Illinois is hurting. Red states and blue states are hurting — and desperate for a real federal rescue

The federal government’s response to the coronavirus pandemic should look beyond handing out trillion-dollar Band-Aids. It should roll out in the spirit of a modern day New Deal, with an eye toward addressing historic inequities

SHARE Illinois is hurting. Red states and blue states are hurting — and desperate for a real federal rescue
the U.S. Capitol in Washington

The U.S. Capitol in Washington.

AP file photo

The coronavirus pandemic is a stress test of our nation’s most fundamental systems, institutions and safety nets, just as the Great Depression was during the 1930s.

And while the $2 trillion federal stimulus package approved last month marked the beginning of a national response, Americans must face the fact that it’ll take a massive, sustained — and far more expensive — federal effort to truly set things right again.

The pandemic has exposed deep pre-existing vulnerabilities and inequities. In just weeks, the virus has thrown 17 million people out of work in an economy that already had been tough on low-wage workers.

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Our nation’s poor and unemployed have been left particularly vulnerable because of a health care system that already was unfairly skewed toward better care for the middle class and wealthy.

Now, on top of this, comes the news that the first federal stimulus package won’t begin to set things right, certainly not for Chicago or the state of Illinois. A massive second stimulus package already is necessary — and it needs to go further to help state and local governments.

Here’s why: The first stimulus is to be spent only on COVID-19-related matters — and not be used to narrow budget gaps. This effectively handcuffs governors and mayors who are desperately in need of flexibility when it comes to spending.

Ordinary tax revenues devastated

The coming financial crisis for cities and states will result not only from unforeseen pandemic-specific expenses, such as the need for a $100 million emergency hospital facility at McCormick Place. It also will result from a devastating decline in normal revenues — from sales taxes, corporate and individual income taxes and the like — that will make it tougher to pay routine bills and provide services.

The city of Chicago, for example, will receive about $572 million in federal stimulus funds. But, as Fran Spielman of the Sun-Times reported Thursday, that money is largely earmarked for coronavirus-related expenses, such as police and fire overtime.

The state’s share of the stimulus funds, $2.7 billion, won’t begin to make up for lost tax revenue or cover escalating expenses, such as the growing number of people being pushed by unemployment onto Medicaid. A new study by the University of Illinois Institute of Government and Public Affairs estimates that state revenues could plummet by $1.9 billion to $6.4 billion in this calendar year alone. Over the next four years, that drop could reach between $10 billion and $28 billion.

For perspective, the state’s 2020-2021 budget is $42 billion. Its backlog of unpaid bills totals nearly $8.3 billion.

Glimmer of hope?

And amid all this, there might be a glimmer of hope: The Washington Post reported Friday that federal officials have pledged to buy “up to $500 billion in short-term notes directly from states as well as larger cities and counties, pledging to take further action if local government finances continue to sour.”

This could be the beginning of the type of government action needed to help stop the financial bleeding.

“If it’s the start of something, it’s good news, and it definitely helps in easing the liquidity crunch states and local governments are facing,” Vikram Rai, the head of Citi’s municipal strategy group, told The Post. But, “If the Fed is going to stop here, it’s a bitter disappointment.”

We agree wholeheartedly that the feds can’t stop. A much larger federal government initiative to make financing available to states and municipalities is a must. It would allow these governments to refinance mountains of debt at lower interest rates, thereby reducing costs.

Red states are hurting. Blue states are hurting. A larger program could help them both.

A deal to make a better America

Beyond that, government should seize on this moment to address historic structural inequities — such as wildly uneven access to health care, a living wage or a financially secure retirement — that have been exposed and exacerbated by the coronavirus’ spread.

We’re not delusional. We know a modern New Deal — a version of President Franklin Delano Roosevelt’s massive public works undertaking to pull America out of the Great Depression — will never happen under a President Trump. Nor will it be embraced by the Republican-majority Senate.

But this broader vision should be an aspirational guide to our nation’s long-term response to the pandemic, embraced for the moment at least by the Democratic House. We’re calling for a return to that spirit.

The coronavirus is real and deadly. It also is a metaphor. In the same way the virus spreads without distinction or favor, most of our nation’s biggest social problems hurt us all.

We do our nation no favors allowing poor children to be poorly educated, allowing mentally ill people to live on the streets, forcing low-income workers to hold two or three jobs.

It all comes back to haunt us in the form of more crime, bigger prisons and a nagging conscience during church services on Easter Sunday morning.

Send letters to letters@suntimes.com.

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