A year after the first COVID-19 shutdown, President Biden signed the American Rescue Plan Act — the $1.9 trillion coronavirus legislation that truly has little to do with coronavirus at all.
The third of its kind since 2020, the bill was proposed with the intention to provide COVID relief and bail out states with federal funds. But in this case, the third time isn’t the charm as once again, federal decision makers have turned to quick fixes that create long-term issues rather than long-term solutions.
Our recent history teaches us a federal bailout of the states threatens to further harm taxpayers, federalism and ultimately the states themselves. This third state bailout, with less than 10% going to COVID relief and only 1% going to vaccine distribution, proves that this will be the case again.
Since the first discussion on federal bailout of the states began in 2020, hundreds of state lawmakers addressed the policy problems with a federal bailout. State leaders were concerned with the federal “solution” prescribed to help them, because a state bailout wrongly rewards those who have made poor financial decisions at the expense of prosperity states.
In 2020, state and local governments already received hundreds of billions in CARES Act funding. In many states, much of the funds remain unspent. My home state of California has a $25 billion surplus, and will now receive $42.63 billion more. Giving more only incentivizes more fiscally irresponsible decision making and will unjustifiably punish the financially responsible states.
We’ve seen the consequences of federal bailout before. In 2009, state legislators voiced concerns over the strings attached to federal dollars during debate on the American Recovery and Reinvestment Act (ARRA), acknowledging the costly consequence of accepting a bailout. Federal aid will unfortunately always come with strings attached and will more than likely only lead to increases in spending and higher state taxes.
Today, though, our national debt lingers at almost three times what it was in 2009. The stakes are too high to continue a cycle that promises quick fixes from the federal government. Quick fixes turn into long-term issues, and if we continue to dig the hole so deep we may never escape. We should instead rely on fact and experience, and learn from our history.
The only real way to make productive, responsible decisions for our states is for our states to practice fiscal discipline. It is one of the more difficult roads to take, but to bring true relief to our communities, we should look to policy solutions in the prosperity states that lead the way in fiscal responsibility. Prosperity doesn’t come from luck, but from the difficult and necessary work to balance state budgets and keep spending in check.