COVID Relief Being Misused?
(UnitedVoice.com) – For decades, some states have spent money beyond their means and relied on the federal government to bail them out of crisis after crisis. Many of the states getting billions of dollars in federal funds for mismanagement are Democratic run. Now, they want more money from Washington to help them with their infrastructure needs, public safety, schools, and on and on it goes.
Last month, Senate Majority Leader Mitch McConnell (R-KY) had enough and said there would be no “blue state bailout” in the next bill.
California, Connecticut, Illinois, New Jersey, New York, and Pennsylvania were projecting multi-billion-dollar deficits before COVID-19 hit. Many of the problems centered on unaffordable and unrealistic pension plans negotiated over decades. Plus, due to high tax rates and unfavorable business environments, these states have seen businesses and more wealthy and middle-class people move out than come in, shrinking the tax base a great deal.
It’s economics 101. Less revenue and more need for services is an explosive combination. Neither the federal government nor states can afford to continue this behavior. At some point, the parent has to tell the adult child it’s time to grow up.
States Want COVID-19 Aid to Pay for Their Mismanagement
As Congress passed trillions of dollars in COVID-19 relief, little scrutiny has been put on the massive spending bills. Some governors of poorly-run states are asking Congress to slip in taxpayer bailouts to save them from their own incompetence. The HEROES Act passed over a week ago by the Democratic-led House, it included a half-trillion dollars in unrestricted funds to state and local governments to use as they please. These funds didn’t have to be used specifically for COVID-19-related issues.
The result was the Republican-led Senate saying the bill was dead on arrival.
Unlike the federal government, states can’t print money or borrow money to sustain their normal operations. They rely on tax revenues, fees, and surcharges, all of which have been impacted by the pandemic. However, much of their losses related to the pandemic are covered by the relief bills. The problem is deeper than the coronavirus situation.
Since mid-March, the federal government has already provided hundreds of billions of dollars of COVID-19 relief to states and local governments. Why do they need more and how did they use the previous money they received?
Republican’s Question the Need for State Bailouts
President Trump has expressed concerns about bailing out poorly run states.
Well run States should not be bailing out poorly run States, using CoronaVirus as the excuse! The elimination of Sanctuary Cities, Payroll Taxes, and perhaps Capital Gains Taxes, must be put on the table. Also lawsuit indemnification & business deductions for restaurants & ent.
— Donald J. Trump (@realDonaldTrump) May 5, 2020
He’s not alone. Sen. Rick Scott (R-FL) recently warned that giving more money to states would amount to bailing out their pension plans. Ultimately, it would reward bad behavior by encouraging states to continue behaving recklessly instead of solving their structural problems.
However, Democrats aren’t interested in solving their problems. In theory, Democrats can spend state money implementing socialist programs they know they can’t afford because the federal government will bail them out whenever the next crisis comes along.
In 2003, states received $20 billion in federal aid during that recession. Did they balance the books? Hardly. Instead, they increased their spending and deficits.
In 2009, states received $300 billion to help them recover from the Great Recession. Instead of using it to balance the books, they expanded government programs like Medicaid and SNAP that they, once again, couldn’t afford.
The other side of the coin is the federal government is not responsible either. Now that the government spent $7 trillion between Congress spending and money printed by the Federal Reserve to keep the economy floating, the national debt is more than $25 trillion. The only difference between the federal government and the states is they have tools the states don’t. States are all too eager to use the federal government to do for them what they should do for themselves.
It’s a vicious cycle that should end immediately.
By Don Purdum, Freelance Contributor
Copyright 2020, UnitedVoice.com