Back in April, as Congress was seeking to finalize an expansion of the Paycheck Protection Program, state governors and their Democratic allies in Congress delayed the rollout of much-needed small-business loans by a week in order to fight for a massive state aid package. That effort ultimately came to nothing, and as recent budget data shows, the restraint Congress showed was the right move.
In April, when the economy was just beginning to recover from the initial shock of lockdowns, the National Governors Association (NGA), headed by Maryland Governor Larry Hogan and New York Governor Andrew Cuomo, demanded $500 billion in federal aid. The NGA warned that, absent this enormous aid package, states may need to cut back services.
This amount of money was always likely to be overkill. Congress had already appropriated $189 billion in state and local aid through the Coronavirus Aid, Relief, and Economic Security (CARES) Act and Families First Act, and the NGA was asking for $500 billion on top of this amount. In total, the $689 billion states were asking for would have covered over three quarters of total 2019 state budgets.
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