Big Government bailouts haven’t just been directed toward businesses and Wall Street, they’ve also been deployed to prop up Big Governments. Having taken “stimulus” money while fully aware that it was a one-time windfall, politicians in many state capitals went ahead and spent as if it was a dedicated revenue stream, according to the State Budget Solutions.
States are still facing serious budget woes and many of them remain indignant at the prospect of serious reform. At least 30 states will have state budget shortfalls because they relied on increased federal stimulus spending for education and Medicaid. This is despite the fact that they were told last year that the funding was one-time and that the states had to “maintain the effort” when the federal funds expired.
Despite – or perhaps because of – the fiscal irresponsibility of state governments, President Obama is now urging Congress to bail them out yet again.
If things continue down this path, we may eventually end up with a system in which a significant portion, if not an outright majority, of state revenues first pass through Washington. This is a dangerous trend which undermines one of America’s greatest strengths: federalism.
When states tax their citizens directly, taxpayers can easily see and compare both the tax rates and the quality of services between states. This means they can choose to live in states that meet their tax preferences. This promotes tax competition between the states as they fight to keep taxpayers in their jurisdiction, and thus helps keep America’s overall tax burden from reaching the level of, say, Europe.
Adding an additional layer between taxpayers and tax spenders by first funneling money into and then out of Washington will only make states less efficient and unresponsive to the needs of their citizens. State bailouts promote bad governance and should be opposed.
