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Congress must create commission on finances of states and localities

Congress must create commission on finances of states and localities
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Harry Truman famously kept a sign on his desk in the Oval Office that said “The Buck Stops Here.” But last weekend, President Trump literally passed the buck to the states. His executive order on coronavirus relief forces the states to somehow find billions of dollars to fund unemployment benefits for jobless residents. It is the proverbial straw that may break the backs of the camels. In this case, the camels are the villages, towns, counties, and states suffering in the economic downturn amidst the pandemic.

The media is consumed by the current debate between Republicans and Democrats for the level of the weekly unemployment benefits in the next stimulus bill. But the real and overlooked economic story here is not over $400 or $600 for weekly unemployment benefits. It is the $900 billion in revenue losses related to the coronavirus in state and local governments over the next two years. The number is both ruinous and lasting.

State and local governments make up about 18 percent of gross domestic product and employ almost 22 million workers. You simply cannot prop up the nation by weakening one of its own legs. State and local governments also provide 80 percent of total spending on infrastructure at a time when Washington has effectively retreated from such key investments.

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After the Great Recession, state and local investments in infrastructure fell 18 percent, according to the Volcker Alliance. It said “this lack of spending has already left behind almost $1 trillion in deferred maintenance of roads, bridges, mass transportation facilities, schools, water and sewer systems, and other infrastructure, a number that is likely to grow significantly in the absence of direct federal support.” Think about this the next time your car rattles over some potholes or your train to work shows up late.

This is not a Republican or a Democratic divide. Red states and blue states are reeling. The New York Times has cited the report by the Urban Institute that sales tax revenues were down 20 percent in the spring over the same period last year, according to data from 46 states. The $2 trillion stimulus deal in March had $150 billion for state and local governments.

The bandage has been washed away by the fiscal hemorrhaging. House Democrats allocated almost $1 trillion in state aid in the legislation they approved in May. Senate Republicans have included no more aid in their proposal. Republican Senator Bill Cassidy of Louisiana proposed around $500 billion several months ago, and some House Democrats seem to be coalescing around that number for the next round of legislation.

Meanwhile, instead of getting relief, governors in both parties got a bill for the extension of unemployment benefits. It is $4 billion in New York, more than $1 billion out in Kentucky, and $26 million weekly out in West Virginia. Republican Governor Asa Hutchinson of Arkansas said his state could pay, but it means taking money away from other areas of the budget.

The state of the states is horrific. The impact on their budgets is structural and lasting. It may fundamentally reshape the fabric and infrastructure for all our communities. Without federal assistance, the Rust Belt will become even rustier, and our landscape will include 21st century ghost towns that can no longer afford to give or pay for services for their residents.

That is why Congress should pass legislation to create a Commission on State and Local Government Finances that will diagnostically assess the problem and submit a report within six months on steps needed to solve it. Our governors, mayors, and experts must be recruited to serve. It may not be the sexiest topic. It may scintillate only municipal controllers and credit ratings analysts. But as Tip O’Neill said, “All politics is local.”

Steve Israel represented New York in Congress for 16 years and was the chairman for the Democratic Congressional Campaign Committee from 2011 to 2015. He is now the director of the Institute of Politics and Global Affairs at Cornell University. You can find him on Twitter @RepSteveIsrael.