Democrats & Liberals Archives

We Must Help the States

After a big senatorial battle, the so-called moderates prevailed upon the Democrats to bring the cost of the stimulus package down to about $780 billion from the $900 billion it had ballooned to. This is the “deal” that will be voted on this Tuesday. If approved it must be reconciled with the House $825 billion bill in a House-Senate conference. The senate bill is flawed.

Republicans have been screaming their usual mantra: "Tax cuts, tax cuts, tax cuts." The moderates - Republicans Susan Collins, Olympia Snowe, Arlen Specter and Democrat Ben Nelson - have presented their case a little more subtly: "Let's reduce the cost of the package."

This sounds OK. But in the process they removed important spending and added superfluous tax cuts. They cut back money for the states from $79 billion to $39 billion. From where I sit money to the states is the most important part of the stimulus package because states are in great trouble. According to the Center on Budget and Policy Analysis:

States are facing a great fiscal crisis. At least 46 states faced or are facing shortfalls in their budgets for this and/or next year, and severe fiscal problems are highly likely to continue into the following year as well. Combined budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total more than $350 billion.

California is probably in worse shape than other states. Things are so bad that state employees are forced to take off 2 Fridays of each month without pay. Furloughed employees are the lucky ones: they still have a source of income. There are many small businesses who have provided goods and services to the state that are not receiving any income at all from the state. California has borrowed and borrowed but does not know how to get out of the financial fix it is in. Services are deteriorating

The same is true of most other states

So what do the senate "moderates" do? They reduce the $79 billion the House passed for the states to $39 billion - $40 billion. And what do they substitute for this? The removal of the AMT (alternate minimum tax), which will cost about $70 billion! The urgent spending for states is dropped in favor of a tax cut for the well-to-do.

Yes, the well-to-do. Sure the AMT was enacted to catch the rich and now it catches the not-so-rich. But those the AMT catches do have plenty of money. Furthermore they know how to use loopholes to reduce their taxes to zero. Isn't this why the AMT was enacted in the first place?

These tax dodgers are preferred to the state workers and small businesses that serve the state? This is wrong.

When the bill gets to conference, we must reverse this terrible mistake: return the $40 billion for the states and get rid of the AMT removal. The AMT does not belong in a stimulus bill. At the very least we must increase the money we provide to the states.

Write your congresspersons and your senator. Tell them we need more money for the states.

Posted by Paul Siegel at February 8, 2009 7:35 PM