Right Wing Finance

I came across an article by Lisa Scherzer from SmartMoney that details the money woes of 6 states in very poor financial health. She quotes Michael Hicks, director of Ball State University’s Center for Business and Economic Research who makes the same mistake so many people do in analyzing the problem though…

“State legislators faced with mammoth budget gaps and sharply lower revenue are looking to residents to bail them out.”

Yeah, no surprise here. Bailouts are an epidemic of poor planning and lack of discipline all around.

“Right now, at least 47 states are facing significant shortfalls in their 2009 and/or 2010 budgets, according to the Center on Budget and Policy Priorities, a think tank in Washington, D.C. And many of those states are looking to tax hikes to help fill the gaps.”

The article spotlights the two worst offenders: California, and New York. California takes 1st place with a $25 billion deficit, and New York comes in at $17.6 billion. I’m not surprised. I live in New York, and we’re #1 in dysfunctional state governments, so it’s no surprise we’re in second place. And California’s lack of fiscal discipline is legendary.

But here’s where it all goes wrong:

“How can these states miss the mark so badly? The recession has sapped the two major sources of state revenue: income taxes (thanks to rising unemployment, fewer people are getting paid) and sales taxes (quite simply, consumers are spending less.) “Those two things together really, really lead to a high loss of tax revenues, far in excess of loss of income,” says Michael Hicks, director of Ball State University’s Center for Business and Economic Research.”

This is like saying that you’re in debt because your boss doesn’t pay you enough, not because you bought too much house, a boat and a new car you couldn’t afford! It’s absolutely ridiculous to blame the economic recession for your state’s deficit! The deficit is a result of poor (or no) planning and an addiction to spending. A responsible state government would set aside money during the good times, so they wouldn’t have to punish its constituents when times turn tough.

American families are having to learn to spend less than the earn, when will the government (federal and local) do likewise?

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