President Barack Obama (center) spoke to reporters during a meeting about the economy with Congressional leaders at the White House on Friday. About one-quarter of the $825 billion recovery package would be devoted to activities crucial to governors, mayors, and local school boards. (Charles Dharapak/AP)
States to win big in stimulus sweepstakes
House bill allots almost one-quarter of the $825 billion recovery package to states, localities. How will that boost the economy?
By Peter Grier | Staff writer/ January 25, 2009 edition
Reporter Peter Grier discusses where some proposed stimulus dollars could go in his Baltimore neighborhood.
Reporter Peter Grier
Washington
The economic stimulus plan now moving through Congress would shower billions of federal dollars on state and local governments desperate for cash.
The House stimulus bill includes an extra $87 billion in federal aid to state Medicaid programs, for instance. It allots some $120 billion to boost state and city education programs.
There’s $4 billion for state and local anticrime initiatives in the legislation, not to mention $30-plus billion for highways and other infrastructure projects.
Overall, about one-quarter of the entire $825 billion recovery package would be devoted to activities crucial to governors, mayors, and local school boards – making them among the plan’s biggest beneficiaries.
Such aid will help needy Americans keep their healthcare, and help teachers, police officers, and other public employees keep their jobs, say Obama administration officials.
Critics say Uncle Sam is about to allocate huge sums to bail out many states and cities that got themselves in trouble by overspending in boom times.
“It will reward states that have behaved irresponsibly,” says Brian Riedl, a senior fellow in budgetary affairs at the Heritage Foundation.
This week could be a big one for the stimulus package. Individual House committees last week approved portions of the bill under their jurisdiction. Now those parts will be welded together, and the full House could vote on the package as soon as Jan. 28.
President Obama pushed hard for the bill over the weekend. In his first weekly presidential radio and video address, he said his American Recovery and Reinvestment Plan is critical to jump-starting the economy.
“It’s a plan that will save or create 3 [million] to 4 million jobs over the next few years,” said Mr. Obama.
A fact sheet released with the address asserted that programs in the bill would double America’s renewable-energy generation capacity within three years, weatherize 2 million homes, and upgrade 10,000 schools.
Congressional Republicans generally agree that Washington must act to try to aid economic recovery. But they question whether such an effort needs to cost almost $1 trillion – and they want a higher percentage of the aid to be delivered via tax cuts. (Tax cuts account for about one-third of the proposed stimulus.)
Obama invited Democratic and Republican legislators to the White House on Monday to discuss their proposals.
“We presented President Obama with our ideas to jump-start the economy through fast-acting tax relief, not slow-moving government spending programs,” said House Republican leader John Boehner of Ohio.
In contrast, proponents of the fiscal package contend that aid to state and local governments, in particular, would be an effective way to boost the economy.
For one thing, such spending would flow through existing programs and budgets, so that setting up entire new bureaucracies to spend most of the cash is not needed. The extra Medicaid funds, for instance, could be spent “very fast,” says Nicholas Johnson, director of state fiscal policy at the Center on Budget and Policy Priorities (CBPP).
Medicaid is a joint federal-state entity that provides healthcare to some 59 million needy and disabled Americans. It is one of the fastest-growing of US government programs, even in good times, and governors and legislatures in many states often struggle to find the funds to pay their Medicaid portions.
Medicaid enrollment is now increasing quickly, as it does in every recession. As people lose their jobs and incomes, they often lose their health insurance.
“This is a big concern for state budgets right now,” says Mr. Johnson.
Overall, states face deficits equal to about $350 billion over the next two years, according to CBPP figures. At least 33 have already proposed health and education cuts. Unlike the federal government, many states must balance their budgets every year, under state law.
Aid allocated by the House version of the stimulus bill would cover only about half of the shortfall states face. Still, it could keep states, cities, and towns from making difficult layoffs of teachers and police, which would add to the already-dim unemployment picture.
“We have to ensure that states don’t have to take actions that damage the economy further,” says Johnson.
Many Republicans, by contrast, say much of the state and local aid would be doled out too slowly to jolt the economy out of its doldrums. They point to a recent Congressional Budget Office study that found that less than half the money for roads, school construction, and other infrastructure projects is likely to be spent within the next two years.
Critics also argue that states spent too much in the flush times, when they should have saved against a possible downturn. They expanded Medicaid coverage, for instance, to the point where in some instances it pays for antiobesity and substance-abuse programs, says the Heritage Foundation’s Mr. Riedl.
In the 1990s, state budgets grew by about 6 percent per year. Some states, such as California and New York, now face especially acute shortfalls. “To demand that residents from other states bail out California is really unfair,” says Riedl.
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Comments
2. evelyn smith | 01.25.09
while i agree slow influxes are coming and will help I also believe that more immediate acts such as the stimulus payments directly to the public can be a great relief for many who desperately need it now.
3. Dana Miller Ervin | 01.25.09
Mr Riedl’s comments are parochial and short-sighted. The rest of the country has been “bailing out” the states most affected by Katrina, although some questioned whether we should rebuild a city below sea level in an age of increasing natural catastrophe. After 911, all the states shared in federal anti terrorism funding, even though Al Qaeda is particularly fond of attacking New York. Now California has been disproportionately hit by foreclosures, and New York’s coffers will bear the brunt of job losses in the financial industry. It is appropriate to help states with greater need more than those who are less affected.
4. Andrew | 01.25.09
There could be no better investment in America than to invest in America becoming energy independent! We need to utilize everything in out power to reduce our dependence on foreign oil including using our own natural resources. Create cheap clean energy, new badly needed green jobs, and reduce our dependence on foreign oil. OPEC will continue to cut production until they achieve their desired 80-100. per barrel. The high cost of fuel this past year seriously damaged our economy and society. Oil is finite. We are using oil globally at the rate of 2X faster than new oil is being discovered. We need to take some of these billions in bail out bucks and bail ourselves out of our dependence on foreign oil. It would cost the equivalent of 60 cents a gallon to charge and drive an electric car. If all gasoline cars, trucks, and SUV’s instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. Jeff Wilson has a really good new book out called The Manhattan Project of 2009 Energy Independence Now. He explores our uses of oil besides gasoline, our depletion, out reserves and stores as well as viable options to replace oil.Oil is finite, it will run out in the not too distant future. WE need to take some of these billions in bail out bucks and bail America out of it’s dependence on foreign oil. The historic high price of gas this past year did serious damage to our economy and society. WE should never allow others to have that much power over our economy again.
5. cheapskate | 01.26.09
I agree with the fiscal conservatives. States like North Dakota has a surplus for the legislature to disburse or save. The governor as well as the plans put forth by the legislature save some of this money in a rainy day fund. I have little faith that stimulus dollars going to states that refused to exhibit fiscal probity in times of plenty will do any good.
6. len | 01.26.09
what are the repubs to do? they love the states getting money.local control and all that. they love
tax cuts,but they hate social spending for health care, schools,welfare.they want to help their friends,the guys who put us in this mess, but don’t want to help the big liberal states and their bloated bureaucracies.they say, don’t help the states who couldn’t balance the budget, but they unbalanced the federal budget by trillions with tax cuts for the rich and war spending off the books for years. they forced Clinton to shape up and then trashed his surplus down the drain,trashed the US military down the drain, and trashed the whole damn economy down the drain.
What a bunch of great Americans they are!
7. The Erie Wire | 01.26.09
Sounds like the Heritage Foundation & the Republicans are showing a public bond.
Let’s hope the money isn’t being spent to start a new wound on the dying body of the Free Market. The infrastructure will have to be revived on “rails” if are future is going to go anywhere in the right direction.
8. felipe jimenez | 01.26.09
lots of money and little oversight might as well have given it to the people directly. in the end most of it goes to administrative costs.and the same old game trickle down blood economics. its like milking the cow after it was milked by its owner already only minutes before.
9. Jacob Dyer | 01.26.09
Hay I did not mean to poke my nose in. But if America is in so much dept,
why can’t there be a donation for it? You see people can donate a dollar a week
to the cause. And by the end of the year America will be pay off its dept.
and people will not loose there jobs. All for a dollar!
10. Sherry | 01.26.09
This is a time in which all Americans should put aside our differences and work together as “The American People”. United we stand. Divided we fall. Whichever President wins we have always supported him as the Commander in Cheif (of Republicans & Democrats). This President seems to be open both parties. If any one has a solution that will work better than the ones being proposed. Share your idea if you think it will work better. We are all looking for answers.
11. Brad | 01.28.09
Len
I would suggest you take a hard look at your Dems, as far as I can tell the republicans were more like Democrates. I believe the Dems were telling us that Freddie and Fannie were just ducky. It was the dems that exempt those two from sarbanes-oxly that every other company in this country had to abide buy. I’m not suggesting the repubs don’t have there part. I’m saying this is a problem with the whole of our government.
As to the bailout, it seems to me that if you spend more than you can pay back, you’re screwed. Why is it different for our country. I don’t think we want to bankrupt our country in the name of social justice.
12. V. Gardner | 01.28.09
Haste is waste, and this Stimulus package is just that. We can never borrow our way out of this mess. And who will be responsible for paying the bill?
Our grand children ? There’s something to be proud of. It’s time the people
we sent to Washington get their house in order like the rest of us are expected to.
13. susan nelson | 01.28.09
I do hope the stimulus package is not another cover up….we the people need the money….instead of saving all these companies that have not been held accountable I believe we should get a big lump of the money to purchase houses,pay off houses, buy cars buy businesses, or help business…you want to stimulate the economy the public could do it by paying off the credit cards by buying things….take this to heart…
Trackbacks/Pingbacks
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1. May Pace | 01.25.09
I would like to see figures on the entire “Stimulus” proposal.
I have “heard” that $850 million is included to shove the fear of free medical coverage.