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What the Devil won't tell you

We've got your 'Blue State bailout' right here, Mitch!

McConnell claims coronavirus bailouts are just for Democrats. Wait 'til he gets a load of Arizona.

We’ve hit peak stupid and in the 21st century and that’s like saying “that’s a bad Bruno Mars song.” How stupid does it have to be, to be stupid even for 2020?

Apparently, if you buy the latest Republican talking points, just the Blue states will get sideswiped by recession, and the coronavirus will take the summer off and simply forget to come back.

Yeah, well, maybe the buffelgrass on A Mountain will commit ritual suicide. Maybe Asian carp will self-deport. And maybe, just maybe, the current recession will know to stop at Red state lines.

Blue states that took the bullet to slow the spread of the illness are free to rot, says Senate Majority Leader Mitch McConnell. His office sent out a press release saying no to “Blue state bailouts.” He’s invoking state pension funds as the real threat to states' economies and he’s not going to bail those Blue states out because of “their bad decisions.”

Then Donald Trump reiterated the Blue state thing, with meandering ignorance.

“It’s certainly the next thing we’re going to be discussing, and in all fairness some states … have not done well for many years, long before the virus came. You can’t blame the plague, this horrible plague. They can’t blame it on that.” Then after rambling on about Harvard not getting a bailout check and Stanford, before coming back to the topic. “It is interesting that the states that are having trouble happen to be blue.”

OK. Ummm. It doesn’t get much richer than Trump and McConnell lecturing states, which annually meet balanced-budget requirements, on the moral failing of budget shortfalls. Second, it's funny when you think about it: hurricanes only seem to hit Red states. Clearly, they have been doing badly for a number of years.

This is the depth to which our public discourse has descended. Claim blue and yellow make green and someone in a red hat will shout “fake news!” at you. Secondary colors are a Deep State plot, developed by so-called physicists who concocted the visible light spectrum out of 5G transmissions.

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It's also amusing how Kentucky is each year subsidized by the taxpayers in other states, as the federal government sends the Senate majority leader's constituents far more than they themselves pay in taxes. It's an annual bailout.

Geography is why hurricanes hit the Gulf Coast and not Vermont. Population density is why the virus hit New York. Here’s some food for thought: New York established that density as a Republican state.

The "bailout," such as they deride it, is a Trump bailout. It's meant to save his re-election prospects in the face of precipitous economic collapse. Blue states? I got your Blue state, right here buddy! It's got cactus, snowbirds, has lost 418,000 jobs and will be in desperate need of a bailout if history is any guide.

Try winning the White House without holding on to Arizona, Mr. President. Just try it.

Back in yesteryear, when Arizona was the sane state next to that whackjob right-wing neighbor California, our treasury would eat recessions for lunch. A diversified tax base just kept piling up receipts as downturns turned on the rest of the country.

The 1982-83 recession was steep and nasty. Arizona’s tax revenues grew by 8 and 9 percent respectively during those two years. During the milder 1989-90 recession, the state’s treasury increased its take by 9 percent both years. Then the state started slashing and burning our tax base during the Fife Symington years. Come the adorable little 2002 recession, those revenues shrank by 7 percent and grew by just 2 percent in 2003. In the Great Recession, revenues fell from $9.2 billion in 2007 to $6.1 billion in 2010.

Arizona’s tax revenues didn’t fully recover to 2007 levels until 2018. That’s 11 years, Trump supporters (“Fake news!”). And those are “absolute dollars” — our state hadn’t fully recovered through fiscal year 2019 in real dollars.

The city of Tucson's sales tax receipts were in free fall during the Great Recession, and also took more than 10 years to recover.

So this cockamamie idea that budget disasters are a “Blue state” thing is utter bullshit, if Arizona is any indication.

Wanna talk pensions? Let's do

The second part of McConnell’s blame-the-states gambit involves pensions.

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New York State’s retirement plan is funded at 94 percent. California's at 68 percent. Kentucky's (because, of course it is) is funded at 32 percent. Arizona's state employee pension plan was last reported to be funded at 71 percent. Big "however": our state's public safety worker pension and elected officials pension system is full of problems.

The Public Safety Retirement Plan, which covers local first responders, is funded at 48 percent of liabilities. The Elected Official Retirement Plan is funded at 33 percent.

Here’s how Arizona's pension administrators described the system in the 2019 annual report:

As you know, there have been numerous and substantial personnel changes at the System dating back to the spring of 2019. It appears that some of the previous staff may have failed to adequately communicate information to the Board as it related to the financial books and records of the System as well as the systems to manage and maintain those records. The Board was also unaware of what appears to be substantial deficiencies in the internal controls for those records at the System.

Clearly, Arizona made bad decisions and can’t be trusted with federal money.

Stop the avalanche

It’s just that this kind of thinking undercuts everything the Republicans have been trying to do in a fit of spending to prop up the economy for Trump's re-election.

The goal is to preempt the chain avalanche. They are trying to contain the falling snow before it snowballs. That's why they are keeping people on the payrolls. If people start losing jobs en masse, then they stop buying stuff, and that forces even more people out.

Government workers may not have as much money as CEOs but what they do have, spends just like everyone else's coins. When it's not there, CEOs miss it because it doesn't spend at all.

State and local governments combined budgets are about $3 trillion on a $20 trillion economy. And, super-duper important, the states and local governments can’t deficit spend. Their constitutions and charters almost universally prohibit it. The feds can deficit spend as long as they can float bonds on the open market.

What's more, they are at the end of their fiscal years and most of their money went out the door prior to when COVID-19 came knocking. They didn't have money left to move around. So they're set to be broke in fiscal year 2020. If the financial woes continue into FY 2021, then that bodes hell for the whole economy.

We know that one sector of the economy cratering can put the country into a recession. The Tech Bubble did it in 2002. The information sector in 2018 accounted for 3.4 percent of jobs in the economy; manufacturing constituted 7.9 percent; retail trade was 9.8 percent and state and local government was 12.2 percent of jobs in the economy.

Good, some say. State and local governments are too bloated and too wasteful. They should be smaller. Let’s eliminate 10 percent of the 20-million person workforce in state and local government. That wouldn’t just kill 2 million jobs, it would kill 2 million jobs in an election year. Then when they stop spending, the snowmass starts to tumble downhill.

In Tucson, government accounts for 20 percent of the local work force. Already, the University of Arizona is planning on furloughing a quarter of its workforce without pay, projecting a $250 million dollar shortfall over the next year.

That quarter-billion dollars is money that won’t be spent in this community. So look out below.

What McConnell and his ilk are saying when they talk about “a Blue State Bailout,” is the fallacy that somehow Blue States are broke because they spend too much and tax too much. Technically, because they tax at a higher rate and spend at a higher rate is exactly why they aren’t broke.

Forgive Republicans in Washington. They have shown themselves ignorant of how deficits build.

Here's how blue and green make yellow.

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The fiscal danger isn't really revenues or spending. It’s because the underlying transaction disappears. With fewer paychecks going out, income tax revenues drop. With incomes dropping in aggregate, sales diminish and sales tax revenues drop. With less income and sales generating less cumulative money in a community, property values suffer and property taxes fall. As transactions flag, fees recede.

The money just goes away because the economy stops working. And for about six weeks now, those transactions have disappeared here and in bunch of other states. To fight the virus, states (many of them Blue) have been on a form of lockdown, halting the transactions that provide the basis for the revenue.

It's not pensions. It's not taxes. It's not anything like that.

A country that doesn’t understand the basics of how viruses spread, and refuses to learn in six weeks, might just buy McConnell’s line that helping state and local governments is a “Blue State Bailout.”

Just a gentle reminder to the R’s: Trump’s presidency may be clinging by the cuticles to Wisconsin’s 10 electoral votes. That plan only works if they win Arizona and polls right now show that a dubious prospect. Every poll this year shows former Vice President Joe Biden beating Trump here by anywhere from 1 point to the most recent survey showing him up 9.

Telling Tucson, Phoenix and Arizona as a whole to pound sand and suffer isn’t a winning strategy for the re-election prospects of Trump and his political followers.

But maybe I’m missing something in the Age of Stupid.

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Senate Majority Leader Mitch McConnell claims state and local bailouts are just for Democrats. Wait 'til he gets a load of Arizona.


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