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Bailout for States the Wrong Idea
By SC Gov. Mark Sanford
posted November 18, 2008
I find myself in a lonely position. While many states and local
governments are lining up for a bailout from Congress, I went to
Washington recently to oppose such bailouts. I may be the only governor
to do so.
But I suspect I'm not entirely alone, as there are a lot of taxpayers
who aren't pleased with Christmas coming early for politicians. And I
hope these taxpayers make their voices heard before Democrats load up
the next bailout train for states with budget deficits.
Several questions led me to oppose bailing out the states. They are
worth asking, even if you supported bailing out Wall Street.
- Who bails out the "bail-outor"?
Washington is short on cash these days and will borrow every dime of
the $150 billion to $300 billion for the "stimulus" bill now being
worked on. Federal appetites may know no bounds. But the federal
government's ability to borrow is not limitless. Already, our nation's
unfunded liabilities total $52 trillion -- about $450,000 per
household. There's something very strange about issuing debt to solve a
problem caused by too much debt.
- Do you now have to be a financial "bad boy" to win?
Community bankers tell me that they are now at a competitive
disadvantage for being careful about who to lend to, because others
that were less disciplined will get a federal bailout. This is also
true for states. Those that have been fiscally responsible will pay for
or lose out to the big spenders. California increased spending 95% over
the past 10 years (federal spending went up 71% over the same period).
To bail out California now seems unfair to fiscally prudent states.
- Was the economist Herb Stein wrong when he said that if something
cannot go on forever, it won't?
Medicaid grew 9.5% annually over the past 10 years. That's
unsustainable. But if Congress opens the checkbook now, there will be
- Isn't government intervention supposed to be the last resort and come
only when it can make a difference?
In 2008 bailouts became the first resort. Over the past year the
federal government has committed itself to $2.3 trillion (including the
tax rebate "stimulus" checks of last February) to "improve" the
economy. I don't see how another $150 billion now will make a
difference in a global slowdown. We've already unloaded truckloads of
sugar in a vain attempt to sweeten a lake. Tossing in a Twinkie will
not make the difference.
However, there is something Congress can do: free states from federal
mandates. South Carolina will spend about $425 million next year
meeting federal unfunded mandates. The increase in the minimum wage
alone will cost the state $2.6 million and meeting Homeland Security's
REAL ID requirements will cost $8.9 million.
Based on what I saw in Washington, the bailout train is being loaded
up. Taxpayers will have to speak up now to change its freight, tab or
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