Skip to comments.Dire States (Deep in debt, most governors will have to either raise taxes or cut spending)
Posted on 01/05/2011 8:01:20 AM PST by Libloather
Deep in debt, most governors will have to either raise taxes or cut spending - exactly what not to do when recovering from a recession.
By Megan McArdle
Many states have what you might call a Dont kill Grandma problem: spending creates dependentand stubbornconstituencies. At least New York doesnt have the legislative gridlock of California, where ballot initiatives have mandated spending and prevented tax increases, and a two-thirds-majority requirement to pass tax increases has resulted in a stalemate between free-spending Democrats and tax-averse Republicans. New Yorks local economy hasnt been devastated by the collapse of a primary local industry, as have those of Michigan and Nevada, where unemployment tops 12 percent. It does not, like New Jersey, have a history of underfunding its pensions.
True, the state is no repository of fiscal virtue. As Josh Barro of the Manhattan Institute says, Theyve made their pension payments on time because state courts have essentially ordered them to make their pension payments on timeif the legislature had had the option to misbehave, Im sure they would have. But its vices arent excessive. Barro says that New Yorks budget woes are probably worse than the average states, but not as bad as those of California, Illinois, or New Jersey.
(Excerpt) Read more at theatlantic.com ...
Some folks just don't get it.
I say go a step further. Accept less federal money.
Money for nothing and your chicks for free.
I heard some politician here the other day make the statement that if revenues are down (and he stated they were due to the majority coming from income tax)that the only answer would be to raise sales tax.
They just don’t get it. How about not building anymore parks, rec centers, adult centers, stadiums, etc? Things that are nice but not necessary.
There is only one thing that can be done - and it ain't raising taaaxes.
Check out the price tag.
I hope people consider the possibility that the states have been given a piece of cheese on a mousetrap, and they happily ate it without regard for the consequences. Many of the states are now like welfare mothers at the mercy of the national govt. and by extension, the Fed.
This is likely to end, eventually, with states being “bailed out” much like GM and the huge banks. Bailed out by who? Well, the national govt...but in reality the fed, which is not really a part of the govt, in many ways you could say they are above the govt.
Local communities have fallen for this to, by making exotic investments with pension funds and bond issues. So all the legitimate talk of state and local government standing up for themselves and reasserting their roles has a roadblock in that they have become just like a huge percentage of the country, dependent on the state through debt.
In Europe the move has already started to use pension funds in the same way the US has used social security. Private pensions you say? Well, the funds here in the US are invested which gives the Fed the power to do with them what they want. The “reforms” of the last few years have done nothing but increase the control of the biggest of the big banks. They can technically shut down any BUSINESS they want, not just banks.
As the financial crisis pushes further and includes the states, rather than creating an opportunity for the states to reassert themselves, most will go with their hat in hand to the national govt and the fed and, in a de facto manner, sign away many remaining powers.
Much like the states technically still have power over education except for one detail........federal money...printed by the fed out of thin air.
This is just a further chapter in a kabuki theater that has been going on since 1913.
Cutting taxes and some spending is great, but it really is like changing the top layer of icing on a 3 foot tall wedding cake.
Isn't that where the rookie Kenyan calls home?
If I were governor........as a first step I would quit sending the Feds all our money.
True enough but its a lot easier when you aren’t accepting it.
The Fed is turning into the equivalent of the British Treasury. Except this is like the US Government being run by the Chairman of the Bank of England. And of course, Bernanke cannot be removed by the President.
Where WHAT kind of governing principles are used????
I guess we should be happy they mentioned the responsible states at all...
I grew up a military brat - all over the world. I had no roots, no hometown.
I chose my own hometown as a very young adult.
Once again, I am reminded that I chose well. :)
Poor Megan has been educated way beyond her intelligence.
Yes, it is also my state (unfortunately).
So according to Democraps there are two times where you gotta spend:
1) when you are in a recession
2) when you are not in a recession
No sir here in California we are years ahead of you we are so far in the hole we can’t see day light,now we have Jerry Brown as governor to put the lid on the hole.
PS send help take liberal for a ride.
This is a very fair, nicely written article.
Congratulations to Megan McArdle. Good work.
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