Bailing out state and local governments

  • 27 April 2020
  • NormanL

Congress approved nearly $500 billion of additional stimulus last week to assist small businesses and hospitals. But before the ink was even dry on that measure, wrangling on the next one was already well underway:

Democrats, for example, have made clear that the four new laws aren’t nearly enough. House Speaker Nancy Pelosi (D-Calif.) said at a news conference Friday that House Democrats would move quickly to advance the next rescue bill, which she said would include a generous financial commitment to cities and states that could match what has already been done to help small businesses — close to $700 billion.

Combining that aid with other priorities Democrats have discussed, such as an additional extension of unemployment insurance and another round of stimulus checks to individual Americans, the price tag on the Democrats’ next bill could rival the $2 trillion for the Cares Act passed in late March.

“There will be a bill, and it will be expensive, and we look forward to doing it as soon as possible because jobs are at stake,” Pelosi said.

At the heart of the next bill is likely to be several hundred billion dollars in aid to state and local governments. "Aid" in this case meaning money to prevent them from having to make tough choices about their own spending programs:

McConnell has voiced opposition to bailing out state budgets, suggesting in a radio interview this week that they should have the option of filing for bankruptcy, a comment that drew blowback from governors. But his view is supported by many fellow Senate Republicans who oppose federal help for states they say managed their budgets poorly long before the coronavirus hit.

Trump has sounded increasingly sympathetic to that point of view, even though he said on Twitter this week that the next legislative initiative should include “fiscal relief to State/Local Governments for lost revenues from COVID 19,” the disease caused by the coronavirus.

There's a legitimate debate to be had about whether the federal government should backstop some or all of state revenues even before states have taken their own steps to re-assess spending. Let's have that debate -- the sooner the better,