Welcome to Business Breakfast.
Tonight, the Senate votes on a $26 billion lifeline to ailing states that would help them with Medicaid expenses and prevent teacher layoffs. The bill would not add to the deficit, as it is offset by combination of foreign tax credit provisions and cuts to food stamps. Aid that doesn't add to the debt: what could be the problem?
If Republicans balk, it will be the tax offsets. During the last mini-stimulus debate, Republicans rejected a larger bill from Sen. Max Baucus on account of its tax increases. The GOP's position on stimulus is either painfully obstructionist or painfully simple depending on where you're sitting: no additional spending, unless it's offset by other spending cuts.
Politico calls the White House's push for this bill "late-breaking." I would have gone with "too late." The Obama administration has had months to make a more public case to rescue states that are wallowing in budget cuts and tax increases. Neither Geithner nor Rahm Emanuel mentioned state aid in their long conversations with reporters last week, and the White House reportedly threatened to veto the measure if Democrats tried tying it to the Afghanistan war bill.
The administration is navigating a narrow course between the deficit and the recession. One sympathizes, but they're making it harder on themselves with these measured, "late-breaking" endorsements of stimulus that should have been declared critical months ago. Republican leadership picked a message -- no tax increases, period -- and stuck with it. That's their choice. The White House needs to pick a economic message and stand behind it. That's their job.