I was reading an article this evening about the fact that the Governors of several states getting together to ask the federal government for help financially, even if it means that we increase the national debt to do so. It got me thinking about how we have gotten to this point, and consequently what should the federal government be required to do because of it. And make no mistake, there is no single right answer, because the situation varies from state to state. It causes me to ask a few distinct questions around state and federal relationships. First, at what point should states be telling the federal government to piss off in terms of required social programs or costly legislation? At what point should the federal government be returning the favor for states that do not hold themselves fiscally responsible? And finally, when is the point that some states should be withholding help to the federal government that is passed on to states that acted fiscally irresponsible? I will explain all of these questions a little further below. But the fact is that we have found ourselves in a situation where it seems like the vast majority of states lack the ability to fiscally sustain themselves, some through reckless spending and others through forced spending from the federal government mandates.
We saw some limited coverage of the state arguments against the stimulus when it was passed last year. I recall some states claiming that they would refuse federal stimulus money because of the strings attached that would later make them fiscally troubled. Texas is the state that pops into my head, as they were one of the initial states who refused federal money because of the future burden that would come with the programs that federal money demanded, but didn’t fund later on down the road.
High on the list of unfunded demands are extended unemployment benefits. The federal stimulus helped to extend the money available to states for payment of unemployment benefits. The catch was that the federal government also extended the length of time eligible for those unemployment benefits, meaning that many states who took the money for a short term fix are now facing a mid term crisis. The law entitles folks to benefits that the states simply do not have the money to pay. Another big expenditure that the federal government expanded is Medicare. The states simply do not have the money to continue paying for this service despite the promises of the federal government that the services would continue.
One of the most laughable things that I have been hearing over the last couple of months as we approached the end of fiscal years and states worked to pass budgets was the following sentiment: What we are facing is not a spending problem. It is a revenue problem. It isn’t that government is spending too much money or promising too many entitlements. The problem is simply that there isn’t enough money being funneled to government from the people. Not enough tax money coming in is the issue. And this is because people aren’t working, aren’t spending money on consumer goods, and aren’t buying houses. Even in the face of reality, government is unwilling to admit that they spend too much money. The problem isn’t the gross overspending that government does, the problem is that the people aren’t doing their part and contributing enough money to be redistributed by the government! What absolute horse droppings.
Before I continue, allow me this one little sidebar. THIS is the exact problem that a progressive/socialist/communist society always, ALWAYS will run into. When you continually increase the scope of what government provides, when you continually redistribute the limited revenue being earned, you eventually reach a point where there simply isn’t any more money to take away. What we are seeing today is the inevitable result of a “greater good / entitlement” society. Eventually what you promise to provide becomes greater than the revenue coming in. You begin running in the red. Our country has ignored this reality for so long now that we have virtually no ability to rebound and ever see the black again without a massive decrease in social programs and entitlement spending. Sidebar complete.
Currently what we have is a government that is very much in the red. More in the red than ever before in history. That is the major story line in the economy. The fact that the national debt is so far beyond recoverable that it is literally beyond the comprehension of many Americans is a known fact. What is not nearly as evident to many is that many states are in the exact same boat. In fact, according to the Center on Budget and Policy Priorities, 48 of the 50 states this year addressed or are facing budget shortfalls. A quick look at the top ten, according to them:
- California: $53.7 billion shortfall or 58 percent of its budget
- New York: $17.9 billion or 32 percent of its budget
- Illinois: $9.2 billion or 33 percent of its budget
- New Jersey: $8.8 billion or 30 percent of its budget
- Oregon: $4.2 billion or 29 percent of its budget
- Connecticut: $4.1 billion or 23 percent of its budget
- Arizona: $4 billion shortfall or 41 percent of its budget
- Washington: $3.6 billion or 23 percent of its budget
- Alaska: $1.35 billion shortfall or 30 percent of its budget
- Nevada: $1.2 billion or 38 percent of its budget
- Vermont: $278 million or 25 percent of its budget
I should note that nearly all of the states listed in that top ten (listed here in order of amount short, although the top ten was listed in the article by percent of its budget, so there may be some states with larger deficits, but less than the 23% that was the lowest in this top ten) are states that lean heavily Democratic and have very liberal state governments. Off the top of my head, only Alaska and Arizona are conservative states. Whether their is a causal relationship to this, I won’t speculate. I don’t have time to really study it this evening. However, it should not be shocking that states with the highest entitlement mentality, such as California, NY, Washington, Oregon, and Vermont are all in the top ten.
The first of the three questions I asked above that I will address is the forced entitlements that the federal government sends down to the states. Things such as increased unemployment benefits are high on this list. Remember that when the federal government does things such as increase the unemployment eligibility terms, it often eventually falls to the states to fulfill the promises that the showboating assholes in DC promised. The federal legislation will usually cover a year or two and then hand it off to the states and tell them to figure out how to continue the handouts that the feds promised. The stimulus bill last year was a prime example of this, and we actually saw some states balking at taking the federal money because they knew the hardships that would come later. Many fiscal hawks wrote lengthy articles as the stimulus was debated noting the plethora of federal mandates that had longer periods to expiration than funds allocated to pay for them. The message to the states: You have a couple years to find a way to pay for what we promised.
Isn’t there a point where states should be able to push back and say, “we are only covering what you have provided the money to cover”? The states are forced to accept this horrible deal with the threat of receiving no money now unless they promise to provide the funding for these enhanced services later. The long term effect is increased entitlements for the population and the corresponding increased STATE taxes that fly under the radar in national elections. Representatives in DC claim to have no say in state fiscal matters, yet it is their federal legislation that forces increased state spending in many cases. Shouldn’t this be a situation where the state simply says that they can’t afford it, so the promises that the feds gave are meaningless and will not be fulfilled unless the federal government wants to step forward and pay for them? I say yes. The states should have that right.
Question two goes the opposite way. Let’s take the state of California as an example. California goes over the top in terms of liberal spending policies. They offer increased entitlements and take political positions (on immigration for example) that result in massive expenditures that other states that are more fiscally responsible simply don’t have. Look at that number for California above. Nearly $54 BILLION in shortfall for their budget. The amount that they are short is several times higher than the entire state budget for the majority of states in America. I know they have the highest population, but Texas is number two, and they are not on the list (37 million people versus 25 million). California has a long and storied history of reckless state spending on many things, with entitlements at the top of the list.
Should the federal government continue to give money to states such as California and New York that utterly fail to get their spending under control and assess whether they are reckless? Let’s take another stimulus example of where the federal government gives money to prop up reckless spending: Medicaid spending by states. For example, New York spends nearly 73% more per enrollee than the national average, and rather than be forced to fix that gap, the stimulus provided a stop-gap help in continuing that spending. In my opinion, what should have been done is that the federal government simply said, “No more federal money for you until you get spending down below the national average per enrollee.” The state would then be forced to look at ways to reduce spending overall in all areas in order to get spending down while they worked on a fix for medicaid expenditures. Force the states to do some tough budgeting and find out what is really important. Eliminate the massive entitlement spending and fall back to what is required and nothing more.
Finally, why should states that effectively work to limit their spending be forced to contribute money to states where they are reckless and fiscally irresponsible? You may recall earlier that I noted that 48 states fell into the bad category. The two states that did not have fiscal problems were Montana and North Dakota. Two of the least populated states, for sure. But they have managed their spending to ensure that they come up with a budget that is BELOW their income. You know, that crazy thing that most Americans are forced to do with their household budgets. Why should those two states continue to be penalized because the other 48 states cannot seem to find any fiscal responsibility? Furthermore, shouldn’t states that manage to run in the black instead of in the red have the fundamental right to tell the federal government to screw off when they say something about fiscal policy. I know I wouldn’t take economic advice from a neighbor that I watched constantly operating in the red. Why should they?
So there are my questions for everyone to discuss. What is the point where states begin to tell the federal government to go to hell with their mandates and requirements that further strain state budgets? What is the point where the federal government tells states begging for fiscal help to go to hell until they get their spending habits under control? And who has the right to tell Montana and North Dakota a damn thing when they seem to be the only governments that have enough fiscal sense to not spend more than they make? The bigger question above all of this: When are we going to realize that we simply cannot bankroll this progressive agenda that the far left keeps telling us is the utopia that we are all “entitled” to?
I got the ten worst states fiscally from this article: