As Congress debates a stimulus to the economy in the wake of the housing bust, many economists are urging federal leaders to make aid to state governments a core part of the package. While direct tax rebates for individuals can help, it will not do much for the economy if states are forced to cut back on critical spending on public works, health care, and education at the same time. As Nobel prize-winning economist Joseph Stiglitz, who was also chair of the President’s Council of Economic Advisors in the 1990s, wrote this week in the New York Times:

The federal government should also provide some assistance to states and localities, which are already beginning to feel the pinch, as property values have fallen. Typically, they respond by cutting spending, and this acts as an automatic destabilizer.

What should go into that stimulus package for states? A few key components include spending on repairing our infrastructure, retrofitting buildings for energy savings, and funding SCHIP and Medicaid to cover families facing rising health costs.

See the rest of this article in a recent issue of Stateside Dispatch.

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