The foremost dictum of arguably the 20th Century's foremost economist holds, "There's no such thing as a free lunch." Nobel economist Milton Friedman meant that somewhere along the line somebody pays for everything. Government and pols tend to resist Friedman's dictum; the feds treat it with particular disdain. But right now the states are confronting it -- bigtime.
Most states must balance their budgets by constitutional stipulation -- a concept also viewed with a federal sneer. In the depression year of 2009, the feds bailed out the states to the tune of $87 billion. In the current fiscal year, state budget shortfalls are expected to total about $180 billion, with a like amount (or more) anticipated for fiscal 2011.
States are no different from families. In tough times, if income does not increase, spending must be cut. Otherwise there will be a lot of explaining to creditors, rating agencies, enforcers, and judges.
SO CALIFORNIA, first out the door in so much wacky stuff, is the first to have said it needs more federal cash to make ends meet.
Last year, California uneasily closed a $60 billion deficit largely through accounting gimmicks, IOUs, and $8 billion in federal "stimulus" money. Now it faces a $20 billion shortfall, and wants another $7 billion federal handout.
Gov. Arnold Schwarzenegger, a Republican, outlined the situation days ago -- saying serious spending cuts (including cuts in "social" programs) will be necessary, as will more federal cash.
The Democrats who run the California legislature want few spending cuts but hefty corporate tax increases. California's leading representatives in Washington -- Mesdames Nancy Pelosi, Barbara Boxer, and Dianne Feinstein -- are telling California to expect little more in the form of federal bailout monies, and to sort out its mess itself. One California college professor said sweetly that legislative Democrats will approve significant spending cuts when "pigs fly."
And again, California likely is but the first of a flood. Thirty-six states are on track to cut $56 billion from their budgets this year. At least two others (Maine and New Mexico) already are including additional federal funds in their early budget assumptions. How badly off are the states -- really? Hawaii is too poor to pay for an election to fill a congressional vacancy. Even a vote-by-mail special election would cost nearly $1 million it can't afford.
Ross Mackenzie lives with his wife and Labrador retriever in the woods west of Richmond, Virginia. They have two grown sons, both Naval officers.
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