Avoiding a Train-Wreck over Federalism

Policy

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Last week, I noted around here that one of the major obstacles to the next phase of pandemic-response legislation in Congress is a dispute among Republicans about how much and what kinds of financial help to offer state governments.

This has in fact turned out to be a key sticking point, and was a major topic of debate among Senate Republicans at their first conference lunch since getting back into session, yesterday at the Capitol. As CNN reported it:

During their first face-to-face meeting after five weeks away from Washington, Senate Republicans engaged in a vigorous debate over lunch about whether to dump more money into state and local governments, according to lawmakers.

Capitol Hill has passed nearly $3 trillion in funding across several packages in response to the novel coronavirus and its fallout in the US, including $150 billion for state and local governments, and Democrats such as House Speaker Nancy Pelosi of California have suggested that state and local governments could need as much as an additional $1 trillion in aid.

A big focal point of Republicans’ discussion Tuesday: whether to give states more flexibility to use their existing federal dollars to pay for lost revenues. Senators say there’s a growing consensus behind that, even though some are flatly opposed.

The disagreement is serious and substantive. And keeping it from derailing the congressional effort to keep up with the economic needs created by the pandemic and related shutdowns is going to take some kind of framework for state assistance that takes Republican worries seriously.

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Over at The Atlantic today, I propose one such framework that members might want to consider. By combining grants for direct pandemic costs with loans to make up lost revenue and options for heavily conditioned aid for more longstanding state fiscal problems, it aims to help meet state needs without rewarding recklessness or treating responsible states unfairly.

Yuval Levin is the director of social, cultural, and constitutional studies at the American Enterprise Institute and the editor of National Affairs.

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