Governors and mayors have been begging for a slice of the bailout pie, and more and more it looks like their wishes will be answered. On CNBC, Senator Kent Conrad was asked about the difficulty states have been having raising money, what will be done:
CNBC: SENATOR, I HAVE A QUESTION. I MEAN, FROM THE FEDERAL PERSPECTIVE,
THE POSITIVE IS THAT YOU HAVE HISTORICALLY LOW COST DEBT COMING IN. ON
THE OTHER HAND, TO HELP STIMULATE THE ECONOMY. ON THE OTHER HAND, YOU
HAVE A WHOLE SET OF STATE AND MUNICIPAL GOVERNMENTS THAT ARE ALSO
SUFFERING DURING THIS ECONOMIC CRISIS, WHICH ARE UNFORTUNATELY, HAVE NOT
BEEN ABLE TO GET ACCESS TO THE DEBT MARKET. SOME HAVE BEEN ABLE — OR
GET ACCESS AT VERY HIGH COST. WHAT LEGISLATIVE ACTIONS ARE BEING
CONTEMPLATED TO TRY TO ADJUST THE FINANCING PROBLEMS THAT THE STATE AND
LOCAL GOVERNMENTS ARE HAVING TO ACCESS DEBT MARKETS?
CONRAD: THAT IS AN EXCELLENT QUESTION. WHAT WE’RE GOING TO DO IN THIS
PACKAGE IS PROVIDE SUBSTANTIAL RELIEF TO STATE GOVERNMENTS, BECAUSE IT
MAKES NO SENSE WHY WE ARE EXPANDING OUR EFFORTS HERE IN ORDER TO LIFT
THE ECONOMY TO INCREASE AGGREGATE DEMAND THAT THEY ARE CUTTING BACK ON
THEIR ROAD PROGRAMS AND THEIR BRIDGE PROGRAMS ON THEIR INFRASTRUCTURE
PROGRAMS, SO THERE WILL BE SUBSTANTIAL ASSISTANCE THAT GOES DIRECTLY TO
His point makes sense. It’s hardly stimulative to spend money on highways and bridges if it just replaces the bridge and road money spent by the states. That being said, states will probably spend this money not on infrastructure but on more basic costs, like healthcare expenditures and salaries for state employees. New York Senator Chuck Schumer has already confirmed that $5 billion in stimulus money for the state will just go to defray Medicaid costs.
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