While reading Noah Smith’s summary of disasters that didn’t happen during the pandemic, it occurred to me that Senator McConnell (R-KY) might be a trifle disappointed in this one:
4) State budgets are healthy
The Great Recession clobbered state budgets, and they never really recovered. It was natural to expect that the COVID-19 recession would have the same effect. Most people predicted giant budget gaps and called urgently for a federal bailout of the states. Here’s Brookings, from April 2020:
[I]n the coming months, states will experience large declines in tax revenues and increased enrollment in safety-net programs as disruptions caused by COVID-19 drive incomes and consumption lower. Without assistance from the federal government, states will likely be forced to make deep program cuts, enact substantial tax increases, or both.
But fortunately, the crisis never happened. The relief bills raised income, and that income got taxed, filling states’ coffers. Capital gains taxes resulting from the big stock market boom helped too. This May it was reported that California has a $75.5 billion budget surplus. New York has a more modest surplus, as does Texas.
In fact, by the time Biden gave states a big dollop of federal cash, most probably no longer needed it.
It’s a known rumor that Senator McConnell would love to see state budgets, plural, get into trouble, because then the judiciary might assign a judge to supervise a state’s budget – and that might result in the big slashes in those budgets that he’d like to see.
No such luck this time, Moscow Mitch.
