The Daily Cow

Apparently we are considering a second stimulus package even before the bulk of the first one has taken effect. If I designed the stimulus package the first time, I would have included $300b of money transfers and the same in cheap credit to states. Because states do not have the borrowing power the federal government does--especially at the dirt-cheap rates that states would love to have, they will be cutting back significantly on services this year while paying significantly more on interest (because increased fears of delinquency), an effect that will surely negate the federal stimulus.

Look at California for instance--even after cutting essential services and even education funds, it's still over $20b short for the year. With one of the nation's highest unemployment rates, it cannot afford to cut spending--but it must. It needs the $35b to continue normal functioning, avert the need to tap the financial markets, and perhaps even pay down some of the most expensive debts.

If we are producing a second stimulus package, it must include a significant transfer of funds and borrowing power to the states so they can get by without squeezing the economy further.

It would be:

1. 300 billion dollars to states, $1000 for each resident, with up to that much more at the Treasury rate, and insure state debt for 10 years. Let the states pay for education with this money
2. 200 billion dollars for infrastructure development: High speed rail, subway systems, upgrading/fixing bridges, modernized bus systems
3. 50 billion dollars for health: Modernization of infrastructure and preventive care (immunizations, etc)
4. 50 billion dollars for alternative energy research/production subsidies
5. 50 billion dollars for miscellaneous projects (WiMax for rural areas, for example) that promote equity and efficiency, not pet projects that benefit only very specific people (No pork)

As you notice, that's somewhat less than the stimulus we have in place today and contains no tax cuts.