I didn’t get around to linking to this earlier and I think it really deserves more attention. It’s a long and wonky post, but to the extent that I understand this stuff, I think Jon Perr has a brilliant plan:
So here is a proposal to rescue the states and protect the fragile American economy, all with only a small impact on the federal government’s long-term debt. Establish a $200 billion, two-year federal fund providing loans to those states desiring them to prevent further layoffs and to help pay for the rising, recession-induced costs of Medicaid, unemployment and other essential services. Call it the State Assistance Fund (SAF).
Or as Jon suggests, the alternate title could be “Recovery and Economic Assistance for Governments Around the Nation” – THE REAGAN ACT.
It’s purely voluntary and the states get to decide how and where to spend the money. The blustering, small government hypocrites can opt out on “principle”, while the smart governors could use the cash to stablize their budgets. I don’t see any reason why it wouldn’t work.
PaulW
The GOP response: “But it’s – GASP – SPENDING MONEY. How DARE you use Reagan’s name to SPEND MONEY!!! Blaspheme!
Omnes Omnibus
Umm, because it makes sense, might do some good, and could help people therefore the Congressional GOP would never allow it to happen.
Biff Longbotham
Two possibilities here:
1) Wouldn’t work–makes too much sense.
2) Would work (too well)–party out of power would scuttle plan.
Either way, it ain’t gonna happen.
Next topic.
mellowjohn
“I don’t see any reason why it wouldn’t work.”
because too many of the small-government hypocrite governors would grudgingly (nudgenudge, winkwink) take the money and pass it out as tax cuts to the wealthy.
meander
A great idea, but it requires common sense and putting the needs of the people ahead of the needs of the party, so the Republicans won’t go for it.
As long as we’re talking about good ideas that won’t happen, let’s look at a nationwide infrastructure advancement program. Los Angeles has been touting one called the “30/10 plan.” In recent years, L.A. County voters have approved sales tax increases that are dedicated to improved transportation (both roads and public transit). The tax surcharges will run for 30 years, but LA needs better transportation infrastructure and people need jobs now. So the idea is to structure a loan from the federal government that would essentially advance the 30 years of taxes to the County over a period of 10 years so the work can be accelerated, and then the federal government would be paid back over 30 years with the tax stream from the county.
Here’s something from an Op Ed in the LA Times:
barkleyg
Republican Governor:
“This is a “small” gesture from the Large, Mean Federal Government to help the citizens of our state, but since it would add to the “National Debt”, I have to put party over citizenry and NOT accept this Trojan Horse!”
Citizen Alan
This is such a brilliant idea that it can’t possibly pass. Seriously, I’m tired of hearing about brilliant ideas. There’s nothing that can be done so long as a cabal of treasonous psychotics who actively want to destroy America control the House and have a filibuster-proof majority in the Senate.
agrippa
The idea is far too sensible for it to be taken seriously.
WereBear
This sounds made of brilliance. How can the Republicans vote against THE REAGAN ACT?
agrippa
Citizen Alan:
I agree.
I think that we are at the point where matters will just have to play out. “Play the tape to the end.”
Then, someone, somewhere, will actually begin to think. I do not know who, where or when.
Scamp Dog
You need to make sure it’s proposed by a Republican–anything a Dem likes is suspect to them.
sixers
Is the writer of this unaware how against new spending the GOP is at this moment? Have you just woken up from a coma? Great idea though.
arguingwithsignposts
Ahem:
Until someone in the GOP tells Grover Fucking Norquist to go get fucked with a Rusty Pitchfork(tm), ain’t gonna happen.
jeffreyw
Friends don’t let friends buy puppies drunk.
Lolis
I have thought state aid would be the most popular stimulus for months but nobody in Congress or the WH has proposed it. We sure need it in Texas. I wish stimulus was part of the debt deal. I think we should trade stimulus for the revenue increases. We should get 300 billion in stimulus funds.
Moonbatting Average
USA!! USA!! Great job, ladies!!
Lolis
Also, if they made the funds available to individual cities, that could get around some Republican governors.
Yutsano
What? Governor Goodhair don’t need no federal assistance balancing is budget! No siree! He did it all on his lonesome and the old fashioned way: by robbing the most vulnerable and screwing education!
Roger Moore
I think it would have to be structured as grants rather than loans. Most states are required to balance their budgets, so they legally can’t borrow money even on very generous terms.
bill
I don’t remember anybody electing Grover Norquist to anything. So what is this mystical power he has over Congress? Does he have photos? Kidnapped hostages?
Last I heard he was a friend of Jack Abramoff; can’t anybody get anything good on him just to shut him the fuck up and maybe get him out of the country?
Bobby Thomson
First, aid to the states was a significant piece of the 2009 stimulus before the Mainers got to it. There’s no reason to think Collins will be any more reasonable today than she was then. Second, if all you’re talking about is a loan at market rates, what’s in it for the states? They can borrow money today. (They can also raise taxes today.) It’s a gamble that they will have the money to repay the loans when they come due, and I don’t see anyone willing to take that bet. Third, Republicans won’t do it because sewshullism! and Democrats won’t do it because it’s just kicking the can to a future administration.
bystander
If only I could balance my pessimism of the intellect with even a degree of optimism of the will, suggestions like this one would be utterly welcome for that day in the future when they might be well received, even if they can be effected now.
Why wouldn’t it work? This could be one problem. The only requirement is to repay the U.S. Treasury within 10 years. Assuming the states could recover sufficiently to repay these – even if interest free – loans, there’s probably no problem at all. But, do we imagine that as heinous as our economic collapse is that recovery to this level is likely in 10 years? Keeping state, county and municipal workers in their jobs surely helps states slow the states’ downward slide, but the real economy has to recover alongside this kind of effort, in order for it to work. I just don’t see anything on the horizon to warrant that kind of optimism. Even if the economy redounded today, we are years from being recovered. Recovered enough to repay these loans? Personally, I wouldn’t want to bet on it.
And, on the federal side, Jon Perr imagines:
I just don’t see that happening either. It’s a campaign-able issue, for sure, but, politically, how does Perr see that happening? Are the Republicans all getting psychiatric treatment, our elite a conscience transplant, our media rediscovering its first amendment defense, and campaign finance being reformed (or, Citizen’s United being constitutionally amended away) by December 2012?
gene108
I LOVE IT!
The REAGAN Act!
Two thumbs up to a great acronym.
bystander
*sigh*
My kingdom for preview.
Apologies…
…should not be italicized. Shoulda used the buttons.
RandyH
The only problem here is that they will be expected to pay the money back, starting in a couple of years. With state and local budgets being slashed due to lower than expected property and sales taxes, how can they be sure that the revenues will grow back to where they ought to be by then? Their local constituents may consider participating in such a loan program as irresponsible.
Dennis SGMM
That $200 billion figure sounds good, but were’s money for the states other than California? I kid, and I’m a Californian.
My only problem with the plan, other than the fact that the R’s will figure out some way to characterize it as a tax increase (Along with clouds, the color Vermilion, igneous rocks, etc.) is that the two year window may be a bit too short. If currently xash strapped states have to face substantial loan repayment and there isn’t a full-blown recovery by then they find themselves in worse shape than when they started.
Bill H.
Don’t see why it wouldn’t work? Because states cannot operate with a deficit, and borrowing money to operate is a defacto deficit. They can sell bonds, but they cannot borrow money.
Bobby Thomson
Selling bonds is borrowing money.
JGabriel
Perr probably knows more about policy than I do, so I’m hesitant to second guess his numbers, but …
Don’t $200b and and 2 years seem a little on the low side? I like the idea of State Assistance Fund, but it seems like it should be more on the scale of a $500b fund for a period of 3-5 years.
Also, given the number of Republican governors who tried to turn down (free!) stimulus money, I suspect an even larger number would refuse to partake in a loan program.
ETA: Remember, the Godawful Old Pricks want an economic collapse — so they can blame it on Obama & Democrats.
.
Martin
Yes, but the state doesn’t control who they’re borrowing from, nor do they control the rate.
IOW, the promise to buy up $200B in state bonds doesn’t do anything for the states that the states can’t already do now by issuing $200B in bonds. If the states want a preferred rate and bondholder (the feds) I don’t think that’s something that they can influence on their end. Basically, there’s no way to pair the two sides together into a relationship favorable to the states.
The other way to do it would be for the feds to give $200B in grants to the states (by application) with some clawback provision in the future that amounted to a loan repayment. That’d work in the states’ interests but you’d never get Congress to not fuck with it. They’d all treat it as an effective state-level tax cut, fight like hell for their state to get all of it, and then once granted, eliminate the clawback leaving the feds on the line for the whole amount.
Emerald
Mellowjohn #4:
Win.
Another Bob
Not to belabor the point, but why isn’t Obama coming up with creative, helpful ideas like this that have a two-fer of sticking it to Republican hypocrites? Why do we get hand-wringing over “out-of-control government spending” and trial balloons about gutting Social Security instead?
Nutella
Speaking of crazy governments, I can’t remember where I got this link but it is interesting. Could the Chinese politicians be even more dedicated to economic ruin than ours are?
Rick Taylor
Obviously, Republicans will not support any measure that might help the recovery, until a Republican is back in the white house.
Suffern ACE
@Nutella: I’m not certain, although having a mall go virtually empty for 6 years and not maintaining it is not a good sign. At the same time, when you actually build stuff, even after the market corrects at least the stuff is still there. It’s not like these are those North Korean propaganda cities built near the DMZ. These might actually be supposed to work somehow.
bill
In construction, all you heard for the past five years was, concrete is expensive because the Chinese are using so much of it. Thanks, China!
Sebastian Dangerfield
The problem with this plan — which would be excellent in a sane world — is that too many state houses and governorships are in the hands of lunatics. Without attaching strings, they take the money and dole it out to private prisons and such-like and use the rest to pay down debt. Hell, even with strings, they’ll do it. Many states took the EdJobs money, employed some fraudulent accounting, and used it to pay debts rather than saving jobs. Arne Duncan just looked the other way.
Steaming Pile
#3 – That’s the thing. Private sector employment was up around 150K. Not great, but not terrible. This was almost entirely offset by state governments laying off whoever they possibly can. I’d like to see a breakdown by state on that; I bet red states were doing it more.
Donut
Why not make the fund a no-interest loan programs, set up so that states have to repay the Treasury directly? Make repayment due 10+ years in the future, and in an odd-numbered year to downplay the political posturing. This actually would be very good political cover for GOPers and the remaining blue dogs. Too bad both of those groups will likely be too stupid and self-involved to go along.
Jado
“BAILOUT!!
SOCIALISM!!
YOU KEEP YOUR BIG GOVERNMENT HANDS OFF MY GOVERNMENT!!!”
Marginalized for stating documented facts
Even better, you could make the interest rates on those loan really low-interest. As in, near zero percent.
Then you’d have something called “revenue sharing,” which was a staple of government response to recessions post-WW II until the Reaganauts devastated it.