In response to several Republican governors declaring their intention to reject portions of the recently signed economic recovery package, Sen. Chuck Schumer (D-NY) sent a letter to OMB Director Peter Orszag on Tuesday arguing that the package does not allow governors to opt out of funding for particular portions of the bill. He writes, “No one would dispute that these governors should be given the choice as to whether to accept the funds or not. But it should not be multiple choice“:
As you know, Section 1607(a) of the economic recovery legislation provides that the Governor of each state must certify a request for stimulus funds before any money can flow. No language in this provision, however, permits the governor to selectively adopt some components of the bill while rejecting others. To allow such picking and choosing would, in effect, empower the governors with a line-item veto authority that President Obama himself did not possess at the time he signed the legislation.
Today, Govs. Phil Bredesen (D-TN) and Gov. John Lynch (D-NH) became the first Democratic governors to suggest that they would follow the GOP’s ill-advised lead in rejecting some of the stimulus funding. “We are evaluating this piece of money, whether it makes sense for us to take it. We may well be one of the states that say we can’t take on that portion of it,” Bredesen said in reference to the package’s funding for the expansion of unemployment insurance.
Testifying to Congress today, Fed Chairman Ben Bernanke said that states refusing to take funds for unemployment benefits would hamper the stimulative effect of the entire bill:
BERNANKE: If unemployment benefits are not distributed to the unemployed, then they won’t spend them and it won’t have that particular element of stimulus.
SEN. JACK REED (D-RI): So if this was done on a wide basis, it would be counterproductive, not productive?
BERNANKE: It would reduce the stimulus effect of the package, yes.