For weeks, House Speaker Nancy Pelosi and her fellow Democrats have demanded $3.5 trillion in new spending, including over $1 trillion to bail out long-corrupt and mismanaged state and local governments.
This is completely irresponsible – we have already spent trillions of dollars on proposals designed to mitigate the pandemic, and the U.S. is projected to have a deficit of over $3 trillion in FY2020. Our nation simply can’t afford Pelosi’s trillion-dollar blank check bailout to blue states.
Fortunately, Congressional Republicans and President Donald Trump are holding the line against this outrageous demand. Rather than caving to the left, President Trump took action to help Americans last weekend and signed several executive orders designed to help the American people through the pandemic, including a payroll tax holiday for taxpayers making less than $100,000.
The fact is, Congress has already provided billions of dollars in aid to state and local governments.
In March, Congress passed the $2 trillion “Coronavirus Aid, Relief, and Economic Security (CARES) Act,” the single largest relief package in our nation’s history.
The CARES Act contained $150 billion in funding for state and local governments, $175 billion in funding for hospitals, and $350 billion for the Paycheck Protection Program (PPP), a necessary program to compensate for the government-mandated closure of millions of businesses during widespread lockdowns. In April, Congress passed $310 billion in further PPP funding, pushing the total funding Congress has already authorized to nearly $2.5 trillion.
The $150 billion in state and local assistance has been more than enough – according to a July Treasury Inspector General report, most states have only spent a small fraction of the federal funding they have obtained.
Michigan Governor Gretchen Whitmer, who recently demanded even more federal funding, has only spent 3 percent of the more than $3 billion her state has received. Similarly, New Jersey Governor Phil Murphy, who has railed against Senate Republican efforts to grant states more flexibility, has only spent 2.1 percent of the funds his state has been allocated.
Many blue-state governors are deliberately withholding funding from local governments in an effort to extort federal taxpayers for more cash. A May report from the National League of Cities found that 32 states are withholding COVID-19 relief funds from local governments and rural towns, preventing critical resources from being used to help Americans in need.
Despite this unprecedented level of federal spending and the fact that states have barely spent money they have already received, Democrats want to spend trillions more.
Pelosi’s “Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act” includes a total of $1.08 trillion in spending for state and local governments, including $500 billion bailout to states, a $375 billion bailout to local governments, and $40 billion in bailouts to tribal and territory governments.
On top of this $915 billion no-strings-attached bailout slush fund, Pelosi calls for $81 billion in enhanced Medicaid funding and $100 billion for “dedicated expenses” that would not have existed prior to the pandemic.
$714 billion of the Pelosi state bailout cash is deemed “flexible,” which means that states can use it to backfill budget gaps and subsidize projects completely unrelated to fighting COVID-19.
The total $1.08 trillion bailout approximately equals the amount of revenue that states collected in FY2019. Moody’s projects that state and local governments are expected to lose a combined $121 billion in tax revenue across FY2020 and FY2021, making the Pelosi allocation more than 10 times what states would need to backfill lost revenue.
Among other things, greedy blue state lawmakers could use this money to shore up their mismanaged pension systems. In 2017, the state pension gap was $1.28 trillion. This means that states would need $1.28 trillion just for their pension systems to break even.
Federal bailouts in times of crisis have historically led to expansions in state spending, creating a moral hazard and disincentivizing decision-makers from being prudent stewards of taxpayer resources. Following a $20 billion federal bailout for state budgets after a market downturn in 2003, state spending rose by 33 percent in the subsequent five years and state debts increased by 20 percent in the following four years.
Instead of using the next coronavirus relief package to help the American people through the pandemic, Democrats want to exploit the crisis to bail out Democrat governors and mayors that have mismanaged their states and cities for decades.
In the face of unprecedented Democrat obstruction, President Trump and his administration are right to hold the line against Pelosi’s irresponsible trillion-dollar blue state bailout.