January 27, 2009

Mitch McConnell's Plan to Worsen the Economy

Paul Krugman wrote a compelling column in December called 50 Herbert Hoovers, about how state governments are cutting back on spending even though they're making the economy worse by doing so.  He wrote,

No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession. The Obama administration will put deficit concerns on hold while it fights the economic crisis. But even as Washington tries to rescue the economy, the nation will be reeling from the actions of 50 Herbert Hoovers — state governors who are slashing spending in a time of recession, often at the expense both of their most vulnerable constituents and of the nation’s economic future.

 Why are they doing this?

State and local government revenues are plunging along with the economy — and unlike the federal government, lower-level governments can’t borrow their way through the crisis. Partly that’s because these governments, unlike the feds, are subject to balanced-budget rules. But even if they weren’t, running temporary deficits would be difficult. Investors, driven by fear, are refusing to buy anything except federal debt, and those states that can borrow at all are being forced to pay punitive interest rates.

We have evidence right here in Washington State, where the government is being forced to cut education, public safety, health care, and other critical services. And there are cuts at the local level too. The Seattle school board is closing schools, and King County has eliminated prosecutors, police, and workers in the courts system and elsewhere. Even those cuts were alleviated by raiding funds set aside to maintain infrastructure and by requiring County employees to take a two week furlough. The Seattle Times quoted Superior Court Presiding Judge Bruce Hilyer, who said "if the courts take further cuts, 'The criminal-justice system is going to look like a train wreck.'"

These state and local cuts are exactly what the US economy doesn't need right now.  And only the Federal government can help.

But here comes Republican Senate Minority Leader Mitch McConnell, who wants to take grants to states out of any economic stimulus package.  In an interview with NPR's Renee Montagne,

McConnell said the government should consider offering financial help to states in the form of loans, instead of grants. That approach could have an added benefit, he said: "I think they'd be more careful in how they spent it."

McConnell is completely out of touch if he thinks states are going to spend this aid profligately.  They just want to keep schools open, to keep professors employed, to maintain infrastructure, and to protect public safety.  Any fat was cut out in much earlier rounds of budget planning.

But McConnell's not alone—the Republican party position is to oppose direct aid to states. Just this past Sunday, House Minority Leader Boehner cited this aid as a key reason he plans to vote against the stimulus plan in its current form.

So what's McConnell's big idea?  What's Boehner's solution?

You guessed it.  Obama's $300 million middle class tax cut is not enough for McConnell and Boehner. They want more tax cuts for the rich, and less stimulus.  Hasn't anybody told these guys that we already tried that for eight years?  Have they seen the results?  I thought the Republican leadership had realized they need some new ideas if they want to stay relevant.  You would not know it to listen to McConnell and Boehner.

By Will Friedman in Politics | Permalink  | 


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