- The Trump administration is open to making federal money available to states if they can take Democratic concessions on tax cuts, including the GOP concessions.
- State governments are demanding at least $ 500 billion to save their destroyed finances.
- The Republicans had spoken out clearly against the idea of state aid, and it could still be a tough sale among lawmakers who mocked them as a "bailout for the blue state."
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The Trump administration is reportedly open to extending federal emergency funds to countries with financial difficulties, but only if it can push other GOP priorities such as tax cuts.
The Washington Post reported that the White House is ready to send tens of billions of dollars to states facing drastic budget constraints during the coronavirus pandemic, citing two government officials. The administration wants to ensure that the money is used only to troubleshoot problems caused by the coronavirus pandemic.
It is also open to tie state aid to the achievement of other republican priorities such as tax breaks and liability protection for reopened companies to protect them from lawsuits.
However, this amount of money is far behind what many experts and governors consider necessary to curb fiscal pain among states. State governments have been advocating massive cash inflows in recent weeks as falling tax revenues are forcing many to cut key public services and fire workers.
This is due to the fact that states are also dealing with increased spending on health care, safety net programs and unemployment benefits.
The National Governors Association, a non-partisan group, issued a new call on Wednesday for at least $ 500 billion in federal aid to all 50 states. State aid has emerged as one of the deepest rifts in the struggle to design another large corona virus spending package.
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The Democrats recently introduced a $ 3 trillion spending package to fight the corona virus and keep the economy going. Around $ 1 trillion would go to state and local governments.
The Republicans have so far spoken out clearly against supporting government finances and have mocked the idea of "rescue packages for the blue state". Trump said he believed extending aid to states was "unfair" to Republicans – and considered democratic-led states to be irresponsible donors.
Senate majority leader Mitch McConnell at one point suggested that states be allowed to file for bankruptcy, but he later tempered his tone after sparking a storm of criticism.
However, some Republicans, such as Senator Bill Cassidy, are urging Congress to take immediate action to help states. The Wall Street Journal reported.
The demand on the legislator to approve another round of aid is increasing. Federal Reserve chairman Jerome Powell warned that if President Trump and Congress took no further action, the American economy could go through an extremely painful downturn for several years.
"Additional tax support could be costly, but it's worth it if it helps prevent long-term economic damage and gives us a stronger recovery," he said Wednesday at a webinar at the Peterson Institute of International Economics.