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President-Elect Obama Seeks To Assure Nervous Governors On Economy

WASHINGTON (AP) - The nation's governors are seeking tens of
billions of dollars in federal spending as their states struggle to
survive the economic crisis.

But how exactly would federal aid help the states - and what
would this sort of spending do for the nation's economy as a whole?

Much of the government spending that states are asking for would
help to create thousands of jobs. That's a major reason why
President-elect Barack Obama and the next Congress are expected to
push hard to include aid for states as they craft an economic
recovery plan to counter the recession.

Governors from across the country met with Obama in Philadelphia
on Tuesday and made their pleas for federal help.

Here are some questions and answers about the role of federal
aid for the states in stimulating the nation's ailing economy.

Q: Why are the states asking for the government's help?
A: Given the steepest economic decline in decades, states are
struggling to keep their budgets balanced.

Unlike the federal government, which runs huge deficits, many
states face tight budgetary constraints and need to limit spending.
Many state constitutions prohibit states from running deficits.

States are in an economic vise, squeezed by rising demands for
state services even as state revenues falls. Obama warned of a
looming crisis in his meeting with the nation's governors. He noted
that 41 states are likely to face budget shortfalls this year or
next.

Q: How are states hurt by budget shortfalls?
A: Budget shortfalls force states to make tough choices between
cutting spending and raising taxes.

Raising state taxes at a time when many people are struggling
from the economic crisis hurts cash-strapped families. And to trim
spending, states are often forced to cut jobs as well as programs
aimed at helping the poor.

As the recession deepens, poor people need more and more help
from food stamp, welfare and health care programs. Those demands
can cripple state budgets.

Q: What are the states asking for?
A: The National Governors Association is asking for $40 billion
over two years to boost the federal government's contribution to
Medicaid, which serves the poor and disabled. (The states and the
federal government share the cost of Medicaid.)

The states also want $136 billion for a long list of ready-to-go
road and bridge repair projects, water and sewer projects, school
repairs and other infrastructure needs.

Q: Can states expect help from the incoming Obama
administration?
A: Obama has pledged to increase federal spending for states as
he consults with governors and Congress in crafting an economic
stimulus package. Obama considers the stimulus package his top
priority as he begins his presidency. The plan could cost more than
$500 billion over two years.

Q: How would the increased federal spending help stimulate the
nation's sputtering economy?
A: Officials hope to create more jobs by pumping new money into
roads and other projects on the state level. They say spending on
things like roads and bridges could help sustain long-range
economic growth when the economy rebounds. More importantly, more
jobs means more people have more money to spend, giving the overall
economy a boost.

(Copyright 2008 by The Associated Press. All Rights Reserved.)


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