Don’t Reward Bad Fiscal Behavior With Another Bailout
House Speaker Nancy Pelosi has put a 48-hour deadline on reaching an agreement on another stimulus. Among the differences between House Democrats and the White House is how much aid to send to state and local governments.
Democrats originally wanted to send $1 trillion to state, local, and tribal governments. They reduced that figure to $500 billion earlier this month. But some contend bailing out poorly managed state governments will punish taxpayers, and reward bad fiscal behavior.
Writing in the Wall Street Journal, Jonathan Williams and Dave Trabert say the only way to keep states like California, Illinois, and New York off the federal dole is for those states to start spending (and taxing) like their more fiscally responsible neighbors:
If Illinois Gov. Jay Pritzker were to trim his state’s per resident spending to match Texas’, he would save his taxpayers $22.3 billion a year—and there would be no need for any income-tax increase. Gov. Gavin Newsom could save Californians $64.6 billion annually if his state matched New Hampshire’s spending.
Getting those state to kick the spending habit will be extremely difficult. But the authors note that some states, like Washington, were able to prune spending in rough times, at least for a few years.
The point is to get started now, rather than asking for a bailout:
Taking the scalpel to state agency budgets will create angst for governors, lawmakers and the lobbyists hired to defend unnecessary spending. But policy makers have a responsibility to make the most effective use of taxpayer money. Congress, likewise, should understand that bailing out profligate state and local governments will only ensure more of this bad behavior in the future.