Critics say Congress Shouldn’t Give States More Aid, but Must Give Them More Flexibility
Article from For Liberty by Norm Leahy.
Congressional negotiations over a fresh round of coronavirus relief includes a competing version of aid to state and local governments. Critics say the House and Senate should drop those plans because they will do much more harm than good.
The House of Representatives has proposed $1.3 trillion in aid to state and local governments, the bulk of which is “general aid” to help close budget gaps. The Senate version offers no such aid to governments but does propose $105 billion for education, including $70 billion on an elementary and secondary school emergency relief fund.
The Cato Institute’s Chris Edwards says none of it makes sense and that the money Congress has already sent to states would cover their budget shortfalls – if the feds would allow it:
Federal aid to the states is harmful for many reasons. When tax revenues fall during recessions, state governments should tap their rainy day funds, cut low‐value programs, freeze salaries, furlough workers, postpone new initiatives, and sell assets. The federal government can help by repealing rules that block the states from cutting spending on activities that receive federal money. Millions of American businesses are tightening their belts, so why not governments? Today’s lean budget climate is an opportunity to improve efficiencies in state and local agencies.
Even if some crisis aid to the states made sense, further aid would be too much. The aid already passed would mainly cover budget gaps if states were allowed maximum flexibility with the funds.
Edwards also notes that large portions of state and local budgets will do just fine regardless of economic conditions – thanks to federal spending already baked into the budget cake:
The media has focused on how much state tax revenues might fall, but even if the federal government provided no crisis aid, the large part of state budgets funded by federal dollars would chug along with steady increases.