Federal Bailouts for States Forestall Necessary Reforms Needed for Long Term Resilience

The Competitive Enterprise Institute (CEI) today reacted to reports that Congress is considering including a provision for state bailouts in legislation aimed at providing relief from the COVID-19 pandemic.

CEI President Kent Lassman said:

“The federal government sending funds to states to bail them out is every bit as pernicious as handing over taxpayer money to insulate bad corporate actors from the consequences of their decisions. It creates moral hazard and forestalls the difficult institutional reforms that are necessary to make states behave responsibly and to provide the sort of long-term resilience they need to recover from the current crisis and prosper into the future. Congress should not attach something as economically harmful as state bailouts to COVID relief legislation. Local economic recovery neither begins nor ends with states spending federal money.”

CEI senior fellow Mario Loyola said:

“This pandemic has been hard on everyone’s budget, and lots of people need help. But the only states pining for a pandemic bailout now are those that were taxing and spending too much before the pandemic started. Federal support for irresponsible states unfairly punishes responsible states. And federal funds that flow to state budgets are merely a way for the federal government to gain control of those budgets. The less the federal government interferes with state finances, the better for residents of all the states.”