The COVID-19 relief law won't just inject $1.9 trillion into the U.S. economy — it gives states and cities a cash windfall that could trigger monetary melees.
Why it matters: From more than $42 billion for California to $1.36 billion for several states, governors and state legislators now have a pot of money to split. The decisions could get sticky in states with leaders from different parties.
- "Each state will have its own priorities and its own debates about what the priorities should be," said Rep. Joaquin Castro (D-Texas). "I just don't like governors playing shell games with federal money, especially folks like (Republican Texas Gov.) Greg Abbott, that don't put up any state money on these things."
- Frank Cownie, mayor of Des Moines, Iowa, told Axios' Jason Clayworth that city officials remain uncertain about how the money can be spent — but have lots of ideas.
- “Wouldn’t it be nice if we could use it at the city’s discretion to fix up streets, bridges, sewers, parks, sidewalks and all the stuff we had to cut back on this last year?” Cownie said.
Between the lines: The direct aid is being dispensed based on a formula in the American Rescue Plan allocating it not simply by population but by the number of unemployed people at the end of 2020.
- The payout is intended to replenish coffers depleted by unexpected spending associated with the coronavirus. At the same time, state and local governments have seen tax revenue plummet from business closures and reduced consumer spending.
- "We're able to do the spending that they can't do. They have to balance their budgets, and we can do deficit spending," said Rep. Lori Trahan (D-Mass.). "This is to get through it, quickly, so we can focus on our recovery."
- Her state, led by Republican Gov. Charlie Baker, will receive $8.1 billion under the law. Baker will work with a Democratic House and Senate to dispense it.
While Wyoming will receive the largest share per resident — $2,350 — its lone House member, Rep. Liz Cheney, joined all her fellow Republicans in voting against the law.
- "The people of Wyoming do not want to be in a position where our taxpayers are having to bail out governments, in states like California and New York, that have not conducted themselves in a responsible manner," Cheney told Axios.
- "I think that, from an economic perspective, the damage that this massive new spending is likely to do is something that's going to be significant and with us for a long time, and is probably going to make it harder — not easier — for us to recover from the impact of COVID."
The bottom line: Some small- and medium-sized cities found themselves left out of previous stimulus rounds.
- The new law gives money directly to such localities, which helped the Biden administration win political support from Republican and Democratic mayors.
Go deeper: A spreadsheet with all the breakdowns