Earlier today I opined that additional aid to states was a "virtual non-starter on the Hill" even though it's one of the most efficient tools we have for preserving and creating jobs. But I stand corrected (sorta). In a telephone interview this afternoon, North Dakota Sen. Kent Conrad, the chairman of the Senate Budget Committee and a key figure in discussions about more stimulus, told me that additional state aid is definitely on the table. Here's the relevant portion of our conversation:

Conrad: I think there’s strong consensus in the short-term about the need to do more things that generate jobs. The things that have the most support are infrastructure, aid to states--the states are laying off people--and some kind of jobs credit [presumably a tax credit] to small business.

NS: I thought aid to states was going nowhere on the Hill?

Conrad: It is tough. But ... most economists say it’s one of the things you could do that would have the most rapid turn-around. The reason is clear. A lot of states are in an extreme situation. They have constitutional balanced budget requirements. They're laying off people. We don’t want them doing that. We want them working on roads, bridges, airports…

I’m just saying what I hear from colleagues, what I hear from analysts, about what would have the most benefits. It's hard to do, the hardest of the three. Infrastructure, jobs credit/assistance to small business I think are the things that enjoy the broadest support.

NSIs the argument against additional aid to states a kind of moral hazard argument--bailing them out after they spent too lavishly only encourages more spending? 

Conrad: Yep, that’s high on the list of concerns.

NS: So presumably that's where the GOP would criticize you, right? It would be tough to get bipartisan support...

Conrad: I don’t know that. Some of their [Republican] states are in pretty deep trouble.

All in all, somewhat enouraging.

Update: I should probably note that "2nd stimulus" is my term, not Sen. Conrad's. For obvious reasons, congressional Democrats tend to avoid describing their forthcoming jobs package that way...