To Republicans, State Surpluses and ‘Liberal Spending’ Illustrate ARPA Was ‘Reckless’

House Republicans on Tuesday attacked how states and local governments are spending their $350 billion share of the American Rescue Plan Act, saying it is going to fund a liberal wish list of programs. As evidence that Democrats and the Biden administration went overboard in the $1.9 trillion stimulus package, the GOP lawmakers pointed to the billions in surpluses some states like California and New Jersey have accumulated.

“Democrats throw money out the door like Mardi Gras beads off of a float on Fat Tuesday,” said Rep. James Comer of Kentucky, the top Republican on the House Oversight and Reform Committee, during a hearing on the impact of the ARPA funds on local economies.

However, representatives of the nation’s mayors, county officials and Democratic Illinois Gov. JB Pritzker disputed the attacks and said ARPA funds have provided aid to help small businesses stay afloat, fund vaccinations, improve broadband and retrain workers  during the pandemic.

With Biden expected to tout his successes in his State of the Union address Tuesday night to counter his low approval ratings, Rep. Carolyn Maloney of New York, the Democratic chairwoman of the committee, pointed to a Moody Analytics report last week that said the economy would be in much worse shape without ARPA.

ARPA resulted in the addition of 4 million jobs in 2021, the report said, putting the U.S. economy on track to recover all of the jobs lost during the pandemic in the next few months.  If there “had been no ARP[A], it would have taken another year for the economy to recover all of these jobs,” the report said.

Maloney also noted that ARPA’s relief funds for state and local governments were in contrast to relief measures passed during the Trump administration, which did not contain such aid. “Governments of all sizes were left to fend for themselves by the previous administration,” she said.

“I’m proud to report that the ARPA has worked,” Maloney said. 

ARPA funds have allowed states and local governments to recover more quickly than after the Great Recession, said Michael Leachman, vice president for state fiscal policy at the left-leaning Center on Budget and Policy Priorities.

In the two years after the recession, which ended in 2009, Leachman said the private sector added 1.2 million jobs but states and localities cut 450,000 positions, making the governments a drag on the recovery.

Since December 2020, however, the ARPA and other recovery funds have allowed states and localities to restore 473,000 jobs, Leachman said. If not for those efforts, Moody estimated the governments would have had to cut 1.2 million jobs, Leachman said.

Where the Funds Went

States and localities have used the federal money in a variety of ways. The $8.2 billion Illinois received funded a Back to Business grant programs for small businesses hit hardest by the pandemic, thousands of mobile vans to administer vaccinations, hire health care personnel and train workers, Pritzker said.

“Workforce development has been enormously helpful to Illinois as we tried to get back to work,” he said. The governor noted that the state has worked with community colleges to train people for available jobs like driving commercial electric vehicles.

Tacoma, Washington Mayor Victoria Woodards, vice president of the National League of Cities, said the relief has helped her city overcome a loss of $59 million in revenue to continue providing essential services and address issues like homelessness. 

The city has also used ARPA funds on workforce development including a Transitional Employment Pathways program that helps people living in homeless encampments get job experience cleaning up litter or doing landscaping, she said.

Other cities like Cheney, Washington, Woodards said, have used the funds to provide rental assistance, while others like Henderson, North Carolina are giving grants to nonprofits that “are on the front lines” of the pandemic, she said.

Gary Moore, judge-executive of Boone County, Kentucky, representing the National Association of Counties, said the fact that counties have spent or budgeted 99% of their  ARPA funds “demonstrates the critical need of the program.” 

His county, Moore said, is using its funds to expand broadband to more people and to make improvements in its water and sewage systems. 

Others, like Los Angeles County, have spent the funds on services like 24-hour homeless shelters. Howard County, Maryland, meanwhile, has used the money to fill staffing shortages in public schools, he said.

‘Common-sense Guardrails’ Needed

Woodards praised Congress for giving flexibility to local governments and “empowering those who know communities best with the resources to make meaningful, impactful change.”

But to Republican lawmakers like Rep. Virginia Foxx of North Carolina, Democrats should have included “common-sense guardrails” to make sure the funds were used to address the pandemic and improve the economy.

Rep. Bob Gibbs, an Ohio Republican, said states have used federal tax dollars to fund liberal priorities. He pointed to New York state’s use of ARPA dollars to create a $2.1 billion Excluded Workers Fund that gave cash grants to people excluded from other forms of coronavirus aid, including undocumented immigrants.

Gibbs also criticized Washington, D.C. Mayor Muriel Bowser’s use of $3 million ARPA funds to transition homes to solar power. 

ARPA funds are being used for things “that have nothing to do with pandemic relief or the recovery,” Gibbs said. “There were a lot of wish lists before the pandemic and now we’re fully funding them.”

Plus, he said, “Privately I’ve had county commissioners saying, ‘we have a lot of money we don’t know what to do with.’” 

Also troubling Republicans like Rep. Andy Biggs of Arizona is that several states have higher surpluses because of the influx of federal dollars. California, for instance, is “flush with cash,” Biggs said. 

California has a $31 billion budget surplus. Other states have extra cash, too, including New Jersey, which has a $10 billion surplus, and Arizona, which has a $1 billion surplus. 

ARPA, said Rep. Jody Hice, a Georgia Republican, represented “absolutely reckless spending. It’s like throwing lighter fluid on a bonfire and now we have a wildfire of inflation that’s out of control.”

However, Maloney pointed to the Moody’s analysis, which disputed the oft-repeated Republican attack that spending by Democrats caused inflation to rise by 7.5% in January, the highest jump since February 1982.

ARPA did increase inflation because the funds gave consumers more money to spend, Moody’s said. But that occurred in the first half of 2021 “at the time it was even viewed positively, as many businesses were simply re-establishing the prices they had previously cut when the pandemic,” the report said. 

Rather Moody’s blamed the disruption in the supply chain caused by the pandemic for the rising prices.