As House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin continue to negotiate over a coronavirus relief package, funding for state and local governments reportedly remains a sticking point. Republicans have consistently opposed that aid, which is desperately needed to prevent crippling public sector layoffs amid a struggling economy. Their intransigence helped stymie a deal in the five months since House Democrats passed the HEROES Act, a $3 trillion stimulus package that included such funds, to the point where Senate Majority Leader Mitch McConnell is now reportedly urging the White House not to make one before the election.
President Donald Trump is particularly attuned to the question of whether state and local aid will be included in any final package. He has raged against such funding for months, depicting it as a partisan effort to funnel “bailout” money to states and localities that elect Democratic leaders. “Pelosi and [Senate Minority Leader Chuck] Schumer only interested in Bailout Money for poorly run Democrat cities and states… No interest. We are going a different way!” Trump tweeted in August. In October, he cited the inclusion of such funding in calling for an end to negotiations until after the election (he subsequently sent Mnuchin back to the bargaining table).
Why has Trump, who is notoriously indifferent to the minutia of federal policy, taken such a hard line on that specific detail, even as the lack of a broader deal risks plunging the economy into crisis and driving millions into poverty? One clue comes from his media diet. For months, the president’s propagandists at Fox News and Fox Business have poisoned the well by warning him against taking any deal that includes such funding. They argued that the money would be a “blue state bailout” that would primarily help states run by Democrats and encourage their governors not to fully reopen their economies. Just as the Fox cabinet helped talk Trump into shutting down the federal government in 2019, its advice proved crucial in delaying a COVID-19 relief deal — and may ultimately prevent it.
COVID-19 has required states and localities to open their coffers to fight the virus even as tax revenues collapsed due to shuttered businesses and increasing unemployment. The result is a tsunami of red ink, with budget shortfalls projected at $500 billion through summer 2022, according to Moody’s Analytics. In response, governors and mayors are asking for aid from the federal government, which unlike the states can run a deficit and currently enjoys the ability to borrow money at historically low rates. Without a source of funding, the states are planning a drastic program of tax increases and spending cuts that would trigger layoffs and an economic spiral.
The calls for relief aren’t coming from just “blue states” -- governors from both parties are seeking aid because the budget crunch is crippling states across the political divide. States with Democratic governors, like New York and California, have been hit hard. But so have “red states” like Texas and Florida, which are respectively estimated to see revenue declines of 15% and 10% in 2021, relative to pre-COVID-19 levels. In Texas, “state spending could be cut by $1 billion, with 4,000 state employee positions frozen or eliminated.” In Florida, Republican Gov. Rick DeSantis has already instituted $1 billion cut in budget vetoes, calling the cuts the “equivalent of the red wedding from Game of Thrones."
But in late April, McConnell characterized the funding for state and local governments included in the HEROES Act as a “blue state bailout.” And ever since, the Fox hosts the president trusts most have been using their shows to emphasize that point with a steady drumbeat of critical segments.
“None of these lockdown liberals should get a penny more in bailout money so long as they continue this lockdown stuff,” Laura Ingraham, who has advised Trump on the federal coronavirus response, argued in May. “There's no good reason to keep any part of the country completely closed unless, that is, you don't want America to recover at least while Trump is president.”
“Pelosi, Schumer, Democrats are still trying to use the packages and other back-door scheme to get a blue state bailout for failed Democratic governors across the country,” said Sean Hannity, who is so close to the president that he has been described by White House aides as a shadow chief of staff, in August.
“A fair deal for the American taxpayer should, I'm sure, looms large,” Lou Dobbs, another influential member of Trump’s Fox cabinet, told Mnuchin during an interview last week. “The bailout for these blue state cities and blue states themselves that are in significant financial trouble through mismanagement, Pelosi obviously wants a bailout for the big blue: California, New York, Illinois, the list goes on.” He went on to suggest to Mnuchin that such funding should not be “conflate[d]” with COVID-19 relief.
As Fox hosts railed against the state funds, Trump dug in against them -- at times in direct response to the network’s programming. In a late April live tweet of a Fox segment he was apparently watching, Trump questioned why “the people and taxpayers of America” should be “bailing out poorly run states… and cities, in all cases Democrat run and managed.” The following week, after watching House Minority Leader Kevin McCarthy demagogue against the funds on the network, he tweeted, “Well run States should not be bailing out poorly run States, using CoronaVirus as the excuse!” The funds, requested on a bipartisan basis by governors of both parties whose states are in dire straits, have been a sticking point in negotiations over the coronavirus relief package ever since.
Trump’s Fox advisers have an unrivaled influence over the federal policies he supports. Their commentary on budget negotiations previously led the president to shut down the federal government and then keep it shuttered for a record 35 days over funding for his border wall. And they’ve had a hand in virtually every aspect of the coronavirus pandemic response. The combination of the two -- with Fox impacting funding talks during a pandemic -- could prove every bit as disastrous.
Video by John Kerr