Over the past couple of years, Washington has thrown out bailout after bailout at the national economy. Following this harrowing trend, the Democrat Majority is expected to bring yet another bailout bill to the House floor this week. This time up, the bailout is for state governments and will cost billions in taxpayer dollars. What is worse, the Democrat Majority is once again attaching its latest bailout to a troop-funding bill.
Aside from this lack of respect for our nation’s military, backfilling state governments’ coffers are not a solution to the problem. In fact, bailing out states is more likely to make the problem worse since it is a one-time fix to a systemic problem.
Take my home state of California, for example. For more than a decade, the Golden State chronically overspent, overregulated, and over-taxed, assuming that the economy would keep growing. As California continued to experience housing booms and economic growth, state lawmakers erroneously presumed that this trend would continue. For that reason, lawmakers spent money they didn’t have, betting that it would soon come in. Under these assumptions, total state expenditures ballooned from $103 billion in 2003 to a staggering $145 billion in 2008.
However, California’s liberal spending habits and overregulation soon caught up with the state as our entire nation went into a deep recession. As home values plummeted and businesses fled the state, California’s anticipated paycheck never came in and is now in financial disarray as a result of its imprudent spending policies.
As it stands now, California faces a $20 billion budget shortfall and has the worst credit rating in the nation. It also has the third highest unemployment rate at 12.4 percent and the third highest home foreclosure rate. Many businesses have closed up shop in California and moved to more business-friendly environments and millions of Californians have moved to more livable areas of the country.
If Washington bails out California, the state’s lawmakers will go on with business as usual. Rather than make the tough budgetary decisions needed to bring the state back to a sustainable fiscal course, California will continue its runaway spending. Budget shortfalls will be met with increased taxes on residents and businesses, and state lawmakers will assume they’ll get another check in the mail from Uncle Sam.
While bailouts and the status quo are problematic for multiple reasons, the most glaring fact in the bailout debate is that Washington does not have money in hand for another bailout. Washington’s infusion of cash into state governments’ coffers is borrowed money.
At present, our nation is borrowing more money than it takes in. Since President Obama took office in January 2009, he signed legislation into law that resulted in an 84 percent increase in domestic discretionary spending. As a result, our national debt currently stands at $13.1 trillion and, under President Obama’s 2011 budget, is on track to be $20.3 trillion by 2020. That amounts to 90 percent of the Gross Domestic Product. Simply put, our nation’s fiscal path, like California’s, is unsustainable.