Mnuchin: States Can Take Out Loans to Cover Revenue Lost to Pandemic

[Right_in_Virginia]

Mnuchin: States Can Take Out Loans to Cover Revenue Lost to Pandemic
'With interest rates very, very low, states can borrow this money'
Epoch Times, May 11, 2020

Treasury Secretary Steven Mnuchin says states encountering financial difficulties should take advantage of low-interest rates and borrow money to cover losses brought on by the pandemic.

Mnuchin said President Donald Trump and Republicans won’t support aid for states to cope with financial issues that are unrelated to the CCP (Chinese Communist Party) virus outbreak. He said those states should get a loan from the Federal Reserve.

“There is not going to be bipartisan support that bails out states from previous problems,” Mnuchin told CNBC on May 11.

“With interest rates very, very low, states can borrow this money,” he continued, adding that some states will have to enact more spending cuts.

House Speaker Nancy Pelosi (D-Calif.) and other top Democrats have said that state and local governments should receive bailouts in the next round of stimulus legislation. Last month, Congress passed a bill that allotted $2.2 trillion to offset a number of different economic losses as people are laid off or furloughed from work, or as small businesses shutter.

A number of states are facing significant budget shortfalls due to rising unemployment claims as well as costs associated with slowing the spread of the CCP virus, commonly known as the novel coronavirus and which emerged in Wuhan, China, in 2019.

While Trump and most GOP lawmakers have said that states shouldn’t be bailed out for mismanagement, they haven’t provided any details about supplementing lost revenue suffered during the pandemic.


https://www.theepochtimes.com/mnuchin-states-can-take-out-loans-to-cover-revenue-lost-to-pandemic_3346555.html

[Right_in_Virginia]

“With interest rates very, very low, states can borrow this money,” he continued, adding that some states will have to enact more spending cuts.

 

[The_Reader_David]

Mnuchin: States Can Take Out Loans to Cover Revenue Lost to Pandemic
'With interest rates very, very low, states can borrow this money'

Howevermuch SecTreas Mnuchin knows about economics and business, he seems to be ignorant of the fact that almost all (if my memory serves me correctly, more precisely 49 out of 50) states have requirements in their state constitutions for balanced budgets.  I suppose if we had negative interest rates, borrowing to make up the shortfalls would be on the table, but we don't.

[roamer_1]

Howevermuch SecTreas Mnuchin knows about economics and business, he seems to be ignorant of the fact that almost all (if my memory serves me correctly, more precisely 49 out of 50) states have requirements in their state constitutions for balanced budgets.  I suppose if we had negative interest rates, borrowing to make up the shortfalls would be on the table, but we don't.

Not to mention strings attached... And no doubt the fine print will jack the advertised vig.

[Right_in_Virginia]

Howevermuch SecTreas Mnuchin knows about economics and business, he seems to be ignorant of the fact that almost all (if my memory serves me correctly, more precisely 49 out of 50) states have requirements in their state constitutions for balanced budgets.  I suppose if we had negative interest rates, borrowing to make up the shortfalls would be on the table, but we don't.

You sound like you prefer a bailout.  You're one vote "for".   

[The_Reader_David]

You sound like you prefer a bailout.  You're one vote "for".   

I have already expressed my view on a bailout for the states:  I support a very measured one which will not reward the profligacy of the blue states.  Specifically, have the OMB run the numbers to find the shortfall in every state budget due to the sudden curtailment of economic activity in favor of universal quarantine measures, compute the per capita shortfall in each state, and bail them all out in an amount equal to the smallest per capita shortfall times the population of the state, with a requirement that the bailout money be used for current expenses.

The primary locus of police powers (including prisons and parole officers), public health powers, education, and a host of local services are the states and local governments which are their creatures and dependencies.  Having too little money to keep these running seems like as bad an idea as tossing money into the maw of the unfunded pension liabilities of states and local governments that foolishly incurred them.  It is precisely keeping the necessary parts of state and local government afloat, without giving room to use the funds to alleviate profligacy on their part that my preferred bailout scheme would accomplish.