As I’ve been saying for a while now, along with complaining about congress’ unwillingness to take appropriate fiscal action progressives also need to be thinking about how to make automatic stabilizers work better. The core of the problem is the state/local fiscal crunch and Chris Edley has excellent ideas on this score.
The core of his piece is to note that state governments receive large regular transfers from the federal government to help pay for Medicaid, education, welfare, highways, etc. Consequently, Congress could “pass legislation that would allow a state to simply get an ‘advance’ on these future federal dollars expected from entitlement programs.” Repayment would be guaranteed because it would simply take the form of the federal government reducing its assistance in future years. It’s a very good idea and I think it should meet the conservative objection that financial aid to state governments simply increases the long-term equilibrium level of state government spending.
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