Chris Edwards of the libertarian Cato Institute unveils a new report today. Here’s the pdf link.
Edwards and colleagues offer 10 reasons to oppose the bailout plan. We’ll highlight two here:
6. A Bailout Would Flout State Fiscal Traditions. Nearly all the states have statutory or constitutional restrictions on budget deficits and government debt levels. Many of those restrictions were put in place a century ago so that politicians would live within the ?allowance? that taxpayers provided them with. A federal bailout of the states goes against the spirit of those state fiscal traditions, which were designed to encourage restraint.
Another tradition that the states should heed is their historic policy independence from the federal government. President-elect Obama met with the governors to discuss a bailout in Philadelphia?s historic Congress Hall. But the once proud and self-governed states that sent representatives to Philadelphia in the 1790s have become so smothered by federal subsidies and regulations that they are becoming little more than regional divisions of Big Government in Washington these days.
7. A Bailout Would Delay State Reforms. Many states have short-term budget gaps, but face a larger fiscal crisis from long-term spending promises. State and local governments have unfunded obligations in their pension and retiree health care plans of at least $2 trillion, as a result of often gold-plated benefit packages for workers. Adding to state fiscal woes is rapidly rising Medicaid spending, which has been fueled by the expansion of benefits in many states. A federal bailout would likely encourage state policymakers to delay needed restructuring in Medicaid, retirement plans, and other spending areas.
