Tuesday, January 13, 2009

Large Portion of Stimulus Aimed at States

by Calculated Risk on 1/13/2009 11:07:00 PM

From the WSJ: Big Chunk of Stimulus Is Proposed to Aid States, Localities

State and local governments would benefit from more than $160 billion in federal aid ... Under the plan, some $80 billion would be steered toward a new "education stabilization fund," which would be used to help states avoid cutbacks in teachers and classroom programs. An additional $87 billion would be set aside for Medicaid, the federal-state program that helps low-income families and is facing budget constraints.
A bailout for Arnold?

In general this seems like a good idea since this keeps states from exacerbating the recession by laying off workers as revenues decline. Unfortunately many states (like California) have structural fiscal problems and were running budget deficits even during the housing boom. These states still need to fix their fiscal problems.