Obama, Governors Try to Patch Stimulus Split

By: , and - February 23, 2009 12:00 am

A lingering dispute between a handful of Republican governors and the administration over a small part of the economic stimulus bill should not jeopardize the broader effort to create millions of jobs to help end the recession, President Obama told the nation’s governors today (Feb.23).

After Obama signed the legislation Feb. 17, six of 22 GOP governors said they would consider rejecting their states’ share of $7 billion in expanded unemployment compensation contained in the stimulus bill. The governors’ opposition to the money dominated the annual winter meeting of the National Governors Association over the weekend (Feb. 21-22) and carried into the White House meeting today between the governors and Obama in the state dining room.

Mississippi Gov. Haley Barbour and South Carolina Gov. Mark Sanford said they told Obama they are concerned that after the stimulus money runs out, employers in their states will pay higher taxes to cover the cost of benefits for part-time as well as full-time workers.

“If we took the unemployment insurance money, it would require a tax increase when the federal money runs out in a couple years,” Barbour said after the meeting.

Obama told the governors, according to a press pool account: “… If we agree on 90 percent of this stuff, and we’re spending all of our time on television arguing about 1, 2, 3 percent …. That starts to sound a little like politics.”

Including Barbour and Sanford, the other governors critical of the unemployment money and other parts of the stimulus package are Louisiana Gov. Bobby Jindal, Alaska Gov. Sarah Palin, Minnesota Gov. Tim Pawlenty and Rick Perry of Texas.

Jindal, Palin and Pawlenty are weighing running for the White House in 2012, and Perry may be in a tough re-election battle next year with U.S. Sen. Kay Bailey Hutchinson (R). After Obama’s decisive win last fall, the party is trying to identify differences with the new president. Jindal said after the meeting that he questioned other parts of the bill, such as including money for the U.S. Census and National Endowment for the Arts. Jindal, who will deliver the Republican response to Obama’s address to Congress Tuesday night (Feb. 24), announced last week that Louisiana would not accept the unemployment money.

According to Virginia Gov. Tim Kaine (D), Obama told Barbour and Sanford “I hear you. There is a philosophical issue about that. I understand that. What I don’t like is an argument about $7 billion in unemployment to be used to characterize this as a wasteful package. If you have a concern about a couple of line items, that’s fair. But don’t use that to say the whole package should have been done differently.”

Arkansas Gov. Mike Beebe (D) said Obama was “a little sensitive to a few of the governors’ criticism and he made the point: ‘We are all in this together and there is plenty of time for partisanship and political wrangling, but right now the American people don’t need that. Right now the American people need this stimulus to work, put people back to work.'”

A Republican governor who is accepting the unemployment compensation funds, Mike Rounds of South Dakota, said the dispute has been exaggerated. “It’s a small part of the entire package and that’s the area that has gotten the most attention in the media and yet it’s not very large, I think it’s less than 1 percent of what the entire package is…The president made it clear. He said, ‘Look I understand all your states are different. You may not want to have tax increases or you may not want to accept the funds because of the long-term implications it has for employment possibilities.'”

Pennsylvania Gov. Ed Rendell (D), who heads the governors association, said he was not thrilled about the possibility of covering the future cost of unemployment compensation. But he said he had a “moral duty” to assist jobless Pennsylvanians in the recession.

According to the White House pool report, Rendell told Obama the governors were ready to help make the stimulus package work. “These are bold strokes at a time when the country needs bold strokes,” Rendell said. “…. All of us are bound and determined to make this program work.”

Obama brought the governors a gift: $15 billion of Medicaid money from the stimulus package. The governors had been expected the money for their fiscal 2009 budgets but did not know until today when they would be getting it.

“By the time most of you get home; money will be waiting to help 20 million vulnerable Americans in your states keep their health care coverage,” Obama told the governors, according to the pool report.

He also announced that Vice President Biden would oversee implementation of the stimulus plan and that Earl Devaney, a former Secret Service agent and inspector general of the Interior Department, would head the Recovery Act Transparency and Accountability Board which will track the states’ stimulus spending.

“He looks like an inspector general,” Obama said. “He’s tough. He barely cracks a smile.”

Several governors in both parties said after the meeting that they were impressed with Obama’s candor. “I thought the meeting at the White House today was the best I’ve attended,” said Indiana Gov. Mitch Daniels (R).

“Governors were not posturing and giving speeches, as they sometimes do. The president himself was very clear and candid, and his team answered some questions that are important for us all to clarify.”

Stateline.org staff writers John Gramlich and Pauline Vu contributed to this report.

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Stephen Fehr

Stephen Fehr is a senior officer with Pew’s government performance portfolio. He is a lead writer on many of the products generated by the portfolio, specializing in state and local fiscal health.