Austerity's becoming the fashion in the public sector

President Barack Obama this week proposed a two-year pay freeze for federal employees.

As he did, Nassau politicos wondered if state monitors might take over the budget - a politically drastic step that could let the county off the hook on its labor contracts.

As that speculation built, dozens of police officers were laid off in Newark and Atlantic City.

As those cops turned in guns and badges, New York City's horse-betting parlors - created to generate public funds - teetered on the brink of closing while Albany balked at a new bailout.

Without doubt, economic downturns always strain and batter government budgets, sap tax revenue and force a squeeze in Washington, in statehouses and in county seats and local districts.

But this time the atmosphere feels different - as if all branches of government together are heading for permanent contraction, a more extended shrinkage of the public sector.

Austerity, in an odd way, has become accepted, if not fashionable. It becomes easier for members of the elected-executive class when everyone else has to do it too.

One year ago, Raymond Scheppach, a longtime director of the National Governors Association, was widely quoted as saying that the states are "kind of in a permanent retrenchment." This week, his organization followed up with a fiscal survey that found 29 new governors taking office after New Year's will face "another very difficult fiscal year for states" - and a fiscal "cliff" created by current conditions.

Lawrence Levy, executive dean of the National Center for Suburban Studies at Hofstra, said: "I don't recall anyone in the early 1990s talking about how this might be a transformative experience, or a new paradigm for relationships between the local, state and federal governments, with its people, with each other, or with the business community."

"That's what makes this different," Levy said. "There's a level of pessimism and uncertainty that I've never seen before." Previous recessions, dating to the 1970s, "were considered part of the economic cycle and not part of a new paradigm shift," he said.

The circumstances of recessions always vary, from one region to the next. Ronnie Lowenstein, director of New York City's Independent Budget Office, noted a number of distinctions between current and previous crises.

In other dips, notably the one in the early 1990s, "we went into the downturn much earlier than the nation as a whole," Lowenstein said. "Disproportionate numbers of jobs were lost and we continued to lose jobs for much longer. This time, we started losing jobs after the U.S. as a whole, and lost proportionally fewer than the nation."

Manufacturing nationwide "took a huge hit in this downturn, but New York City has little manufacturing left to lose," she said. "The stability of the education and health sectors continued to add jobs throughout the downturn. The federal government was quick to aid the financial sector, with bailouts of the major institutions."

In Brentwood Thursday, departing Gov. David A. Paterson seemed hopeful or wishful that the state has weathered the worst. "I'd like to be remembered for the fact that during the most difficult time in the state's history," he said, "and at a time when other states were passing out IOUs and having severe credit-rating downgrades, that New York was able to get through that, as a prelude, hopefully, to a resounding recovery from this very deep recession."

Recovery or none, Paterson will have plenty of company if he's remembered as a budget-slicer.