In the wake of the federal government over-stimulating the economy with hundreds of billions in COVID-related rescue funds, many states now have a budget surplus which they are throwing at every pet project they can devise.
The funds were supposed to help states avoid lay-offs and budget cuts, but Arizona, for example, is now using some of its allocated monies to boost the purses at three separate horse tracks.
North Carolina is sprucing up the NASCAR speedway in Charlotte and constructing new walking trails that celebrate the history of moonshine.
Alaska is using some of its surplus to pay social media advertisers to promote the state’s seafood industry.
It turns out that while plenty of the trillions pumped into the economy since 2020 did go where it was intended – health care, education, and infrastructure – most states are royally flush with cash which serves to pour gasoline on an economy already on fire with record-high inflation, Bloomberg reported.
“They have too much money so they’re just shoving it out through typical political channels,” said Chris Thornberg, founding partner of Beacon Economics, an independent consulting firm. “They’re doing so under the guise of economic recovery, even though the economy is largely recovered. You might go so far as to say that it’s not even recovered, it’s overheated.”
State tax revenue collections increased 44.8 percent in March 2022 compared with March 2021, according to data from the Urban Institute. The state of California, for instance, announced last week it has a record-breaking $97 billion dollar operating surplus.
Republican leaders say the largesse is proof that local and state governments didn’t really need the funds for which they clamored. Senate Minority Leader Mitch McConnell (R-Ky.) called the spending “reckless” and cited examples of city-funded pickleball courts and skate parks as examples in a recent statement on his website.
“Last spring, Democrats had inherited an economy that was already poised for an historic comeback. Even top liberal economists such as Larry Summers and Jason Furman, both senior advisors to the Obama White House, warned that Democrats’ $2 trillion spending binge was completely out of proportion to the remaining output gap. The country didn’t need anything like it,” McConnell wrote.
He continued, “One recent news report found this bonanza has, quote, ‘provided a boon for localities seeking to build or upgrade their pickleball amenities.'”
“You heard that right. Quote: ‘Dozens of municipalities are adding pickleball courts to their park and recreation offerings – and many are using a slice of their coronavirus aid package to underwrite the construction boom. If the Hoover Dam and the Lincoln Tunnel are enduring monuments to the New Deal’s infrastructure spending, perhaps pickleball courts will become a lasting legacy of the $1.9 trillion American Rescue Plan Act.’ End quote,” said McConnell.
Dan White, senior director of economic research at Moody’s Analytics said, “It’s going to result in more demand than the supply can handle, and it’s going to result in more inflation. “It’s a microcosm of a much larger argument that’s happening right now — did we give away too much stimulus? Is this really what Congress had in mind when they passed that stimulus bill?”
Gene Sperling, coordinator of the American Rescue Plan at the White House insisted the infusion of money has nothing to do with inflation.
“The evidence is already showing that this was wise policy,” Sperling said in an interview, but he admitted that flexibility in using the funds might lend itself to questionable decisions on the part of local governments.
“When this type of flexibility is provided, it’s going to allow for some very creative and very well-tuned economic and health responses,” he said. “But it’s inevitable that there will be some uses that meet the legal test but don’t meet the common sense or wisdom test.”
Ray Scheppach, a professor at the University of Virginia said there was simply too much money in the rescue plan, especially considering that tax revenue in many states has been on the rise.
“It means they can easily fund their top priorities,” said Scheppach, who led the National Governors Association for nearly three decades. “And let’s say they’re able to fund their top three priorities. With that kind of federal money, now they can fund priority four, five, six.”
“The intent of the law clearly is to help state and local economies recover from the pandemic, from the recession, especially those most harmed — I don’t think horse racing purses gets anywhere near that intent, I don’t think NASCAR gets near that intent,” said Greg LeRoy, the executive director of Good Jobs First, a think-tank that tracks where government subsidies to the private sector are spent.
As for horse racing in Arizona, it is believed that larger purses will bring in more of the upper echelon of participants and thus more fans and bettors.
“High purses ensure high-quality races and full race cards that bettors in Arizona and around the country can engage through live and simulcast betting,” Maxwell Hartgraves, a spokesperson for the Arizona Department of Gaming, said. “This will assist the industry in attracting high-quality owners, trainers, and horses to Arizona.”
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