Today, Congress made a potentially devastating economic blunder: they cut state aid:
With the federal deficit a growing political liability, lawmakers in Congress are backing off plans to send more aid to financially strapped states, putting in jeopardy billions of dollars that California and others were counting on to balance their budgets.
The potential loss of funds is a significant setback for Gov. Arnold Schwarzenegger and state lawmakers, who may not see nearly $2 billion in federal assistance that they intended to use to help bring California out of the red.
The money was to be California's share of $24 billion in proposed assistance, mostly to cover healthcare spending, spread among all states. Budget experts say that is enough to wipe out about one-fourth of the combined state budget shortfalls. (LAT)
The outlandish comparisons to Greece are taking their toll. Fear and panic are running rampant, while good policy is taking a beating. The economy still hasn't recovered; it's chugging along listlessly. Meanwhile, the states are facing massive budget gaps and are looking at being the next wave of layoffs. The $24Billion would have prevented much of that. Instead we get this. Jean Ross nails it:
"This is a serious problem," said Jean Ross, executive director of the California Budget Project, a Sacramento-based nonprofit. "The fear of deficits seems to be overtaking Washington. They are not realizing the bigger threat is the economy could slide back into recession as a result of state and local budget cuts."