14 Democratic state treasurers caution Congress against 'clawing back' stimulus funds for infrastructure

• Fourteen state treasurers urged Congress to refrain from repurposing stimulus aid to fund infrastructure.
• The GOP's $928 billion infrastructure counter-offer proposed funding through unspent stimulus money.
• The treasurers said taking that money away would strip state and local governments of needed aid.

On Thursday, Republican senators introduced their second counter-offer to President Joe Biden's infrastructure plan, proposing funding the plan by using unspent stimulus money. State treasurers say this is a bad idea.

In a letter sent to Congress on Thursday - organized by Invest in America Action - 14 state treasurers urged lawmakers to resist calls to use stimulus aid from the American Rescue Plan to fund infrastructure.

The letter follows the introcution of a $928 billion counter offer to Biden's infrastructure plan, which was introduced by a group of GOP senators, led by Shelley Moore Capito of West Virginia. The proposal is largely funded by stimulus money, and the state treasurers said in their letter that taking back that funding "will cause a longer, more difficult economic recovery for everyone."

The letter cited Congress taking out state and local aid from the American Recovery and Reinvestment Act in 2009, and said it took states nearly a decade to return to pre-crisis employment levels. The authors argued that "clawing back funds from the American Rescue Plan would be making the same mistake again, and even more so."

"Weeks after bragging about the good that they have done for Main Street USA, certain members of Congress want to threaten economic collapse to protect their billionaire donors and fund their pet projects with money they already promised to cities and states," Illinois State Treasurer Michael W. Frerichs said in a press release.

He continued: "This cannot stand. No one in good faith can deny the harm that would come to pass if Congress demanded that the financial aid it wisely promised must now be forfeited. Doing so would cause generational harm to workers and employers alike."

Biden's $1.9 trillion American Rescue Plan included a $350 billion investment in aid for states, localities, tribal nations, and US territories. The state treasurers said those funds are critical to ensuring economic recovery for state and local governments.

The letter also cited an analysis from Moody's that found investing in state and local governments adds $1.36 to gross domestic product (GDP) for every dollar spent, and underfunding those areas would hurt the economy.

Last week, Insider reported that Capito floated using unspent unemployment benefits to fund infrastructure. This came as a growing number of GOP-led states are cutting unemployment benefits early following a weak April jobs report - $300 weekly benefits that were initially from Biden's stimulus plan.

"I think there's all kinds of different ways that we're looking at. Certainly repurposing some of those covid dollars," Capito told Bloomberg. "I've been looking at those 21 states that are no longer paying the enhanced unemployment - why don't we repurpose those dollars to help those folks coming off unemployment get work in an infrastructure plan."

Meanwhile, many Democrats continue to support Biden's proposed corporate tax hikes to fund infrastructure, and some, like Sen. Bernie Sanders of Vermont, have opposed repurposing unspent unemployment money for infrastructure funding.

"Workers who lack access to childcare, have lost employer-sponsored health insurance, and fear for their health and safety as we work to get every American vaccinated are entitled to these benefits," Sanders wrote in a letter to Labor Secretary Marty Walsh. "They will be forced into poverty-either with poor jobs with unfair wages or no income at all-if you fail to provide these benefits."