Any National Stimulus Might Be Offset by State Finances
November 30, 2001
It might be compared to a salmon struggling to swim upstream: any stimulus package Congress might pass will be forced to battle budget cuts and tax hikes put into motion by cash-strapped cities and states.
- States may be looking at a shortfall this year of up to $50 billion.
- That could neutralize as much as one-third of any tax cuts and new spending in a Washington stimulus package, experts warn.
- Some 44 states are facing lower-than-expected revenues, 19 are spending over their budgets and 28 are considering budget cuts.
- Making matters worse, proposals in Washington to speed up corporate tax write-offs for capital investment could drain up to $5 billion from state coffers - just as states are hit with unexpected public safety costs to deal with terrorism.
And the Urban Institute figures even a one-percentage-point rise in jobless rolls will throw 1.5 million more people into the program.
Source: Howard Gleckman, "Why States Will Be a Drag on Recovery," Business Week, November 26, 2001.
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