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Not just a 'blue state bailout': Economy booms under plan GOP opposed

President Joe Biden’s $1.9 trillion American Rescue Plan is allowing states to invest in education and infrastructure.

By Josh Israel - June 07, 2021
Joe Biden

When Congress passed President Joe Biden’s $1.9 trillion American Rescue Plan in March, every single Republican in both chambers opposed it. Three months later, governments in both red and blue states are reaping the benefits of the law.

A year after states were forced to make major cuts and carry out layoffs due to the COVID-19 pandemic and the economic meltdown that resulted, things are now looking much better, according to an Associated Press report.

According to analysts the AP spoke to, that improvement stems in part from hundreds of billions of dollars in relief funds provided to state and local governments under the rescue plan.

They said that another provision of the rescue package — $1,400 relief checks sent to most Americans — also helped increase consumer spending, leading to growing state revenue in many states.

According to an April 30 Reuters analysis, those checks helped fuel a 4.2% increase in consumer spending in March, up from a 1% decline in February. The report notes that consumer spending makes up two-thirds of all U.S. economic activity.

The American Rescue Plan provided $350 billion in emergency federal aid to help cash-strapped state, local, territorial, and tribal governments. About 60% of that went directly to state governments, with each guaranteed a minimum of $500 million plus funds allocated based on its number of unemployed workers.

State government spending is up 10% or more in Democratic and Republican states alike, and states are investing in education, infrastructure, and other social programs.

Justin Theal, a state fiscal research expert with The Pew Charitable Trusts, told the wire service that state governments now enjoy “a very promising fiscal and economic outlook over the next couple of years.”

“After spending almost the entire part of last year in sleepless nights trying to figure out what in the world we were going to do, to find yourselves in that position was pretty amazing,” Maryland state Sen. Guy Guzzone, a Democrat and chair of the Maryland Senate Budget and Taxation Committee, told the Associated Press.

Some states, like Colorado and Missouri, have not yet determined how they’ll spend the federal grants. Others have already done so: New York, for example, used the funds to add $1.4 billion to its budget for schools and $1.3 billion to improve New York City’s Penn Station.

While the funds provided to states under the law was reported in March to disproportionately aid GOP-controlled states, Republicans in Congress strongly opposed the $350 billion provision, calling it a “blue state bailout.”

“Biden wants to spend more than $350 billion to bailout wasteful states,” Florida Sen. Rick Scott argued in January. “I’ve been clear — asking taxpayers to bailout failed politicians in liberal states like New York and Illinois and save them from their own bad decisions isn’t fair to fiscally responsible states like Florida.”

Under the law he opposed, Florida was allocated more than $10 billion in direct state aid. The state legislature used the funds to help finance a $101.5 billion budget in April, which included bonuses for teachers and first responders.

Scott demanded in March that state governors reject the relief money and send it back. Even Republican governors quickly dismissed this advice — and Florida Gov. Ron DeSantis said the idea “doesn’t make any sense.”

Published with permission of The American Independent Foundation.

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