Now Is Not the Time to Bail Out States and Increase Dependency

Posted: Dec 17, 2020 12:01 AM
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Now Is Not the Time to Bail Out States and Increase Dependency

Source: AP Photo/Mark Tenally

As Congress negotiates another coronavirus relief package, some are considering sending billions of taxpayer dollars to bail out state and local governments.

The proposal comes at a time when our economy is experiencing one of the greatest comebacks in history. This is the news the left doesn’t want you to hear. Millions of new jobs and businesses are forming, unemployment continues to drop, and the economy is growing at a record-shattering pace. Yet the most irresponsible state and local politicians are still begging for billions in handouts. Now is not the time to bail out our most mismanaged governments. 

First of all, many states are in much better shape than some on Capitol Hill are claiming. The data shows there is no nationwide state budget crisis. It’s true that some cities, such as New York City, are suffering from self-inflicted wounds that existed long before COVID-19. But most state and local governments cannot claim a real need for financial rescue due to the pandemic.

States are making out pretty well with property taxes this year since real estate prices rose by more than six percent. The Bureau of Economic Analysis shows that state and local tax revenues are rising nearly across the board and will likely continue to as our economy recovers. State and local governments simply don’t need billions of dollars right now. 

But even if state and municipalities needed financial rescue, bailouts are still a bad idea because they reward irresponsible behavior. They spare governors and mayors from the consequences of years of reckless spending and don’t give them any motivation to change their ways. Congress shouldn’t reward California for shutting down its economy, New York for its bloated state government, or Illinois for its mounting unfunded pension liabilities. Their states were in fiscal distress long before the pandemic, and they spent 2020 kicking their own economies—and their citizens—while they were already down. Meanwhile, fiscally-responsible states like Florida have weathered this crisis without running a deficit or forcing unneeded shutdowns.

Bailouts enable state politicians to keep businesses locked down longer. State and local governments should be incentivized to help businesses thrive because they rely on local establishments and the people they employ for tax revenue. But if the money governments have lost from shutting down restaurants and hair salons is made up for by a massive bailout, then they won’t feel the urgency to reopen. It’s no coincidence that less than a week after the left started their victory lap over a possible President-Elect Biden blue states started closing up shop for Thanksgiving and Christmas.  And their shutdown victory lap is stomping out the American Dream for the people who call these states home. What comfort are a bailout and welfare handouts to someone who's hard work went out of business thanks to their own state government?

The self-destructive shutdowns for the sake of bailout money shouldn’t surprise anyone who has been following along these past nine months. We saw what happens when the federal government rewards bad behavior earlier this year when the $600 unemployment bonus was issued. People were content to stay home and refuse to return to work because staying at home typically paid more. Unemployment skyrocketed while employers struggled to fill open positions. But when the $600weekly bonus expired at the end of July, the unemployment rate dropped and job creation rose. Once the government withdrew the handout, our economy bounced back and people returned to work.

But some in Congress want to resurrect these tried-and-failed policies. A revived weekly unemployment bonus is included in the Democrat and bipartisan relief proposals. Repeating this mistake would derail our economic comeback, kill hundreds of thousands of small businesses for good, and add insult to injury for the American worker.

What would happen if the federal government didn’t bail out the states? They would be forced to re-open, unleashing the power and ingenuity of entrepreneurs and workers across the country. That’s the recovery plan America needs.

Tarren Bragdon is the chief executive officer at the Foundation for Government Accountability