Republicans should care about state and local financial relief in this crisis
Senate Majority Leader Mitch McConnell has opposed providing relief to state and local governments for months beyond the $150 billion with the Cares Act. He has called such aid a “bailout” for blue states and a “blank check” for governments to do as they wish. He set forward a $500 billion “skinny bill” over the summer that offered no support for state and local governments, creating a deadlock with Democrats.
But such resistance to state and local aid will hurt red states as much as blue states. States and rural counties led by Republicans will miss out on critical resources, while coronavirus cases and deaths hit new records and local economies struggle. That is why state and local aid is getting added back on the docket. McConnell will consider a new $900 billion bipartisan proposal, which includes $160 billion for state and local governments. It also has support from Joe Biden and Democrats.
The resistance to state and local aid from Republicans is a missed political opportunity to negotiate differently on this package and make up for the Cares Act that was skewed toward blue states. Moreover, by not taking the olive branch from Democrats to provide aid to red states, Republicans are reiterating and exacerbating the economic divide.
So let us examine why McConnell and Republicans should embrace state and local aid, especially with an approach that mirrors the one adopted in the $2 trillion Heroes Act by Democrats. That included nearly $440 billion in direct aid to all 50 states, as well as municipalities, counties, territories, and tribes. But unlike the Cares Act, which was skewed toward blue states as it limited aid to areas with at least 500,000 residents, the Heroes Act would send assistance to small towns and rural areas.
In that case, state and local aid would be far from a bailout for blue states. It would instead be a lifeline for thousands of communities dominated by Republicans in red states. For Biden, it would be a gesture toward building bridges and governing for all Americans, including around 80 percent of counties that voted for President Trump. More importantly, it would be an overdue act of basic governance for the entire country.
The urgency to act is rising. Infections in red states are surging, while rural hospitals and businesses are facing new challenges heading into winter. The public health crisis in red states comes with an economic crisis. Red counties struggling with low commodity prices and outward migration, which strips the fiscal capacity of the local governments to confront rising infections and rebuild their economies.
The rhetoric over bloated state budgets that do not need “bailouts” and “blank checks” also belies reality. States entered the public health crisis with some of the strongest reserves in recent history, a display of fiscal responsibility while meeting balanced budget mandates. Further, recent measures show that regardless of party control, nearly all 50 states have made dramatic cuts to critical programs, including Medicaid, education, and social services for vulnerable populations, in order to make up for severe revenue loss caused by the coronavirus recession.
When state and local leaders are given the opportunities to “do as they wish” with federal dollars, they have admirably ramped up efforts to fight the pandemic and stave off economic collapse, while maintaining a basic level of services to support commerce and families. Several states passed their own stimulus bills, and local governments in Charlotte, Indianapolis, and Birmingham have used their Cares Act funding to employ workers in better jobs, save small businesses, and hire dislocated workers for public service. Federal aid which keeps state and local governments operational would not just plug budget deficits, but develop strong allies in the efforts to provide economic recovery assistance to communities.
Federal aid for state and local governments is beneficial for the economy. A chorus of economists have found that the federal proposals to increase unemployment insurance, provide checks to families, and offer state and local assistance have a high return on productivity for the dollars invested. In contrast, economists say that a lack of state and local aid will result in further cuts to both public and private sector employment.
McConnell and many other obstinate lawmakers need to drop the partisan gamesmanship and confront reality. Without assistance for the states and localities bearing the brunt of this crisis, the pandemic and recession will worsen, not just in blue states or red states, but everywhere.
Amy Liu is a vice president and director, and Mark Muro is a senior fellow, at the Metropolitan Policy Program at Brookings Institution in Washington.
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