THIS WEEK’S meeting between President-elect Barack Obama and America’s cash-strapped governors at Congress Hall was a promising start toward easing the states’ fiscal woes.
Obama didn’t commit to a bailout figure, but it was clear after listening to the governors that he intends to send them significant federal aid upon taking office on Jan. 20.
Congressional leaders have pledged to have another economic stimulus package of $700 billion ready for the new president’s signature.
Gov. Ed Rendell, head of the National Governors Association, said federal aid would be targeted at three areas: direct help for citizens via unemployment benefits and food stamps, infrastructure projects such as bridge repairs, and “safety-net” programs such as Medicaid.
Unlike previous federal bailouts, this money will directly help average people who are experiencing tough times.
The recession, combined with some states’ irresponsible budget decisions, has caused deficits in as many as 38 states, including Pennsylvania and New Jersey.
If the national economy remains weak, as is forecast, Pennsylvania could face a $2 billion shortfall by next summer, out of a budget of $28.3 billion.
The tone of Tuesday’s Philadelphia meeting was on the mark.
Governors were not demanding a handout from Washington; they understand it’s their responsibility to get their state budgets back in balance. Twenty states have cut more than $7.6 billion from their current budgets, according to the NGA. They will need to cut more.
But the federal government can help states to avoid deeper cuts in services, or steeper tax increases.
The governors were not unanimous about a new stimulus plan.
Some Republican governors raised concerns about piling on even more federal debt, which can create pressure to raise interest rates and curtail job creation.
In the short term, however, federal aid to states has become an urgent priority that makes sense.