Cover: United States of America
States of Our Union: Late last week, President Trump expressed support for federal aid to states through the fourth iteration of fiscal relief that is being debated in the empty and now virtual halls of Congress. However, on Monday the President tweeted, “Why should the people and taxpayers of America be bailing out poorly run states (like Illinois…) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help. I am open to discussing anything, but just asking?” The question follows Mitch McConnell’s earlier suggestion that states should alternatively pursue bankruptcy. With some investment returns likely falling as far as 15 percent, states are going to face a cumulative pension debt of between $1.5 trillion and $2 trillion by the end of the year. The President’s latest statements have sparked debate about the best way to “bail them out.”
On the Left: Democratic Governors and Congressional Democrats have strongly resisted the idea that federal funding for the states would be a “blue-state bailout”. Governor J.B. Pritzker of Illinois warned, “If we don’t get any further federal aid, it will be extremely difficult…not just for ones that have Democratic governors but for Republican states as well.” House Speaker Nancy Pelosi also emphasized that the money is needed for states to support first responders, explaining, “We have to protect our heroes: the health-care workers….police, fire, emergency services…”. Democratic leaders have also pointed out that their states contribute more money to the federal government, but have received considerably less.
On the Right: Conservative voices and right-leaning outlets appear to be doubling down on the notion that Republican-led states should not be asked to foot the bill for states that have mismanaged their own budgets. Senator McConnell explained that he supports funding states for areas directly impacted by the pandemic, however he clarified “…we’re not interested in helping [states] fix age-old problems that they haven’t had the courage to fix in the past.” Many assert that certain states (in their view, primarily blue states) are exploiting the crisis to pull in federal money in order to pad neglected programs like faltering pension plans. It’s interesting to observe that the Republican Governor of Oklahoma, Kevin Stitt, went so far as to ask Congress to wait before sending additional money to his state, explaining “we need to figure out if we need more before we go back to the well again for a fourth round.”
Flag This: This debate isn’t going away. Since McConnell’s comments, several constitutional scholars have called into question whether Congress can even allow states to declare bankruptcy. Financial experts have also said that regardless of the constitutionality, it would simply “be a bad idea”. The issue also has potential political consequences for Trump’s reelection. As mentioned, contrary to the idea that providing funding would be a “blue-state bailout”, red states are suffering as well. Choosing to not support state funding may end up costing Trump the support of “middle-of-the-road” Republicans and Independents. Many within this cohort live in critical, battleground states like Ohio, Pennsylvania, Michigan, and Wisconsin.