Why Are We Cutting Aid To The States?

February 8, 2009

This strikes me as making no sense whatsoever. States have to balance their budgets. When there is an economic downturn, state revenues drop, and the state governments are forced to cut spending. This inevitably leads to cuts in social services that people depend on MOST during times of economic trouble.

Matt Yglesias, as usual, nails it:

“Perhaps the most obvious thing to do in fiscal policy terms is to extent the automatic stabilizer effect that you see on the federal level down to the state level. Since states need to balance their budgets, recessions normally force them to engage in pro-cyclical cutbacks rather than counter-cyclical expansions. But the federal government can borrow money on states’ behalf to help them plug the gap. This is a good idea and it was in the House bill. On this morning’s Meet The Press, Barney Frank slammed the cutback on this state fiscal aid, observing ‘Money to go to the states to stop them from laying off cops and firefighters, money to help keep teachers going. Those are jobs.’ Ali Frick reports that Senator John Ensign was having none of it:

‘Ensign (R-NV) — who began the show by saying that doing nothing would be better than passing this stimulus plan — insisted that states’ budgets are “bloated” and derided Frank’s concerns as “fearmongering,” denying that any teachers, cops, or firefighters would lose their jobs:

“To get back to what Congressman Frank said, is that we’re going to be laying off teachers and firefighters. You know, that’s just fearmongering. We’re not going to be doing that in any of the states. … [The states’] budgets are bloated, the federal government’s budget is bloated. What we should be doing is cutting back.”‘

The idea that it would be good for states to cut back in the midst of the recession is stupid. The idea that the recession won’t, absent federal aid, lead to layoffs of state employees such as teachers and firefighters is also stupid. But the idea that it’s simultaneously true that the reason we should eschew aid is that states need to cut back and also true that it’s fearmongering to warn of layoffs is doubleplus stupid. What does Ensign think cutbacks consist of? States will be reducing vital services. The cutbacks will have the immediate impact of reducing the incomes of laid-off families and beneficiaries of state programs. That will have an additional impact on businesses where the newly laid-off teachers and cops used to work.”

Further proof that the Republicans are simply not serious when it comes to this stimulus bill.

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