President Obama has proposed that Congress yet again dump another bucket of money on state and local governments, as a jobs-saving measure. But the “free” money would cost states a lot.
Under the president’s plan, Minnesota would receive $504,400,000 to “save” 6,900 jobs in the fields of “teachers and first responders.” That comes out to $73,101 per job.
Unfortunately, that money has to come from somewhere (adding to the national debt, most likely), and it’s not a permanent source of money. So Minnesota state government, school districts, and cities would have to pick up the load, after one year. In other words, it’s a one-year “gift” that does not address the long-range structural problems facing Minnesota.
In fact, one-time aid “can even induce higher state and local government spending,” setting up the state that takes the money for more fiscal problems down the road. In fact, by one estimate, each dollar of federal grant brings about another 40 cents of increased state and local spending. Not only does that represent a permanent increase in the budget, it places thousands of government employees in the position of hoping that state and local government finances hold up.