Aid the States, Save the Economy

In a previous post we argued that more money should have been give to the states to fight off economic sluggishness. This article from Daily Kos lays it out strong rational and solution in a way we never could.

What Obama seems to be ignoring is the united front of Republicans working at the federal and state levels to sabotage recovery while pursuing their political orthodoxy. The layoffs at the state level, unchecked, will not be superseded any time soon by hiring gains in the private sector, and there is somewhat of a symbiotic relationship between the two. Developing some kind of direct state aid via additional stimulus is imperative, despite the general public's inability to see how it actually helps them.

Avenging Angel writes:

The Washington Post, the New York Times,Bloomberg,and the Wall Street Journal among others began ringing the alarm bell late last year, warning that state and local governments were fiscal facing a fiscal triple-whammy. Even with spending now well below 2008 levels, the downturn-induced drop in revenues and increased demand for social services coupled with the looming end of the American Recovery and Reinvestment Act (ARRA) is producing yawning gaps in state budgets. And the states, all but one of which must balance its budget each year, are responding with sharp spending cuts, massive layoffs, deferred payments to state employee pension funds and, in some cases, tax hikes.

(Daily Kos)

The author proposes a voluntary state aid/loan fund with lenient repayment schedules to help stem the tide of layoffs, and it's exactly the right prescription.

It's much harder at the federal level to direct money to where it should go; states can handle that task better and faster, and it frees the government from having to micromanage in matters where its policy effect might be minimal or distorted as it trickles down to application.