About JBE’s Claim That Ending His Shutdown Will Bankrupt The State…

…we really can’t let that lie stand without answering it, because there is so much wrong with that claim, and it belies such a rotten, uncooperative and tyrannical attitude toward preserving his shutdown, that somebody has to take it apart.

Here’s the substance of the claim

Gov. John Bel Edwards on Thursday blasted a movement by some GOP state lawmakers to cancel his emergency declaration on the new coronavirus in order to end his stay-at-home order on businesses and residents, calling it “nonsensical.”

“That would just be completely irresponsible and nonsensical to be the only state in the nation without an emergency declaration in place for the public health emergency of COVID-19,” Edwards said at a press conference.

Edwards noted the state currently has the sixth-highest rate of cases per capita in the U.S., and he said cancelling the emergency declaration would disqualify Louisiana from millions in federal funding.

“Silly is not the right word,’ Edwards said. “It would be profoundly regrettable.”

As we understand it, what Edwards is talking about are FEMA dollars to repay the state for its coronavirus spending. There is a threshold at which the federal share of disaster spending jumps from 75 percent of the total to 90 percent – that threshold is $660 million in this case.

Louisiana is not at $660 million in spending despite Edwards’ best efforts to get there (the waste associated with the more than $150 million he’s poured into the pop-up hospital at the convention center in New Orleans, where the patient count yesterday was all of 46 people, is a good example). The last number we heard on the state’s total spending amount was $579 million.

Call it $600 million as a nice round number. That would mean Louisiana would have to pick up $150 million of that cost. If the state were to maintain its emergency declaration, per Edwards’ logic, and spend the full $660 million, then Louisiana’s cost would drop to $66 million rather than $150 million.

If you’ve just broken out in a rash over the idea that the federal government’s rules are set up that way, which is the dumbest and most wasteful method possible of staging federal matching dollars, then you’re paying attention.

You’ll hear a number of $150 million thrown around. By our math, the number is really more like $84 million, which is $150 million minus the $66 million the state would be obligated for in a 90/10 share of disaster spending. In any event, that’s what Edwards’ camp is saying Louisiana would lose if the emergency declaration was overridden by a petition of the state legislature.

Except it isn’t established that this claim is even true. From FEMA’s website

On March 13, 2020, President Trump declared a nationwide emergency pursuant to Sec. 501(b) of Stafford Act to avoid governors needing to request individual emergency declarations.

All 50 states, the District of Columbia, and 4 territories have been approved for major disaster declarations to assist with additional needs identified under the nationwide emergency declaration for COVID-19. Additionally, 32 tribes are working directly with FEMA under the emergency declaration.

That would indicate since there’s a nationwide emergency declaration Louisiana could rescind its statewide declaration and FEMA wouldn’t care.

Of course, there is the $1.8 billion in federal dollars under the CARES Act which has already been allocated to Louisiana for coronavirus relief. None of that money would be affected by rescinding the emergency order now.

So that’s the federal-dollars claim. We’re told that when Edwards rolled it out yesterday a number of the state legislators committed to signing the petition got cold feet and pulled back from that commitment for fear they were about to make the state’s budget problems worse. Edwards has also been calling Republican legislators and threatening them that if they signed the petition he would use his line-item veto to insure their districts would be zeroed out of any state construction funding.

Which is an empty threat, because at this point it’s hard to see how Louisiana will have much, if any, capital outlay money to spend in the near future anyway.

Now let’s get to the truth of the matter, because today is May 1 and Edwards wants a full shutdown until May 15. That’s two weeks. It ought to be noted that Edwards had said he’d open the state back up on May 1, and it turned out he lied about that, which means nobody should assume he’s telling the truth about opening the state on May 15. He could just as easily fudge the numbers again and concoct some reasoning why he has to keep Louisiana on lockdown until May 31 or June 1.

If he were to do that, by the way, he’d have a lockdown that ran out the clock on the state legislative session, and if he could pressure them to recess the session after it starts back up on Monday, he’d then call a special session and limit the scope of what bills they could debate. For example, tort reform wouldn’t be included in that call, but a tax increase would be. But that’s a whole other column.

Louisiana’s GDP, as reported by the Bureau of Economic Analysis in its most recent report covering the 4th quarter of 2019, is $267 billion. Two weeks reflects 1/26th of that number, which means you’re talking about $10 billion in economic activity which would be affected by a shutdown.

How much activity are you restricting with the current shutdown? Well, nationally the estimates vary wildly – but the Congressional Budget Office is talking about a 40 percent drop in GDP for the 2nd quarter of this year. We’d argue Louisiana might end up off more than that, given how much of the state’s economy is dependent on tourism and hospitality, not to mention oil and gas and the petrochemical industry which are to a large extent demand-driven – when there are half the cars on the road, that means they’re only selling half the gas at the gas station, and that means the oil refinery is only refining half the oil to service that demand.

So we’ll call it a 50 percent decline in economic activity here to make the numbers understandable. Half of $10 billion would be $5 billion in economic activity in Louisiana going up in smoke by government fiat based on Edwards’ shutdown.

That isn’t the government’s money, mind you. That $5 billion belonged to the people of Louisiana. It’s our money, not John Bel Edwards’. And he’s demanding the privilege to set it on fire to keep his shutdown in place.

That alone should end this argument, because $5 billion of the people’s money greatly outweighs $84 million, or even $150 million, in federal swag Edwards thinks he can trail in if his disaster declaration stays in place.

Not to mention prolonging the shutdown two more weeks has lasting effects in the number of businesses it will permanently kill and the number of people who’ll end up leaving Louisiana to find work elsewhere. It’s a very real concern that if Texas is open two weeks before Louisiana is, Texas employers will steal away Louisiana employees with jobs our companies can’t offer, and the damage from that outmigration is permanent. So we’re really not just talking about two weeks of economic activity going up in smoke – it’s worse than that.

But even if you’re a statist who only cares about revenues coming into the Louisiana capitol, Edwards still loses the argument.

Government takes a cut of that $5 billion, after all.

Let’s just apply Louisiana’s 4.45 percent sales tax to that $5 billion. It’s reasonable to do that – while not everything has the state sales tax applied to it, there are other ways government gets a cut of that money. Louisiana charges income taxes, for example, there are severance and excise taxes, fees, casino and gas taxes and so forth. We’ll say it balances out and go with the 4.45 percent.

And 4.45 percent of $5 billion comes to $222.5 million. Which is more than $150 million, and it’s certainly more than $84 million.

We can be plenty wrong in our calculations and still conclude you’re losing more money in state revenues with an economic shutdown than you’ll gain by dragging in federal disaster dollars.

Oh, and that $222.5 million? That’s general-purpose money. It doesn’t have any purse strings to it. It spends however Edwards and the legislature decide. The federal dollars come with earmarks – in this case FEMA’s money has to be spent on the coronavirus.

In no way does what Edwards is saying make sense. He’s either an abject liar, an economic illiterate, or both.

Louisiana needs to open back up, and it needs to open back up now. And John Bel Edwards needs to stop lying and get out of the way.



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