Senator Ensign Thinks States Can Cut Back Without Cutting Anything Back
The single most perverse thing about the Senate version of the stimulus package is that it made big reductions in federal aid to the states. In economic terms, this was just about the least-controversial idea you could put in a stimulus package. On the federal level, a recession leads to a reduction in tax revenues and an increase in expenditure on social welfare services. This creates an “automatic stabilizer” effect on the fiscal side of the equation. The combined efficacy of automatic stabilizers and monetary policy is one of the main reasons why we don’t normally see big fiscal stimulus packages to combat a downturn. But we’ve already done everything we can with conventional monetary policy, so we’re looking at fiscal policy.
Perhaps the most obvious thing to do in fiscal policy terms is to extent the automatic stabilizer effect that you see on the federal level down to the state level. Since states need to balance their budgets, recessions normally force them to engage in pro-cyclical cutbacks rather than counter-cyclical expansions. But the federal government can borrow money on states’ behalf to help them plug the gap. This is a good idea and it was in the House bill. On this morning’s Meet The Press, Barney Frank slammed the cutback on this state fiscal aid, observing “Money to go to the states to stop them from laying off cops and firefighters, money to help keep teachers going. Those are jobs.” Ali Frick reports that Senator John Ensign was having none of it:
Ensign (R-NV) — who began the show by saying that doing nothing would be better than passing this stimulus plan — insisted that states’ budgets are “bloated” and derided Frank’s concerns as “fearmongering,” denying that any teachers, cops, or firefighters would lose their jobs:
To get back to what Congressman Frank said, is that we’re going to be laying off teachers and firefighters. You know, that’s just fearmongering. We’re not going to be doing that in any of the states. … [The states’] budgets are bloated, the federal government’s budget is bloated. What we should be doing is cutting back.
The idea that it would be good for states to cut back in the midst of the recession is stupid. The idea that the recession won’t, absent federal aid, lead to layoffs of state employees such as teachers and firefighters is also stupid. But the idea that it’s simultaneously true that the reason we should eschew aid is that states need to cut back and also true that it’s fearmongering to warn of layoffs is doubleplus stupid. What does Ensign think cutbacks consist of? States will be reducing vital services. The cutbacks will have the immediate impact of reducing the incomes of laid-off families and beneficiaries of state programs. That will have an additional impact on businesses where the newly laid-off teachers and cops used to work.
And the reduced level of service will have its own bad economic impacts. Cutting back public safety budgets will mean fewer cops on the beat. That means more crime which will further reduce economic activity. State cutbacks to child care subsidies will make it harder for people who lose jobs to find and accept new ones. The cutbacks to mass transit services that are happening across the country will introduce additional rigidity into the labor market and reduce patronage of businesses that people are accustomed to reaching via transit. And in the most severe cases, cutbacks in assistant to the severely impoverished will have a decades-long impact on the well-being of their children.
In Ensign’s home state they’re talking about a fifteen percent cut in K-12 education. Does Gibbons really think that can be implemented without a detrimental impact on Nevada’s citizens and local economy?
59 Responses to “Senator Ensign Thinks States Can Cut Back Without Cutting Anything Back”
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February 8th, 2009 at 12:43 pm
It should be noted that much of our problems today are occurring because George W Bush followed his own Stimulus package for the past 8 years. One based almost totally on Consumption.
Over a year ago, I noted that George had promoted a false prosperity among the Republican base by borrowing $5 Trillion on our national credit card and pissing the money away. I asked what would happen when the spigot was turned off. Well , now we know –and Obama is trying to turn the spigot back on.
George Bush’s stimulus was oriented toward the Republican grassroots: massive , wasteful increases in defense spending –an increase of almost 100 percent even though we already were spending more than the rest of the world powers combined.
But the military has always been the go-to Jobs Program in the South.
Plus a Fed-based housing boom to employ all those half-educated, Southern blue collar workers — and to gin up sales for campaign contributors like Home Depot , Georgia Pacific and the real estate developers. Which is why we have a shitload of empty homes out in the rural hinterlands:
http://www.nytimes.com/2009/02/08/us/08lehigh.html?_r=1&hp
Some might argue that military systems and homes are Investment not Consumption. They are if they are needed — but Bush crossed over the line of Investment into Massive Waste, Fraud and Abuse a long time ago.
Of course, a large mass of unemployed, resentful redneck Republicans will be sitting around the next four years and talking mournfully of the Bush Golden Era. Of how they had the Big Rock Candy Mountain until the “Liburals” went and elected that Negro.
February 8th, 2009 at 12:45 pm
Here is the results of Bush’s Stimulus Package:
http://www.nytimes.com/2009/02/08/us/08lehigh.html?_r=1&hp
February 8th, 2009 at 12:48 pm
Oh — I forgot the other result of Bush’s Stimulus Package: $6 Trillion in additional debt, with an annual interest charge of $300 BILLION dollars.
February 8th, 2009 at 12:51 pm
Of course, Big Oil thinks of Iraqi Prime Minister Maliki as an “Investment”.
The Iranians and Putin grin whenever they hear that. After all, Big Oil and Cheney thought the same of that pipeline in Georgia:
http://news.yahoo.com/s/nm/20090207/pl_nm/us_security_georgia_usa_1
February 8th, 2009 at 12:52 pm
Funny how Republicans have been running against budgetary “bloat” for my entire adult life, yet, even though they have had most of the power in Washington, they have failed to trim spending at all. Except, of course, for cutting a few minisucle budget items that support the poorest and most defenseless members of our society.
The fact that the media takes the economic arguments of these charlatans and fools seriously is Exhibit A in why our political discourse is irrevocably broken.
February 8th, 2009 at 12:59 pm
It turns out gibbons wants to take the stimulus AND fire cops. http://www.mercurynews.com/breakingnews/ci_11652779
It’s not entirely clear what the grant would accomplish at that point.
February 8th, 2009 at 1:01 pm
I’m still surprised (and disappointed) that Obama hasn’t squeezed GOP governors more, in a “bipartisan” divide-and-conquer.
Sarah Palin, in particular, can be sure that her long-term political aspirations depend upon re-election in 2010, but the same applies to Pawlenty and Crist. They presumably would prefer not to contest re-election while their states are in the poorhouse. California is fucked, for reasons of its own making.
But Alaska stands out, as a state with no personal income tax or state-wide sales tax, and oil revenues in the shitter for the Permanent Fund. Perhaps Palin has too much wingnut credibility at stake to share a stage with Obama and demand that the GOP Senate caucus deliver on emergency funding, but that’s quite a political gamble.
February 8th, 2009 at 1:09 pm
pseudonymous is right, this needs to be all over the place: http://news.yahoo.com/s/ap/20090201/ap_on_go_co/stimulus_gop_governors
Also, it’s a bit rich for the GOP to be talking about how the states should cut back during the bad times because they overspent during the good. Along with the fact that this is terrible for the economy, who was more irresponsible than the federal GOP during the “good” times? And who caused the bad times? Assholes.
February 8th, 2009 at 1:20 pm
This guy is just a monster and there is no way that he should be booked on national programming.
However, one problem with the House bill and a problem with a lot of people on these blogs is that people treat this bill as the only bill that Congress will take up in this session. There will be a gigantic, Omnibus budget coming down the line this spring. There is still a healthcare fight, climate change, renewable energy, infrastructure, education, etc, etc in the foreseeable future. Thats ignoring the plans to tackle entitlement spending as well, and the need to fix the banking system which will cost more money no matter what plan they go with. All of these things will take time and cost huge amounts of money.
This bill is only just the beginning.
February 8th, 2009 at 1:21 pm
While this is stupid, Steele’s argument on This Week was even more absurd.
February 8th, 2009 at 1:23 pm
“Senator Ensign Thinks States Can Cut Back Without Cutting Anything Back”.Yea, just like the last eight years with tax cuts, we`ll just run a tiny little deficit and maybe our police, fire, educators,road and bridge depts and whole lot of other cuts we don`t need for safety and education, your re-puke ideology will no longer work in America that`s why we put Obama in the W.H.
February 8th, 2009 at 1:25 pm
Normally, I try to give my ideological adversaries some benefit of the doubt — that their disagreements are honest, that they’re reasonable people…
Senator Ensign is showing none of this. Agree with Matt entirely.
February 8th, 2009 at 1:29 pm
pseudonymous in nc:
I’m still surprised (and disappointed) that Obama hasn’t squeezed GOP governors more, in a “bipartisan” divide-and-conquer.
Yes you would hope the Democrats would gather Republican governors for a PR push and thereby restore the aid in conference.
Trade more tax cuts for more spending, and tell the deficit hawks, look, a decade-long global slump will result in much more debt – less tax money coming in, etc. – than if we have a stimulus now which turns the economy around.
It’s easy for Ensign to do the fearmongering charge, because the stimulus package is “preventative” and not after-the-fact. An analogy would be the easy fearmongering charge doves made against hawks regarding Saddam Hussein.
February 8th, 2009 at 1:36 pm
However, one problem with the House bill and a problem with a lot of people on these blogs is that people treat this bill as the only bill that Congress will take up in this session. There will be a gigantic, Omnibus budget coming down the line this spring. There is still a healthcare fight, climate change, renewable energy, infrastructure, education, etc, etc in the foreseeable future. Thats ignoring the plans to tackle entitlement spending as well, and the need to fix the banking system which will cost more money no matter what plan they go with. All of these things will take time and cost huge amounts of money.
That’s why I think it would have been stupid for Obama to come out in full partisan mode with guns blazing right after he came into office. It’s also why he would have been stupid to act like a dictator to the Democrats in Congress. (Not to mention this would have gone against his campaign theme.)
You need to be able to pick off Republicans, some of whom are reasonable on certain issues if not others, so one needs to talk “as if” the Republicans are reasonable and don’t fully alienate them. Although it was nice to see Obama be a little combative since Republicans seem to respect that and it boosts the morale of our side.
February 8th, 2009 at 1:37 pm
The city of Atlanta (where I live) has already laid off firefighters and closed stations. Fulton county will hire no new teachers next year, despite rapid population growth.
Ensign is a shithead.
February 8th, 2009 at 1:56 pm
Not sure if it can be overstated how terrible David Gregory is .
February 8th, 2009 at 3:05 pm
You know what’s stupid –
50 guys at Goldman Sachs being paid $20million dollars each last year. And what does 50 x $20million = ???
$1 Billion dollars….
Enough to pay quite a few teacher salaries last I looked.
So I ask you Matt, where are the articles about clawbacks?? Where is the outrage over NY AG Cumo totally going dark on the issue?? WHY HAS CUMO VANISHED FROM SIGHT???
February 8th, 2009 at 3:08 pm
There are few Republican governors, and even fewer who aren’t ideologically strait-jacketed, to give the congressional GOP a reality check on state aid in the stimulus bill. By insisting that money for state and local governments be removed from the package, congressional Republicans could wind up gutting the GOP at state and local levels once the consequences hit home.
Here in Virginia, for example, we’re facing a shortfall of more than $3 billion in the state budget, and who knows how much more in the budgets of local governments. Layoffs and hiring freezes are already under way. Thanks to the congressional GOP, we can anticipate a scenario in which Republican candidates for governor, lieutenant governor, attorney general and the House of Delegates this fall will have to explain why it’s a good thing that college tuitions will spike, highways will deteriorate further, schools will be overcrowded and classes cut, and fewer cops will be on the beat.
February 8th, 2009 at 3:28 pm
Let’s assume that Matt is serious here and that cutbacks are inappropriate.
Shouldn’t we oppose efforts to limit luxury spending by bailed out Wall Street companies? It may be wasteful in some sense, but even waste produces jobs. Where was Matt earlier this week when Obama pushed to eliminate those jobs?
February 8th, 2009 at 3:31 pm
The idea that states will put cops, firefighters, and teachers at the top of the list for budget cuts is pure fear-mongering.
February 8th, 2009 at 3:38 pm
Plus a Fed-based housing boom to employ all those half-educated, Southern blue collar workers — and to gin up sales for campaign contributors like Home Depot , Georgia Pacific and the real estate developers.
Funny how you forget to mention that a large portion of the people employed by the Fed-based houing boom were not uneducated Southern blue collar workers but uneducated Latin Americans – and for that matter, a large portion of the housing boom consisted of Bush encouraging the banks to lower lending standards in order to ge uneducated, unwealthy Latinos into houses they couldn’t afford in an attempt to increase the GOP share of the Latino vote.
February 8th, 2009 at 3:54 pm
If Republican governors don’t support the stimulus, there shouldn’t be any stimulus spending in their states. Federalism in action!
February 8th, 2009 at 4:04 pm
Matt, you don’t know the half of how bad things really are in Nevada. Go look into it. The brain-dead Guv was proposing a 6% pay cut across the board for ALL state employees, and over 50% cuts to the states two public universities, in addition to the K-12 cuts you mentioned. All because they refuse to raise taxes on the mining and casino industries.
For a Nevada pol to be saying this ridiculous crap on TV is especially galling.
February 8th, 2009 at 4:47 pm
In a bill adopted Jan. 30, Arizona, John McCain’s home state and my own, has already implemented budget cuts of $1.6 billion for this fiscal year with $3 billion still sought for next fiscal year. Education at both K-12 and the university level has been hit hardest, but so have other governmental services across the board from the AG’s office to Child & Family Services. Other cuts include leaving 250 police officer positions vacant, along with 51 firefighter slots.
February 8th, 2009 at 5:57 pm
Matt, what’s even more striking about this is the degree to which higher education is being gutted in Nevada. UNLV, one of two flagship research universities in the state, is facing effective budget cuts of over 50%–which will essentially shutter the insitution outright. (See educatenevada.org for more reports on this). Ultimately, Hairdo McWedgeshot (local blogger Hugh Jackson’s moniker for Ensign) is echoing the same bankrupt philosophy as our governor (who called for the cuts in the first place). He is also ignoring that the state workers don’t seem to do nearly as well as some of the local ones. My gut tells me that what it comes down to is that it’s an attempt to slash the urban services, which have trended increasingly anti-conservative, in order to preserve the rural, where the conservatives political base remains strong but are weakening demographically. But they are going to essentially destroy their own state in the process–teachers and professors are already talking about fleeing the state (that is, the good ones or ones who can move). Ultimately, all this is about preserving eroding power, not something aimed at the public good.
February 8th, 2009 at 6:00 pm
In my county the government is talking about all the freezes and cuts they are making, yet are proposing to raise the real estate tax from 71 to 77 cents per $100.
Cut expenditures and raise taxes. Isn’t that what FDR did to mess up his recovery?
February 8th, 2009 at 6:32 pm
Does he wonder why everyone feels so constrained by the the laws of physics? Cutting back means cutting back.
February 8th, 2009 at 6:51 pm
Don Williams, the article is about a Western politician, but you gotta go and bash the Southerners. Don’t tell me. You’re a Southerner.
Ensign’s floor speech was a vomitous disaster. It was disrespectful and ignorant. The Republicans are way out of touch.
At the same time, the Democrats either need to be more focused and sharp in the process or need better promotion. When I look at what’s being offered in the bill, a lot of it looks good. But we hear none of the specifics. Just the same macro, from 30 thousand feet criticisms of the opposite parties. GET SPECIFIC.
February 8th, 2009 at 8:01 pm
@ Thomas: “Shouldn’t we oppose efforts to limit luxury spending by bailed out Wall Street companies? It may be wasteful in some sense, but even waste produces jobs.”
Notice, once again, how the instinct of the Republic party types who want Obama to fail is to make ‘gotcha’ points that might sound clever but are actually completely wrongheaded.
Economists and most Democrats have argued that the best use of stimulus dollars is to get them to working-class or poorer Americans, who are likely to spend them quickly. A dollar spent hiring road workers quickly becomes a dollar spent by road workers for their families at grocery stores, discount stores, auto mechanics, etc. This helps increase demand, which is in the cellar, and also helps increase the velocity with which money circulates, helping to avoid deflation.
In contrast, giving goodies to wealthy people is largely ineffective, because they have lots of money, and are probably spending about as much as they like on commercial transactions. The very wealthy are still buying luxury shoes and fine crystal, because they can still afford it. The pretty-wealthy are continuing their existing plans for home renovation. In short, since they haven’t had to cut back much, they’re not likely to increase their spending much with a huge bonus. Rather, they’ll send it to their investment advisor (unless that was Madoff), or put it in the bank, doing little to create incremental demand.
So, yes, getting funds to the wealthy for luxury spending really does create way fewer jobs and do less for our economic situation than getting the same funds to Food Stamp recipients, road workers, electricians retrofitting buildings, and the like.
But don’t expect Ensign, or any of the Republic party senators, to be able to think this through.
February 8th, 2009 at 8:31 pm
Rich, although your proposal would be unconstitutional, it does give you the key to GOP politics: freeriding. Freeriding has become engrained in red state constituencies. They consistently vote for GOP tax cutters who rail against the government, with the ocnfidence, born of sixty years of postwar history, that middle class entitlements are never going anywhere. They know the Dems aren’t going to allow that. So why not enjoy the entitlements, enjoy the tax cuts, and, as a freebie, pretend you are a hard working individualist who hates that there big guvmint – the one that pays for Grandpa’s pills and retirement, and without which the money for the bass fishin’ boat would have gone to same.
A culture of free riding eventually produces a deeply corrupt moral outlook. Rent seeking behavior in the Red states is really no different than that of gangs anywhere in the third world. Our problem, of course, is that, as a legacy of the slaveholders in the Constitutional convention, we are saddled with an outrageous senate that magnifies the white vote from the meth states and damps down the vote from the real population of this country – hence, the absurdity of California and Nebraska both having two senators. This has been a very effective brake on democracy in the U.S., but it has only recently started to affect the American political economy as a whole. The freeriders are going to ride the American economy down to second rate status. It will be fun to watch!
February 8th, 2009 at 8:32 pm
PQ, yet another liberal who has only half digested the talking points and hasn’t every learned a thing. We aren’t talking about some hypothetical distribution, or a proposed tax cut. We’re talking about an actual bar on spending. They’re trying to keep Wall Street banks from spending. In other words, actual spending will be cut, and the people who supplied those luxury goods and services will be out of work. Are you suggesting that the money will somehow be spent by poor folk instead? Cause that’s the sort of stupid I’d expect from you.
Luxury spending doesn’t create fewer jobs than other spending. Just doesn’t. Ask Paul Krugman if you’d like. Not giving rich people money because they’re less likely to spend it isn’t saying the same thing. My god some folks just don’t get it. You don’t even understand your own fucking theory.
The rest of your comment is remarkably out of date. Spending on luxury goods is off significantly. High income earners aren’t spending. They are disproportionately losing their jobs. Their bonuses are falling or disappearing.
February 8th, 2009 at 9:01 pm
Rich, you nail the head on the hit! But then you confused me at the last part with Neb and Calif having two senators. I’ll mentally delete that part because the freeriding leading to moral bankruptcy observation was so true and the wink to Republicans who secretly rely on Democrats’ fighting to preserve their programs was THE BEST! Thanks!
February 8th, 2009 at 10:09 pm
Ensign is an stooge for the GOP, but I hope he makes people in Nevada mad
over this and they vote him out. In addition to the 15% cut in K-12, that Matt
mentioned above, he is also proposing the state increasing its take from
property tax by 85 million — this means the counties will be hard pressed to
fund schools as well. Also a 6% cut in salaries of state employees, including
teachers. A 30% cut in higher education.
Nevada is in terrible shape, made worse by it’s constitutional requirement to
keep a balanced budget. If the state doesn’t get help, it will probably have to
close one of its two universities, just at a time when applications are up because
jobs are scarce and retraining is needed.
February 9th, 2009 at 2:41 am
Ensign is right. States won’t lay off cops, firefighters, and teachers. States will cut payments to municipalities and school districts and they will lay off the cops, firefighters and teachers. Yeah that’s the ticket, problem solved. The real question is how does Ensign keep his hair so clean and white when he has his head stuck up his ass all the time.
February 9th, 2009 at 9:26 am
Roger, the problem with your argument is that it’s absurd for a Democrat to rail against the red states for free riding, for the simple reason that if your ideology is correct, there’s nothing wrong with free riding.
At worst you can rail against them for hypocrisy – for accepting the largesse of the state while espousing rhetoric deriding that largesse. But you can’t morally disparage them for taking handouts, because there’s nothing wrong with taking handouts. Right?
The shame and disgrace of the GOP is that they lied. They campaigned on the promise of smaller government for decades, and it was always a lie. The Bush administration proved that, with terrible finality. And so it is ridiculous for them to try to argue for small government now – I agree with that point completely. They don’t have the right to offer such arguments any more. If advocates of such policies want a place in national debate, they either need a different party as a vehicle, or they need a wholesale gutting of 95% of the GOP infrastructure. If they aren’t willing to do one of those things, then they should just smile and shut up. They should be ashamed to offer the arguments they are currently offering, given their history. But please don’t tell me that free riding creates a poisonous moral atmosphere, on the one hand, but then tell me that what we need is more free riding, because that just doesn’t make sense.
February 9th, 2009 at 11:33 am
That’s a serious distortion of the argument for welfare there, Brian. The difference between giving handouts to the poor and giving handouts to people who claim a, that they aren’t getting handouts, b., vote to lower their taxes for the handouts, and c., expect to get the handouts is — that poor a., do admit to getting the handout, b., vote for the tax measures to finance the handout, and c., (unfortunately)accept the cuts in the handout.
It is funny that the right can’t make an elementary distinction between social welfare and freeriding. But by such dodges they have successfully continued to freeride. Meanwhile, places with more generous welfare programs do seem to be the places where all the innovations and new industries come from, for the simple reason that governance that concerns itself with social welfare will face up to its responsibilities to educate the population, and an educated population is the greatest factor in economic growth. Meanwhile, in the freerider states, they will ardently argue over teaching intelligent design in the classroom.
February 9th, 2009 at 12:52 pm
Roger,
Social welfare schemes make the entire concept of freeriding a non sequitur, Roger.
For the simple reason that if the state has the moral authority to redistribute property from one set of citizens to another set of citizens, all such redistributions are legislatively equal. You may prefer one set of redistributions to another, but there’s really no reason for me to give a damn about that.
If the state has the moral authority to engage in redistribution, then no individual citizen has the right to expect to retain any particular piece of property, and the legislature’s decision to give that property to “red staters” [or anyone else] is reflexively self-justified by the act of passing legislation. Legislation is the will of the people, after all, and to find moral fault with the distributive will of the people you’d have to argue that there are moral claims to property that are superior to the will of the people – and that’s precisely what you cannot argue, once you argue for redistribution. If there were moral claims to property that were superior to the will of the people, there’d be no justification for legislative redistribution in the first place.
February 9th, 2009 at 1:32 pm
Typical rightwing logic. But let’s play. Then, in the same way, profit is freeriding. After all, if I make a good or service, then I should be paid for its whole value. If someone else lives off that good or service, they are merely rentseeking. Their profitable activity simply consists of using the system to coerce me to disgorge my just reward.
And in this way we tumble down into baby talk, in which the individuals rights (which exist in nowhereland, as the welfare state has been around for seventy years and during that time there has visibly been an increase in freedom for blacks, women, gays, etc) become self-erasing. For just by creating laws of property at all, in ahy way, the state is redistributing. After all, if I am strong enough to steal your property, what business is it of the state’s? To keep me from doing so is to freeze the distribution of property. Oh, but your rights depend, after all, on the state?
That’s a non-sequitor, Brian. You can have anarchy or you can have the state – you can’t have both.
February 9th, 2009 at 1:50 pm
PS – Brian, you might want to ponder the fate of the very spirit of redstatedom, Rush Limbaugh. Every day he speaks to millions. But, poor baby, he uses airwaves that were unilaterally seized by the state in the 20s, under Calvin Coolidge, and have since been rented out by the state. The horror! If only the state hadn’t done that, and we could listen to the clashing of radio stations instead of the voice of reason.
Such are the non-sequitors of American capitalism
February 9th, 2009 at 7:16 pm
Bloated state governments? Oh, you mean like here in Arizona. Did you know that teachers have been paid for teaching students 180 days out of the year? So wasteful! So, thanks to our current budget crisis, we’ve been able to trim 5 days off that number. Students will go to school only 175 days each year, and teachers will take a 2.5% pay cut. And that’s not even to mention full-day kindergarten (described by one of our legislators as “glorified day care”), which is slated to be cut back to the apparently less-glorified half-day kindergarten. Wonder what those teachers will do? It doesn’t matter – they’ll probably find one of those high-paying private sector jobs that will open up once we get rid of the rest of the government waste.
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