This combination of pictures created on September 29, 2020 shows Democratic Presidential candidate and former US Vice President Joe Biden (L) and US President Donald Trump speaking during the first presidential debate at the Case Western Reserve University and Cleveland Clinic in Cleveland, Ohio on September 29, 2020.
The House of Representatives’ $2.2 trillion stimulus bill is not a bailout of blue states that voted for Hillary Clinton in 2016, but it does provide more funds to states run by Democratic governors, according to a CNBC analysis.
CNBC analyzed data provided by the House Appropriations committee that estimates how the roughly $417 billion earmarked in the bill for state and local governments will be appropriated.
Funding for states has become a major stumbling block for the broader bill with Republicans seeing it as a bailout for badly managed and high-tax blue states.
The analysis found that an estimated $206 billion will go to red states that voted for President Donald Trump in 2016 and $208 billion will be awarded to blue states that voted for Hillary Clinton. However, states headed by Democratic governors will receive $89 billion more than states headed by GOP governors.
Using that metric, the average red state will receive about $1,066 per person, or $322 less per person than in the blue states.
But it does not appear that the red state/blue state division drives the distribution.
Funding linked to unemployment
A summary of the bill provided by the office of House Speaker Nancy Pelosi says state funds will be allocated according to a state’s share of its unemployment. Local and county-level funding will be allocated according to a formula used in other programs based on population and poverty levels.
The CNBC analysis found that every one of the top ten states ranked by their number of unemployed also ranks in the top 10 in how much they would receive as a percent of the total state and local grants. Four of them voted Democratic in 2016 and have Democratic governors; three voted Republican in 2016 and have Republican governors. The remaining three split.
California would receive about 14% of the total funds, or $59 billion, ranking it first. But it’s also the most populous state and its 2.1 million unemployed rank it first among states. New York, which would receive an estimated 8.6% of the funds, ranking it second but it also ranks second in number of unemployed. Red state Texas ranks third in how much it would receive and third in unemployment.
A Trump administration official who asked not to be named focused on the breakdown by Governor-led states in the CNBC analysis and called it “a bailout for poorly run blue states.” The official added that these states have higher unemployment because they have pursued overly restrictive lockdown rules that hurt growth.
The official rejected a connection between lockdowns and a decline in the spread of the virus, very much echoing a view that seems to be widely held within the administration. The official added that states had money left over from the original CARES act program they can use.
It’s unclear if the Republican side is willing to accept a smaller allocation for state aid or a different distribution or if it opposes any funds at all. Speaker Pelosi has contended that she has received appeals for funds from state, county and municipal leaders of both parties.
Most Wall Street economists, along with Federal Reserve officials, see state spending dragging on overall growth without federal aid due to revenue lost from the shutdowns. That includes shortfalls in red states. Forecasters have begun reducing their estimates for fourth quarter growth as a result of the breakdown in talks between Republicans and Democrats.
The Brookings Institution estimates a state revenue shortfall from the pandemic of around $500 billion over the next 3 years, which would not quite be covered by the $417 billion allocated in the Heroes Act.