Mixed in the debate among the many issues swirling around Washington is the question on federal bailouts for cash-strapped states. Following the practice of using taxpayer money to prop up failed banks, the auto industry and the notorious AIG, the ‘too big to fail’ approach is being thrown around to lend assistance to a handful of states that are careening towards a cliff they must find some way to navigate.
Living generously during prosperous times, committing to lavish pensions with menacing unions, and failing to plan when good times end, states now find themselves squeezed. The deficit numbers are quite stark: $25 billion for California, $15 billion for Illinois, and $10 billion for New Jersey. Financial analyst Meredith Whitney, celebrated for forecasting the collapse of the banks, now predicts that we’ll begin to feel the states’ pain in the spring when federal stimulus money dries up. As recently as 2009, California was forced to issue IOU’s in lieu of payment due to lack of funds, the State Treasurer Bill Lockyer is making headlines once again saying the Golden State may have to once again use promissory notes as early as April if new Governor Jerry Brown does not address the problem quickly. In Illinois, the state legislature just passed a 66 percent increase on income tax as a means to address their state financial shortfall.
The conspicuous question on the table is what to do? Is the federal government now to run to the aide of states who can’t keep their books balanced? Is California to live high-on-the-hog with all benefits of Golden State amenities while a Texas or Indiana covers their bill? The answer is a resounding ‘no.’ In difficult times you have to make difficult decisions, a family must find ways to reduce spending and live within their means when hard time fall upon them, a business must learn to adapt and cut expenditures when the economy slows, and so it must be the same for states.
Within each of these states’ governments, they must confront their own problem and find a solution unique to their own circumstances including cutting state programs. The above-mentioned New Jersey is garnering front-page news with Governor Chris Christie making sweeping decisions in confronting runaway union pensions, ending wasteful construction projects that incur massive costs, and actually laying out a business friendly environment to encourage companies to move to New Jersey rather than increase taxes on their earnings. Here in Texas, our legislature is meeting to find a solution to our own budget shortfall, estimated to be close to 15 billion.
The fatigue voters felt after the numerous bailouts and government acquisition of private entities has run itself deep in the minds of voters across the country; recent November elections and a new congress reflect this sentiment. If Washington were to attempt another bailout for states on the brink, the general response from voters would be swift and harsh claiming they’ve had enough already, let the states figure it out for themselves.
One of the great, and often understated, things about this nation is the freedoms we have across the board. Aside from the constitutional rights we all know and love, one liberty we have is the ability to move freely whenever and however we choose. If someone finds themselves living in a state that issues worthless IOU’s for payment and has to suffer through a massive tax increase so government can balance their books, he is free to get up and move and find a much better place to live, most likely to a state that controls spending and keeps taxes low.