Struggling Cities and States Shouldn’t Pay the Price for Federal Bipartisanship

For much of the past week, the media has been rather fixated on the supposed resurrection of a “moderate-middle” of ten GOP senators willing to cut a financial deal with President Biden, and with the Democratic congressional majorities, over another COVID relief package.

On Friday, however, after days of back-and-forth in which the moderate-Republican block trumpeted their bipartisanship while refusing to budge on a host of issues vital to the overall package, the Democrats took a series of procedural steps to make it easier to pass, by a bare-majority vote, the proposal that Biden and his team have crafted.

Yet, while the relief package may end up being muscled through largely on a party-line vote, the fact that a significant number of GOP senators were even paying lip-service to pragmatic, non-ideological politics, represented something of a sea change. After all, for years now moderation among the GOP has been about as easy to find as the elusive snow leopard. As a result, the group, made up of Mitt Romney (R-Utah), Susan Collins (R-Maine), Lisa Murkowski (R-Alaska), and seven others, who wrote to Biden of their desire for “bipartisanship and unity,” has been perhaps over-lauded for its willingness to engage in dialogue and negotiation.

Among the political punditocracy there is a craving, in these post-Trump weeks, for renewed civility, and for at least a partial diminution of rigid party-political allegiances. The ten GOP senators seem to offer a pathway to that more civil place. Add into that mix the more conservative Democrats — particularly Joe Manchin (D-West Virginia) and Kyrsten Sinema (D-Arizona) — and, the conventional wisdom has it, there exists now the making of a powerful, gridlock-busting, political bloc.

Yet, sometimes the middle proves to be inadequate to the needs of the moment. The $600 billion skinny aid package the Republicans have proposed, and have sat down with Biden to discuss — less than one-third the $1.9 trillion that Biden and the Democratic majorities have been pushing — has a huge hole in its center: aid to struggling cities and states.

Currently, much of the haggling over the respective proposals comes down to scale — how large should stimulus checks sent out to individual Americans be? What income level should serve as a cut-off for receiving these checks? Should expanded unemployment benefits be extended to the summer or to the fall? But where the GOP senators have shown utter rigidity, to the point of probably rendering their project ultimately moot, is in crafting a plan that contains no additional relief to local government.

It would be one thing if the Republicans were simply arguing that the $350 billion in state and local relief contained in Biden’s plan was a little on the large side; but they’re not really saying that. Instead, hewing to their party line, they are implicitly arguing that all such relief is misplaced and ought to be scrapped.

That’s a huge problem. In the last year of the Trump presidency, as the pandemic created a set of cascading economic crises, the president and his congressional supporters continuously blocked large-scale relief to cities and states that were hemorrhaging dollars. Time and again, Trump portrayed such assistance as a lifeline to mismanaged Democratic-controlled local governments, arguing that it was a way to bail out public pension systems under the guise of pandemic response.

Meanwhile, with their tax revenues plummeting, local governments shed more than 1.3 million jobs as the pandemic took hold in 2020.

Since the nadir last spring and summer, local and state revenues have actually rebounded fairly well. In California, for example, Gov. Gavin Newsom’s doomsday budget predictions, in which he estimated a budget shortfall greater than $50 billion, were replaced by a realization that, following mid-year cuts, and as a result of the roaring stock market, the state would actually be projected to have a $15 billion surplus to spend. In addition, it would have tens of billions of additional dollars from the $900 billion COVID relief package passed by Congress at the tail-end of 2020, money that would be used to expand California’s unemployment benefits and to give state-level stimulus checks to residents.

But state analysts fear the state surplus is a one-off action, largely driven by the extraordinary accumulation of wealth by tech companies and others during the crisis, and they worry that, absent federal support, within a couple of years there will be multi-billion deficits again. They also worry that the moneys already allocated by Congress will quickly run out given the depth of economic need faced by so many residents in a state where unemployment skyrocketed to over 16 percent in the spring and still remains at above 8 percent; and where 1.6 million households are behind on their water payments.

California’s situation isn’t unique. While the booming stock market has provided a well of tax revenue for states, at the same time they have faced an acute need to dramatically expand their social safety net expenditures to meet the needs of desperate residents. New York State estimates it will have a more than $60 billion shortfall between now and 2024. New York City has lost more than $10 billion in tax revenue, much of it due to the sudden frailty of its once red-hot real estate market. Los Angeles is finalizing plans to reduce its police force by nearly 1,000 officers. In the fall, the Brookings Institute calculated that, nationwide, state and local government revenue would decline by roughly $150 billion in each of the next three years, equaling about five percent of pre-pandemic revenues. The Center on Budget and Policy Priorities has estimated that revenue shortfalls could ultimately outpace the cataclysmic declines faced by cities and states after the 2008 financial melt-down.

Nationwide, the unemployment rate stands at just under 7 percent, with worrying signs that, as the pandemic continues, the job market is softening again. The number of residents estimated to be food-insecure is now north of 20 percent — and for households with children, closer to 30 percent. Increasingly, cities and states are on the frontlines when it comes to crafting social interventions to help these individuals and families navigate the economic and public health crises of the moment.

Which brings me back to the skinny-relief package proposed by the moderate-middle GOPers. Yes, they deserve credit for being willing to at least sit down and engage in serious political and economic debate. But no plan that doesn’t set in place long-term interventions to help struggling cities and states passes muster at the moment. The needs are too great — and will remain so for years to come — and the costs of thinking small too high. In fact, so great are the needs that many economists, including Robert Pollin, co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst, have argued that Biden’s plan is actually not nearly ambitious enough. Some have called for a rescue package more than double that proposed by the new president.

Of course, it would be better if the relief package that ultimately passes had a measure of bi-partisan support, and it would be wonderful if Romney and his colleagues proved to be flexible, over the coming weeks, when it comes to aid to cities and states. But, absent that flexibility, the proposal brought to the table by the ten GOP senators buys bipartisanship at too high a price. Cities and states around the country are shedding jobs and cutting vital programs. It is true that some have had temporary revenue surges; but, in the long-run, without additional federal support they will continue to shed jobs, weakening the economic bounce-back from the pandemic-induced recession and extending the economic pain faced by many tens of millions of Americans.