RALEIGH – Perhaps Congress will surprise me and do the right thing. But I tend to doubt it.
The right thing would be to refuse to take American taxpayers an additional $24 billion into debt to bail out state governors and legislators, including North Carolina’s political leaders, who refuse to balance their own budgets in accord with their state constitutions.
More than two dozen state governments have already written their 2010-11 budgets with the assumption that Washington will send the money shortly. But in the face of widespread public anger about skyrocketing government budgets and debts, the U.S. House decided a few weeks ago not to include the Medicaid bailout in its budget plan. The U.S. Senate is signaling it may do the same.
In North Carolina, the anticipated Medicaid bailout comes to about half a billion dollars. Gov. Beverly Perdue and legislative appropriators had initially assumed that the federal funds would flow, and fashioned North Carolina’s 2010-11 spending plan accordingly. But as the fate of the bailout in Congress became less clear, state legislators were forced to come up with a Plan B: pass a separate bill authorizing the governor to cut another $500 million if the Medicaid bailout doesn’t materialize.
I’m pleased that the General Assembly isn’t willing to throw caution and its constitutional responsibilities entirely to the wind. But rather than authorize a smaller budget as a contingency, legislators should simply make that smaller budget the only one. And they should urge North Carolina’s congressional delegation to vote against any new federal bailouts.
One reason is fiscal. The federal government is already running annual deficits exceeding $1 trillion. The past two years of bailout mania have been ruinous. It’s long past time to bring Washington’s borrowing spree to a halt. As for North Carolina’s fiscal situation, everyone knows that whatever happens with the federal bailout this year, Perdue and a newly elected legislature will return in Raleigh in 2011 to another $3 billion budget hole. Why not at least cut it to $2.5 billion?
Another reason is educational. To the extent that state voters actually believe the “federal government” can give North Carolina money our state doesn’t already possess, we ought to take this opportunity to disabuse them of that notion. Not a single dollar of the anticipated $500 million Medicaid bailout will be transferred from somewhere else to North Carolina. The entire amount will either be collected from North Carolina taxpayers today or collected from North Carolina taxpayers tomorrow to pay for federal bonds issued today.
The final reason is constitutional. There’s a reason why North Carolina and most other states have balanced-budget requirements written into their state constitutions. It’s a way to protect future taxpayers against such foolish policies as issuing debt to pay the government’s operating expenses. While government debt can be a useful tool for financing long-term capital projects, it is too easy to abuse when politicians can use it to finance routine expenses.
As I have previously argued, to employ the federal government as an agent for borrowing funds to pay North Carolina’s bills is at best a dodgy and dangerous practice and at worst an unconstitutional one. Those who take their legal responsibilities seriously should refuse to participate in such a transaction.
All of this having been said, I remain skeptical that the Democratic Congress will, in the end, deny state politicians their desperately desired Medicaid bailout. But if such an event should come to pass, I’ll be the first to praise Washington for its newfound fiscal restraint – and encourage North Carolina legislators to get back to work balancing the state budget the right way.
Hood is president of the John Locke Foundation.