into the economy to stop what looked like a full-fledged collapse following the financial crisis. Eventually, in the Dodd-Frank Act, they attempted to insure against future such trouble. We can debate whether that bill was any good, but the point is that they made a serious effort to prevent the next financial crisis, just as the 2009 American Recovery and Reinvestment Act was a serious effort to get the economy back on its feet. What they failed to do, however, was to fix another structural problem that was painfully evident back then, just as it is now: the downward economic spiral caused by state and local government austerity during recessions. At the federal level, Keynesian economics has been built into the system since the New Deal. When times are bad, the government automatically spends more money, thereby (at least theoretically) boosting demand and jumpstarting the economy. Sure, Congress often passes additional spending or tax cuts, and the Federal Reserve can help as well, but even before they act, built-in stabilizers get to work. The problem is that states, which must balance their budgets, react in the opposite way. Since recessions reduce economic activity and hence tax revenue, states have no choice but to either cut spending or raise taxes to compensate — thereby further dampening economy activity, reducing revenue, and on and on. Of course, this is happening just as demand for the services that state governments provide are rapidly increasing as a result of hard times. The obvious solution is for the federal government to help. As of now, however, that requires action from Congress, and as we've seen for the past few months, that's easier said than done. In part, that may have to do with electoral politics and what Republicans perceive to be their self-interest. The constant chaos in the Oval Office plays a role too. So does ideology; it seems likely that many Republicans sincerely (if mistakenly) believe that helping state and local governments will make the economy worse. After all, there's a good chance that Senate inaction this summer on the next relief bill cost Donald Trump the presidency. The solution, from the point of view of the Democrats and of mainstream economics, is to make increased federal help for state and local governments automatic during recessions. Of course, Congress could always choose to provide even more aid. But at least the downward spiral would be halted. I'd certainly like the new Congress to make that happen. But even if Democrats win a slim Senate majority, it's going to be difficult to pass anything, and it's hard to imagine this being near the top of their agenda. They had the votes in 2009 and 2010 and still didn't get it done. It was a missed opportunity — and it may well hurt the first few years of Joe Biden's presidency. 1. Nadia E. Brown and Bry Reed at the Monkey Cage on Stacey Abrams and Democrats in Georgia. 2. Amelia Thomson-DeVeaux on Trump's pardons. 3. My Bloomberg Opinion colleague Ramesh Ponnuru on Biden's trade agenda. 4. Greg Sargent on Rudy Giuliani's celebrity status and the Trump era. 5. And Amy Walter on U.S. politics after Trump. Get Early Returns every morning in your inbox. Click here to subscribe. Also subscribe to Bloomberg All Access and get much, much more. You'll receive our unmatched global news coverage and two in-depth daily newsletters, the Bloomberg Open and the Bloomberg Close. | 
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