On May 12, FoxNation.com featured the headline “States Say Stimulus Not Working.” But contrary to the headline's suggestion that states are claiming that the American Recovery and Reinvestment Act of 2009 is not providing effective economic stimulus, the May 12 Washington Post article to which the headline linked reported: “Eleven weeks after Congress settled on a stimulus package that provided $135 billion to limit layoffs in state governments, many states are finding that the funds are not enough and are moving to lay off thousands of public employees” [emphasis added].

The Post further reported that "[a]s the stimulus plan was being drawn up, there was agreement among the White House, congressional Democrats and many economists that a key goal was to keep states from making big layoffs at a time when 700,000 Americans were losing their jobs every month," and that the House-passed version of the bill included "$79 billion in 'stabilization' money to plug gaps in states' budgets," while “in the Senate, the stabilization funding was cut by $40 billion to secure the support of the three Republicans who were needed for a filibuster-proof 60 votes.”

From FoxNation.com:

As Media Matters for America documented, economist Mark Zandi testified to Congress that “aid to financially-pressed state governments” is an “economically potent stimulus,” and a table provided with his testimony indicated that aid to states would boost GDP by $1.36 for every dollar spent. Similarly, information that the Congressional Budget Office provided to Congress shows that aid to states produces a greater “cumulative impact on GDP” than do tax cuts.

In reports on the recovery plan, the media rarely discussed whether the recovery package might not be big enough and might have to be followed by additional measures, despite statements from many economists to that effect. Indeed, a Media Matters review of the ABC, CBS, and NBC evening news programs from January 25 through February 15 found that of the 59 broadcasts that addressed the recovery package and debate in Congress during the three-week period leading up to and immediately following its passage, only three of those broadcasts included discussion of whether that package was big enough.

From the May 12 Post article:

Eleven weeks after Congress settled on a stimulus package that provided $135 billion to limit layoffs in state governments, many states are finding that the funds are not enough and are moving to lay off thousands of public employees.

[...]

The layoffs are one early indication of how the stimulus funding could be coming up short against the economic downturn. As the stimulus plan was being drawn up, there was agreement among the White House, congressional Democrats and many economists that a key goal was to keep states from making big layoffs at a time when 700,000 Americans were losing their jobs every month.

The House passed a stimulus bill with $87 billion in extra Medicaid funding for states, as well as $79 billion in “stabilization” money to plug gaps in states' budgets for education and other areas.

But in the Senate, the stabilization funding was cut by $40 billion to secure the support of the three Republicans who were needed for a filibuster-proof 60 votes -- Sens. Susan Collins and Olympia J. Snowe of Maine and Sen. Arlen Specter of Pennsylvania -- as well as to gain the support of conservative Democrats such as Sen. Ben Nelson of Nebraska. The senators wanted to reduce the package to less than $800 billion, and several wanted to make room for a $70 billion patch of the alternative minimum tax.

Supporters of the final $787 billion bill, which included $25 billion less in state aid than the House plan, said it would help states avoid severe cuts. But tax revenue is coming in even lower than feared.