As any follower of our absurd fiscal policy would have guessed, federal spending in the coronavirus crisis had not been fully made before the Republicans in Washington began to call for austerity.
Senate Majority Leader Mitch McConnell (R-Ky.) Pitched the ball on Tuesday after the Senate passed a $ 484 billion phase three stimulus bill when he told reporters that he was skeptical about the increase in money. solve the nation’s coronavirus “problem”
State and local governments are predicting staggering deficits and lack the funds to pay for the patient tests and follow-up necessary to keep their citizens safe, and hospitals and other health care providers face financial constraints.
We are not prepared to send a blank check to states and local governments to spend as they see fit.
Majority Leader in the Senate, Mitch McConnell
Yet McConnell said it was “time to start thinking about the amount of debt we are adding to our country and the future impact of that. … until we can start to open up the economy, we can’t spend enough money to fix the problem. “
Speaking on a right commentator Hugh Hewitt Radio Show On Wednesday, McConnell went further, enriching his remarks with open partisanship.
“We are not ready to send a blank check to states and local governments to spend as they wish,” he said, presumably aware that Hewitt would accept his remarks without reservation.
He attributed the state budget crises to “problems they have created over the years with their retirement programs,” hitting public servants, who McConnell says seemingly do not deserve to take a reasonable retirement.
He even pushed back to allow states to go bankrupt, although he acknowledged that there is no provision in bankruptcy law for that.
“There is no good reason why it should not be available,” he said. “I guess their first choice would be for the federal government to borrow money from future generations and send it to them now so they don’t have to [declare bankruptcy]. It’s not something I’m going to be in favor of. “
Incredibly, McConnell told Hewitt: “There will be no desire on the Republican side to bail out state pensions by borrowing money from future generations” – this after arranging to borrow about $ 2 trillion dollars to future generations over 10 years to finance a Republican tax reduction that fills the pockets of the wealthy.
McConnell’s office calls state and local aid requests “blue state bailouts.” As we will see in a moment, this is exactly wrong.
But in a general sense, he should know that state houses from coast to coast will be budget black holes over the next few years due to higher spending on coronaviruses and lower incomes. due to the economic closure.
Let us not forget that he is talking about depriving states and localities of funds to pay the police, firefighters and teachers. And their share if the cost of providing health care to the poor through Medicaid.
Could he really believe that the bankruptcy of states, including his own, is a good political strategy or a responsible public policy?
Of course, there may not be a better time in history for the U.S. government to borrow to finance a pandemic response, and more so today than when interest rates on the federal debt reach the bottom.
But tackling the deficit is a familiar feature of our policy. Faced with a crisis, politicians commit to spending every dollar necessary to resolve it. Once the size of this engagement becomes clear, they begin to retreat, often at a rate that only the most sensitive speed cameras can measure.
The result is that the government often fails to spend what is really needed, or cuts programs before it starts showing results. This is what happened during the financial crisis, when the $ 787 billion 2009 stimulus law proved too modest and too focused on tax cuts to avoid recession and slow recovery .
This also happened during the New Deal, when the federal deficit of $ 3.6 billion in 1934 was judged by progressive economists to represent only 60% of what was needed to get the country out of the Great Depression .
In both cases, the handlers on the federal deficit hindered an effective full-throated recovery. It happens again. But this time the arguments are more cynical than ever, as they aim to bypass basic American workers after the rich have already been paid.
At least one federal government official always speaks rationally. It was Treasury Secretary Steven T. Mnuchin, who helped negotiate bills for coronavirus assistance and Wednesday said on Fox Business“It’s a war, and we have to win this war and we have to spend what it takes to win the war.”
The Senate-approved measure of $ 484 billion is the third bill before Congress in crisis, after the Family First Coronavirus Response Act and the $ 2 trillion CARES Act, all two promulgated last month. Since the duration and depth of the crisis are not yet known, it is assumed that more will be needed.
What makes McConnell’s hypocrite about the impact of these measures on federal debt is that a huge proportion of the debt comes from the Tax Cut and Jobs Act of 2017, which was passed by a Republican Congress and signed by President Trump. Tax cuts were massively granted to businesses and the wealthy, who did not need tax breaks in the booming economy of this period.
Although the tax cuts were seen as paying off by the overeating of the US economy, this never happened. The high sugar produced by the tax cuts dissipated in early 2019.
After increasing annualized growth rates to more than 3% in a few quarters in 2018 and early 2019, economic growth has returned to annualized levels of around 2%. Basic wage growth has barely budged, but corporate share buybacks, which spill into shareholders’ pockets, have reached a record high.
Tax cuts, however, blew a hole in the federal budget which add almost $ 2 trillion of federal debt over the next decade, according to a committee calculation for a responsible federal budget. When McConnell begins to worry about “the amount of debt we are adding to our country and its future impact”, he should start to worry about his own tax cut for the wealthy.
This is not a new game for McConnell, by the way. In 2018, shortly after distributing benefits to his wealthy patrons, he had the temerity to claim that “rights” – Washington-speak for social security, Medicare and Medicaid – were “the real drivers of debt” and called on them to be adjusted “to the demographics of the future.”
Translation: He was talking about reducing benefits.
These points, however, are not the most cynical aspect of McConnell’s complaint. This is the characterization of state and local aid as “blue state bailouts” – that is, bailouts of democratic states.
The truth is that the red states – the republican states – have always been supported the most by the federal government. According to the Tax Foundation, among the top-ranked states in terms of federal assistance as a percentage of general state revenue are the red states of Montana (# 1), Wyoming (2) and Mississippi (4). One of the biggest beggars in the federal hospice is the hometown of McConnell, Kentucky, who ranks eighth.
New York ranks 15th, but many of the other larger blue states are in the bottom half of the list, including California (34), Washington (38) and Illinois (41).
According to another measure, the blue states tend to be the largest net contributors to the federal government, judging by the net outflow of tax payments from their residents relative to federal revenues that accrue.
The biggest loser out there, according to an analysis of the 2017 figures by the Rockefeller Institute of Government, is New York, which recovers 86 cents for every dollar it sends to the federal government. The biggest winner? Go figure – it’s Kentucky, which receives $ 2.35 for every dollar it sends to federal authorities.
In other words, McConnell is just making fun of him. Its real targets are civil servants, because they tend to vote democrats. Given his attitude, why wouldn’t they do it?
It should be recognized that in historical terms, concern over the deficit was not exclusively a Republican position. It is still a conservative position, however, and generally aligned with policies that help low and middle income Americans rather than the wealthy.
For example, in 1938, shortly after the Roosevelt administration halted a recession with a fiscal stimulus package, Democrat Senator Harry F. Byrd of Virginia appeared before a group of taxpayers in Boston to denounce “the current orgy of spending”. He demanded a balanced federal budget, a ruthless purge of the spare rollers and an end to “dispensable” public works projects.
McConnell wears the costume of a current Byrd, calling to sacrifice the most vulnerable Americans in search of an imaginary fiscal balance. The lesson of history is that when a crisis demands spending what it takes to defeat an enemy, whether it be a foreign power, an economic collapse or a virulent microbe, spending less only means prolonging the pain and maybe losing the war. McConnell and his fellow Republican prepare the American public for death and defeat.