Trump Questions Whether U.S. Should Aid ‘Democrat’ States

(Bloomberg) -- President Donald Trump questioned whether the federal government should provide financial assistance to “poorly run” states led by Democrats on Monday, again framing the U.S. response to the coronavirus outbreak in partisan terms.

Trump appeared to align himself with Senate Majority Leader Mitch McConnell, who has said Congress shouldn’t debate relief to cash-strapped states until legislators reconvene in May. The Kentucky Republican has suggested states with large pension obligations under union contracts should be forced into bankruptcy instead of receiving federal aid.

Many Democrats and some Republicans have criticized McConnell’s bankruptcy proposal, arguing such a move would have far-reaching and disastrous financial consequences for the country. Democrats say federal aid for states and local governments must be part of the next round of coronavirus-related stimulus.

New York Representative Peter King, a Republican, called McConnell the “Marie Antoinette of the Senate” for his seeming indifference to the plight of local governments, including in his home state.

McConnell’s home town of Louisville faces a massive budget deficit as a result of the coronavirus outbreak, which has put a quarter of Kentuckians out of work.

Kevin Hassett, a senior economic adviser to the president, questioned the wisdom of letting states go bankrupt in an interview on ABC News on Sunday.

“The state going bankrupt is something that’s not really been anticipated by the founders,” Hassett said. “And so I’m not sure exactly -- I didn’t see the clip from Senator McConnell but I’m not sure exactly what he was talking about.”

Illinois Trouble

Trump singled out Illinois in his tweet after the state’s Democratic governor, J.B. Pritzker, repeatedly criticized the president’s response to the coronavirus outbreak.

Pritzker last week said “everything is on the table” as he and the state’s General Assembly deal with a budget shortfall for next year of at least $6.2 billion. Illinois has the worst credit rating of any U.S. state and faced financial problems even before the outbreak.

The pandemic and its economic consequences “are likely to exacerbate the already substantial financial challenges that Illinois faces and test its resilience compared with other states,” according to an April 21 report by Moody’s Investors Service, which rates Illinois Baa3, its lowest investment grade.

The firm earlier this month cut Illinois’s outlook to negative from stable as expected investment losses, tax revenue declines, large unfunded pension liabilities and a large unpaid bill backlog “are likely to worsen significantly, reducing future financial flexibility.”

The state’s five retirement funds had about $137 billion of unfunded liabilities as of June 30 and its unpaid bill backlog stands at about $7.5 billion. Illinois is expected to receive about $4.9 billion from the $2.2 trillion coronavirus stimulus package Trump signed into law last month.

“The state of Illinois sends more taxpayer dollars to Washington than it receives each year, so we’d urge the president to avoid his instincts to make this a partisan issue and do what’s right for the country,” Jordan Abudayyeh, a Pritzker spokeswoman, said in an e-mail.

Earlier in the day, Trump told his more than 78 million Twitter followers that they should blame Democrats for delays in receiving unemployment assistance. Florida, a state that is crucial to his re-election, has been particularly beset by such delays, the New York Times reported last week. The state has a Republican governor, Ron DeSantis.

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