Senate Majority Leader Mitch McConnell says states with budgets devastated by the pandemic should consider declaring bankruptcy rather than counting on federal help. This view is more than just unfair — it’s a recipe for worsening the economic crisis.
State governments have been on the front lines in the battle to save lives. An earlier federal aid package to states was restricted only to new expenses directly related to the pandemic. To continue that approach ignores the economic emergency caused by plummeting state tax revenues, which threatens to necessitate cuts in crucial state-led areas like education, health and housing. Cuts in those areas would ripple through an already-weakened economy, making recovery that much more difficult.
Yet McConnell, in a series of interviews last week, suggested that rather than have the federal government help keep those states’ budgets afloat, current law should be changed to allow them to declare bankruptcy. This shortsightedness by the top Republican on Capitol Hill is largely driven by partisanship, as indicated by his false claim that federal help would represent a “blue-state bailout.”
In fact, McConnell’s own home state of Kentucky, as well as other Republican-led states like Missouri, will need help if they are expected to continue responding to the emergency while still providing the basic services that states normally provide. It’s true that some states had pre-pandemic fiscal problems stemming from irresponsible pension management and other failures — Illinois, of course, is a poster child for such criticism. But what does that have to do with a shutdown-imposed crisis that’s suddenly draining state resources while cutting off tax revenue?
McConnell’s myopic focus on previous state finances fails to take into account the fact that many of the red states he implies are fiscally responsible have in fact been carried by their blue-state neighbors for years. Lists of net “takers” from the federal government — states that receive more money from Washington than their taxpayers send there — are heavy with red states like Mississippi, Alabama and, yes, Kentucky. “Givers,” meanwhile, are led by blue states like New York, New Jersey and Illinois. How does that fit into McConnell’s lectures about state responsibility?
And how, exactly, does his concern about further inflating the federal deficit match with his own central role in exploding that deficit by an estimate of almost $2 trillion with a 2017 tax cut that primarily benefited the wealthy? Talk about irresponsible.
The instinct by McConnell’s party toward a federalist approach isn’t helpful in a crisis that demands a unified national response. McConnell’s personal instinct toward injecting partisan positioning into every decision makes it worse. The next aid package should include funding to offset states’ tax-revenue losses so they can continue to offer not just the emergency services needed to fight the virus, but the ordinary services upon which their citizens rely.