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End the duopoly

Congress Could Extend The Recession If It Doesn’t Bail Out The States

A pandemic is an expensive thing to weather. The COVID-19 crisis has already prompted a huge drop in state tax dollars and seems likely to cost states hundreds of billions of dollars in lost revenue over the upcoming fiscal year.

That’s pushed governors to come to the federal government, hat in hand, asking for a federal bailout. But while Democrats in Congress seem eager to oblige — a new stimulus package that narrowly passed the House on May 15 includes nearly $1 trillion for state, local and tribal governments — congressional Republicans and President Trump aren’t sold yet .

There’s a tinge of moral and political outrage to this debate. Trump has repeatedly suggested that blue-state governors mismanaged their finances and don’t deserve a bailout. Senate Majority Leader Mitch McConnell, meanwhile, made headlines last month when he suggested that states should simply file for bankruptcy if they run out of money.

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But experts think that doing nothing could be even more costly in the long run than bailing the states out. Without a lifeline from the federal government, states would have no choice but to start slashing budgets and raising taxes.

Recessions […]

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