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COVID stimulus money favors blue states

Trillion of dollars in new federal stimulus spending has raised questions about where the money is going and who benefits the most.

new study addressing this issue found that the $1.9 trillion COVID stimulus bill passed earlier this year disproportionately went to Democrat-led states. According to the report, that partisan bias occurred largely because the bill gives preference to areas with high unemployment rates, which favors blue states.

Republicans argue those unemployment rates are the result of bad economic policies and unnecessarily long COVID shutdowns and that taxpayers in red states shouldn’t have to pay for their mistakes.

“COVID-19 relief legislation offers a unique setting to study how political representation shapes the distribution of federal assistance to state and local governments,” the report reads. “Alignment with the Democratic party predicts increases in states’ allocations through legislation designed after the January 2021 political transition. This benefit of partisan alignment operates through the American Rescue Plan Act’s sheer size, as well as the formulas through which it distributed transportation and general relief funds.”

The study also compared the most recents stimulus bill – passed under a Democratic majority in the House and Senate with a Democratic president – to the federal funds handed to state and local governments in the previous Congress, under a divided government.

“We show that arrival of the Democratic trifecta predicts a non-trivial increase in aid allocated to states whose delegations lean Democratic rather than Republican,” the report reads. “A fully Democratic delegation predicts a $300 per capita increase in federal funds under unified Democratic control of the federal government relative to the previous year’s divided government.”

Republican members of Congress warned of this bias when the bill was up for debate earlier this year. Now, it appears the data has backed up some of those claims.

“They want to send wheelbarrows of cash to state and local bureaucrats to bail out mismanagement from before the pandemic,” Senate Republican Leader Mitch McConnell, R-Ky., said in March. “They’re changing the previous bipartisan funding formula in ways that will especially bias the money toward big blue states.”

Others on the right warned of a disproportionate distribution earlier this year. Former President Donald Trump said that the funds reward Democratic leaders in blue states that he says kept their states shut down for too long.

“I don’t think the Republicans want to be in a position where they bail out states that are, that have been mismanaged over a long period of time,” Trump told the New York Post in May. “You look at Illinois, you look at New York, look at California, you know, those three, there’s tremendous debt there, and many others.”

Trump compared those to red states, which will help foot the bill to “bail out” the Democrat-led states.

“Florida is doing phenomenal, Texas is doing phenomenal, the Midwest is, you know, fantastic – very little debt,” Trump said.

The study also found some bias toward smaller states, that they received more funds per-capita than larger states.

“We provide evidence of a substantial small-state bias: an additional Senator or Representative per million residents predicts an additional $670 dollars in aid per capita across the four relief packages,” the report reads.

The report highlights, though, that stimulus funds handed out under a Democrat-led Congress and White House trend significantly more to blue states than the stimulus passed when Democrats and Republicans shared control.

The report was conducted by Jefferey Clemens, an associate professor at the University of California San Diego along with Stan Veuger, an economic expert at the American Enterprise Institute.

Veuger said one key reason for this imbalance is the given formula used to allocate funds. Formulas vary based on the issue, from distributing transportation funds based on bus miles to handing out stimulus money based on unemployment.

Veuger said a major driver for the partisan bias in the most recent stimulus bill was handing out funds to states based on unemployment, which is notably higher in blue states.

“These allocations by formula, people often think of them as better in a way,” Veuger said. “They seem technocratic and there’s a reason behind them, but obviously the politicians pick the formulas that they use in different circumstances. I think there’s a tendency to treat these formulas as completely de-politicized and that’s just not the case.”

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