The House of Representatives this week is expected to pass a federal stimulus package that could pump at least $17 billion of noncapital funding directly into New York’s state and local government coffers over the next two years. But what Sen. Charles Schumer is touting as a “shot in the arm” for New York looks more like a sock in the face to the state’s taxpayers.
The stimulus bills would temporarily offset Gov. Paterson’s planned cuts in Albany’s projected spending on education and Medicaid – the operative word here being “temporarily,” since the extra cash is only for 2009 and 2010.
As a result, the federal bailout will do painfully little to forestall the massive tax hikes now being cooked up in Albany and City Hall. Nor will it do much to “stimulate” New York’s economy (unless, like Schumer and too many other leading New York politicians, you pretend public-sector unions and Medicaid providers are engines of economic growth).
By delaying any serious reform or restructuring of New York’s most costly programs, the “stimulus” would actually make the state’s long-term financial outlook even worse. If the current versions of the stimulus bills become law, bond-raters might as well downgrade New York’s paper right away – because when two years are up, the state budget hole will probably be as big as ever, and the economic outlook may not be much brighter.