Meeting on Capitol Hill yesterday, House Democratic leaders and
10 economic experts (Nobel Laureate Joseph Stiglitz, EPI's Jared
Bernstein, and former SEC Chair Arthur Levitt among them) discussed
what to include in a new economic stimulus package Democrats intend
Meeting on Capitol Hill yesterday, House Democratic leaders and 10 economic experts (Nobel Laureate Joseph Stiglitz, EPI's Jared Bernstein, and former SEC Chair Arthur Levitt among them) discussed what to include in a new economic stimulus package Democrats intend to enact on the heels of a Congress' Wall Street bailout. Aside from extending unemployment insurance benefits, investing in transportation and infrastructure, and perhaps providing a new round of tax rebate checks -- all likely to provide a valuable bang for the taxpayer's buck -- those in attendance pushed for another crucial investment: federal assistance for state governments.
A slowing economy causes revenues to decline, demand for services like Medicare to rise, and state coffers nationwide to starve. According to the Center on Budget and Policy Priorities, at least 29 states plus the District of Columbia face an estimated $48 billion in combined shortfalls in their budgets for fiscal year 2009. In Illinois, it's $2 billion and State Treasurer Alexi Giannoulias says the state is facing "a perfect storm of fiscal problems."
The worst is yet to come, according to Raymond C. Scheppach, the executive director of the National Governors Association. Mortgage defaults will undoubtedly rise and U.S. exports will decrease as the global economy drags, he writes, meaning "this economic downturn will likely be longer and more severe than any states have experienced since the downturn of 1982–1983."
Meanwhile, states can't deficit spend. That means crucial programs fall by the wayside during rough economic patches, including public health programs, education funding, and state jobs. In Illinois, we saw this dynamic play out earlier in the year when Governor Blagojevich tried to slash funding for substance abuse centers. Providing aid to state governments so they aren't forced to raise taxes, eviscerate social programs, or layoff workers is a valuable way to help working and middle class Americans deal with the recessionary pressures.
But conservative Republicans want none of it.
"Nothing being discussed will ease the uncompetitive nature of our nation's tax rates," wrote minority leader John Boehner in a letter to majority leader Nancy Pelosi, "Nothing being discussed will bring a single dollar of private capital into our markets, which would help stabilize and restore American families' savings and retirement accounts. And nothing being discussed will help small businesses compete and thrive." What do they propose instead? Among their ideas is removing legal barriers to offshore drilling, suspending the capital gains tax for two years, and lowering taxes on income that U.S. corporations earn from their overseas subsidiaries. Or as Matt Yglesias writes, "a stimulus package that doesn’t include the most valuable stimulus measures."