States and Cities Need $1 Trillion: They May Well Get $0
Yesterday there was a post on our go-to Illinois politics site (Capitol Fax) with some discussion about Illinois Governor JB Pritzker and US Senator Dick Durbin calling for federal aid to states and municipalities. The excerpts from the local press included such gems as this:
Fox:
“The Republican proposal would add $300 a week to unemployment checks, down from the $600 boost that expired last month. Democrat Bernie Sanders tweeted that it also included $161 million ‘corporate welfare to the coal industry.’ But for many Democrats, the biggest objection is that Republicans offer nothing to local governments, such as the state of Illinois, which is warning of layoffs without at least $5 billion. [Emphasis added]
“Big corporations all across the nation have received billions and billions and billions of dollars of aid. But now when it comes to the very social services, the very education, the frontline, you know, first responders–our police, our firefighters–now they’re gonna fall short?” Pritzker said.
Center Square:
“As members of Congress get back to work, some are looking for another COVID-19 aid package. President Donald Trump said he doesn’t support bailing out what he called “badly run” Democratic cities and states, “whether it’s New York or Illinois.” […]
“U.S. Rep. Rodney Davis, R-Taylorville, said Illinois should not get a bailout for years of policymakers neglecting the state’s finances before the COVID-19 pandemic.
“‘No one is going to bail out the structural debt and deficit that Illinois has,’ Davis said. ‘That’s not a pandemic expense, that’s not something that’s caused by the pandemic.’” […]
Note to Representative Davis: That $1 trillion wasn’t for structural deficits, as we would hope you are aware. And you should also know that every single state in the U.S. is in more or less the same position as Illinois right now (and a good many are in far worse shape – Hawaii, California and Texas, for example).
Not, about that “skinny” version of the coronavirus relief bill the Senate might vote on tomorrow (or not, who knows?):
The version of the HEALS Act Senate Majority Leader McConnell is shopping around among his colleagues is about half of what it was before the Senate went on vacation in August ($1.3 trillion). What happened in August that persuaded McConnell to cut the earlier version in half? Did Covid recede (190,000+ deaths and counting as of today)? Did the economy recover? Did manna fall from heaven?
So: about $500 billion (maybe $700 billion, but don’t count on it), with $100 billion for schools/colleges to re-open in person, a second Paycheck Protection Program for small businesses to keep employees on their payrolls, and $300 a week to unemployed workers (half of what the CARES Act authorized), through the end of December.
There’s nothing at all for states/municipalities, which means that nearly every state is looking at significant deficits in their current budgets and deficits perhaps twice as large in 2021.
This doesn’t have much to do with what the President and conservatives are putting forth as their main argument against aid to states/cities, for example: “We can’t reward states like Illinois for being profligate and allow them to pay down their public employees’ pension debt,” etc. Illinois is Every Republican in Washington’s favorite whipping-boy, and it’s always the same argument.
But this is a deceptive argument to say the least: this isn’t about Illinois, it’s about every single state in the country (+ the territories + D.C.), and it’s not about long-term debt (the pension debt), it’s about current fund deficits – in other words, it’s a liquidity crunch that threatens every single state and city in America.
Without federal assistance (the House’s HEROES Act, voted in May, included around $1.3 billion for states/cities) both state and local governments will have to slash state/local employees (think “police, fire, health care, core services) just to stay afloat until 2022. [Note: All states, with the exception of Vermont, are obligated to operate with balanced budgets.]
The irony shouldn’t escape us – many of the states which are going to be hit hardest are not “Democrat-controlled” (like Illinois), but Republican (Texas) or swing states (Pennsylvania).
The inability to meet current (running) expenses due to a massive drop in current (tax) revenues doesn’t break down “Democratic” and “Republican,” and both local/state government officials and citizens who pretend it does are harming any last-ditch lobbying efforts still (barely) possible in Washington over the next few days. Repeat: they’re harming their own state, and they’re harming the entire country.
You don’t have to be politically woke to figure out that getting rid of firefighters (my own hometown just got rid of two “engines,” i.e. stations = 22 firefighters), police, health department personnel and critical services isn’t any way to deal with a country in the midst of an ongoing pandemic.
Moody’s Analytics calculated in June that states will need around $300 billion and cities, around $200 billion over the next two years just to keep afloat.
What’s the plan? We can’t seem to discern one – and frankly, nobody else can, either.
Or maybe there is some rhyme to this total absence of reason: the Hill is reporting today that the relief bill is falling victim to some Republicans’ 2024 Presidential aspirations.
A look at five prime suspects:
Ted Cruz (Texas):
Cruz won a big concession for private school tax credits so that “scholarship tax credits” could continue for two years; in addition, he pushed for tax credits to include those who homeschool.
Cruz for the win:
“‘I made clear to the conference if my legislation providing tax credits for school choice was included I would vote yes and if it wasn’t, I would vote no,’ he added.
Josh Hawley (Missouri):
“Hawley, a rising conservative star, as of Wednesday said he remained undecided on the bill as he pushed for his own idea: a fully refundable tax credit for home-schooling expenses.
“I’m undecided,” he said. “I would like to see us do something for home-school parents and for parents whose kids are learning at home because their schools are all online — something to help them cover their out-of-pocket costs.”
In which Hawley out-Cruzes Cruz, that’s an accomplishment of sorts.
Rand Paul (Kentucky):
“We don’t have any money up here, we’ve already borrowed $3 trillion for this thing,” he said. “If we keep printing up money and giving it to people, no one has an incentive to open the economy.”
Kentucky’s doing itself proud what with enjoying the libertarian services of Mr. Paul and the Majority leadership services of Mr. McConnell. Also: No matter what bill is voted on, Mr. Paul will vote against it, because that’s the libertarian: always vote “No.”
Marco Rubio (Florida):
“Rubio, who also ran against Trump for the GOP nomination in 2016, led the recent effort to include funding for another round of Paycheck Protection Program (PPP) small-business loans in the revamped Republican bill.
“The PPP loans would cover up to 2½ times a business’s monthly payroll costs, up to a maximum loan value of $2 million. The new language simplifies the loan forgiveness application process for current and future borrowers who receive loans under $150,000.
The PPP (=Pandemic Protection Program), of which Rubio was a key architect, is considered a huge success for him (let’s just hope all those $2 million dollar loans actually go to companies that a) need them and b) are going to remain open following the pandemic.
Tom Cotton (Arkansas):
“Cotton, a fiery conservative senator, played a key role in helping to unify the Republican conference behind a relief bill by urging colleagues to listen to the needs of vulnerable Senate Republicans in tough races.
“Cotton argued that it would be better for Republicans to pass a moderately sized relief bill than risk Democrats winning control of the White House and Senate and passing legislation on the scale of the $3.4 trillion Health and Economic Recovery Omnibus Emergency Solutions Act that the House advanced in May, according to GOP senators who attended the meeting.”
It seems possible that Presidential wannabes are jostling for a position in 2024 here, although the disdain and disregard for individual states and cities is breathtaking – they’re putting personal ambitions and party in-fighting ahead of the economic survival of the entire country (which, we note, is still more than 11 million jobs short of what it had in early March).
This may well end in a total debacle, i.e. no coronavirus relief bill at all being passed. And the Republicans will blame the Democrats and turn it to their “advantage” in November – even though no relief at all is exactly what Republican leadership has clearly been hoping for since May.
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