I think the truth is that the loss of public sector jobs that account for most of the decline is because states, counties, and cities have had to reduce their current workforce so they can meet their pension and HC obligations to the public sector unions. They won't hire very many new employees if we were to bail them out with a big new spending bill, they'll use most of it to cover their debts.
There's a squeeze going on, state and local gov'ts are going to have to come to grips with those obligations somehow, funneling more money to them will merely postpone the problem. That's one reason why the last stimulus bill wasn't as effective as it could've been, it didn't really go to hiring new people and creating new shovel ready projects and jobs.
And the public isn't in any mood for tax hikes and loss of services either.
These people were elected to figure it out...and if they can't? They'll get fired.
That simple.