PHOENIX - Battered by the recession and the deepest and most widespread budget deficits in several decades, a large majority of states are slicing into their social safety nets - often crippling preventive efforts that officials say would save money over time.
President Obama's $787 billion stimulus package is helping to alleviate some of the pain, providing large amounts of money to pay for education and unemployment insurance, bolster food stamp programs and expand tax credits for low earners. But the money will offset only 40 percent of the losses in state revenues, and programs for vulnerable groups have been cut in at least 34 states, according to the Center for Budget and Policy Priorities [CBPP], a private research group in Washington.
Thing is, this is hardly the first time CBPP has called attention to this problem. CBPP first cited the 40% figure back in late January. The link to that post is dead, as it's been replaced by a later version, posted February 20:
Funding For States in Economic Recovery Package Will Close Less Than Half of State Deficits By Nicholas Johnson, Iris J. Lav and Elizabeth McNichol
February 20, 2009
The state fiscal situation is dire. Revenues are declining, and the need for services such as Medicaid is rising as people lose income and jobs. Before passage of the economic stimulus package, state deficits were projected to equal $350 billion over the next 30 months. Because nearly all states are required to balance their budgets, states have begun to cut expenditures and raise taxes - both of which create a drag on the economy and threaten to counteract part of the intended federal economic stimulus.
The American Recovery and Reinvestment Act recognizes this fact and includes substantial assistance for states. The amount of funding that will go to states to help them maintain current activities is approximately $135 billion to $140 billion - or about 40 percent of projected state deficits. Most of this money is in the form of increased Medicaid funding and a "State Fiscal Stabilization Fund." This funding will reduce the depth of state budget cuts and moderate state tax and fee increases. There are also other streams of funding in the economic recovery bill that will flow through states, but - for reasons described below - those funds will not address state operating budget shortfalls.
I did no less than 5 posts between February 1 and 11 on different aspects of the states' need and their neglect:
A Media Matters study of Sunday talk shows and 12 cable news programs from January 25 through February 8 found that few economists have been given time on television to talk about the economic recovery plan. During 139 1/2 hours of programming in which the economic recovery legislation was discussed, economists made 25 guest appearances out of a total of 460 -- only 5 percent.
As if that weren't bad enough, Media Matters went on to say:
On cable news channels, economists made a total of 18 guest appearances out of a total of 399 guest appearances in broadcasts that included guest discussions of the stimulus. The show that featured the most guest appearances by economists was Fox News' Glenn Beck, which featured seven: Arthur Laffer, Stephen Moore (who appeared twice), Barry Ritholtz, Amity Shlaes, Thomas Sowell, and Ben Stein:
That's more than 1/3 of all the economists who appeared on one show--and most of those economists (Ritholtz is the glaring exception) are not the least bit representative of the profession. As a group, they are more accurately described as political activists, impersonating economists, pimping their expertise, such as it may be. The way they are used (and use themselves) is entirely typical of the rightwing approach to expertise--particularly scientific expertise--across a wide range of issues, including global warming, and evolution, just to name two of the most prominent and outrageous examples.
In all three cases--global warming, evolution, and economic recession--there exists a solid professional consensus about the fundamental processes involved, a consensus which the right wing does everything possible to obscure, distort, deny--and even stand on its head. In short, they fight back through a process of mass impersonation. Traditionally, elites were honored, respected and obeyed without question. The triple threat of the Renaissance, the Reformation and the Enlightenment did away with much of that. Now we often trust experts instead-particularly scientists. And so the conservative elitists fight back by impersonating the sorts of experts who have proven themselves over the course of the past 300-700 years.
First, there's the fundamental hypocrisy of taking credit for legislation you voted against. That's sort of basic, ground-state GOP hypocrisy. But then there was Don Young's claim of working in a bipartisan manner! On a bill that no Republican voted for! And Young followed that up by (a) telling MacClatchy he would have inserted earmarks if he could and (b) issuing a later press release blasting the bill as "a vehicle for pet projects."
And that's just the most easily describable stuff.
We all know what happened. But what SHUOLD have happened? What should be the model for the next time? I'd like to add something a little more substantial to this discussion-and then see what you think. Most significantly, in doing so, I am not insisting that Obama abandon his commitment to bipartisanship. I am, however, suggesting that it be substantially reformulated in a way that I think would be just as politically effective and far more practically effective.
Originally, Obama said that he wanted a stimulus bill ready to sign on his desk when he took office on January 20. This should have been the deadline that all Democratic activism was directed toward.
To ensure the best possible bill, the Progressive Caucus should have organized in advance to lay down a framework of non-negotiable demands, so that Obama could credibly say to Republicans, "I'm sorry, but I can't touch that, or the bill will not pass." And they should have amassed unified support outside the Beltway to made their stand credible, particularly drawing on state and local officials of both parties who face the prospects of draconian budget cuts. This should have gone down all the way to the local schoolboard level, and even beyond, to local PTA chapters and the like.
To ensure quick action and strong public support, thus keeping the GOP on the defensive and making full-scale obstruction extremely costly-but still leaving the GOP with a role to play, Obama should have made a major address to the nation-preferably around Thanksgiving, in which he laid down the basic requirements for a successful stimulus bill, explained why they were necessary, and invited the GOP to help achieve those goals and contribute their ideas about any other goals that should also be included.
Put this in the category of "Who are you going to believe, me or your lying eyes?" Who are you going to believe about what states need and what they're getting in the stimulus package? The guy who gutted their portion of the stimulus? Or the organization that represents the state legislatures who won't be getting the money he gutted?
"Don't trust the numbers your lying eyes see in your state budgets," Ben Nelson says, but despite Nelson's incoherent "explanations" on Rachael Maddow's show (more on that on the flip), states really do have massive budget needs that are going unmet, as a press release from the National Conference of State Legislatures explains:
Some 43 states are reporting cumulative budget shortfalls of $183 billion for fiscal year 2009, according to findings from NCSL's most recent fiscal survey in January. That gap is expected to balloon to more than $200 billion for fiscal year 2010. Because states are required to balance their budgets each year, the decisions they make to reduce spending and raise taxes have the effect of deepening and prolonging economic downturns.
State legislatures are meeting in sessions now to make tough decisions on how to balance their budgets. Expeditious passage of some form of the economic recovery legislation is critical for all state legislatures.
Here are some items of concern for state legislatures that need to be addressed as Congress negotiates a final bill:....
The bill is all but passed, but that doesn't mean we shouldn't keep fighting to get something better. Here's another reminder of why (as if we needed it.)
The $800 Billion Gamble: Economists Say Stimulus Cuts Could Be "Disastrous"
...
The reaction to the changes adopted at the behest of a small but key group of "centrist" Senators -- Maine Republicans Susan Collins and Olympia Snowe, Ben Nelson (D-NE) and Arlen Specter (R-PA) -- was strong.
Berkeley economist J. Bradford DeLong, who was a Deputy Assistant Treasury Secretary during the Clinton administration:
"worse than the original bill...reduced rather than increased the bang-for-buck effectiveness of the bill.... Nelson and Collins, well, it's not clear what their objective is."
Jeffrey D. Sachs, Quetelet Professor of Sustainable Development at Columbia (Mr. "shock therapy" in the 1990s):
"the Senate version is clearly worse: more tax cuts, less infrastructure, and less in transfers to state and local governments."
University of Texas economist James Galbraith:
"The behavior of the so-called bipartisan group has been outrageous.... The cutbacks to state aid have every potential of being disastrous. What they really reflect is the indifference of people who represent places like Nebraska and Maine to what goes on in New York or California."
Menzie D. Chinn, professor of Public Affairs and Economics at the University of Wisconsin:
"Cutting the transfers to the states seems particularly ill-advised, as we have a good feeling that the propensity to spend out these funds will be high and relatively quick."
Harry J. Holzer., Georgetown economist and former chief economist for the U.S. Department of Labor:
"The AMT is a complete waste of money from a stimulus point of view.... All the money goes to high income people who will not spend most of it."
A lot of readers see what Collins, Nelson, Specter et al. are doing in the worst light. Nelson as a turncoat. And Collins, Snowe and Specter diluting the Stimulus Bill to no good end. On the policy merits, I completely agree. As many others with greater grasps of the budgetary and economics particulars have argued, the list of cuts they've pushed through follow no coherent approach to the package -- and build up the least effective parts of the package at the expense of the most. They follow a logic of political grandstanding.
But one of the biggest outside, labor-liberal groups pushing this bill, Americans United for Change, is out in these states running new ads this weekend in support of Collins, Specter, Snowe and Nelson.
"Fortunately, Pennsylvania Senator Arlen Specter is providing the leadership we need to get the job done," the announcer says. "Senator Specter has with President Obama to reach agreement on a plan that has support from a broad range of groups -- including the US Chamber of Commerce and organized labor."
to appease the centrists, a plan that was already too small and too focused on ineffective tax cuts has been made significantly smaller, and even more focused on tax cuts....
Now the centrists have shaved off $86 billion in spending - much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast - because it prevents spending cuts rather than having to start up new projects - and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. But in the name of mighty centrism, $40 billion of that aid has been cut out.
My first cut says that the changes to the Senate bill will ensure that we have at least 600,000 fewer Americans employed over the next two years.
The real question now is whether Obama will be able to come back for more once it's clear that the plan is way inadequate. My guess is no. This is really, really bad.
Top Cuts:
$40 billion State Fiscal Stabilization
$16 billion School Construction
$7.5 billion of State Incentive Grants
$5.8 billion Health Prevention Activity
If he [Obama] had started out stronger the evolving dynamic would have been different
The Republican Senators would have come over because they would be under public pressure not to screw the country. Instead he handed them the dynamic and they got to push those 3-4 Republicans to go with their party instead of the people. It's known as whipping the vote. He let the whip fall out of his hands and into their theirs.
Someone here linked to these Harry Truman quotes. Obama must not have ever read them..because he violated each precept.
"Carry the battle to them. Don't let them bring it to you. Put them on the defensive. And don't ever apologize for anything."
"I don't like bipartisan. Whenever a fellow tells me he's bipartisan, I know that he's going to vote against me."
He let them carry the battle to him. He let them put him on the defensive. And he apologized.
And he didn't know that this was the Republican definition of bipartisan....voting against you.
I believe that her point is inarguable, self-evident. One can spin whatever sorts of theories one wants about Obama's grand strategy--and I've got a post in the works on that. But one thing should be blindingly clear: it's just been refuted, "big time" as war criminal Dick Cheney would say. If one wants to argue that Obama's bipartisan strategic vision is not to blame, then all the blame has to go to how it was executed--and it surely could have been better done. But if it had been better executed, wouldn't that have only postponed the inevitable??
Note: I'm greatly encouraged by the news that the Collins-Nelson betrayal may be cut off at the pass. But just to make sure we all understand just how bad their proposal is, I'm posting this diary anyway.
To be effective a stimulus requires four things: (1) that it be quick, (2) that it be effective, (3) that it avoid counterproductive measures, (4) that it be sustained long enough for the economy to fully recovery before being phased out. So far, the Blue Dogs have focused on making sure the stimulus will fail because of #4 (insisting on immediate reimplementation of PayGo). Now Collins-Nelson are going to war against #s 1-3.
(1) State spending is quick: So quick that if Congress doesn't give them this money by President's Day, they'll start cutting it from the budgets they are working on now.
(2) State spending is effective: As shown in my diary, "Stimulus Reality: Spending Creates VASTLY More Jobs Than Tax Cuts", "General Aid to State Governments" produces 920,000 jobs per $100 billion in spending, compared to 200,000 jobs created by cutting corporate taxes by $100 billion.
(3) Allowing state government spending to plummet is directly counter-productive to the intent of the stimulus package. "Cuts in state and local government outlays are sure to be a substantial drag on the economy in 2009 and 2010," Moodys.com Chief Economist Mark Zandy wrote in his analysis, "The Economic Impact of the American Recovery and Reinvestment Act Mark Zandi - January 21, 2009" [PDF]. During the Great Depression, state public works spending plummeted so severely that it completely offset the increases in federal spending for the first three years of the New Deal (1933-35). This was a major impediment to recovery.
Mark Zandi s Chief Economist and co-founder of Moody's Economy.com, where he directs the company's research and consulting activities. His analysis "The Economic Impact of the American Recovery and Reinvestment Act, Mark Zandi - January 21, 2009" [pdf] contains the following chart showing the relative efficacy ("bang for the buck") of different categories of tax cuts and spending measures. As can be seen, the spending measures deliver considerable more bang--particularly compared to the GOP favorites, such as making Bush Tax cuts permanent:
On the flip, I present an expanded version that adds information about how these differences translate into GDP and jobs, plus a snippet of commentary from Zandi.
GOP governors press Congress to pass stimulus bill
Breaking with congressional Republicans, GOP governors back Obama on stimulus plan
BETH FOUHY
AP News
Jan 31, 2009 21:30 EST
Most Republican governors have broken with their GOP colleagues in Congress and are pushing for passage of President Barack Obama's economic aid plan that would send billions to states for education, public works and health care.
Their state treasuries drained by the financial crisis, governors would welcome the money from Capitol Hill, where GOP lawmakers are more skeptical of Obama's spending priorities.
The 2008 GOP vice presidential nominee, Alaska Gov. Sarah Palin, planned to meet in Washington this weekend with Senate Republican leader Mitch McConnell of Kentucky and other senators to press for her state's share of the package.
Not the least bit surprising, really. If the Versailles media had wanted to, this could have been the dominant narrative all last week--how the Democrats were working in partnership with a bi-partisan coalition of governors against an ideologically irrational minority of House Republicans. Because, uh, it's true!
Of course, it wouldn't have hurt to have the Democrats pushing this narrative like crazy. But as Chief Wiggums would say, "What are the chances of that?"
STATE BLOGS
In a 
