Coronavirus

Floor Speech

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Mr. GRASSLEY. Mr. President, Congress has taken action in response to the coronavirus pandemic and its significant effects on workers, families, and the economy. It is because the State, Federal, and local governments shut down the U.S. economy for the first time in the 240- year history of our country.

We enacted four laws in March and April, which CBO says has increased the deficit by at least $2.4 trillion, but that doesn't measure the entirety of the relief. If you add in support from programs initiated by the Fed and the Treasury, you would add trillions more of relief.

One of the recent pieces of legislation, the CARES Act, devoted $150 billion of direct Federal relief to governments of the States, localities, territories, the District of Columbia, and Tribes. That is around 16 percent of the total fiscal year 2020 State general fund expenditures enacted prior to the public emergency.

In addition to the $150 billion, CBO has identified hundreds of billions more from the various relief programs that are directed to State and local governments. From the $340 billion of emergency funding in the CARES Act alone, the Senate appropriators have told me that more than 80 percent, or roughly $275 billion, goes to States and localities.

So, you can see, the CARES Act alone provided $150 billion of direct aid to State and local governments, and the emergency funding added $275 billion. That means that $425 billion in the CARES Act is directed to governments of the States, localities, territories, Tribes, and the District of Columbia. That happens to be 47 percent of the total State general revenue expenditures enacted prior to the public emergency for fiscal year 2020 and about the same percentage of enacted total State revenue.

On top of that, the Fed has allowed use of municipal securities as collateral for bank lending to help ease borrowing costs for local and State governments. Treasury and the Fed also established a Municipal Liquidity Facility. The purpose of it is to ``help state and local governments better manage cash flow pressures.''

The Fed will buy up to $500 billion of debt from State, counties, and cities. As others have noted here on this very floor, a significant amount of the funding directed to States and localities and the like are still in the pipeline and remain unspent or even unallocated. Some States, as I understand it, have not even allocated any money downstream to their own local governments from the $150 billion of direct aid provided under the CARES Act.

Despite all that, we have heard a number of calls for massive amounts of additional spending. The reason, according to most people asking for more, is that the direct aid for States and localities in the CARES Act is too restrictive and cannot be used to replace lost revenue. I am sympathetic to the idea of giving States and localities more flexibility in how to use $150 billion of direct relief provided in the CARES Act if it is not needed for the virus health issues. Beyond that, I want you to know I am more skeptical, until we get more solid numbers on unrealized State and local revenue and the impact of the CARES dollars not yet allowed.

I recently heard the minority leader here on the floor attempting to scold us Republicans for not doing exactly what he wants, exactly when he wants it, and saying we need to immediately spend more, including more direct aid to States. Of course, in his partisan political analysis, Republicans are blamed for not wanting massive amounts of additional aid for State and local governments because what he believes is ideological opposition to government in general.

Now, that is quite a stretch, even for the minority leader. Republicans supported four pieces of legislation in recent months providing hundreds of billions of dollars in relief to State and local governments in various ways.

I heard the Governor of California instruct Congress on moral and ethical grounds, saying that it is our duty to give more funding to States and localities or else first responders will be the first ones laid off by cities and counties. It is almost like the first argument when we were just about ready to shut down the Federal Government, if we don't finance everything, first thing we are going to do is shut down the Washington Monument.

While that may have been a subtle threat from the Governor of California to use as leverage to pressure Congress to provide more funds to California, it is unfortunate that State and local governments laid off so many of their workers in recent months. That doesn't seem to be much dedication by government to its workforce.

I heard from associations of Governors, associations of counties, cities, and other municipal governments that they need between a half a trillion and a trillion more in direct aid from the Federal Government. Usually, they cite a need to ``replace lost revenue.''

Many have asked for funds to cover lost revenue as far out as two additional fiscal years beyond fiscal year 2020. Most of those requests are based on forecasts of what the pandemic and the economy will look like for the rest of the year and even in coming years.

I think you have to take those forecasts with a grain of salt. Just look at what the last employment report looked like relative to the forecasts, and you can tell how cloudy people's crystal balls are right now.

I heard from some here on the floor that Moody's thinks States and localities may need hundreds of billions more in direct relief. People haven't been very careful, though, in reading the Moody's reports that are the basis of their arguments.

Moody's Analytics, which makes very clear in the report that it is not an arm of Moody's that rates bonds--though, I am not sure everyone is clear on that--Moody's Analytics said in April that under their most severely adverse assumptions about the future, State and local governments would have a budget shortfall of around $172 billion over the next 15 months and more than $450 billion if you extend out to cover the years 2022.

Again, this is all based on shaky forecasts, and it is not at all clear that the ratings on municipal bonds done by the Moody's ratings agency align with the forecasts of Moody's Analytics.

More recently, Moody's Analytics' chief economist, Mark Zandi, who is a regular proponent of Keynesian stimulus for the Democratic Party, upped the estimate of the needs to about $500 billion. That number remarkably matches what we heard from the National Governors Association about 6 weeks ago. Dr. Zandi promises so-called bang-for- the-buck magic to save States and localities, but the government will have to pony up perhaps a half a trillion more just to start that magic. So I am skeptical, to put it mildly.

If you remember, it was that kind of reasoning that led to the Obama stimulus promising vague and relatively quick unemployment deductions following the financial crisis but failed to come even close to these promised results.

Finally, regarding funding requests, there is the Heroes Act over at the House. State and local aid in that act provides nearly $1 trillion to States and localities inside a liberal wish list in their bill.

That, along with what we have already done, would put State and local relief at more than 75 percent of all combined State and local tax collections for a year, depending how you measure things. That is more of a Federal bailout than the partnership that we are asked to finance.

I have heard a lot of calls for massive amounts of additional direct aid to our States, funded by Federal debt. Yet there still is a lot of money in the pipeline that hasn't even been used yet. And future needs of States and localities are highly uncertain--too uncertain, in my view--to commit the Federal Government today to half a trillion dollars or $1 trillion more to States and localities, on top of the $425 billion or more of funding already in play and up to $500 billion of credit support.

I am highly skeptical of schemes to index future aid to measures of the incidence of COVID-19 cases, since we already have had controversies surrounding those measures, and some of them are political controversies.

Of course, I do understand budget rules that States and localities operate under. They do provide constraints. I also believe that proponents of massive amounts of additional Federal aid to States and localities overstate the severity of those constraints. I think State budgets are more flexible and fungible, for example, than some would have us believe.

We have seen that flexibility recently in legislators' consideration of altering police funding or using taxpayers' funds to erect barriers in occupied zones of lawlessness as just one example of that flexibility.

There are also many issues about incentives associated with massive new amounts of direct Federal funding of State and local governments. Sending massive amounts of additional Federal funds to States that were responsible in good times and built up rainy day funds means that they are treated the same as States that didn't build much, if any, in rainy day funds, as I said, Illinois and New Jersey, for examples. Those States that acted irresponsibly then get rewarded.

Since funds in State and local governments are fungible, sending massive amounts of additional Federal dollars to States and localities means that hard-earned Federal tax dollars coming from Iowa, as an example, can end up helping financially unsustainable pension promises of fiscally irresponsible States, and it means that Federal tax revenues get channeled to States run by politicians who will not even enforce existing Federal laws and who use taxpayer resources on lawless occupied zones or sanctuary cities to provide benefits to undocumented residents. There are many of my constituents in Iowa who do not support those uses of Federal funds.

So, as I wind down here, I am highly skeptical of sending massive amounts of additional funds to States and localities, since future needs are so highly uncertain and there is still unspent money in the pipelines.

I am, however, sympathetic to providing additional flexibility for funds we have already provided in the CARES Act so that State and local communities can make broader uses of those funds. And I believe that if the pandemic and the economy worsens, under those circumstances, future needs can be addressed when needed.

I understand that there are a range of views regarding additional funds for States and localities. At this point, I believe it may be useful to entertain more flexibility in what has already been approved, and there may be a need to make sure that States get shares of money they have received to counties and cities. There may even be a reasoned case for limited additional funding to States and localities in the near term, although, as I said, I am a bit skeptical.

But approving half a trillion dollars to $1 trillion of additional funds for uncertain future needs right now to cover unknown State and local needs as far out as 2 years down the road just isn't the responsible or prudent action to take.

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