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You are here: Home / How to rescue the recovery

How to rescue the recovery

by Libby Spencer|  July 10, 20111:29 pm| 41 Comments

This post is in: The Dirty F-ing Hippies Were Right

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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.

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41Comments

  1. 1.

    PaulW

    July 10, 2011 at 1:31 pm

    The GOP response: “But it’s – GASP – SPENDING MONEY. How DARE you use Reagan’s name to SPEND MONEY!!! Blaspheme!

  2. 2.

    Omnes Omnibus

    July 10, 2011 at 1:32 pm

    I don’t see any reason why it wouldn’t work.

    Umm, because it makes sense, might do some good, and could help people therefore the Congressional GOP would never allow it to happen.

  3. 3.

    Biff Longbotham

    July 10, 2011 at 1:37 pm

    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.

  4. 4.

    mellowjohn

    July 10, 2011 at 1:38 pm

    “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.

  5. 5.

    meander

    July 10, 2011 at 1:39 pm

    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:

    From the start, 30/10 won the support of the Obama administration and most of the key congressional Democrats involved in making transportation policy, particularly Sen. Barbara Boxer (D-Calif). The midterm elections, however, not only brought the Republicans to power in the House but also changed the conceptual landscape when it comes to federal spending initiatives: Anything resembling an earmark is beyond the pale; any new spending is suspect.
    . Like most of the country’s mayors, Villaraigosa is keenly aware of local government’s simultaneous need to create jobs and invest in future growth. He has used that shared sentiment – along with President Obama’s observation that 30/10 provides a national template – to build a bipartisan coalition behind America Fast Forward. In an era when bipartisanship is notoriously elusive, this proposal already has been endorsed by both Thomas J. Donohue, president of the U.S. Chamber of Commerce, and Richard Trumka, president of the AFL-CIO.

  6. 6.

    barkleyg

    July 10, 2011 at 1:39 pm

    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!”

    Shorter version: PARTY over Country!

  7. 7.

    Citizen Alan

    July 10, 2011 at 1:42 pm

    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.

  8. 8.

    agrippa

    July 10, 2011 at 1:42 pm

    The idea is far too sensible for it to be taken seriously.

  9. 9.

    WereBear

    July 10, 2011 at 1:43 pm

    This sounds made of brilliance. How can the Republicans vote against THE REAGAN ACT?

  10. 10.

    agrippa

    July 10, 2011 at 1:45 pm

    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.

  11. 11.

    Scamp Dog

    July 10, 2011 at 1:47 pm

    You need to make sure it’s proposed by a Republican–anything a Dem likes is suspect to them.

  12. 12.

    sixers

    July 10, 2011 at 1:48 pm

    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.

  13. 13.

    arguingwithsignposts

    July 10, 2011 at 1:53 pm

    Ahem:

    As for compromise: “Democrats want to spend more; Republicans want to spend less,” Norquist said. “What would a compromise look like? If you spend more, the Democrats just won… Spending more and raising taxes a little is not a compromise, it’s called losing.”

    Until someone in the GOP tells Grover Fucking Norquist to go get fucked with a Rusty Pitchfork(tm), ain’t gonna happen.

  14. 14.

    jeffreyw

    July 10, 2011 at 2:11 pm

    Friends don’t let friends buy puppies drunk.

  15. 15.

    Lolis

    July 10, 2011 at 2:13 pm

    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.

  16. 16.

    Moonbatting Average

    July 10, 2011 at 2:14 pm

    USA!! USA!! Great job, ladies!!

  17. 17.

    Lolis

    July 10, 2011 at 2:14 pm

    Also, if they made the funds available to individual cities, that could get around some Republican governors.

  18. 18.

    Yutsano

    July 10, 2011 at 2:16 pm

    We sure need it in Texas.

    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!

  19. 19.

    Roger Moore

    July 10, 2011 at 2:19 pm

    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.

  20. 20.

    bill

    July 10, 2011 at 2:21 pm

    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?

  21. 21.

    Bobby Thomson

    July 10, 2011 at 2:24 pm

    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.

  22. 22.

    bystander

    July 10, 2011 at 2:25 pm

    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:

    Sadly, the two-year tax cut compromise inked by President Obama and Congress in December will drain over $800 billion from the United States Treasury over the next two year. (That’s why the projected deficit for this fiscal year jumped last month by $400 billion to $1.5 trillion.) But when those budget-busting tax cuts expire at the end of 2012…

    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?

  23. 23.

    gene108

    July 10, 2011 at 2:26 pm

    Or as Jon suggests, the alternate title could be “Recovery and Economic Assistance for Governments Around the Nation” – THE REAGAN ACT.

    I LOVE IT!

    The REAGAN Act!

    Two thumbs up to a great acronym.

  24. 24.

    bystander

    July 10, 2011 at 2:28 pm

    *sigh*

    My kingdom for preview.

    Apologies…

    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…

    …should not be italicized. Shoulda used the buttons.

  25. 25.

    RandyH

    July 10, 2011 at 2:29 pm

    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.

  26. 26.

    Dennis SGMM

    July 10, 2011 at 2:38 pm

    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.

  27. 27.

    Bill H.

    July 10, 2011 at 2:56 pm

    providing loans to those states desiring them

    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.

  28. 28.

    Bobby Thomson

    July 10, 2011 at 2:58 pm

    They can sell bonds, but they cannot borrow money.

    Selling bonds is borrowing money.

  29. 29.

    JGabriel

    July 10, 2011 at 3:10 pm

    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.

    .

  30. 30.

    Martin

    July 10, 2011 at 3:11 pm

    Selling bonds is borrowing money.

    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.

  31. 31.

    Emerald

    July 10, 2011 at 3:25 pm

    Mellowjohn #4:

    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.

    Win.

  32. 32.

    Another Bob

    July 10, 2011 at 3:37 pm

    I don’t see any reason why it wouldn’t work.

    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?

  33. 33.

    Nutella

    July 10, 2011 at 3:58 pm

    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?

  34. 34.

    Rick Taylor

    July 10, 2011 at 4:04 pm

    Obviously, Republicans will not support any measure that might help the recovery, until a Republican is back in the white house.

  35. 35.

    Suffern ACE

    July 10, 2011 at 4:24 pm

    @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.

  36. 36.

    bill

    July 10, 2011 at 4:43 pm

    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!

  37. 37.

    Sebastian Dangerfield

    July 10, 2011 at 5:43 pm

    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.

  38. 38.

    Steaming Pile

    July 10, 2011 at 8:47 pm

    #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.

  39. 39.

    Donut

    July 10, 2011 at 10:47 pm

    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.

  40. 40.

    Jado

    July 11, 2011 at 2:48 pm

    “BAILOUT!!

    SOCIALISM!!

    YOU KEEP YOUR BIG GOVERNMENT HANDS OFF MY GOVERNMENT!!!”

  41. 41.

    Marginalized for stating documented facts

    July 11, 2011 at 8:08 pm

    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.

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