Without federal aid, cities can’t expand the number of homeless shelters. In the photo above, we see a man sleeping on the streets of Manhattan during the COVID-19 pandemic.
Homelessness – Politics – Economy
Updated: date
Published: December 18, 2020

President Biden could outflank Sen. Mitch McConnell by teaming up with GOP governors on COVID-19 aid

Writing from Washington, D.C.

On November 18, 2020, a group of Democratic governors in the U.S. Midwest held a conference calli and agreed that they can’t fight the pandemic alone. Between now and June 2022, state and local governments could face budget shortfalls of $500 billion.ii They need help from Washington. This was not a call from what Senate Majority Leader Mitch McConnell, a Kentucky Republican, likes to refer to as mismanaged coastal elite Democratic blue states such as California and New York.

But the appeal for help for millions of desperate constituents seems to have fallen on deaf ears. McConnell dismisses such requests, saying Democrats just want “a massive slush fund for their own use.”iii

But what if Republican governors felt the same way – and said so? This is an opportunity for President-elect Joe Biden. He should meet with all the Republican governors (there are more of them than Democratic governors). The goal: uniting them to pressure McConnell to pass a bill that not only helps constituents pay the rent and put food on the table, but also replenishes pandemic-eviscerated state and local budgets. That will avoid layoffs of police, firefighters, healthcare workers and teachers, while enabling states to repair the crumbling transportation infrastructure. The cost of fixing the infrastructure will be an estimated $2 trillion, much of which cities and states must finance.iv

The benefits to Biden would be substantial. It would show his willingness to cross the aisle. That, in turn, would demonstrate a willingness to heal the country’s deep divisions. It would put the onus squarely on McConnell’s shoulders if he turned down his own party. and if Biden was successful, it would goose the economy and set him up for success instead of failure.

The impact that American cities and states have on the overall economy is significant. A March 2020 paper by the Washington, D.C., think tank Brookings Institution noted that state and local governments represent about 13% of total employment and their tax revenues account for about 9% of gross domestic product (GDP). The paper said that the Hutchins Center Fiscal Impact Measure showed cuts in state spending during the last recession between 2009 and 2012 lowered real GDP growth about 1.2 percentage points.v

In addition, according to the paper, while tax cuts helped fuel private spending during that recession and boosted growth slightly, the negative effects of government spending cuts more than offset the benefits. The bottom line: federal aid to states and localities will give the economy a needed boost. So the question for McConnell is whether he wants to make Biden a one-term president – his unachieved, stated goal for Barak Obama – or does he want to help his constituents, the nation, and Republican senators who are up for election in 2022?

Biden already has started down a bipartisan road. The day after the Democratic conference call, he met with Democrats and Republicans on the executive committee of the National Governors Association to promise coordination in fighting the pandemic. The group included Republicans Charlie Baker from Massachusetts, Gary Herbert of Utah, Larry Hogan of Maryland, Asa Hutchinson of Arkansas, and Kay Ivey of

Red states are reeling

Why would Republicans join forces with Biden? Because Republican red states are hurting every bit as much, if not more, than blue states. Moody’s Analytics found that six of the seven states expected to see the biggest drops in revenue over the next couple of years are red states that Trump won.vii

Republican red states are hurting financially every bit as much, if not more, than blue states. This electoral map shows red states and blue states, including their electoral counts, following the November 2020 U.S. presidential election.

And since red states typically have done far less than Democratic blue states to fight COVID-19, it will take longer for their economies to recover. For months, these states wouldn’t adopt mask mandates or promote physical distancing and handwashing. COVID-19 was a Democratic hoax, right? But now their delusions are haunting them as the states with fewer restrictions see big COVID-19 spikes.viii Two red states in mid-November had the highest seven-day positivity rates in the nation: Wyoming with a rate of more than 70% and South Dakota with a rate that exceeded 55%.ix

Making matters worse, red states didn’t have the best starting point. The McConnell mantra that blue states are fiscally irresponsible and, hence, need bailouts while red states are fiscally fit is a typical McConnell statement: blatantly false. 

In 2018, Forbes (owned by a conservative Republican) ran a piece that ranked state fiscal solvency based on a study by two authors, including an economist at conservative George Mason University. The bottom five did not include California or New York. They were Kentucky, Massachusetts, New Jersey, Connecticut, and Illinois. Four of the five states (all but Connecticut) had Republican governors at the time.x

Flash forward to the pandemic. Oklahoma, which has a Republican governor, faced a $1.3 billion budget deficit in the summer of 2020 after losing 18% of its revenue.xi That might not seem that large in the grand scheme of things, but the Oklahoma budget itself is not a grand scheme: roughly $8 billion.xii So the deficit was 22.5% of the entire budget.

Other red states face long-term fiscal woes that the pandemic has just aggravated. Wyoming, Alaska, and North Dakota face years of budget shortfalls as demand declines for fossil fuels – a major source of tax revenue.xiii Wyoming’s financial plight, for example, has continued to deteriorate thanks to the pandemic. In July, Republican governor Mark Gordon proposed a $250 million cut – more than 8% of the budget.xiv He came back in November with an additional $500 million budget cut – 15% – with some agencies cut by 20%.xv And that still left a $300 million shortfall.

In addition to the short-term budget issue, long-term unfunded pension liabilities dog most states. A Pew Charitable Trusts’ study a year ago ranked states by the percentage of these liabilities that they had funded. New York came in with the fourth-best ratio, 94.5%. California was in the middle with 68.9%. McConnell's Kentucky was dead last with a 33.9%. New York and California ranked better than a bunch of other red states: Kansas, Alaska, Louisiana, Indiana, North Dakota, Mississippi, and South Carolina. Someone from Kentucky has no standing to point fingers.xvi

A break in the red wall?

Some Republican governors already are asking for help from Washington. On the same day as the Democratic governors conference call, Maryland’s Hogan said: "Everyone on both sides of the aisle in Washington needs to come together and finally get this done for the American people." In April 2020, Hogan, then chairman of the National Governors Association, and New York’s Democratic governor Andrew Cuomo – the vice chairman – asked congressional leadership for direct state aid to offset the revenue shortfall.xvii

Gov. Larry Hogan (R-Maryland) has already gone on record requesting of Congress direct state aid to offset revenue shortfalls.

By September 2020, Cuomo was chairman and Arkansas’s governor Asa Hutchinson was vice chairman. Together, they issued a joint statement explaining that state solvency was critical to an economic recovery. "Every major economist, regardless of party or ideological bent, came to the same conclusion after the 2007-09 financial crisis,” the statement said. “The lack of support for state and local governments slowed the nation's economic growth for more than a decade. As we begin to recover and rebuild from the COVID-19 crisis, we can't afford to repeat the mistakes of the past – we know now that there can be no national recovery if state and local governments aren't solvent.”

Even the most recalcitrant GOP governors may hop on board. South Dakota governor Kristi Noem, for example, disputes the efficacy of masks, noting that 41 states have some kind of mandate, and cases are rising in 39 of them.xviii That is a perfect lawyer’s statement: absolutely true and utterly misleading. It ignores little facts such as the rates of increase and positivity rates that show masks are effective, if not foolproof. Sure, cases are rising in California and New York. But on November 28 2020, California’s 14-day positivity rate was 6%,xix while New York City closed schools when the city’s rate went north of 3%, and the rate in the schools was 0.16%.xx

Look overseas, Gov. Noem. Have you ever compared the COVID-19 death rates of South Korea (1.01 deaths per 100,000 as of November 29) and Taiwan (0.03 deaths per 100,000) with those of the U.S. (81.32 per 100,000)?xxi With South Dakota’s stratospheric positivity of 55%, I don’t know how she can keep a straight face when arguing that her moronic approach is as effective as what New York, California, South Korea, and Taiwan are doing.

She may not help her constituents stay well by heeding federal health advice, but she has no problem swilling from the federal trough to keep her state afloat financially. South Dakota had a $19 million surplusxxii on a $4.9 billion budgetxxiii in the fiscal year ended June 30, 2020, but only after spending about $75 million of $1.25 billion in federal COVID-19 aid. Analysts project a deficit of between $16 million and $40 million for the next fiscal year. In June 2020, Noem announced that city and county governments would be able to get access to federal coronavirus relief funds. Will the color of that money – and its allure – change in a Biden administration? Or will she lay off a lot of government workers – teachers, cops, firefighters, health workers­– to make a political point? Somehow I doubt it.

Blue states also need budget support

I don’t mean to suggest that blue states don’t need the help. But California, ironically, is one that doesn’t right now. In fact, it expects a $26 billion surplusxxiv on a $202.1 billion budget for 2020-2021.xxv Analysts say the reason the Golden State is in good shape is that higher-earning residents have been largely insulated from the pandemic – they’re happy to telecommute – and the state’s progressive income tax rates stabilized revenue. This, of course, runs counter to Republican orthodoxy about the pernicious effects of progressive taxes. (As an aside, California spends $5,430 per capita, while per capita outlays for red states include $5,575 for South Dakota, $10,585 for Arkansas, $15,419 for Wyoming, and $19,328 for North Dakota.xxvi Sen. McConnell, who is profligate?)

New York, the other GOP bogeyman, has fared less well. In September, it reported a $14.5 billion deficitxxvii on a $177 billion budget.xxviii That 8%, however, is a lot less than some of the red states.

The GOP senators up for reelection in 2022 also could put pressure on McConnell. If Kelly Loeffler wins the January special election runoff in Georgia, that will mean 21 of the 34 senators up in 2022 will be Republicans. Loeffler, Ron Johnson in Wisconsin, and Pat Toomey in Pennsylvania are from states Biden won. John Thune of South Dakota, no doubt, has seen the benefits his state has received. After a Pennsylvania judge tossed out a Trump challenge to vote certification, Toomey issued an olive branch. The ruling confirmed Biden’s victory, he said, adding: "I congratulate President-elect Biden and Vice President-elect Kamala Harris on their victory. They are both dedicated public servants and I will be praying for them and for our country."xxix Might others break ranks with McConnell, if not out of patriotism then at least to save their political skins?

The fiscal plight of some of the other states could prompt more senators to join a rebellion against McConnell’s do-nothing policy:

Ohio: It projects a 9% drop in revenue and a $2.4 billion deficit on a $69 billion budget for Rob Portman is more of a traditional Republican than a Trump acolyte and could press for aid for his state.

North Carolina: Its revenues will be short about $5 billionxxxi on its $26 billion 2020-2021 budget.xxxii Trump edged Biden by just 1.3 percentage points.xxxiii Richard Burr reportedly is under investigation for the sale of up to $1.7 million in stock in February before the pandemic began to devastate the economy – but after he and other senators got private briefings about the potential for a massive economic downturn.xxxiv He might want to show that his presence in Washington benefits his hard-pressed voters.

Indiana: The Hoosier State had an $882 million deficit xxxv on a $21 billion 2020 budget and drew down on previous surpluses to balance the budget.xxxvi The state has lost 60,000 jobs since February, and though many aren’t looking for jobs now, one Indiana economic outlook projects the state won’t return to the pre-COVID state of economic affairs until the end of 2021.xxxvii That means another tough year. Will Sen. Todd Young want to wait to see if that projection materializes or do something to increase its odds before the 2022 election?

Kentucky: McConnell’s home state, where Rand Paul is up for reelection, is one the majority leader doesn’t have to worry about. Sure, the state faces a $1.1 billion deficitxxxviii on an $11.4 billion fiscal 2021 budget and enacted only a one-year budget instead of the normal two-year budget because of pandemic-related economic uncertainties.xxxix (Kentucky spends about 49% more per capita than California.xl Just sayin’.) In his 2016 election, Paul was dominant, winning by 14.5 percentage points,xli and Trump crushed Biden in the state by 26 percentage points.xlii Democratic governor Andy Beshear’s ability to squeak by in 2019 with a 0.37 percentage point margin against an enormously unpopular governor seems an aberration.xliii If McConnell doesn’t have to worry about retaining a Republican senate seat, he has little incentive to help Beshear and Biden – or his constituents.

President-elect Joe Biden (R.) should leave it to Republican governors to make the case with Senate Majority Leader Mitch McConnell (L.) for congressional economic aid to states, but he should help coordinate the effort.

The McConnell conundrum

So what’s the bottom line? GOP governors have a strong case to make. It’s better if it comes from them than from Biden or Democratic governors. Biden can help coordinate the effort and show he wants to collaborate. Whether McConnell will flinch depends on how he gauges his self-interest.

With Trump out of the White House, McConnell may be less fearful of the right-wing base. He isn’t up for reelection for six years – if he runs again (he’ll be 84). If the Democrats win the two Georgia seats and he no longer is majority leader, his incentives may change. He already has cemented his legacy for remaking the federal judiciary in an ultraconservative mold. Does he want the rest of his legacy to be one of recalcitrance or one of helping rescue the country from a perilous predicament?

I don’t know. His recent actions delaying any further aid suggest a heartlessness that is hard to stomach as eviction moratoriums and unemployment benefits head for year-end expiration. His attitude actually stretches back at least to Obama’s first electoral victory.

I have no confidence McConnell on his own will see the light instead of the darkness where he normally dwells. He has said he won’t even consider state and city aid unless the legislation immunizes employers from lawsuits by workers who get COVID-19 because of inadequate safety precautions at work. His callousness knows no bounds. Workers get screwed if they go to work and get COVID-19, and they get screwed if they don’t work since new federal aid won’t include the $600-a-week in assistance in the initial COVID-19 spending bill. Only if Biden gets GOP governors to gang up on McConnell may he feel pressure to change his stance – and at long last grudgingly do the right thing.

Stan’s biography can be found here.



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© Stan Crock. All Rights Reserved. Publication by 2012-2024.
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