Democrats are on a mission to spend pandemic relief funds on problems they created
Democrats are very entrepreneurial, but not in the economic sense. They’re entrepreneurial in seeking to get special deals for their supporters, policymakers, and politicians in legislation to help people survive the COVID-19 crisis. This may sound fine or, at worst, business as usual. But there’s a problem: The deals Democrats have been pushing have little or nothing to do with keeping the country afloat during the tough months ahead. They’re irrelevant.
The biggest of these deals would have restored the deduction of state and local taxes in federal tax bills. House Speaker Nancy Pelosi proposes to insert it into the next bailout, which is expected to focus on state and local communities. She also wants the tax deduction to be applied retroactively.
Ask anyone in the political community who Pelosi is looking out for, and the answer would be “rich Democrats.” They include the big Democratic donors in the wealthy blue states: New York, New Jersey, Connecticut, Illinois, and California.
Republicans have opposed the deduction for state and local taxes seemingly forever. It was President Ronald Reagan who first sought to kill the deduction, popularly known as SALT, in his 1981 supply-side tax bill. He failed. Thirty-six years later, President Trump proposed to cap the deduction at $10,000 a year in his 2017 tax cut. He succeeded.
Democrats have been conspiring to resurrect the full deduction or a higher cap ever since. But it’s an uphill fight. Free market and conservative economists back Republicans in opposing the deduction. Liberal economists have never been particularly enthusiastic about it.
“This is not a good idea,” Michael Linden, executive director of the liberal Groundwork Collaborative, told Politico. “It would not help the economy heal, and it would not benefit the people who need help.” Those who do benefit “won’t spend the extra money and don’t really need it,” Linden added.
Pelosi’s pitch was received so poorly that she’s stopped mentioning it. But Democrats think there’s a new voting bloc to whom it may appeal: well-heeled suburbanites. We’ll see.
For the next emergency bill, a measure to aid state and local communities during the pandemic, Democrats have another special plea. They want no restrictions on how the money, as much as $500 billion, should be spent. Republicans argue it must be coronavirus-related, a sensible requirement since the virus is the cause of the economic downturn and the national crisis.
Senate Majority Leader Mitch McConnell is insistent on this point. “We’re not ready to just send a blank check down to states and local governments to spend any way they choose to,” he told radio host Hugh Hewitt. “It has to be coronavirus-related.”
“We’ll certainly insist that anything we’d borrow to send down to the states is not spent on solving problems that they created for themselves over the years with their pension programs,” McConnell said.
Though their case is weak, Democrats won’t give up easily on this issue. In a letter to the Trump administration, 48 Democratic senators said some communities have been hurt far more by the economic shutdown than by the virus, as if the two are separate. Republicans have a name for what Democrats really want: “revenue replacement,” and they’re against providing it.
Illinois Senate President Don Harmon didn’t help matters by seeking a $41 billion federal bailout, which would include $10 billion for the state’s famously underfunded retirement system. This prompted ridicule. The Chicago Sun-Times called the pension liability “a problem not even remotely related to COVID-19.” At best, the paper went on, “Harmon’s pension ask is politically clueless. At worst, it will serve to explode efforts at bipartisanship in Washington … You can almost see congressional Republicans waving Harmon’s letter in the air and saying: ‘See, we told you. Blue states like Illinois are just being greedy. They want us to bail them out of problems of their own making, created over decades.'”
Whew! That’s exactly what Republicans have said. And they were right. For Harmon, it’s hard to recover from a rookie mistake. He’s been president of the state senate for three months. But Pelosi doesn’t have that excuse. She’s been speaker for nearly five years.
When the CARES Act was being put together, she was talking up things such as imposing diversity mandates on corporate boards, strengthening public employee unions, and requiring airline magazines to feature propaganda about greenhouse emissions.
Pelosi may not look like a leader of power and skill. But her biggest wish is coming true. Trillions are being spent, and the federal government is growing like wildfire.
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