Stalled Relief Bill Would Hike US Debt and Crush Fiscal Accountability
Earlier this year, the U.S. Congress passed the $2 trillion CARES Act to provide emergency relief for the coronavirus pandemic. Several months later, many of the relief programs that bill established are set to run out of funds. Right now on Capitol Hill, gridlock reigns because Democrats and Republicans cannot agree on how much more to spend on a new coronavirus economic relief bill.
That may not be a bad thing.
Democrats, who control the House of Representatives, originally planned to spend $3 trillion more to replenish the relief pot and to fund a wishlist of new spending. They have recently lowered their new spending ask to somewhere between $2.0 and $2.4 trillion.
Republicans, who control the Senate and the White House, have proposed spending $1.3 trillion more. Their proposal prioritizes meeting the immediate relief needs of Americans who have become economically displaced because of the pandemic.
The main difference between the two proposals largely comes down to the House Democrats’ proposal to fund a bailout of state and local governments. Unfortunately, many of these governments have long been in fiscal trouble having nothing to do with the pandemic’s impact. Regardless, they would be rewarded with huge sums of cash under the guise of coronavirus relief.
What’s wrong with that?
The bailout proposal fails to force the worst-managed state and local governments to adopt sound fiscal policies. Without requiring serious reforms in return for funds, spendthrift state and local politicians have little incentive to face up to their deeper problems.
The only outcome guaranteed by the House bill’s approach to state and local government bailouts is that those who receive them will someday return for bigger bailouts. When they do, they will be looking to burden ordinary American taxpayers with the ever-growing cost of their fiscal failures. Again.
Writing at RealClearPolitics, OpenTheBooks’ Thomas W. Smith and Adam Andrzejewski have some thoughts on the proposed spending and bailouts:
Half a billion here. Half a billion there. The federal debt continues to explode. It has quadrupled in the last 20 years. Today, has surpassed $26.6 trillion and is rising rapidly. The deficit this year is unknown. It will be somewhere around $4 trillion, the equivalent of a wartime deficit. The entire federal debt in 1992—after 216 years, two world wars, depressions, countless natural disasters—was $4 trillion.
The Pelosi state bailout bill clearly screams, “So what? It’s not my money.” By the time our country’s debt becomes so corrosive to your livelihood, to your life, that it can’t be ignored—as it will—Pelosi and the big spenders in both major political parties will be long out of office.
In other words, federal, state and local government officials need more incentives to fix their fiscal problems.
Here is a thought. What if they could never escape the consequences of their actions in office unless they did?
Here is a modest proposal. Require state and local governments to put their public employee pension funds’ assets up as collateral in return for a federal bailout. Now, politicians and bureaucrats would no longer be able to leave their problems for others without risking the garnishment of their generous retirement packages in the future. Everlasting accountability will have arrived for them at last.
Sometimes, gridlock in Washington, D.C., is good. If today’s gridlock leads to strong fiscal reforms among state and local governments that puts them onto a sustainable fiscal path, it is worth it. If that goal is achieved by burdening politicians and bureaucrats without burdening American taxpayers, all the better.