States squeezed into austerity

>>> all right. joining us at the table is maya, the founder of a non-profit organization tackling economic inequi inequity. we are talking about the underemphasized, undertold story about the great recession from the perspective of the budgets and fiscal battles which tend to focus on washington in the state houses and where states all but i believe vermont, have to balance their budgets. they can't run deficits. the things that are theoretical are not. you have to do it. it's caused a lot of pain and also it's been an interesting laboratory because there's been very different approaches taken by different parties that have been in power in terms of where the emphasis is. there was something you wanted to say before the break.

>> i was going to say, i think we need to be careful when talking austerity. states cut general revenue. when you look at overall spending in most states , it's gone up. it's been able to go up because of massive injection of federal money. i was going to say your experiment at the state level is awesome except now, roughly 30%, if not more of state's budget is actually fed by the federal government . then you can wonder, do we still have a federal system ?

>> i'm glad you brought that up. i think there's too little of it. too much is on the stakes. there's an argument in favor of the following. federal government can run deficits. when you have these incredible recessions, you want to do cyclical policy like cutting when things are bad and growing when things are good. maybe the federal government should be handling there and have the revenue sharing that was part of the recovery act.

>> i think you are making an important point. when we talk about what's going to happen with the fiscal fiasco, it's a cliff, a political construction. 18% of federal grants to states are at risk. when we hear from governor malloy, what it means for connecticut, it's devastating. one of the things that means is that we have to look at what it means to think about federal support. states are actually the distribution vehicles for important programs to support people to feed their families. if you just take the woman and infant nutrition program, which is one of the programs we are looking at being slashed, you are talking about people who actually are trying to feed their families working 12 hours a day. states are actually the distribution sources for that. a lot of those funds do come from the federal government . when we cut them, we put states like connecticut in the position they are in.

>> there was a trick play. the stimulus came in and said --

>> that's the recovery act, right?

>> the recovery act. in that package, we are going to increase your medicaid reimbursement. no one made the changes they might otherwise have made because they were going to get a 60% increase, a large increase representing 60% of the total cost. but that ran out. by the way, it was supported by a bunch of people to do that. in fact, in my state, the legislature said hey, we are going to offer a new plan with 89,000 enrollees in my state costing $95 million in expenditures this year. there are unintended consequences of let's insert money and by the way, take it out.

>> this is an argument against more federal involvement.

>> it's a conversation that's been going on a long time, how much they should be helping out. states don't want to give up responsibility but want more support from the federal government . in normal economic times , the state can cut spending, raise taxes, rely on savings. they are not normal economic times .

>> over the course of this very long, slow period in our economy, the federal government is playing a smaller role in helping states than any recession since the second world war . that's the reality. that's why 31 states are having an income problem now.

>> we have to distinguish whether it's an argument against. we are saying it has to increase. it's what i hear governor malloy saying. if we are going to make sure people can see a doctor when they are sick, we have to think about how we nationally meet the needs of people.

>> immaterial to talk about the consequences and not make --