State Budget Disasters Are A Good Thing
By Wes Keene | February 24, 2010 | In Category: Government Debt
It’s been written about extensively, State budgets coast to coast are in disarray. California is facing a $24 billion budget gap last year, and IOUs were issued in lieu of tax refunds. In California, income tax rates alone are over 10% for top earners. New Jersey faces an $11 billion deficit. The picture is bleak in many other States as well.
Unlike the Federal government, States cannot print money. Even though their borrow capacity and their corruption capacity exceeds any household by a mile, they still face the same basic economic realities ordinary citizens face (albeit on a bigger and more protracted scale). When States like Illinois fail to balance their budgets, they simply stop paying their bills, jobs get cut, lawsuits are filed, and legislators panic. There is no magic government money tree for Illinois. There is no Federal Reserve Bank to create more cash. The 2009 stimulus plan is basically a State bailout, but even that is woefully inadequate to address the mid and long term struggles these States face.
State budget difficulties could be a good thing, however. Because States have to actually confront budget problems, they are forced to (eventually) fix them. Some may decide to raise taxes as California did, other will make tough choices like slashing programs for things like education, such as NJ Governor Chris Christie. Still others will attempt to audit State budgets and eliminate fraud, waste and abuses. These are all legitimate choices. Naturally, the conservative prefers the latter two choices to the former, but they are all on the table. At least the decision actually gets made at the State level…eventually. They can’t vote to increase their debt ceiling infinitely, as Congress recently did.
When the Federal government is forced to quit living off Federal Reserve notes, they will have to make the same decisions. The popular policies of handouts, giveaways, and entitlements, will necessarily come to an end. Social spending will be left to the State government. If they cannot afford it, it won’t happen. The 10th amendment will be in force because it has to be.
Conservative activists insist on rigorous enforcement of the 10th amendment not only because it is the Founder’s vision, but also because it is the only way to hold politicians accountable. Any financial officer is only credible when they have limits to their budget. States meet that criteria. It isn’t perfect and it takes too long, but the job eventually gets done. New Jersey is evidence that tough choices will eventually get made. That’s more than we can say for the Federal government.
I was proud to work on the Adam Andrzejewski campaign for the IL governor seat. We didn’t win. But today the ideas live on, because Illinois no longer pays it bills. Something has to give. At the State level, it always does…eventually.
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