Another tax deal ticking bomb: State aid excluded

[Donnachaidh]

http://www.dailykos.com/storyonly/2010/12/10/927841/-Another-tax-deal-ticking-bomb:-State-aid-excluded?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+dailykos%2Findex+%28Daily+Kos%29&utm_content=Twitter

Most American states have been reeling in this great recession, cutting not just meat out of their budgets, but bone. In some states that means cruel, draconian measure. That would include Arizona, which decided to impose new death panels by slashing Medicaid funding for life-saving transplants. But states are having to take drastic measures, like closing firehouses, cutting cops, and laying off teachers.

Congress has been able to make some bad deals to keep aid flowing, like last summer's deal to cut food assistance programs in order to extend critical funding for Medicaid and other state aid. Apparently we're at a place in America where you have to make choices--keeping people employed and with basics of health care, or helping them buy food.

Almost all of the states have constitutionally mandated balanced budgets, unable to run deficits. In recessions, declining revenues mean states have to make cuts--they can't borrow against the future. Recessions and high unemployment also bring greater demand, particularly more people being forced on to Medicaid because of job loss. So the states lay off state workers, demand decreases because these people have less to spend, and more private sector lay-offs result.

It's a vicious cycle that isn't going to stop any time soon, apparently. With continuation state aid missing from the tax cut deal, states are bracing for the end of any kind of help.

More at the link ---