RALEIGH – With a number of governors signaling their unwillingness to accept all of the federal government’s “help” in addressing state fiscal problems, I was delighted to see Governor Perdue express skepticism about the bailout, too. If “we have to change our laws and regulations in order to comply with federal mandates,” Perdue said, “getting this money may not be worth it” to the taxpayers of the state.
Well, okay, that was Gov. Sonny Perdue of Georgia.
Among other things, the new stimulus bill brings a massive and dangerous expansion of federal power over state and local governments, far exceeding past intrusions such as No Child Left Behind. But our own Gov. Beverly Perdue chose to laugh the issue off. “I am not a real good driver,” she said during a visit to the White House, “but I will take a pickup truck to South Carolina and be glad to take any of the money that (Gov.) Mark Sanford and the people of South Carolina don’t want.”
Ha, ha. Now let’s get serious and apply some basic math.
All of the money in the federal stimulus bill comes from the states. North Carolinians aren’t going to “get” money from Washington. Thanks to President Obama and the Democratic Congress, they are going to pay a lot more of their own money to Washington in the coming years – as their federal taxes begin to finance the average $30,000 per household increase in federal debt.
For governors such as Beverly Perdue who seem to think more federal borrow-and-spend policies are the proper response to a recession caused by easy money and excessing borrowing, I guess there is no dilemma to resolve. But for governors such as Sonny Perdue, Mark Sanford, Bobby Jindal of Louisiana, and Phil Bredesen of Tennessee who see through Washington’s latest fiscal racket, how much of the temporary state aid to accept is a difficult question.
None of the governors is saying he will reject the entire package on behalf of his state. Because Georgians and South Carolinians are no less subject to federal taxes than North Carolinians are, it may not be practical to say no to “federal” infrastructure spending, for example, that merely returns a portion of gas taxes paid to Washington. Nor is it inconsistent for governors to criticize the federal stimulus bill as wrongheaded and nevertheless accept some of the resulting money flow, just as it is not inconsistent for fiscal conservatives to accept government benefits for themselves or their children that they strongly oppose. As taxpayers, they are given no choice but to finance these programs in the first place.
But what about the many elements of the stimulus package that offer short-run gain and long-term pain?
While there was a lot of early talk about shovel-ready construction projects and signature-ready tax rebates, the biggest part of the final stimulus package consisted of expanding Medicaid, unemployment insurance, and other public assistance programs. Sure, the federal government will pay for these expansions over the next couple of years by borrowing hundreds of billions of additional dollars. Later, federal taxes will have to soar to pay the debt.
State governments will then be left with a fiscal mess. Does anyone really believe that once UI benefits are expanded to part-time workers, new teachers are hired with temporary federal funds, and millions of middle-income folks are enrolled in Medicaid, state governors, legislators, and local officials are going to rescind these programs? No, public expectations and spending levels will be ratcheted up another couple of notches. The result will likely be either a round of costly state and local tax hikes or reductions in spending on core functions such as law enforcement, resulting in an irrational budgetary mix.
That’s why the nation’s far-sighted governors are exercising caution here, while certain myopic chief executives are making jokes. The former do not believe that fiscal restraint and the traditional, constitutional division of responsibilities between Washington and the states are laughing matters.
Hood is president of the John Locke Foundation