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Editorial: Economic Stimulus

Bail out the neediest, too

As Congress has debated a bailout for Wall Street, there is also an urgent need for aid to working families and for state governments struggling in this weak economy.

Slumping tax revenues have caused the budgets in at least 13 states to fall out of balance, only two months after those states closed deficits. States can't operate in the red, so they're being forced either to cut services or raise taxes.

Gov. Rendell has ordered a hiring freeze and other spending cuts to save $200 million to keep the budget in balance. New Jersey Republicans have asked Gov. Corzine to call an emergency session of the Legislature to trim the budget deeper than the $600 million in cuts already imposed in June.

Mayor Nutter has ordered city department heads to trim their budgets as much as 10 percent, including possible layoffs.

Meanwhile, the unemployment rate and consumer prices are rising. The unemployment rate in August rose to 6.1 percent.

In the past 12 months, 2.2 million people have been thrown out of work. As people lose their jobs, they are unable to pay for medical care, placing an added financial burden on states.

Senate Democrats have advocated for a second package to stimulate the economy, at a cost of $56 billion. It would include new spending for infrastructure to create jobs, extended unemployment benefits, funding for food stamps and food banks, energy assistance to low-income families, aid to states to pay for Medicaid costs for the poor, and funding for job-training programs.

Senate Republicans blocked the proposal on Friday, while House Democrats were promoting a similar plan. President Bush has said he would likely veto such a bill, a view that is shortsighted.

This proposal is a small amount, compared with the likely $700 billion bailout for banks. It's true that Congress already doled out a $136 billion stimulus plan in the spring, mostly in the form of rebate checks mailed directly to taxpayers. That aid, for the most part, did produce the desired effect, stimulating some consumer spending.

But this new proposal would target families most in need of help as the economy continues to slump. And without more state aid, governors will be forced to keep cutting services, which would only worsen the situation for those at the lowest end of the economic ladder.

Rendell late last week called on Congress to match the proposed financial-industry bailout with an extra $100 billion to rebuild highways, bridges and other critical infrastructure. He's on the right track; such a public works project would create needed jobs.

House Democrats have succeeded in obtaining an additional $5 billion for the Low Income Home Energy Assistance Program, to help families pay their utility and heating bills this winter. That's important, because the cost of heating a home is expected to rise as much as 30 percent over last winter.

If the final rescue plan for Wall Street doesn't include these features, lawmakers will need to revisit these needs soon after the November election. State and local officials are facing a bleak winter, with few good fiscal options.

States will cut budgets where they can, but vital services for the most vulnerable citizens must not be ignored.