- Apr 14, 2001
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No Relief for the States
By RWGodwin
By now, we've all read the headlines: the states are in their worst fiscal condition since World War II. Anemic economic growth has caused the states to run out of cash. And in order to close their huge budget deficits, the states must either cut essential services or raise taxes.
President Bush and the Republican Congress had initially refused a state bailout package. However, in order to get their tax cut passed, they have now agreed to $20 billion to help the supposedly cash-strapped states.
This is how the news media usually portrays the story. But is it true? Are the states really starving for cash? Are essential services really being cut? And are the Republicans big meanies for not wanting to help the states out?
Nope.
The fact is that the states overspent dramatically throughout the '90s, and they still are, if not by as much. According to USA Today, one of the few news publications to tell the other side of this story, state spending actually went up 4.9 percent last year. You read that correctly. The states are complaining that they don't have enough money, but they were somehow able to increase spending more than twice the rate of inflation.
Still not appalled? OK. From 1992 to 2001, state spending went up over 50 percent, even after accounting for inflation. Education spending grew 85 percent without anyone checking to see if this new money was actually improving education, or if it was just a gift to the teachers' unions. Need-based spending (Medicaid, for example) grew 35 percent in the late '90s, even though such spending should go down during an economic boom because fewer people need to use such programs. State employment has gone up as well.
The state budget "crises" clearly could have been avoided. A Club for Growth study found that if the states had kept spending increases to the rate of inflation plus population growth, they would be nearly $100 billion in the black today.
So when you hear politicians claim they have made "tough budget cuts," all they mean is that they haven't increased spending on a program by as much as they wanted.
And it's unlikely that any real spending cuts will be achieved this year. State revenues grew 5.4 percent in the first three months of 2003 over the same period last year. However, that doesn't mean the politicians will stop claiming that their states are cash-strapped.
Given these facts, do you think the federal government should bail out the states for their fiscal irresponsibility? If you don't, you should write a letter to your congressman and senators because Congress is likely to approve $20 billion in aid to the states. [Editor's note: On Thursday night, the Senate passed a tax cut plan that includes $20 billion in spending for Medicaid and other programs for financially ailing states. The House and Senate must now work out a final compromise on the bill.]
If you still disagree with me, consider this: if you had spent as extravagantly as the states had and were all of a sudden broke, would Congress bail you out?
This state-aid package will only lead to more of the same policies that caused the budget "crises" in the first place. It will encourage the states to continue overspending, rather than practice fiscal responsibility.
By RWGodwin
By now, we've all read the headlines: the states are in their worst fiscal condition since World War II. Anemic economic growth has caused the states to run out of cash. And in order to close their huge budget deficits, the states must either cut essential services or raise taxes.
President Bush and the Republican Congress had initially refused a state bailout package. However, in order to get their tax cut passed, they have now agreed to $20 billion to help the supposedly cash-strapped states.
This is how the news media usually portrays the story. But is it true? Are the states really starving for cash? Are essential services really being cut? And are the Republicans big meanies for not wanting to help the states out?
Nope.
The fact is that the states overspent dramatically throughout the '90s, and they still are, if not by as much. According to USA Today, one of the few news publications to tell the other side of this story, state spending actually went up 4.9 percent last year. You read that correctly. The states are complaining that they don't have enough money, but they were somehow able to increase spending more than twice the rate of inflation.
Still not appalled? OK. From 1992 to 2001, state spending went up over 50 percent, even after accounting for inflation. Education spending grew 85 percent without anyone checking to see if this new money was actually improving education, or if it was just a gift to the teachers' unions. Need-based spending (Medicaid, for example) grew 35 percent in the late '90s, even though such spending should go down during an economic boom because fewer people need to use such programs. State employment has gone up as well.
The state budget "crises" clearly could have been avoided. A Club for Growth study found that if the states had kept spending increases to the rate of inflation plus population growth, they would be nearly $100 billion in the black today.
So when you hear politicians claim they have made "tough budget cuts," all they mean is that they haven't increased spending on a program by as much as they wanted.
And it's unlikely that any real spending cuts will be achieved this year. State revenues grew 5.4 percent in the first three months of 2003 over the same period last year. However, that doesn't mean the politicians will stop claiming that their states are cash-strapped.
Given these facts, do you think the federal government should bail out the states for their fiscal irresponsibility? If you don't, you should write a letter to your congressman and senators because Congress is likely to approve $20 billion in aid to the states. [Editor's note: On Thursday night, the Senate passed a tax cut plan that includes $20 billion in spending for Medicaid and other programs for financially ailing states. The House and Senate must now work out a final compromise on the bill.]
If you still disagree with me, consider this: if you had spent as extravagantly as the states had and were all of a sudden broke, would Congress bail you out?
This state-aid package will only lead to more of the same policies that caused the budget "crises" in the first place. It will encourage the states to continue overspending, rather than practice fiscal responsibility.