When Senate Majority Leader Mitch McConnell denounced the idea of lending federal aid to state governments as a “Blue State Bailout,” his opponents, including Democratic New York Gov. Andrew Cuomo, had plenty of good counterarguments. Unfortunately, the one that seems to have caught on the most was the one where liberals attack Republicans for not being richer.
That’s not what they thought they were doing, of course. Cuomo and his cheerleaders in the press seem to have thought they were “fact-checking” McConnell’s claims about which states have fiscal imbalances.
McConnell, while supporting additional federal aid to businesses and individuals suffering from the coronavirus, objected to the idea of federal aid to state governments. “I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated,” he said. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”
States and cities are suffering from lost tax revenue and increased expenses as state governments deal with the coronavirus, and as their citizens lose income and reduce consumption. But even before this pandemic, many states, most notably Illinois and New Jersey, had real fiscal problems. They had very high pension obligations they were unlikely to meet. They had other debt to pay off and not a great stream of revenue with which to pay it off.
The states with the worst fiscal health tend to be Democrat-run, and those in the best fiscal shape tend to be Republican-run. That’s not really up for debate. That fact gave McConnell a political angle here: He called aid to states “a blue-state bailout.”
This is short-sighted. Coronavirus aid is going to poorly-run businesses as well as well-run businesses because both were harmed by the virus and the lockdown. State governments are legitimately harmed by doing the right thing to battle the coronavirus. Cuomo made good points, including saying that state bankruptcy would be economically dangerous at this time.
McConnell’s opponents, however, decided not to simply argue on the merits but to engage McConnell in the culture war.
“His state, the state of Kentucky,” Cuomo said, “takes out $138 billion more than they put in. New York puts in more money to the federal pot than it takes out. … Senator McConnell, who’s getting bailed out here? … Your state is getting bailed out — not my state.”
NY has given $116 billion more to the federal government than we received since 2015.
Kentucky *took* $148 billion more from the federal government than it gave.
Just give NY our money back, Senator McConnell. pic.twitter.com/kejNSU2oK5
— Andrew Cuomo (@NYGovCuomo) April 24, 2020
This was a very popular line of argument among left-leaning activists and journalists, who disproportionately live in states that both are in bad fiscal shape and have wealthy residents, who are net taxpayers to the federal government.
Holy shit. Is this true, @senatemajldr? You’d rather see the people who live in blue states suffer than give bailout money? How about the blue states who are donor states to the federal government? You’d rather see these blue states file for bankruptcy? You’re evil. https://t.co/RqulTkVrSp
— Alyssa Milano (@Alyssa_Milano) April 23, 2020
This is comparing apples to oranges, though. One thing is the flow of federal funds to individuals and businesses in various states. The other thing is the fiscal health of state governments.
Cuomo, with this donor-state/taker-state attack, is basically bragging that the people of his state have high pre-tax incomes, while attacking McConnell for representing poorer and older people. Other liberal commentators are expanding that brag to point out that they and their neighbors are wealthy, and that they don’t have very many low-income neighbors who need federal assistance.
The numbers Cuomo is citing, when he says New York is the top donor state, seems to be the “balance of payments.” This is a number calculated by the Rockefeller Institute.
On the one side of the balance-of-payments ledger is federal spending on everything from defense contracts and federal employee wages to Social Security and Medicare. Most of this never passes through a state agency. These are checks from Uncle Sam to the people in the states. Generally, states with older residents, more federal land, more defense contractors, and more poor people “get” more federal aid. I use quotations because the state governments aren’t getting the money in this calculation — people and businesses in the states are.
On the other side of the ledger is federal revenue, which mostly means payroll tax and individual income tax. Again, this doesn’t pass through state coffers. Cuomo isn’t cutting big checks to Washington — the rich New Yorkers who vote for him are.
McConnell is mistaken in opposing coronavirus aid to state governments. He’s fighting a dumb culture war at the wrong time, as Cuomo points out. But to bring up impertinent numbers on the balance of payments, as plenty of journalists and Democratic politicians are doing, is largely just attacking Republican voters for not being richer.
