More on Those State Loans…
Yesterday, Senate Minority Leader Mitch McConnell (R-Ky.) introduced what will likely be a major GOP talking point as the debate over the Democrats’ economic stimulus package evolves: Republicans, it seems, will be pushing for states to take their cash in the form of loans in lieu of direct aid.
Writing in The Washington Post this morning, op-ed columnist Harold Meyerson points out that the strategy has already been tried — with disastrous results.
This idea was tried once before, in the depths of the Depression. In 1932, Congress appropriated $300 million to the Reconstruction Finance Corporation to send to the states for unemployment relief. (Unemployment insurance did not exist until the Social Security Act of 1935 was passed). Unfortunately, Herbert Hoover’s RFC didn’t offer the funds to the states as grants but as loans. Already all-but-insolvent, many states didn’t take the offer. And the economy continued its plunge into the abyss.
This is Mitch McConnell’s idea of a policy worth reviving.
Not that Democrats are likely to give the state-loan concept much thought, but President-elect Barack Obama is already eying hundreds of billions in business tax breaks as a way to get Republicans behind the bill. The question is: will that be enough?