Governors ask Uncle Sam for $1 trillion

CNN reports about governors asking Uncle Sam for $1 trillion:

(emphasis mine)
[my comment]

Governors ask Uncle Sam for $1 trillion
Five Democratic leaders seek aid for all 50 states to maintain education, welfare, infrastructure, as recession worsens.
January 2, 2009: 6:13 PM ET

PHILADELPHIA (Reuters) -- Governors of five states urged the federal government to provide $1 trillion in aid to the country's 50 states to help pay for education, welfare and infrastructure, as states struggle with steep budget deficits amid a deepening recession. [I saw this bailout coming a mile away. This is another nail in the dollar's coffin]

The governors of New York, New Jersey, Massachusetts, Ohio and Wisconsin - all Democrats - said the initiative for the two-year aid package was backed by other governors and follows a meeting in December where governors called on President-elect Barack Obama to help them maintain services in the face of slumping revenues.

Gov. David Paterson of New York said 43 states now have budget deficits totaling some $100 billion as tax revenues plunge.

"It's clear that the federal government needs to step in and jump-start the economy," said Gov. Deval Patrick of Massachusetts.

Public spending

The latest package calls for $350 billion to create jobs by building or repairing roads, bridges and other public works; $250 billion to maintain education; and another $250 billion in "counter-cyclical" spending such as extending unemployment benefits and food stamps, which are typically a responsibility of the states.

The remainder would be used to fund middle-class tax cuts, stimulate the embattled housing market and stem the tide of home foreclosures through a loan-modification program.

Gov. Jon Corzine of New Jersey said he hoped some of the $700 billion authorized by Congress in the Troubled Asset Relief Program would be available to help the housing market.

The governors said during a conference call with reporters that the plan had been discussed with Congressional leaders and the incoming administration, which had indicated its willingness to help.

"The Obama team has been very receptive in listening to us," said Gov. Jim Doyle of Wisconsin. He said "quite a number" of other governors back the initiative.

GOP governors

The Republican Governors Association, however, said the level of federal aid being sought would create a burden for the future.

"The proposal by the Democratic governors goes beyond things like 'shovel-ready' infrastructure projects and is essentially a bailout of these states' general funds," Nick Ayers, executive director of the Republican Governors Association, said in a statement. "Now is the time to focus on finding cost-effective ways to provide essential services without burdening future generations with ever greater debt." [it won't be future generations paying for it. We will pay for it this year through a massive devaluation of our currency.]

Doyle of Wisconsin said the plan would allow states to maintain essential services at about the current level until 2010, when the national economy is expected to begin a recovery.

Obama's plan

The proposal comes amid expectations that the Obama administration, which takes office on Jan. 20, will provide hundreds of billions of dollars in economic stimulus to boost the shrinking U.S. economy and halt the loss of jobs.

Paterson of New York said his state's budget deficit has surged to $15.4 billion currently from $5 billion in April 2008, despite a 3.2% cut in the education budget.

Corzine said the money called for represents about 3% to 3.5% of the economy, equivalent to the amount that the economy is expected to contract by over the next two quarters.

In light of the $700 billion provided to bail out the financial industry, "It's not shockingly large," he said. [the true moral hazard of bailouts at work. Previous bailouts make it impossible to say no to next bailout.]

My reaction: Considering I just wrote an article yesterday warning about another 1 trillion bailout for states and unemployment insurance. I am feeling pretty good about myself right now.

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0 Responses to Governors ask Uncle Sam for $1 trillion

  1. Anonymous says:

    I couldn't help but hear the un-mistable sound of screeching tires and a major pile-up whilst reading your article.

    This economy is dead. Not in 10 years or five years possibly not even in five months. It's exhausted and desperate much the way the people will be once this hits the "real economy".

    All this seems to be terrifying. And alot of people that I associate with dont see whats going on, but I think they do and they're closing their eyes before they hit the retaining wall.

  2. Dave says:

    What is it they say, a trillion here, a trillion there, and pretty soon you're talking real ... hyperinflation.

    So this trillion dollar bailout will tide the states over until 2010, when the economy is expected to begin a recovery. Oh, please, don't make me laugh.

    First of all, they will be back next year if not sooner for another loan to "tide them over."

    Secondly, I don't think the economy is going to start recovering in 2010. How's it going to recover at all with a reduced means to generate wealth, i.e. all that manufacturing base we cleverly exported during these past few decades?

    Never do these government types espouse serious budget cuts. 3%? Give me a break! How about 30%?

    I mean, if my income went down, I'd scale back my expenditures accordingly. Governments are loathe to do the same.


  3. Dave says:

    I'll make this offer to any state facing budget problems: give me a copy of your budget and a machete and I'll fix your budget for you.


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