How Stable is the State

HR 1586 was signed by Pres Obama yesterday. Known as either "aid to states" or "a state bailout" or a "jobs bill" or "payoff to the special interest teachers unions", it will provide $36 billion to states. Of this, $10 billion is for education, and $26 billion for Medicaid match.

OK a lot of states have been banking on this money. In Oregon I'm sure it will be helpful. What interesting tea leaves do we find lurking? To pass the bill in the House it had to be fully offset (every penny paid for). So I guess there will be no more "emergency" spending bills.

An emergency lets you spend money without the revenue to pay for it. Let's see, I will be taking the kids clothes shopping this afternoon, though I still owe on my credit cards and don't really have any spare money. And no taxing authority either much as I might like. But no doubt they will make it seem an emergency with school approaching quite soon, so spend I must.

But in Congress offsets are the new reality. Closing foreign tax loopholes, and scaling down food stamp benefits starting in 2014. Tricky how future savings can count as a way to pay for something today. Maybe Nordstrom Rack will take my IOU for "I promise not to go shopping next year, so I don't really have to pay for this blouse now do I?"

Oh and rescinding Stimulus money. This is a precedent. To help pay for this aid-to-states bill some of those unspent stimulus dollars have been rescinded, or taken back. Which I guess makes sense, if it was such an emergency why, 18 months after passage of the Stimulus bill, is there money still left on the table?

So, besides the political win for Democratic congresspeople as they flock home to enjoy the rest of their recess in their home sandboxes, will this money stabilize the states? It is another short term temporary infusion. Always deferring the ultimate fiscal reality till tomorrow, after that next election.