Recent editorials of statewide and national interest from New York’s newspapers:
The Coming GOP Spending Split
Wall Street Journal
The U.S. Congress has appropriated an astonishing $2.9 trillion in a mere six weeks to counter the coronavirus, and Democrats and some Republicans want trillions more. President Trump talks as if he’s eager to go along, but if he does he may have a Senate Republican revolt on his hands. The better strategy is to pause, see how the country’s reopening goes, and then decide where the money is needed if it still is.
To put $2.9 trillion in perspective, that’s 60% of what the feds had expected to spend for all of fiscal 2021. The Congressional Budget Office says the federal deficit this year is now expected to quadruple to $3.7 trillion, or a stunning 17.9% of GDP. Even after the $800 billion Obama-Pelosi spending bill in 2009, the deficit reached only 9.8% of GDP. The 2008 TARP money was repaid; most Cares Act spending and loans won’t be.
Not since the end of World War II has debt as a share of the economy risen so fast, as the nearby chart shows. In 1946 the debt held by the public stood at 106.1% of GDP. Slowly but surely the postwar growth boom worked the debt down to a low of 23.2% in 1974. The response to the recession of 2008-2009 set debt climbing again, and both parties have kept it rising during the Trump era. Debt was expected to be 79% of GDP this year, but CBO now says it will rise to 101% by September 30.
We’ve never been deficit scolds as long as policies promote economic growth, and the U.S. has the advantage of paying off its debts in its own currency. Treasury Secretary Steven Mnuchin likes to say the debt is no problem because interest rates are near zero. He’s right, at least for the near term, but he overlooks that so much federal borrowing makes an outsize claim on the world’s limited capital.
Every dollar the federal government is spending, and having to finance with Treasury bills, is a dollar that won’t be available for lending to private citizens or investing in new businesses. Unless you believe that the government can replace the private economy as an engine of growth, as many Democrats now believe, where will the investment come from to drive the recovery?
On that point, Casey Mulligan, the University of Chicago economist formerly on the White House Council of Economic Advisers, has calculated in a new paper the real cost of shutting down the economy as the government has done. He estimates about a $6 trillion loss of private market production a year, plus another $2 trillion for the future costs (i.e., higher taxes) of paying for current relief efforts. Subtract for black market effects and other things and he figures a $7 trillion net cost per year of shutdown.
As Mr. Mulligan puts it, “Without any improvement in our techniques for fighting the war (on the coronavirus), the sacrifices by households and businesses will be staggering and historically unprecedented.” The larger point is that no amount of public spending can substitute for the economic losses to private production and human and financial capital.
This means reopening the economy first and foremost and finding a vaccine. But it also means thinking more thoughtfully about the government response, rather than spending willy-nilly on Democratic priorities plus Republican priorities to reach what Washington calls a compromise.
This is the message that Senate Majority Leader Mitch McConnell has been sending to his party in Congress—and to the White House. No one is more attuned to the mood of his own Members than Mr. McConnell, and he knows the rumblings of dissent are growing. Behind the scenes many are starting to ask if signing onto every Chuck Schumer-Nancy Pelosi priority is good for the country.
Mr. McConnell made a tactical mistake last week in floating the idea of state bankruptcy, which runs into constitutional problems. But at least he got everybody’s attention. He is right that Democrats want to use the virus to achieve non-virus-related priorities, especially bailing out the public union governance models that have done so much economic and fiscal harm in states like Illinois.
He was also right Tuesday to warn Mr. Trump about a big budget blowout on public works. None of that money would be spent in time to help the economy this year. Mr. Trump needs the recovery to begin this summer if he wants to have any chance to win a second term—or if Republicans want to have any chance of keeping a Senate majority.
If Mr. Trump sends Mr. Mnuchin to negotiate another trillion-dollar spending deal with Democrats, he runs the risk of dividing his own party in Congress. A divided GOP will make his re-election chances well-nigh impossible.
Mr. Trump doesn’t have to rule out all new spending. He can say let’s spend what Congress has already appropriated, including $150 billion for the states, see how the Federal Reserve lending programs work, and how well the economic reopening goes. Then we can see what the urgent needs are and respond. Our guess is that millions of taxpayers would applaud.
Republicans, Who Do You Think Is Bailing Out Your State?
New York Times
As negotiations over the next coronavirus relief package heat up, a key point of contention — perhaps the key point — is whether Congress will provide meaningful aid to struggling state and local governments.
Boiling down the politics: Democratic lawmakers favor the move. Many Republicans, including the Senate majority leader, Mitch McConnell, do not. Some in the Trump administration have suggested that withholding aid is a great way to pressure states to reopen sooner rather than later. This is both cynical and destructive. Denying states a financial lifeline, even as Washington is showering trillions of dollars on the private sector, will only exacerbate the economic devastation that Congress is trying to mitigate.
The situation is dire. The Center on Budget and Policy Priorities estimates that states could suffer a collective shortfall of $500 billion through the 2022 fiscal year. Tapping rainy-day funds and using the targeted federal aid already appropriated would still leave a $360 billion gap, the center warns, “not including the substantial new costs they face to combat the Covid-19 virus.” Local, state and territorial governments face their own funding crunches. As tax revenues plunge, costs are expected to skyrocket as layoffs and pay cuts drive more people to apply for food stamps, Medicaid and other public assistance.
The nation’s governors have petitioned Congress for $500 billion in direct funding to help address lost revenue. Without this aid, the states — which, unlike the federal government, cannot run budget deficits — will have to start slashing costs. Read: services. Read also: jobs. Lots of public-sector jobs.
As a result of the financial crisis of 2008, state and local governments shed an estimated 585,000 jobs. This time around, the pain is expected to be even more pronounced. Teachers, law enforcement officers, bus drivers and legions of others stand to get hit. In addition, the nation’s nonprofit sector, which accounts for around 10 percent of private employment, relies heavily on government grants and contracts.
With overall unemployment anticipated to crack 16 percent this month, it is in the interest of all Americans for Congress to stabilize these pillars of the economy.
Despite this, some Republicans are presenting the issue as a partisan clash, even a question of morality. Chief among them is Mr. McConnell. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations,” Mr. McConnell told the conservative radio host Hugh Hewitt in an interview last week, suggesting that the problem stemmed from fiscal mismanagement on the part of Democratic-led states such as New York, California and Illinois. “We’ll certainly insist that anything we’d borrow to send down to the states is not spent on solving problems that they created for themselves over the years with their pension programs.”
Mr. McConnell suggested that, rather than receiving additional aid, states should be allowed to declare bankruptcy. His office later issued a news release touting Mr. McConnell’s opposition to “Blue State Bailouts.”
Mr. Trump parroted Mr. McConnell’s argument in a Monday tweet, dialing up the partisan rhetoric, as is his way: “Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help? I am open to discussing anything, but just asking?”
The idea of thrifty, self-sufficient red states propping up blue states has long been a Republican canard. In 2017, Paul Ryan, who was the House speaker, trotted out this line while pushing to repeal the exemption for state and local taxes as part of the tax package. (Ultimately, the deduction was merely capped.) “States that got their act together are paying for states that didn’t,” he claimed, and promised that his desired repeal would put an end to the rest of the country “propping up profligate, big-government states.”
This claim was wrong then, and it is wrong now. To the contrary, a 2017 Associated Press analysis noted that “High-tax, traditionally Democratic states (blue), subsidize low-tax, traditionally Republican states (red) — in a big way.”
For the past few years, the Rockefeller Institute of Government has been crunching the numbers on what Mr. Ryan might have called “maker” and “taker” states — that is, which states pay more into federal coffers than they receive in federal spending, and vice versa. This year’s report found that, over four years, New York businesses and residents paid in $116.2 billion more than the state received back. New York, in fact, has the “least favorable balance of payments of any state in the nation.”
Of the 20 states with the most favorable balance of payments, a handful, at most, are blue. For every dollar in federal taxes it pays, New York receives 91 cents in return, behind only Connecticut (which receives 84 cents for each dollar), New Jersey and Massachusetts (which both receive 90 cents per dollar). Mr. McConnell’s home state, Kentucky, by contrast, rakes in $2.41 for every tax dollar it sends Washington.
In other words, Mr. McConnell’s state is effectively subsidized by blue states like New York and New Jersey. Gov. Andrew Cuomo of New York reminded Mr. McConnell of this during his Thursday news briefing. “Senator McConnell, who’s getting bailed out here?” the governor demanded. “It’s your state that is living on the money that we generate.”
Mr. McConnell took heat even from some members of his own party. “The last thing we need in the middle of an economic crisis is to have states all filing bankruptcy all across America and not able to provide services to people who desperately need them,” Maryland’s governor, Larry Hogan, the current chairman of the National Governors Association, told Politico in an interview on Thursday.
Representative Peter King, a New York Republican, took particular exception to Mr. McConnell’s suggestion that states were looking for “free money.” “To say that it is ‘free money’ to provide funds for cops, firefighters and health care workers makes McConnell the Marie Antoinette of the Senate,” Mr. King tweeted.
The Treasury Department last week also issued rules requiring states to use funding from the previous relief package to cover only “necessary expenditures due to the public health emergency” and not to offset declining revenues. This is a step in exactly the wrong direction.
Allowing state budgets to collapse is shortsighted and counterproductive. Democratic lawmakers need to hold the line in this round of relief negotiations.
McConnell plays politics with coronavirus aid to states
Senate Majority Leader Mitch McConnell’s suggestion that states declare bankruptcy rather than receive a “bailout” from the federal government made even members of his own Republican Party blanch at its moral bankruptcy.
Rep. Peter King, R-Long Island, blasted McConnell as “the Marie Antoinette of the Senate,” referring to the French queen who was said to suggest to peasants without bread, “Let them eat cake.”
McConnell cast federal aid to states as “blue state bailouts,” the kind of cold political calculation that is his hallmark. Such naked partisanship has no place during a national crisis. The people in New York or Illinois or Michigan or California, who are suffering the worst of the coronavirus pandemic, are no less worthy of help from their government because they voted for a Democratic governor.
These are the United States of America, right?
Congress has so far passed coronavirus relief packages to help individual Americans, the unemployed, states and local governments, small businesses, airlines, colleges and hospitals. The National Governors Association is asking Congress for $500 billion to shore up state finances decimated by business closures and public health expenses. This was not included in the aid bill passed last week, and McConnell is skeptical of putting it into a fifth bill.
On Friday, Cuomo dared McConnell to turn his talking point into legislation allowing states to declare bankruptcy, and he dared President Donald Trump to sign it. The governor predicted that would send a disastrous signal to financial markets and to the world, and set back the nation’s economic recovery from the coronavirus pandemic.
If McConnell were to put forward such legislation, it would box in Republican members of Congress in purple and blue states, including Rep. John Katko, R-Camillus. Republican senators facing re-election in November have been silent.
On the facts, McConnell does not hold the high ground, either. New York contributes $116 billion more to federal coffers than it gets back in federal aid, while McConnell’s state of Kentucky takes out $148 billion more than it puts in. Who’s getting a bailout, Senator?
Critics who suggest that “blue states” such as New York should have salted away money in a rainy day fund to cover these expenses are fooling themselves. There isn’t a rainy day fund big enough to support this level of economic collapse.
State and local governments on the front line of this disaster shut down their economies to save lives. Unlike the federal government, they cannot print their own money to make up for the shortfall in tax revenues that resulted. They are major employers in their communities and provide for public safety, public health and public schools. Forcing them into bankruptcy would cause even more economic pain than their residents are already bearing.
McConnell ought to stop seeking political advantage from the coronavirus crisis and get help to all Americans who need it.
New York election cancellations go too far
The Auburn Citizen
With so much news happening every day during the coronavirus pandemic, it can be easy to lose track of time. But it was less than a month ago that Gov. Andrew Cuomo took two important steps to help preserve a fundamental democratic process: elections.
On March 28, the governor used his emergency power to postpone the presidential primary and special elections, including one for a vacant central New York state Senate seat that includes a large part of Auburn. The move to consolidate this election day with the federal primary in late June was aimed at giving state and local elections officials more time to come up with the safest way to allow people to cast ballots.
To that end, another important measure came on April 8, when the governor declared anyone could vote by absentee ballot in the late June elections. No one would be required to vote in-person at a public polling place.
But last Friday night, without any warning, Cuomo canceled the special elections as part of a new executive order. And on Monday, state elections commissioners canceled the presidential primary, citing the fact that Bernie Sanders, while still on the ballot, had suspended his campaign.
What they didn’t cancel are other primaries, including two big ones for voters in Cayuga County. Democrats will still be choosing a nominee for the 24th Congressional District. And Republicans will be picking a candidate for the state’s 126th Assembly District.
Despite a substantial overlap between those districts and the state’s 50th Senate District, where that central New York special election was going to take place, the governor decided it was best to keep that seat vacant by canceling the vote.
It’s a move that doesn’t add up. If we can safely vote for congressional and Assembly candidates at the end of June, there’s no reason not to cast ballots for Senate. The presidential primary cancellation similarly lacks logic, because elections in other races will be happening all over the state.
And unlike the early April Wisconsin election, with its debacle of people standing in long lines amid the pandemic, an unlimited absentee voting solution is ready to implement.
The result of this decision with respect to the special election is that it prolongs the absence of representation in the state Senate for residents of the 50th Senate District. Yes, there is a small staff in the office that can help with questions, but the clout of a senator can’t be replaced.
At a time when Auburn and Cayuga County school, government and health care officials are fighting for state support, that voice has been missing. At a time when residents are trying to navigate a glitch-filled unemployment insurance system, the assistance that could come from a state senator’s call or letter to Albany is not available. And with some potentially huge fiscal decisions ahead for New York state, there will now be no voice for this district into the late fall.
For people who will already be voting in other elections in a couple of months, that’s just not fair.
A Federal Stimulus Bill Is Needed To Fund Essential Operations
This week will be a pivotal week for school districts trying to build their budgets.
Robert Mujica, state budget director, will release his first of four 2020 examinations of state revenues and expenses, an analysis that will likely trigger a first round of state spending cuts. Gov. Andrew Cuomo said earlier this week that schools could see state aid cuts as high as 20%.
Of course, that could change in the next five days if the state sees a large infusion of revenue through the fourth phase of federal stimulus that is being debated in the halls of Congress. The presence of massive amounts of aid to state and local governments is muddied somewhat by Senate Majority Leader Mitch McConnell’s comments that the federal government shouldn’t take on more debt to rescue states that have given too much to public employee unions in the past.
“There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations,” McConnell said.
Mr. McConnell fails to mention that we’re borrowing money from future generations because politicians from both parties spend taxpayer money unnecessarily on frivolous programs, including throwing money at companies that didn’t necessarily need help in the last federal stimulus bill while small companies found themselves shut out of business aid programs.
The federal debt is certainly a concern, and ordinarily McConnell would be correct in his analysis. But Gov. Andrew Cuomo isn’t asking for a union bailout. He’s asking for an infusion of cash so that necessary aid for things like schools can be delivered as promised.
Ask any parent struggling to teach their child in place of trained educators if they view state aid to schools as a union bailout or necessary spending to make sure schools open with a full compliment of trained teachers. We’re pretty sure after six weeks of teaching their child, they would give teachers anything they want.
Perhaps McConnell and his fellow Republicans can come up with conditions for accepting the federal dollars so that the federal money is last-resort spending to cover shortfalls driven by COVID-19 shutdowns but not to be used for new spending. It would make sense for the federal government to want to see before writing a check what the states want to use the money for. Cuomo has blanched at writing blank checks to local municipalities in the past, so he should understand why the federal government would have reservations. One could discuss structuring some of these items as loans based on expected tax receipts. Perhaps there could be some required efforts on the parts of states to show they are trying to cut spending rather than simply run to the federal government for additional money. Surely there is some fat in New York’s recently enacted budget that could be cut to meet such a requirement. Maybe, Republicans could require every child to write a thank-you letter to Mr. McConnell for his benevolence in approving money so that teachers can remain on the job.
All we know is that right now is not the time for political talking points. A federal stimulus bill must be approved that spends no more than necessary, but enough to make sure that essential operations like schools and hospitals are funded.