Send The Governors Packing

National Review Online: The Federal Government Should Not Be In The Business Of Bailing Out Irresponsible States

(National Review Online)  This column was written by The Editors of National Review Online.

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Having wasted their substance with riotous spending, the prodigal governors have come not to their senses but to Washington. But let’s spare that fatted calf.

American politics is too often the art of bribing the people with their own money. It’s a neat trick and easier to pull off when you have the ability to borrow tons of money - literally tons, if you put it into $100 bills and weighed it - with which to reward loyal supporters and entice new ones. The federal government is guilty enough in its own right, but to subsidize that practice in the 50 fiefdoms subordinate to it will only encourage further recklessness from Albany to Sacramento. It would also further undermine the economy by creating yet more uncertainty in the financial markets.

The states have been on a spending jag, and now that the bills are coming due, Washington is hosting a parade of governors led by Arnold Schwarzenegger, who has demanded that the federal bursars “get off of their rigid ideologies” and write him a check for a couple dozen billion dollars. Tellingly, he compares the state of California to an “accident victim on the side of the road that is bleeding to death.” But this was no accident. Who was behind the wheel, governor?

California’s projected budget deficit over the next 20 months is about $28 billion, or 26 percent of the state’s budget. Since taking over from Gray Davis, who didn’t exactly set the gold standard of fiscal discipline, Schwarzenegger has steered the state into a 40-percent increase in spending, some $41 billion a year. Arithmetically inclined readers may calculate that California’s spending increase under Schwarzenegger and the usual spendthrift Democrats in the legislature is a greater sum than the projected shortfall. Which is to say, if only Californians could return to the Gray Davis version of fiscal discipline, they’d be in the black. But spending under Schwarzenegger has grown at twice the rate it did under Davis. If this is the alternative, give us that old-time rigid ideology, the one that says Republicans were put on this Earth with a mandate to cut spending and lower taxes.

Instead of looking to Washington for a handout, the prodigal governors should look to their more prudent brothers, such as Gov. Rick Perry of Texas. Noting on Tuesday that Texas currently enjoys a budget surplus, Governor Perry laid out his state’s formula for success: “Texas has created a business-friendly environment where 1,000 people a day move to our state to work and raise a family.” Montana’s Democratic governor, Brian Schweitzer, is no captive to conservative ideology, but he stewards a surplus as well, helped along by Republicans in the state senate. Even in Alaska, where 90 percent of the state’s revenue depends in some part on oil, the price of which has this year fallen by two-thirds, Governor Palin is managing admirably. Raising Wyoming’s taxes to subsidize Californians’ extravagance violates both prudence and federalism; we have 50 different states for a reason.

Governor Schwarzenegger’s proposed package of tax hikes and Keynesian stimulus merely reformulates the feeble for the consumption of the credulous. But while hiking taxes or cutting spending during a recession is not normally the preferred prescription, the ill effects of doing so would be less destructive, immediately and in the long run, than those of declaring California a ward of the federal government. Steep tax hikes may not even be necessary: It is hard to believe that scaling back California’s spending to Davis-era levels would prove insufferably austere. Better a spending shock than federal receivership.

Washington should be mindful of the chaotic effect that a bailout of the states would have on the economy. One of the reasons the financial markets are in turmoil is that investors are having a hard time deciding how to price risk, which is to say they’re having trouble deciding how great a return they should demand in exchange for the risk that they will lose money when they invest in bonds and other securities. One of the main sources of this uncertainty is the federal government itself.

The unpredictable and often irresponsible actions of the government enabled, among other things, the proliferation of dodgy mortgage-backed securities through Fannie Mae and Freddie Mac. An implicit federal guarantee of state debt will have precisely the same effect as the implicit federal guarantee of Fannie Mae’s debt: artificially lowering the cost of credit, subsidizing excessive risk-taking, encouraging yet more irresponsible spending and borrowing. And note this well: The federal government’s ability to absorb the cost of these shenanigans is limited. To exceed that limit invites economic catastrophe.

If spending cuts prove insufficient and a few states are forced to restructure their debt, the markets will penalize those states in an appropriate fashion by making it more expensive for them to borrow money in the future. This will be a good thing, just as it is a good thing in the long run that certain Wall Street operators are going to find it cumbrous and costly to borrow more money than they can ever credibly hope to repay. If there is too much risk in the system, the best way to wring it out is to let the market put a price on it. If that means that poorly governed states have to enter unpleasant negotiations with their creditors, that is the price they have to pay. It’s time for our public servants to come to their senses.

[hitoyou11]

Send The Governors Packing and Congress. No one knows haw to not spend money. The one thing all of theses people forget is, it is no there money. Then again, maybe that is wat the wast so much, it is easy to wast someone elses money.The only people that ate looking for a hand out, are those that don''t want to loss "There Money" Bill France asking for the big 3 becase he does not want NASCAR to go under. B.S. he does not want to loss his money. The CEO"s saying they will work for a dollar a year. So would you are IO if we had stolen millions in the past years. GM had the WORLD by the tail, in 57 they sold over 50% of the cars in the U.S. and in 50 years they are not worth red cent. It is "NOT" managements fault, and it is not the UAW. It is BOTH. Greed has killed them both. It is time for them to shut up, stop tying to take the tax payer for a ride and "CLOSE DOWN" The U.S. does not need the Big 3 like some people would want you to belive. Sooner then latter they are going to shut down. The tax payer is going to loss. Thans to Congress, Bush, and Obama, yes Obama.
All of you Obama lovers, I don''t need to hear your B.S. about he is not doing anything, Like H___L, he is behind the door running his big mouth, and he has said nore then once, he is for the Auto bailout. Anyone under 50 will see the U.S. automaker shut down.

[brianbwb-2009]

"Who was behind the wheel, governor?"

That is an easy one, the party represented by the NRO, i.e., the GOP.

"The Editors Of National Review Online" demonstrate a group sociopathy by refusing to recognize the humanistic aspects of the federal government assisting the states in providing for all of it''s citizens, not just it''s richest.

Populations migrate, as millions did when Detroit, for example, died in the early 70s. The influx of "economic refugees" to the recipient states changes conditions, alters budgets, increases expenditures, necessitates changes in the tax policies and otherwise forces states to take steps to manage the new population, usually of the recently unemployed, whose need for support services is logical.

By not considering the human need, and only considering the inconvenience to the moneyed class, the NRO editors display a mindset that is obsolete, unpatriotic, inhumane, and basically fascist.

Good thing people like these editors are almost extinct, but it will be a better thing when they are totally so.

[noloyalisti]

However, the irresponsible federal government should be responsible for ALL their illegal actions. Including the failed invasions of Afghanistan and Iraq. Giving huge sums of money to corporate criminals and war profiteers. Time to seize the assets of the Republican elite and give it to the needy.

[centerfall94]

After supporting Shrub and the neocons for the last eight years, I''m amazed that anyone at the NRO believes they have the moral authority to write or say or speak to anyone about anything, anyone, at any time. LOL! Talk about delusional!!

[pvperson]

So according to the NRO, the government should NOT be involved in bailing out banks or auto makers or people endanger of foreclosure or states, who do you nit-wits think the government should be concerned over? Anyone? Anything?

Do you think the US government should be concerned about the US?

[ubrew12]

NRO: "Raising Wyoming''s taxes to subsidize Californians'' extravagance violates both prudence and federalism; we have 50 different states for a reason."

Wyoming gets $1.11 from the Federal gov''t for every dollar they put in as taxes, while California only gets 78 cents per dollar. http://www.taxfoundation.org/research/show/266.html

But who, by now, would expect the NRO to publish the truth?

[hitoyou11]

Governors, you all heard that FAT PA Gov. Say, we are not asking the GOV. for money we are asking that are people are taken care of. He was asking for money. He is a no good cook, and he don''t even know if a mike is on are off. He sits on his fat ASSSSSS and does nothing but run his fat mouth.

[tjm509]

The issue at hand is not to raise taxes to balance the budget, the Real issue is whether to raise taxes to cover up the incompetent skills they have to manage our money. As with the private sector, maybe it''s time for these elected officials to take a pay cut, not to be restored until we are in the black. Just my thoughts, I could be wrong.

[gglenc]

What the National Review does NOT address is the CAUSE of such irresponsible spending policies in the first place. The FORMS of government at the state and federal levels are anachronistic; are NOT responsive to a now URBAN population in the 21st century; and cannot be reliable to BE responsive/responsible while corporatist/fascists control the ELECTIONS process; hence, the policy-making at the state and federal levels.

The outcome of such corrupt exceeses is no surprise, but a certainty. But, who will hold any one of those electeds or their governments accountable when citizens are being held HOSTAGE with their own monies?

It is a recipe for the self-destruction of the United States of America, which by the way IS occurring right now. It was NOT caused by a "foreign enemy," but by the enemies of this nation called corporatists/fascists who are a PREDATORY CANCER on the "body politic" of both state and federal organizations; hence, on the American people.

A MAJOR, MASSIVE REFORM of governments, elective processes, and the federal/state Constitutions is required IF Americans truly do value liberty and freedom. It not, "stay the course" and starve. The "Great Recession of 2008, 2009, 2010..." caused by TRILLIONS of unpaid debts may just continue for decades!