News & Politics

A Trillion Dollars More to Bail Out States? Not Likely, Says McConnell

House Speaker Nancy Pelosi of Calif., left, and Senate Majority Leader Mitch McConnell of Ky., right, bump elbows as they attend a lunch with Irish Prime Minister Leo Varadkar on Capitol Hill in Washington, Thursday, March 12, 2020. (AP Photo/Susan Walsh)

In the $2 trillion stimulus bill passed by Congress last month, states received $150 billion to help with coronavirus-related costs.

But governors from coast to coast are saying they need more — a lot more — in order to make up the massive holes in their budgets because of lost revenue and increased public aid.

Illinois Governor J.B. Pritzker recently sent a letter to Congress asking for $41 billion, including $10 billion to bail out the Illinois pension system. Cities and states are both crying for help. New York City Mayor Bill De Blasio is asking Washington to help make up the $7.4 billion budget shortfall expected because of the coronavirus pandemic.

You can see where this is headed. Democrats in Congress are talking about the “next” coronavirus relief package directed at the states. The numbers they’re throwing around are scary — half a trillion to start. And that doesn’t include additional aid for testing and contact tracing — two hugely expensive undertakings.

At some point, someone is going to have to say “enough!” And Mitch McConnell, the Republican leader in the Senate, may be just the man to do it.

McConnell thinks that Congress has to start looking rationally at the funding problems. He says he would be in favor of changing the law so that states could declare bankruptcy.

The Hill:

McConnell, during an interview with radio host Hugh Hewitt, said any additional federal assistance to state and local governments needed to be “thoroughly evaluated.”

“I would certainly be in favor of allowing states to use the bankruptcy route. It saves some cities. And there’s no good reason for it not to be available. My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that. That’s not something I’m going to be in favor of,” McConnell said.

This is a crisis, yes. But that doesn’t mean Congress should give states a blanket bailout that solves other fiscal problems that have been present long before the coronavirus appeared.

“You raised yourself the important issue of what states have done, many of them have done it to themselves with their pension programs. 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, after Hewitt floated Illinois, California and Connecticut as examples of states that have overly generous benefits for public employees.

“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 program,” McConnell added.

Those howls of rage you hear are from public employee unions that might have to go through a bankruptcy proceeding at the state level that would almost certainly alter the benefits they negotiated with the states.

And it’s not just pensions. Many states have structural deficits where their budgets might balance on paper, but are several billion dollars in the hole. Should the government solve all of a state’s money problems during this crisis?

The governors looking for a bailout never talk about cutting their budgets or raising taxes. They want Big Daddy Washington to come to the rescue. After all, “We’re all in this together,” right?

Right now, it’s the politicians versus the taxpayers. And the taxpayers are losing.

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