Advertisement

Drudge Retort: The Other Side of the News
Friday, August 07, 2020

One of the key sticking points that has emerged in (relief) negotiations is direct funding to states and municipalities. Democrats have proposed over $1 trillion, about six times as much as was spent in the last relief package. Republicans, as Politico reported Wednesday, have counter-offered $150 billion. And that's a problem, policy analysts told TPM - one we've seen before.

More

Comments

Admin's note: Participants in this discussion must follow the site's moderation policy. Profanity will be filtered. Abusive conduct is not allowed.

"One of the lessons of the Great Recession is that it affected state and local government very harshly due to property taxes, then unemployment getting very high, then income taxes falling," said Stephanie Aaronson, director of economic studies at the Brookings Institute. "It's part of the reason that the recovery from the Great Recession was so slow - state and local spending was a drag on overall spending for almost a decade."

And states are in a worse place now than they were then. State budget shortfalls are on track to exceed $500 billion this year, according to the Center on Budget and Policy Priorities. Even calculating in federal aid from the COVID-19 relief packages Congress has passed, plus states dipping into their rainy-day funds, that number still hovers around $360 billion - a figure that dwarfs the $283 billion they lost after the Great Recession.

Almost all of the states have to maintain a balanced budget, largely a result of bills passed in the last 30 years. During shortfalls, that means they have to impose austerity measures like raising taxes and slashing spending. Those measures can have ripple effects - in the aftermath of the Great Recession, for example, one of the results of those strictures was sky-high tuition at state colleges, which contributed to the growing student loan debt crisis.

"A lesson of the Great Recession is even though we got a lot of great federal stimulus, it was offset by state and local austerity efforts that hurt the recovery," Arnab Datta, senior legislative counsel at Employ America, told TPM.

To try to offset that, one of the integral differences in the aid Democrats are proposing for states this time around is that it can be used to make up for revenue shortfalls. The aid in the last package could only be put toward expenditures related to fighting the pandemic, such as the cost of providing health care.

The funding would also stop the bleeding among the public-sector jobs state and local governments maintain, stemming layoffs which would strain unemployment benefits, another tenet of the relief package. Without the aid, "states will have to start laying off workers " which they've been doing but not in huge numbers," said Aaronson.

Ah yes, the balanced budget amendments which all those red states love so much are actually millstones around those state's necks in times of fiscal imbalance caused by economic factors outside any state or local government's ability to control. Nancy Pelosi and the Dems are actually trying to help these red states from facing the catastrophic choice between cutting budgets and firing workers due to the statutory requirements of ill-thought-out statutes designed to exacerbate negative economic trends at the worst possible time.

But of course, the GOP wants to ignore the ticking time bombs that their own political ideology put in place that not only will gut state and local governments, they will actually harm millions of taxpayers looking for help in these dire times only to find forced austerity.

Heck of a job GOPers.

#1 | Posted by tonyroma at 2020-08-07 06:39 AM | Reply

Republicans in power = recessions. End of story!

#2 | Posted by a_monson at 2020-08-07 06:48 AM | Reply | Newsworthy 2

If Republicans want balanced budgets by law, then they should accept the higher taxes that come with them.

#3 | Posted by TFDNihilist at 2020-08-07 09:25 AM | Reply

Nancy Pelosi commenting on negotiating with the Republicans over issues she addressed in a bill passed by the House 11 weeks ago:

Speaker Pelosi: Perhaps you mistook them for somebody who gives a damn for what you just described.

Jim Cramer: Ooh, jeez.

Speaker Pelosi: Yeah. That's the problem. See, the thing is, they don't believe in governance. They don't believe in governance, and that requires some acts of government to do that. . . . And basically, economists tell us, spend the money, invest the money for those who need it the most, because they will spend it. It will be a stimulus or at least a stabilization of " and that's a good thing. Consumer confidence is a good thing for the economy. You know that better than anyone.

www.washingtonpost.com

#4 | Posted by tonyroma at 2020-08-07 02:36 PM | Reply

The 2008 financial crisis and the sluggish recovery that followed weren't that long ago, and they taught us valuable lessons directly relevant to our current plight. Above all, experience in that slump demonstrated both that economic depressions are no time to obsess over debt and that slashing spending in the face of mass unemployment is a terrible mistake.

Now that aid has expired. Democrats offered a plan months ago to maintain benefits, but Republicans can't even agree among themselves on a counteroffer. Even if an agreement is hammered out " and there's no sign that this is imminent " it will be weeks before the money is flowing again.

Evidence on the initial effects of emergency aid suggests that the end of benefits will push overall consumer spending - the main driver of the economy - down by more than 4 percent. Furthermore, evidence from austerity policies a decade ago suggests a substantial "multiplier" effect, as spending cuts lead to falling incomes, leading to further spending cuts.

Put it all together and the expiration of emergency aid could produce a 4 percent to 5 percent fall in G.D.P. But wait, there's more. States and cities are in dire straits and are already planning harsh spending cuts; but Republicans refuse to provide aid, with Trump insisting, falsely, that local fiscal crises have nothing to do with Covid-19.

But nobody in the White House or on the G.O.P. side of Capitol Hill seems to have learned anything from that experience. In fact, not having learned anything from the last crisis almost seems to be a requirement for Republican economic advisers.

So at the moment we seem to be headed for a Greater Recession - a worse slump than 2007-2009, overlaid on the coronavirus slump. MAGA!

www.nytimes.com

#5 | Posted by tonyroma at 2020-08-07 09:29 PM | Reply

We're gonna be able to buy art real cheap from gov't run museums real soon.

I can't wait.

#6 | Posted by LostAngeles at 2020-08-07 09:40 PM | Reply

Imma get me some masterpieces...

#7 | Posted by LostAngeles at 2020-08-07 09:41 PM | Reply

We have no choice now but to believe that the GOP does not want a "stabilized" America, in keeping with Trump's plan for a permanent autocratic America in his second term.

Trump, with the help of the U.S. Senate, has been working on "destabilization" since his first day in office. The Covid-19 pandemic fell right into their lap. America has never been more "destabilized."

Isn't a bit nave to think the GOP, including Trump and the Senate, would do anything other than capitalize on the chaos they worked so hard to create.

#8 | Posted by Twinpac at 2020-08-08 02:24 AM | Reply

We have no choice now but to believe that the GOP does not want a "stabilized" America, in keeping with Trump's plan for a permanent autocratic America in his second term.

Trump, with the help of the U.S. Senate, has been working on "destabilization" since his first day in office. The Covid-19 pandemic fell right into his lap. America has never been more "destabilized."

Isn't it a bit naive to think the GOP, including Trump and the Senate, would do anything other than capitalize on the chaos they worked so hard to create.

With 88 days to go, isn't it obvious that the GOP, including Trump and the Senate, would benefit from even more "destabilization," ~~ not less.

And, with 88 days to go, aren't they desperate enough to tap dance on the edge of a ledge to pull it off?

#9 | Posted by Twinpac at 2020-08-08 02:35 AM | Reply

And, with 88 days to go, aren't they desperate enough to tap dance on the edge of a ledge to pull it off?

Posted by Twinpac

Tens of millions of people just had their unemployment slashed to a level where most will have to choose between food and health insurance premiums or pay rent or mortgage.

I think most know who's on their side and who isn't. Seems like it's widely known by now The WH and GOP Senate offered little to meet the needs of individuals and local/state governments.

Also, aware Trump has horribly mismanaged the pandemic response, which continues to affect our daily lives.

#10 | Posted by AMERICANUNITY at 2020-08-08 04:25 AM | Reply | Newsworthy 2

In short, I think Republicans are about to feel a whole lot of hurt in November.

#11 | Posted by AMERICANUNITY at 2020-08-08 04:26 AM | Reply

AU

"In short, I think Republicans are about to feel a whole lot of hurt in November.

The mission creep is to protect the top of the ticket in hopes that the trickle down will save his loyal enablers in the Senate.

Sometimes it works that way.

Right now Lindsay Graham is in possession of the package that Devin Nunes received vis-a-vie Giuliani and his Ukrainian contact re dirt on Hunter Biden which, I'm assuming, is the "October Surprise."

However, reports have leaked out that the so-called "dirt" is pretty weak sauce which will probably backfire on Trump's enablers in the Senate.

If there is an "October Surprise" it'll probably just look like another Hail Mary.

#12 | Posted by Twinpac at 2020-08-08 06:25 AM | Reply

Comments are closed for this entry.

Home | Breaking News | Comments | User Blogs | Stats | Back Page | RSS Feed | RSS Spec | DMCA Compliance | Privacy | Copyright 2020 World Readable

Drudge Retort