States Need Funding

States have been begging the federal government for additional funding to combat COVID-19 and support critical infrastructure during this unprecedented recession. Although the HEROES Act included funding for the beleaguered states, the HEALS Act has no such mandate and Republicans have continuously voiced their opposition to additional aid for states. Mitch McConnell went so far as to suggest states should go bankrupt. Apart from the fact states cannot legally declare bankruptcy, there are two main reasons that this suggestion is nonsensical:  

1. It would signal to the rest of the world that the US is in dire straits and truly spiraling in a way that would never have previously been thought possible.  Our standing on the world stage, already in tatters, would be completely diminished. 

2. It would make it that much more difficult for the country as a whole to rebound from the recession. 

As the US sinks deeper and deeper into what promises to be a long and bleak economic downturn, states have been left on their own to try to fight and contain COVID-19 with limited resources and success. Borders are not physical. A virus overwhelming one state will spread to others.

But since federal help is not forthcoming, states are instead forced to slash their budgets and make cuts to essential programs and employees.

What’s on the chopping block?  Education, public employees like teachers and firefighters, important infrastructure maintenance. All highly important sectors that are also important job providers. 

Most states have money saved for tough times, but again, this is not just a tough time–it is a worldwide pandemic, a historic and life altering event that demands a coordinated and comprehensive response that is currently lacking.

States rely on income taxes and sales taxes, both of which have been devastated by the pandemic and resulting unemployment.  Nevada and Hawaii have had their tourism industries wiped out. “Responding to this crisis has created a multiyear budget crisis unlike anything the state has ever faced before, more than three times worse than the Great Recession,” says Republican Maryland Gov. Larry Hogan.  Maryland has had to cut $190 million from higher education so far.  States are reporting that they expect their tax revenues to decline up to 35% over the next year. This is much worse than the recession of 2008 which saw an average decline of 12.5% across state budgets.

The United States needs explicit and comprehensive guidance from the federal government during a time of national crisis–and this is an unprecedented, and literally viral, national crisis. At the very least, the federal government should be doing its best to provide states with adequate supplies and funding in an effort to help the overall economy. “We know that helping state and local governments is one of the most efficacious ways to support the economy in a downturn. For each dollar spent by state and local governments, the economy sees an estimated benefit of $1.34. In other words, the economy sees an immediate 34% return on the dollar, and this bang for the buck is among the highest of any policy step lawmakers can take,” says Mark Zandy, chief economist at Moody’s Analytics. It seems that as long as the stock market is doing well, Republicans are unconcerned with the well being of the rest of the country.

Yours in Strength,

The Take Back Control Team