coronavirus stimulus

McConnell Calls General Relief for States ‘Blue-State Bailouts’

Mitch McConnell is worried that states might be too generous to their employees. Photo: Saul Loeb/AFP via Getty Images

Once upon a time, the Republican Party, in order to signal its support for decentralized government, made unrestricted fiscal assistance to state and local government a signature initiative. Indeed, when Richard Nixon introduced General Revenue Sharing — no-strings aid for state and localities, which he called “a New American Revolution” — it was the centerpiece of his 1971 State of the Union.

By the time General Revenue Sharing died in 1986 in the midst of one of that decade’s chronic federal budget crises, Republicans were more enamored of federal spending restraint than intergovernmental relations, though they did generally retain a relatively stable commitment to more flexible forms of federal-to-state aid — like the block grants they often have proposed to dump some unwanted federal responsibility like health care for the poor onto another level of government.

Right now state and local governments are dealing with most of the front-line responsibilities for battling the coronavirus at a time when the economic collapse is destroying their revenue bases; unlike the Feds, they can’t just print money, and most toil under balanced-budget requirements. So they could use some no-strings help, but the party of Richard Nixon is hostile to the idea, even though Republicans completely control 21 states and share power in 14 others.

Democrats had to champion aid to state and local coronavirus efforts as part of the big $2.2 trillion coronavirus stimulus bill enacted nearly a month ago, and were able to secure $150 billion. With governors of both parties calling for $500 billion for states alone prior to passage of the “interim” stimulus bill that has passed the Senate and is pending in the House, Democrats went to the well again, but only got permission for states to use money unobligated from the first pot of money for general fiscal purposes. Donald Trump tweeted support for doing something for the “lost revenues” the states have experienced in the next stimulus bill — which is presumably the final one, at least before the election. But now Mitch McConnell is pumping the brakes and complaining about the profligate states and how they don’t deserve help:

In an interview with conservative pundit Hugh Hewitt, McConnell became more specific and adamant in his complaints about the unworthiness of the states, as The Hill reports:

McConnell, during the Tuesday interview, appeared wary, saying that there needed to be a “broad discussion” within the Senate Republican conference, where lawmakers warned that including state and local funding in the “interim” bill likely would have prevented it from clearing by unanimous consent. 

“You raised yourself the important issue of what states have done, many of them have done 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. 

This is a favorite complaint of conservatives who don’t like public employees — particularly unionized ones — to begin with, and are likely enjoying the devastation the bear market has wrought on public pension funds. In conversation with Hewitt, McConnell even raised an idea he would never endorse with respect to anyone in the private sector:

“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.

Apparently the idea that bankruptcy would inflict some pain on public employees and Democratic pols alike (who would face much higher future borrowing costs) made it attractive to the saturnine Kentuckian.

McConnell’s remarks should mostly be understood as an ideological signal that any further federal aid for states and localities will be narrowly conditioned and vetted to ensure it does no particular favors to Democratic elected officials or to the employees whom Democrats often defend. The days of GOP beneficence toward states on the grounds of federalism are clearly over. Governors, legislators, mayors, and county commissioners who urgently need help had better be ready to satisfy Mitch that they aren’t doing too much good.

McConnell Calls General State Relief ‘Blue-State Bailouts’