01.31.2010 0

Editorial: States Should Get No More Bailouts

  • On: 02/15/2010 11:58:56
  • In: Fiscal Responsibility
  • When Senate Majority Leader Harry Reid released his so-called “jobs bill” in the midst of some of the highest unemployment in recent memory — for January U-3 would have risen to 10.6 percent and U-6 to 18 percent if not for annual, Census-based population estimates adjustments — one item that was curiously missing, that was included in the House’s $154 billion version: over $71.3 billion for assistance to state governments.

    Specifically, the House-passed “stimulus” contained some $48.3 billion for infrastructure and transportation spending, which is really just a bailout for construction unions working on the state and local levels, and some $23 billion for an “education jobs fund,” which, again, is a bailout for teachers unions. The $787 billion “stimulus” bill also contained $53.6 billion to bail out state and local governments, but not Reid’s $15 billion bill. He would do well to keep it that way.

    As reported by CNNMoney.com, “States are looking at a total budget gap of $180 billion for fiscal 2011, which for most of them begins July 1.” In other words, the funds proposed even by the House will not surmount the budget deficits of the several states, and they will only put off painful cuts that are necessary to rein in spending that grew unbridled in the 2000’s. We now know that increased revenues during the 2000’s was in large part owed to the housing bubble, inflated property prices, and the higher taxes they brought.

    According to the National Association of State Budget Officers (NASBO), state spending grew from $945.3 billion in 2000 to more than $1.5 trillion 2008, almost a 58.7 percent increased during what can be termed the boom years, where revenues were generally rising. Despite the economic downturn in 2007, spending still grew by about $100 billion in 2008.

    In fact, in the past 3 years, the states’ troubles have only increased due to declining revenue and an unwillingness to make necessary cuts. According to Sunshinereview.org, state budget shortfalls totaled $113.2 billion for FY 2009, and then rose to $142.6 billion in FY 2010. With the number now alarmingly rising to $180 billion for FY 2011, it is time for the federal government to send a message to states: it is time to cut state operations back to levels justified by revenue.

    To do that really is quite simple, Congress need only do nothing. Stop bailing out the states, and wasteful, immoral, and unproductive practice. The painful readjustments the economy needs to undergo for full-fledged recovery to ensue are postponed by bailouts of this nature. Perpetual bailouts for the states and other institutions are only taking capital away from what would be productive sectors of the economy that could create new jobs, and dedicating it to areas that really do need to be cut.

    California alone faces a $20 billion shortfall. Across the fruited plain, New York faces a more than $8 billion deficit. New Jersey fares even worse, it faces a $11 billion deficit more 2011. The list goes on and on.

    The Senate would do well to consider the dangers of creating a permanent line on the budget for balancing state budgets. With the federal national debt rapidly approaching $14 trillion, and the nation’s Triple-A rating already threatened, now is not the time to be sending the message that Washington exists simply to finance unsustainable operations. It is time for some tough medicine.

    The best way to create jobs in the current economy is not more deficit-spending, it is permanent tax relief coupled with bringing budgets into accordance with revenue. Through frugality and reducing the burden government imposes on the private sector, the freed-up capital would be the quickest jobs-booster to be offered.

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