Governors Against State Bailouts, for Ideological Purity
While around 40 governors met with President-elect Obama in Philadelphia to discuss states’ growing budget woes, two governors took to the Wall Street Journal’s op-ed page to argue against federal aid to states. Governor Rick Perry of Texas (which is not one of the 41 states facing budget shortfalls) and Governor Mark Sanford of South Carolina (which is) presented three doctrinally sound reasons to oppose “a free lunch” for states.
First, spending on states would increase the federal deficit. “We’re crossing the Rubicon with regard to debt,” they wrote. Certainly, the federal deficit is expanding and national debt is growing. But the governors offer no rationale for shutting off the spigot now. Aren’t we just getting around to the moment when spending is absolutely necessary? As The Economist fretted this week about Britain’s bailout, “Yes, fiscal discipline is important; but in times as dire as these stimulus is needed and stimulus, if it is to have any effect, has to be unfunded, at least in the short term.”
Second, they argued, “the bailout mentality” is at odds with – and, indeed, threatens – Americans’ sense of personal responsibility. Better to let the “others [that is, the non-winners] go back to the drawing board better prepared to try again.” (My italics.) The governors lament government spending on “enterprises that in many cases need to reorganize their business model” and point to the Big Three CEOs’ private plane boondoggle as an example. There might be sound arguments for refusing money to the auto industry, but are the governors really invoking corporate extravagance to oppose federal money that will prevent states from cutting health care services for low-income households? Will someone who loses his or her job and finds himself or herself without health insurance really be “better prepared” to try it again? Try what again? Isn’t one of the arguments for “automatic stabilizers” like extended unemployment insurance (one of the proposals the National Association of Governors is seeking) that they ease the transition out of and then back into (unemployment benefits don’t last forever) the labor force?
Third, Perry and Sanford call on the federal government “to stop believing it has all the answers.” We have a system in which the federal government only steps in “for that which states cannot do themselves.” Whether you believe that assertion or not, unfortunately, the “expansionist federal government” the governors criticize is the same one that has avoided doing what states cannot do for themselves (and the same one, in some important cases, that has prevented states from doing what they can do). One glaring example is President Bush’s repeated veto of SCHIP. Indeed, in the same issue of the trusty Economist, the weekly writes an “e-mail” to Obama calling on him to “quickly increase the money given to states to pay for Medicaid and SCHIP (the scheme for children’s health that W. hates so much). You can deflect skeptics by arguing that increased spending on health…will do more to stimulate the economy than issuing tax refunds…”
At the governors’ meeting yesterday, Obama told the state executives: “one of the messages that Joe [Biden] and I want to continually send is that we are not going to be hampered by ideology in trying to get this country back on track.”
Perry and Sanford, on the other hand, have maintained their ideological purity.