Congress must act by sending more federal money to states to help them recover from massive budget shortfalls and high unemployment rates or risk "a significantly worse and protracted recession," former Federal Reserve Chairman Ben Bernanke argues in a new opinion piece.
Writing for The New York Times, Bernanke — a member of New Jersey's Restart and Recovery Commission — said the federal government must act to help states offset the financial burdens they've taken on because of the coronavirus pandemic.
"It's become abundantly clear that the responsibility for responding to the pandemic cannot lie only with local and state governments. Congress must act decisively — and it must act in ways that don’t repeat mistakes of the recent past, during the Great Recession," Bernanke wrote.
Bernanke then explained how New Jersey "flattened the curve" of virus cases earlier this year by shutting down large portions of its economy and forcing people to work from home, which wreaked havoc with the state's finances.
"The state faces a revenue shortfall in the billions of dollars," he wrote.
"Many other states face ominous budgetary outlooks, too, implying the need for draconian reductions in essential services to state residents and large potential job cuts. Furloughs have already begun in New Jersey. Since February, state and local governments collectively have laid off close to 1.5 million workers."
To help states recover from the COVID-19 crisis, Bernanke said Congress needs to step up and allocate billions of dollars to states — just as it did with legislation in March and also during the Great Recession in 2008.
"The CARES Act allocated $150 billion to state and local governments. This new aid package must be significantly larger and provide not only assistance for state and local governments but also continued support for the unemployed, investments in public health and aid as needed to stabilize aggregate demand and restore full employment," he wrote.
"To continue to provide services that its citizens need and to avoid severe budget and employment cuts that will drag down the economy, states and localities need more federal help. Providing that help is in everyone's interest."
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