Out of Control Policy Blog

Second Stimulus?

At Stateline.org, David Harrison explores the current thinking on a so-called "second stimulus" to prop up state budgets when the "first stimulus" dries up in 2011:

Edward DeSeve, President Obama's special adviser on the recovery, declined to offer specifics on how Washington would help statehouses after the stimulus ends, including whether there would be another fiscal aid package for states. But he suggested that the fiscal relationship between the states and the federal government could change after the worst downturn since the Great Depression.

"At some point during the next two years, Congress is going to be faced with the need to rationalize the relationship between these spending accounts that they’ve given the states and the money they've appropriated to the states during this period and the great needs that the states have in their economies," he said at a State Economic and Fiscal Forum for reporters co-sponsored by Capitolbeat and the Pew Center on the States, of which Stateline.org is a part. "Do we have the right fiscal balance between the states and the federal government?"

One comment: could that be more ambiguous?

One question: are we supposed to have a "fiscal balance" between the states and federal government?

For more on the "second stimulus" topic, see Reason Foundation's Economics, Bailouts and Stimulus archive.

Leonard Gilroy is Director of Government Reform

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Comments to "Second Stimulus?":

MJ | September 26, 2009, 2:55am | #

I'm worried about the precedent this is setting. Even if the Obama Administration was considering a "second stimulus" primarily comprised of aid to the states, they shouldn't be tipping their hand this early in the process. They are sending the message to the states that state governments don't need to make any tough decisions about spending, because the feds will bail them out and help them balance their books. What is worse, states will come to expect this as the response during every future economic slowdown. It would be hard to imagine any circumstance under which states would be subject to any serious budget-cutting pressure.

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