I agree – let the states dig themselves out of the hole they’ve made

Earlier this week I pointed out that, just as I predicted some time ago, states with serious budgetary and fiscal problems of their own making were using the coronavirus pandemic as an excuse to get Federal funds to bail themselves out.  I used Illinois as the prime example, but added:

Look for other states to make similar demands during this crisis.  They think that since so much federal money is being thrown around, no-one will notice (or care very much) that they’re taking the opportunity to divert billions, even trillions of federal dollars to pay for their own excesses and self-indulgence.  We dare not let that happen, because it will establish a precedent that will be used again in future.  If we pay off Illinois’, or California’s, or any other state’s deficits, what’s to stop them spending just as much all over again, then demanding another bailout?  What makes you think they’ve learned anything from their excesses, and won’t repeat them at our expense given half a chance?

I’m relieved to see that Senate Majority Leader Mitch McConnell is well aware of the danger, and has a proposal to fend it off.

Senate Majority Leader Mitch McConnell said Wednesday he favors allowing states struggling with high public employee pension costs amid the burdens of the pandemic response to declare bankruptcy rather than giving them a federal bailout.

“I would certainly be in favor of allowing states to use the bankruptcy route,” he said Wednesday in response to a question on the syndicated Hugh Hewitt radio show. “It’s saved some cities, and there’s no good reason for it not to be available.”

The host cited California, Illinois and Connecticut as states that had given too much to public employee unions, and McConnell said he was reluctant to take on more debt for any rescue.

“You raised yourself the important issue of what states have done, many of them have done to themselves with their pension programs,” he said. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”

McConnell’s remarks drew a biting response from state and local officials … McConnell’s statements also set up a conflict with House Speaker Nancy Pelosi, who said on Bloomberg Television Wednesday that a “major package” of aid for state and local government will be in the next stimulus legislation considered by Congress.

There’s more at the link.

I think the Senator is exactly right.  Our Founding Fathers never intended the Federal government to be an endless cornucopia of funds and other largesse, pouring taxpayer dollars into the states to cater for their needs.  Each state was supposed to be financially independent, raising its own funds, balancing its own budget, and providing for its own needs.  That’s long since gone by the board, because the allure of federal funding has proved too strong for greedy, fiscally feckless politicians.  It’s long gone time the constitutional balance was restored.

Of course, the propaganda drumbeat in favor of the states has already started.  Consider this article yesterday, published even as Senator McConnell was stating his position.

State and local governments are warning of a wave of layoffs and pay cuts after getting left out of the federal coronavirus relief package expected to pass Congress this week.

In many places, those painful reductions are already taking shape:

• Los Angeles plans to force city workers to spend 26 days on unpaid leave as revenues are forecast to drop as much as $600 million next fiscal year.
• Detroit has proposed laying off 200 workers and furloughing thousands more.
• In Ohio’s Hamilton County, Commissioner Denise Driehaus is taking a 10% pay cut alongside county workers. “We are really struggling,” Driehaus said.

The $2.2 trillion emergency legislation known as the CARES Act, which President Donald Trump signed late last month, included $150 billion in direct help for state and local governments grappling with the impact of the deadly outbreak. Democrats pushed to include another $150 billion in the next tranche of aid, but Republicans sought to keep the bill narrowly focused on support for small business.

By Tuesday night, Democrats yielded on their demand. The Senate passed the legislation by unanimous consent — without additional help for state and local governments. The House is slated to vote Thursday, and Trump is expected to sign it.

Senate Minority Leader Chuck Schumer vowed to revisit the issue in the coming round of negotiations over what could be an even bigger package of relief.

“The people who are on the front lines, they should get extra money, and at the top of the list is a robust state and local plan,” Schumer said. “We’re going to fight for that and many more things” in the next aid bill. It “will soon be upon us because the nation will demand it.”

. . .

“The approaching state budget cuts … will cause the U.S. economy to contract further — making the economic downturn deeper and more protracted, causing many more people to lose their jobs, and magnifying the serious hardship we already see,” said Robert Greenstein, the think tank’s president.

Again, more at the link.

The comment by Mr. Greenstein is disingenuous.  As Illinois just showed, fiscally irresponsible states aren’t just asking for money to cope with the coronavirus.  They’re asking for billions and billions of dollars to bail out their pension systems, pay off their deficits, and fund their own social and entitlement programs.  Funds for day-to-day state government expenditure are relatively minor by comparison.

For that matter, why shouldn’t state governments be forced to contract and reduce expenditure, just as almost every business – and every taxpayer – has had to do in their jurisdiction?  Why should government employees be “feather-bedded” and insulated against the economic realities imposed on the rest of us?  Why should taxpayers have to bail them out at their expense, at a time when many of us are facing personal ruin as we watch our jobs and our livelihoods being destroyed as the result of the pandemic and resultant government decisions and actions?

There’s no way I can or will ever support federal funds being used to bail out states and state governments for the mistakes their own politicians have made, and the egregious greed they’ve demonstrated.  They dug their own hole.  Let them get out of it by their own efforts – or, as Senator McConnell rightly states, let them declare bankruptcy and find a fiscally responsible way out of the mess.  Funds to deal directly with the pandemic and its problems?  Possibly.  Funds to bail out decades of overspending and waste?  No way!

For a start, how about balanced budget amendments for the federal government and every single one of our fifty states, including a prohibition on borrowing more than a given percentage or proportion of state expenditure?  If they were all forced to balance their budget each and every year, instead of relying on deficit spending and endless, uncontrolled borrowing, the entire nation – and all of us taxpayers – would be in a far better position.  Now that’s a financial system I’m sure many of us, of all shades of political opinion, would support!

Peter