The Corner

White House Rejects S.C. Governor’s Plan to Pay Debt with Stimulus Funds

Last week, South Carolina’s governor, Mark Sanford, requested that he be able to use up to $700 million of his state’s economic stimulus funds to pay down state government debt rather than use it. His request makes a lot of sense. Why spend your one-time stimulus money on creating new jobs and new programs that the state won’t have money to pay for later?

Well, he got an answer from the White House: No.

The Office of Management and Budget director Peter Orszag responded on behalf of President Obama, saying that the law doesn’t allow governors to use money intended for other purposes to instead make debt payments. “During this severe economic downturn, Congress and the president wanted to provide states and localities with emergency funding in order to prevent the layoffs of teachers, police officers and other vital public servants,” Orszag wrote. After citing two specific clauses of the stimulus law, Orszag said: “Congress has not authorized the executive branch to waive any of the above statutory requirements governing the State Fiscal Stabilization Fund. Accordingly, states’ spending . . . must satisfy the statutory requirements.”


This adds insult to injuries. Remember that the stimulus bill included a clause (in Section 1607 of the final bill) saying that if a governor refuses to accept stimulus funds allocated to his or her state, the state legislature can override the governor’s decision by passing a concurrent resolution. It means that governors, such as Sanford, who have said that they would not accept the money, could be overridden by their state legislative bodies. The clause targeted at Governor Sanford and was crafted by Rep. Jim Clyburn of South Carolina, the No. 3 Democrat in the House of Representatives. (For what’s in the stimulus bill read this.)

Finally, starting this week the National Democrats have been running ads in South Carolina accusing Republican Governor Sanford of putting politics ahead of jobs and schools.

Would those who supported the stimulus like to explain to taxpayers who will pay for the stimulus? Do they also want to explain who will have to continue paying for these new programs when the stimulus money runs out? I didn’t think so.

— Veronique de Rugy is an economist at the Mercatus Center at George Mason University.


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