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Obama Asks for $50 Billion in Additional Stimulus for Local, State Aid

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FireDogLake.com

Obama Asks for $50 Billion in Additional Stimulus for Local, State Aid

by
David Dayen

President Barack Obama makes remarks in Washington June 11, 2010. In the clearest indication yet that the White House believes the economy needs more stimulus to keep the recovery going, President Barack Obama sent a letter to the Congressional leadership of both parties, begging that they add into upcoming bills measures to keep poor people on their health insurance and aid struggling state and local budgets.(REUTERS/Jim Young)

In the clearest indication yet that the White House believes the
economy needs more stimulus to keep the recovery going, President
Barack Obama sent a letter
to the Congressional leadership of both parties, begging that they add
into upcoming bills measures to keep poor people on their health
insurance and aid struggling state and local budgets.

In the long, four-page letter, Obama says that “we are at a critical
juncture in our nation’s path to economic recovery,” and that more
support must be given to the economy in upcoming bills before Congress.
Specifically, Obama wants Congress to pass a $6-8 billion measure to
extend the 65% subsidy for COBRA eligibles, so jobless Americans can
keep the health insurance provided by their former employer. He wants
$23 billion in FMAP funding to go to the states so they don’t have to
cut back on their Medicaid rolls. Both of these measures were cut from
the tax extenders/jobs package in the House, a concession to Blue Dogs
nervous about short-term deficits.

In addition, Obama calls on Congressional leaders to include $25
billion for state education and public safety jobs for state and local
governments in the war supplemental. The Senate passed that bill in
late May without the state aid, and while House Appropriations
Committee Chair David Obey has vowed to include it in his version of
the bill, he has wavered in recent days, talking about cutting back the
$25 billion to $10 billion. Finally, Obama touts the Home Star program
of rebates for energy efficiency audits of commercial and residential
buildings, and his $30 billion small business lending fund which he
promoted in a speech this week. He does nod to some of his medium-term
measures, like the budget freeze on discretionary spending, and the
bank tax to pay for TARP losses, selling off federal property and
expediting rescissions to the budget (a form of the line-item veto).

Here’s an excerpt from the letter, which should leave no doubt about
the attitude in the White House, that the recovery is perilous without
emergency measures:

I am concerned, however, that the
lingering economic damage left by the financial crisis we inherited has
left a mounting employment crisis at the state and local level that
could set back the pace of our economic recovery. Because this
recession has been deeper and more painful than any in 70 years, our
state and local governments face a vicious cycle. The lost jobs and
foreclosed homes caused by this financial crisis have led to a dramatic
decline in revenues that has provoked major cutbacks in critical
services at the very time our Nation’s families need them most. Already
this year, we have lost 84,000 jobs in state and local governments, a
loss that was cushioned by the substantial assistance provided in the
Recovery Act. And while state and local governments have already taken
difficult steps to balance their budgets, if additional action is not
taken hundreds of thousands of jobs would be lost.

That’s about as clear as you can get. Obama only withholds the fact
that the kind of assistance necessary to the crisis in state and local
budgets was originally present in the Recovery Act, but Ben Nelson,
Susan Collins and Arlen Specter deleted $100 billion from the final
cost on a whim and to look moderate. Most of that money came from state
and local governments, leaving those “moderates” directly responsible
for that job loss.

Rather than lament this, the Administration at least recognizes the
need for action. He notes that allowing hundreds of thousands more
layoffs just adds more costs in automatic stabilizers like unemployment
and job training, as well as lowered demand for goods that can no
longer be afforded, and lower tax revenue as jobs vanish. “That is why
the actual cost of saving state and local jobs is likely to be 20 to 40
percent below their budgetary cost,” Obama writes.

So far, the President has not been able to persuade
lawmakers of the importance of more stimulus in the short term to just
maintain, let alone further, economic recovery. But this is the
strongest statement yet, clarifying what some Congressional aides have
considered mixed signals
on deficit reduction and job creation. Here, the President is
affirmatively asking for over $50 billion dollars in new stimulus.

The next move would be in the Senate, where the tax extenders bill
is on the floor. But Senate leadership has not rounded up 60 votes, and
while they’ve re-inserted the FMAP funding, the COBRA subsidy has only
been offered as an amendment.

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