I live in Texas. We do a lot of things backwards here in Texas, and I could be critical if I wanted. However we do two things right:
1. The state legislature is required to balance the state’s budget and spend no more than it takes in in taxes and other revenue.
2. We only allow the state legislature to meet every two years.
(I won’t say much about about number two; I’ll just let you think about how nice it would be, if you live somewhere else, to only have to worry about what the state legislature might do next, every two years.)
In the so-called Stimulus Package that is now moving sluggishly but surely, like a juggernaut of an oil spill, through the Senate, there is a provision for 79 billion dollars in monies for a “State Fiscal Stabilization Fund.” Correct me if I’m wrong, but what I think this government-speak title means is that those of us who live in states that have a balanced budget will be sending money, lots of money, to states that spend money like it’s water to save them from dying of thirst. Only they’re not dying, just in debt. And I don’t particularly feel obligated to pay California’s debts.
This 79 billion is only one of many boondoggles spending sprees disguised as economic stimulus that are in the bill that is about to make through Congress if we don’t do something to stop it. I’ll be highlighting several more in the next few days. Why? What hath this to do with books?
Well, I won’t be able to buy any books or much of anything else, I fear. I’ll be too busy paying for an economic stimulus that didn’t stimulate anything but more spending and more debt that we, as a nation, can’t afford. You don’t get out of a economic depression by spending money that you don’t have!
For more information on Congress spending like a drunken sailor, see The Corner, 50 De-Stimulating Facts.
I believe that state aid is actually one of the best pieces of the stimulus package.
Texas is not unique. Every state except Vermont is required to balance their budget. So this clearly isn’t a case of people in fiscally responsible states subsidizing the folks in spendthrift states (unless you believe Vermonters are wildly profligate 😉
Instead, what is happening is that economic downturns drive state budgets out of balance. When people lose their jobs, they pay less taxes. When business make less money (or lose money outright), they pay less taxes. At the same time that state revenues are going down, their expenses are going up. Unemployment benefits are paid by the states. Likewise, states pay a significant part of Medicaid expenses. Naturally, when the economy goes south, both of these expenses go up; more people are unemployed, and more people qualify for and rely on Medicaid.
States could cut these benefits to balance their budgets. (I’m not sure about that—there may be federally imposed minimums.) But at a time when many people are losing their jobs, taking away the safety net is not only cruel, but it also takes away one of the best types of stimulus spending. The point of stimulus spending is to do things that will generate additional economic activity. People who are out of work are quite likely to spend their unemployment benefits, since they need things like food, clothes, and housing.
I love the book reviews, by the way. That’s how I wound up here in the first place!
I read the material you linked to, Wombat, and s well as I can understand, many states have some sort of requirement to balance some part of the state budget. And many have done so out of tradition in the past. However, not anymore.
Nevada, November, 2008: “Legislators and Gov. Jim Gibbons announced on Tuesday a tentative agreement to bridge the state’s $300 million budget shortfall by making $150 million in cuts and — to spare agencies even deeper cuts — borrowing $150 million from a local government investment account.”
California, February 2009: California became the lowest rated U.S. state as Standard & Poor’s cut its general obligation bonds one grade because Governor Arnold Schwarzenegger and lawmakers have failed to close a record budget deficit.
Florida, NOvember 2008: Gov. Charlie Crist said he still might propose borrowing from the state’s tobacco settlement trust fund to help avoid a budget deficit even after getting a report Thursday that the fund had lost almost $600 million because of the declining stock market.
This report indicates that Texas will be among the few states NOT expected to have a “budget gap” in mid 2009. I don’t know why this is, but I suspect it’s because Texas actually requires its legislature to match expenditures with expected revenue.
I think California has been out of whack for several years. There’s no excuse for a state with so many rich people 😉 to have budget issues. But I don’t really understand it all.
The key to this mess, we are in, is not allowing any party to gain a majority in the Senate or the House. Think about the endless bickering and blame games that control the votes for stupid spending. Why not level the playing field? It’s very easy and will make a huge impact on any elected politician; State or Federal. Just register as a Nonpartisan (neutral) voter. Are you tired of being ignored? Why not “sock it to them?” The biggest fears they have are: 1. fear of not being re-elected 2. term limits and 3. loss of power. You can still request a ballot from any party you choose prior to the primaries. We need to break the two party stranglehold. We need new faces and voices with fresh innovative ideas to stop secret meetings on 2000 page unread bills.