An Old Idea on U.S. Aid to States Is Floated, but Isn't Likely to Swim
The latest idea to help cash-strapped state governments and resuscitate the U.S. economy: Revive former President Richard Nixon's plan for sharing federal revenues with the states.</br></br>Alice Rivlin, a senior fellow at the Brookings Institution and former Clinton administration budget director, floated the idea this week, with a twist. From 1972 to 1980, the federal government sent unrestricted cash to the states regardless of the economic climate. Ms. Rivlin proposes creating a trigger to automatically start the payments when the economy enters a recession. This way, the federal government could come to the aid of states, helping them avoid poorly timed tax increases and social-service spending cuts.</br></br>But Mr. Nixon's fellow Republicans long ago disowned his idea, and Congress is unlikely to embrace it. Indeed, for nearly a year, states have lobbied Congress for aid only to come away empty-handed. There was bipartisan support in the Senate for a plan to temporarily raise the federal share of funding for Medicaid, a health plan for low-income and disabled people jointly paid for by the states and federal government. The idea has slowly died in the Republican-controlled House. More recently, states have failed so far to get an agreement to increase funding for cash assistance and welfare-to-work programs.</br></br>Why can't the states get any help from Washington? A majority in Congress, mainly Republicans, don't want to approve new spending because of the growing federal deficit -- exactly what killed general revenue sharing 20 years ago. They would rather approve spending for which they can take credit.</br></br>Some argue that states helped to create their own crisis by unrealistically relying on uninterrupted tax revenue fattened by '90s personal income-tax and other gains while also enacting spending programs and reducing taxes.