Give some to the states

Congress has thought of all sorts of interesting ways to spend $50 billion to $75 billion in economic stimulus but one obvious and effective measure has yet to receive as much attention as it deserves. State governments, nationwide, are hurting and with many of them, including Maine, constrained by balanced-budget rules, there is little they can do about it except spend less money at exactly the time they should be spending more. The federal government can and should help.

Giving a boost swiftly and temporarily to the states makes sense for several reasons, including the fact that they would be sure to spend every penny of it. That might sound like an insult but one of the problems with giving the money to consumers is that many, if not most, won’t consume with it. A recent University of Michigan poll concluded that only 18 percent of taxpayers who received rebates would spend them. A Critical Insights poll this week in Maine has that number higher, with bills and debt as the most popular choice of recipients, followed by savings.

But the point is that states could spend the money on infrastructure improvements or other projects that need doing, that keep people employed in the short term and make the states economically stronger long term. And better than the federal government, states could also target local industries that have been particularly hard hit by the declining economy or the Sept. 11 attack. Gov. King recently said Maine may have to cut $10 million from its budget, other states are looking at much larger cuts – Florida, $600 million; Tennessee perhaps $200 million – and just about every state needs to cut something. Not only do these cuts shake consumer confidence, they slow economic activity when spending has never been more necessary.

Sen. Olympia Snowe says she is open to the idea of spending some of the stimulus on states. Rep. Tom Allen, noting that economic downturns tend to hit states worse that the federal government, said the idea, “makes a lot of sense to me.” Rep. John Baldacci noted that Congress already has decided to boost spending to the states in the areas of health, education and unemployment insurance, but added that further grants should also be considered: “Whatever it takes,” he said, “If grants show they’re effective, then we’re going to do it.” Any state government that is behind in expected revenues and has not contacted its congressional delegation is failing to pay attention.

The sole purpose of the stimulus package should be to give the economy a boost. But by giving money to the states, Congress would also provide for essential state services that would otherwise soon be cut, move up planned programs, help build roads, bridges and spec buildings and allow states to avoid tax increases. The money could be delivered quickly and there is no question about it being temporary – Congress could set a use-it-or-lose-it deadline to ensure it is spent.

Federal lawmakers are loath to send states money without also sending mandates and restrictions. This is one occasion when they need only the simplest of instructions. State governments are feeling the effects of the recession acutely enough to know what to do.