Posted on 06/24/2003 3:55:51 AM PDT by tdadams
Any college kid with too much credit-card debt might look longingly at state governments these days and wonder: How can I do that? The states are having a fiscal crisis without reducing spending.
If the states face the worst fiscal emergency since World War II, as governors are wont to complain, they aren't acting like it.
According to USA Today, state spending increased 6.3 percent in the fiscal year ending June 30, 2002. It increased another 5 percent in the fiscal year ending this month. During the past two years, states have added workers, hiring another 74,000 people at a time when the private sector is shedding jobs.
It is imprecise to say that the states are suffering from fiscal crises. They are really suffering from overspending crises, fueled during the boom when it seemed the good times would never end and continuing through today.
State spending increased 38 percent from 1997 to 2002, an increase on average of more than $1,000 per person. Most states have doubled their budgets since 1990, and through the 1990s, state spending grew at two times the rate of federal spending.
A USA Today report says that state and local spending soaked up 15.2 percent of U.S. personal income in 2002 -- the highest rate on record, and up from 13.3 percent in 1980.
Yes, states generally cut taxes in the late 1990s, but this doesn't account for their fiscal troubles now. As a report from the libertarian Cato Institute notes: "During the 1990s, large tax revenue increases occurred despite substantial state tax cuts. Indeed, total state tax revenues grew $186 billion between 1994 and 2001 ($374 billion to $560 billion), even though states enacted net tax cuts of $33 billion."
The level of taxation doesn't determine the fiscal health of states. Low-tax Colorado, for instance, has been spared the tide of red ink overtaking other states.
Colorado voters enacted an initiative in the early 1990s capping state spending growth at the inflation rate plus population growth. Almost every politician in the state opposed the initiative, but it served to impose by law a fiscal responsibility that lawmakers probably wouldn't have been capable of on their own.
Likewise, Georgia, Utah and Delaware didn't go on a spending spree during the boom and quickly trimmed their finances when the bust came. They aren't feeling the dire effects of the overspending crisis.
California, on the other hand, is -- with a vengeance. It spent like a recently minted Internet millionaire during the boom and kept right on going into the bust, hoping that accounting gimmicks would hold it over. It faces a budget shortfall of nearly $40 billion.
States, almost all of which have laws demanding balanced budgets, are doing everything they can to avoid facing their situations frankly. They have borrowed funds roughly equal to 10 percent of their revenue. California, Colorado, Kentucky, Tennessee, New Jersey and Wisconsin have all seen their credit ratings downgraded during the past two years.
The National Governors Association essentially exists to make excuses for state fiscal incontinence, since governors are responsible for so much of it. It recently demanded that Congress "provide substantial funds to every state territory," since "the governors believe the most powerful immediate economic stimulus for the nation's failing economy is to provide fiscal assistance to the states."
If state spending were the key to economic growth, the economy never would have experienced a recession in the first place. The recently passed Bush tax cut nonetheless included $10 billion in aid to states this year and another $10 billion next year.
This federal bailout just takes money from taxpayers in frugal states to subsidize taxpayers in spendthrift states. There is likely only to be more such demands from governors as they try to avoid the most basic act of governance: living within their means.
Governors see the "crisis" as having to trim the state budget. This is what they don't get: That's the solution.
Rich Lowry is editor of National Review, a TownHall.com member group.
For the most part, I believe this is a non-issue, or will soon be a non issue. 3 million americans no longer have to pay any taxes since bush got elected, and the predictions are that many more millions will not have to pay taxes in the future. There will be few companies remaining in the United States to pay ANY!! state taxes, so who cares? Who cares what state spending is, if your job is moved overseas and you arent going to be paying any taxes anyway ? or if you move your factory to china where there are no state taxes?
No businessman with any sense, will care about state spending if all of his offices and factories are elsewhere. This "state spending cry" is a false scare tactic being spread by a few uneducated people who refuse to move out of the country to places with a low cost of doing business .
I do hope you're being sarcastic. Either that or you work in the credit industry.
"Living" on credit cards is about the stupidest thing anyone could ever do. Why would you even think that? Johnny Graduate can go out and get a job at UPS and watch his expenses until he gets his career job.
Running up credit card debt only shackles you for years and delays your ability to save, invest, and build wealth.
You didn't answer me, so now I'm sure you work in the credit industry.
I guess you have not heard that we have been in a recession, and that the job market for college grads is the worst in 30 years, with very little hiring/recuriting on campus these days.
FYI, lots of college graduates cannot find a job. Furthermore, declaring bankruptcy does not hinder you, in getting credit, or in being a success.
People like Thomas Edison, John Sutter, Wayne Nueton, Donald TRump, Davy Crockett, Henry Ford, Walt Disney, Larry King, Mickey Rooney, Milton Hershey, Burt Reynolds, etc, have all went bankrupt.
We would not have fords to drive, chocolat to eat, Donald Duck or Mickey Mouse, electric lights to turn on, etc if it were not for people who lived on credit, did not pay their bills, and then declard bankruptcy to start over.
There is no negative stigma to being bankrupt anymore, people love Disney, love chocolate, and go to see Wayne Nueton by the thousands regardless of being deadbeats !
It is obvious that you have not heard any major politician since the 1920's. You also have not heard of any federal or state legislation that has passed since the 1920's either.
I got news for you, we have loads of social welfare programs from the 1930's, 1960's, etc.
Go back and read the campaign promises of the democrat and republican presidential candidates since the 1930's. For that matter , go back and read the promises of the presidential candidates in the last election. Bush is a repubican, and he promised more Marxist programs than nearly anyone in history.
The states WILL take care of all who have lost their jobs. And for those new immigrants(57,000 new ones coming in each week) the states will take care of them too. Even if they NEVER had a job in this country.
If you dont think so, you just dont know what has been happening in america during the past 70 years. Where have you been?
How many candidates, how many of your neighbors think the federal and state budgets deficits should be eliminated? How many people do you know who would not vote for someone who voted to increase the federal deficit?
No body cares about balancing any budget, and most economists/teachers/politicians say that spending more than you earn, is a good thing. In fact, most economists say that if we eliminated the deficit, and balanced the budget, it would lead to disaster.
When was the last time the federal budget was "really" balanced(dont count 1968, nor the borrowing from the social security trust funds).
Spending more than your income is either good, or bad, doesnt matter if you are an individual, business, or a governemnt agency. The principal is the same.
Of course there have been tons of programs in various levels of government over the last 70 years. That's exactly what happens when you have unconstrained government -- people who ought to be perfectly content with their lives suddenly take it upon themselves to demand more through their government.
The end result of all this will be financial ruin -- when you give the public free access to the treasury of a state or nation, you end up with a bankrupt government.
Extending credit to college kids is a calculated risk. They were quite stupid to offer me a card when I was 20 years old, and I was stupid enough to accept. It took me several years to clean up my credit report.
Where are they going to get the money to "take care" of these people?
You are right about Wayne Neuton, but Wayne is the exception. The others I mentioned were dead broke. Donald Trump had negative net worth in the millions, there were few americans who had less money than Donald Trump. If all americans were given additional millions until their luck changed, then we all could get out of debt like Donald Trump.
John Sutter was flat broke, and had to leave the country to stay out of prison. Sutter went bankrupt twice! Yet, if it were not for his bankruptcies, we would not have discovered gold in CAlifornia, and america would not have been as prosperous as it was after 1849.
Henry Ford, Milton Hershey, Thomas Edison, Walt Disney were also flat broke, and deadbeats. They did not go into bankrupcty just to "restructure". They went into bankruptcy because they had no money and they wanted to welsch on all their debt and still all their lenders .
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