Senate Stimulus Compromise Deals a Blow to Cash-Strapped States
Washington has a way of blurring the human impact of a major policy debate -- such as the one going on right now over the stimulus -- by using vague and dense terminology to describe certain programs. Take, for instance, this talk of "state stabilization funds" that were cut back by $40 billion this weekend in the deal cut by Senate centrists.
The term sounds bone-dry, but the stabilization funds are a crucial bulwark against budget deficits that are already forcing layoffs, cutbacks, and higher taxes and fees in 39 states, 21 of which have at least one GOP senator. You heard right: Senate Republicans are insisting on cutting federal aid to their own states in the name of fiscal responsibility -- while some of these state governments are actually pulling back on tax breaks in response.
"If you take a combination of the [budget] gaps for the rest of the current fiscal year, the gaps for the next fiscal year, and the gaps for 2011, [when] unemployment is still going to be high ... we estimate that the [total state budget] gap is $350 billion to $370 billion," Nick Johnson, director of the state fiscal project at the Center on Budget and Policy Priorities (CBPP), told me.
Compare that two-year deficit to the $79 billion in state stabilization funding that was included in both the House and Senate's original stimulus bills; then consider that the Senate's compromise left states with only $39 billion to close their budget gaps. Better yet, consider the plights of Maine and Arizona ...
Arizona, where Sen. John McCain (R) is touting his dogged opposition to the stimulus, is facing a $1.6 billion budget shortfall that could double in size by next year -- a gap representing nearly one-third of the state's general fund, according to the CBPP.
The state already has eliminated temporary health benefits for the disabled, hiked public university tuition by 9.5%, and instituted a hiring freeze. Meanwhile, McCain and Sen. Jon Kyl (R-AZ) are almost certain to vote against even the compromise cuts to state stabilization aid, with McCain thundering that the stimulus will "mortgage the future of our children [with] fiscally profligate spending."
Let's not even mention Nevada, where Sen. John Ensign (R) is opposing state stabilization aid despite a budget deficit that swallows 38% of the general fund. A provision in the stimulus says that states may lose out on money if they do not increase education spending to 2006 levels -- a requirement that Nevada is finding difficult to meet. The state already has delayed a promised kindergarten expansion, cut money for gifted and disabled education, and sliced public university aid, according to the CBPP's analysis.
Which brings us to Maine, the home of lead centrist negotiator Sen. Susan Collins (R). The state budget chief says Maine is hoping for as much as $1 billion in federal aid to help close a deficit that is already forcing layoffs and fee increases. So why did Collins work so hard to trim the estimated $250 million in state stabilization aid that would have gone to her own constituents? If she knows, she's not telling.
And these Republicans are just the tip of the iceberg.
One suspects Georgia's GOP senators, Saxby Chambliss and Johnny Isakson, won't want to talk about the homeowners' property tax benefit that's being cut in order to close their state budget gap.
Also, Kansas GOPers Sam Brownback and Pat Roberts would be loath to admit that their opposition to the stimulus will help keep the estate tax alive in their state.
Josh
Matt
Eric
Brian
The Republicans are shooting themselves in the feet on this. Unfortunately, it's going to cause a lot of people some real pain. However, if people are paying attention, hopefully, they'll vote the suckers out in 2010 and beyond.
February 9, 2009 1:40 PM | Reply | Permalink
The people who voted for these Republicans didn't vote for them because they thought they would do what you and I know will improve the economy. They voted for them because they thought the Republicans would make it easier to get firearms, would blow people up overseas, would push to combine church and state and restrict reproductive freedom, and would keep black people and immigrants in their place.
A person who supported the Republicans in 2008 did so because they knew that agenda had a better chance with Republicans than with Democrats, and they were right. If the economy gets worse, which I assume it will, these voters will blame any minority or foreigner they can think of, but they will not punish the Republicans. First because everyone knows that tax cuts are the only thing that creates jobs, and it's Obama's fault that we still have to pay taxes. Second because a good portion of these people feel that things like wars and depressions are purifying, and that in the next life they will be rewarded for being such bastards.
As long as we're stuck with these voters we will have these sort of people in government. As long as our structure of government allows a committed minority to set the terms of debate, we will have this sort of problem.
February 9, 2009 2:01 PM | Reply | Permalink
Yeah, but I think they also voted for their senators and representatives to help keep their home state from going belly up.
February 9, 2009 2:14 PM | Reply | Permalink
Perhaps, but they may not share our definition of "belly up."
February 9, 2009 2:27 PM | Reply | Permalink
No, trust me, they'll be looking to their state officials to do that. And let's look at what we have there:
Arizona currently has a Republican governor, but she's only just taken office. Republicans will likely point the finger of blame for large deficits at former governor Napolitano, a Democrat, who left office to take the post of Homeland Security Secretary under Obama.
Nevada has a Republican governor, but both houses of the state legislature are under the control of Democrats. Republicans will be happy to let them take the heat for any unpopular cuts that need to be made and additional taxes that need to be levied in order to balance the budget.
Maine's current governor is a Democrat, and the legislature is in Democratic hands. Guess who's going to get blamed for the pain there?
D's need to be broadcasting the message of Elana's post: that the Republicans in the U.S. Senate are helping to inflict further pain on their own already cash-strapped states. If people can be made to understand that these guys are not acting in the interests of the people who elected them, but in the interests of conservative ideology and GOP political strategy, it might result in pressure being put on Republicans to quit trying to screw up efforts at economic recovery.
February 9, 2009 4:10 PM | Reply | Permalink
You are so right, Skybolt. You sound as though you grew up around these people.
I have a friend who is a high-respected electrical engineer. He's no dummy -- pigheaded, but definitely an intelligent human being. Yet, he defends every move of the Republican Party. He's one of those people who was born a Republican, and he'll die one, too.
February 9, 2009 2:54 PM | Reply | Permalink
So sad and so true. How many times did we hear 'Sarah Palin is just like me'?
February 9, 2009 3:11 PM | Reply | Permalink
The easy solution to keep Senators Collins and Snowe in line is to eliminate the "stabilization funds" for every state where it's Senators voted against it.
Exempt Arizona, Nevada, South Carolina, Georgia, Mississippi, Texas, Alabama, Oklahoma, Kansas, Utah, Kentucky, Tennessee and Idaho from receiving ANY funds whatsoever from any part of this package.
That has to save a least $100 billion that you could put back into school reconstruction.
February 9, 2009 2:51 PM | Reply | Permalink
Vicious. I like it.
February 9, 2009 2:57 PM | Reply | Permalink
I don't even know if that's possible, but if it is, I heartily second this.
February 9, 2009 3:05 PM | Reply | Permalink
I feel your fury, Candide, but keep in mind that denying federal money to Kentucky actually hurts Mitchie-poo and Jimbo not at all. Mitchie-poo just got re-elected and Jimbo's been non compos mentis for years, and will lose in 2010 regardless of the stimulus package.
Meanwhile, the few people in Kentucky who still have jobs are losing their homes because after the ice storm left them without power for more than a week, the utility companies are refusing to re-connect electricity to their 60-plus-year-old homes without thousands of dollars in wiring upgrades.
Not all of them vote repug, either.
February 9, 2009 3:05 PM | Reply | Permalink
Refusing to re-connect them even though they were connected before the ice storm took the power out? My God, that's terrible! Is that commonly done, or is this a first?
February 9, 2009 4:20 PM | Reply | Permalink
It's common but usually not as widespread as with this ice storm, which is the worst in the state's history.
The problem is that many "homeowners" in Kentucky live in unsafe, indecent shacks that were poorly built in the first place or added electricity later by amateurs. It truly is too dangerous to reconnect power to some of these places.
What we need, and what would put hundreds of Kentuckians back to work immediately, is a few million stimulus bucks to repair the dying power grid in this state, including upgrading older homes.
It's at least as important and worthy as weatherization, if not as inexpensive.
February 9, 2009 4:54 PM | Reply | Permalink
Absolutely. Wasn't there something like that as part of the New Deal package that was targeted at getting electricity to rural areas in the first place? We need an electrification upgrade as part of the new New Deal package.
February 9, 2009 5:14 PM | Reply | Permalink
I believe they were trying to do that with the rural internet connectivity issue and the repugs where shooting holes at it every chance they could.
February 10, 2009 9:10 AM | Reply | Permalink
Some states, like Nevada have one of each. Perhaps you should reconsider your approach and only reward them with half a cut - gives the other side of the state something to think about between now and the mid-term elections. For those states with both Senators in the repug corner - give'em hell!
February 10, 2009 9:08 AM | Reply | Permalink
Elanor, Can we have the Obama Indiana townhall video?
February 9, 2009 1:44 PM | Reply | Permalink
I could've watched that townhall all day. Yep, I'm a dork.
February 9, 2009 1:46 PM | Reply | Permalink
I love to watch the poltics of the man to be honest...lol
February 9, 2009 2:03 PM | Reply | Permalink
Thanks Elna...a subject near and dear to my heart
Ben Nelson needs to feel some pain on this
February 9, 2009 1:47 PM | Reply | Permalink
Get rid of the AMT exemption in the Senate bill and put the state aid, among other things, back in. The House had a better bill in this regard. AMT recipients don't' need help.
The reconciliation of the bills can make this happen if our Congress wants it and have the moral strength to do it.
February 9, 2009 1:48 PM | Reply | Permalink
"AMT recipients don't' need help."
You have a grossly exaggerated view of who is affected by the AMT. Without adjustment, people with incomes of $75k would be affected. That's hardly wealthy.
February 9, 2009 3:09 PM | Reply | Permalink
Then they should change it just for people below a certain level--but of course Repubs don't want to do that.
February 9, 2009 3:51 PM | Reply | Permalink
That's exactly what the law is trying to do. The AMT law doesn't have a provision to adjust it for inflation, so every year Congress has to pass a law doing just that. It's so expensive to do because so many people are affected by it.
February 9, 2009 4:47 PM | Reply | Permalink
AMT "recipients"??? What kind of weird spin is that?
The problem here is that the level at which the AMT kicks in isn't automatically adjusted for inflation, so unless it is to affect greater and greater percentages of taxpayers, Congress has to pass legislation every year to change it.
When the AMT was originally enacted in 1969, it was targeted at 155 (yes, one hundred fifty-five) households earning over $200,000 which, through a combination of tax benefits, owed no income tax in 1966.
By tax year 2003, 2.3 million households were affected by the AMT. In 2001, there were people with taxable incomes of $50,000 who nevertheless fell subject to the AMT.
See this 2004 article in the Washington Post for an illustration of the effects of an AMT gone wild. It has grown from something targeted at a microscopically small number of taxpayers to something so large that it is reaching levels of "too big to remove." Failing to adjust it for "bracket creep" has the added benefit being a tax increase without the embarrassment of actually having to vote for one.
February 9, 2009 5:10 PM | Reply | Permalink
Very good reporting Elana,
This type of information is manna from heaven for opponents in the next election cycle of anyone who votes against this bill.
February 9, 2009 1:52 PM | Reply | Permalink
My answer: To the conference committee!
Look -- if we want a better stimulus bill, we do that by electing more Democrats in the House and Senate -- particularly the Senate. That means winning open Senate seats in FL, OH, MO, NH, and KS in 2010 and unseating Republican Sens. Richard Burr (NC), "Diaper" David Vitter (LA), and Arlen Specter (PA) -- all while holding onto all Democratic seats.
February 9, 2009 1:56 PM | Reply | Permalink
2010 (2011 when they're seated) is a bit late for the stimulus bill.
I'm all for electing more progressive Democrats, but we're stuck with the Congress we have as far as the stimulus goes.
February 9, 2009 3:40 PM | Reply | Permalink
Unfortunately, we're STILL watching sausage be made. We'll see what happens in conference. Fingers crossed.
February 9, 2009 2:15 PM | Reply | Permalink
You know why they did this, because red states were pressuring the Senators and that pissed them off. Also there is a lot of Democratic Governor states up for election in two years time (I believe 12), and they don't want the States bailed out - they want the Dem Governors to be held accountable.
February 9, 2009 2:24 PM | Reply | Permalink
that's a good point. Which means that a solid ground game by Democrats in each of these areas is critical. If you can't change the mind of lifelong Republicans, you can outnumber them.
February 9, 2009 2:57 PM | Reply | Permalink
Yes! Exactly the point I was making in reply to another message.
February 9, 2009 5:18 PM | Reply | Permalink
Why aren't the governors trying to protest the obstructionism of what the Congressional Repubs are doing?
Why aren't they speaking up or tyring to speak up for their state? Is it that they just want to be seen as siding with their party or what??
February 9, 2009 2:45 PM | Reply | Permalink
Crist is appearing with Obama tomorrow. I think some don't want to break party ranks - they know it's coming regardless and will gladly accept it, so why put themselves out there vs their party if they don't have to.
February 9, 2009 2:59 PM | Reply | Permalink
What, no mention of Mitchie-poo, whose neglected home state is suffering a half-billion-dollar deficit for just the five months until the end of this fiscal year June 30?
The governor's not releasing the shortfall estimates for FY 2010 and 2011, but they're likely to be well over a billion dollars a year.
Meanwhile, Mitchie-poo's allies in the state senate are demanding spending cuts to avoid raising the country's third-lowest cigarette tax (30 cents per pack) to a measly dollar a pack. This in the state with the highest rate of smoking deaths in the nation.
It's a fucking disgrace.
February 9, 2009 2:59 PM | Reply | Permalink
You've lived in Kentucky your whole life and you're still not innured to disgraces?
I mean, c'mon: Ernie Fletcher, Paul Patton, Mitch and Jim, the environmental law laxity and corruption, the schools, the largest number of people living in trailers over 30 years old in the nation, those smiley face license plates,and, worst of all, the way the the 'Cats are doing this year . . .
(I was born and raised there, so I still get to say stuff like this.)
February 9, 2009 3:20 PM | Reply | Permalink
Accustomed, yes - inured, never.
I hated Paul Patton's fucking smily-face license plates, but I'd wear one hanging around my neck every day if I could have him back as governor.
Unlike ball-less Beshear, Patton would never let a repug - even the president of the senate - push him around.
February 9, 2009 3:40 PM | Reply | Permalink
Think about it. Kentucky's current governor is a Democrat, and the lower house of the legislature is controlled by Democrats. The entire lower house is up for re-election this coming November, but only half of the Senate (which is under Republican control).
If Mitchie-poo screws the state budget, don't you think that is likely to make life harder for Democrats in state government than it is going to make it for him? He's not up for re-election for another six years.
February 9, 2009 5:33 PM | Reply | Permalink
I can't believe either of you are really Kentuckians given that you passed up,ignored, really, an opportunity to talk about the 'Cats.
February 9, 2009 10:05 PM | Reply | Permalink
you passed up,ignored, really, an opportunity to talk about the 'Cats.
Can't speak for slb, who may be attempting to hide his love for the Cards, but I bleed UK blue.
I usually wait until the SEC tournament to start bragging on public boards, however. :-)
February 10, 2009 8:36 AM | Reply | Permalink
Excellent point. Mitchie-poo lives to fuck over the dems, even when it seems to hurt his re-election chances. Somehow he always gets re-elected anyway.
February 10, 2009 8:33 AM | Reply | Permalink
Jeez, relax, people. This is an easy one. It's a near certainty that these funds will be put back in conference committee.
February 9, 2009 3:11 PM | Reply | Permalink
Actually, for once, I'm calling "all aboard" for the outrage train, on this one. That money doesn't get back into the bill in conference and onto Obama's desk unless certain Senators get very worried.
Been doing that since Friday, actually.
February 9, 2009 3:38 PM | Reply | Permalink
I'm pretty sure all the Senators' governors are going to be giving them an earful over the next week or two. This is a disaster in the making. It will get fixed.
February 9, 2009 3:48 PM | Reply | Permalink
btw, Great post Ms. Schor, thank you.
February 9, 2009 3:15 PM | Reply | Permalink
Hoowee! Listening the Senate debate...the stupid really hurts. Thune (R-SD) just said that some calculator he had back in the day couldn't even fit the kind of numbers we are talking about today...as a reason against the bill instead of that THAT IS THE POINT of why it needs to be big. What a numbskull.
February 9, 2009 3:17 PM | Reply | Permalink
Did you realize that if you stitched 800 billion dollar bills together you could make a pair of pants for everyone on earth?
February 9, 2009 3:50 PM | Reply | Permalink
I'd certainly prefer to see those health, education, and state aid items back in there, but is this stimulus the only way to get it?
I'm with others who say that if we don't get it now, we'll get it a little bit later in other bills or as part of the budget.
I'd like to see them slash $100 billion from a bloated and wasteful defense budget. That frees up a lot right there.
Priorities are changing in a big way, and this stimulus is just the beginning of it.
February 9, 2009 3:49 PM | Reply | Permalink
California also has serious budget woes due to their tax-cutting madness. I can't feel all that sorry for them - their wounds are self-inflicted to a certain extent. Why should other, more responsible states, which adequately taxed their residents (like New York, for example), have their wealth transferred to "free-loader" states like California? The more-responsible states have fiscal problems, too, but not because of irrational tax-cutting.
February 9, 2009 4:05 PM | Reply | Permalink
The AMT reduction is not stimulus. The tax savings would not appear until March 2010, and since the congress adjusts that every year the savings would not be incremental to the previous year. Congress should adress the AMT, and eliminate it in a seperate bill. The effect of the AMT basically depends on your property tax not on your income. States with high property taxes like NY where I live lead to high deductions regardless of your income level.
The $40 billion in state aid is stimulus and will be spent immediately on Jobs.Taking it out of the stimulus bill is a big mistake.
The Tax Credit on autos and houses is not big enough to affect purchase decisions, and besides you need a job to buy a house or an auto.These tax credits will not increase spending.
If you add the senate changes to the CBO report which said $169 billion in 2009 from the stimulus bill, we are left with only $60 billion of extra spending in 2009 which is next to now stimulus. So now what is the point of the stimulus.
How did Obama let all this happen? I am an ardent Obama supporter, will remain one but I am very disappointed in his performance.
February 9, 2009 4:14 PM | Reply | Permalink
If you think of AMT bracket creep as a tax increase (which it is), then if you don't address it, you are in effect legislating a default tax increase in the face of a severe recession, an anti-Keynesian thing to do. So yes, an AMT patch absolutely belongs in the stimulus package.
February 9, 2009 5:39 PM | Reply | Permalink
I was thinking about this article, and was ready to write my Senators (Georgia), when I realized a flaw in your argument. You assumed that these Republican Senators would actually vote for the compromised stimulus bill (thereby voting against federal aid to their own States), but I don't think they will vote for it in ANY form.
February 9, 2009 4:23 PM | Reply | Permalink
Grits, I agree with you. But regardless, not voting seems to be against many of their constituents economic interests too, isn't it? Everyone seems to be in a conflicted position. Seems to me, the best criterion for judgment is whether or not jobs will be saved or lost. If you have a job, imagine the damage to your family or yourself or your community of losing a job. All other considerations seem to pale in comparison.
February 9, 2009 5:00 PM | Reply | Permalink
News you can use folks. Get on the horn to your senators and House reps in those states or if you're not there to friend and family who are and tell them to. Spell out to them the costs detailing it in faxes (preferably), phonecalls or emails. Then write letters to the editors of local papers.
Keep it coming Elena. Let's here what cutbacks all states will suffer so we can take action.
February 9, 2009 5:05 PM | Reply | Permalink
Has anyone ever thought about the money we send to foreign countries? Have you heard about funding being cut from those? No? Why not? Therefore, I don't believe any of our leaders are really concerned about saving the economy. they talk about cutting services to us, but still send money overseas. Who should come first?
February 9, 2009 6:24 PM | Reply | Permalink
Contrary to what you hear on Rush, Hannity and Dobbs, foreign aid is less than 1% of the federal budget, about 17 billion last year. 4.1 billion of it went to just two countries: Egypt and Israel.
February 9, 2009 10:10 PM | Reply | Permalink
The Republicans are not done wrecking the country. And they are getting help from some Democrats.
February 9, 2009 6:30 PM | Reply | Permalink
Let's not forget those 'moderate' Democrats screwing over their own states for a little limelight.
The two Democratic senators from Colorado (one elected, one appointed) took a lot of credit for making the package 'better.'
Mark Udall had his office put out a statement that was right out of the GOP playbook, claiming that while aid to the states might be worthy, it didn't belong in a stimulus bill, which was about creating jobs.
It's hard to believe that this is anything other than crass pandering. It is obvious to anyone who is not a complete moron that aid to cash-strapped states is the most effective way available to save/create jobs and create a rapid stimulus.
Bennet, the other Colorado senator, was appointed to replace Ken Salazar by Democratic governor Ritter, who is in the process of cutting back the state budget in education, CHIPS, construction, and the like--destroying jobs and hurting the most vulnerable.
So, let's not blame it all on Susan Collins.
Perhaps if these guys had just been coming up with the compromises necessary to break the Republican filibuster, these cuts could have been justified, but when Democrats brag about them producing a better bill, it turns the stomach.
February 10, 2009 12:59 AM | Reply | Permalink