The Economist - USA (2022-02-26)

TheEconomistFebruary26th 2022 UnitedStates 25

havesentorplantosendbonusestogov­
ernmentemployees,suchashealth­care
workers,policeofficersandteachers.Cou­
pledwithpayrises,thisisintendednot
onlytoretainvaluableworkersina tight
labourmarket, but also to curry favour
withvoters.Inspiredbythepopularityof
thedirectpaymentstohouseholdsinthe
caresAct(a$2.2trnfiscalstimuluspassed
underDonaldTrump),GovernorTimWalz
ofMinnesotaispromotinghisproposed
“Walzchecks”,paymentsofupto$350that
wouldbesenttoeveryhouseholdinthe
state.California,IndianaandPennsylva­
niahavesimilarschemesafoot.
Theinfrastructureprojectsthatmany
stategovernmentsareembarkingon,how­
ever,area mixedbag.Onpaper,theTreasu­
ryDepartment’srulesadministeringarpa
allowstatestospendfundsononlythree
types of physical infrastructure: broad­
band,sewerageandwater.Stateshaveea­
gerlyallocatedmoneytobroadband,with
anestimated$7.6bn alreadygoingto it,
thoughAdieTomeroftheBrookingsInsti­
tution,athink­tank inWashington, dc,
cautionsthatfewstateshaverelevantbu­
reaucraticexperience. These efforts will
geta furtherboostthisyearasthe$1.2trn
Infrastructure Investment and Jobs Act
beginsdisbursingmoney,muchofitear­
markedforbroadbandinfrastructure.

arpadiem
In practice, however, the ability to use
fundsfor“revenuereplacement”hasal­
lowedmanystatepolicymakerstosupport
cherishedpriorities,nomatterhowmis­
guided.ThisishowAlabamajustifiedits
prison construction. From rural broad­
bandtoenvironmentalclean­up,itisnot
hard to think of good long­run invest­
mentsforthestate,butprisonsarea priori­
tyforAlabama’sRepublicans.Iowa’sgover­
nor,KimReynolds,ishanding$11minar­
pafundstoimprovethe“FieldofDreams”,
thebaseballdiamondmadefamousina
filmstarringKevinCostner.
Moreworryingarethenewsocialpro­
grammesandtaxcutsthatseveralstates

areembarkingon.Thesemayproveunsus­

tainable.Coloradowillspend$275monbe­

havioural­health programmes thanks to

arpa, alongwith$13mjusttobuildthebu­

reaucracyforafutureuniversalpre­kin­

dergartenprogramme.NewYork’sgover­

nor,KathyHochul,hasproposed$150min

tuitionassistanceforpart­timestudents.

JaredWalczakoftheTaxFoundation,an­

otherthink­tank,saysnearlyeverystate

has reduced, or is contemplating trim­

ming,itstaxes,afterRepublicansledthe

wayin2021.“ThisistheyearoftheDemo­

cratictaxcut,”hesays,pointingtothema­

ny Democratic governors who are pro­

posedslashingthemoreregressivesales

tax.SomeRepublicansaregoingfurther—

Mississippi,thepooreststateinAmerica,

mayrepealitsstateincometaxentirely.

Ifsuchprofligacyiscauseforconcern,

votershardlyseemtonotice.ForRepubli­

cans,sooftentheapostlesofausterity,the

fundshavebeena boon.Vermont’sgover­

nor,PhilScott,whoisanglingforanother

termina statethatleansheavilytowards

theDemocrats, isemphasisinghislarge

spendingcommitments.Thenewgover­

norofVirginia,GlennYoungkin,ismoving

to eliminate thestate’s grocery tax and

raiseteachers’salaries,keyplanksofhis

winningcampaign.NearlyallRepublican

incumbent governors facing re­election

looksafe.OnlyembattledBrianKempof

Georgiaappearsinanydangeroflosing—

he is desperately pushingpay rises for

stateemployeesandincome­taxrefunds.

Thosesamestateleaderswillprobably

havemovedonbythetimefederalfunds

rundry.Fornow,statesrisksquandering

the opportunityto make productive in­

vestments, andmay be exposing them­

selvestoliabilitiesthatwillbitewhenthe

next recession comes.With patterns of

workdisruptedbythepandemic,LauraKa­

lambokidis,Minnesota’schiefeconomist,

warnsstatestoplantheirlong­termspend­

ingwithcaution:“Noneofusfullyunder­

standsyethowthepandemichasperma­

nentlychangedtheeconomy.”n

Federallargesse

UnitedStates,totalstatespendingbysource

$trn

Source:NationalAssociation of State Budget Officers

1

3

2

1



1987 21151005200095

Bonds

Otherstatefunds

Generalstatefunds

Federalfunds

Where the money goes

United States, total fiscal-recovery-fund allocations

At February 17th 2022, $bn

Source:NationalConference of State Legislatures

*Includesunemployment relief

2

Other

Education

Housing

Health and human

services

State operation and

administration

Infrastructure

Economic relief and

development*

100 20 30

KathyHochul

The unexpected

governor

“I

’m a buffalo billsfan. I always have

an  underdog  mentality,”  said  Kathy

Hochul,  New  York’s  governor,  earlier  this

month.  Last  summer  she  succeeded  An­

drew Cuomo, who had resigned amid sexu­

al­harassment  and  abuse  allegations.  Few

then  would  have  predicted  she  would  be

the front­runner in November’s governor’s

race and scoring umpteen political touch­

downs.  The  recent  state  Democratic  con­

vention, where she was introduced by Hil­

lary Clinton, resembled a coronation. Sup­

porters carried tote bags depicting Ms Ho­

chul as Rosie the Riveter. Ms Hochul is an

underdog no longer.

She  has  surprised  even  longtime  ob­

servers of Albany, New York’s capital. “Po­

litically,  she’s  off  to  a  roaring  start,”  says

John Kaehny of Reinvent Albany, a govern­

ment watchdog. Despite being Mr Cuomo’s

deputy, she has successfully distanced her­

self  from  him  and  his  alleged  misdeeds.

She  is  more  cordial  with  lawmakers  (Ron

Kim, a Democratic assemblyman, has said

Mr  Cuomo  threatened  to  “destroy”  him

after he criticised the governor). Instead of

vetoing bills, she requests tweaks to get the

legislation  she  wants.  “She  may  not  agree

with  what  you  want  to  do,  but  at  least

there’s a conversation,” says Sandy Galef, a

Democratic assemblywoman.

Ms  Hochul  has  promised  to  forge  a

“new era of transparency” in Albany, where

ethics scandals are the norm. She is prov­

ing to be far more politically effective than

anyone imagined. 

N EW YORK

New York’s governor is proving to be

remarkably adept at the power game

New wave in New York